Amid talk of oil play, Wyoming nets record lease sale

 Associated Press

The U.S. Bureau of Land Management auctioned off a record $32.3 million in federal oil and gas rights in Wyoming amid speculation that a major oil play could be in the offing in the eastern part of the state.

Tuesday’s quarterly lease sale in Cheyenne broke the previous record of $30 million set in April 2008 and was three times the total paid for all leases in Wyoming last year.

The leases with the highest bids were in Converse, Goshen and Platte counties in eastern and southeastern Wyoming. Applications to the state to drill oil wells have surged in southeastern Wyoming in recent months.

“Obviously the people that are bidding on these acreages have a lot of confidence in the area and think the play is going to be a really great oil play for the state,” Bruce Hinchey, president of the Petroleum Association of Wyoming, said Wednesday.

The highest single bid at the BLM auction was $5.4 million for the rights to 1,724 acres in Converse County, northeast of Casper. That also set a record, topping the $4.5 million paid for a single lease in 1999, according to the BLM.

Maurice Brown, of Cheyenne, submitted the record-breaking bid, as well as the winning bid of $1.7 million for the rights to 560 acres in Converse County.

Big Bear Oil & Gas, based in Pleasanton, Texas, won a handful of high-priced leases including $2.2 million for the rights to 1,400 acres in Goshen County northeast of Cheyenne.

“It looks fantastic,” said Cindy Mercer, a certified public landman who represented Big Bear at the sale. “The potential appears to be there.”

The state has granted companies including EOG Resources Inc. more than two dozen permits in recent months to drill deep, horizontal oil wells into the Niobrara shale formation north of Cheyenne. New drilling technology used in North Dakota’s geologically similar — and booming — Bakken formation has led to speculation that a similar boom could happen here.

The Niobrara shale extends beneath western Nebraska and northeastern Colorado, as well as southeastern Wyoming.

When the BLM will issue the leases sold Tuesday is uncertain. The office in Wyoming has issued just 51 out of more than 1,200 leases auctioned off in the past two years.

BLM officials blame the backlog on protests filed by environmental groups, policy changes resulting from the change in presidential administrations, and environmentalist petitions to protect certain species as endangered.

AP – Cheyenne 

Environmental protests, uncertainty over endangered species and a change in presidential administrations have bogged down oil and gas leasing in Wyoming.

The U.S. Bureau of Land Management has issued just 51 of nearly 1,200 oil and gas leases sold at its 11 lease auctions since June 2008.

The backlog prompted Gov. Dave Freudenthal to “implore” Interior Secretary Ken Salazar, a fellow Democrat, to act in a January letter. Yet the backlog is likely to grow when the BLM holds its next lease auction today.

Of the 85 leases the BLM plans to offer at the regular sale in Cheyenne, environmental groups are protesting 62. If previous auctions are any indication, that means at least 62 more leases in limbo — none of the 51 leases recently issued was protested.

Environmental groups have protested 1,297 of 1,351, or 96 percent, of leases offered from the June 2008 sale through the upcoming sale, BLM documents show.

“No wonder companies are taking their money and investing in other states that have private land, where they don’t have to deal with this bureaucracy and politics,” said Bruce Hinchey, president of the Petroleum Association of Wyoming.

Oil and gas leasing in Wyoming provides a significant share of the nation’s energy. The state in 2008 ranked second among states for natural gas production, providing more than 10 percent of the U.S. total, and ranked seventh for oil production, according to the U.S. Energy Information Administration.

Environmentalists defend the protests as necessary to protect Wyoming’s wildlife and cherished vistas. They expressed doubt that the protests are slowing down drilling.

“The oil industry has enough leases in its pocket now to drill for decades. So the idea that somehow a scarcity of oil and gas leases is holding up energy production is laughable,” said Erik Molvar, executive director of the Biodiversity Conservation Alliance.

Not only are companies unable to drill on leases they’ve bought, the state and federal governments haven’t had access to the $50 million companies have paid.

Half of the money would go to the state and half to the federal government. Both are having budget trouble, yet the money has been piling up in an escrow account pending a BLM decision on whether to issue the leases.

“I implore your immediate attention to these unissued leases,” Freudenthal wrote Salazar on Jan. 8. “Some would say that the oil and gas industry is getting what it deserves. But this is much too serious an issue for such pettiness.”

A reply letter from Assistant Interior Secretary Wilma Lewis said the leasing process is “broken” and the department is working on a way to “restore needed balance.”

