Wyoming regulators are prepared to begin plugging some of the 1,200 abandoned coal-bed methane wells on state and private land in the Powder River Basin.
The effort to close the abandoned wells comes several years after the collapse of the CBM industry and amid increasing pressure from landowners, who want the wells reclaimed or converted to water production. Gov. Matt Mead announced a plan in December to spend $3 million to close about 300 wells in each of the next four years.
"I think if the state keeps their foot on the accelerator we can do 300 in a year," said Robert King, an independent contractor hired by the Wyoming Oil and Gas Conservation Commission to spearhead the effort.
The state has finalized plans to plug 67 wells south of Gillette and will begin work as soon as weather permits. The Oil and Gas Commission is also accepting bids to close another 141 wells in Campbell and Sheridan counties, King said.
Still, challenges remain. Luca Technologies Inc., a Colorado gas firm, filed for bankruptcy last year. The company's 900 wells could be added to the list of those Wyoming needs to close, raising the scope and cost of the state's plugging program.
"That could impact our scheduling," King said, noting the state is waiting to see how the bankruptcy works out before it commits to further plugging.
Luca officials have proposed selling a subsidiary, Patriot Energy Resources, to High Plains Gas, a Sheridan company. The sale would prevent the wells from being officially abandoned.
But the proposal was warily greeted by Oil and Gas Commission officials. At a March commission meeting, former Oil and Gas Supervisor Grant Black raised doubts over High Plains ability to afford the bonds on Luca's wells. The Wyoming company paid $1.1 million of the $4.9 million in bonds owed to the state for its wells.
Closing non-producing wells is the responsibility of producers, who pay bonds on their wells to cover the reclamation costs in the event they run into financial trouble. If producers go bankrupt, the task of closing the wells falls to the state. The state uses the bond funds and production taxes on oil and gas operators to pay for the plugging.
An Oil and Gas Commission hearing scheduled for today on the proposed Patriot Energy sale was postponed until July, according to the commission's website. The reason for the postponement was not immediately clear. Oil and Gas Commission officials did not return requests for comment by press time.
Jill Morrison, an organizer at Powder River Basin Resource Council, a landowners group, worried the number of wells the state needs to close may rise. There are many companies that are not officially bankrupt but stopped production years ago and have not paid mineral royalties to landowners, she noted.
"We know we have a whole other set of companies on this list," she said. "They (the commission) are getting rolling, but they’ve got a huge job ahead of them."
Others were pleased with the progress. At a recent meeting in Gillette, many landowners expressed interest in converting the former CBM wells to water wells, said John Robitaille, vice president of Petroleum Association of Wyoming.
He said the industry group is supportive of the state's efforts and has backed a proposal to raise production taxes on producers to cover the cost of the plugging program.
"I think they are moving forward, and I’m pleased to see that," Robitaille said.