An ongoing environmental study on plans for 136 wells near the Hoback Rim could affect attempts to purchase and retire 77,000 acres of valid oil and gas leases under the Wyoming Range Legacy Act, according to conservation groups.

Bridger-Teton officials expect to release their decision on a proposal for 136 wells on roughly 22,000 acres of leases owned by Plains Exploration and Production Company in late 2009 or early 2010.

Plains Exploration and Production Company officials hope to construct 136 wells on 17 well pads on between 10,000 and 12,000 acres spread across roughly 22,000 acres that the company has leased on the Hoback Rim in the northern part of the Wyoming Range. The preliminary plan would disrupt about 400 acres and also calls for the construction of 15 miles of new roads and upgrading 14 miles of existing roads.

Peter Aengst, northern Rockies deputy director of the Wilderness Society, said groups will soon shift their focus from protesting contested leases to purchasing the 77,000 acres of valid leases, similar to what occurred on the Rocky Mountain Front in Montana.

“What a lot of people are watching is what’s going to happen with Plains,” said Aengst. “If that gets approved, that sends a real signal.”

Aengst said that if the Bridger-Teton allows full development of the 136 wells, it could prompt other oil and gas companies to hold onto their leases in hopes of either developing them or selling them for a higher price. However, if the environmental study stipulates restrictions such as helicopter access or a limited number of well pads, energy companies might be eager to sell to conservation groups that would then preserve the land.

Steven Rusch, vice president for environmental, health, safety and governmental affairs for Plains Exploration and Production Co., said the company is waiting for the environmental study before making any decisions on whether to sell leases to conservation groups.

“We have a viable Eagle Prospect master development plan that was reviewed in detail,” he said. “[But] PXP thinks outside the box all the time, and everything is always in play.

A good business option

Regardless, the process of buying out those valid Wyoming Range leases could be similar to the process that allowed conservation groups to purchase 83,000 acres of leases on the Rocky Mountain Front in Montana, Aengst said. Groups purchased those leases in four separate deals between the time Rocky Mountain legislation was passed in December 2005 to spring of this year. Several thousand acres of Rocky Mountain Front leases remain in the hands of oil and gas companies.

“Industry officials are calling these [Rocky Mountain Front] retirements sort of a win-win solution,” said Aengst. “As long as they can still make money off of these, it presents a good business option for them and a good conservation option for those who care about the landscape.”

One notable difference between the Rocky Mountain and Wyoming Range situations is that energy companies that donated their Rocky Mountain Front leases for conservation purposes got a tax break. That tax incentive wasn’t included in the Wyoming Range act.

For instance, Questar, an oil and gas company that owns a significant portion of the leased acreage on the Pinedale Anticline and was making money there, took advantage of that tax incentive in Montana. But with the current economy, Aengst said, oil and gas companies have already lost money and likely don’t need write-offs.

Another factor is whether the leases are easily developable. Companies that hold leases on steep terrain or far away from existing roads might be more inclined to sell. Conversely, lease holders with land near already developed sites like Riley Ridge – “they have roads and pipelines. ... all the infrastructure,” said Aengst. Development “would be very feasible, especially if they think there’s a lot of gas there.”

Something on the books

Even leases that may be hard to develop still have some value. “It is something on the books that they can show their shareholders,” said Aengst.

How much conservation groups would pay to willing lease sellers is also unknown. Aengst said there is no precedent and declined to comment on how much conservation groups spent on the Rocky Mountain Front

“Every one is totally case-dependent,” he said. “There is no formula for setting a fair price. It’s whatever the market decides. Each lease holder is different, which is why it is complicated.”

While natural gas prices have dropped, and energy companies are generally hurting for cash, so are the conservation groups, Aengst said.

“I suspect that there are some lease holders that are totally in the range of realistic for us, and there will be some lease holders that are going to go ‘Well, I need like $8 million or $10 million,’” Aengst said. “That’s not going to work.”

In August, the Bureau of Land Management’s Wyoming director, Don Simpson, announced a decision to pull 24,000 acres of 44,000 contested leases in the Wyoming Range. Bridger-Teton officials say they’ll likely issue a decision on the remaining 20,000 acres of contested leases sometime this month.

Plains Exploration holds about 3,000 acres of leases in the recent BLM withdrawal area. Rusch said officials haven’t decided whether to contest the decision to invalidate those leases.

“We just got the notices within the last couple of weeks, we’re still reviewing all that,” he said.