An oil and gas company that is making moves to drill on the Thompson Divide asked the Bureau of Land Management (BLM) for more time last week to develop two leases that it acquired in March.
On March 1, Houston-based SG Interests acquired mineral rights on two leases from Encana Corp. The leases are located within the 221,500 acres of federal land known as the Thompson Divide. They also are inside an area that SG Interests has proposed to develop called the Lake Ridge Unit.
SG Interests owns 16 leases in the Lake Ridge Unit, each of which are due to expire this spring. In February, SG Interests requested that the expiration dates be suspended. The federal government gives oil and gas companies 10 years after a lease auction to build a well that produces an amount of oil or gas that can be sold, otherwise the lease holder gives up their rights.
The Encana-owned leases are set to expire in August, according to Doug Hock, Encana public relations director.
“We made the decision to assign those to SG with the idea that we would get some value out of them,” Hock said.
Encana officials knew that SG Interests had an interest in the leases because they are within the Lake Ridge Unit, Hock said. Encana had no interest in developing those leases anyway because the company is focusing its effort on developing in other areas in the Piceance Basin, which is to the west of the Thompson Divide, he added.
“We have other areas that are more of an interest to us,” Hock said. “At this point they really don’t fit into our plans.”
Encana also owns a couple of other leases in the Thompson Divide that are outside the Lake Ridge Unit and they are due to expire this year. The company will likely let their mineral rights lapse because the company has not had success assigning those leases to other companies, Hock said. An Encana geologist also noted there was likely not large amounts of valuable mineral deposits there, he added.
Encana previously declined an offer by the Thompson Divide Coalition, a diverse group of local drilling opponents, to buy back those leases. The coalition offered $2.5 million to six different Thompson Divide lease holders, but none of them accepted it.
“We wish that they would have come to us instead of [working with] SG,” said Zane Kessler, the coalition’s director.
Still, Encana is getting rid of its leases in the area because the company doesn’t believe it makes economical sense to drill there, Kessler said.
Companies that have owned Thompson Divide leases for 10 years opted not to develop them because the commodity prices were low and the venture wouldn’t be profitable, local drilling opponents argue. Now that they are expiring, the companies want more time.
“This is just another example of where a significant player couldn’t find a business case to develop in the Thompson Divide,” Kessler said.
The BLM currently is reviewing the request and does not have an estimate on when a decision will be made, according to David Boyd, BLM spokesperson.