From The Grand Junction Daily Sentinel (Dennis Webb):
A landmark deal canceling federal oil and gas leases on the Roan Plateau leaves Bill Barrett Corp. with just a sliver of its former holdings there, but it has high hopes about the prospects for the 4,650 acres it still controls. Nearly 500 wells could be drilled on that acreage, said Duane Zavadil, a senior vice president for the company.
In a lawsuit settlement announced last week, the company agreed to give up 17 of 19 leases it owned on the top of the plateau west of Rifle and be reimbursed about $47.6 million by the Bureau of Land Management. The canceled leases cover about 36,000 acres.
But Bill Barrett Corp. considers the leases it retained to have the highest prospects of the 19, given that they are immediately bordered on the south and west by acreage where companies have drilled producing wells, and where access roads, pipelines and other infrastructure already are in place.
The settlement resolves a lawsuit brought by conservation groups, and is one of the biggest lease buybacks ever for the BLM, and the biggest ever for the agency in Colorado.
“We were trading off acres and reserves for trying to drive a degree of regulatory and litigation certainty,” Zavadil said.
The settlement itself was no windfall for the company, he notes. Barrett bought the 19 leases for $60 million in 2009 from Vantage Energy, which had acquired them at the BLM’s Roan Plateau lease sale a year earlier for $57.6 million. But Vantage retained a 10 percent interest in them.
The $47.6 million the BLM is reimbursing for 17 of the leases covers what Vantage paid for them at the lease sale, and about $53,500 in total annual rental payments made on the canceled leases. Zavadil said Vantage will share in the reimbursement Barrett receives. In a news release Monday, Barrett said it will end up with $42.3 million in the settlement.
Under the deal, there’s no reimbursement for other costs such as legal fees related to the lawsuit and having money tied up for years in leases in legal limbo. But Zavadil said the reimbursed amount “is really all that could be accomplished” because there’s no federal mechanism for reimbursing for such additional expenditures in such cases.
The settlement “is equitable, it’s fair, it sort of is what it is,” said Zavadil, who said Bill Barrett Corp. never asked for more or less than that amount and no other amount ever was contemplated in settlement discussions.
As for settling in general, BBC knew that might be a necessity when it bought the leases due to the lawsuit that conservationists filed even before the 2008 lease sale occurred. But Zavadil said while Vantage already had been in settlement talks that potentially involved giving up some leases, Barrett initially had hoped to hold on to all of the leases and instead reach an agreement with conservation groups on measures to mitigate the impacts of developing them.
“We clearly erred in that assessment,” he said.
In 2010, Barrett showed its willingness to compromise in drilling projects on federal lands when it struck a deal with environmentalists to downsize its development plan for the West Tavaputs Plateau outside Price, Utah, to address concerns such as protection of lands with wilderness characteristics.
But the company couldn’t get buy-in from conservation groups on developing all its Roan Plateau leases. And in 2012, a federal judge found fault with the BLM’s management plan that led to those and other leases being offered. Barrett appealed and the BLM reopened its Roan Plateau planning process.
It was during court-mandated mediation following Barrett’s appeal that the concept of giving up leases began to solidify.
One thing that helped facilitate a settlement was the fact that the lease areas Barrett most wanted to keep and the areas that conservationists most wanted to protect generally didn’t overlap. The remaining Barrett lease areas don’t have habitat for endangered plants or for the native Colorado River cutthroat trout, and are largely landlocked by private property and not easily accessible to the public, which minimizes their recreational value, Zavadil said.
BBC also has agreed to limit its drilling to seven well pads on the two leases combined.
Zavadil said Barrett worried that had it not settled, a whole new round of litigation would have followed the BLM’s revised Roan Plateau plan.
“What we were trying to avoid was more delay in having capital tied up without any real hope of sort of resolving the litigation,” he said.
Instead, the BLM will consider the settlement agreement as one of its alternatives in its new planning process, which it hopes to finish within two years. Groups involved in the suit waive the right to further challenge the BLM’s decision if it selects the settlement alternative.
Zavadil said Bill Barrett Corp. is happy with the settlement and believes it’s “as good an outcome as one could hope for.”
Michael Freeman, an attorney for the group Earthjustice who represented conservation groups in the lawsuit, said while both sides litigated the case pretty hard up through the district court decision, afterward they realized a win-win situation was possible.
“To Barrett’s credit they were willing to work really hard to get it done and make it happen,” Freeman said.
Zavadil said Barrett will look at natural gas prices once the BLM completes its revised Roan plan to see if it makes sense to develop the acreage then. Gas prices began declining in 2008, even before Barrett’s Roan purchase, but prices have remained depressed ever since due in large part to a boom in domestic production from shale formations. And drilling on the plateau top will cost more than operations closer to the Colorado River valley floor, where access is easier and wells don’t have to be drilled as deeply to reach gas-bearing formations.
