Denver-based Rancher Energy Corp. could have up to $83.5 million later this year to fund a carbon dioxide enhanced oil recovery effort in the Powder River Basin.

Rancher Energy announced Wednesday it had executed a letter of intent with an "experienced industry partner" that would provide the funding. In return, the partner would receive a 55 percent working interest in Rancher Energy's three Powder River Basin oil fields: the Big Muddy, Cole Creek South and south Glenrock B.

"We believe that our prospective partner is well financed with significant industry expertise, and we look forward to moving ahead with our ambitious (enhanced oil recovery) program at three promising, historically productive fields in the Powder River Basin," Rancher Energy President and CEO John Works said in a prepared statement.

Works told the Star-Tribune Wednesday that the $83.5 million will pay for the first of three phases of the project, allowing for the construction of infrastructure and the injection of CO2 in one of the three fields.

Works said Rancher Energy may announce within the coming week its CO2 supply source. He said when the third phase of the project is operational several years from now, it should yield more than 15,000 barrels of oil per day.

"We can withstand a huge decrease in the price of oil and still make this economical," Works said. "There's a lot of oil still left in the ground in this country."

Wyoming ended 20 years of declining oil production in 2005 with the help of a major CO2 flooding project at the Salt Creek oil field in the southern Powder River Basin. In enhanced oil recovery, alternate flows of water and CO2 are pumped into an oil reservoir, sweeping additional volumes of oil to production wells.

With the high price of oil, many Wyoming producers are eager to use enhanced oil recovery methods such as water flooding and CO2 injection to revitalize old oil fields. Most older oil fields still have significant reserves that were not attainable through primary recovery methods.

In 2005, about 8.5 percent of Wyoming's total oil production came from enhanced oil recovery using CO2 injection, according to the Wyoming Enhanced Oil Recovery Institute.

An estimated 8 million barrels of oil remain in Wyoming, of which up to 15 percent can be recovered using various enhanced oil recovery methods, according to the Wyoming State Geological Survey.

Oil production contributed $133 million in severance taxes alone to state government coffers in 2006.

Energy reporter Dustin Bleizeffer can be reached at (307) 577-6069 or dustin.bleizeffer@trib.com.