Roan leases come in low
Industry blames Dems and Ritter; he faults Bush administration
By Gargi Chakrabarty, Rocky Mountain News (Contact), Todd Hartman, Rocky Mountain News (Contact), Burt Hubbard, Rocky Mountain News (Contact)
Published August 13, 2008 at 2:46 p.m.
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Photo by Matt McClain © The Rocky
Auctioneer Chuck Cumberlin, of Odle-Cumberlin Auctioneers in Brush, looks for bidders during a Bureau of Land Management oil and gas lease sale for 54,631 acres on the Roan Plateau. The auction Thursday at the Denver West Marriott in Golden netted $114 million, a record for public land leases in the continental U.S.
Photo by Matt McClain © The Rocky
Bidders take part in a Bureau of Land Management oil and gas lease sale for 54,631 acres on the Roan Plateau. The $114 million netted was far below state and industry expectations.
Photo by Matt McClain © The Rocky
Jaime Garcia works at Grey Wolf rig 51 on the Roan Plateau on Monday. One stipulation in the leases sold Thursday is that a single operator do all the drilling for all leaseholders.
The long-debated sale of 54,631 acres of natural gas leases on the Roan Plateau in western Colorado netted a continental U.S. record $114 million Thursday, but that figure came as a stunning disappointment to state and industry leaders.
And it was far below the more ambitious predictions of energy boosters.
Gov. Bill Ritter and an industry group both called it a dismal day for Colorado - but each cited different reasons for why sales on the gas-rich Roan failed to live up to expectations. In the end, the state came away with its half-share of only $57 million, money earmarked to help higher education and Western Slope roads and facilities.
The final haul is about 1/20th of the amount predicted last year by an industry lobbying group - Golden-based Americans for American Energy - that suggested the Roan sale could fetch $2 billion, with Colorado getting $1 billion of that.
Industry blamed Ritter and green groups for mucking up the sale with administrative protests that put a "dark cloud of uncertainty" over drilling prospects on the Roan.
"Colorado was robbed today," said Meg Collins, president of the Colorado Oil & Gas Association. She blamed Ritter, Sen. Ken Salazar, Rep. Mark Udall, all Democrats, and environmental groups for "disappointingly low" bids.
The governor, however, never expected that kind of money. Indeed, he long called the $2 billion prediction outlandish, and a ploy by industry to raise unrealistic expectations as a way to build public support for drilling on the site cherished by conservationists for its scenery and wildlife.
But Ritter said the sale was a big letdown, and could have netted hundreds of millions of dollars for the state had it been handled otherwise.
At an afternoon news conference, he blamed the Bush administration, saying the U.S. Bureau of Land Management discounted his proposal to lease the Roan's public lands in phases. That approach, the governor argued, would drive up the bids in part because the value of natural gas is expected to rise over time.
"Today is a sad day for Colorado," Ritter said. "It's a missed opportunity - one we will never get back, one that falls squarely on the shoulders of the Bush administration, which is rushing through bad fiscal policy in its waning days."
As it happened, energy companies swooped up 31 parcels atop and below the massive Roan in an auction in a hotel ballroom that lasted just over an hour. It brought a speedy end to eight years of planning rife with controversy and still dogged by legal fights that make it unclear when and if drilling will actually begin.
About the only satisfied party was the federal BLM. Spokesman Steven Hall said the $114 million marks the agency's largest take ever in a lease sale of BLM lands in the lower 48 states. Only Alaska has netted more.
A more typical lease sale nets in the $20 million to $40 million range, he said. Colorado's previous record was $11.8 million.
"We're happy with the results," he said.
BLM's less-antagonized position might be explained by its own prediction last year of how much the lease sale would net: About $100 million. The agency, it turns out, was nearly spot-on.
But all other parties were casting blame.
COGA president Collins complained the average bid price of $2,083 per acre on the Roan was dismal when compared to the $40,690 per acre Marathon Oil paid last May on nearby gas-imbued land. Indeed, the $40,000-per-acre price is how the lobbying group AAE figured its $2 billion prediction for 50,000 acres on the Roan.
Said AAE chief Greg Schnacke, "Our numbers were based upon public documents . . . we didn't make things up." He blamed the low results on "the political poison" he said Ritter and Salazar had injected into the process.
