BILLINGS, Mont. (AP) — Leaders of the Crow Indian Tribe have reached a lease agreement with a Washington state company that is seeking oil on the tribe’s Montana reservation.
Representatives of the tribe and Spokane-based Blue Water Petroleum LLC announced the deal Tuesday.
The company wants to tap a reserve of heavy oil, a thick, tar-like crude that Blue Water representative Tom Hynes said will require an injection of steam to be extracted.
The company has conducted exploration work on Crow land southwest of Pryor for the past five years. Its lease was due to expire this year.
The new agreement extends Blue Water’s lease on 16,300 acres until December 2015, Hynes said. The tribe will receive $10 per acre as an upfront payment — equal to $163,000 — and a 16.6 percent production royalty on any oil produced, he said.
Blue Water hopes to begin producing oil by year’s end. Surveys of the area have found as much as 2.6 million barrels of oil per 40 acres on portions of the lease area, according documents posted on the company’s website. It’s uncertain if similar volumes exist elsewhere.
Because heavy oil is too thick to be extracted through conventional means, Blue Water has attained a steam injection permit from the Environmental Protection Agency to pump heated water into the ground and liquefy the fuel, Hynes said. It’s expected to take five barrels of water to produce every barrel of oil.
“It’s something that could turn into something very large — 200 wells, 250 wells,” Hynes said. “Even if it’s 50, it’s a great resource and helps the tribe.”
