Thompson Divide environmental assessment has high cost

by Dorothy Atkins, Aspen Daily News Staff Writer

An environmental assessment that will occur before drilling can take place on the Thompson Divide will likely cost either the U.S. Forest Service or the oil and gas company proposing to drill hundreds of thousands of dollars.

Houston-based SG Interests has filed two applications for a permit to drill (APD) in the Thompson Divide area with the Bureau of Land Management (BLM) and the U.S. Forest Service since Oct. 17. The company plans to file seven more in the upcoming months, SG Interests vice president Robbie Guinn said earlier this week. The Thompson Divide includes 220,000 acres of federal land running from the Sunlight Ski Area to McClure Pass crossing Pitkin, Gunnison, Garfield, Mesa and Delta counties.

Once the applications are deemed complete, an environmental assessment of the area will take place. That can take anywhere from a few months to two years and is the last step before gas well construction can occur.

Generally, the cost of performing a single assessment ranges from tens of thousands to hundreds of thousands of dollars depending on the site and situation, said White River National Forest Supervisor Scott Fitzwilliams.

If multiple APDs are filed in the same area, the Forest Service will combine the assessments into one larger in-depth study of the location, which usually is more expensive, Fitzwilliams said.

Although the Forest Service and SG Interests haven’t discussed it yet, if the company files seven more APDs that will likely be the case, Fitzwilliams said.

The Forest Service has plans to meet with SG Interests this week to begin discussions on creating a development master plan that will determine which of the nine applications are the top priority so that the assessments are done as efficiently as possible, he said.

SG Interests can opt to hire a third-party contractor to perform the assessment, but then it will have to foot the bill instead of the Forest Service, Fitzwilliams said. Oil and gas companies often choose that option because the Forest Service does not prioritize completing an assessment over other duties and in turn it takes longer to complete, he said.

 Chris Council/Aspen Daily News
A road leads to a natural gas drilling pad located in the Thompson Divide, as viewed from the air this summer.

Still, Fitzwilliams has the final say on which contractor is hired out to do the job. For example, if SG Interests chose to use a third-party contractor that did not have relevant assessment experience in the region, Fitzwilliams would not approve it, he said.

“The bottom line is I’m signing the document,” Fitzwilliams said. “It’s my decision. It’s not some company’s [decision].”

Results from environmental assessments can favor actions like requiring drillers to move their planned well to another location on the lease, but he can’t think of a situation where the results prevented drilling altogether, Fitzwilliams said.

“They purchased the leases with the intent of drilling the wells,” Fitzwilliams said. “We have to provide them reasonable access to the resource.”

Costs of owning and developing leases

Oil and gas companies pay a $6,500 fee per application, which is collected by the BLM to cover processing costs, said BLM spokesman David Boyd. Lease holders also pay an annual rental fee for non-producing leases of $1.50 per acre in the first five years and $2 per acre thereafter.

If a well is producing, the company pays royalties of 12.5 percent to the BLM.

All of those revenues are then deposited into a national account and funds are split between the federal and the state governments where leasing occurs.

The BLM’s energy office in Silt processed 224 APDs last fiscal year, which ran Oct. 1, 2011 through Sept. 30, 2012. Most of those applications were for developing leases in western Garfield County, Boyd said. The office typically processes between 200 and 300 APDs a year and the highest number ever processed by the office was in 2008 when 397 were filed, Boyd said.

The Silt office is one of seven in the western region that were established through the Energy Policy Act of 2005, and it is the only one in Colorado.

Revenue from rental fees, royalties and lease sales for oil, gas and minerals on federal lands in Colorado generated $198 million dollars in the 2011 fiscal year, according to Boyd. The state received 49 percent of that revenue — $97 million — which goes to the Department of Local Affairs (DOLA), which makes some of the funds available to local governments through grants.

Pitkin County hasn’t received any DOLA grants in recent years, according to county finance director John Redmond.