Craig A Quicksilver Resources executive laid out ambitious oil and gas exploration plans for his company during a meeting with the Moffat County Commission this week. Those plans include numerous new exploratory wells in Moffat County, where the company says it is having an easier time getting approval to drill than in Routt County.
Danny Mondragon, Quicksilver’s Colorado project manager, also told the Moffat County commissioners that his company, which has maintained a Steamboat Springs office, is trying to purchase a Craig office building and could relocate its employees there.
“Quicksilver is the company to keep an eye on,” Moffat County Commissioner Tom Mathers said after the Tuesday lunch meeting. “They’re more motivated and hungrier to grow their business, unlike Shell, which seems to move at a snail’s pace because they’re so big.”
Mondragon moved to Steamboat a year ago to oversee the company’s work here, which includes major plays in Moffat and Routt counties.
To date, Quicksilver has drilled nine exploratory wells in Moffat County and one in Routt County. Many of those wells currently are producing oil, Mondragon said, but not in the volume the company had hoped for.
“We know there’s flow down there because we’re seeing the product,” Mondragon said. “But the pressure isn’t where we need it to be to determine whether the wells we have will produce in (commercial) volume.”
Mondragon told the Moffat County commissioners that Quicksilver plans to drill anywhere from eight to 15 more exploratory wells this summer and already has acquired permits to drill as many as 40 in the region.
“Our plans could include a lot more wells in the future or a lot less,” Mondragon said. “It just depends on what we find, but we’re hoping to make a long-term, viable play here.”
Although Routt County encompasses approximately half of Quicksilver’s play for oil in the Niobrara Shale formation, most of the company’s activity for 2012 is slated to take place in Moffat County. To be closer to the action, Mondragon said Quicksilver executives made an offer to purchase an office building in Craig.
“We should know in the next 30 days if the offer has been accepted,” Mondragon said. “The perception is going to be that we’re running from Routt County, but that’s not true. We have way too much money invested in Routt to just walk away.”
The reason for the potential move has nothing to do with the company favoring one county over the other, Mondragon said.
However, Quicksilver has acknowledged that it’s been more difficult to acquire permits in Routt County than it has in Moffat County.
“It’s a tourist-based economy, and I believe the citizens there have a legitimate concern, but this is also pretty new to them, and they’re trying to write local regulations as they go,” Mondragon said about Routt County. “It’s made the process really long and difficult, so from our perspective it just makes more sense to be closer to where we are operating.”
Routt County officials have led a public process to review and amend the conditions under which permits for oil and gas operations are approved. During a seven-hour-plus hearing in late March, county officials and Quicksilver Resources argued about a condition requiring annual well water testing throughout the life of a special-use permit allowing oil drilling on Wolf Mountain near Milner. In the end, Quicksilver relented to the condition but said it retained the right to challenge it in the future.
On Thursday night, the Routt County Planning Commission voted, 6-1, to approve a special-use permit for a new Quicksilver well on Wolf Mountain north of Milner. The permit now must be approved by the Routt County Board of Commissioners.
In addition to a bold exploration plan and an office move, Mondragon said Quicksilver is considering an expansion to its central tank battery located in Lay Creek.
A central tank battery is a facility that separates oil, natural gas and water.
Land men are surveying Quicksilver’s parcels to examine whether a pipeline can be constructed to connect its Moffat County well sites at Stoddard, Grandbouche and K-Diamond to the Lay Creek battery.
If the pipeline is a viable option, Mondragon said the likely next step would be to construct another pipeline from Lay Creek to the distribution hub in Maybell.
“From Maybell, the product gets pumped north (to Wyoming) where it is refined and prepared for public distribution,” Mondragon said. “If it looks like a go, we’re pretty sure other operators in the area will want to tie into the system, as well.”