State approves drilling permits on Banning Lewis Ranch

March 26, 2012
photo - Ultra Resources' drilling site in El Paso County, near the corner of Drennan and Curtis roads. Photo by Andrew Wineke, The Gazette
Ultra Resources' drilling site in El Paso County, near the corner of Drennan and Curtis roads. Photo by Andrew Wineke, The Gazette 

The Colorado Oil and Gas Conservation Commission on Friday approved two permits to allow Ultra Resources to drill on Banning Lewis Ranch.

It’s unclear whether the company could or would actually start drilling in the near future, because Colorado Springs has a moratorium on oil and gas exploration until May while a city task force evaluates how to manage the industry. Ultra and the city are also locked in a court case in which the company is trying to set aside the annexation agreement and zoning that brought Banning Lewis into the city in 1988.

Ultra bought 18,000 acres of Banning Lewis Ranch at a bankruptcy auction last year, although the city’s current zoning for the ranch does not allow for oil exploration.

Colorado Springs city attorney Christopher Melcher said the city has made it clear to Ultra that local approval is required before any drilling begins and that he plans to write the company a letter Tuesday reiterating that point. However, Melcher said Ultra hasn’t made any commitments to the city.

“My office has clearly informed Ultra that the law requires that they will need to get local approval to go forward with any drilling activity,” Melcher said. “We have no reason to expect Ultra not to comply with that process.”

A 2002 court case found in favor of the town of Frederick after an oil company began drilling there with a state, but no local permit, Melcher said.

The city tried to make local approval a condition of the state permits: In a Feb. 14 letter to the oil and gas commission (COGCC) Colorado Springs planning and development manager Dick Anderwald: “Reliance by Ultra solely upon COGCC permits to conduct clearly illegal activities on the ranch would flout the city’s lawful land use authority.”

That stipulation did not make it into the final permits, but Anderwald said his impression is that the state felt it would be redundant, since following local zoning rules is already a matter of law.

In El Paso County, Ultra waited for a county moratorium to expire and the county to adopt new regulations covering oil and gas exploration at the end of January before it began drilling earlier this month.

A spokeswoman for Ultra did not return a request for comment Monday, but officials from Houston-based Ultra Petroleum, Ultra Resources’ parent company, laid out the company’s plans to the city task force last week. Ultra vice president for exploration Doug Selvius told the task force that Banning Lewis Ranch was the heart of the company’s ambitions in El Paso County.

“If the play is going to work, it’s going to work there,” Selvius said, referring to Banning Lewis.

He said Ultra would like to receive special use permits from the city to drill on the two sites on Banning Lewis Ranch.

Ultra is already drilling at two sites in unincorporated El Paso County, where it holds mineral rights leases on more than 100,000 acres of land, and has applied for permits to drill at several other sites.

If the city and Ultra reach an agreement on Banning Lewis, the company eventually hopes to drill on about 20 pads spread across its portion of the ranch, each containing up to eight wells, Ultra officials said. Initially, however, it would drill only on the two sites the state approved Friday so it can find out whether there’s enough oil and gas under the ranch to warrant further development.

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