Colorado's Black Gold

The fledgling Niobrara oil play in northern Colorado and southern Wyoming is drawing intense interest—and investment—from oil and gas companies across the United States.

Land that used to fetch just $1 per acre in leases for mineral rights has been getting up to $3,200 per acre in recent months at auction.

The Niobrara is the name of a layer of shale rock thousands of feet underground in Colorado and Wyoming that oil and gas companies believe may hold millions of barrels of oil. The auctioned leases give oil and gas companies the right to seek drilling permits on the land to get at the minerals.

“We’ve had a good run for the last three months,” said Harold Kemp, assistant director for mineral leasing in Wyoming’s Office of State Lands and Investments. “We’re striking while the iron is hot.”

The Colorado State Land Board’s May 20 lease auction raked in a record of nearly $12.7 million for about 45,000 acres of state land—up from the previous record of about $4.5 million set in 2005, said Timothy Kelly, the board’s mineral leasing manager.

A few years ago, state-owned mineral leases in the southeastern corner of Wyoming received either no bids or the minimum bid of $1 per acre, said Harold Kemp, head of mineral leasing for Wyoming’s Office of State Lands and Investments.

But a special July auction—shoved onto the calendar to handle demand for leasing opportunities—landed $42 million, with some bids as high as $3,200 an acre.

For more on the explosive new demand for drilling rights in Colorado and Wyoming, click here for the full story from the Denver Business Journal (subscription required).