Oil & gas lease buy-back deal coming up short

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Oil & gas lease buy-back deal coming up short

By Kelsey Dayton, WyoFil.comoriginally published December 4, 2012

An historic effort that could be a model for future land conservation is running out of time and still needs to raise more than $3 million by the end of the year.

In October, the Trust for Public Land announced a deal with Plains Exploration & Production Co. (PXP) to buy back several leases for natural gas drilling in the Wyoming Range. PXP had proposed a controversial drilling project in the environmentally sensitive area that included 17 well pads.

Deb Love

Deb Love, Northern Rockies director for the Trust for Public Land

As of November 27, the Trust had raised about $5.6 million of the total $8.75 million it needs. The Trust had already raised about $4.5 million of the total $8.75 million price tag when the deal was announced. The $4.5 million mostly came from large donors, said Deb Love, Northern Rockies director for the Trust for Public Land. The rest of the money is being raised through a first-of-its-kind mass fundraising effort, Love said.

It’s the first time the public, as opposed to large donors, has attempted to buy out energy leases. Other lease buyouts have been made by a handful of donors or organizations, such as efforts to protect an area on the Montana-Canadian border.

The efforts in Wyoming could provide a model for future deals. Residents in Colorado are considering similar action. Love said she’s even talking with people in the eastern U.S. who are interested in buying out coal leases.

“Drilling has increased exponentially and we don’t see any signs of that abating,” said Love. “There are going to be places that people thought were protected … and we’re going to have to make some difficult choices in the future about where are the places we’re willing to sacrifice and where are the places — like the Hoback — that are too special to drill?”

Are buy-outs good or bad?

Bruce Hinchey, president of the Petroleum Association of Wyoming, says the PXP Wyoming Range deal is unique, but he’s not sure whether the lease buy-out was a good or bad thing for energy development in Wyoming. “I have no idea,” he said. “Each company has to make their own decisions.”

Hinchey said he was surprised that the groups reached an agreement before raising the money.

http://wyofile.com/wp-content/pl...), pointer; outline: none;">A map from the American Wilderness GIS Lab shows the area of Wyoming Range in which the Plains Exploration & Production Co. plans to drill.

A map from the American Wilderness GIS Lab shows the area of Wyoming Range in which the Plains Exploration & Production Co. planned to drill. (Courtesy of Josh Gage/American Wilderness GIS Lab — click to enlarge)

However, Hinchey said he doesn’t see citizen lease buy-outs becoming a trend. This deal is unique because of the controversy around the project.

“Normally you don’t see people complaining that much about an operation,” he said.

Neal Thagard, Western Outreach Director with the Theodore Roosevelt Conservation Partnership, said the deal is good for Wyoming and unique in PXP’s willingness to negotiate. But he worries about setting a precedent for lease buy-outs on public lands.

“I’m a little concerned about the prospect of buying back our own public lands,” he said.

For years Thagard worked on efforts to protect Big Horn sheep susceptible to disease carried by domestic sheep. Instead of abiding by policies, federal land agencies started turning to conservation groups and citizens to buy out the grazing allotments as a solution.

“Now here we’re doing the same thing with oil and gas leases,” he said.

The deal with PXP is different than grazing rights because PXP had undisputed claims to drill in the area, he said. Still there could soon be an assumption that anyone unhappy with a drilling project should just buy-out the leases. There’s also a fear among some that energy companies could threaten to drill in areas that are likely not productive, but that people feel are too special, in an effort to negotiate a buy-out.

“You open up the cookie jar for everyone to put their hand in,” said Thagard.

Despite his concerns, Thagard said he wants the PXP deal to move forward because of what it will mean for the area, and also because failing to raise the money could result in natural gas development and negative environmental impacts.

Variety of donors pitch in

As of November 27, the Trust had raised about $5.6 million of the total $8.75 million it needs, according to Love. “It’s tremendous progress, but clearly we have a long way to go,” she said. “If people want to save the Hoback, now is the time.” Since fundraising began, the Trust has received about 300 donations from people in 36 states and Hong Kong.

Forest Service shifts focus to fate of 2005-06 leases

With the U.S. Forest Service suspending its work on the Plains Exploration & Production Co. drilling proposal, staff has been working on another highly watched issue in the Wyoming Range; the validity of 44,700 acres of land originally leased in sales in 2005 and 2006, before the Wyoming Range Legacy Act passed in 2009 to protect the area from future oil and gas development.The Forest Service is analyzing what to do with the leases, said Jacque Buchanan, Bridger-Teton forest supervisor. Work on the leases was never tabled, but the agency’s focus was on PXP. Now that PXP’s project has been sidelined — perhaps for good —Buchanan is developing a timeline to deal with the leases that preceded the Wyoming Range Legacy Act. A draft could be to the public by next fall if things went smoothly, she said.

 

 

 

If the money isn’t raised by the end of the year the deal is void and PXP could go back to its original plan of drilling and producing natural gas in the Wyoming Range. The company could not be reached for comment for this article.

The Trust began negotiating with PXP about a year ago. Love said she doesn’t know exactly how much PXP originally paid for the mineral leases. However, the pending deal between PXP and the Trust represents about 80 percent of the leases’ current market value ($10.5 million), according to a recent market assessment.

The agreement was reached before the U.S. Forest Service released a draft supplemental environmental impact statement that was expected to require the company to comply with all existing forest regulations, and it could have seriously restricted PXP’s development plans. But the only way to know is if the buy-out effort fails, and PXP asks the Forest Service to proceed with the approval process.

While the money might be slow to come in, Love said it is coming from a variety of people; from elected officials to a Wyoming Steelworkers group from Rock Springs that voted to contributed $1,500. About 40 of the group’s members vote in favor to donate, said Mike Burd, vice president of United Steelworkers 13214 and a member of Citizens for the Wyoming Range, which has been working to block energy development in the Hoback.

Most of the group likes the outdoors, hunting, fishing and camping with their families, Burd said. They wanted to protect the area so they can enjoy it in the future. The fundraising effort gives people a sense of ownership, while still honoring the rights of PXP who own the leases, he said.

Final push

The Trust for Public Land is ramping up its fundraising efforts this month, presenting to community groups like rotary clubs in Jackson.

“If we don’t reach our goal, the Hoback will again be at jeopardy,” Love said. “The Trust for Public Land does not have the resources to just buy this ourselves.”

If the money isn’t raised by December 31 the leases will stay with PXP. If PXP wanted to move forward with their original plans the Forest Service would pick up where it suspended work on the draft supplemental environmental impact statement, said Jacque Buchanan, forest supervisor for the Bridger-Teton. The forest was a month or less away from releasing the draft supplement when the deal was announced, she said.

Love said supporters of the buyout are thinking positively.

“We’re optimistic, we’re going to get there – if people dig deep into their pockets,” she said. “This is what we’ve been waiting for.”

— Kelsey Dayton is a freelance writer based in Lander. She has been a journalist in Wyoming for seven years, reporting for the Jackson Hole News & Guide, Casper Star-Tribune and the Gillette News-Record. Contact Kelsey at kelsey.dayton@gmail.com.

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