A coal-bed methane company in the midst of bankruptcy has received another extension on a hearing before the Wyoming Oil and Gas Conservation Commission, but the state’s regulatory body appears to be reaching the end of its patience.
Storm Cat Energy has 2,432 wells on state, federal and private land across two counties in northern Wyoming, which either need integrity testing or reclamation, and is short $10.8 million in bonds.
The bankrupt Denver-based company also has a series of wastewater pits, some of which may need to be reclaimed, and has failed to provide production reports.
The company’s drop-dead hearing date to address these delinquencies was scheduled for this month but has been moved to June 13.
Trouble with Storm Cat and the commission began more than a year ago, when questions of delinquent taxes and idle wells were first raised by state regulators.
Storm Cat’s president, Chris Naro, told the state in May 2016 that Storm Cat was attempting to transfer its assets to Summit Gas Resources and that the deal would hopefully be completed by November. Reclamation obligations and bonding responsibilities would then be transferred to the new company.
But things have not proceeded as planned.
In an April 6 letter to Storm Cat’s lawyer, Commission Supervisor Mark Watson implied that the company was running out of time.
“The show cause hearing against Storm Cat Operating has been continued month to month since May of 2016,” Watson wrote. “These continuances have been granted on ongoing and reportedly progressing negotiations.”
The commission is no longer satisfied that the complexities of the bankruptcy proceedings are slowing bonding issues, however, he said.
“WOGCC has determined that negotiations have not progressed in the manner that Mr. Naro and Mr. Schoonmaker (Summit’s executive) have led us to believe,” Watson stated.
The commission then set a drop-dead date of May 1, but the commission recently gave the company yet another month to provide information on how it plans to proceed.
The commission has asked Storm Cat and Summit for a detailed list on which wells will be in production and which will be plugged. It also asked for a list of which pits will be used for wastewater and which will be reclaimed. The two companies will be required to show bonding amounts and name the company that will be providing the insurance.
State regulators have not threatened to pull the company’s current bonds.
“We’ve been in communication with them on a weekly basis,” said Kimberly Mazza, spokeswoman for the commission. “Had that not been the case, we do have that authority to pull the bond and could’ve taken a different route. Because they’ve communicated with us, we’ve been monitoring the situation. We know where things are at.”
The company has posted its pit bonds in full for $6.4 million. However, its idle wells are not fully covered. Wyoming requires idle well bonding at $10 per foot after production stops. As of February, the company had posted about $2.8 million of a $13.6 million obligation for idle wells.
Storm Cat and Summit are both represented by Tom Throne of Sheridan before the commission.
Throne said he could not speak to the details of the bankruptcy proceedings but that the parties hoped to be ready by next month’s commissioners meeting.
“We are working to get the wells transferred from Storm Cat to Summit so that the Commission will be adequately protected on the bonding,” he said. “There are some wells that will not be put on production and there are some wells that will be. We are working on a plan to have those (non-producing) wells plugged.”
Mazza, with the commission, said these types of delays are not unusual in a bankruptcy case.
Storm Cat was one of many companies that jumped on the opportunity to draw natural gas from coal beds only to see the industry plummet with the falling price of natural gas.
Since 2014, defunct companies, from CBM and more traditional industries, have left 4,650 orphaned wells littered across the landscape of northern Wyoming. Thousands more were left on federal land. In contrast, before the CBM bust, only 500 wells were orphaned in the state over nearly two decades, according to the commission’s records.
In recent years, the commission, with the prodding of Gov. Matt Mead, developed a plan to clean up the landscape year by year.
To address the cost, the state instituted a fund, fed by a tax on oil and gas operators.
The state has plugged 1,754 wells since 2014, and continues to do so, on an almost monthly basis. Each well costs between $5,000 and $7,000 to plug.