Salazar spokeswoman Kendra Barkoff did not respond to a request for comment.

Julie Weaver, the BLM’s head of oil and gas leasing in Wyoming, said she expects the backlog to end soon, especially now that the U.S. Fish and Wildlife Service announced in March that it would not list sage grouse as a threatened or endangered species. Most of Wyoming, including its best oil and gas fields, is sage grouse habitat.

Even so, Fish and Wildlife determined that protection for sage grouse is warranted, just precluded by higher priorities. That didn’t exactly open the gate for leases.

“We had to go back and re-evaluate everything to make sure that we are complying with the Fish and Wildlife decision to warrant that animal,” Weaver said.

The BLM auctions offer oil and gas leases every other month in Cheyenne. Environmental groups began stepping up protests against the leases a couple years ago.

Groups have protested not just leases in sage grouse habitat but leases they said could affect a wide range of wildlife — prairie dogs, raptors, big game migration corridors and fish. Some protests have focused on climate change.

“We must address a protest before we can issue a lease,” Weaver said. “And we have protests on every sale, different parcels in every sale, that we’re trying to resolve.”

She also said the change in presidential administrations has required the BLM state office in Cheyenne to adjust to new policies.

On Thursday, environmental groups stepped up pressure on the BLM by suing over the BLM’s plan for oil and gas development in southern Wyoming. The area includes Adobe Town, a “wilderness quality” badlands where the groups say the BLM has approved five drilling permits.

The groups, represented by the Natural Resources Defense Council, include the Biodiversity Conservation Alliance, which by itself or with others has protested more than 90 percent of leases offered over the past two years. Other plaintiffs include the Wyoming Outdoor Council, which has protested leases offered at every sale over the past two years.

Wyoming Outdoor Council attorney Bruce Pendery said his group used to be one of the few that would protest oil and gas leases in Wyoming. Now, he said, a range of groups have been protesting leases.

“To me, what that speaks to is that there was this massive effort to increase oil and gas leasing during the Bush administration,” Pendery said. “Because of that massive effort to increase leasing, there was an equally massive response.”

Other groups that have been protesting leases include the National Audubon Society, Theodore Roosevelt Conservation Partnership, Trout Unlimited, Center for Native Ecosystems and Wyoming Wildlife Federation. Sometimes the groups object to just a handful of leases.

Other times, it’s every lease offered at a sale, as the Biodiversity Conservation Alliance has done eight times in the past two years.

“Our goal here is to get results on the ground for wildlife and for special landscapes,” Molvar said. “Not to prevent the oil and gas industry from gaining access to oil and gas leases.”

Will Drill Up to 100 Additional Wells on Anticline – Readies Bakken

BY: GERRY MINICK

Questar Corporation plans to drill between 95 – 100 additional wells on Wyoming’s Pinedale Anticline, and is moving forward to separate off its exploration and production business from the regulated utility arm of the company pending approval of the Board of Directors.

CEO Keith Rattie said the split is intended to separate the regulated parts of the company that provide steady but conservative returns from the more volatile drilling business, which has grown rapidly in recent years.

The E & P unit accounted for about 34 percent of the company’s net income in 2009. Tentatively named E&P Co.,  the new entity would be comprised of the commodity businesses, Questar E&P, Questar Gas Management, and Questar Energy Trading.

After the spinoff, Questar Corp. would remain an integrated natural gas company, comprised of Wexpro, plus our regulated businesses, Questar Pipeline, and Questar Gas.

 “A separation of our high-growth E&P business from our regulated businesses may be a logical step in a long-term strategy that has served all Questar stakeholders well over the past decade,” Rattie said in the statement. “If consummated, we believe the spinoff would create two top-tier companies in their respective market segments.”

Shareholders would get an equal value of shares in both companies, Questar Corp. and would be headquartered in Denver.

Subject to Board approval and other conditions precedent, the spin could occur in the third or fourth quarter of this year.

“Bottom line, we think that a spinoff of our E&P business would create two top tier companies in their respective market segments. Over the past decade, you’ve seen what we’ve done to transform Questar by driving growth in our E&P business. We’ve transformed Questar E&P from what was once primarily a Rockies producer into a multi-basin growth company operating in several of the most economic natural gas plays in the country today. And in doing so, we’ve delivered double digit reserves and production growth while maintaining one of the lowest cost structures in the industry.  We think that E&P Co would continue to be one of America’s fastest growing E&P companies.”

The transaction would not require the approval of federal or state regulators.

