(COMTEX) B: U.S. Hasnt Made Move to Buy Mineral Rights to Crestone, C
B: U.S. Hasnt Made Move to Buy Mineral Rights to Crestone, Colo.-Area Ranch
Nov. 30 (The Pueblo Chieftain/KRTBN)--CRESTONE, Colo.--A geologist who
brokered the deal to allow two Canadian companies to drill two natural gas test
wells on the Baca Ranch said Wednesday there have been no overtures from the
federal government to purchase the mineral rights.
"It is our point of view that the mineral rights are not for sale and no one has
inquired about buying them," geologist Tom Watkins, operator of Table Mountain
Explorations in Golden, said this week.
The two companies that are doing the testing are Hyperion Resources Corp. and
Adrian Resources Ltd.
The ranch has been earmarked for inclusion within the recently approved Great
Sand Dunes National Park and Preserve and in a 93, 000-acre U.S. Fish and
Wildlife refuge.
Watkins used to work for Lexam Explorations, the Canadian company that owns 75
percent of the mineral rights on the 100,000-acre Baca Ranch. The other 25
percent is owned by another Canadian company, Tosco.
He said that Lexam does not have the money or interest to do the drilling.
Watkins, 50, left Lexam when it closed its U.S. office in Denver in June 1999.
He now is a geology consultant operating his own business out of Golden.
He said he and Jim Donaldson, a former Lexam vice president, remained in
Colorado after Lexam left. The two men believe there is 1 trillion to 7 trillion
cubic feet of natural gas under the Baca Ranch, and obtained Lexam's permission
to find a driller, Watkins said.
At up to $6 for 1,000 cubic feet of natural gas, that amount would represent a
potential of billions of dollars for developers in what Watkins calls "a fairly
risky operation."
Watkins is a consulting geologist to Hyperion, which along with Adrian will
spend up to $8 million to drill the two wells. They will be drilled about a mile
apart.
In exchange for financing the wildcat operation that Watkins says has a "1-in-20
chance of being a success," Lexam will give Hyperion and Adrian a percentage --
reportedly 60 percent -- of its 75 percent interest in the property's mineral
rights.
Drilling could be months away because of difficulties in finding a rig for such
deep drilling. Hyperion and Adrian have received permission to drill to 15,000
feet.
Watkins said that with the high cost of petroleum products, rigs are in high
demand.
Watkins said his association with the Crestone area and the San Luis Valley
began in 1987 with Challenger Gold, now Lexam. Challenger was looking for gold
on the Baca Ranch in the foothills of the Sangre de Cristo Mountains, where gold
was found in the late 19th and early 20th centuries.
Shallow gold exploration holes revealed "oil shows," the first time any evidence
of petroleum was noted, Watkins said. The Sangre de Cristos weren't considered a
likely spot for oil and gas by most geologists.
The results of the gold exploration holes and 1994 seismic studies encouraged
Challenger, by then re-named Lexam, to drill two oil and gas test holes.
One hole was drilled about 4,300 feet; the other, 6,900 feet, both in 1995. That
work offered "sufficient encouragement" for further work, Watkins said.
Additional seismic studies were done in 1996 and 1998. Three independent studies
encouraged further exploration, Watkins said.
What the tests found was Mancos shale, the source rock for petroleum products
such as natural gas. And there is a possibility of the presence of oil on the
eastern fringes of the target area, Watkins indicated.
Lisa Norby, the petroleum geologist for the National Park Service nationwide,
said there "is no evidence" as far as she knows that the source rocks for
petroleum are there. But then, she said, no deep wells have been drilled "to
confirm or deny" petroleum's presence.
"It's possible, but there is no data at this point," Norby said Tuesday.
She questioned the presence of a trap, or reservoir, for the oil and a seal to
prevent the substances from migrating upward.
Watkins said the studies have led them to believe that there is an outcropping
of the Dakota formation, found below Mancos shale, which acts as the reservoir
for the petroleum. And "Mancos shale is both the source of the hydrocarbon and
acts as a seal."
Norby said the National Park Service has oil and gas operations in 13 national
parks. By far, the most wells are in the Big South Fork National River and
Recreation area in Kentucky and Tennessee, with about 300 wells; and in Lake
Meredith National Recreation Area in Texas, with about 200 oil wells.
Norby and Watkins noted that last July, Lexam approached Colorado's State Trust
Land Board and "nominated a fair bit of state land south of the Baca Ranch --
50,000-75,000 acres -- for oil and gas leases."
Some of the potential leases would have been on the Zapata Ranch owned by the
Nature Conservancy. Norby said she and Nature Conservancy officials attended the
meeting of the State Land Board last July.
Watkins said it "was clear the State Land Board did not want to do anything
without knowing about the national park status" and put the matter on hold.
Watkins said the "big question is what the State Land Board is going to do in
light of the park. Will it transfer the mineral rights to the park?"
If the Baca wells come up dry or aren't commercially viable, "it will be a long
while before anyone does anything else," Watkins said.
Steve Cheney, superintendent of the Great Sand Dunes National Monument, said the
park service's "greatest concern now is not to acquire the mineral rights but to
acquire the surface rights, which we feel is reasonably sufficient protection"
for the park.
Mike Blenden, refuge manager for the U.S. Fish and Wildlife Service, said the
purchase of the mineral rights along with the surface rights on the Baca Ranch
would "make my job a lot easier."
If the mineral rights aren't purchased, Blenden said, it would be his job to
work with the owner of the mineral rights and to provide access to their claims.
Blenden said it isn't necessary that the federal government own the mineral
rights but "it's a very good idea. It takes away the bull's-eye."
By Erin Smith
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