Wyoming Oil and Gas Commission

Time for Wyoming to reform oil and gas bonding regs
February 7, 2015 – 05:47 pm

Coal-bed methane gas activity in the Powder River Basin is depicted by new road and pipeline installations in this 2002 file photo. Thousands of wells and related facilities have been orphaned, leaving a cleanup liability in the tens of millions of dollars. (Photo courtesy of Powder River Basin Resource Council — click to enlarge)Guest column by Gillian Malone

It is high time that Wyoming began reforming oil and gas bonding.

The state is facing the daunting and expensive task of reclaiming over 1, 500 orphaned coal-bed methane (CBM) wells left by bankrupt oil and gas companies at an estimated cost of $50 million. And the list is growing. For the past few years, on a nearly monthly basis, the Wyoming Oil and Gas Conservation Commission has been holding hearings about “delinquent” oil and gas operators that do not have sufficient bonding money to ensure reclamation of their wells.

Gillian Malone

In every case it seems the operator either: 1) is a no-show, leading to the minimal bonding the state holds being seized to pay a tiny portion of plugging and surface reclamation costs; or 2) has a list of excuses and a plea for more time to come up with the money they owe.

Unfortunately, nine times out of 10 the outcome is the same: the oil and gas company fails to come up with the required money and the wells get added to the list of orphaned wells the State of Wyoming must pay to clean up.

This scenario unfolded yet again at the Oil and Gas Commission’s July meeting when commissioners had to decide whether to revoke a company’s inadequate reclamation bonds or give the company — High Plains Gas — more time to come up with the $6.7 million they owe the state.

High Plains already admits to being at least $50 million in debt. They also have millions in default judgments against them from landowners, mineral owners and businesses, and they owe millions in back taxes to local and state governments. And to complicate matters, they recently acquired an additional 1, 200 idle CBM wells from another derelict company in bankruptcy court.

But instead of providing the Commission with a plan and a timeline for bringing the 2, 251 idle wells back into operation, High Plains CEO Ed Presley — during three hours of testimony — only mentioned reactivating five or 10 wells.

Despite grave doubts, commissioners opted to give the company another 120 days. The Commission decision in this case — and in others — only delays the inevitable, because in all likelihood, 120 days from now High Plains will still be unable to post the additional bond, and the state will be left holding the bag.

Source: www.wyofile.com
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