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BLM making big bucks on leases

But some worry the rush to develop new energy poses threat to Utah’s vistas

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Not too long ago, the Bureau of Land Management was lucky to get $10 an acre at its Utah lease auctions.

Today, against a backdrop of skyrocketing energy prices and the push to drill for more oil and natural gas, those same lands are capturing 10 times more money on average, with some bids commanding as much as $3,000 an acre.

In May, the federal agency's Salt Lake City office raised $54.1 million in its quarterly land-lease auction, a more than 300 percent increase from $13.5 million raised during the same quarter in 2005 and nearly 450 percent more than $10 million raised in second quarter 2004.

But the rush to develop new energy in Utah is bringing controversy as proposed leases encroach on some of Utah's most scenic landscapes.

Theresa Butler, owner of Moab-based Red River Canoe Co., is formally protesting the BLM's Aug. 15 lease sale. The company offers a 47-mile guided or self-guided paddle trip along a stretch of the Green River through Labyrinth Canyon, a three-day journey that Butler likens to an experience through the Grand Canyon.

"Our biggest request is that maybe they can lease other spots and not so close to Labyrinth Canyon," Butler said. "If they were to put oil wells that close to the river and the confluence of the San Raphael Swell, the noise pollution would be devastating."

Henri Bisson, interim director for the Utah Bureau of Land Management, concedes that the BLM will offer lands in its August lease sale that are near some of Utah's most outstanding river ways.

"These special places are floated by Utahns and visitors from throughout the world, but many of them also have potential for oil and gas reserves that could help meet our nation's energy demands," Bisson said. "BLM is only offering lands for oil and gas leasing if they have appropriate setbacks from the river. These setbacks will prevent development from being seen from the river way and inaudible after the wells are in place, if development does occur."

Stephen Bloch, an attorney with the Southern Utah Wilderness Alliance, which is protesting 41,300 acres of the proposed 334,000 acres being offered in the August lease sale, said proposed leases have increased along the Green and San Juan river corridors, sections popular among river-runners. Some of the leases, he said, lie a quarter-mile from the river.

"That's why you've also seen not only an increase in protests from conservation groups but local businesses," Bloch said. "These leases are in areas that are incredibly environmentally sensitive and important for recreation and for tourism. They should be far enough back that you're not going to see them or hear them. A quarter-mile simply isn't going to cut it."

The renewed interest in Utah, along with record-breaking lease receipts, in many ways can be tied to one company — Wolverine Gas and Oil, a Michigan-based company, which in 2004 made one of the biggest surprise oil finds near the town of Sigurd, Sevier County.

Wolverine's wildcat well sent companies scrambling for lease rights, believing they could be the next ones to strike it big.

"Interest in central Utah has exploded," Bisson said. "BLM has sold and issued nearly 1 million acres of oil and gas leases in its central Utah field offices since the 2004 discovery. . . . Lease sales prior to 2004 seldom resulted in more than 100 parcels, but since then, upwards of 300 parcels have been offered in a single sale."

Sid Jansma III, vice president of Wolverine, said what made Wolverine successful when other companies had given up on Utah's "picked over" fields was new technology.

"Our geologists and geophysicists looked at something with new eyes, and we were able to see some things on the seismic that maybe others in the past were not able to see," Jansma said. "That does not mean that we are doing anything different than other companies, but the technology has improved over the past 10 years."

The story of Wolverine's find, which today accounts for 10 percent of Utah's crude oil production, began with leases of BLM land. In order to find investors to fund Wolverine's $3.5 million new exploratory well, Bisson said, the company "first had to buy leases from the BLM to show investors that if oil was discovered, they would have the rights protected."

The leasing of BLM lands begins with industry, as companies are allowed to nominate specific lands they want to lease. The BLM then conducts environmental reviews of the nominated lands, deferring or setting aside lands needing more environmental review or analyses. In the upcoming August lease sale, industry originally nominated 563,000 acres, but the BLM pared that down to 334,000 acres.

"Leasing decisions are not arbitrary," Bisson said. "All of the lands we are offering have been open to leasing in BLM's land-use plans for decades, and most have been leased in the past. Some even have existing development."

Parcels in the August lease sale also include lands adjacent to Arches National Park. In May, the National Park Service raised concerns over the parcels, but the BLM concluded that the nominated lands were more than four miles from key observation points. One parcel, which fell within the Delicate Arch viewshed, was taken out.

With demand for natural gas expected to increase 50 percent over the next 20 years and oil consumption expected to increase 30 percent, the conflict between finding new energy sources and protecting Utah's scenic landscapes is sure to escalate.

Bisson said nearly every oil and gas lease sale since 1998 has resulted in formal administrative protests. When a lease is protested by a member of the public, the lease is not issued until the protest is resolved. More than $40 million in recent leases have been awarded, but the leases have not been formally issued because of an 18-month backlog in protests. Currently, the $40 million is sitting in a non-interest bearing account. Utah state government is entitled to roughly half of the $40 million.

In addition, delayed leases mean delays for drilling permits, which generate millions more in royalties to state and local governments.

"The protest period is an important part of BLM's process," Bisson said. "However, many of these protests have become increasingly complex and lengthy. Many protests add significant time and workload for BLM staff, and rarely yield new information or valid arguments that compel BLM to change its environmental analysis or proposed decisions."

Roughly 5 million acres of the 23 million acres BLM manages in Utah are off-limits to oil and gas. Currently, 4.5 million acres are under lease in Utah, a small sample compared to the nearly 20 million acres that were under lease in 1984 during the state's last oil boom.

Last week, a federal judge struck down the BLM's leasing of 16 parcels in a 2003 lease sale because the agency failed to take into consideration wilderness characteristics of the parcels in light of the agency's own wilderness inventory and subsequent new information provided by SUWA.

Since 2003, the BLM has auctioned more than 124,000 acres of lands the agency considered worthy of wilderness, according to Bloch.

The BLM said it is not certain if the ruling will affect its Aug. 15 lease sale.

But Bloch said he anticipates several parcels in the August lease sale will be eliminated, including Labyrinth Canyon, where Red River Canoe Co. conducts its river trips.

"That's an area that BLM reinventoried and concluded had wilderness character," Bloch said. "That area now falls under the purview of the decision."

E-mail: danderton@desnews.com