Thursday, August 07, 2008
Tecton faces tough time in New Mexico
By Winthrop Quigley
Copyright © 2008 Albuquerque Journal
On first meeting someone, Bill Dirks tries to delay talking about what he does for a living.
Dirks runs an oil company. More to the point, he runs Tecton Energy LLC, which wants to drill for oil in the Galisteo Basin southeast of Santa Fe and for natural gas in the Albuquerque Basin on the West Mesa.
"It's a fascinating business, but it's a strange place to be when we know what we do is so badly needed by our country but yet a high percentage of the population of the country thinks what we do is evil and that we are evil," Dirks said in a phone interview from his Houston office.
Some of that population seems to live in Santa Fe County. The Journal's Raam Wong reported last November that at a community meeting to discuss Tecton's Galisteo Basin plans Dirks "faced so many boos and jeers . . . that the event could have been held in the facility's hockey arena."
"On a scale of one to 10," Dirks said, "where one is easy and straightforward and every day business and 10 is kind of the worst experience that we have seen in the oil and gas business in trying to gain access, Santa Fe is definitely a seven or an eight.
"Santa Fe is a bad one," he continued. "Myself and my partner have done many of these in the past. Some are very contentious, some are not contentious. Personally for me, this has been the worst one I've been involved in."
Dirks worked against tough opposition in British Columbia one time. "There were some real serious objectors, every bit as passionate as in Galisteo Basin. The difference was they were willing to work with us. I felt both sides won. The Galisteo Basin opposition is not of that mind-set. They want oil and gas gone."
Area residents have objected that oil field development would damage water resources, create noise, disrupt traditional lifestyles, create visual pollution and threaten archeological finds.
So far the Santa Fe County project is blocked. The county commission and Gov. Bill Richardson imposed a moratorium on drilling in the Galisteo Basin. Richardson said he wants to block drilling until the impact of oil development on archeological sites, water supplies and the environment can be more fully assessed.
"Tecton definitely doesn't believe the governor has acted legally in his personally imposed moratorium in not accepting state permits" that allow drilling, Dirks said.
Tecton is evaluating its legal position, but Dirks expects the U.S. Supreme Court will have to rule on any local government's role in permitting oil and gas projects. County government roadblocks to oil and gas projects are "happening all over the Western United States," he said. "The law of the land has left a lot of gray area between the rights of the state and the rights of the county and between the rights of the county and the rights of the municipality."
Tecton acquired rights to drill for oil on at least 100,000 acres in the Galisteo Basin and 57,000 acres west of Albuquerque. Most of the Galisteo rights were acquired from private owners of subsurface mineral rights. The Albuquerque rights were acquired from a unit of the SunCal Companies, which bought the Atrisco Land Grant in 2006. SunCal's deal requires it to share oil-generated profits with Artisco heirs.
Oil companies have known for years about the Galisteo and Albuquerque basins. "Shell spent more than 10 years and more than $100 million exploring in the Albuquerque Basin in the 1970s and early 1980s," Dirks said. "They shot seismic data, they drilled the deepest wells ever drilled in the basin, they used all of the technical resources and muscle of Shell Oil Company. They eventually left without putting a commercial discovery behind."
Several wells were drilled in the Galisteo Basin and they produced oil, but the oil sat in rock that in the 1980s did not easily yield crude. When oil prices collapsed in 1985, interest in the area evaporated.
Tecton was founded two years ago precisely to re-examine areas that were evaluated years ago but bypassed.
"We now recognize there are many places in North America and all over the world, quite frankly, where there are what the industry calls unconventional or continuous traps that we didn't pay much attention to in the 1960s, the 1970s, the 1980s," Dirks said. "With our present day understanding of oil and gas traps (the basins) are definitely a place to be looked at again."
Identifying the value of those bypassed resources is part of the skill Tecton brings to a project, he said. New technology that uses hydrology to release oil and gas from the traps is another.
"The Albuquerque Basin to us looks like a very large continuous gas trap," Dirks said. "It has the characteristics of other places in the United States and the Canadian Rocky Mountains where our team has discovered large quantities of natural gas."
The Galisteo Basin "looks like a big unconventional oil trap" that resembles northwestern New Mexico's San Juan Basin. "We already know there is oil present and producible there because we've re-entered an existing well in the Galisteo Basin (and it is) producing commercial quantities."
The company faces nonpolitical challenges in the basins as well. Dirks estimates a natural gas well in the Albuquerque Basin will cost from $4 million to $10 million. A similar well in the Permian Basin in southeastern New Mexico could cost as little as $200,000.
Tecton raised $140 million to begin operations. Some of the money came from private equity firm Quantum Energy Partners and some from Jefferies Capital Partners. The rest was contributed by Dirks and his partners. "In this day and age, that is only a modest capital raise," Dirks said.
"There is significant money to be made, but there is also significant money to be lost," he said. "We've put lots and lots of our money into this thing. Rolling the dice can be a stimulating thing."
Most of Tecton's 15 employees have worked for many years in the industry. "We were all at points in our careers that we had worked as part of large oil and gas development programs for other companies, mostly majors," Dirks said. "We wanted to go out and do one on our own."
Dirks spent 20 years with Shell Oil. He resigned his position as U.S. exploration manager to become CEO of Samson Resources, which operates mostly in Canada.
"A lot of us just want to prove to ourselves that we're skilled enough in this business that we can do it from scratch," he said.
Some of Dirks's private time is spent at the Aspen Institute, a nonprofit that tries to develop what it calls enlightened leaders with a commitment to "timeless values."
Dirks spent weeks at Aspen looking for alternatives to oil, gas and other traditional fuels. The problem, he found, is it will take a lot of time to develop the alternatives. "The sad thing is you can't create those alternatives without hydrocarbons. You have to have something to bridge the gap."