Idaho Natural Gas Pains
FRUITLAND – When an Alta Mesa Idaho agent came seeking to lease the mineral rights on Luke and Brynna Smith’s land earlier this year, they asked where in the neighborhood the company would drill the natural gas well.
“You might as well sign,” Brynna Smith recalls being told, “ because it’s going to be behind your house.”
The young couple had just bought their home in a quiet neighborhood on the edge of a farm field, where Brynna could home-school their four children. When they asked for more information, the company and even the state told them they couldn’t talk because the parties were involved in a legal proceeding that would determine mineral rights owners are treated fairly and natural gas is conserved.
Five years after natural gas was discovered in Payette County, few are happy with the way development has proceeded even though production began in August at a pace that will soon bring tax and royalty dollars to the state.
The Smiths and their neighbors are wary of the regulations put in place to protect them as mineral right owners and residents of a future gas field.
The company is frustrated with the processes it helped the state develop to encourage and regulate gas and oil development in Idaho.
Lawmakers who represent the area are unhappy with the secrecy of the company as it moves into a region that has never before had oil and gas development.
But some of this is changing. Alta Mesa Idaho has scheduled a meeting in Fruitland for Tuesday to meet with residents there and answer their questions. The three lawmakers and the Statesman were allowed to see the Little Willow Gathering Facility — where gas and other products are initially processed and piped together — that is the center of Alta Mesa’s Idaho operations.
Idaho Department of Lands Director Tom Schultz has acknowledged that the process needs to become better and he’s going to other states to learn how they run their programs to find the right balance between efficiency and democracy.
“I do sympathize that (the integration process) is a lot longer than other states,” Schultz said.
The Smiths and other Fruitland residents were sent a packet of documents earlier this year telling them the Idaho Oil and Gas Commission was going to “integrate” the 640-acre section where their home and half-acre were located. This process, also called mandatory pooling, was approved by the Idaho Legislature this year to protect mineral-right holders and ensure gas is not wasted.
If 55 percent of mineral-interest owners in a 640-acre area designated by the state as a “unit” or “pool” agree to lease their rights, a driller can ask the state to force the other 45 percent to be included in the unit. Owners are then presented a list of options for compensation, among them leasing their right to the driller or investing in the drilling for a larger share of the profits.
Much of the documents the Smiths got had been redacted — key details about the company’s plans and proprietary information blacked out — providing the Smiths with none of the information about the integration process or the effects of drilling, which are their primary concern.
“Most of us immediately surrounding this field don’t want it here,” Luke Smith said.
The people pushing the no-drilling response are part of a group led by farmer-organizer Alma Hasse. They’ve formed Citizens Alliance for Integrity and Accountability to take on the gas developers and hired a lawyer they shared with the Smiths.
Haase, a self-described “fractivist,” refused to leave a Payette County planning and zoning committee a year ago and was arrested for disorderly conduct; she was released after eight days and charges later dismissed. She has since filed a legal claim for monetary damages against the county.
Today, the Smiths know they can’t stop the drilling. They have become sophisticated about the state’s regulatory program and what state officials admit is a predisposition toward drilling.
“They said repeatedly it’s for the greater good,” said Luke Smith, a paramedic. “What’s a greater good than the health of my family?”
SECRECY BRINGS LAWMAKERS TOGETHER
The health, welfare and prosperity of their constituents is what made both Fruitland Republican Sen. Abby Lee and Midvale Republican Judy Boyle support natural gas development. But the secrecy and the way residents were treated by company representatives was sending people to Hasse for information.
“I told (the company), ‘I see you can raise our district’s standard of living,’ ” Boyle said. “‘I want you to succeed.’ ”
She and Lee have not been close since Lee defeated Boyle’s close friend, Sen. Monte Pearce. But they joined together, along with New Plymouth Republican Rep. Ryan Kerby, when Boyle said lobbyists for Alta Mesa treating Lee as an enemy because of the concerns she raised about secrecy and other issues.
“I want to make sure this kind of development benefits the state 20 years from now and not just two years from now,” Lee said.
Company officials told Lee she could not visit the Little Willow facility, because of safety and proprietary processes. Lee called Alta Mesa President and CEO Hal Chappelle and a week later, she, Boyle and Kerby got a tour.
“After that, my confidence level grew,” Lee said.
The decisions we make here are going to be seen throughout the area. This stands to be a transformative process for this district.
Idaho Sen. Abby Lee, Fruitland
Boyle had introduced the company at a local public meeting in September that had not been advertised and was poorly attended. She told Chappelle they needed another meeting — with better notice — to offer the public a chance to get their questions answered.
