BLM wants bidders to reclaim disconnected wells as a condition of securing oil and gas leases

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In the 1960s, a Texas company called Shamrock Oil and Gas Corp. drilled several wells on public land in a new oil and gas field called Horseshoe Bend, named after a prominent feature of the Green River in Utah’s Uinta Basin.

One well, called McLish #3, produced for two decades producing nearly 700 million cubic feet of gas before being idle in 1987 when a new owner concluded it was no longer economical to operate, according to records filed with the Utah Division. Oil, Gas and Mining (DOGM). Over the next 35 years, the well changed operators several times; each new owner tried unsuccessfully to profit from it.

McLish #3 eventually landed in the hands of Vernal oilman Mark Peterson, doing business as Hot Rod Oil, which was acquiring numerous marginal wells in the basin in the mid-1990s. essentially moved away from unproductive McLish wells without plugging them or remediating the sites, leaving the mess to federal land managers to clean up, according to DOGM records.

Federal leases have expired and the wells have joined a list of “orphaned” and “inactive” wells proliferating on public lands in the West, a problem the Biden administration is now seeking to reverse.

“Parts of our federal lands have been neglected after years of prioritizing fossil fuel development above all other uses – ignoring the potential impacts on people, water, wildlife, climate and potential economic benefits of sanitation,” Nada Culver, Bureau of Land Management’s deputy director of policy and programs, testified before Congress last year. “The cleanup of this past development has now been left to the taxpayer to remedy, instead of the liable responsible party.”

Now the BLM has decided to reissue the lease on which McLish #3 sat for a long time – but with one big hitch. Whoever acquires the lease on this 159-acre parcel would be required to plug the well if he did not put it back into production. They must provide security for site reclamation before the lease is issued under a BLM decision released April 18, officially marking the end of the White House’s 15-month moratorium on oil leasing. and gas.

“The well requires immediate attention, and the successful bidder should plan to perform work on the well soon after the lease is issued,” the decision states.

In fact this is not the case. In the months following the environmental review of the lease sale, the Home Office’s well-plugging program caught up with the McLish wells.

How a Utah Well Became an “Orphan”

June 1967: Shamrock Oil and Gas Corp., based in Amarillo, Texas, drills the McLish #2 and #3 wells near Horseshoe Bend in Uintah County.

1984: Alta Energy acquires the McLish wells in 1984 and soon idles Mclish #3 when it is no longer economical to produce natural gas from it.

March 1987: Columbia Gas Development Corp. of Houston purchased the well in March 1987 and was able to produce 611,000 cubic feet, before idling it again the following month.

1989: Columbia brings in a drill to “rework” the well in an unsuccessful attempt to bring it back into production.

February 1992: Ross Exploration Inc, of Roosevelt, acquires the wells.

October 1992: The city of Nephi acquires the wells.

October 1994: Vernal’s Hot Rod Oil acquires them and brings them back to marginal and intermittent production.

August 2003: McLish #3 produces its last reported cubic foot of gas

December 3, 2021: BLM plugs the well.

March 2022: State Designates McLish# as “Orphan Operator Without Liability”

Source: Utah Oil, Gas and Mining Division

A contractor hired by BLM hooked up McLish #2 on Dec. 1 and McLish #3 on Dec. 3, according to well permit files maintained by state regulators. But well sites may still require surface reclamation

Either way, the McLish site will be the one and only parcel on offer at BLM’s upcoming quarterly auction for Utah, to be held online June 28, the first since December 2020. Under d court order, Interior Department offers leases for first time since Joe Biden was sworn in, taking over from a president who declared climate change a hoax and offered far more western public land for oil and gas development that the industry couldn’t even afford.

Interior Secretary Deb Haaland ordered a resumption of leasing, but as part of a more deliberative program in line with reforms advocated in a November report. In an effort to discourage speculation and ensure a better return for the American public, bids will be well below what the industry has asked for, operators will pay a higher license fee, and minimum bids and annual rents will be increased by compared to the current $2 per acre. .

The BLM has increased the royalty rate on new leases by half to 18.75%. Rent and minimum bids will not be increased for leases sold during the June sale.

The new BLM rules and slim bids for the June auction have upset the oil and gas industry, whose representatives have complained that the Homeland policy change would “further” reduce domestic energy production and exacerbate the global rise in fuel costs.

“The only thing that will substantially reduce the cost of gasoline in the long term is a sincere effort to increase domestic production, which would be a very different set of policies than what we see now from the administration,” said Rikki Hrenko-Browning, president of the Utah Petroleum Association. “Here in Utah, we, along with our members, look forward to working with the administration on policies that can really help increase production and provide relief to consumers and strengthen our energy security.”

(Trent Nelson | The Salt Lake Tribune) The Three Rivers field west of Ouray National Wildlife Refuge, photographed Nov. 17, 2001, is one of Utah’s most productive oil and gas fields. This photograph was taken on a flight chartered by LightHawk.

For sale in Utah, the BLM only considered six parcels on 6,645 acres of the nearly 100,000 acres “nominated” for lease since the start of 2021. Four were on the Green River near Horseshoe Bend, 10 miles south of Vernal. The area has a long history of drilling. Within a mile of these plots are two producing wells, six unused wells and 28 “abandoned” wells, the industry parlance for plugged wells. Also on the list were individual parcels each in Grand and Emery counties.

Ultimately, the BLM decided to offer only the 159-acre quarter section with the McLish Well in a plan dubbed Recreational Resource Preservation Alternative. The public or industry can file a protest against the decision by May 18.

This parcel is one of 173, totaling 144,000 acres, that the BLM is auctioning in June across multiple states. This will be the first round of bidding since December 2020, when energy prices were sharply depressed under the weight of the pandemic. Two months after Russia invaded Ukraine, oil prices have skyrocketed and industry interest in public lands is intensifying.

“We knew lifting the rental ban wouldn’t restart production, but it would send a message to the market that help is on the way,” said Thom Carter, director of the Utah Office of Energy Development. “What we’re seeing in Utah, which is so minimal, won’t send the kind of message we need to send to the market.”

Interestingly, the Trump administration flooded the market with federal lease offers at a time when oil and gas prices were at historic lows. The situation is now completely reversed with rare offers coming at a time of astronomical prices.

Even with the current thirst for oil and gas, however, it seems unlikely that anyone would risk bidding on the Utah parcel, which has already been mined and abandoned.

According to the BLM, Hot Rod will remain obligated to reclaim the site if the plot is not leased and the agency holds a bond from the company, although it is unclear whether this would be sufficient to cover the costs of reclaiming the site. well.

At the last auction in 2020, the BLM tried and failed to lease another Utah parcel cluttered with a disconnected well, according to rental records.

This 40-acre parcel in Grand County was once part of a much larger lease issued decades ago to Ambra Oil and Gas in the Cisco Springs oil and gas field north of Interstate 70. Ambra has drilled the TXO Springs 9-1 well in 1981 and produced nearly 300 million cubic feet of gas, according to the well’s DOGM filing. But in the early 1990s, the well stopped producing, and the BLM asked Ambra to plug it and other “temporarily abandoned” wells in the Cisco field.

Instead of capping the wells, Ambra sold them and they ended up in the hands of a Colorado company called Falcon Energy LLC, whose director Wayne Stout died in 2015 without ever resuming production at TXO Springs 9-1 nor butcher it.

The site remains unclaimed, awaiting uptake work courtesy of US taxpayers unless the BLM can find a new tenant.

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