By the Numbers:

Pinedale Anticline:

• 95-100 new completions forecast for 2010
• Completed well cost below $4.5 MM
• 6 Questar operated rigs in 2010

Bakken

• 7th operated well drilling
• 1 operated rig in 2010
• Three Forks Fm to be tested in 2010

Social Justice Center provides forum for green groups sans rebuttal

BY: GERRY MINICK

 A recent article in the Laramie Boomerang lauded the Powder River Basin Resource Council/Wyoming Outdoor Council (http://www.laramieboomerang.com/articles/2010/04/09/news/doc4bbeb7e9a0832451532947.txt) presentation during a symposium on Environmental Social Justice at UW in late April.

The writer described how, according to the PRBRC and WOC, their members in the Powder River Basin are being forced to bear the burden of energy development.

Here’s an exerpt of the story:

“Environmental social justice is the theme of this year’s symposium, something University of Wyoming president Tom Buchanan said was “important, relevant and connected to all of us.”
During a panel discussion in the Wyoming Union, Steve Smutko, the Wyoming Excellence Spicer Distinguished Chair in Environment and Natural Resources, framed the symposium’s theme as a question:
“How is it that your decision to alter our environment for the benefits we receive… how does that affect those who are predominantly or repeatedly asked to bear the burdens of our comfort?” he said. The question becomes more difficult when trying to weigh moral or social consequences against economic development, or even environmental consequences.”
In the Powder River Basin, Jill Morrison has seen her neighbors bear the burden of energy development. A community organizer for the Powder River Basin Resource Council, Morrison talked during a panel discussion about ongoing issues there.
“We have to shovel a lot of excuses from energy developers and the state for why they can’t do a better job protecting our land, wildlife and air while we develop these important resources,” she said.
Richard Garrett, a legislative and outreach advocate for the Wyoming Outdoor Council, said the state should take a stand about the water that’s wasted and the damage it does in the process.
“We’re wasting a resource, and we are polluting the ground over which that resource flows, and we have an obligation to do better with that resource,” he said.

There are many facts missing from the symposium and from the story, none the least of which there was apparently no attempt by Mr. Smutko nor the Laramie Boomerang to fully frame the discussion by challenging PRBRC/WOC’s assertions; to offer opposing landowner viewpoints; or to explore the social and environmental injustices when special interest groups run rampant over public policy.

Incidentally, Mr. Smutko is facilitating a WDEQ working group that is supposed to be looking for consensus solutions on the Agricultural Use Protection Policy. 

The story prompted some rebuttals, and created some questions, like why did the symposium organizers assume that environmental injustice occurs only how and when the PRBRC/WOC says it does?  If the goal of the symposium is to stimulate thought and discussion, why weren’t those with other viewpoints invited to speak? Is there an agenda at work that may be counter to the mission of resolving differences on the WDEQ working group?      

Comments:

concerned citizen wrote on Apr 9, 2010 12:24 PM:

” What this story DOESN’T mention is that the PRBRC is BY FAR THE MINORITY in the PRB!!!! The MAJORITY of landowners (both surface and mineral owners) think CBNG development is a huge benefit to them that have changed their ranches for the BETTER!
They say development saved their ranches in the drought years and they will reap benefits from the methane years and year s after the development is gone. The reclaimed land looks better than it did in the first place. It is a win-win situation! The PRBRC is really just 4-5 landowners vs. 100′s that love it! ”

And, received from Monica Deromedi, executive director of the Coalbed Natural Gas Alliance:

More to Wyoming’s energy development

The Laramie Boomerang’s story, “Symposium focuses on education, energy” is missing many facts about Wyoming energy development. According to the article, it seems as if  the University of Wyoming unfortunately took part in delivering a less-than-the complete representation of the facts to our youth.

The first paragraph says the Shepard Symposium taught children about, “… the burden of energy development on rural Wyoming residents.”

It uses words to imply Wyomingites think energy development is a burden. The word ‘burden’ should have been ‘benefit’.

To the vast majority of state residents, the energy industry means jobs and tax revenue. In a recent poll (done by an outside polling agency), 89 percent of Wyoming residents supported oil and natural gas exploration and production activities in our state. See the survey at www.cbnga.com.

Development co-exists with our agricultural operations, our environment and our intrinsic way of life. Technology is ever-changing to allow energy development with the smallest footprint possible.

In the 2009 tax year, Wyoming received nearly 3 billion dollars only from coalbed natural gas development in the Powder River Basin.

