Even though U.S. oil prices have dropped to levels not seen in more than a decade, a Denver-based company is proposing a drilling project that could threaten prime wildlife habitat in southwest Montana.
The Beaverhead-Deerlodge National Forest and the Dillon Bureau of Land Management Office are conducting an environmental assessment of oil drilling in the Tendoy Mountains south of Dillon. They are accepting public comment until midnight on March 25.
Denver-based Lima Exploration Company, LLC, is proposing to drill an 12,500-foot exploratory well either on BLM property near Big Sheep Creek Road west of Dell or on Forest Service property off Little Sheep Creek Road west of Lima. The roads leading into either site would have to be upgraded for heavy machinery and additional roads would have to be built.
The drilling rig is 150 feet tall, the well pad would cover 5 acres, and drilling operations would occur around the clock for 30 to 40 days. If the well produced, it would remain operational for 20 years or more.
Scot Donato, manager of regulatory affairs and environmental health and safety for Great Western Oil and Gas, told the Montana Standard that the future could bring 10 to 20 wells to the area.
The environmental assessment says water for drilling would be brought in from elsewhere and wastewater would be disposed of offsite. But the assessment doesn’t mention where the water is coming from or where wastewater would be taken.
With a well of more than 2 miles deep, Lima Exploration would probably use fracking technology, although the assessment doesn’t reveal the drilling method. Fracking uses a significant amount of water during the drilling process, and the wastewater often contains significant amounts of toxic pollutants, including benzene. So there’s always some concern about groundwater and surface water contamination.
Both the Big Sheep and Little Sheep Creeks flow into the Red Rock River and ultimately into the Beaverhead and Jefferson rivers. Both rivers have suffered from low streamflow due to decreasing winter snowpack over the years, so the concentrations of any toxic contaminants would be higher than in rivers with more water.
The Lima Exploration Company already holds 37,688 acres of oil leases covering much of the southern Tendoy Mountains and down into the Lima Peaks. Up until now, this area has had no real oil and gas development, but the Snowcrest Range formation sitting more than 10,000 feet below the surface is supposed to have oil potential similar to that of the shale formations under the area around the BIg Snowy Mountains.
So Lima Exploration is proposing to designate almost 16,000 of those acres as an exploratory drilling area between Big Sheep Creek and Little Sheep Creek.
The BLM’s Big Sheep Creek Special Recreation Management Area lies just to the north of the proposed drilling area. According to federal law, agencies are supposed to provide special management and control measures for the protection of such areas, but the environmental assessment makes no mention of impacts to the SRMA.
While one exploratory well might not destroy too much wildlife habitat, a complex of 10 to 20 wells could have a big effect on a number of high-profile species.
The Tendoy Mountains and Lima Peaks have thriving elk herds, so they are popular with hunters. In addition, Montana Fish, Wildlife & Parks is putting in a lot of time and effort trying to reestablish a wild sheep herd there. Biologists are killing off the existing herd, which has suffered from disease, and intend to replace them with disease-free animals.
Finally, the proposed area is near designated core areas of sage grouse habitat. If oil and gas fields in Wyoming are any indication, full-blown development of the Tendoy area could have a noticeable effect on sage grouse.
The timing of Lima Exploration’s permit request is strange since oil prices are currently so low that sales don’t justify the expense of drilling operations. For that reason, oil workers in the Bakken area are being laid off, and the use of drilling rigs in North America has dropped 70 percent over the past year.
Like many of the exploratory drilling companies buying claims throughout the West, Lima Exploration is fairly new, having been incorporated in November 2013 as a subsidiary of the Great Western Oil and Gas Company. As a result, the only leases it owns are the Tendoy leases.
The leases have existed since 1987 and have been owned by various companies but never developed. Most recently, Baseline Minerals acquired the leases in 2007 and then the leases were shuffled off to the Samson Resources Corporation.
Ironically, Lima Exploration acquired the leases when Samson Resources sold them off prior to declaring bankruptcy in September because low oil prices made it too difficult Samson to overcome its debt.
The recent acquisition coincides with the Tendoy exploration permit request, and Lima Exploration isn’t as likely to suffer the same financial pitfalls as Samson Resources. That’s because the Great Western Oil and Gas Company is owned by the Denver-based Broe Group, a private investment firm that has diversified income from real estate, transportation and natural resource properties.
The Great Western Oil and Gas Company is trying to close a deal with Encana that would allow the Broe Group to have part of the Denver Julesburg Basin project in northern Colorado. That project includes more than 1,600 wells across 51,000 acres.