Zavadil noted that gas price isn’t the only determinant, pointing out that WPX Energy has been drilling on highlands locations.
“But we have a lot of assets that have a higher rate of return at this point of time” than the Roan leases, he said.
Barrett has shifted its focus in recent years from gas to oil production, which as a result has meant a shift in its attention from western Colorado’s gas-based Piceance Basin holdings to assets in northeastern Colorado and in northeastern Utah’s Uinta Basin. In September it announced the sale of its other Piceance Basin natural gas holdings, which included some 950 wells south of Silt. It also has sold other gas assets including its West Tavaputs acreage in Utah.
Zavadil said he can’t speak to whether Barrett’s Roan acreage might be put up for sale, any more than whether anything else the company owns is for sale.
“At any moment in time, it’s all for sale, and none of it’s for sale,” and it all depends on whether someone comes to BBC offering the right price on any of its assets, Zavadil said.
But he said it’s safe to say Barrett will pursue the regulatory authorizations to drill on its Roan leases.
He said it’s also important to understand that the company didn’t pursue the settlement and reimbursement for the 17 leases because of low gas prices. If not for the legal and regulatory risks that were involved, he said, Barrett “would still absolutely own every acre” it had acquired on the Roan Plateau.
From The Grand Junction Daily Sentinel (Dennis Webb):
In what is being hailed as a model for how to deal with oil and gas development on other special landscapes, 17 leases are being canceled on top of the Roan Plateau under a deal intended to let drilling go forward on other leases on and below the plateau rim. Seventeen of 19 oil and gas leases owned by Bill Barrett Corp. on the plateau top are being canceled, and the company will be reimbursed about $47.6 million for the costs of acquiring and making annual rental payments on the canceled leases under a lawsuit settlement announced Friday.
“In a nutshell, I think this is a really positive resolution,” Interior Secretary Sally Jewell said in an interview with The Daily Sentinel.
The Bureau of Land Management also has agreed to pay $400,000 to settle all claims to attorney fees, expenses and costs by the conservation groups that brought the lawsuit. Those are among the terms of a deal to resolve a lawsuit challenging the BLM’s management plan leading to the leasing of some 55,000 acres on and around the Roan Plateau west of Rifle in 2008.
The deal doesn’t guarantee that the acreage where the leases were canceled will be off-limits to leasing. Rather, the BLM has agreed to consider the settlement agreement as one alternative in an ongoing supplemental environmental impact statement re-evaluating its prior Roan Plateau plan because of a 2012 court ruling in the lawsuit.
If the BLM chooses to again lease the 17 canceled parcels, the conservation groups could sue again or otherwise challenge the decision.
Garfield County Commissioner Tom Jankovsky said he “would be amazed” if the BLM didn’t select the settlement agreement as its final management alternative.
Said Michael Freeman, an Earthjustice attorney who has been litigating the Roan Plateau case for conservation groups, “What this deal does is to create a path forward to give the Roan the kind of protection it deserves. There’s more work to be done to implement the settlement.”
Legally, the BLM can’t commit to a course of action until it finishes its new planning process, Freeman said. But he also is confident that the settlement alternative will be selected.
“What we’ve agreed to in the settlement provides kind of a consensus proposal for how to manage the Roan. We think it’s a really good balance between protecting the habitat, the lands of the Roan, but also allowing responsible drilling to happen in appropriate places,” he said.
The settlement agreement calls for the lands where the leases were canceled to be closed for leasing for the life of the revised management plan, Freeman said.
If the BLM selects the settlement agreement as its alternative, the conservation groups involved in the suit also “additionally agree to engage as broad a spectrum of the environmental and conservation community as possible” and encourage them not to pursue an administrative or legal challenge to it, the agreement says.
Leases issued in 2008 on the Roan but not canceled could begin seeing development once the BLM’s planning process is complete, something the agency has agreed to try to accomplish within two years.
“For the first time in decades western Colorado’s natural gas companies are very close to securing responsible drilling on and around the Roan Plateau. This compromise will provide decades of jobs and hundreds of millions of dollars for local communities,” said David Ludlam, executive director of the West Slope Colorado Oil and Gas Association.
Jewell, Gov. John Hickenlooper and other officials announced the settlement in Denver Friday.
Hickenlooper said in a release, “We are thrilled to see resolution for this decade-long controversy over one of Colorado’s most special places. This settlement will protect the valuable fish and wildlife resources atop the Roan Plateau, while clearing the way for orderly development to take place elsewhere in the planning area.”
The Roan Plateau rises from the Colorado River Valley to some 9,000 feet in elevation and is noted for its biodiversity. It provides important habitat to deer and elk, is home to rare plants and provides important habitat for native Colorado River cutthroat trout, which now occupy less than a 10th of its historic range. The settlement cancels all the leases in the Trapper and Northwater Creek watersheds, which conservationists say hold the best cutthroat trout habitat on the Roan.
