Firm loses challenge on expired Mesa leases

A federal appeals board has dealt a setback to an oil and gas company and a victory for environmentalists and the Bureau of Land Management in connection with three expired leases in the Mesa County portion of the Thompson Divide.

The Interior Board of Land Appeals ruled against WillSource Enterprise LLC on one aspect of the company’s ongoing battle with the BLM over three federal leases that were eliminated from a seven-lease unit in the Thompson Divide.

The BLM allows for the grouping of leases into larger units to promote orderly development, and the unit agreements lay out obligations for drilling in the unit.

Peter Hart, attorney for the conservation group Wilderness Workshop, said WillSource was granted numerous drilling extensions by the BLM over five years before the agency, at the urging of Wilderness Workshop, refused to provide another extension in 2009.

As a result, three leases were automatically dropped from the unit under the unit terms, and those leases subsequently expired in 2011 because of a failure to develop them under their individual lease terms.

The land appeals decision this week upheld a state BLM order requiring WillSource to describe lands eliminated from the unit under the unit agreement.

But it also denied WillSource’s claim that the BLM should be prevented from contracting the unit and eliminating the three leases based on a legal remedy called “estoppel.” The board said that requires showing the government misrepresented or concealed material facts upon which a party detrimentally relied, and WillSource failed to show that.

Hart says the IBLA ruling confirms that companies can’t indefinitely hold leases without using them. He said the ruling protects national forest lands that include important wildlife habitat, inventoried roadless areas, a municipal watershed and scenic aspen groves.

“It’s really a special spot, for sure,” he said.

Hart said two other WillSource appeals on the matter are still pending, but he says the challenges being pursued by the company have been frivolous.

“They didn’t timely challenge the expiration of their leases, basically, so these appeals are really an effort to reach back in time and trying to challenge decisions which they didn’t challenge,” Hart said.

Said WillSource President Reed Williams, “It’s a long, drawn-out, tedious process, one we wish that was smoother, (with) more pleasant ways of reaching compromises, but as it is, the system doesn’t allow us to do anything other than work within the requirements until we’ve fulfilled those.”

But he said WillSource looks forward to continuing to have discussions on the issue and reaching agreements in the future.

He said the three contested leases cover roughly 2,500 acres, but WillSource also continues to hold the other leases in the area.

“We believe our position is important to the economy on the Western Slope and good for business, and we think we’re an operator who can get it done in the right way. We intend to continue going down that path,” he said.

He pointed to pipeline, gas-processing and road infrastructure that is already in place in the area, and previous local drilling work establishing an oil and gas resource.

“The leases that do exist we think are well on their way to being valuable with or without the three leases and we intend to move forward. It’s just a matter of whether the three leases are part of that move forward or not,” he said.

Conservationists and other interests in the Roaring Fork Valley have been seeking to prevent oil and gas development in the Thompson Divide area, and the BLM recently canceled 25 other leases there, a decision being challenged in court.


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