Gross production from the largest Powder River Basin coalbedmethane operators, joint partners Western Gas Resources Inc. andBarrett Resources, hit their year-end target of 200 MMcf/d inmid-December, then exceeded that goal by producing 206 MMcf/d inthe last two weeks of the year. Now the producers are crossingtheir fingers that pending permits to further ramp up productiongain approval by Wyoming regulators.

Western and Barrett, which are 50-50 partners in their numerousCBM projects in the basin, have begun the new year with about 70%of their water quality permits there approved. Western officialssaid they also are optimistic that the Wyoming Department ofEnvironmental Quality (DEQ) will give them the green light to moveforward with their expanded 2001 production plans.

The Denver-based producers hold approximately 531,000 net acresunder lease in the basin, and the companies drilled about 950 grosswells last year. Another 800 gross wells already have approval fromDEQ for production in the next 12 months. While that covers nearly_ of this year’s planned production, there are still a lot ofpermits needing approval to meet 2001 targets.

Ron Wirth, director of investor relations for Western, saidyesterday that the company is optimistic that its pending 85permits, which cover 336 existing gross wells and 1,260 locationsin the basin scheduled for production this year, eventually will beapproved by DEQ.

The Wyoming Environmental Quality Council held a six-hour hearingWednesday, with an overflow crowd of industry representatives,landowners and environmental groups, to hear how CBM production may beaffecting the state’s water quality and the state’s quality oflife. After reviewing comments from the hearing, the council willforward its recommendations to DEQ, which had placed a partialmoratorium on permit approvals last year (see Daily GPI, Nov. 6, 2000).

The slowdown in permit approvals followed a request by the U.S.Environmental Protection Agency for the state to more closelyscrutinize CBM operations (see Daily GPI, Dec. 18, 2000). Although DEQ has approvedeight of the permit requests from Western and Barrett in December, thecompanies said that without approvals continuing, production couldslow sometime this year.

Wirth said the eight approved permits in December covered 132existing gross well sites and 281 undrilled locations. Another 12permits, covering 214 existing gross well sites and 294 undrilledlocations, also should be approved by DEQ this month. Those pendingpermits were in the approval loop before the moratorium crackdown.

“We’ve got about 70% of the permits approved for our planned2001 production schedule,” said Wirth, covering the 800 gross wellscurrently planned for drilling this year. The other 30% as yetunapproved 85 permits cover 346 existing gross wells and 575undrilled locations. With DEQ’s approval of the permits before thethird quarter, the companies most likely would remain on scheduleto meet 2001 projections.

“We’re in good shape at the present time,” Wirth said, but hecould not specify when the production outlook might sag withoutmore approved permits.

The biggest issue facing Powder River Basin producers, he said,is the production from wells that flow into Montana waterways. SomeMontana groups and Montana regulators have protested the runofffrom Wyoming CBM wells because it has found a higher acidity fromrunoff in those locations. But Western officials are optimisticthat other locations’ permits should sail through without anyproblems.

“The Powder River play continues to progress and we areextremely proud of our continued leadership position in all facetsof its development,” said CEO Lanny Outlaw. “We believe we are ontrack to reach our next production milestone of 300 MMcf/d of grosscoalbed methane production by the end of 2001.” Wirth said a searchcontinues to replace Outlaw, who retires at the end of May.

As it targets its production within the basin, Western also soldwhat it called its “under-performing” Pinnacle Gas Treating Inc.facility in East Texas yesterday to Anadarko Petroleum (see relatedstory) for $38 million. Western plans to initially pay down somedebt then use the proceeds for more CBM production.

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