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High Plains Gas vows to keep CBM wells

World Coal,

High Plains Gas has surprised many by procuring funds to keep hold of its coalbed methane (CBM) wells, which were threatened with closure.

The unconventional gas production company has announced it will post a US$ 6.8 million bond sought by Wyoming regulators, in a move that would prevent about 3000 non producing CBM wells from being claimed and plugged by the state.

The Sheridan-based firm had faced long months of scrutiny as it tried to bring its idle wells back online in spite of difficult financial circumstances. The Wyoming Oil and Gas Conservation Commission gave the company 120 days in July to pay the additional bond fee or face forfeiture of its wells.

"They’re supposed to finalize everything with our attorney tomorrow," state Oil and Gas Supervisor Mark Watson said Tuesday. "I can’t say 100 percent we have the bond in hand, but they have assured us we will this week. We’re hopeful."

He said the company presented an adequate plan for conducting mechanical integrity tests on its wells and phasing in production. High Plains will meet on a quarterly basis with regulators to discuss its progress, Watson said. 

The issue of orphaned CBM wells has become more pressing in recent years, as a tide of small firms bankrupted by a fall in natural gas prices abandoned their wells.

In 2013, Governor Matt Mead announced a US$ 7.7 million plan to close 1200 CBM wells by 2017. Officials suggest about 400 wells are likely to have been plugged over 2014.

But High Plains CEO Ed Presley said the company plans to pay the bonding fee, which the state seeks when a firm idles its wells. The bond is intended to cover the cost of reclaiming a well if a company goes bankrupt.

High Plains has received a line of credit from a silent partner in the firm to cover the bond payments, Presley said. He did not name the silent partner, but said the person was backed by Bank of America and Wells Fargo.

"I’m very, very pleased. It was a big mountain to climb," Presley said.

Though this is somewhat of a coup for High Plains Gas, the embattled company still faces a series of challenges: not least of which is US$ 50 million of debt. The company also faces outstanding royalty payments to surface and mineral owners.

The company was recently fined US$ 3.4 million by the US Department of the Interior’s Office of Natural Resource Revenue for failure to report production on federal land.

The Gazmo

Presley has staked much of his reputation – and his company’s future – on his faith in the Gazmo: a device he says could revolutionise the coalbed methane industry.

The Gazmo, if successful, could lower CBM companies’ operating costs. The device would keep water, a byproduct of gas production, in the ground.

Detractors say the Gazmo – a name coined by Presley – is commercially untested. Nonetheless, the High Plains CEO is undeterred.

High Plains Gas is now focused on starting production at 25 CBM wells in the Recluse area. The company is set to calibrate metres on the wells before production begins. Presley said the firm hopes to install four Gazmos onsite in December. 

Edited from various sources by Sam Dodson

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