‘Fracking’ expands Nevada oil search

RENO — The U.S. Bureau of Land Management generated almost $2 million in its last quarterly oil and gas competitive lease sale here last month, selling 54 parcels in the Ely BLM District comprising 93,816 acres.

The parcels were southeast of the traditional oil-producing area of Railroad Valley, in White River Valley and Garden Valley where the BLM said new techniques like directional drilling and hydraulic fracturing or “fracking” could generate more oil exploration.

The highest bids were submitted for Nye County parcels.

Contex Energy Co. — which set a Colorado record with a bid of $5,850 per acre for a 320-acre parcel in Weld County, Colo. in 2011 — bid the highest price per acre in the December auction, of $54 per acre for a 983.78-acre parcel in Nye County, offering $53,136.

The Contex high bid went for a parcel in White River Valley, near Sunnyside. The BLM offered up 56 parcels in White River Valley totaling 107,581 acres, in the extreme eastern corner of Nye County between Lincoln and White Pine counties, of which leases for 34 parcels were sold at auction.

Another 80 parcels totaling 158,924 acres were offered for auction in Garden Valley, south of there, but offering prices for the 15 parcels that sold were lower, up to a maximum of $12 per acre submitted by Roy G. Barton Jr. of Hobbs, Nev. Many of the remaining parcels in the quarterly auction were in Steptoe Valley, north of Ely, where 45 parcels were offered for auction totaling 72,681 acres, but only three parcels sold, attracting bids of only $2 per acre.

Contex Energy was one of the major players in the latest auction, scooping up 15,415 acres of leases for over $645,000.

Housing Int., LLC, of Belvedere, Calif., submitted the total highest price for one parcel, $135,044 for a 2,548-acre parcel, or $53 per acre in White River Valley.

Hawkwood Energy Agent Corporation of Greenwood Village, Colo., a suburb of Denver, submitted bids on 38,146 acres, totaling $321,030. A description of Hawkwood Energy states the company began operations in April 2012 and focuses on early stage, unconventional liquid opportunities in the Rockies.

Another major player was White Wolf Land Service of Bakersfield, Calif., which bid on 18,311 acres, for a total of $591,498. White Wolf specializes in land acquisitions and project management for energy companies. White Wolf submitted the second highest total bid for a parcel, offering $117,500 for a 2,349-acre parcel, at $50 per acre, also in White River Valley.

Contex Energy and White Wolf Land Company submitted all their bids for parcels in White River Valley.

The BLM received offers on 54 parcels in the quarterly sale, less than a third of the 178 parcels offered. The BLM offered up 303.3 million acres. The quarterly oil and gas competitive lease sale generated a combined $1.98 million. Half of the bid and rental receipts go to the state of Nevada, the other half to the federal government.

The BLM deferred auctioning 76,784 acres from the preliminary list up for auctiion due to sage grouse habitat.

Leases are for a period of 10 years, with annual rentals of $1.50 per acre for the first five years and $2 an acre after that until production begins. Once a lease is producing, a royalty of 12.5 percent is charged.

The BLM designates areas for fluid mineral leasing through a planning process. The BLM has 6.53 million acres open to fluid mineral leasing in the Ely district, of which 3.27 million acres have moderate restrictions of timing and surface use, due to wildlife and other considerations. Another 1.15 million acres are designated wilderness or wilderness study areas, with another 306,700 acres of discretionary closures.

The BLM report notes the assessment area is generally prospective for hydrocarbon production. The locally prospective reservoir rocks hold potential oil and gas traps; late tertiary volcanic rocks form the main reservoir of the oil fields in the Railroad Valley.

The BLM report said, “New directional drilling and hydraulic fracturing technology may allow for more extensive exploration into these tight formations not previously considered feasible.”

The first oil discovery in Nevada was in 1954 in Railroad Valley, the predominant area of oil and gas production in extreme northeastern Nye County, which has the state’s only oil refinery. Since 1907 over 970 wells were drilled in Nevada — including 270 drilled since 1986 — of which 50 produced oil, the BLM report states. Numerous wildcat wells were drilled throughout White Pine, Northeast Nye and Lincoln counties.

Only two producing wells are in the Ely BLM district, many had the presence of hydrocarbons but not in commercially producible quantities, the BLM said. But the report adds those numbers may increase with new advancements in technology.

A 1995 estimate by the U.S. Geological Survey of potential, undiscovered, technically recoverable, hydrocarbon resources estimated 98 million barrels of oil and almost 126 billion cubic feet of natural gas for the East Basin and Range area, which includes part of the latest assessment area.

“Much of the assessment area has a high potential for hydrocarbons based on the following geologic characteristics: presence of hydrocarbon source rocks, evidence of thermal maturation, presence of reservoir rocks with adequate porosity and permeability and the potential for hydrocarbon traps to exist,” the BLM evaluation states.

The BLM leased over 3.9 million acres of public land for oil and gas development in the past 11 years, but only 2 million acres of leases remain active. Federal lease sales average 395,000 acres per year. Since 2011, after oil and gas leasing reform took effect, the BLM state office put on a limit of 200 parcels per sale and one sale per BLM district office per year.