Powder River Bottleneck Not Seen Impacting 1Q

If the Wyoming Department of Environmental Quality slows down the permit approval process for companies eager to begin coal bed methane projects in the state, the largest producers already there are expected to have no trouble meeting their drilling schedules through at least the first quarter of 2001. Anticipating the hearings, many had already moved proposed drilling projects for 2001 through the regulatory process.

On Jan. 3, 2001, the Wyoming DEQ's Environmental Council will hold a water discharge hearing that could have an effect on the future permitting process for coal bed methane projects in the prolific Powder River Basin (see NGI, Dec. 4). The discharge permits cover the amount of chemicals allowed into the nearest water source, and are a requirement for coal bed methane production because water is pumped out of the drilling area to allow methane to escape from the coal in the production process.

Expected to voice their opinions at next month's hearing are producers, landowners and environmental groups, according to DEQ's Gary Beach, the administrator of the Water Quality Division. Following the hearings, DEQ will make a decision by February 2001 on whether to change discharge limits, keep them the same, or in a worst case scenario, shut down future drilling for the long- or short-term beyond those permits already approved.

Don't expect the ruling to be written in stone. Following DEQ's decision, there could be an appeal by an opposing group, and the appeals process could take up to a year, possibly delaying pending permits.

However, producers already operating in the basin had been prepared for the coming hearings. Barrett Resources, one of the largest producers in the Powder River Basin, had announced it would drill 1,000 wells in 2001. But when Barrett discussed its third quarter results earlier this year, it warned of possible slowdowns in the Powder River Basin if its water permits were delayed. Western Gas also had warned of possible production delays.

However, of the 1,000 wells Barrett plans to drill next year, it already has obtained discharge permits for nearly 800 of them. Based on the approved permits, a Barrett spokeswoman said that the company would not be changing its 2001 drilling schedule "one bit." She added that Barrett did not anticipate delays in the first quarter.

Pennaco, which has been dewatering 37 wells in its House Creek Project for several months, also was granted water discharge permits for four projects. The four new permits allow the Denver-based company to begin dewatering 70 additional wells, which have been drilled to the Big George Coal in the House Creek Project.

Pennaco estimates that the new permits will give it the water discharge capacity to dewater another 270 wells through 2001. Of the 270 new wells planned, nearly 100 will be drilled to the Big George Coal. Another 170 are slated for drilling to the Wyodak Coal. Pennaco owns 100% working interest in the House Creek Project.

Pennaco said that the recent slowdown would have no affect on its production profile over the next several months since most of its wells already have permits in p lace. The company has 12 additional permit applications awaiting approval by DEQ, and one approval is expected by next week.

What effect permit delays will have on other producers is open to question - most permit requests cover more than one well. DEQ already had approved 80% of more than 50 water discharge permits placed for public notice in September and October, according to Beach. All of the approved permits covered discharges into the Cheyenne River and the Belle Fourche River, which are both in the Powder River Basin flowing into South Dakota.

The 11 delayed permits all were tied to water discharges into the Powder River, but the flows would be north into Montana, where public opposition to the water discharges has discouraged Wyoming officials from approving permits for those discharges. There also are seven permits requested in November that now are held up. Before September, DEQ had cleared the books of all pending permits.

Carolyn Davis, Houston

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