King of the county

Potential for oil, gas development is here, but Kinder Morgan rules block

Kinder Morgan pays about half the property taxes in Montezuma County with its CO2 fields. Pictured is the pumping plant on Goodman Point. Enlargephoto

Sam Green/Cortez Journal

Kinder Morgan pays about half the property taxes in Montezuma County with its CO2 fields. Pictured is the pumping plant on Goodman Point.

Kinder Morgan rules the block in the Montezuma County fuel industry, drawing out CO2 from the McElmo Dome and Doe Canyon fields. It’s the largest reserve of its type in the U.S., estimated to hold 17 trillion cubic feet.

But oil and natural gas are also playing a role in local energy development, says explains Tracy Perfors, a BLM natural resource specialist.

“There are pockets of oil and gas in Montezuma County, some near Hesperus, and a few areas in Dolores and San Miguel counties,” she said. “But it is up to the developer to determine whether it is a good play or not. We offer the lease.”

In Dolores County, there are about 15 producing oil wells and 15 natural gas wells, she said. Montezuma has about 40 producing oil wells and a handful of natural gas wells.

There are eight injection wells in the area, used to deposit briny liquids brought up during the drilling process back underground.

“The main player in that area is CO2 production,” said Shannon Borders, a BLM spokesperson. “There is not much oil and gas in the region.”

According to the Montezuma County Assessor’s office, 57 percent of property tax revenues are derived from oil and gas production. Officials estimate that 95 percent of those revenues come from approximately 97 CO2 wells.

New leases stalled

The BLM plans to offer more oil and gas development leases in 2014, but the process has been delayed, Perfors said, pending resolution of appeals to a recently released public lands resource management plan.

“Once the protest appeals for the new management plan are completed, our plan is to move forward with analyzing the sale,” Perfors said, adding that “the companies recommend lease areas based on their geologic investigations.”

The leasing process takes nine months, and the auction typically takes place in February. If the plan is finalized by May, there could be a 2015 auction; if not, it would be delayed until 2016, officials say.

Two leases will go off deferment status when the resource management plan is finalized.

A proposed lease near Mesa Verde National Park includes eight parcels that include 3,365 acres of private land and 6,845 acres of private land between Hesperus and Mancos.

An additional five parcels containing 5,444 acres of federal mineral estate in Dolores and San Miguel counties will be offered for lease.

“One parcel is in Dolores County near Groundhog Reservoir that would be brand-new to the area,” Perfors said. “If the lease goes ahead, and it has successful wells – two big ifs – then certainly that could put a lot of attention on the area.”

Leases don’t guarantee production, Perfors said, and additional environmental reviews are conducted for each proposed well site to determine and mitigate its impacts from new roads and on wildlife habitat, cultural sites, viewsheds, air and water.

In Montezuma County, 70 companies and individuals hold 378 active leases on 186,857 acres of land. Some of the main players are ExxonMobil, Kinder Morgan, Questar Corp., Bill Barrett Corp. and Chevron Texaco.

Stricter regulations

San Juan Citizen’s Alliance, an local energy watchdog group, agrees that waiting for a finalized record of decision on a land management resource plan makes sense.

New oil and gas leases will have to comply with much more comprehensive regulatory stipulations in the new management plan, said Jimbo Buickerood, public lands coordinator for the Alliance.

“It is not in the public interest to start more oil and gas leasing using an outdated plan from 20 years ago that only has a few paragraphs relating to the industry issues,” he said. “Why rush it?”

The new plan has additional regulations to protect human health and the environment. For example, closed-loop systems minimize exposure of drilling wastes, and directional drilling technology reduces the amount of well pads required.

“We feel more could have been done such as capturing methane, a greenhouse gas, and better control of volatile organic compounds and particulate pollution,” Buickerood said. “We’re not categorically against leasing if it is done appropriately and safely.”

Oil and gas bring in revenues and jobs but also have impacts on land, human health and local services, he said. New roads to wells fragment wildlife habitat, and pollution from industrial development affects public health. Industrial development also impacts fire departments and rescue services that would need to respond if accidents occur.

“There was a lack of outreach to the community regarding these leases. Energy development puts a strain on local services, and they need to know if they are coming,” Buickerood said.

Energy’s future

No new oil and gas leases are allowed on Canyons of the Ancients National Monument, said manager Marietta Eaton, but existing leases are still active.

According to the management plan, there is potential for 150 new wells on up to 121 new locations (81 for oil and gas and 69 for CO2).

The new BLM plan, which has not been finalized, shows high oil potential and moderate shale gas potential in the Paradox Basin west of the Dolores River. Actively producing oil and gas fields are in the Sleeping Ute Mountain area and northwest of Cortez.

Undiscovered oil reserves in the Paradox Basin are estimated at 500 million barrels, according to the BLM plan. Substantial new gas reserves are also anticipated in the eastern Paradox Basin.

Since 1999, 34 new wells have been added annually, mostly in the Northern San Juan Basin south of Durango, according to the management plan. The basin is the second-largest gas field in the U.S. In 2004, 331,000 barrels of oil and 89 billion cubic feet of gas were produced in the planning area, excluding CO2 production.

Projections show the potential for 185 new wells in the BLM Paradox Basin west of the Dolores River in the next 20 years, and possibly 140 new wells in the San Juan National Forest.

But infrastructure issues could hamper development.

“Capacity for future gas development appears problematic,” the BLM plan states. “Pipeline capacity constraints in Paradox Basin could diminish long-term activity levels.”

Oil and gas production in the county is dwarfed by the local CO2 industry. Enlargephoto

Sam Green/Cortez Journal

Oil and gas production in the county is dwarfed by the local CO2 industry.