What neither Collins nor Schnacke pointed out, however, is that the Marathon bid was for private land, with none of the federal restrictions and oversight accompanying public lands.
Those BLM restrictions on the Roan include drilling timeouts to protect wildlife, off-limits areas for roads and rig work, and the use of a single operator to do all the drilling atop the plateau on behalf of all the leaseholders.
The latter requirement, especially, is an approach companies are uncomfortable with, said Steve Cumella, a senior geologist with Bill Barrett Corp. With wells costing $3 million to $8 million apiece to drill atop the plateau, companies want to have direct oversight.
"If the operator doesn't know what they're doing, that's a lot of money to have exposed," Cumella said. He believes that element was a key reason bids atop the plateau were lower.
Pete Morton, an economist for the Wilderness Society, said industry lobbyists were unfairly casting blame on environmental protections for lower bid prices.
Industry, he said, "knew full well of the stipulations included in the Roan plan for protecting wildlife, water and our environment. And yet they still insisted the sale would bring in $2 billion.
"So it is very disingenuous of industry lobbyists to now say that the stipulations were the reason the bids were so low," he said.
hartmant@RockyMountainNews.com or 303-954-5048
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August 13, 2008
9:41 p.m.
Suggest removal
Brockage writes:
Finally! I thought this would NEVER get done. Thank the gods we have that job done and can get on to the real problems in the state -- how to lower taxes and get the same or a better level of output by government workers, and how to make safe some of our creepy infrastructure.
August 13, 2008
10:51 p.m.
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windbourne writes:
Have to laugh at the statement that the roan would be discounted due to protests. It will be discounted because nobody has rigs available. They are all drilling elsewhere, namely Dakotas and Wyoming.
The best thing that can happen is wait for a few rigs to be idled (or near idled) and then open up the leases.
August 14, 2008
6:48 a.m.
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danirobi writes:
It's about time!
August 14, 2008
7:09 a.m.
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Buckwheat writes:
Here's the stat's chance for fiscal independence. Buy up the leases, drill it yourself, and have a state run refinery.
August 14, 2008
7:39 a.m.
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mrfxx writes:
Congratulations Froward69 - you figured it out! Oil/gas companies have leases they are sitting on, demanding more and whining about being expected to clean up messes they make while extracting oil/gas (it took almost 20 years for Exxon to pay for the Valdez mess - and while in the midst of record profits, got their "penalty fines" reduced to a tenth of what was originally found - the original amount less than a week's profit at this time - by an activist CONSERVATIVE judge), while bemoaning the fact that we consumers are blaming them for something out of their control (supply and demand aggravated by speculation) - and keeping their collective hands out to collect state and federal tax breaks (federal breaks alone are in the billions annually - with no strings attached). Anyone who doesn't think the industry will sell to the highest bidder, whether US or foreign, and manipulate prices to keep them high is either in the industry or is foolish enough to believe the industry's lies.
August 14, 2008
7:53 a.m.
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upacreek333 writes:
This is the latest (and best) effort in an industry propaganda campaign to scare the masses into believing that drilling for natural gas will actually lower energy prices. Even with the Roan drilled, the gas won't hit the market for years--your home heating costs will stay the same or go up, probably for another decade, and when the Roan's gas is "on the market," it'll be sold at the market rate. And if you think drilling the Roan is going to help lower gasoline prices, you're wrong. It's natural gas, not petroleum. The industry, though, has made that connection a thousand times in the last month. Just plain misinformation in the name of corporate profits. We already get the bulk of our natural gas domestically, so this energy independence pap Americans for American Energy is preaching is pure BS.
So, what does Colorado get? Some royalty money, years from now and a trashed place that is one of the last, best places to get away from it all. Keep in mind that the governor's plan would have allowed those same royalty payments, but he didn't want to lose the recreational value of the Roan... shows him what's what--with this administration, multiple use means oil AND gas. Bunch of tools.
August 14, 2008
8:29 a.m.
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danirobi writes:
http://www.blm.gov/wo/st/en/info/news...
http://www.blm.gov/rmp/co/roanplateau/
http://www.doi.gov/news/08_News_Relea...
August 14, 2008
8:35 a.m.
