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Banning Lewis purchase just part of Ultra's plans

By: WAYNE HEILMAN AND DEBBBIE KELLEY
October 12, 2011
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photo - Ultra Resources, which has bought the bulk of the Banning Lewis Ranch on the east side of Colorado Springs, says it plans to drill for oil and gas on the property. Photo by THE GAZETTE FILE
Ultra Resources, which has bought the bulk of the Banning Lewis Ranch on the east side of Colorado Springs, says it plans to drill for oil and gas on the property. Photo by THE GAZETTE FILE 

Ultra Resources on Wednesday confirmed it has completed its $20 million purchase of most of the Banning Lewis Ranch, setting the stage for a U.S. Bankruptcy Court battle with the city of Colorado Springs over whether city land-use agreements should remain intact.

Kelly Whitley, an Ultra spokeswoman, confirmed the company had acquired 18,000 acres in the ranch, which makes up much of the eastern border of the city, but declined further comment. The company has said it wants to drill for oil and natural gas on the ranch.

The Banning Lewis deal appears to be just one part of Ultra’s plans for drilling in the area. Ultra paid $1.67 million in July and August to Denver-based Pine Ridge Oil & Gas LLC for leases on nearly 100,000 acres of land in eastern El Paso County and an exploratory well east of Fountain.

Ultra told stockholders in August that it had “amassed nearly 100,000 net acres targeting the Niobrara formation in the Denver-Julesburg Basin in Colorado” where  “inherent reservoir characteristics indicate significant resource potential.” The company said it plans to drill and complete several exploration wells this winter on the leased property.

The El Paso County Board of Commissioners imposed a four-month moratorium Sept. 29 on new drilling permits to give county officials time to draft land use regulations for the industry.

Whitley said Wednesday that commenting on the company’s ongoing leasing efforts would be “detrimental.”

Colorado Springs Mayor Steve Bach, who is in Washington, D.C., on a lobbying trip with local business leaders, said Wednesday in a statement that the sale of most of Banning Lewis to Ultra means “there is a real possibility that the Banning Lewis Ranch will not be built into residential and commercial neighborhoods as previously expected.”

Ultra, a subsidiary of Houston-based Ultra Petroleum, submitted the winning bid for the 18,000 acres of Banning Lewis during a June bankruptcy court auction. Keybank National Association, which had loaned the previous owners of the ranch $65 million, bought the remaining 2,400 acres on the far north side of the ranch for $24.5 million as part of the auction. A Keybank spokeswoman said the bank plans to sell the land.

A U.S. Bankruptcy Court judge in Delaware last month approved both sales, with Ultra’s original purchase price of $26.3 million reduced to $20 million. The judge left it to the U.S. Bankruptcy Court in Denver to determine whether agreements related to the city’s 1988 annexation of the ranch should remain in effect.

City Attorney Chris Melcher said Wednesday in statement that the city will continue negotiations with Ultra “to reach a satisfactory resolution of the annexation issues, but if that effort is not successful the city intends to seek enforcement of all rights and responsibilities under the agreement in the Colorado bankruptcy court of Colorado state court.”

Colorado Springs City Council President Scott Hente said Wednesday the sale means Ultra “must have some degree of confidence that they can have successful negotiations with the city. I don’t know that they can’t, but we just need to sit down and talk to them.”

Hente said Steve Cox, Bach’s chief of staff, is leading an effort among city staff and council members to determine what regulations, if any, the city should impose on drilling through its land-use regulations and what modifications, if any, it should make in its land-use agreements on the ranch.

The 1988 annexation agreement, and a separate utilities agreement, regulate development of the ranch, which the previous owners had expected would include 75,000 housing units and 79 million square feet of commercial space. Ultra has argued that the agreements would pose a burden to the company’s oil and gas drilling efforts, while the city has said the agreements are needed to ensure orderly development of the property.

Two California limited liability companies that owned the ranch sought U.S. Bankruptcy Court protection from creditors last year, citing more than $242 million in debts. Although the ranch was sold to developers by Raymond “Pinky” Lewis in 1963, development on the largest part of the property did not begin until 2007. About 300 homes have been built in the northwest corner of the ranch.

Contact Wayne Heilman: 636-0234 Twitter @wayneheilman
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