The Powder River Basin of Wyoming and Montana has become one ofthe fastest growing gas production areas in the nation, maybe eventhe world, but that could change if agricultural interests andenvironmentalists succeed in blocking the issuance of waterdischarge permits by the Wyoming Department of EnvironmentalQuality (DEQ).

“This could affect the pace [of coal-bed methane production],”said Gary Beach, administrator of the water quality division at theDEQ. “I think the basin will continue to be developed, but there isa question now about how fast. We’re still accepting permits andputting them out for public notice. Right now were not issuing someof them in certain areas. The question [going forward will be]which wells can be permitted and by what methods.”

Each well drilled in the basin begins with a discharge of about20-90 gallons of salty water a minute and that water typically isdumped right on the land surface and makes its way to streams andrivers in the region. In order to discharge the water, however,producers must file for and receive permits from the DEQ.

The department has been under pressure for some time fromirrigators and environmentalists about the quality of the water.Now landowners have stepped in with concerns that the brackishwater discharged from coal-bed methane wells could adversely affecttheir crops. In addition, the state of Montana jumped into the frayand sent a letter to the DEQ expressing concerns about the affectsthe well water could have on the Powder and Tongue rivers. Attemptsalso have been made to draw in the EPA by alleging the DEQ violatedprovisions of the Clean Water Act.

“With that kind of building concern and increased attention fromEPA, we felt it was time to have a hearing on how we are issuingpermits and making these decisions,” said Beach. DEQ has scheduleda hearing for Jan. 3 in Gillette, WY, at City Hall between 1 p.m.and 7 p.m.

In the meantime, the DEQ will continue to evaluate data on waterquality with participation from the gas industry and help from theUniversity of Wyoming. It also is continuing to issue permits inthe Belle Fourche River drainage area where the wells being drilleddischarge better quality water with a lower level of salinity. Thatarea encompasses about one-third of the basin but includes most ofthe current permit requests.

Much of the development in the basin is moving toward the PowderRiver. Permits for wells that would drain into the Powder (whichrepresent about 30% of all current permit requests) are beingdelayed until the outcome of the hearing.

“I think the concerns [about production] delays are true,particularly when you get into the Powder and the Tongue Riverdrainages, the western part of the play,” said Beach. “We’ve got tocome up with a resolution of how we deal with Montana’s concerns,and that’s pretty significant because if we get into a dispute withMontana that brings in other players, including EPA, to resolve it.As you move into the Powder and Tongue River drainage basins, thequality of the water gets much worse and that’s where the futuregas production is. There’s no doubt there are some realchallenges.”

Beach said water quality is not an issue unless the water isused for irrigation. As a result the DEQ may come up with aseasonal plan in which water can be discharged on the surface inparticular areas only certain times of the year.

“I’m not sure I can look in my crystal ball and tell you whatthe outcome will be. There may be restrictions during certain partsof the year.”

If producers want to discharge well water on the surface,whether they are on state, private or federal land they still haveto get a discharge permit. “There are other ways to manage thewater: re-injection, use it for irrigation. But none of those areas attractive as surface discharge.”

Producers also are looking at developing large water collectionareas, in which the drainage water is collected and diverted toareas with minimal environmental impact. What water dischargerestrictions clearly will do is affect the economics of the PowderRiver play.

Powder River producers have other things to worry about as well,however. Producers have run out of federal well permits. In August,they had drilled up all of the wells for which they had receivedpermits from Bureau of Land Management (BLM) and had done so fiveyears too soon.

The BLM has been scrambling since April to come up with a quickshort-term extension to the federal well limits.

“One of the problems is that nobody really did foresee howextensive a development and a play this was going to turn out tobe,” said BLM Project Manager Paul Beels. “When we started into[the WyoDak coal-bed play] back in the spring of 1998, we wereworking closely with industry and were anticipating 3,000 wellsinitially. We told industry ‘let’s go to 5,000 wells’ and theysaid, ‘geez no, that’s way too much'” to cover in the first five toseven years. “Well, it happened in eight months.”

The BLM and industry currently are looking at a more realistic10-year projection of 45,000 wells. “We just have a lot better ideanow of what we’re looking at. We’re looking at somewhere in theneighborhood of 25 and 28 Tcf of recoverable reserves.” A year agothe projection was 9 to 13 Tcf. “I wouldn’t doubt that [this basin]is now the fastest growing gas production area in the world,” saidBeels.

The industry reached the federal limit of 5,890 wells on Aug.11, and BLM started work on the WyoDak Drainage EnvironmentalAssessment in April to add up to 2,500 additional wells over thenext 15 months. “We’re looking at probably sometime in January atthe earliest” for the release of the EA.

In the meantime, producers are drilling as many state andprivate wells as possible to make up for the slow down on thefederal environmental review. However, the DEQ delay on waterdischarge has hindered their progress.

“I don’t look for the DEQ hold-up to last much beyond January,”said Beels. “They’ve basically said that after the end of Januarythey probably will be issuing discharge permits again. I don’t lookfor that to be a long-term situation.”

BLM and industry now are planning far ahead with an EIS thatcovers nine million acres or the entire Wyoming portion of thePowder River Basin. “We’re waiting on the final proposed actionfrom industry. We’re looking at a draft release for the EISsometime next summer in June or July and a final EIS sometimearound December 2001.

“There is plenty of fee acreage out there to drill,” Beelsnoted. “The industry has modeled the situation and stated that theyprobably have three to four years of state fee land to operate on,and after that point the federal lands minerals will be driving theplate.” The DEQ, however, will be involved all the way through theprocess having to do with water issues, and could put the brakes ondevelopment in the short-term.

Rocco Canonica

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