Report questions Thompson Divide drilling potential
A 221,000-acre area that a coalition is trying to protect from drilling southwest of Glenwood Springs probably doesn’t have commercial volumes of oil and gas and any drilling there would likely fail “and leave lasting visual scars on a pristine landscape.”
That’s according to a new analysis conducted for the Thompson Divide Coalition by MHA Petroleum Consultants, LLC, which recommends valuing federal leases there based on the cost of lease sale and rental fees.
The coalition previous used exactly those criteria in making a $2.5 million offer to lease holders in the Thompson Divide area to buy the leases. But companies have dismissed the offer as far too low due to other expenses they have incurred for the leases and the potential value of their development.
Reed Williams, president of Willsource Enterprise, LLC, which holds leases covering some 8,500 acres on the western edge of the Thompson Divide area, said Wednesday, “We are very comfortable, with our many years of analysis, that we understand the economic potential of the region and we think it’s very glamorous.”
The analysis says that some leases may involve geological formations that are gas-free because they are on the far eastern edge of the Piceance Basin, a region that has seen heavy gas development farther west. It also points to challenges such as seasonal closures and other drilling restrictions and lack of road and pipeline infrastructure. It cites a separately prepared engineering estimate that improving an access road south of Silt could cost up to $28 million.
Said David Ludlam, executive director of the West Slope Colorado Oil and Gas Association, “This is merely the latest slurry of self-serving gimmicks being used to strip our member companies of their valid and existing property rights.”
He and Williams both pointed to the success that WPX Energy and other companies have been having elsewhere in the Piceance with exploratory drilling in the Mancos shale formation. Ludlam noted that the report acknowledges that not enough is known about the potential of that formation.
Thompson Divide Coalition director Zane Kessler said the report specifically considered the Mancos potential and estimated that 40 successful Mancos wells would have to be drilled just to cover road costs, which isn’t economically viable.
He considers the report’s estimate of the lease values important as the coalition continues to negotiate with energy companies over a possible buyout.
“For us this is a business transaction and we couldn’t just take the industry’s word” for what the leases are worth, he said.