Western Optimistic Wyoming DEQ to Grant CBM Permits
Gross production from the largest Powder River Basin coalbed methane
operators, joint partners Western Gas Resources Inc. and Barrett Resources,
hit a year-end target of 200 MMcf/d in mid-December, then exceeded that
goal by producing 206 MMcf/d in the last two weeks of the year. Now the
producers are crossing their fingers that pending permits to further ramp
up production gain approval by Wyoming regulators.
Western and Barrett, which are 50-50 partners in their numerous CBM
projects in the basin, have begun the new year with about 70% of their
water quality permits there approved. Western officials said they also
are optimistic that the Wyoming Department of Environmental Quality (DEQ)
will give them the green light to move forward with their expanded 2001
The Denver-based producers hold approximately 531,000 net acres under
lease in the basin, and the companies drilled about 950 gross wells last
year. Another 800 gross wells already have approval from DEQ for production
in the next 12 months. While that covers most of this year's planned production,
a lot of permits need approval to meet 2001 targets.
Ron Wirth, director of investor relations for Western, said last week
that the company is optimistic that 85 pending, which cover 336 existing
gross wells and 1,260 locations in the basin scheduled for production this
year, eventually will be approved by DEQ.
The Wyoming Environmental Quality Council held a six-hour hearing last
Wednesday, with an overflow crowd of industry representatives, landowners
and environmental groups, to hear how CBM production may be affecting the
state's water quality and the state's quality of life. After reviewing
comments from the hearing, the council will forward its recommendations
to DEQ, which had placed a partial moratorium on permit approvals last
year (see NGI, Nov. 6, 2000).
The slowdown in permit approvals followed a request by the U.S. Environmental
Protection Agency for the state to more closely scrutinize CBM operations
(see NGI, Dec. 18, 2000). Although DEQ approved
eight of the permit requests from Western and Barrett in December, the
companies said that without approvals continuing, production could slow
sometime this year.
Wirth said the eight approved permits in December covered 132 existing
gross well sites and 281 undrilled locations. Another 12 permits, covering
214 existing gross well sites and 294 undrilled locations, also should
be approved by DEQ this month, he said. Those pending permits were in the
approval loop before the moratorium crackdown.
"We've got about 70% of the permits approved for our planned 2001
production schedule," said Wirth, covering the 800 gross wells currently
planned for drilling this year. The other 30% as yet unapproved 85 permits
cover 346 existing gross wells and 575 undrilled locations. With DEQ's
approval of the permits before the third quarter, the companies most likely
would remain on schedule to meet 2001 projections.
"We're in good shape at the present time," Wirth said, but
he could not specify when the production outlook might sag without more
The biggest issue facing Powder River Basin producers, he said, is the
production from wells that flow into Montana waterways. Some Montana groups
and Montana regulators have protested the runoff from Wyoming CBM wells
because of higher salinity rates in the runoff in those locations. But
Western officials are optimistic that other locations' permits should sail
through without any problems.
"The Powder River play continues to progress and we are extremely
proud of our continued leadership position in all facets of its development,"
said CEO Lanny Outlaw. "We believe we are on track to reach our next
production milestone of 300 MMcf/d of gross coalbed methane production
by the end of 2001." Wirth said a search continues to replace Outlaw,
who retires at the end of May.
As it focuses on production within the basin, Western also sold what
it called its "under-performing" Pinnacle Gas Treating Inc. facility
in East Texas yesterday to Anadarko Petroleum for $38 million (see related
story this issue). Western plans to initially pay down some debt then use
the proceeds for more CBM production.
Carolyn Davis, Houston