Oil and gas companies look to Eastern Oregon

PORTLAND, Ore. (AP) – The price of oil and gas has gotten high enough to get energy companies prospecting in places they once passed up, such as Oregon.

The U.S. Bureau of Land Management offered 224,516 acres in Eastern Oregon for oil and gas exploration at an auction Thursday and sold rights to much of it, bringing in a total of $3.3 million. That’s the largest amount put up for sale in Oregon in many years.

The Oregon Department of State Lands last week received its first application since 1982 to lease state holdings for oil and gas exploration, said assistant director Steve Purchase.

Bob Houston, a geologist at the Oregon Department of Geology and Mineral Industries, said he has fielded calls from landowners in Eastern Oregon who have been approached about leasing their property for its oil and gas potential.

Most of the interest is in eastern Malheur County, near Vale and the Idaho border, and in Morrow and Umatilla counties.

"For Oregon’s experience at least, it’s a boom," Houston said. "In comparison to other states, maybe not."

Oregon has seen scattered drilling but holds just one developed gas field — the Mist Field in Columbia County, now on the decline. Of the 12 westernmost states, Oregon ranks last for the amount of lands currently producing oil and gas, according to an analysis by the Environmental Working Group.

Oil and gas reserves are often found within rock formations left behind by ancient seas. Such formations in the Northwest are commonly covered by thick layers of hard volcanic rock, said Eric Hoffman, acting section chief for the BLM’s minerals division in Oregon and Washington.

Along with rising prices to spur exploration, new technology now gives geologists a better view beneath the surface, and improved drilling methods make it more economical to punch through the volcanic rock, Hoffman said.

South-central Washington has seen increasing energy exploration in recent years, and that’s now spilling over into Oregon, he said.

The BLM has often offered parcels in Oregon for auction that went unsold.

For the auction Thursday, companies expressed interest in 167 parcels ranging in size from less than 50 acres to more than 2,500 acres, with nearly 90 percent in Malheur County and the rest in Morrow and Umatilla counties.

The auction also includes 55,181 acres in Washington.

Of the total of almost 280,000 acres, the BLM auctioned exploration rights to more than 227,000. The minimum bid was $2 per acre, and the highest bid was $230, although that was in Washington State, where the energy play has been hotter.

The bids represent a one-year bonus amount. After the first year of a lease, the exploration company pays $2 per acre for the right to continue drilling. If a company strikes oil or hits gas, it pays a 12.5 percent royalty on the production. Half of the federal revenues are returned to the state.

Many leases include conditions to protect wildlife, such as seasonal restrictions to avoid disturbing big-game winter range.

Bill Marlett of the Oregon Natural Desert Association in Bend said he does not see the leasing as a major concern because Oregon is not known for major energy reservoirs.