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Buckwheat writes:
I don't know what the answer is actually. We need to move on to alternative sources but this won't happen overnight. While in the mean time, we need energy to run the country. If we don't have the rescourses to last we have to get them. If anyone has a viable and realistic plan to put alternative energy on line tomorrow, I'am all ears...
August 14, 2008
9:45 a.m.
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danirobi writes:
Oh Froward- I'm sorry for putting the scienific facts up for you.
You know that the majority of people that work in the government are not political appointees and a good majority of the people doing the research are Democrats...just an FYI.
August 14, 2008
9:45 a.m.
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HopiMedicineMan writes:
Of course Soros says the issue is to lower gas prices immediately and the entire liberal block focuses on that one idea and they repeat over and over ad infinitum all brainless parrots. How fast a product goes to market depends on how deep we have to drill. Du'uh. And why put it off another ten years?
August 14, 2008
9:47 a.m.
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Frontranger writes:
i was on the western slope last weekend and it is getting crazy. nothing but oil and gas trucks and rigs everywhere. i guess good for the people there but it is getting ugly.
August 14, 2008
10:27 a.m.
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deerman writes:
This process has been flawed and illegal from the start. Evidently, the BLM run by the Bush Administration did not follow the laws of the National Environmental Policy Act and listen to the local west slope county and city governments who opposed this leasing. Trashed landscape and diminished wildlife...who will want to live or visit Colorado to enjoy what this state once had to offer. This mantra of drill...drill..drill...is the end of the one of the last great wildife habitats in North America. This state has been turned over to the "texans" and their lifestyle of trash the environment.
August 14, 2008
10:27 a.m.
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danirobi writes:
Well Froward, I like to look at both sides of the issue and like I said before the majority of the people who work in the federal gov't and BLM are career employees and tend to lean the other way on politics.
August 14, 2008
10:37 a.m.
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TC writes:
Drilling oil/mining shale in Colorado will be lots of fun. But it ain't going to have jack to do with the price of oil in a world market compared to this:
1 July 2008
Iraq has invited 35 foreign companies to bid on contracts for the further development of six existing oil fields and two gas fields.
The oil ministry hopes that granting multinationals technical contracts can help boost production at the under developed oil fields in Iraq, which holds the world's third largest oil reserves, Al Jazeera reported.
Iraqi Oil Minister Hussain al-Shahristani said the government would seek to tap Western technology and capital to increase oil production by about 60 percent, which approximately equals 1.5 million barrels a day.
Among the selected companies, seven are from the US and four each from China and Japan.
The move is expected to cause controversy in a nation wary of Western influence over its largest source of wealth and among critics who say the Bush administration started the war in Iraq in order to gain access to its oil.
August 14, 2008
10:48 a.m.
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Frontranger writes:
hemp for fuel beotches
August 14, 2008
10:55 a.m.
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danirobi writes:
Thanks but I don't need help...
August 14, 2008
1:08 p.m.
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danirobi writes:
Why is it that when the scienific facts are given, it is some how partisan politics or "...blind to any facts that aren't in line with the oil lobby"
August 14, 2008
1:15 p.m.
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independentenergy writes:
Meanwhile Udall wants to put food in our fuel tank. That way food prices can go up too, while doing nothing about energy prices except make Boulder liberals feel better about it.
August 14, 2008
2:11 p.m.
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justright writes:
MarineGrunt,
Your taxes would have gone down alot more if it weren't for the 15000 law suits by the tree huggers. See they drove off a huge amount of bidders for those leases. More bidders would have drove the price per acre way up so the libs managed to get the least amount for a huge prize leaving you and me to come up with the rest.
August 14, 2008
2:58 p.m.
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JDub writes:
Congrats greenies and Ritter, you just cost the state over $500 million... and to think you wanted even more strict stipulations. Man I love this state but when the trash these liberals spew comes out, I am simply embarrassed. I just can't wait to see how this is "Big Oil's" fault. Lets be honest, how many of you have met a single person that says "Man, I only come to Colorado to see the Roan Plateau"? Tourism will not be hurt and that industry pails in comparison to the revenue created by the O&G Industry. They should be Ritter's best friends, but that is impossible because he is irrational, aka Liberal. America is run by people and businesses that want to be great, but the Dems just want hold back American companies, and in Turn America from being the Great country we once were. Sorry Colorado, you just got shafted big time.
