Mineral lease auction yields funds for Moffat County, museum
January 4, 2012
On Dec. 13, the Moffat County Commission unanimously approved conducting its third mineral lease auction.
Up for grabs were 32 tracts encompassing 444 mineral acres owned by the Museum of Northwest Colorado, plus an additional 200 acres divided into two parcels owned by Moffat County.
On Wednesday, county officials released results of the sealed bid auction, in which all 34 tracts were leased — netting more than $158,000 and $152,000 for the county and museum, respectively.
The biggest earner in the latest auction was a roughly 46.5-acre parcel owned by the county, known as Tract 133, located underneath the Moffat County Fairgrounds.
Gulfport Energy Corporation outbid Westpoint Energy, Inc., for Tract 133 by offering a price of $2,510.33 per acre for a total of $116,730.
"I don't know how you could justify stopping it now," Mathers said. "How do you tell a company's shareholders they can't develop the minerals after they have just forked over that kind of money?"
Mathers' comments may be a precursor to potential issues to come given Tract 133 is unique.
Dan Davidson, director of the Museum of Northwest Colorado, said the county purchased the land and the minerals under the fairgrounds more than 70 years ago and is therefore entitled to all revenue generated by the lease auction and any future royalties if minerals are developed.
The money generated Wednesday from Tract 133 will not be shared among the county's taxing districts, and more than likely will go straight to county coffers.
Tract 133 is inside Craig city limits and the municipal government has instituted ordinances against drilling activity within the city.
Jeff Comstock, the county's director of natural resources, doesn't believe it's a serious issue considering the advancements in drilling technology.
"It wouldn't be difficult for Gulfport to come in directionally or horizontally to access those minerals if they decide to develop them," Comstock said. "The chance of an oil rig in town isn't likely."
In addition to Gulfport and Westpoint, Shell Western Exploration and Production, LP, Axia Energy, and Yates Petroleum Corporation participated in the auction.
As with previous auctions, the county instituted terms, including a starting bid of $100 and a 3/16s royalty on development.
Previous leases were awarded for five years, but lease lengths were reduced to three years for the latest auction.
All five companies came out winning something from the auction, even Yates which submitted bids eight minutes after the 11 a.m. deadline.
"Coming in late really didn't affect them because they were the only bidders on the five parcels they won and got largely outbid on everything else they wanted," Comstock said.
Compared to the March 2011 mineral lease auction, Comstock said prices this time around were "drastically lower."
In March, leases were won at an average bid of $1,233 per mineral acre.
Not including Tract 133, which went for a steeper price than the rest of the tracts up for auction, leases were won at an average price of $324 per acre.
Davidson attributes the low bids to small tract size — in some cases as little as 3/10s of an acre — and the lack of competition.
"But, that's OK with me," Davidson said. "What we (the museum) came away with is certainly fine in my book."
Technically speaking, none of the bids are final. Comstock and Davidson will present the auction results to the commissioners at 9:30 a.m. Jan. 11.
"There's no reason why they wouldn't accept the high bids and the late bids from Yates," Comstock said. "That's going to be our recommendation next Wednesday."
Once the county accepts the bids, participating companies have until Feb. 7 to fill out the leases, complete the title work and cut a check.
The county commissioners would then sign final leases Feb. 14.