Coal bed methane

A coal bed methane wellhead on Bill West's family ranch near Arvada. 

File, Star-Tribune

A federal agency is wading into the fray over a bankrupt company’s attempt to sell its wells in northern Wyoming. But the recent pushback from the feds is not the only voice opposing the sale, as landowners want the wells plugged and county officials seek unpaid taxes.

Storm Cat, a coal bed methane company that went bankrupt in 2008 and again in 2016, is seeking to sell its viable wells to Summit Gas Resources. The transfer of property has staggered through bankruptcy court over the last year.

The company is also short about $10 million in idle well bonding. Wyoming requires that companies post additional bonds when production ceases to ensure cleanup will be completed, but Storm Cat has failed to do so.

In June, state regulators wanted to pull Storm Cat’s bonds and begin reclaiming the wells and associated disposal pits scattered across Campbell and Sheridan counties. Instead the companies’ lawyer and the Wyoming Oil and Gas Conservation Commission made a deal, allowing Storm Cat and Summit one final chance to close on the sale of nearly 700 wells that can still produce gas.

Contingent on the sale, the remaining 1,736 wells would be taken over by the state to be plugged and reclaimed. Summit would be able to give about $2 million in additional bonds to Wyoming and gradually bring the idle wells back to production.

Though the $2 million in bonds is far short of the $10 million Storm Cat owed to the state, the unconventional compromise would put Wyoming in a better position and keep gas flowing, commissioners agreed in the June hearing.

However, in a filing with the bankruptcy court on July 3, the Bureau of Land Management objected to the sale unless assurances were made that Summit would pick up the unpaid royalties and penalties Storm Cat was leaving behind.

Campbell County, where many of the wells are located, made a similar case in its opposition letter to the court. The county is owed $7.6 million in unpaid taxes and has liens on the company’s assets in the county, according to court documents. The proposed sale would unlawfully free Summit of those obligations, the county argued.

Local landowners, weary of unreclaimed wells and disposal pits on their property, want state regulators to pull the bonds. Lawyers for Padlock Ranch Company, Bow and Arrow Ranch and PeeGee Ranch say they want the state to start the task of plugging wells and reclaiming disposal pits. Though Storm Cat is short on bonding for its CBM wells, the company is up to date with its pit bonds.

In a June 6 letter to commission supervisor Mark Watson, the ranchers’ council called the pits an “eyesore.”

“The wells have not been maintained or pumped in over two years and their condition is deteriorating. Fences around the off-channel pits have not been maintained, except by our clients, and as a result the pits constitute a hazard to livestock. Some of the pits leak.”

Storm Cat is one of a number of Wyoming companies with a similar history. Falling gas prices pushed companies out of the Powder River Basin as the coal bed methane boom turned into a bust. Those firms often sold their assets to smaller companies at a bargain price. Many of those companies then fell into bankruptcy as prices continued to fall.

Thousands of wells were orphaned in the state on state, private and federal land. The work to reclaim those wells, by the Oil and Gas Conservation Commission, is ongoing.

Storm Cat and Summit are due in a Denver bankruptcy court Thursday and are likely to come before state commissioners again in its August hearing.

A spokesman for the commission said though staff is not involved in the bankruptcy proceedings, they are following the case.

Follow energy reporter Heather Richards on Twitter @hroxaner

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Star-Tribune reporter Heather Richards covers Wyoming's energy industry and related issues.

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