Questar’s year-round drilling plan for the Pinedale Anticline area in Wyoming was approved Tuesday by the state office of the Bureau of Land Management (BLM). The program will be phased in over the next year, allowing Questar to significantly increase exploration and production activities while reducing its overall environmental impact through directional drilling and other measures.

Questar previously estimated that its 2004 production would be 102 Bcfe and its 2005 production would be in a range of 112-114 Bcfe. “What we are saying at this point — and it’s really too early to tell — is that we have more comfort in the higher end of that range [for 2005],” said Questar spokesman Curtis Burnett. The real impact, however, will come in 2006 following the phase-in.

“On Oct. 26 we said that if we could get year-round drilling and do a 42-well program at Pinedale, that would probably add about 7 Bcfe in 2006. At this stage it is too early to tell if we are going to be able to do 42 wells.” Questar expects to drill 30 wells in the Pinedale this year. It has not broken out the production from the field.

Analysts have predicted that the year-round drilling plan could add at least $0.10-0.15/share to Questar’s 2005 earnings based on gross production of 1.2 Bcfe per well and 45 wells per year (see Daily GPI, Aug. 5).

While the program will lead to more gas production and improve Questar’s financial performance, it also is expected to reduce the environmental impact of drilling in this area.

Current seasonal restrictions give Questar a narrow drilling window (May through November) to protect big game, sage grouse, and other sensitive species’ habitats. However, year-round drilling is expected to cut 10 years from development time.

The year-round plan also includes a move to directional drilling, which will reduce impacts on soil, wildlife, water and air resources. The company plans to limit its drilling footprint to 9% of the total authorized under the Pinedale Anticline environmental impact statement (EIS) record of decision. Furthermore, a new 107-mile six-inch diameter condensate pipeline is expected to save more than 25,000 truck trips each year. Questar also has proposed to spend $210 million in mitigation implementation.

The BLM touted the reduction in human activity impacts and surface disturbance in crucial mule deer winter range and greater sage-grouse habitats. “We coordinated closely with the Wyoming Governor’s Office, the Wyoming Game & Fish (WG&F) and Wyoming Department of Environmental Quality on this proposal to develop a decision that provides a long-term benefit to deer and sage-grouse habitat,” said Pinedale Field Office Manager Priscilla E. Mecham. “This is a model of cooperation between state and federal agencies, working together for the coexistence of energy development and wildlife needs.”

Questar CEO Keith Rattie said the plan “embodies what Wyoming Governor Dave Freudenthal and others have called ‘responsible development.’ While we would prefer to begin full implementation this winter, we understand and accept the BLM rationale for phased implementation over the next year.”

The new drilling plan is scheduled to begin this winter and continue for nine years. It allows Questar to do the following:

“We’ll have a better idea of the upside potential of the BLM’s decision on 2005 well count and production by midyear after we see how much impact, if any, sage-grouse nesting activity has on startup of our unrestricted summer operations,” said Chuck Stanley, CEO of Questar Exploration and Production. “Obviously, the biggest impact on production will occur in 2006 and beyond, when the benefits of the full six-rig winter program kick in.”

Questar E&P and affiliate Wexpro Co. have a 62% average working interest in about 17,950 acres on the Pinedale Anticline. Questar subsidiaries operated 95 Pinedale producing wells on Nov. 8, 2004.

The company also announced on Wednesday that it increased its hedge positions on its gas production for 2005 and 2006. With the new hedges, Questar E&P now has 72.6 Bcf of 2005 gas production hedged at a net-to-the-well price of $4.86/Mcf versus 65.6 Bcf at an average price of $4.64/Mcf reported earlier. For 2006, the company has now hedged 31.5 Bcf of gas production at an average net-to-the-well price of $5.09/Mcf compared to 24.6 Bcf at $4.77/Mcf reported in its October earnings release.

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