Colorado’s State Land Board on Friday approved a controversial metro-Denver drilling project in which ConocoPhillips will pay $137 million to tap oil and gas under 40 square miles of public land east of Aurora.
ConocoPhillips also agreed to pay a 20 percent royalty on any oil and gas produced after drilling on this Lowry Range property.
State Land Board director Bill Ryan called the deal the best ever done by the board and a model for other large-block leases.
“While it brings important economic benefits to Colorado, it does so with an operating partner and a development plan that will respect and protect the natural values” of the land, Ryan said.
Colorado’s land board is charged with using state lands to raise revenue to fund schools.
The deal is controversial because of public opposition to drilling and a lawsuit. Colorado’s Oil and Public Safety Division contends ConocoPhillips has failed to pay the state $152 million it owes for cleanup of leaky underground gas tanks at 354 sites. Last month, the land board delayed a decision on Conoco’s Lowry Range lease so that staffers could look into the dispute.
State officials alleged in the lawsuit that Conoco said it was not reimbursed by insurers for cleanup costs when, in fact, insurers paid Conoco $286 million. Colorado Attorney General John Suthers is pressing the case for reimbursement.
“We determined it was a different division of Conoco and different division of the state,” Ryan said.
The land board has granted 2,500 oil and gas leases. Oil and gas account for a growing share of mineral revenues that last year topped $100 million.
“We learned a lot going through this process and developing a specialized lease,” Ryan said. “I would hope many things we learned will be applicable to other leases around the state.”
Under the current deal, ConocoPhillips must adhere to stewardship criteria developed by the state. The total allowable surface disturbance has been limited to 650 acres, or about 3 percent of the leased area. ConocoPhillips is expected to use horizontal drilling, with multiple wells drilled from a single well pad.
The Coalition for a Clean Colorado opposed the land board’s decision to let Conoco drill.
“Here they are doing business with people who don’t pay their bills,” said Phil Doe, a coalition member and former federal employee.
Doe said the land board failed to analyze adequately the water-use and air-quality impacts of hydraulic fracturing.
“How is this going to affect surrounding areas? It is heavy industrial activity,” Doe said. “There will be trucks out there for months.”
