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SALT LAKE CITY -- A tiny oil company has snapped up leasing rights to a half-million acres in central Utah that it says could yield a billion barrels or more of oil, the Associated Press reported.
Geologists are calling it a spectacular find - the largest onshore discovery in at least 30 years, located in a region of complex geology long abandoned for exploration by major oil companies. It's turning out to contain high-quality oil already commanding a premium at refineries.
With the secret out, industry players expect a bidding war to break out at the next Utah leasing auction, set for May 17 in Salt Lake City.
At today's prices the oil reserve could bring Utah $5.6 billion in royalties, state auditors conservatively estimate. Although the discovery is still playing out, the oil will take years to recover and some skeptics question the company's projections for a region yet to be fully surveyed.
"It's just very highly unlikely because the U.S. onshore has been picked clean, if you will," Fadel Gheit, senior oil analyst at Oppenheimer & Co. in New York told the AP. "That's like finding a wallet in the subway after all the cleaners went through it. It's possible, but very highly unlikely."
Gov. Jon Huntsman said he was aware of the discovery "and we are tracking the progress with great interest. If the prospects prove to be true, it will be important that the resources are developed responsibly."
The discovery is playing out just outside Sigurd, Utah, more than 100 miles from any of Utah's other major oil fields and 45 miles from the nearest operating well.
The find, 130 miles south of Salt Lake City, was made by Wolverine Gas & Oil Corp., a privately held company with just 25 employees improbably located in Grand Rapids, Mich.
Wolverine's test well hit "pay" in late 2003, and by May 2004 it started producing from a single deposit estimated to contain 100 million to 200 million barrels of oil.
Wolverine and government geologists said the company is examining 25 deposits in all that could contain 1 billion barrels of oil.
Those underground deposits are widely scattered over a crescent-shaped belt 100 miles long and up to 50 miles wide that contains all the geologic "right stuff" for oil pockets in folds of Jurassic Navajo sandstone, said Tom Chidsey, petroleum section chief for the Utah Geological Survey.
If Wolverine could produce 1 billion barrels at once, it could satisfy the nation's demand for about 45 days -- less than the reserve that Congress may open at the Arctic National Wildlife Refuge, which by equally speculative estimates may contain 10 billion barrels of oil.
Chidsey told the AP that Wolverine's discovery could dwarf Utah's last major find, the still-producing Pineview field overlapping the Wyoming border. That field, tapped in 1975, has produced 31 million barrels and may contain another 100 million barrels, he said.
Oil companies began exploring central Utah more than 50 years ago without success, even though it's part of an oil-producing belt thrust ranging from Mexico to Alaska. The complex geology of central Utah produced only dry wells -- 58 of them in the past 25 years.
In 1999, Wolverine bought Chevron's leasing rights and seismic data and started poking around itself, bouncing seismic waves more than 5,000 feet deep. With just two wells operating at full capacity now, Wolverine is pumping 1,500 barrels of oil a day from the ground and trucking it to Salt Lake refineries.
"The secret's out and we will face competition" at the next BLM auction, said Doug Strickland, a geologist for Wolverine. "We had a year and three months to ourselves."
The BLM will auction 300,000 acres throughout Utah. Acres that Wolverine once picked up for $10 are now being valued at $1,200 in central Utah. Leasing rights are good for five years and as long as a well is producing.
Oil companies pay 12.5 percent of the value of oil taken from federal lands -- and half of that comes back to Utah, which shares some of it with local governments, said Steve Schneider, audit manager for the Utah Division of Oil, Gas & Mining.