Utah officials have turned a small piece of protected wildlife habitat into a rare, $1.8-million windfall after seeking sealed bids for the rights to tap oil and gas under the 270-acre Kevin Conway Wildlife Management Area, near the Uinta Basin town of Myton.
The winning bidder, Calgary-based Crescent Point Energy, paid top dollar despite a requirement that it not disturb any ground inside the area’s marshlands and migratory waterfowl habitat while the company extracts the oil and gas.
“The operators will have to come in from off site. They have the technology to do that,” said Bill James, assistant habitat section chief for the Utah Division of Wildlife Resources (DWR). “We are supportive of responsible energy development. When it can be done right we like to help other state objectives.”
The $1.8 million, meanwhile, will be used for managing Utah’s wildlife.
On a per-acre basis, the $6,429 DWR received for the Conway parcel by far exceeds anything the Bureau of Land Management has received for drilling rights on public lands in the Uinta Basin in recent years. At its last auction in December, for example, the priciest bid submitted to the BLM came from Lonesome Oil and Gas in Fort Worth, which paid $2,021 an acre for a 860-acre tract about 18 miles to the east. Most of the BLM’s successful bids failed to break $100 an acre.
In exchange for these payments, successful lease bidders win an exclusive right to develop the oil and gas beneath public lands, subject to certain stipulations, and leaseholders also pay rent and a royalty on production.
DWR owns 500,000 acres across the state that it manages as protected habitat, but in almost all cases the agency holds only the surface rights but not rights to minerals beneath the surface. Acquired in the mid-1990s, the former Mallard Springs Wildlife Management Area, is a rare exception. In series of three transactions, Frank and Beverly Uresk of Myton sold 270 acres for $103,490 raised from Utah’s “duck stamp” fund. An additional 10 acres of minerals were thrown in, bringing the total acreage to 280.
“We were seeking to increase hunting opportunities for waterfowl and upland game, and the minerals just came with the purchase, in this rare instance,” James said. “Now that investment is paying dividends to aid our wildlife management efforts.”
The marshlands a mile southeast of Myton were renamed in honor of Kevin Conway, following the DWR director’s death from cancer in 2004. Conway began his career in Roosevelt as a conservation officer, according to James.
Crescent Point is developing a 115,000-acre oil and gas play just east of Myton and plans to drill near to the Conway area as part of a 4,000-well proposal under study by the BLM. The Canadian firm initially approached DWR about acquiring formal rights to the Conway minerals, which would likely be drained by nearby drilling. A $700,000 price was negotiated — before DWR realized that Utah law requires such transactions to go through competitive bidding.
The state Division of Forestry, Fire and State Lands decided soliciting sealed bids was the best option. Five bids came in and when the first one was opened Monday, it offered only $142,000, prompting a moment of panic.
But as state officials opened the others, it became clear that companies were serious about the parcel, with three coming in above $1.5 million. Crescent Point was the highest with a bid that was 2 1/2-times higher than the negotiated price. State Lands will received a 20 percent cut of the sales price. The agencies will likewise share the $308 annual rent and 12.5 percent production royalty.
“We saw this could be developed without negatively impacting wildlife,” James said. “We saw a market-based approach, well advertised, actually worked. It enables us to get some resources and channel them back to wildlife management.”