Amid controversy, Interior cancels Thompson Divide oil and gas leases

By Daniel Enoch and Jodi Delapaz

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Nov. 23, 2016 - Federal officials and Colorado Gov. John Hickenlooper last week tried to put an end to a longstanding dispute by announcing the cancellation of 25 oil and gas leases in Colorado's White River National Forest.  But the company holding many of the leases promises to challenge the decision in court.

The decision, which may have allayed some concerns of environmental groups and community organizers about potential development in the forest's Thompson Divide, was announced on Nov. 17 by Hickenlooper, Interior Secretary Sally Jewell and Bureau of Land Management (BLM) Director Neil Kornze.  

“This resolution strikes the right balance by protecting one of Colorado's most spectacular places and important watersheds, and ensuring that any future development is done responsibly and held to high standards,” Jewel said.

The Thompson Divide encompasses some 221,500 acres of federal land on the eastern fringe of the natural gas-rich Piceance Basin. The U.S. Geological Survey estimates that the formation holds 66 trillion cubic feet of natural gas, the second-largest assessment of potential shale and tight gas resources that the agency has ever conducted.

“This is a resolution that protects the beautiful environment of the Thompson Divide, that acknowledges the investments companies have made in the area and lets people get back to business,” says Hickenlooper. He says the decision reflects the hard work of local governments, industry, engaged residents and federal partners to reach a “balanced solution.” Hickenlooper has previously described the area as Colorado's “crown jewel.”

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Sen. Michael Bennet, D-Colo., who introduced the Thompson Divide Withdrawal and Protection Act in 2013 in response to bipartisan requests from Colorado communities and local governments, notes that ranchers, sportsmen, outdoor enthusiasts and elected officials who live in the area's communities feel that speculative leases in the Divide jeopardize their local economies. 

“Today's announcement is a significant step towards addressing those concerns,” says Bennet.

BLM analyzed some 65 oil and gas leases, located primarily on lands managed by the White River National Forest. The Department of the Interior (DOI) says the Record of Decision (ROD) puts in place appropriate environmental protections for the “pristine portion” of Colorado's Western Slope.

The ROD addresses deficiencies in the original environmental analyses and the process used to support the initial issuance of oil and gas leases in the region, DOI says.

In addition to the cancellation of the leases in the Thompson Divide area, BLM says it will apply new stipulations and conditions that are consistent with recent Forest Service decisions on the remaining leases that are not currently producing oil or gas. DOI says it will make no adjustments, or only minor adjustments to the leases that are currently producing oil and gas.  

None of the 25 leases being canceled are producing, Interior says, and amount to less than half of 1 percent of the active leases on public lands in Colorado. Meanwhile, DOI notes that the vast majority of the lands in the Thompson Divide area are used for agriculture, sporting, recreation or are undeveloped open space.

But SG Interests, which holds 18 of the 25 leases, comprising over 21,000 acres in the “prolific Piceance Basin,” says the cancellation amounts to a violation of the law “by taking private property rights and/or a breach of the lease contracts.” In a statement to Agri-Pulse, the company says it intends to seek relief in the courts.

And, SG contends, BLM will find it difficult to defend its actions. 

“Documents obtained through FOIA (the Freedom of Information Act) clearly show that the retroactive NEPA (National Environmental Policy Act) the BLM used to cancel SG's leases was a predetermined political decision from the Obama administration taking orders from environmental groups,” SG said in a statement.

SG contends that all 65 of the leases subject to the retroactive NEPA “suffer from the same administrative error” - consisting of BLM not formally adopting the original Forest Service leasing level under NEPA. SG believes that all 65 of these leases are valid - and that none should have been canceled.

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However, the company says that if a court finds that all of the leases were improperly issued, then all of the leases should have been canceled. 

“By canceling some of the leases and allowing others to stand, the BLM is acting in and arbitrary and capricious manner,” SG says.

SG still owns lease rights in the Wolf Creek Storage Unit, which covers 9,200 acres of federal leases next to the leases that were canceled. Since the Wolf Creek leases were not subject to the retroactive NEPA, SG says it will proceed to develop these leases.   

“SG has faith that the new Trump administration will re-establish confidence in government lease contracts,” the company says.

“It is our hope that the new administration will realize that without the sanctity of a federal contract and the rule of law, federal minerals will not be developed by the private sector.”

BLM also announced that it had formally adopted the Forest Service's 2014 White River National Forest Oil and Gas Final EIS analysis for use in its leasing decision on the White River National Forest going forward. The Forest Service has identified the majority of the Divide area as closed to leasing.

Bennet says he will continue to work with community members and industry to determine whether a legislative compromise can permanently protect the Divide and provide market-based compensation for those who have just had their leases canceled.

BLM has also issued a ROD fully adopting the terms of the 2014 Settlement Agreement that resolved litigation surrounding the Roan Plateau Resource Management Plan.

The Interior Department says the action represents the final step in the “landmark settlement” announced almost two years ago that brought together local, state, industry, sportsmen and conservation leaders.

BLM's Record of Decision closes the area on top of the plateau to future leasing where some 17 oil and gas leases were previously canceled. In areas that remain open to leasing, BLM says that development will be subject to the terms and conditions to ensure safe and responsible development.  

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