Drilling project hangs on gas price

Barrett proposes 127 GarCo wells

Bill Barrett Corp. is seeking federal approval for a 127-well drilling project in Garfield County that could begin in 2015 if natural gas prices pick up enough to warrant it.

The Bureau of Land Management is seeking public comments on what’s called the Jackson Gulch master development plan about six miles southwest of New Castle. It entails drilling up to 127 wells from eight pads. All would involve federally leased minerals, tapped from a mix of BLM land and land owned by BBC’s Circle B Land Co.

BBC has an interest in nearly 1,000 wells in western Colorado’s Piceance Basin but hasn’t drilled there since 2012 due to low gas prices that caused the company to focus on oil projects in other areas. It has no plans to drill in the basin this year, said Duane Zavadil, a senior vice president for the company. He said BBC is trying to work ahead of time on the Jackson Gulch project so it can act if market conditions change.

“We would be ready to drill in 2015 if in fact pricing for the commodity is favorable. That’s kind of the objective here,” he said.

He said that given the long lead time that things such as federal approvals require, and how quickly gas and oil prices can respond to factors such as world events, the company wants to “maintain a state of readiness” in connection with Piceance projects like Jackson Gulch.

Zavadil said he knew of nothing to indicate gas prices will be recovering by 2015, but gas development at some point will be competitive again with drilling for oil.

“We just need to be ready for that day,” he said.

BBC’s efforts to rebalance its portfolio to include more oil have included selling what ultimately will amount to a 26 percent interest in its gas holdings south of Silt to Vanguard Natural Resources, LLC. Late last year, it sold its West Tavaputs natural gas holdings in the Uinta Basin in northeast Utah to affiliates of EnerVest, Ltd., for $369 million. The sale included 300 producing wells, about 35,000 acres of mineral interests and 265 billion cubic feet equivalent of proved reserves.

BBC’s Jackson Gulch project would involve up to 4.9 miles of new access roads, 4.2 miles of new pipelines and short-term disturbance of 36 acres of federal land. Garfield County Road 311 (Divide Creek Road) south of Silt would be the main access road. Pipelines mostly would follow roads.

“Generally, a mile of pipeline would be constructed in approximately 6 to 8 weeks and take approximately 15 workers,” the proposal says.

Parts of the project area contain raptor nests and elk and deer winter range. BBC wants to do year-round drilling and well completions and plans to submit a habitat mitigation plan it says would improve and expand winter habitat conditions and water availability in the area and result at a minimum of no net impacts for wildlife.

The BLM is asking for public comments by April 30 as it begins preparing an environmental assessment on the project. Comments may be sent to the Colorado River Valley Field Office, 2300 River Frontage Road, Silt, CO 81652, or e-mailed to .(JavaScript must be enabled to view this email address).

The proposal and a project map are available at that office or at http://www.blm.gov/co/crvfo.

The Jackson Gulch project would involve drilling in the Mesaverde sandstone formation that’s typically targeted by local gas developers. Zavadil said that given current gas prices and BBC’s oil emphasis, the company has no immediate plans to do exploratory drilling into the deeper Mancos/Niobrara shale formations where other companies have drilled highly productive gas wells.

BBC is among the energy developers keeping an eye on the growing interest in exporting liquefied natural gas, sparked partly by concerns about Ukraine’s vulnerability due to its reliance on gas from Russia. Zavadil said he doesn’t think exports could shore up gas prices as early as 2015 due to the time required to deal with infrastructure and permitting.

But he sees it as a “bright spot on the horizon” that should have a material effect on prices in future years.

“We would hope it would have the effect of making these resources more feasible (to develop), more viable, but it is very much a long-term prospect,” he said.

At a recent open house in Silt, Don Simpson, vice president of business development at Ursa Resources Group II, another local gas producer, voiced ambivalence toward the idea of gas exports. He called construction of LNG plants “an expensive proposition” and said a supply of multiple trillions of cubic feet of gas is needed to make it work.

He added, “Part of me wants to say, keep it here in the U.S, but it’s a global economy now, right, so maybe in certain instances you want to export it.”


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