Bill Barrett Corp. once had projected drilling more than 3,000 wells on its Roan leases.
“This settlement helps us achieve the goal of preserving important natural areas like the Roan Plateau in Colorado while oil and gas development continues in Colorado and across the West,” said Pete Maysmith, executive director of Conservation Colorado.
The settlement contains restrictions on how Bill Barrett Corp. can develop its two remaining Roan Plateau leases, including limiting it to seven well pad locations altogether on the leases.
Twelve other Roan Plateau leases issued under the 2008 lease sale would remain in place under the settlement agreement. Those are owned by WPX Energy, Oxy USA and Ursa Resources. But the agreement requires that before drilling on those leases, the companies submit proposed master development plans, and include within them conditions to minimize impacts on wildlife and other resources, identified through consultation with the BLM and Colorado Parks and Wildlife.
Jewell said that while she doesn’t like lawsuits, this suit identified opportunities for the BLM to do a better job on the Roan Plateau plan. She said she appreciates the plaintiffs raising concerns and others recognizing those concerns and coming to the table to settle, and said the settlement is “a model for collaboration” on public land management.
The Interior Department is looking elsewhere “at what are the areas too special to develop,” and trying to steer drilling to areas of high development potential and less conflict, so there’s more certainty for industry, she said.
Freeman said the settlement is an example of how the BLM “can strike a balance that protects the really important areas of public lands that shouldn’t be drilled,” while identifying places where drilling is appropriate.
The federal government shares about half of its oil and gas lease revenue with the state of Colorado, which will be responsible for reimbursing its portion of the revenue Bill Barrett Corp. will be receiving under the deal. That will occur by the federal government withholding future royalty distributions to the state, BLM spokesman David Boyd said.
Hickenlooper is pushing legislation to ensure refunding the canceled leases has no financial impacts on local governments, with which the state shares federal lease revenues.
The state and local governments expect federal mineral lease revenue associated with developing the remaining Roan Plateau leases will more than offset the costs of canceling the 17 leases.
Scot Woodall, chief executive officer of Bill Barrett Corp., said on the company’s website that he appreciated the community and elected-official support for the settlement.
“It was critical to us that Garfield and Mesa counties, who host our business, support the agreement. To that end, the county commissioners, in particular Garfield Commissioner Tom Jankovsky, worked tirelessly along with State Representative Bob Rankin, a member of the Joint Budget Committee of the General Assembly, to ensure that local communities would not suffer an economic loss as a consequence of settlement.”
Rankin is a Republican from Carbondale.
In an interview, Duane Zavadil, a senior vice president for the company, said the work of Hickenlooper, U.S. Rep. Scott Tipton, R-Cortez, and U.S. Sens. Mark Udall and Michael Bennet, D-Colo., in encouraging Jewell to approve the deal was crucial.
He also credited the BLM and Interior Department for being willing “to get creative … to cause this settlement to happen as well.”
The plateau-top leases initially were acquired by Vantage Energy for $57.6 million. In 2009, Bill Barrett Corp. obtained a 90 percent interest in those lease under a $60 million deal.
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Timeline of the Roan Plateau events
1997— Congress passes Transfer Act shifting authority over the Roan Plateau acreage at issue from the Energy Department to the Department of Interior and Bureau of Land Management.
2000-08 — BLM works on resource management plan for Roan, receiving more than 75,000 public comments on draft plan. Most favor strong protections and oppose drilling on public lands on top.
July 2008 — Conservation groups sue, challenging BLM management plan paving way for oil and gas lease sale on Roan Plateau.
August 2008 — Lease sale covering about 55,000 acres nets $114 million, which for the Bureau of Land Management at that time was the largest ever in total dollars in the continental United States.
June 2012 — U.S. District Court Judge Marcia Krieger rules that the BLM failed to adequately consider keeping drilling off the plateau top by requiring use of directional drilling from surrounding lands, and failed to sufficiently consider air quality issues.
August 2012: Bill Barrett Corp., owner of the leases on the plateau top, appeals the ruling. Conservation groups cross-appeal.
January 2013: The BLM announces it will conduct supplemental planning process to address issues raised by court.
Early 2013: Parties in litigation enter mandated mediation with an appeals court representative.
Nov. 21, 2014: Settlement of suit announced; 17 leases will be canceled.
Sources: Daily Sentinel archives, plaintiffs in lawsuit
Following are the conservation groups that legally challenged the Bureau of Land Management’s plan leading to leasing of some 55,000 acres for oil and gas development on the Roan Plateau:
Colorado Mountain Club
Colorado Trout Unlimited
National Wildlife Federation
Natural Resources Defense Council
Rock the Earth
Rocky Mountain Wild
The Wilderness Society
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