- Associated Press - Saturday, August 16, 2014

CASPER, Wyo. (AP) - An effort to plug abandoned coal-bed methane wells around Wyoming is ahead of schedule, although the number of wells in need of closure grows.

Wyoming is now on track to plug 479 wells this year, said Robert King, an independent consultant charged with heading the effort.

Gov. Matt Mead initially set a target of closing 300 orphaned wells in each of the next four years.

“I’m optimistic we can do it, unless something happens to derail it,” King told the Casper Star-Tribune (https://bit.ly/1oEt4vv).

At the same time, state regulators added 340 wells to the list of 1,200 in need of plugging.

The Wyoming Oil and Gas Conservation Commission recently pulled the bonds on the coal-bed methane wells owned by Black Diamond Energy.

In June, the commission gave the Buffalo-based company 30 days to come up with $4.2 million in additional bond payments to cover its nonproducing wells. The company failed to do so, meaning the state will plug Black Diamond’s wells and reclaim them.

Oil and gas companies are required to put down bonds on wells they drill. The bond payment is like an insurance policy. If a company plugs a well after the end of its productive life, the bond money is returned.

But if a company runs into financial trouble and cannot afford the reclamation cost, the state uses the bond payment to pay for closing the well.

Additional bond payments are required when a company’s wells stop producing.

Many coal-bed methane producers went bankrupt following a drop in natural gas prices several years ago and were unable to cover the cost of closing their wells.

King said the program should be able to absorb the cost of plugging Black Diamond’s wells. The state already held $293,000 in existing Black Diamond bonds. That money will now go directly toward plugging the company’s wells.

But another wave of orphaned wells could be coming soon.

High Plains Gas of Sheridan was given 120 days by regulators in July to come up with $6.8 million in additional bond payments or face the closure of its 2,320 coal-bed methane wells.

King said he is confident the plugging program has enough money to close the High Plains wells if necessary.

The state already holds $8 million in High Plains’ bonds, King noted. Funding for the plugging program also comes from the conservation mill levy, a production tax paid for by oil and gas companies.

“I feel that funding for the orphaned well program is healthy right now, and I don’t see the need to raise the mill levy,” King said.

He added that was his personal opinion and did not necessarily reflect the position of the commission.

Both industry groups and environmentalists have expressed support for an increase in the mill levy to address the growing number of orphaned wells.

The state is in the process of plugging 67 wells north of Gillette and 133 wells in Sheridan and northern Campbell counties. Work is also underway to close six conventional wells spread across Natrona, Niobrara and Weston counties.

A bid package for closing another 172 wells southeast of Gillette is being finalized.


Information from: Casper (Wyo.) Star-Tribune, https://www.trib.com

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