A 3,500-well gas field planned in sensitive wildlife habitat in the upper Green River Basin is expected to generate an estimated $17.8 billion over 40 years, but for whom?
The Bureau of Land Management is preparing to approve the 141,000-acre NPL Field — a certainty given that the federal agency sold oil and gas leases across the sprawling sagebrush landscape starting decades ago. Today, the world’s fourth largest private equity firm — Texas Pacific Group — controls the leases through its affiliate Jonah Energy and has begun selling interests to investors as it touts its reputation for profits based on unique strategies.
Sublette County residents who attend the Bondurant Barbecue, the Green River Rendezvous parade, or the Chuckwagon Days July 4 Rodeo know the Jonah name well. Wyoming wildcatters and fracking innovators the McMurry Oil Company developed the Jonah Field in the early 1990s, discovering reserves estimated at 10.5 trillion cubic feet of natural gas. That’s enough to power the entire nation for almost six months. The Jonah brand endured when Encana Corporation bought the natural gas field, and again when it sold it to TPG, which created Jonah Energy for the 2014 purchase.
Jonah’s key local employees have a strong community presence that persists. But TPG is not a name that appears regularly in the local Pinedale Roundup or Sublette Examiner weekly newspapers. Who TPG is and what it does is not largely discussed. (TPG officials referred questions to Jonah Energy’s long-time director of government affairs Paul Ulrich)
Claiming $73 billion under management with headquarters in Fort Worth, Texas and 16 offices worldwide, TPG makes money through a dizzying array financial transactions including leveraged buyouts, recapitalizations, spinouts, growth investments, joint ventures and restructurings.
TPG’s co-founders got their start in the offices of Robert M. Bass, known to some as one of the “corporate raiders” of the 1980s. TPG raises cash by offering a portion of a fund — unspecified investments that will mature in about a decade — to long-term clients. Private equity firms market their expertise to a variety of investors, including family trusts, pension plans, university endowments, insurance funds, and sovereign-wealth entities like Wyoming itself. TPG invests those commitments where it figures it can more efficiently operate a company, or make other gains, then acts on those strategies before selling for a hopefully higher price.
TPG has boasted of internal rates of return three times that of Standard and Poor’s 500 stockmarket index, according to a document “TPG Capital 2015,” obtained by WyoFile. TPG Capital has the “most experienced ops group in the market,” it tells prospective investors. When Encana Corporation decided to move out of Jonah gas holdings, TPG recognized an opportunity. Jonah is Wyoming’s second-largest natural gas field. It has associated neighboring leases and is located in a state friendly to mineral developers.
A whale of a field
To conservationists, the prospect of a 5.25-trillion-cubic-foot NPL field with 3,500 wells, 227 miles of roads, development in critical greater sage grouse winter range and on the only nationally recognized wildlife migration route is frightening. NPL will industrialize pronghorn winter range and parts of the longest terrestrial animal migration route in the Lower 48 states, Grand Teton National Park warned the BLM in 2011. “Radio collared pronghorn from the park have moved through the NPL project area en route to wintering grounds near Fontanelle [sic] Reservoir and areas further south towards Rock Springs,” a park environmental official wrote in 2011. Conservation of the areas “are essential to the persistence of the park’s pronghorn population,” which numbers about 300-400 animals. “Although pronghorn are currently successful in returning to the park each year there may be a threshold of oil and gas development and activity at which they no longer do so,” the park said.
The BLM also predicts disruption after it approves NPL. Pronghorn, and mule deer, “could face permanent displacement from seasonal habitat and disruption of migration routes,” the agency says in its draft environmental study, completed this summer.
Also unsettling to conservationists is Jonah Energy’s intention to drill in greater sage grouse winter concentration areas, significant habitat that was only discovered in 2005. Biologists twice sought to add much of the winter concentration area — which holds 1,500 to 2,000 wintering grouse — to Wyoming’s protected core-area habitat. But the latest attempt was, in effect, vetoed by an oil and gas representative sitting on a local sage grouse working group. The Green River Basin is rich grouse country in the state, with the largest portion of the imperiled birds and their habitat in the world.
