A project that will drill the first oil and gas wells in La Plata County targeting the Mancos Shale formation will move ahead for further permitting after an agreement with La Plata County.
La Plata County commissioners on Tuesday signed a memorandum of understanding with NueVida Resources LLC, a Texas-based oil and gas company, allowing the company’s initial application for a roughly 1,280-acre exploratory development near Ignacio to return to the Colorado Oil and Gas Conservation Commission for approval.
“This is step one in a lengthy, lengthy process,” said Jim Bob Byrd, vice president of business development for NueVida Resources. “... We have several steps to go in our process and this was just phase one that La Plata County had requested.”
On Jan. 5, NueVida Resources submitted an application to the COGCC to create an exploratory drilling area with up to eight horizontal oil and gas wells near the intersection of County Road 309A and County Road 318 south of Durango and west of Ignacio on the Southern Ute Indian Reservation.
The company would drill on privately owned land with previous oil and gas development as it searches for natural gas at the northern edge of the San Juan Basin’s Mancos formation.
The COGCC set a hearing for the proposed project in June, but La Plata County submitted a petition to the commission in May raising environmental, public health, safety and welfare concerns.
The county asked that the commission modify the application to address the potential impacts the operation would have on groundwater quality, noise, wildlife habitat, air quality and local infrastructure, among others. It also requested the negotiation of a memorandum of understanding with NueVida Resources.
In June, NueVida Resources asked the COGCC to consolidate the hearings for its spacing and oil and gas development plan applications so it could finish the agreement with the county.
In the past, La Plata County has intervened with other oil and gas applications so it could develop memorandums of understanding with producers, said Anna Sigler, a natural resource planner with the county.
“The first memorandum of understanding that we negotiated was with BP in 2005 and this kind of follows that template,” Sigler said.
However, there were some differences the agreement addressed, she said.
The proposed wells will be drilled horizontally using hydraulic fracturing so they will be longer than many of the other wells in the county. The Mancos Shale formation is also significantly deeper than the Fruitland formation that many of the county’s other wells target, so the timeline for drilling will be longer, Sigler said.
If the exploratory development finds natural gas, it could be a windfall for NueVida Resources. Natural gas prices have spiked in recent months, reaching a five-year high in early October.
LOGOS Resources II LLC announced in October that it had developed two highly productive wells targeting the Mancos Shale in northwestern New Mexico. The two natural gas wells were the highest producing in the San Juan Basin in the last 20 years.
According to Byrd, they are among the top 10 ever discovered in the region.
La Plata County will now withdraw its intervention to NueVida Resources’ spacing application. NueVida Resources will submit an oil and gas development plan application to the COGCC and proceed to a hearing for the approval of its two outstanding applications.
The company will need further permits from La Plata County, Colorado Parks and Wildlife and the COGCC before it can drill.
“This will be several months for us to go through the various and sundry processes and submit applications that we need to have in hand before we conduct any operations,” Byrd said.
“The overall project is extremely complex,” he said. “... And we take very seriously our responsibility to be the best stewards that we possibly can to the environment, and that’s one of the things that we’re discussing with various agencies.”