A large percentage of this money goes directly to education and to improve our way of life in Wyoming — our roads, our facilities, hospitals and schools are thanks to energy development.

The Powder River Basin Resource Council speaks for only a handful of landowners in Wyoming. They have endless grants from out-of-state donors, allowing their ‘squeaky wheel’ to be heard.

Through kitchen table discussions, industry and landowners cooperate openly and honestly to create long term relationships and plans for ranches, plans that improve the ranch in ways that the most ranchers could never do on their own.

It is unfortunate UW allowed the PRBRC to use their forum to teach our children things that aren’t true about energy development. Without energy development, the children wouldn’t have schools to sit in, Hathaway Scholarships, top-notch infrastructure, renowned teachers and personal lap-tops for students.

UW should have forums that instead teach our children to be proud of how we manage our natural resources because it is something to be proud about in Wyoming.

Monica Deromedi

Task Force Seeks to Restore the Constitutional Balance of Power

WASHINGTON, D.C. – U.S. Representative Cynthia Lummis (R-Wyo.) and ten other Members of Congress officially launched the newly formed 10th Amendment Task Force.  The Task Force will develop and promote proposals that aim to disperse power, decision-making, and taxpayer money from Washington back to states, local governments and individuals. 

 The following are excerpts of Representative Lummis’ remarks during the 10th Amendment Task Force press conference:

“It’s a shame that it takes a financial crisis to finally motivate Washington to read the directions. You know the old saying, ‘when all else fails read the directions.’  And the directions are in our Constitution. And the Constitution– after we had the Declaration of Independence reminding us that we were endowed with inalienable rights by our Creator, and that we were consenting to be governed by this unified government under the Constitution — giving that government in Washington limited powers so we would protect our borders, we would defend our country, and we’d deliver the mail.

“It was contemplated that other powers would be reserved to the states and the people. And as someone who has spent her entire adult life before coming here in the Wyoming Legislature and as State Treasurer, and as the Director of State Lands and Investments in Wyoming, I am astounded by what Members of Congress feel are appropriate issues for this Congress to deal with.

“The issues we deal with every day are by and large issues that were intended by the framers of the Constitution to be addressed at the state level. And that’s because states know their people better. They know their issues better.

“It’s important that we return to states what states do best. And that we have a strong limited government here in Washington to make sure that we do what we do best — securing the strength and integrity of this country.”

Local Government Cautious – Greens Outraged

BY: GERRY MINICK

Utah has apparently gotten the attention of the Obama Administration with what is being termed “message legislation.”

Like several other states, including Wyoming, Utah lawmakers feel that the federal government is over-reaching. They passed a law in March allowing the state to use eminent domain to take federal land and secure state access to coal and other resources.

The legislative effort was spurred on by the leaked “Monument Memo,” which detailed plans by the administration to bypass local input and designate additional monuments in the Beehive State.

The Department of Interior quickly issued a statement, saying the memo was nothing more than “brainstorming.”    

Governor Gary Herbert quickly signed the bill into law, prompting typical cries of outrage among environmentalists.

Meanwhile, Herbert had been urging Secretary Salazar for months to visit the state to discuss collaboration on land use issues.

Herbert and a slate of local governments have worked for months to resolve hostilities generated at the local level by Interior’s decision to rollback oil and gas leases issued during the Bush administration.       

Salazar said he “got the message” and will work to open dialogue about access. And he promised to listen to Utahns “on the ground” before designating more national monuments; that he is willing to collaborate and find a way forward on the question of whether Utah counties or the feds have jurisdiction over roads on public lands.

Current law requires local government to prove right-of-way claims in court.  

For his part, Salazar adopted a conciliatory tone, and the response from most attendees was cautious, but hopeful, though the public comment portion of the meeting was cut short.     

Mike McKee, a Uintah County Commissioner, has had an ongoing dialogue with Interior since the decision to rescind the Utah leases. Locals say the decision has had a disastrous effect on the economy in Eastern Utah.  

He attended the meeting and news gathering on Monday and said that he is encouraged to know there is an open dialogue with regard to the ongoing problem surrounding 77 Utah energy leases suspended in early 2009.

Investor sues Brown Publishing; accuses “shell game”

BY: Gerry Minick

The parent company of the Wyoming Business Report, Brown Publishing Co., has filed for Chapter 11 bankruptcy while allegations of corporate wrongdoing are swirling in an Ohio court.  