The BLM may limit in winter some “disruptive activities,” such as well-pad construction and drilling, Caleb Hiner, BLM Pinedale office field manager, said in an interview. But it didn’t fully analyze barring Jonah Energy completely from grouse winter concentration areas during winter. “These additional protection measures would not be technically or economically feasible,” the agency said in the DEIS.
At Audubon, the nation’s preeminent avian advocacy association, advisor Brian Rutledge said development in the winter concentration areas is “unavoidable at this point.” Today, the state’s Sage Grouse Implementation Team is working on ways to protect wintering grouse. Jonah and the BLM say drilling in wintering areas won’t start until such plans are completed. Federal officials promise in their environmental study “to maintain the health and viability of Sage-Grouse populations in the project vicinity.”
“A decision on how this area will be developed has not been made,” the BLM’s Hiner said. After it closed public comment on its draft environmental impact statement last week, the BLM will consider those comments while seeking “a thoughtful take on how to minimize disturbance on winter concentration areas while still allowing for development of valid existing lease rights,” he said.
Audubon’s Rutledge considers the drilling a $17 billion experiment. He hopes a program is developed “so we can pull back when we see we’re having negative effects, and be able to determine what caused negative effects — what are those factors that elicit a negative response from the bird.” But there’s a huge element of uncertainty.
“We don’t even know why it’s a winter concentration area,” Rutledge said, “why … that space [is] more important to the birds than very similar spaces nearby.”
Ideally, Jonah Energy would stay away, he said. “I fully hope Jonah will discover a way, if there are reserves under those winter concentration areas, to access them remotely,” Rutledge said.
For Erik Molvar, director of the environmental watchdog activist Western Watersheds Project, the drilling risk is big. “The nut of it for sage grouse is the NPL project area has most of the known winter concentration area for the entire Upper Green River Valley,” he said. “If they are displaced, would we have any population at all? That’s a real unknown.”
Jonah the poster child
Yet TPG, which courts investors by underscoring the company’s financial and operations acumen, uses Jonah Energy as a poster child of corporate responsibility. It boasts a photo of Jonah’s Paul Ulrich, wearing an “I heart sage grouse” T-shirt with an arm around former Secretary of the Interior Sally Jewell in a corporate report about responsible investing. Jewell famously brokered nationwide grouse conservation plans in 2015 that kept the bird off the list of endangered species.
“We at Jonah Energy pride ourselves on being the gold standard in the industry when it comes to environmental protection,” Ulrich told WyoFile in an interview. “I encourage anybody to come down and pay us a visit at the Jonah Field.”
Ulrich called Jonah’s drilling proposal, developed in 2011, “a very bold technical leap to consolidate our production facilities, significantly reduce our overall surface footprint and provide for meaningful habitat restoration and space between those locations.” Among the efforts are consolidation of drill pads and the utilization of directional drilling. Ulrich sits on the Sage Grouse Implementation Team that has outlined ways to reduce disturbance to grouse and their habitat. “The protection measures that have been identified and codified will do their job and have done their job in many areas of the state and those will be applied to NPL,” he said. “In winter concentration areas, we’ve said all along we’ll follow the science.”
Jonah Energy plans on “disturbing” 6,340 acres, according to the BLM environmental review. It is an area that, if consolidated, would be larger than three miles by three miles. Permanent disturbance would remain across almost 2,000 acres, the equivalent of an area one by three miles. To drive across the 141,000-acre field, either north-south or east-west, you would travel about 18 miles.
Up to 11 percent of the landscape would be disturbed by well pads, according to calculations made by Wyofile. In contrast, Wyoming limits disturbance in sage grouse core areas to 5 percent and federal plans in other states call for no more than 3 percent. In grouse wintering areas, the BLM hopes to limit disturbance to that 5 percent, Doug Linn, BLM’s assistant field manager in Pinedale said in an interview.
