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For This Permian Land Deal, No Drilling Permitted

Warburg Pincus, energy companies paying to lock Texas’ Sawtooth Mountain in conservation pact

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Written by Ryan Dezember

Click HERE to Read the Article by the Publisher.


FORT DAVIS, Texas—Usually when wildcatters and their Wall Street backers purchase property in West Texas, drilling rigs soon follow.

That won’t happen at Sawtooth Mountain, though. Four energy companies and investment firm Warburg Pincus LLC are paying $1.2 million to lock the craggy, 7,686-foot protrusion at the edge of the Chihuahuan Desert in a conservation pact that will forever prohibit human disturbance, be it drilling for oil or building driveways.

The 2,576 acres that encompass Sawtooth, the most distinctive of the Davis Mountains, will remain owned by department store heiress Miranda Leonard, who bought the land and more nearby in 1989. But the property is to be perpetually protected with a conservation easement. Combined with the Nature Conservancy’s neighboring Davis Mountain Preserve and state land, the area will form a sprawling sanctuary about 50 miles from the Mexican border.

Conservationists say the peaks are important for their relatively lush “sky islands” that host plants and animals, such as migrating hummingbirds and a species of 20-pound rabbits, that are very different from and rarer than those in the scrubby desert below.

Threats to Sawtooth aren’t immediately apparent.

The mountain is more than 150 miles southwest of Midland, the pumpjack-packed epicenter of the Permian Basin drilling frenzy that has upended global energy markets. Yet, rights to drill in a county adjacent to Sawtooth have hit record prices of more than $40,000 an acre. And the recent discovery by Houston’s Apache Corp. of a massive prospect just north of the Davis Mountains portends the boom’s encroachment.

In a county with about a square mile for each resident, settlement is sparse. The area is so undeveloped that its deep darkness attracted researchers, who built a space observatory on one of its peaks. The remoteness has made the area popular with separatists.

Lately, though, there has been an influx of wealthy Texans from the state’s hot and crowded cities. Enabled often by fortunes made in the shale-drilling boom, they’ve come looking for their own expanse where 80-degree days begin with frosted windows. Landowners with thousands and sometimes tens of thousands of acres have seized on the demand to divide their tracts into what are known locally as ranchettes.

More ranches mean more people, more impervious surfaces—like driveways and rooftops—and more fences, says Laura Huffman, who leads the Nature Conservancy’s efforts in Texas. Many local ranchers ring their land with barbed wire to corral game, like Barbary sheep brought from North Africa for trophy hunting, and in doing so limit the movement of native mountain lions and bighorn sheep.

“Texas is the fastest fragmenting state in the country,” Ms. Huffman said earlier this week after showing the oilmen and financiers around the conservation group’s neighboring preserve.

The Texas Chapter of the American Society of Farm Managers and Rural Appraisers in its most recent annual report describes land prices rising in a race between “the investment-driven recreational buyer” and conservationists.

Warburg Pincus, which has invested $13 billion in energy companies over the past 25 years, in recent years has funded conservation efforts near where it has profited producing oil and gas.

In 2012, the firm paid to preserve 400,000 acres of Canadian wilderness not far from where it wagered on a regional drilling boom. Two years later, it and Antero Resources, which Warburg built into one of the country’s largest natural gas producers, pitched in on a forested stretch along West Virginia’s Cheat River that is home to a snail found nowhere else.

For Sawtooth, Warburg enlisted four companies it backs: Permian oil producers Laredo Petroleum Inc. and Brigham Resources LLC, offshore explorer Kosmos Energy Ltd., and Zenith Energy Management LLC, which operates oil-shipping terminals. Their cash is being used by Ms. Leonard to buy part of the mountain that she didn’t already own, and in turn she is donating an easement to safeguard all of Sawtooth.

Chip Kaye, a Texan who is Warburg’s co-chief executive, said the firm approaches conservation projects as its does investments, taking big stakes that enable it to effect quick change.

“We don’t want to be a drop in the bucket. We want to close the project and do something we can see and appreciate” said Ken Juster, another Warburg executive. “This one selected itself pretty easily.”


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Written by Ryan Dezember

Click HERE to Read the Article by the Publisher.

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