Cincinnati-based Brown Media Holdings, Brown Publishing Co. and related subsidiaries filed a request for protection in U.S. Bankruptcy Court for the Eastern District of New York.

Brown is attempting to sell essentially all of its assets to a bidder that would involve all of the companies’ assets in Ohio, Colorado, New York, Texas, South Carolina, Illinois, Iowa, Utah, Arizona and Wyoming.

Other subsidiaries named in the filing include Boulder Business Information LLC, Utah Business Publishers LLC, Texas Business News LLC, Texas Community Newspapers Inc. and Upstate Business News LLC.

Brown has asked for court approval of several motions, including $2.5 million of debtor-in-possession financing, use of cash collateral, maintenance of employee payroll and health benefits and continuation of the companies’ cash-management systems. Granting those motions would enable the companies to continue to operate as normal pending the sale, the press release stated.

Executives named as defendants

 Meanwhile, West Coast investment firm Windjammer Capital Investors alleges in a lawsuit that the family-controlled Ohio chain shifted its newspapers and other assets to shell companies and was preparing a bankruptcy filing — all with the aim of keeping the firm from collecting at least $9 million under a stock warrant agreement.

Acting on a request in the lawsuit by Windjammer, an Ohio judge issued a temporary restraining order in the case — but later lifted the order while denying Windjammer’s request for a preliminary injunction against Brown Publishing and several executives named as defendants.

Brown Publishing, the lawsuit says, “initiated a scheme of trying to move assets between shell companies in order to avoid contractual and fiduciary duties to Windjammer.”

Windjammer alleges that without its knowledge, Brown Publishing created a new limited liability company called Business Publications, and that on March 20, again without notice to Windjammer, Brown Publishing’s board of directors approved a “sale” of all the company’s assets to Business Publications. Other shareholders were aware of the transfer, and approved a bankruptcy filing.

“The sale would not include any payment to Brown Publishing and would leave it an empty shell with no assets,” the lawsuit says. The suit was first reported by Cincinnati Enquirer reporter Mike Boyer.

Judge Steven E. Martin instructed Brown Publishing to provide Windjammer with documents and records relating to the transfer of assets to Business Publications and any sale or proposed sale of assets to Business Publications.

“If Brown Publishing is permitted to consummate the asset transfer with its insiders, it will render Brown Publishing insolvent and unable to satisfy its obligation to Windjammer,” the lawsuit says. “Brown Publishing’s shareholders, other than Windjammer, appreciated that fact because they voted to authorize Brown Publishing to file for bankruptcy.”

Learning of the transfer, Windjammer said that on March 27, it exercised a “put” option under which it says it must be paid “the greater of $9 million or the fair market value” of all exercised and unexercised shares under its warrant agreement.

Bark beetle epidemic tops Cheyenne agenda

“This is a great opportunity for members of Congress to gain on-the-ground knowledge of the challenges Wyoming’s farmers, ranchers and forest managers are facing.”

WASHINGTON, D.C. – U.S. Representative Cynthia Lummis (R-Wyo.), member of the U.S. House Agriculture Committee, today announced that the committee will be hosting a full Congressional field hearing to review farm and ranchland conservation, forest health, and the bark beetle epidemic. The hearing is scheduled for Tuesday, May 4 at 8:00 a.m. (MT) at Laramie County Community College, Center for Conferences and Institutes, Centennial Room 130.

 “I am pleased the House Agriculture Committee decided to hold this important hearing, and am particularly grateful that they accepted my invitation to come to Wyoming to discuss the bark beetle epidemic that is ravaging our forests. The heart of Wyoming’s economy is based in natural resources and agriculture. This is a great opportunity for members of Congress to gain on-the-ground knowledge of the challenges Wyoming’s farmers, ranchers and forest managers are facing.

“We must work together and find smart solutions that adapt to our changing world. And we must ensure that Washington doesn’t interfere with more red tape and regulations. As a rancher, I fully understand the far-reaching effect the federal government can have on the livelihoods of our ranchers and farmers.

“As Farm Bill negotiations near, I will see to it that Wyoming’s priorities remain at the forefront. We need fair treatment of Wyoming’s producers so that they have every opportunity to successfully compete in a global marketplace. In addition, we must see to it that the Forest Service has every available tool to increase their efforts to mitigate the impact of Bark Beetle on Wyoming’s forests.”

The Committee will hear testimony from two panels. The first panel will focus on forest health and bark beetle. A second panel will focus on farm and ranchland conservation.

The hearing is open to the public.