But not all known winter concentration areas are designated for special consideration. Consequently, “wintering Sage-Grouse that use these [other] areas could be displaced year-round,” the BLM says.
Seasonal development restrictions would be placed on areas critical to antelope and grouse, the BLM’s Hiner said. “We would look at not allowing a pad for a well to be built in that period, not allowing a rig to rig up,” he said. “Regular traffic may still occur on established roadways, [as well as] other permitted activities that would not be considered disruptive. Regular old drilling — that would be considered a disruptive act in a winter range during a timing limitation.”
Gov. Matt Mead, however, recently warned BLM not to exceed its authority. The DEIS appears inconsistent with Wyoming’s core-area strategy because it defines winter habitat and creates new drilling restrictions. “…[T]he Greater sage-grouse falls under the jurisdiction of the State of Wyoming, including the responsibility to define the habitat areas used by the species,” Mead wrote the BLM on Aug. 18 in response to the DEIS.
The BLM is clear on one thing about greater sage grouse winter range. When asked whether the agency knew how to create new winter habitat to offset what might be destroyed, officials responded by email, “not at this time.”
Investment portfolios hold many companies
In 2014 TPG put $325 million of investors’ money into Jonah Energy through a platform called TPG Capital, according to documents. The investment was made in its TPG Capital VI fund, one of at least 7 such funds developed since 1992. By 2015 it had invested $46 billion in 169 companies, TPG said in a 29-page description of operations and performance.
Its TPG Capital platform pursues “differentiated investment strategy” including traditional buyouts of market-leading franchises where it accelerates execution of existing strategy. It seeks “transformational” investments in a rapidly changing digital world. And it looks for “off-the-beaten-path” opportunities where it usually is a lone bidder buying in at an attractive price.
TPG’s gross internal rate of return was 24 percent for TPG Capital versus Standard and Poor’s return of eight percent, the firm said in the description. The TPG VI fund by 2015 had holdings in 67 companies, including the Jonah Energy investment. Also in the portfolio were companies as diverse as Lynda.com, the online tutorial service into which TPG put at least $149 million; and Chobani, the yogurt company in which it invested at least $336 million. TPG has invested $408 million in RentPath as that company turned digital, put money into pharma and healthcare, industrials, and the consumer/retail sector including Neiman Marcus, J. Crew, Burger King, and Petco.
TPG disclosed some deals to potential clients as it sought investors in TPG Capital VII, a fund that documents say could reach $8 billion. Such funds operate for a decade or slightly longer. TPG would require investors to pony up in the first half of the fund’s life, then receive returns in the second half of the decade, financial advisors who reviewed the documents explained.
Investors understand that TPG takes fees — shown to be on the order of 11 percent — and they are warned in pages of fine print about the risk of investing and that past performance is no guarantee of future profits.
Profitable TPG also paints itself as a responsible investment firm. “Responsible investment means considering the environmental, social, and governance (ESG) factors of a market or company before investing,” it stated in a 2016 annual Governance, Environmental and Social report. This includes “careful attention to natural resources, climate change, human rights, health and safety, and global and local factors…”
The company writes about sustainability, service on nonprofit boards, measurable results, diligence, transparency, investment reviews, self-assessments, international principles, work plans, frameworks and other indicators of corporate responsibility. TPG says it has invested in recycling, raised money for hungry children, fought human trafficking, and was invested in Petco when that company joined 1% for the Planet, donating one percent of gross revenues to environmental causes.
TPG is investing in education, launching the Rise Fund with U2 frontman Bono and former eBay president Jeff Skoll, according to ImpactAlpha. That fund invested $120 million into EverFi, an educational startup in Washington, D.C., with $30 million of that investment coming from TPG Growth.
TPG co-founder David Bonderman himself is a board member of the Grand Canyon Trust. He’s also attracted attention for reasons other than environmental ones. He resigned from Uber’s board in June after making “disparaging remarks about women,” The New York Times reported.
