Issues simmer over oil, gas leases

A recent attempt to settle oil and gas leasing bid collusion allegations led to a wide-ranging airing of grievances related to the industry in general and one billionaire-owned company in particular.

Public comments submitted to the Department of Justice in a case involving Gunnison Energy and SG Interests covered the gamut from controversy over proposed drilling in the North Fork Valley and in the Thompson Divide area west of Carbondale, to an intra-industry legal dispute over pipeline access, to comparisons of the treatment of a Utah environmental activist to that of Gunnison Energy’s owner, Bill Koch.

Even issues surrounding Koch’s Bear Ranch property near Paonia Reservoir were pulled into the collusion case fray before U.S. District Court Senior Judge Richard Matsch this month rejected a Department of Justice proposal to let the two companies pay $275,000 apiece to settle the case. While finding a lot of the concerns raised to be not germane to the case, Matsch agreed with some commenters that the amount was inadequate to deter such actions in the future.

Seventy-six comments were submitted on the proposal, and one them was from Gunnison Energy. It took issue with comments made about the case to the government, and in other venues such as in blogs and newspapers, alleging it had violated antitrust laws. Neither company admitted fault under the proposed settlement.

Gunnison Energy “is a good and respected corporate citizen by all accounts other than certain isolated anti-industry activists. It values its reputation, which these activists have smeared, including with actionably defamatory publications,” the company letter said.

Settlement criticized

At issue are 3,650 lease acres SG Interests acquired in a 2005 Bureau of Land Management auction, under an agreement in which Gunnison Energy then acquired a half-interest. Gunnison Energy has contended it had entered in a legal, joint bidding arrangement.

Many commenters questioned letting the companies off with what they called a slap on the wrist compared to Tim DeChristopher, who was sentenced to two years in prison after successfully bidding on leases in Utah with no intention of paying for them.

“Why is Bill Koch walking free for a much larger offense?” Mary Smith of Hotchkiss wrote.

In a court response to public comments, the Department of Justice said its decision to pursue civil rather than criminal action was “based on a full and complete investigation of all the facts and circumstances.”

Scott Thurner was an officer with Riviera Drilling & Exploration Co., which had sued Gunnison Energy and SG Interests, claiming they illegally denied Riviera access to pipelines they owned in the Ragged Mountain area.

He wrote, “Penalties and fines that cost them less than what it cost William Koch and Russell Gordy (of SG Interests) to purchase fuel for their private jets for less than a year are not going to impress upon them the fact that they must comply with the law.”

The Riviera lawsuit was dismissed after it filed for bankruptcy and couldn’t obtain new legal counsel.

Game of Monopoly

In a joint letter, NFRIA-WSERC Conservation Center, Wilderness Workshop and High Country Citizens’ Alliance representatives said one of the lease parcels underlies part of ranch acreage Koch later acquired. They said any settlement should take into account that he may have been able to buy the land for less because his company controlled subsurface minerals that if developed could affect the land’s value, and that he since has been able to make extensive improvements to the property with the security of controlling the mineral development.

Ed Marston of Paonia noted in his letter that Koch has been seeking approval for a federal land swap to consolidate his ranch holdings.

“I cannot begin to figure out what is going on, but it does seem that some gigantic game of Monopoly is being played with private land and federal land and natural resources in the Ragged Mountain Basin,” wrote Marston, an opponent of the proposed exchange.

Meanwhile, Geoffrey Levens of Paonia objected to Gunnison Energy and SG Interests being “levied very small fines and allowed to keep what they had essentially stolen from the people, and the local and state governments.” Most of his letter went on to express general concern about the potential impacts if the BLM proceeds with plans to lease tens of thousands of acres for oil and gas development in the North Fork Valley.

Judge’s reaction

Pitkin County supports a coalition effort to try to prevent drilling on more than 200,000 acres in the Thompson Divide area, which includes part of the county. In contending that the settlement is too lenient, its letter worried that SG’s winning bids on lease parcels in Pitkin County “may have been the product of similar illegal activity” to what is alleged in the collusion case.

“The government has an obligation to deter oil and gas companies from illegally acquiring and operating leases in Pitkin County,” the county said.

In insisting on its innocence in its letter, Gunnison Energy said “the cost of defending itself would far exceed the cost of settling.” But Matsch found that the company’s letter exhibited “unrepentant arrogance” and said it would be not in the public interest “to approve a final judgment that permits a defendant to leave its civil action in such a smirking, self-righteous attitude.”

Gunnison Energy concluded its letter by saying, “Gunnison Energy supports the settlement, but stands ready to defend itself if the settlement is not approved.”


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