SILT, Colorado - The Board of Trustees on Tuesday unanimously agreed to lease the town's 75 acres of mineral rights to Antero Resources for four more years, until 2016.
The decision, made at the regular trustees meeting in Town Hall, established a lease rate of $400 per acre, which will bring $30,000 a year in revenue to the town. The May 29 edition of the Post Independent incorrectly reported that figure as $180,000 per year.
The deal was ratified despite objections voiced by one local resident, Peggy Tibbetts.
The lease revenue is significantly lower than the income the town got seven years ago, when it first leased 235 acres to Antero at a cost of $1,000 per acre.
The company is leasing only about a third of the acreage it leased from the town in 2005, because exploratory wells drilled north of town apparently have been deemed "uneconomical," according to Antero officials.
Silt Trustee Rick Aluise said on Tuesday that the town agreed in 2005 to lease 235 "net mineral acres" to Antero. The lease rate at that time was $1,000 per acre, for a total of $235,000 per year in revenues paid to the town, Aluise said.
Speaking before the trustees meeting officially began, Aluise asked why and when the leased acreage had been reduced.
"I'm not voting for this until I can understand how it went from 235 acres to 74," he said. He noted that the 235-acre lease covered all publicly owned land in town, including streets, parks and other property.
Once the meeting had commenced, Antero landman Dave Strickland explained that the reduction in the lease area and resulting revenue to the town was due to the company's realizing that its leases on the north side of town were not economically viable.
"They drilled a couple of wells up by the Hogback, and they're not producing," Strickland said.
He did not elaborate as to which wells he was referring to and left the council chambers before a reporter could talk with him.
The Grand Hogback is a geologic uplift of low hills to the north of town. The rural Silt Mesa lies between the town and the Hogback.
Antero drilled five exploratory wells on Silt Mesa in 2010 and 2011, and earlier this year announced it would not drill on Silt Mesa in 2012.
Antero spokesman Al Schopp, reached at his Denver office on Wednesday, declined to specifically say which wells are not economically viable, but confirmed Strickland's assessment of recent drilling history in the area.
"We have drilled some wells up there that we don't believe are economically viable in today's price environment," he said.
The Wall Street Journal reported on Wednesday that market prices for natural gas stood at $2.73 per MMBtu (million British thermal units), well below its 2008 peak of nearly $14 per MMBtu.
Price declines have been blamed nationally for a slowdown in drilling, although the industry continues to sign lease agreements with landowners and accumulate drilling permits in numerous states.
The trustees voted to renew the lease despite concern expressed by area resident Peggy Tibbetts about the potential negative environmental effects from drilling and hydraulic fracturing activities.
Tibbetts writes a blog, "From The Styx," that is critical of the oil and gas industry. She cited growing concerns nationwide that gas drilling and hydraulic fracturing pose serious potential health threats to those living nearby.
Aluise noted that the company will drill horizontally from rigs located outside the town limits, and that no well rigs will be erected within Silt.
"But that doesn't mean the residents of the town of Silt are not impacted," Tibbetts shot back.
Reading from a prepared statement, Tibbetts argued that there is mounting evidence that drilling and hydraulic fracturing release toxic substances into the atmosphere.
"Whether we admit it or not, being in Silt, we already suffer from prolonged exposure" to such airborne chemicals, Tibbetts told the trustees.
Industry officials have long maintained that there is no proof that hydraulic fracturing or other drilling activities are harmful to those living near the rigs.
In other action the trustees:
• Reapproved a contract for trash removal by Waste Management. The initial approval, from two weeks ago, was voided after a competing trash company complained that Trustee Sonny Fernandez is related to a manager at Waste Management. Fernandez recused himself from the reapproval process.
• Established a utility zone over the 132-acre, town-owned property known as the Silt River Preserve, south of the Colorado River.
• Delayed consideration of a proposal to pay trustees more for attending special meetings, while town administrator Pamela Woods researches the question.