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Utah's Uinta Basin lease sale attracts 5 times the cash

A controversial sale of leases on federal lands in Utah sold five times the acreage of a similar lease sale in 2016, with drillers spending nearly $6 million for bonuses for land in and around the oil- and gas–rich Uinta Basin, five times the amount they spent in 2016.

Like the Texas Permian Shale, drillers have worked the Utah formation for decades, but new resources have opened up with the advent of horizontal drilling and hydraulic fracturing.

The biggest spender at the Dec. 12 sale was privately held Texas oil and gas producer Lonesome Oil & Gas LLC. Lonesome spent $4.7 million, about 80% of the lease sale's total receipts, on seven of the 74 parcels offered, including almost $2.9 million on a single parcel, according to the U.S. Bureau of Land Management. Lonesome spent about $1.7 million on the parcel next door to its top-priced purchase.

The largest company to bid into the sale was QEP Resources Inc. QEP purchased two parcels for a total of $54,288. QEP ended the third quarter with 9,800 barrels of oil equivalent per day of oil and gas production from the Uinta, even though by the end of the quarter it had no active rigs in the play.

Uintah County saw 582,178 Mcf/d of gas production and 28,593 bbl/d of crude production through June, according to the Utah Department of Natural Resources. Duchesne, the other county in the basin, logged 104,300 Mcf/d of gas and 44,226 bbl/d of crude production.

Because of its unique topography, the basin is prone to atmospheric inversions that trap ozone near the surface, most often on winter days, pushing the region's ozone past limits in the Clean Air Act. The Trump administration is looking to establish new U.S. Environmental Protection Agency ozone rules change for the Uinta, presumably to relax them, according to its agenda for regulatory reform released Dec. 14.

"Promulgating these federal regulations will address ozone-forming emissions from existing and new and modified oil and natural gas sources on Indian country lands within the Uintah and Ouray Indian Reservation in Utah, where ambient ozone levels violate the 2015 ozone national ambient air quality standard (NAAQS) for human health," an EPA agenda said.

"The rulemaking seeks to achieve three goals for the Indian country portion of the Uinta Basin: (1) clean air; (2) continued, uninterrupted development of the oil and natural gas resources; and (3) consistent [Clean Air Act] regulatory requirements between Indian country lands within the [Uintah and Ouray] Reservation and lands under State of Utah jurisdiction," the agenda said.

The reservation for the Ute Tribe covers a considerable portion of the Uinta Basin southeast of Salt Lake City.

Environmental groups protested the 2017 lease sale, saying the BLM's environmental assessment made no allowance for methane leaks and the impact on greenhouse gas levels, while drilling activity would endanger the black-footed ferret and five plant species. The Center for Biological Diversity and the Sierra Club said in a letter protesting the sale that no new drilling or fracking should be allowed in the Uinta.

"Because new fossil fuel leasing within the planning area will contribute to worsening the climate crisis, the vast majority of all proven fossil fuels must be kept in the ground to preserve any chance of averting catastrophic climate disruption," the groups said in their protest. "Opening up new areas to oil and gas exploration and unlocking new sources of greenhouse gas pollution would only fuel greater warming and contravenes BLM's mandate to manage the public lands without permanent impairment of the productivity of the land and the quality of the environment."

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