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Elbert County

County signs exploration deal with oil-gas company

Three-year lease of mineral rights applies to northwest corner

Posted

The Niobrara formation that covers the northeastern part of Colorado has attracted new gas and oil exploration in the northwestern portion of Elbert County.

Signing for the county manager, County Commissioner Danny Willcox submitted a contract to Bison Oil and Gas on June 21 that will lease the county's mineral rights to the company. The county commissioners have assumed the responsibilities of the county manager due to the resignation of Ed Ehmann.

Bison will pay Elbert County $90,000 for three-year prospecting and mineral rights over 30 net mineral acres that extend one mile south of the northern border of Elbert County and up to six miles east of the western border.

In a county that is hurting for funds, the contract could be a precursor to future opportunities and provide revenue for much-needed road repair and improvements in the county, officials believe.

According to Willcox, Bison requires a confidentiality agreement in most of its contracts, but as the commissioners contemplated the terms of the lease contract, they determined this was not an appropriate stipulation to include as the land being used is owned by the county. Commissioner Grant Thayer called the company to ask if they could strike the standard confidentiality section of the contract, to which Bison agreed.

The contract could potentially be extended another two years “if they actually find something,” said Commissioner Chris Richardson. If that happens, the rate for leasing the property rights would go up and a lease bonus would be enacted, where the county would also receive royalties from the drilling.

The area covers three miles of County Road 194 and two miles of Delbert Road. One reason for going forward with the contract is to determine how many actual mineral acres the county owns, as this initial contract with Bison covers a small part of the 1,800 miles of county roads in Elbert County.

Thayer, who has more than 40 years of experience in the oil and gas industry, shared his perspective about the implications of signing of the lease with Bison.

“Most leases that are signed are never drilled,” he said.

“Putting together a lease block tells you that they have a prospective plan there, but who knows, the economy changes, commodity prices change, politics change.”

Taking into account the success of the wells in eastern Arapahoe County, which also draw from the Niobrara formation, and “given the price they're paying for it, it's pretty indicative that they're optimistic,” Thayer said.

“I've talked with a few of the residents out there, and Bison is trying to put together a lease package for the residents in that area,” he said. Terms for such packages would remain confidential as the leases would be made with private citizens.

Based on the history of drilling in Arapahoe and Weld counties in the Niobrara formation, “we would expect that Bison Oil will drill a horizontal well,” Thayer said.

“The way I take this, with the Rush Creek wind farm in southeast Elbert and with Bison putting together lease blocks like this,” Thayer said, “it says that optimism is returning to economic activity in the county.”

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