A natural gas well sits to the side of an empty wheat field off state Colo. 13, north of Craig. Southwestern Energy, the fifth largest natural gas company in the United States, announced Wednesday that it entered an agreement to purchase 312,000 acres of land in Moffat and Routt counties for natural gas exploration.

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A natural gas well sits to the side of an empty wheat field off state Colo. 13, north of Craig. Southwestern Energy, the fifth largest natural gas company in the United States, announced Wednesday that it entered an agreement to purchase 312,000 acres of land in Moffat and Routt counties for natural gas exploration.

Southwestern Energy announces multimillion-dollar deal to purchase mineral leases in Moffat and Routt counties

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— A big energy player announced Wednesday that it had signed an agreement to purchase the mineral leases on 312,000 net acres in Moffat and Routt counties for $180 million, according to a press release.

Houston-based Southwestern Energy will purchase the leases from Quicksilver Resources Inc., targeting crude oil, natural gas liquids and natural gas contained in the Niobrara formation, according to a news release from Southwestern Energy.

Shell Oil, which had a joint venture with Quicksilver the mineral leases, announced last August that it would pull out of Northwest Colorado and put its stake up for sale. Now, Southwestern Energy — the fifth-largest producer of natural gas in the United States, according to its website — will take over the leases.

The transaction is expected to close in the second quarter of 2014.

“We are very excited about our entry into this emerging liquids-rich resource play,” President and Chief Executive Officer of Southwestern Energy Steve Mueller said in a statement. “This acreage position covers a substantial area in the Sand Wash Basin — over 50 miles across and over 20 miles wide — and provides the opportunity for us to leverage our operational strengths into a new large, scalable project. Upon closing, we expect that we could begin drilling operations as early as June of this year.”

Moffat County Natural Resource Director Jeff Comstock is optimistic about the purchase and thinks the news could be great for Northwest Colorado, but he wants more information from Southwestern Energy before hanging his hat on the deal.

“I think it’d be foolish to speculate on what this means until we have a discussion with Southwestern Energy,” Comstock said.

Shell Oil called Comstock on Wednesday morning to notify him and the county commissioners about the business deal before it was made public.

“We were told that the area of mutual interest in both counties was being sold,” he said.

Last summer’s news that Shell was selling its stake in Northwest Colorado created a nervous ripple effect on local economies in the northwest corner of the state.

It’s unclear whether Southwestern Energy will produce an economic boon for the area, Comstock said.

Contact Noelle Leavitt Riley at 970-875-1790 or nriley@craigdailypress.com.

Comments

Vincent Anderson 8 months, 3 weeks ago

I'd say there's a great deal of uncertainty surrounding the economic impact of this shale development. The most popular basins in the United States right now are the Marcellus and Utica Shale basins (recent acreage deals in the area have fetched between $10,000 - $16,000/acre, compared to only about $575/acre in this deal). This is not simply because of the sheer amount of gas available for extraction in these favored plays (though that's a major part of it), but also because of the region's proximity to major end-use markets, availability of storage/pipeline ("midstream") infrastructure, and relatively higher coal prices.

Compare that to Moffat county using EIA's energy mapping app, and you can see some of the geographical disadvantages (Unfortunately I can't save the map with my custom filters, but it's easy enough to use to add gas pipelines, power plants, etc):

http://www.eia.gov/state/maps.cfm?src=home-f3

Relatively speaking, though Moffat sits near existing pipeline infrastructure, when you look at the total pipeline distance traveled to major storage and major end-use markets (gas-fired power plants) is considerably further. Add on top of that the lower relative cost of coal power for the area due to the proximity to the Powder River Basin coal mines (http://www.eia.gov/electricity/monthly/index.cfm?src=Electricity-f2 : Chapter 4), and you can see why this may not prove to be as big a payday as we've seen elsewhere in the nation. On the other hand, increased demand for the gas extracted from Moffat county would likely require additional infrastructure spending, which would benefit the area and likely the state on a whole.

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