State efforts to plug wells abandoned after the collapse of the coal-bed methane industry are ahead of schedule, even as the list of wells in need of closure grows, the consultant leading Wyoming's plugging program said this week.
Gov. Matt Mead initially set a target of closing 300 orphaned wells in each of the next four years. Wyoming is now on track to plug 479 wells this year, said Robert King, an independent consultant charged with heading the plugging effort.
"I’m optimistic we can do it, unless something happens to derail it," King said.
That news comes after regulators added 340 wells to the list of 1,200 in need of plugging.
The Wyoming Oil and Gas Conservation Commission recently pulled the bonds on the coal-bed methane wells owned by Black Diamond Energy.
In June, the commission gave the Buffalo-based company 30 days to come up with $4.2 million in additional bond payments to cover its nonproducing wells. The company failed to do so, meaning the state will plug Black Diamond's wells and reclaim them.
Oil and gas companies are required to put down bonds on wells they drill. The bond payment is like an insurance policy. If a company plugs a well after the end of its productive life, the bond money is returned.
But if a company runs into financial trouble and cannot afford the reclamation cost, the state uses the bond payment to pay for closing the well.
Additional bond payments are required when a company's wells stop producing.
Many coal-bed methane producers went bankrupt following a drop in natural gas prices several years ago and were unable to cover the cost of closing their wells.
King said the plugging program should be able to absorb the cost of plugging Black Diamond's wells. The state already held $293,000 in existing Black Diamond bonds. That funding will now go directly toward plugging the company's wells.
But Black Diamond could be a dress rehearsal for an even bigger wave of orphaned wells.
High Plains Gas of Sheridan was given 120 days by regulators in July to come up with $6.8 million in additional bond payments or face the closure of its 2,320 coal-bed methane wells.
King said he is confident the plugging program has enough money to close the High Plains wells, should the company fail to raise the additional funding.
The state already holds $8 million in High Plains' bonds, King noted. Funding for the plugging program also comes from the conservation mill levy, a production tax paid for by oil and gas companies.
"I feel that funding for the orphaned well program is healthy right now, and I don’t see the need to raise the mill levy," King said.
He added that was his personal opinion and did not necessarily reflect the position of the commission. Both industry groups and environmentalists have expressed support for an increase in the mill levy to address the growing number of orphaned wells.
Plugging costs to date have been lower than projected. Numbers submitted to the Legislature last year predicted plugging costs of $7.40 per foot.
The average cost of plugging 101 wells south of Gillette was $6.99 per foot, King said. Those wells have now been closed and are off the books, he said.
The state is in the process of plugging 67 wells north of Gillette and 133 wells in Sheridan and northern Campbell counties. Work is also underway to close six conventional wells spread across Natrona, Niobrara and Weston counties, King said.
A bid package for closing another 172 wells southeast of Gillette is being finalized. King said he hopes those wells will be plugged by the end of the year.