Oh, and I Ski, Flyfish, Backpack and RIDE MY BIKE TO WORK! Probably more than any Enviro or Liberal could ever say...
August 14, 2008
4:28 p.m.
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bobbyb writes:
yea-- how dare the natural gas industry try to scare people into believing the laws of supply and demand! The audacity!!
August 14, 2008
5:56 p.m.
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HopiMedicineMan writes:
I may be coming to the party late, but it's occurred to me based on what I'm reading above, the liberals believe in some sort of oil conspiracy. Oil executives are holding hands in the huddle. Anyone in the business, battling competitors, not conspiring with them, must find this funny, if not tragic.
August 14, 2008
9:25 p.m.
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Frank25 writes:
With Jimmy Carter we were told in 1973 we would use exhaust all known fossil fuels within next 10 years, Jimmy signed executive order and congress wrote laws restricting or locking up areas in 48 mainland states, all off-shore, continental shelf, nuclear power production under strict environmental laws. And by 1979 NREL was working on alternate fuels and renewable energy. What do we have to show for all the money, time, and effort? Solar and wind was inefficient in 1870-1920 period, but NREL thought they could perfect this, and public seems to have bought it too. Batteries improved efficiency, decreased size, but still are not sufficient for power needed. Solar panels work great in space, being oriented to Sun constantly, but lot of heat on earth. So after 30 years, we still can look forward to 40-50 more years for new energy sources. Hybrid vehicles are great for stop and go traffic, but at regular highway speeds are no better than pure gasoline vehicle. Can't afford current vehicles,so future looks bleak. Half of you seem content to wait until you can afford hydrogen cell or hybrid vehicle, which may be a whole lot more expensive by time you save for it. Other half will set on their hands, and vote for Obama who will bring hope and change. I go to church or sit on side of my bed and pray to my God for "hope" and "change" and feel better. I don't hear any voices telling me I will receive either. We may get some help if we set up a wind turbine in downtown Denver end of month, since Hillary, Michelle, Chelsea, and Bill will speak. I assume Barack will get a few minutes too. I noted today as I filled gastank, that with the windbags and dipsticks out of Washington on vacation, gasoline has dropped 33 cents per gallon. If they stay on vacation, would gas drop lower, even with Georgia invasion? Maybe we could also reduce their salaries and benefits, since I don't see them working on the 12 budget bills due by 1 Oct FY2009.
August 15, 2008
6:15 a.m.
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Mike846 writes:
I guess Ritter doesn't like the free market setting the prices for the leases. Gee, "Tax" Ritter, opposed to government not controlling the price of something? Gimme a break. Mike
August 15, 2008
6:47 a.m.
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danirobi writes:
Governor Ritter- "It's everyone elses fault but mine"
August 15, 2008
8:16 a.m.
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ghoax writes:
the greens have done nothing but obstruct economic progress and security and need to be sued and voted out of existence for us to ever get back a state of reasonableness.
August 15, 2008
9:38 a.m.
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Cwillyrun1 writes:
Frank25, excellent post. It seems some people don't learn from history, probably because they don't care to learn it. I guess they feel they know everything already. If the state government and environmentalists didn't make it so hard for the drilling to actually take place, odds are the state would've taken it a lot more than $114 million. What else should we expect from the state government though? Ritter just wants to tax, tax, tax, and give state employees bargaining power even when they have some of the best compensation packages for state employees in the country. The Democrats that were voted in are failing us. Ritter is the worst Governor the state has had in at least the last 25 years, Salazar is a do-nothing Senator, Hickenlooper allows the DNC to illegally acquire gas at city pumps, and Ritter and Hickenlooper are union puppets, yet they want to talk about big oil? Who's the so called "big oil" companies that bought the property in the Roan Plateau for drilling? Doesn't Ritter know "big oil" is into drilling for oil, not natural gas? Something not mentioned in this article is that natural gas drilling is not controlled by XCEL, and that natural gas itself has limited options for delivery. It's not going to be drilled and sent to another country. It can only be delivered in mass by pipeline, so it stays in the country.
froward, it's possible the rates may not come down, and certainly not anytime soon. But it's not for the reasons you think. Government has kept telling us to turn to natural gas, the "cheap and clean" fuel for many uses, including heating the home (instead of electricity). Well, when everyone turns to it and there's only so much supply, it's what happens. Coal powered plants are going away in favor of natural gas, so the demand there rises as well.
