The CEO of the only company producing oil and gas in Idaho offered to provide Idaho Gov. Butch Otter and state agencies its Idaho production, revenue tax and royalty payments to clear up concerns it hasn’t reported all of its output.
Hal Chappelle made the offer in a letter to Otter Jan. 24 that was circulated to some Idaho lawmakers and the Idaho Oil and Gas Conservation Commission. The Idaho Statesman obtained the letter using Idaho’s Open Records law.
The CEO of Alta Mesa, the Texas-based company that has invested more than $150 million in oil and gas development in Idaho since 2012, said critics have made “accusations that we have somehow behaved inappropriately, such as claiming that Alta Mesa is ‘driving away trucks of condensate in the middle of the night.’”
“If claims like this are in fact being made, they are defamatory and harmful to our business, and in fact are harmful to our industry’s presence in Idaho generally,” Chappelle said.
I believe transparency and openness are crucial to the success of our industry in this state. However, I strongly believe this must include those who have concerns about our operations being open, direct and specific with us about those concerns.
Hal Chappelle, Alta Mesa CEO
Critics, using published data and observations of oil, gas and natural gas liquids delivered by truck to a rail yard in Ontario, Ore., raised those questions in 2016. Landowners who own mineral resources complained to Otter and legislative leaders just before the beginning of the 2017 legislative session.
“We want to verify what they say they’re producing,” said Harry Soulen, a landowner from Weiser.
At a recent meeting of the Idaho Oil and Gas Conservation Commission, Commissioner Jim Classen raised questions about whether expenses like processing and transportation were being taken out of royalty payments by Alta Mesa.
“The mineral interest owners may not be getting appropriately paid,” Classen said.
A House committee rejected new oil and gas rules last week that critics said did not provide enough transparency and discouraged competition. Lawmakers are also working on legislation that would improve access to information and protect mineral owners’ private property rights.
Chappelle said Alta Mesa Idaho is today producing at only three of its eight oil and gas wells where production already had begun. He blamed the shutdown on the high cost of water disposal.
“We currently have only three wells on continuous production due to the volume of geologic water being produced,” Chappelle said. “In every other producing oil and gas state, there is a Class II injection well program so operators can put that produced water back where they found it.”
It’s different in Idaho, Chappelle said.
“The EPA’s unwillingness to grant Idaho authority for a Class II injection well program means a significant amount of oil, gas and (natural gas liquids) will simply be abandoned as uneconomic,” Chappelle said. “As a result, mineral owners, taxing authorities, our investors, field contractors, local businesses supporting our industry and the state of ldaho will never see revenue they otherwise might.”
He also blamed the Idaho Tax Commission and the Idaho Department of Lands for having reporting forms that treat production differently. Finally, he said, Alta Mesa is facing low prices, using natural gas liquids as an example.
“The depressed market along with the cost to process and transport those products has resulted in a price received by us at the wellhead by our purchaser averaging $0.13 per gallon over the last year,” he said.
Public records at the Office of Natural Resources Revenue show Alta Mesa paid $0.178 a gallon in 2016 for natural gas liquids from three of its wells on which it pays royalties on federal land.
Current law allows Alta Mesa to keep production data secret from even state regulators for six months. The public gets access six months after the state.
“I believe transparency and openness are crucial to the success of our industry in this state,” Chappelle said in his letter. “However, I strongly believe this must include those who have concerns about our operations being open, direct and specific with us about those concerns.”