Producers active in Wyoming’s Powder River Basin, which is fastbecoming the most prodigious play in the nation, breathed acollective sigh of relief last week when FERC gave WyomingInterstate Co. Inc. (WIC) the go-ahead to construct its MedicineBow connecting lateral that will enable it to tap into thebountiful coal-bed methane (CBM) reserves in the region. Withoutit, producers said they would be forced to shut in production ofCBM gas for the long term.

CBM production activity has “totally overwhelmed theinfrastructure” that’s in place in the basin to gather and delivergas, and is keeping producers from realizing their full productionpotential until more facilities can be built, said LannyWaguespack, director of business development for CMS Energy’soffice in Denver. The region “is getting a lot of attention in theUnited States from E&P companies.” He called it the “mostactive play” in the U.S., with hundreds of wells drilled alreadyand thousands more expected. It’s estimated the basin could hold upto 30 Tcf of potential gas reserves. Production is expected to morethan triple over the next couple of years with the potential toreach 1.4 Bcf/d eventually if all existing leases are fullydeveloped.

Powder River producers vigorously lobbied the Commission toapprove the Medicine Bow Lateral at last week’s meeting. Theyreported existing pipelines out of the basin already wereconstrained, and absent swift action from FERC, the targetedin-service date for the lateral – Dec. 1 of this year – would bedelayed for a year. Existing lines include Western Gas Resources’MIGC, Colorado Interstate Gas’ (CIG) Powder River lateral andWilliston Basin.

The Medicine Bow project calls for the construction of a149-mile, 24-inch gas transmission line with the capability to moveabout 260 MDth/d of gas reserves from the basin in Wyoming todownstream markets. The $78 million lateral would connect WIC’smainline with the Fort Union Gas Gathering project, a 106-milesystem that is being built by a consortium of five companies -including CIG Resources Co., Barrett Resources, CMS ContinentalNatural Gas, Western Gas Resources and Enron Capital and TradeCorp. The 450 MMcf/d gathering line is scheduled to start up inSeptember.

Also scheduled to be constructed is the Northern Header GasGathering System, a 256-system that would move up to 500 MMcf/d(with added compression) from the northeast end of the basin nearGillette and Sheridan, WY, southward into the Fort Union system.The header, which is expected to be operational by Nov. 1, wouldgather gas from 580,000 acres owned evenly by CMS Oil and Gas, theproduction arm of parent CMS Energy, and Denver-based PennacoEnergy. CMS Continental, another CMS Energy subsidiary, will be theoperator of the new header system.

“There are three main parts to our transmission strategy. You’vegot the Medicine Bow Lateral, the Fort Union system and this newheader. All these things will make gas from the basin much moreaccessible,” said CMS Energy’s Waguespack.

Before entering the WIC system, the unprocessed methane gaswould be treated in carbon dioxide extraction facilities, two ofwhich are slated for construction in the Powder River region – oneby the Fort Union consortium and another by Devon Energy and KNEnergy as part of their joint Thunder Creek Gas Services Project.

Some of the most active producers in the Power River Basin arePennaco Energy, Western Gas Resources, Yates Petroleum in NewMexico, Barrett Resources, Sonat, and CMS Oil and Gas, just to namea handful, Waguespack said. Pennaco, which has been active in thebasin since April 1999, last week reported estimated net provedreserves of 42.7 Bcf for the six-month period ending June 30, upfrom 18.1 Bcf in late 1998. All of the net reserves were located inthe South Gillette area of the basin.

Pennaco pegged its production at about 11 MMcf/d conservatively,but suspects it may be even higher. However, the Denver producersaid it can’t sell and transport additional volumes until some ofthe new gathering and pipeline delivery projects begin operation.It reported it has had to shut in about 15.4 Bcf of probablereserves, representing 59 wells, due to the short-term shortage oftakeaway capacity in the basin.

Susan Parker, John Norris

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