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Study: Thompson Divide gas not economically viable

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Sopris Sun Staff Report

An independent, peer-reviewed geologic and economic analysis released on Feb. 12 by the Thompson Divide Coalition finds “little to no economic viability” for the drilling of oil and gas leases currently held in the Thompson Divide, according to a press release.

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Among the assessment’s key findings is a conclusion that oil and gas exploration in the Thompson Divide “will likely fail… and would leave lasting visual scars on a pristine landscape” that currently supports 300 jobs and nearly $30 million in annual economic activity, according to independent economists.

“This assessment should make us all ask ‘for what, and at what cost?” said Zane Kessler, Executive Director of the Carbondale-based Thompson Divide Coalition. “It’s a risky bet, at best. Unfortunately, if that bet goes bad, it will be our vibrant rural economy, our local businesses, and our ranchers that suffer.”

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SG Interests, Ursa and others own leases in the Thompson Divide west of Carbondale and they have said they hope to produce natural gas there in the future. Of those companies, SG Interests was not available for comment at press-time.

The main conclusion of the assessment finds oil and gas development in the Thompson Divide area to be uneconomical due to the very low potential of finding substantial, commercially viable oil and gas reserves combined with the “prohibitively expensive” capital investments required.

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The assessment represents more than 10 months of analysis by Denver-based MHA Petroleum Consultants.

“MHA is a national and international petroleum geology firm with a diverse portfolio focused on providing reservoir management services to energy-sector companies,” the press release said. “From single-well valuations to fully integrated field studies, MHA provides a broad range of services to energy companies throughout the nation.”

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Among other things, MHA’s resource reserve assessment highlights terrain, geologic structure, historical production trends, lack of existing infrastructure and drilling restrictions (seasonal closures, wildlife, wetlands and more) as major contributors to making the Thompson Divide area “extremely unattractive” for oil and gas development. According to MHA’s assessment, any attempt to develop the area will “likely fail, in a commercial sense, and would leave lasting visual scars on a pristine landscape.”

“Our analysis finds that the enormous capital expense required to overcome existing barriers to development, combined with low potential reserve numbers, make drilling in the Thompson Divide extremely unattractive and uneconomic under current market conditions,” said Leslie O’Connor, managing partner at MHA Petroleum Consultants and primary author of the analysis.

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The Thompson Divide Coalition is negotiation with SG and Ursa to buy out the leases.

“We’re working to approach these negotiations in as business-like fashion as possible” said Kessler. “We needed to know what these assets were worth on the open market. This analysis paints a pretty clear picture for us.”

The study also states, “… one would need to drill at least 40 of these wells, with a 100 percent success rate, to cover the upfront capital cost of the road requirements. It is clear that this endeavor would not constitute a commercially viable project.”

The Thompson Divide Coalition retained MHA to perform a geologic and economic assessment of the oil and gas leases in the Thompson Divide area.

The TDC released a six-page report based on the assessment. The report states that during a drilling pad inspection, a SG representative told O’Connor that the area had the potential for a coalbed methane “play.” The report disagrees with the potential, citing:

• “A … play requires many more wells than a conventional gas field … .”

• “The dewatering process can take months … and creates the problem of disposing of thousands (perhaps hundreds of thousands) of barrels of produced water.”

• “Freezing temperatures in the winter months will not only hamper the water problem (sic) but has the potential to create an environmental catastrophe.”

• “The coalbeds in this geologic region are thin, intermittent and discontinuous.”

• “The wells in this area that are producing only from the Cameo coals are uneconomic. Most of the wells are completed in multiple zones. … “

As of Wednesday afternoon, the entire study had not been posted on the Thompson Divide website (savethompsondivide.org).

The SG and Ursa leases sit in Pitkin County, which opposes drilling there, as do the towns of Carbondale and Glenwood Springs.

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