It's funny when Democrats talk about "big oil" without stating the fact that big oil is not involved in drilling natural gas. As a matter of fact, drilling for any type of oil or gas in the state is likely done by small, independant firms. Funny how the facts get in the way of storytelling.
August 15, 2008
9:47 a.m.
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deerman writes:
ToJDUb:
So you bike and backpack...so what, as you don't understand that leasing the top of the Roan will do nothing to ease our energy issues. The Plateau contains significant natural resources other than natural gas. I think you miss the point...no one on the west slope (local government) wanted drilling on the Plateau. Once the gas is gone, the other resource values are more lasting and sustainable . Hopefully the pending legal issues will make this sale go away. The Plateau is great place to hunt and fish...and it is public land.
August 15, 2008
10:07 a.m.
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fairness writes:
So Shaggy, please enlighten everyone on McCain's extensive business background. I'm sure that he must have been a CEO of some company or something, right?
And Danirobi, it just sounds hypocritical to hear people like you backing the "science" for this, but denouncing it for global warming. You guys claim that there are other points of view on the global warming science, but I guess there is only one point of view on the energy science, right?
August 15, 2008
10:36 a.m.
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jbowen43 writes:
This was all about acquiring the leases. No one is in a hurry to explore. The Bushies are doing all they can to reward their friends before they leave office. These leases are the means to future wealth. If they can make political hay too, well then so much the better for them. Every thing this administration does is designed to increase the wealth and power of the republicans and their supporters. This include domestic policy and foreign policy. They will go so far as to make war for those purposes. This basic stuff so don't read into it anything more than that.
The only hope for the rest of us is to tax the heck out of them and enforce regulations to, as much as possible, protect the water and air.
August 15, 2008
10:48 a.m.
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fairness writes:
Shaggy,
You were specifically complaining about the business experience of Ritter and Obama, therefore, the amount of time that McCain has in the senate vs. Obama is irrelevant. That doesn't make him any more experienced or knowledgeable about business or the economy than Obama. If it does, then I fail to understand your logic.
You stated that Ritter and Obama don't "have any experience in the private buisiness sector nor have either one ever held a job where they actually have to produce to be paid a salary, they have always held positions where the tax payers pay their wages regardless of performance." How are they different from McCain? Hasn't he always been on the taxpayer's roles? First in the military, then in congress. When has he ever worked for a regular paycheck?
So again, explain why Obama would be so bad understanding business and McCain would be so much better.
August 15, 2008
10:55 a.m.
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Sundog writes:
<Those BLM restrictions on the Roan include drilling timeouts to protect wildlife, off-limits areas for roads and rig work, and the use of a single operator to do all the drilling atop the plateau on behalf of all the leaseholders.
The latter requirement, especially, is an approach companies are uncomfortable with, said Steve Cumella, a senior geologist with Bill Barrett Corp. With wells costing $3 million to $8 million apiece to drill atop the plateau, companies want to have direct oversight.">
Who can blame them? This is the crux...more govt. micromanagement, so that we can pay taxes for the "oversight fees" on top of everything else. Green can get silly and expensive, whew.
August 15, 2008
11:01 a.m.
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Frontranger writes:
I don't trust the BLM. They are very shady in their dealings. In Crested Butte they sold several mine's right out side of town for $5 dollars an acre. What the? They used some 1800's clause, now the Lucky Jack mine is poised to destroy the town water supply and create serious environmental impact.
August 15, 2008
2:19 p.m.
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carlindenver writes:
Gov. Ritter and Salazar are shocked. Simply shocked that events and results would turn out different than what they wanted and expected. Realists. Sure. As for the Roan Plateau leases, would you want to lease some hilly, rocky and dry land and spend even more money to drill even an exploratory well with the knowledge that within a decade, or so, gas and oil will be no longer needed? Ritter and far left enviros have promised, and demanded, all of us to expect the new Green Economy will provide. Soon, of course. Well as soon as a couple of technical bugs get straightened out.
Comrades!! Keep the faith and keep resisting, keep resisting.