McInnis: Barrett knew Roan risk
Energy company Bill Barrett Corp. knew it was taking a gamble in buying legally disputed oil and gas leases on the Roan Plateau, and local communities shouldn’t have to pay for its losing bet, the executive director of Associated Governments of Northwest Colorado says.
Scott McInnis made the comments Monday in outlining for Garfield County commissioners the association’s opposition to any Roan lease litigation settlement that carries financial costs to local communities.
Barrett is seeking reimbursement for any leases it ends up giving up in a settlement. The settlement being negotiated envisions that any lease reimbursements made by the federal government would be more than offset by the royalties resulting from development of remaining leases in the 2008 sale.
Associated Governments says the reimbursement could result in local governments not receiving some federal royalty-related revenue that would rightfully be theirs. McInnis says that would leave the governments on the hook for risk assumed by Barrett.
“Barrett went into this with their eyes wide open” and knew what the risk was, he said.
The settlement talks involve a lawsuit brought by conservation groups in connection with the Bureau of Land Management’s plans to lease about 55,000 acres on the plateau west of Rifle. The 2008 lease sale netted nearly $114 million.
A federal judge in 2012 found fault with aspects of the BLM’s management plan that led to the lease sale, and the BLM is undertaking an overhaul of that plan. Meanwhile, Barrett has appealed the ruling.
The lawsuit has centered on leasing on the plateau top. Those and nearby leases initially were acquired by Vantage Energy for $57.6 million, and in 2009 Barrett acquired a 90 percent interest in them for $60 million.
Barrett representative Doug Dennison told Garfield commissioners Monday that Barrett hopes to keep some Roan leases, and only wants to be reimbursed for the cost Vantage paid for any leases it gives up. That also doesn’t account for legal, debt-related and other costs associated with the leases, he said.
“It’s definitely not a winning situation for us,” he said.
He said McInnis is right about the risk Barrett assumed in buying leases before the lawsuit had been ruled on.
But between that ruling and the BLM’s new planning process, “We look at it as the landscape has changed so significantly … that there’s no end in sight,” he said.
“The intent on our part is to try to break the logjam.”
That logjam also affects 2008 leases below the Roan Plateau rim owned by other companies. David Ludlam, executive director of the West Slope Colorado Oil and Gas Association, said a settlement at least would “shake loose” those bottom leases, and it’s important to consider the production value that would come from development on leases where drilling could proceed under a settlement.
Dennison said Barrett doesn’t want to be secretive regarding the negotiations, but as a party to the litigation has to be careful how much it shares with local governments.
“We’ll stand by you guys every step of the way to try to make this as palatable as possible,” he said.