Record-breaking Colorado lease sale still falls short of what many expected

The long-anticipated Roan Plateau lease sale netted a record $113.9 million, the US Bureau of Land Management said on Aug. 14. But the amount was less than what many Colorado politicians and groups anticipated.

Aug 22nd, 2008

The long-anticipated Roan Plateau lease sale netted $113.9 million, a record for the US Bureau of Land Management in the Lower 48 states, the US Department of the Interior Agency said on Aug. 14. But the amount fell short of what many politicians and groups in Colorado anticipated, and they quickly blamed each other for the results.

"For more than a year, the oil and gas industry and some politicians have claimed that a Roan Plateau lease sale would generate proceeds of up to $2 billion. Today, when the bids came in at only $114 million, we learned just how wrong and over-exaggerated those claims were," Gov. Bill Ritter said following the sale.

He and other Colorado Democrats, including US Sen. Ken Salazar and US Reps. John Salazar and Mark Udall, advocated leasing federal land on the western Colorado plateau in phases instead of holding a full lease sale. "We warned that an all-at-once lease sale would result in vastly undervalued bids. Unfortunately, these predictions turned out to be true," Ritter said.

But others blamed Democrats' opposition to the sale for the lower-than-expected bids. "The efforts of anti-energy politicians took their toll in the form of lower bids than we expected and cost Coloradans millions of dollars by pandering to the extreme environmentalists," said US Sen. Wayne Allard (R-Colo.).

"Development on top of the plateau is the result of a lengthy and thoughtful planning process that has put the needs of Colorado first. It is one of the most environmentally conscious plans ever created, representing over seven years of collaboration between local, state and federal officials. It will be conducted in a staged, ridge-by-ridge approach, and minimize wildlife habitat fragmentation," he maintained.

'Dark cloud of uncertainty'

Colorado Oil and Gas Association President Meg Collins said that actions by Ritter, Udall and Sen. Salazar were responsible for the "disappointingly low" bonus bids. "The dark cloud of uncertainty cast by these elected officials and environmental groups through their lease sale protests, lawsuits and rulemaking efforts grossly impact the value of the Roan," she said.

She compared the Aug. 14 sale's average parcel price of $2,083/acre with the $40,690/acre which Marathon Oil Corp. paid when it leased 8,700 acres for nearly $354 million in May 2007. "If industry believed it could produce the full volume of natural gas present beneath the Roan anytime soon, values much closer to the market comparables would have been obtained," Collins said.

BLM said that 54,631 acres in 31 parcels were leased in the latest sale. It also broke the record for a federal oil and gas lease sale in Colorado of $11.8 million, which was set in February 2006. Sellmar Co. of Denver submitted the single highest bid, nearly $25.3 million or $11,800/acre. Vantage Energy Piceance LLC of Englewood, Colo., won 20 of the leases with bids totaling $57,565,425, followed by Meadow Ridge LLC of Denver, which won eight leases, and Oxy USA Inc. of Houston which won two.

The sale culminated eight years of public planning which involved state and local governments, constituent groups and the general public in developing what BLM said is one of the most environmentally sensitive resource management plans connected with oil and gas leasing in the DOI agency's history.

It noted that the plan confines development at the top of the plateau to existing road corridors, with disturbance limited to 350 acres or approximately 1% of the total surface there. More than 50%, or 38,470 acres, of the planning area is stipulated for no surface occupancy. Development on top of the plateau will occur in a staged, ridge-by-ridge process with well pads more than a half-mile apart. Leases there will require operators to enter into a single federal unit, with consolidation of planning and operations under a single unit operator.

Colorado will receive 49% of the lease sale proceeds as well as 49% of future royalties from oil and gas production on the plateau. BLM said that no money will be dispersed until its Colorado state office resolves protests to the sale, including those from the state and various environmental groups.

Contact Nick Snow at nicks@pennwell.com

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