Most of the fear and opposition will be cleared up, Boyle said, by eliminating that secrecy.
“It’s like they’ve landed on a strange planet with strange people they don’t understand,” Boyle said. “We don’t understand them. They’re aliens.”
CLEARING THE AIR
John Peiserich, Alta Mesa Idaho’s chief counsel, has been representing the gas industry in Idaho even before Alta Mesa bought out Bridge Resources’ interest — including the Willow field — in 2012. Idaho’s “play,” as an oil and gas exploration effort is called, is described in the industry as a “wildcat” because of all the financial risk it entails.
The wildcatters who take these risks inherently keep their information close to the vest so they don’t attract competitors. But it is rare they have to start from scratch and help develop the regulatory framework for an entire state.
Idaho’s new rules haven’t worked out the way Peiserich hoped. The company filed to integrate the two sections in Fruitland in May. Now it’s the end of October and the state still hasn’t completed the process, even though the regulations say the Oil and Gas Commission “shall” integrate. The company can’t start drilling until it has the various rights straightened out.
By making the process a legal proceeding as its rules say, the company was forced to present families like the Smiths with all of the information — with company details redacted so competitors couldn’t get them — at once, company spokesmen said.
A hearing is now set for Nov. 19, but Peiserich said it won’t happen. Alta Mesa plans to withdraw its application because the state has changed the rules in the middle of the process, opening the entire integration decision up for legal challenge.
He wants the process changed to make it quicker, simpler and clearer for all parties.
“It’s too complicated,” Peiserich said. The “messed-up” system also is likely to keep competitors from entering the state.
Above the Little Willow gathering station, construction workers are building pads for new wells that Alta Mesa hopes to have drilled by the end of the year. Older wells sending natural gas into its pipeline surround the station, which is filled with state-of-the-art technology.
The company’s dehydration facility (removing water from the gas) on the other end of the pipeline is filling tanker trucks owned by a Fruitland business with condensate, a liquid hydrocarbon byproduct priced like gasoline and transported to a railhead in Ontario, Ore., for shipment to Salt Lake.
Some of the gas goes into the Northwest Pipeline and the rest goes into Idaho Power’s Langley Gulch gas power plant nearby. Alta Mesa’s pipeline supplies enough for 40 percent of the plant’s power, Peiserich said.
“My goal is to produce more gas than they can take,” he said.
Alta Mesa has invested $140 million in Idaho so far. The Little Willow site and Payette County as a whole is the center of Alta Mesa’s operations, in part because that’s where they have the most information, Peiserich said.
The company has sophisticated geophysical models of the underground resources they seek, mainly reservoirs in the sandstone geology that once was an ocean floor.
Each time Alta Mesa drills and with each well in production they get more and more information that allows them to unlock the mysteries of a geology Peiserich said can’t be found anywhere else in the world, except perhaps China.
The company holds mineral rights elsewhere, including in Ada County near Eagle. The company bid on all the rights put out for bid by the state in the area, but Payette County is going to be their focus for years to come.
When the federal government leases mineral rights to its lands in Idaho, as it did for the first time in a decade in May Idaho gets half of the proceeds. On the sale in May that totaled $3.8 million.
“We’re going to do everything we can to maximize value,” Peiserich said.
That also means the company won’t look at horizontal fracturing, or fracking. One reason is that the geology isn’t shale and isn’t needed to get at the oil, but cost also is a factor.
“Because of the way the reservoirs sit here,” he said, “it would be a waste of resources.”
STANDING UP FOR THEMSELVES
A white stake stands in the field about 1,000 feet from the Smiths’ home. A worker told Luke that’s where the drill rig will be, tilting toward their home. The target is 5,000 feet down — right below their home.
The company has 85 percent of the mineral rights in the section leased, Peiserich said. It is paying people a $100-an-acre bonus with a minimum payment of $50 for smaller parcels, along with a 12.5 percent royalty if commercial quantities of gas are found.
$200,000 to $400,000How much money Idaho estimates it will get in severance taxes from Alta Mesa this fiscal year through July.
The Smiths’ main concern now is whether the road next to their home will be used for the 65 trucks that will come to the drill site over the four weeks of drilling. They also worry about the long-term presence of drillers and drill rigs and are going to stay involved to protect their own.
But they also may make some money.
“We’ve been told we’re sitting on a gold mine,” Brynna Smith said.
Meeting Nov. 3
Alta Mesa Idaho is hosting an informational meeting on its natural gas development plans at the Fruitland Middle School Commons Area Tuesday, Nov. 3 from 6 pm to 8 pm.