Barrett in $60M Roan gas purchase

Hoping to settle lawsuit over leases

Bill Barrett Corp. has taken control of federal oil and gas leases sold last year for the top of the Roan Plateau, and says it is eager to settle a lawsuit challenging those leases.

That settlement could include giving up some of the leases, said Duane Zavadil, senior vice president of government and regulatory affairs for Barrett.

“There may be opportunity to give up certain leases that have a high ecological value and lower oil and gas value. Any and all opportunities for settlement are on the table at this point in time,” Zavadil said.

Barrett announced this week it has purchased a 90 percent interest in oil and gas leases on and around the plateau top near Rifle. Denver-based Barrett paid $60 million for its investment in 40,300 acres worth of federal leases owned by Englewood-based Vantage Energy.

Vantage, which will retain a 10 percent interest in the leases, paid $57.6 million for them last year. The acreage leased by Vantage includes all of the 34,000 plateau-top acres that were part of the lease sale, which was conducted by the Bureau of Land Management.

The sale to Barrett comes as the federal government, Vantage and other energy companies are engaged in settlement talks with conservation groups who sued to challenge the government’s issuing of leases covering nearly 55,000 acres on the plateau top and nearby land in August. The conservation groups hope to prevent drilling on top.

“We were a little perturbed, since we’ve been busy negotiating with Vantage now for quite some time, that no hint was given that they were up to this,” said James Angell, one of the attorneys representing the environmental groups. “But be that as it may, the essential fight, the issue remains the same, which is to try to protect the Roan Plateau from oil and gas development no matter who’s doing it.”

Steven Hall, a BLM spokesman in Colorado, said oil and gas leases are transferable, pending a review by the BLM to ensure they are in good status.

Mark Rothenberg, Vantage’s Piceance Basin project manager, declined to address the specific reasons behind the sale, calling it “just a business decision.” But he said the lawsuit didn’t come as a surprise to Vantage, which anticipated it when the company bought the leases.

He added, “We still believe that there is still tremendous potential in all of those leases.

Otherwise we wouldn’t have kept 10 percent working leases.”

Barrett already has area operations south of Silt. Thomas Tyree, president and chief financial officer at Vantage, formerly was chief financial officer at Barrett.

Barrett thinks its Roan acquisition could contain 2 trillion cubic feet of probable and possible gas resources, triple the company’s current potential resource holdings in western Colorado’s Piceance Basin. The nation consumes about 23 trillion cubic feet of gas a year.

Zavadil said Barrett believes a tremendous amount of gas can be developed on the Roan
Plateau without impacting other resources, and the current BLM Roan management plan contains strong protections for those resources. But the company is open to the idea of additional restrictions.

“We’re actively pursuing a settlement, and we also recognize that regardless of a settlement, a good working relationship with both (the U.S. Department of) Interior and the environmental community is vital for the success of this project,” Zavadil said.

Barrett hopes to begin development of the leases early next year. Parties in the case all have agreed there will be no ground disturbance related to federal oil and gas leases on the Roan before July 1. However, no companies have applied for site-specific environmental approvals, meaning there couldn’t be immediate drilling after July 1, Hall said.

The prospect of a company giving up leases also raises questions about how it would be reimbursed.

Said Angell, “We spent a lot of time thinking about that, and I think all sides figured out to their satisfaction that there were ways to get out of some of these leases if necessary and make everyone whole again.”

However, 49 percent of the proceeds from the Roan lease sale, which netted $113.9 million, already have gone to the state of Colorado, which is not a party to the legal battle. State Sen.
Al White, R-Hayden, who sits on the Legislature’s Joint Budget Committee, said the state presumably is not in a financial position to be reimbursing lease money.

“I’d be surprised if that would be available for the federal government to take,” he said.

Meanwhile, Rothenberg and Zavadil voiced continued confidence in gas development opportunities in the Piceance Basin, despite the area’s recent drilling slowdown.

“We still like the Piceance Basin. We’d like to invest all $60 million (from the sale) out in the Piceance Basin if we could,” Rothenberg said.

Vantage doesn’t currently operate in the basin but holds non-operating interests in other leases there.

Said Zavadil, “You have to be encouraged about what the future holds. It certainly won’t look like this forever, and drilling and producing in the Piceance Basin will rebound.”


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