Natural Gas Auction in Colorado

GOLDEN, Colo. - A federal auction of oil and gas leases on Colorado's scenic Roan Plateau generated nearly $114 million Thursday, a record for onshore energy lease sales in the lower 48 states.

The U.S. Bureau of Land Management's auction netted more than 10 times the state's previous highest-grossing federal auction - $11.8 million in February 2006 - and underscored the push to develop domestic energy sources. The BLM estimates the plateau contains 9 trillion cubic feet of recoverable natural gas.

While a record, some industry groups had predicted the auction would net as much as $1 billion for the state. The state will get 49 percent of the lease revenue and the federal government will get 51 percent.

Gov. Bill Ritter, who opposes the BLM's Roan plans, accused the Bush administration of trying to rush through the sale before Bush leaves office.

Ritter had proposed selling leases over a number of years rather than all at once. He said that way, revenues would be higher because the value of natural gas would increase over time with growing demand.

"Today is a sad day for Colorado," Ritter said. "It's a missed opportunity, one we don't get back, one that falls squarely on the shoulders of the Bush administration."

Although the sale is over, no leases will be issued until the BLM considers nearly 15,000 protests. That could take several months. The protesters include the state, some communities and cities, environmentalists, anglers and hunters.

Another potential hurdle is a lawsuit filed by environmentalists challenging the BLM's development plan.

Leases on 31 parcels of land covering 54,631 acres were auctioned Thursday. Agency spokesman Steven Hall said the sale earned double the previous record for a BLM auction in the lower 48 states - $53.5 million in 2006 in Utah.

A 2,100-acre parcel drew the highest bid at $11,800 per acre, the second-highest bid for federal land in Colorado. The highest was $26,000 an acre in November near the plateau, located 180 miles west of Denver.

Nearly half the tracts Thursday went for less than $1,000 per acre, with the cheapest lease fetching $68 per acre.

"We're pleased that we've gotten to this point," said Jon Bargas, spokesman for the Denver-based Independent Petroleum Association of Mountain States. "But the lease sale is not a green light to develop. It's a first step."

About 100 people, including news media, attend the auction in the west-Denver suburb of Golden. Two auctioneers, both wearing white cowboy hats, coaxed buyers to increase their bids. BLM officials said brokers usually do the buying and the agency doesn't immediately know what companies are behind the deals.

After the sale, Mike Haley of buyer Meadow Ridge No. 3 LLC declined to say whom he was representing.

EnCana Oil and Gas (USA), one of the largest gas producers in Colorado, unsuccessfully bid on some parcels, spokesman Doug Hock said. EnCana didn't consider the plateau tracts a priority because of BLM restrictions in the area and uncertainly about a Colorado effort to change its oil and gas development regulations, Hock said.

EnCana already has 1.2 million acres under lease in the gas-rich Piceance Basin, which includes the Roan Plateau. The company is drilling on 45,000 acres of its own land next to some of the land leased Thursday.

The Roan boasts open land, deep canyons and rugged peaks as high as 9,000 feet. It provides winter habitat for some of the country's largest elk and mule deer herds and is home to mountain lions, peregrine falcons, bears, rare plants and native cutthroat trout.

The BLM's plan calls for 1,570 wells drilled from 193 pads and over 20 years, including 210 wells from 13 pads on top of the plateau. The BLM says its proposal would preserve 51 percent of land on the Roan while allowing recovery of more than 90 percent of natural gas there.

An unusual feature of the plan is that one company will oversee the on-the-ground operations for all leaseholders. The goal is to reduce the number of roads, pipelines and other facilities and minimize the impacts.

The BLM rejected a proposal by Ritter to make more land off-limits to drilling and to phase in leasing.

Conservationists note the plateau that looms over the Colorado River has been a mainstay of the area economy because it boasts hunting, fishing and other recreation.

Suzanne O'Neill of the Colorado Wildlife Federation said she's not optimistic that protests filed by her group, some city and counties and the state Department of Natural Resources will change much.

Clare Bastable, conservation director for the Colorado Mountain Club, called the sale "disheartening."

"This certainly does not mark the end of the battle to protect this important area," said Bastable. "There's more to come."