Letters from the West

Idaho oil and gas industry advocacy group blows up

Idaho Gov. Butch Otter talks with former Idaho Petroleum Council executive director Suzanne Budge at the site of Alta Mesa Idaho's gas dehydration plant near New Plymouth in 2014. The future of the council is up in the air and Budge resigned after Alta Mesa demanded her dismissal.
Idaho Gov. Butch Otter talks with former Idaho Petroleum Council executive director Suzanne Budge at the site of Alta Mesa Idaho's gas dehydration plant near New Plymouth in 2014. The future of the council is up in the air and Budge resigned after Alta Mesa demanded her dismissal.

Editor’s note: This article has been revised since it was posted earlier Thursday.

The Idaho Petroleum Council, an independent voice for Idaho’s infant oil and gas industry, disintegrated this month after the representative of Alta Mesa Idaho, the sole producer of natural gas in the state, asked its leaders to dismiss its respected executive director.

Suzanne Budge, executive director of the organization she’s led for five years, resigned Feb. 26, a day after Alta Mesa chief counsel John Pieserich emailed members of the council’s executive committee insisting they dismiss her. At the same time Petroleum Council President Scott Madison, executive vice president and general manager of Intermountain Gas, and Petroleum Council Vice President Paul Powell, president of Utah oil- and gas-drilling company Petroglyph Energy, also resigned. Other local companies have said they will not renew, Budge said.

Pieserich, an attorney who has helped write Idaho’s oil and gas laws and rules even before Alta Mesa came to the state, has since resigned from Alta Mesa. It’s not clear how and why the rift developed; neither Pieserich nor others involved would say.

The industry chaos comes as Idaho Gov. Butch Otter signed an industry-backed bill Wednesday that makes it easier to force mineral-right holders into a pool that conserves the resource. It also comes as gasoline prices have dropped 70 percent, driving many exploration and drilling companies out of business.

Alta Mesa’s President and CEO Hal Chappelle said by telephone that his Houston-based company is weathering the low prices and he remains confident about Southwest Idaho and eastern Oregon as a continuing center of growth. The company has drilled a dozen wells and for the fiscal year that began July 2015 has paid more than $49,600 in taxes to date and millions more in royalties and leasing payments.

But the company has invested more than $140 million in mostly Payette County, and Chapelle expects investment to slow.

“It’s a tough time to do exploration anywhere on the globe,” Chappelle said. “We made good investments and in the next few years we’ll see them bear fruit.”

Alta Mesa and its representatives have had a stormy relationship with many landowners in Payette County and nearby counties who are not used to the development of subsurface minerals — where owners have rights that are senior to surface landowner rights. The conflicts came to a head in Fruitland in 2015, when the company sought to drill a well next to a residential neighborhood.

Those with mineral rights who had not sold them to Alta Mesa or another company were forced into a “mandatory pooling,” also called an “integration.” If 55 percent of mineral-interest owners in a 640-acre unit or pool agree to lease their rights, a driller can ask the state to force the other 45 percent to be included. Today Alta Mesa says 90 percent of the mineral owners in the area have signed leases with the company.

Those 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. Alta Mesa later scrapped the Fruitland integration proposal and started over. It then sought to work on changing the law.

The new law streamlines the process and set timelines, which many near gas leasing areas opposed because it did not give landowners and others enough time to object.

But SB 1339 sailed through the Legislature after changes made at the request of Idaho Department of Lands Director Tom Schultz. The three legislators representing the area supported the bill. While this was happening, the conflict at the Idaho Petroleum Council was coming to a head.

I spoke with many people on all sides of the issue who told me Alta Mesa’s local team did not do enough to establish long-term relationships. Most of those people support the industry.

Petroglyph Energy’s Powell, on behalf of the council, spoke for the industry at a meeting in 2015 in Eagle, where opponents fear Alta Mesa plans to drill despite the company’s expressed focus on Payette. Council President Madison wrote a Guest Opinion in the Idaho Statesman.

Madison and Powell deny that such a conflict triggered their resignations from the council. Madison said the council was taking up too much of his time; Powell said Madison’s resignation triggered his withdrawal, which he’d already planned. Companies like J.R. Simplot and Idaho Power simply would not renew their membership, Budge said.

“These are the companies that the industry needs to build a credible reputation in the state,” said Budge, a geologist who previously worked in the oil industry before returning to Idaho and becoming a lobbyist. “Nobody more than I wants this industry to be a success.”

Alta Mesa’s Chappelle had praise for both Budge and Peiserich, and said the council is in transition and not dead. How it will reorganize, he said, he isn’t sure, but he did say that it will not simply be a council representing Alta Mesa. He said he eventually expects competition to return when the oil and gas market turns around.

He also said Dale Hayes, the operations chief, remains Alta Mesa’s top Idaho executive. Kestrel West will remain its public affairs consultant.

Chappelle also said Fruitland Republican Sen. Abby Lee and Schultz traveled to other states to see how they regulated the industry, and helped shape and pass the legislation.

Lee said Budge provided an independent voice for the council that is critical to the future of the industry in Idaho.

“With the dissolution of the council, we will only have one voice, a monopoly with little or no oversight except from the Department of Lands,” Lee said. “That’s not good for this industry.”

Rocky Barker: 208-377-6484, @RockyBarker