Gas Exploration Expands in the County
by Elizabeth Covington
Jan 20, 2005 | 666 views | 0 0 comments | 7 7 recommendations | email to a friend | print
Oil and Gas 101, a full-day seminar on oil and gas development sponsored by San Miguel County in Telluride, may be the first, but likely not the last, that residents in the east end of San Miguel County hear of oil and gas development in the region.

That seminar was convened last week in response to an explosion of leases offered for auction by the Bureau of Land Management in the west end of San Miguel and Montrose counties. That large increase mirrors the Bush administration's stated intention to open federal lands to energy exploration and extraction. While the thrust for natural gas that has overrun areas like Wyoming's Powder Basin or Montana's Rocky Mountain Front or even nearby San Juan Basin has not yet hit San Miguel County, the county has recently been more in the crosshairs of gas drilling and production companies.

For its November 2003 auction, the BLM offered 36,533 acres up for lease in Colorado. One year later the federal agency offered 63,472 acres for lease and in February 2005, the BLM will offer at auction leases on 67,674 acres.

Actual production in the county has jumped dramatically. In 1999 just over one million thousand cubic feet (or mcf) of gas were produced in the county. In 2003 just over 20 million mcf of gas were taken to market.

Publicly auctioned leases are no longer limited to the far west end of the county, a relatively isolated area and traditionally the locus of gas drilling in the county. Leases of the subsurface rights of BLM property adjacent to The Nature Conservancy's middle preserve on the San Miguel River were offered for sale in the BLM's November 2004 sale, according to Mallory Dimmitt, San Juan Mountain program manager for the Nature Conservancy.

The Ah Haa School for the Arts which owns 40 acres west of Norwood on Wright's Mesa has also been contacted by a gas company. In December Bill Kirkpatrick from Tom Brown, Inc. (which was purchased by Encana USA Corp. in May), stopped by her office and brought with him and a contract titled Oil and Gas Lease, said Ah Haa School Executive Director Judy Kohin. The Ah Haa School did not sign the lease and is weighing its rights and options, said Kohin.

For the Nature Conservancy, which did not realize their preserve was at risk for exploration or drilling, a call from the Colorado Environmental Coalition that the rights had been leased was a wake up call, said Dimmitt. In the end the CEC was mistaken and the rights auctioned by the BLM were not the preserve. However, the auctioned rights were on the part of BLM land designated an Area of Critical Environmental Concern, which lies along the lower portion of San Miguel River. An Area of Critical Environmental Concern is a BLM designation for land that warrants higher levels of protection. In this case, the ACEC covers 21,000 acres of BLM-managed land designated in 1993 for its riparian and scenic values.

The subsurface rights on the Conservancy's preserve are not owned by the federal government, but are held by a private company.

In addition, the BLM lease auction offered for sale leases on property considered prime habitat for the Gunnison sage grouse.

"Mineral exploration was not excluded from uses on the [federally managed] land," said Dimmitt of the ACEC-designated land.

While Dimmitt and other environmental groups sought to have the ACEC property removed from the slate of subsurface rights up for lease, they were unsuccessful.

"With this administration it is difficult to have areas withdrawn," said Dimmitt.

Several thousand acres of the ACEC were leased for as little as $2 to $9 an acre per year to Interzone Energy, Inc., which is based in Denver. Some experts surmised that the lessee was likely "wildcatting" or gambling on the leases, hoping that in the future exploration of the gas deposits in the region would indicate that indeed there was gas on the fringes of known deposits and under the ACEC land. Or that technology could become so advanced, or natural gas prices so high, that it would be economically viable to drill on those leases.

However, at the behest of The Nature Conservancy and other environmental groups, the BLM agreed to withdraw the sage grouse habitat from auction. The Gunnison Sage Grouse is a candidate for being listed as an endangered species.

"Oil and gas companies put pressure on the BLM to offer certain places for lease," said Dimmitt. "None of the three offices [Dolores, Montrose or Grand Junction] caught the habitat which they have a national mandate to protect."

The Gunnison Sage Grouse population, which is endemic to southwest Colorado, has only 3,000 birds remaining.

"Our concern is that Dry Creek Basin is important remaining habitat for the sage grouse. Their numbers are declining and the whole basin is being rapidly developed with a network of roads and pipelines. This is fragmenting habitat," said Dimmitt. "This is going to be something that the county has to watch."

BLM auctions leases four times a year.

In fact, San Miguel County is running to catch up with gas development already proceeding in the far west end of the county, said county environment and health officer Dave Schneck, who has been appointed by the county commissioners to track gas leases and work with the Geographic Information

Systems department to map the location of the offered leases.

Encana USA Corporation has a network of wells and pipelines in Dry Creek Basin five miles south of Dry Creek on Andy's Mesa, said Schneck, who added that the county has before it two gas applications, one for a well pad and one for a gas well.

Encana USA has at least 22 producing wells in Paradox Basin, a geologic formation that stretches from southeast Utah through the southwest corner of Colorado and covers portions of Dolores, Montrose and San Miguel counties. Encana plans to drill an additional one to five wells on Andy's Mesa and 15 to 30 in Hamilton Creek, confirmed Encana spokesperson Walt Lowry. Lowry would not specify how many unexplored leases Encana held in San Miguel County, saying that such information was proprietary and confidential.

"The country has a high demand for natural gas and we do the best we can to produce the resource in a responsible manner to help meet that demand," said Lowry. "So we try to reach a balance between protecting the environment, which is one of our biggest initiatives, and drilling and supplying natural gas for Colorado and the country, for the benefit of the country. We engage with all of our stakeholders, landowners and neighbors frequently and freely."

Even so the encroachment of oil leasing in the more populated portions of the county has some concerned.
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