SALT LAKE CITY — This month's federal oil and gas lease auction will be a crucial first test in Utah of new environmental mandates implemented by Interior Secretary Ken Salazar.
Even though the 11 parcels snatched up by a pair of companies have gone through environmental analysis by the Bureau of Land Management prior to the auction, the Southern Utah Wilderness Alliance and other groups lodged a protest.
That protest could result in a courtroom battle where a judge would determine if the BLM did an adequate amount of review up front.
The sale was a record-setter, too, for the amount of money paid per acre: $12,100 by Bill Barrett Corp. for 811 acres in Carbon County in the West Tavaputs Plateau area. In all, after XTO bid $18.6 million on another 1,751 acres, the sale will generate $49.4 million for the agency, with about half that revenue being returned to the state.
"This is the best sale we've had as far as the maximum price per acre," said Kent Hoffman, the agency's deputy director of the land and minerals division. "Getting this kind of money on just six parcels is certainly a record."
Those six of the 11 parcels that were bid on were part of the 77 parcels Salazar yanked in 2009 after a controversial auction in Salt Lake City. That December 2008 event was marred by protesters out on the street and spoiled by phony bids made by environmental activist Timothy DeChristopher. He has since been convicted of two third-degree felonies in connection with the fraudulent bids and is serving a prison term in California. His convictions are on appeal.
Hoffman said the parcels offered this month have been altered since the 2008 auction, with some changes made that include considerations for sage grouse habitat.
"They have been slightly reconfigured from the original 2008 parcels," Hoffman said. "Some have been enlarged to pick up certain areas or trimmed off to not include other areas."
The successful auction, Hoffman believes, marks a turning point in the agency's slow crawl of releasing parcels — a pace that necessarily was brought on by Salazar's new reforms.
"This is the tip of the iceberg that we are working on in terms of trying to free up some of these backlogged parcels. The logjam is starting to break loose," he said.
The 2010 reforms are resulting in a much longer period of time for parcels to be offered at auction, though industry interest is on the uptick, Hoffman said.
"That interest is increasing slightly, but our ability to offer parcels is down," he said. "It is a fine sieve and not a lot of parcels make it through the sieve." Hoffman said an indication of that agency slowdown is the disparity between the number of parcels the industry nominates for possible development and the actual number of parcels the agency is able to release for bid — which is substantially lower.
For Hoffman, the November auction reinforces the strong amount of interest that oil and gas developers have in the Uinta Basin region.
"This sale shows that if we go through the process and implement these reforms, we can come up with a decent lease sale where there is sufficient interest by industry," Hoffman said.
Kathleen Sgamma, government relations director for the Western Energy Alliance, said she is not greatly encouraged by the results of November's auction.
"I do not think this is any kind of turning point," she said, pointing to the nearly three-year lag time it took for the federal agency to offer just six parcels.
Upfront environmental reviews, too, apparently are not satisfying critics of the oil and gas lease sales.
"We have gone through the entire reform process," Hoffman said. "We still have the specter of a protest hanging over us."
Sgamma, whose group represents 400 independent oil and gas companies in the West, said that trend is duplicated in other states. "We have not seen a significant reduction in protests in the Rockies" as a result of the May 2010 reforms, she said.
In this protest filed by the groups, the BLM is accused of failing to take into account noise that would result from drilling activity, visual impacts to the scenery and increases in ozone pollution in the region that would happen.
The groups also assert oil and gas development on the parcels will add to regional dust, which could contribute to early snowmelt. Additionally, protesters say there are several rare and imperiled plants in the area where mitigation efforts by the companies may not be sufficient to protect them.
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