- Associated Press - Thursday, September 4, 2014

BOISE, Idaho (AP) - Idaho officials have rejected a Texas company’s request to exclude federal lands and potential royalties from what is believed to be a profitable natural gas field in the southwest part of the state.

The five-member Idaho Oil and Gas Conservation Commission struggled on Thursday before voting 3-2 in a decision that went against Houston-based oil company Alta Mesa’s petition to omit 187 acres of Bureau of Land Management land from a 615-acre drilling unit.

“This means the BLM and the federal government will dictate how mineral rights are developed in Idaho,” said Alta Mesa attorney John Peiserich in brief remarks before quickly leaving after the decision. He said he wasn’t sure what the company’s next move would be.

The company argued that the U.S. Bureau of Land Management’s roughly 30 percent interest should be excluded because the agency for years hasn’t made the land in Payette County available for lease, halting progress on drilling.

The federal agency told commissioners that regulations require public comments and an environmental assessment. The agency also noted the state stood to gain half of the Bureau of Land Management’s royalties. Dave Murphy, the agency’s Idaho chief of lands, minerals and water rights, testified that the agency was aiming to have the leases available in the spring of 2015.

“We think it’s the right decision,” Bureau of Land Management attorney John Hockberger said after the decision.

It was the first big test for the five members appointed by Gov. C.L. “Butch” Otter in July 2013. The commission was created earlier that year by the Idaho Legislature to deal with the state’s nascent natural gas industry, made possible by new technologies.

On Thursday, the members struggled with two big unknowns: when the Bureau of Land Management would make leases available, and the extent and location of recoverable natural gas in the 615 acres.

Several commissioners openly doubted the federal agency would have leases available next spring, and they said they expected the process to take much longer, perhaps years, should lawsuits be filed by environmental groups.

Commissioners also tried to get a better understanding of the geology of the 615 acres and where the natural gas might be located, possibly eliminating the federal agency’s interest that way. But information that precise wasn’t available.

In Idaho, landowners are due a percentage of royalties from natural gas found within sections that are usually 640 acres, but can vary, and is based on the percentage of the 640 acres they own.

Vice Chairman Margaret Chipman, who after the meeting said the state getting half of the federal agency’s royalties was a factor for her, made a motion that the commission reject Alta Mesa’s petition. But no one seconded it.

Jim Classen then made a motion to accept Alta Mesa’s petition, but no one seconded that motion.

Commissioner Ken Smith tried to find a way for the commission to be allowed to make a decision at a later time, but he was told by the group’s attorney the commission was required by law to make a decision at the meeting.

“For a group that’s been active for a short period of time, this is a big decision,” said Chairman Chris Beck, aware that precedents might be set.

After more discussion, Classen again made a motion to accept Alta Mesa’s petition, and again it wasn’t seconded.

More discussion followed before Chipman put forth the same motion she made before, to reject Alta Mesa’s request, and it passed 3-2.

Chipman, Smith and Sid Cellan voted for it, while Beck and Classen voted no.

“I think for everybody this was a learning process,” said Tom Schultz, director of the Idaho Department of Lands, the administrative arm of the commission. “We’re in the infancy stages of the process.”

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