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Obama administration cancels 25 Colorado oil, gas leases

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Obama administration cancels 25 Colorado oil, gas leases

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Washington — The Obama administration Thursday formally cancelled 25 undeveloped oil and natural gas leases and put new conditions on 40 other leases in Colorado's Thompson Divide, a decision which drew criticism from industry.

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The leases, which are located in the Mancos Shale in the Piceance Basin of Colorado, were granted over a decade ago, but were fought by environmental groups due to "deficiencies in the original environmental analyses and process used to support the initial issuance of oil and gas leases in the region," the US Interior Department said in a statement.

"This resolution strikes the right balance by protecting one of Colorado's most spectacular places and important watersheds, and ensuring that any future development is done responsibly and held to high standards," Interior Secretary Sally Jewell said in the statement.

In that statement, Colorado Governor John Hickenlooper, a Democrat, said the resolution is one that "protects the beautiful environment of the Thompson Divide, that acknowledges the investments companies have made in the area and lets people get back to business."

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But Kathleen Sgamma, a vice president with Western Energy Alliance, an industry group, said the leases were cancelled and conditions were changed due to a minor technicality in the environmental review, not a substantial issue which impacted the environment.

"As a federal lease holder you are subject to the whims of the federal government, let's face it," Sgamma said. "It's like adding clauses to your homeowners' contract ten years after you buy your house."

According to Interior, the 25 leases cancelled were not producing oil or gas and made up less than 1% of the active leases on public lands in Colorado. But Sgamma said the other 40 leases were producing and said the new conditions will likely increase costs for the operators, including SG Interests and Ursa Resources Group, who hold those leases.

The Mancos Shale contains an estimated mean of 66 Tcf of shale gas, 74 million barrels of shale oil and 45 million barrels of gas liquids, according to a US Geological Survey report released in June.

The Mancos is the second-largest assessment of potential continuous gas resources that the agency has ever conducted.

--Brian Scheid, brian.scheid@spglobal.com
--Edited by Richard Rubin, richard.rubin@spglobal.com