CMS Energy Corp. subsidiary CMS Continental Natural Gas Inc.agreed with Pennaco Energy Inc., and CMS corporate affiliate CMSOil and Gas to gather coal-bed methane gas from the Powder RiverBasin in Wyoming and Montana. CMS Continental is to providelong-term, low-pressure gathering. The deal includes an acreagededication of more than 580,000 acres in the Powder River Basinwithin the previously announced CMS Oil and Gas/Pennaco Energy Areaof Mutual Interest.

CMS Continental also announced plans to construct a $190 millionhigh-pressure gathering header from southwest of Gillette, WY,north to Montana and west to Sheridan, WY. The plan initially callsfor about 110 miles of 24-inch, 20-inch and 16-inch high-pressurepipeline and about 40 miles of six- and eight-inch gatheringlaterals, with more than 14,000 horsepower of compression. Thefirst phase of the project is expected to be in service by Nov. 1.Construction of the system will begin in July at its southernterminus where it will connect with the previously announced FortUnion Gas Gathering system.

“Initially, the CMS system will gather coal-bed methane from asfar north as Township 56 North Range 75 West and as far west asTownship 55 North, Range 83 West, near the northern portions ofCampbell County and Sheridan County, WY. Further expansion isanticipated, which would extend the northern terminus of the systeminto Montana,” said Dave Presley, president of CMS Continental. “Weintend to offer quality low-pressure gathering and marketingservices to third parties in the basin, particularly the northernBasin.”

CMS Oil and Gas and Pennaco Energy formed a 50/50 joint ventureand area of mutual interest last October to develop and producecoal-bed methane on 492,000 net acres in the Powder River Basin ofnortheastern Wyoming and southeastern Montana. Since October, theparties’ acreage position has grown to more than 580,000 net acresin the area of mutual interest through additional acreagepurchases. The parties will each operate about 50% of the wells.

Pennaco Energy is headquartered in Denver and is primarilyengaged in the exploration, development and production of gas fromcoal-bed methane properties in the Powder River Basin Coal-bedMethane Play in northeastern Wyoming and southeastern Montana.Pennaco is one of the largest leaseholders in the play withapproximately 311,800 net acres. This lease position includes about290,000 net acres held by Pennaco in its previously announced jointventure with CMS Oil and Gas. Gas production is dedicated to a CMSaffiliate.

Several pipeline companies and producers are planning majorpipeline expansions to serve the Powder River Basin. KN Energy andDevon Energy are planning to build a $110 million, 126-mile gasgathering system that would extend between Gillette and Glenrock,WY, bringing up to 450 MMcf/d of new production to connections withmultiple downstream pipelines during the first half of 1999. AndWestern Gas Resources and an affiliate of Colorado Interstate Gashave proposed a 90-mile, 20-inch diameter gathering system and atreating facility to bring 200 MMcf/d out of the basin. KN, CIG andQuestar also are planning new downstream interstate pipelines andexpansions that could increase access to the basin by 1.3 Bcf/d.

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