Four-thousand-dollar well fee will continue

A new $4,000 fee for U.S. Bureau of Land Management oil and gas drilling permits will continue to be assessed at least until early March, while Congress decides whether to keep it in place.

Some area energy developers say the fee is yet another possible deterrent when determining activity levels in western Colorado’s Piceance Basin.

“It’s just one more factor at a time when the economics in the Piceance are less than robust,”
said Doug Hock, a spokesman for EnCana Oil & Gas (USA).

A reduction in drilling already is expected locally in 2009 because of tight lending markets, low natural gas prices and stricter rules recently approved by state regulators.

Congress implemented the fee for the 2008 fiscal year in an appropriations bill signed by
President Bush on Dec. 26, 2007. Although that fiscal year expired Oct. 1, the fee was extended as part of a stopgap 2009 budget resolution that runs out March 6, said Tom Gorey, a BLM spokesman in Washington.

Williams Production RMT spokeswman Susan Alvillar said probably about half of the 500 wells Williams normally drills per year in the Piceance Basin are under BLM jurisdiction.

“That’s a pretty hefty price tag,” she said.

For 250 wells, it would amount to $1 million.

The fee has generated $28 million nationally and almost $3 million in Colorado, including $2.6 million in northwest Colorado.

Alvillar said Williams always has favored fees that expedite permit processing by ensuring enough BLM staff are in place. But it hasn’t been clear whether locally generated fee revenue comes back to the local BLM office, she said.

The BLM says the fee revenue is reimbursement to the U.S. Treasury for the estimated cost of
processing drilling permits.

Alvillar questioned the justification for charging $4,000 per well in cases in which Williams drills 22 wells on one pad, all with similar permit conditions.

Eric Wortman, a spokesman for U.S. Rep. John Salazar, D-Colorado, said the fee probably will be discussed in the congressional budget process in February, with significant administrative input.

Silt-area resident Bob Elderkin, a BLM retiree and member of the Colorado Mule Deer Association, said he supports the fee as a way of helping cover BLM costs to protect public lands during drilling.

“It costs a lot of money to do this environmental analysis and come up with ways that the companies can recover the natural gas while at the same time having minimal impact on the surface resources,” he said.


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