Report: Thompson Divide drilling likely to fail

The second report in as many days questioning the economic viability of natural gas leases in the Thompson Divide says the holdings are more likely to reap a loss rather than turn a profit for drillers.

The report by John Wright, a former professor at Colorado School of Mines and the author of a textbook, “Oil Property Evaluation,” follows on a report by MHA Petroleum Consultants, LLC, that found drilling there would likely be a failing proposition.

Attempting to develop oil and gas on the SG Interests leases he studied “is not an economically viable venture and that it is highly likely that any attempts to develop the leases would lead to a substantial loss of money for the operator,” Wright wrote in a report that Pitkin County, Glenwood Springs and Carbondale hope will persuade the Bureau of Land Management to treat the leases as expired.

No comment was immediately available from SG Interests, but an official with Ursa Operating Co. LLC said the report might work against the purposes of the drilling opponents.

Ursa, SG and others are negotiating with the Thompson Divide Coalition on a buyout of the leases.

“I frankly think it hurt their ability to gather the funding that they don’t have yet” for a buyout, said Don Simpson, Ursa vice president of business development. “We’re not going to sell out without some decent assurances.”

Wright’s report focused on the leases owned by SG Interests, but those held by Ursa are similarly situated and sometimes adjacent to those of SG, said Christopher Seldin, assistant Pitkin County attorney.

Pitkin County commissioned the study, asking Wright to look at the project in the most favorable manner possible to industry, Seldin said.

The study, for instance, assumes the leases would be as productive as those in the center of the Piceance Basin, as well as having the kinds of pressures associated with highly productive wells. It also compared development costs much as if the project were in the easier-to-access, lower elevation areas, Seldin said.

“And even when you do that, this play ends up losing money,” Seldin said.

Wright used a different methodology as MHA Petroleum Consultants, “but he arrives at the same conclusion,” Seldin said.

The findings were predictable, said David Ludlam, executive director of the West Slope Colorado Oil and Gas Association.

“All right already,” Ludlam said. “We get it. Rich people in Aspen don’t want drilling anywhere near them. But these self-serving attempts to devalue our member company assets ignore a stubborn fact: the best oil and gas well in the state of Colorado today was drilled a few months ago into the very shale formation the Thompson Divide Coalition is spending lots of money to discredit.”

Perhaps, said Zane Kessler, executive director of the Thompson Divide Coalition, but that’s not how the market viewed it.

“There is a reason that these leases (on the divide) sold for $2 an acre while the ones down in the Piceance sold for $15,000 to $20,000 an acre.”


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