The Powder River Basin, which is known widely for its coal-bedmethane (CBM) gas production, is without a doubt the “most active”onshore basin in the Lower 48, and will likely hold thisdistinction for a long time to come, according to a majorgatherer-processor in the basin.

There’s “nothing to suggest there’s not going to be12,000-15,000 wells drilled over the next five to seven years” inPowder River, said Robert J. Clark, CEO of Bear Paw Energy, at theRocky Mountain Energy Investment Forum in Denver last week.

Official figures estimate production in Powder River, whichincludes North Central Wyoming and Montana, at more than 324 MMcf/dfrom 2,100 wells. But Clark thinks current activity is greater. “Webelieve, based on our estimates, there’s about 395 MMcf/d beingproduced from 2,500 wells in ‘The Powder,'” as the basin is calledby those active there.Bear Paw handles gathering and processingfor about 530 wells in the basin, with throughput of about 89MMcf/d.

“The Powder has been an opportunity for us to grow into a newarea and … at a significant pace with the help initially of[Pennaco Energy], who was very active.” Clark said the company hasentered into a deal to interconnect with another 160 wells,enabling Bear Paw to expand into the western part of the PowderRiver Basin. And it’s in the process of negotiating finalagreements on a project that will kick off by the end of the year,he noted.

But Bear Paw isn’t the only Powder River player in an expansionmood. Wyoming Interstate Co. Ltd. (WIC) “just announced it plans toloop its Medicine Bow Lateral, which I believe will give themupwards of 1 Bcf/d [of] takeaway capacity…Williams earlier [last]week announced an open season for new capacity from its CheyenneCompressor Station,” Clark said at the investment forum, which washeld in conjunction with the 12th annual Colorado Oil and GasAssociation conference in Denver. Also, Big Horn Gas Gathering hasplans to build a $19 million extension into the western section ofPowder River, he noted.

Powder River producers are eager to transport their gas tomarkets in the West as well as those in the East, but capacityconstraints on pipelines running to California are preventing themfrom supplying gas for power generation demand there, he noted.

“Pipelines are looking at ways they can alleviate that bylooping lines or adding compression. Unfortunately… because[pipes] have to file at FERC, and that’s typically a 12-monthprocess from the day you file until you get approval,” Clark saidhe wasn’t expecting an easing of the constraints anytime soon.

With respect to serving Powder River producers, “I think [WIC]was probably ahead of the game compared to any other pipeline inthe Rockies in building the Medicine Bow Lateral. It was ready forthe gas when it started to come down both Fort Union and ThunderCreek [systems in Wyoming]. Now they’ve added some horsepower [thatbecame] operational” last week, bringing the WIC lateral’s currentcapacity up to 389 MMcf/d. The planned looping will more thandouble the capacity of the lateral, Clark noted, adding that WIC’sconstruction “is falling right in line with the volumes as theycome out ofÿthe Powder.”

Others are eyeing system expansions as well. Williston BasinInterstate Pipeline, which just completed an open season for newcapacity, is considering building an extension of its existingsystem serving the basin, Clark said.

Also, Richard H. Lewis, CEO of Denver-based Prima Energy Corp.,said it expects to complete by the end of the quarter Phase One ofa new gathering system that initially will hook up the company’s 20producing wells in the Stones Throw area of the Powder River Basin.”That will be our first coal-bed methane wells actually onproduction.” Ultimately, the project, which will have five phases,will provide gathering to the 115 CBM wells that Prima plans tohave drilled by the end of the year, as well as service thegathering needs of competitors.

Lewis said Prima recently formed Arete Gathering Co., a whollyowned subsidiary, to “pursue gathering opportunities where we thinkit’s warranted, where our lease position is not [strong] enough, inan effort to capture additional value from wellhead to theburnertip.” Initially, the new company will focus on gatheringprospects in the Powder River, where Prima has a substantial leaseposition, he said.

Bear Paw’s Clark believes gas prices will remain strong in thefuture, and will “promote continued drilling not only in the Powderbut elsewhere in the Rockies.” However, if prices were to trenddownwards, he doesn’t think that that would affect Rockies’production as much as gas-on-gas competition would. “I think overthe next 12 months while [WIC] is getting approval on its MedicineBow loop, there’s the potential because of the volume of gas beingdrilled and produced in the Powder you’re going to see a widening[of] the differential in the Rockies compared to the Henry Hub. Ithink that will alleviate itself as CIG has that capacity addedlater next year,” Clark said.

Susan Parker, Denver

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