His wealth, including a huge home in the Moab, Utah area, drew satire from the editor of the Canyon Country Zephyr who recommended homeless people occupy the mansion when its owner was absent.
TPG and its affiliates also have sharp pencils. Creating Jonah Energy was a “complicated corporate carve-out from Encana of orphaned O&G assets in Wyoming’s Jonah field,” TPG said in documents. The “transaction required deep Ops expertise and [an] entirely new management team to run [the] business — 80% hedged production with 1,500+ active wells and 100,000 undeveloped acres of mineral rights.”
“Through improved efficiency and innovation we have halted production declines and reduced operating costs, while emphasizing safety and environmental performance,” TPG states. Jonah Energy CEO Tom Hart writes on the Jonah website, “we create exceptional value for our investors and our people by acquiring oil and gas fields with unappreciated potential, then mobilizing the capital and talent necessary to fully realize that potential.”
As an example, in May, Jonah Energy acted opportunistically during an energy bust and bought 1,200 producing wells, half of them in the Jonah Field, from Linn Energy, according to Reuters. It also got energy rights on 27,000 more acres, all for approximately $580 million after Linn filed for Chapter 11 bankruptcy protection in 2016.
Wide-sweeping regional economic benefits
The NPL field would benefit more than investors. It would create 954 “development and production jobs,” the BLM says. Some 370 workers would move in, helping boost the regional population by 973 people. Housing in Sublette and Sweetwater counties could accommodate the influx. Drilling would produce $2.2 billion in royalties, half of which would go to Wyoming, over the course of 40 years.
Linda Baker of the Upper Green River Valley Alliance has concerns however about the costs to be borne by the local community. “We’re talking about economic gain here and quality-of-life decline,” she said. “The public certainly suffers in many ways, from the loss of wildlife, the loss of the human community from the boom, the upsetting of our little town, the air-quality problem that cause us to worry about our health our lungs, our hearts.”
Nitrogen deposition is increasing in wilderness areas of Bridger-Teton National Forest’s Wind River Range, a supposedly pristine airshed. “The oxygen levels in the lakes are going down,” Baker said. The change is significant and important for fish and even land-dwellers.
In a place that used to have air “as clean as the Tibetan plateau,” Baker’s home suffers pollution that has been characterized as sometimes worse than Los Angeles. Pinedale folk now check pollution levels before they go out for a ski “and that’s insane,” she said. “It’s clear that the NPL emissions are going to be above and beyond what horrible air we already have.”
Added Western Watersheds’ Molvar, “As long as a corporation can make more money producing mineral resources at the cost of the land and its wildlife, that cycle is going to continue. If we could make it profitable for them to protect the wildlife resources and the air quality, that’s when you start seeing them get serious about protecting those resources.” He points to the BLM and “their failure to set the bar to provide minimum protection for these wildlife and the resources of the Upper Green River Basin.”
The BLM, which closed public comment on the plan last week, will decide whether to approve Jonah Energy’s plan or adopt its own, preferred alternative. The BLM’s own plan would have similar, but slightly fewer, deleterious consequences for wildlife than Jonah’s. The federal agency considered, but rejected as uneconomical, plans to develop the field at lower densities.
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Gov. Mead wants the BLM to wrap up its decision by the end of the year. Even then the world may not know how much profit-making will occur on the back of public wildlife resources. Many telling decisions will be made only when Jonah Energy applies for permits to drill individual wells. Developing the Normally Pressured Lance would continue a contentious history of regional oil and gas exploration that even saw a 1970s proposal to free trapped gas by detonating nuclear blasts underground.
Meantime, wildlife advocates like Audubon’s Rutledge put their hopes in Ulrich, whom he called, “the lead figure in industry in cooperative work in sage grouse conservation.”
Rutledge has his own principles, however when it comes to minerals investments. “I was approached to invest in the Bakken Field,” he said. “I refused that. I don’t invest in fossil fuels.”
This article has been corrected to say the project would generate $2.2 billion in royalties, not taxes, and to add the proper title of the Upper Green River Alliance, originally called a coalition — Ed.