Roan Plateau refunds feared

Kelly Sloan

Kelly Sloan, The Business Times

County and municipal governments in Northwest Colorado demand the federal government not hold them liable if money paid for leases on the Roan Plateau and in part distributed to them and spent must be refunded because energy development on the plateau doesn’t occur.

The Associated Governments of Northwest Colorado (AGNC) — a group representing counties and cities in the region, including Mesa County — sent a letter to Interior Secretary Sally Jewell. The AGNC, the letter states, “on behalf of our member governments, demands that the state of Colorado, and all jurisdictions within, be held harmless for any financial consequences of a withdrawal or vacation of any oil and gas leases on the Roan Plateau.”

The AGNC detailed its position in a news conference in Grand Junction.

“What we are telling the feds is that if the leases on the Roan Plateau are withdrawn or vacated, it is not due to any fault or action on our part,” said Mike Samson, a Garfield County commissioner  who serves as chairman of the AGNC. “Any attempt, therefore, at clawing back those funds from our local or state government would be entirely unacceptable.”

Oil and natural gas leases on about 56,000 acres on the Roan Plateau in Western Colorado were sold in 2008, bringing in $113.9 million to the Department of the Interior in the largest onshore oil and gas lease sale in the U.S.

Of that total, $56 million, went to the state of Colorado. From there, the state divided its share into two funds – the Higher Education Maintenance Fund and Local Government Permanent Fund.

The State Legislature enacted a measure that directed $17 million of the Local Government Permanent Fund into a separate Local Government Mineral Impact Fund that financed four grants. Those grants included $3.2 million paid jointly to the City of Grand Junction and Mesa County for the 29 Road overpass and $8 million paid to Garfield County for a new highway interchange at Parachute.

 The state subsequently transferred the remainder of the Roan money to the general fund and spent it.

The leases on the Roan Plateau have never been developed, however, tied up in lawsuits leveled by a consortium of environmental groups. The lawsuits followed a decision by the U.S. Bureau of Land Management to lease acreage for oil and gas development in line with the federal law that transferred administration of what were naval reserve lands from the Department of Energy to the BLM in 1997.

A federal court judge found partially for the plaintiffs in a June 2012 ruling and remanded the resource management plan for the Roan Plateau back to the BLM to address what were described as shortcomings in the analysis of cumulative air quality and ozone effects as well as a plaintiff-sponsored “community alternative” for extracting Roan gas resources from the side. The BLM decided in January to draft a new supplemental environmental impact statement.

The delays have raised concerns among local officials the BLM or a court will vacate the leases or that a settlement will be reached with environmental groups to withdraw a sizeable portion of acreage for the leases. In that event, officials said lease holders will have a right to be refunded the money paid for the leases. But officials don’t want that money to come from state or local coffers.

“This is money that was received by the state and by local governments in good faith and in full reliance on being able to use that funding,” Samson said.

Moreover, it could prove difficult and painful to retrieve those funds.

“That money has been spent,” said State Rep. Ray Scott, R-Grand Junction. “The state received $56 million dollars from that lease sale and spent it on education, roads, bridges, social programs, prisons and even some directly on local projects like the 29 Road overpass. That is a lot of money for the federal government to come and try to take to pay for their mistakes.”

Doug Monger, a Routt County commissioner who serves as vice chairman of the AGNC, said a lot of the money went for projects that anticipated an increase in economic activity development of the Roan leases would have brought. “Parachute, for example, built their new interchange in the expectation that it would be needed to handle the increased traffic that the Roan development would bring. Now that development doesn’t look like it’s going to happen, and they still have that new infrastructure to maintain.”

Although no precedent exists to indicate how the Department of Interior might attempt to recover those funds in the event it must refund the lease payments, it appears that one mechanism to do so would be to withhold future federal mineral lease payments from individual counties and municipalities — direct distributions from such federal mineral lease revenue as royalties from production off federal leases.

Monger said that, too, would be unacceptable. “FML payments are an important part of the overall revenue for our local governments. It would be fundamentally unfair for the federal government to withhold those funds to pay for something which is in no way our fault.”

Other officials lamented the potential loss of future revenue from production on the Roan Plateau — as well as the message sent to other energy companies looking to invest in the region.

“Offering these leases and then changing the rules of the game five years out, that’s simply not good business,” said John Justman, a Mesa County Commissioner on the AGNC board.