CASPER, Wyo. — Three days before a state deadline, Storm Cat Energy, a bankrupt coal bed methane company that owed Wyoming $10.8 million, received approval to unload hundreds of wells on another company for nearly nothing.
Storm Cat went under after the price of natural gas plummeted. Large companies, seeing the writing on the wall for the market, stepped out of the coal bed methane game years ago. Smaller companies bought those wells and pits but were often financially weak, falling into bankruptcy as the price continued to decline.
Since 2014, 4,681 wells have been left idle on state and private land. Using a tax on operators, Wyoming’s Oil and Gas Conservation Commission has fewer than half of them.
Wyoming could have seized Storm Cat’s insufficient reclamation bonds. Its 2,432 idle wells would have become orphans, adding to a long list of such wells the state and federal agencies have to clean up.
Instead, Storm Cat offered another solution: It would sell the wells that could still produce gas to Summit Natural Gas. Storm Cat’s exhausted wells, on state, private and federal land, would go onto the orphan list, and though the state wouldn’t get the full $10 million in idle bonds, Summit could offer $1.3 million.
The commission took the deal, hoping to salvage about 42 billion cubic feet of gas, the companies estimate. Gov. Matt Mead, the commission’s chairman, called it a “reasonable solution.” And last week, a court approved the plan.
Summit still must hand over $2 million in bonding within 30 days of the sale and have full bonding in place within 18 months. Summit also has to broker agreements with surface owners — and provide proof of that to the commission within three months.
A handful of surface owners, including Padlock Ranch Company in Sheridan County, which has 302 Storm Cat wells on its property and 34 pits, have urged the state to pull the bonds and plug the wells.
The landowners, who once brokered rights of way and surface agreements from companies in return for a piece of the profits, now want the detritus Storm Cat left behind cleaned up.
Campbell County, which says Storm Cat owes it $7.6 million in back taxes, pulled its objection to the bankruptcy agreement in July. The wells Summit wants to return to production are outside the county. The thousands left and the unpaid taxes Campbell seeks will remain an issue for Storm Cat.
Federal opposition was also retracted on July 24. In a statement, lawyers for the Department of the Interior said the company remedied the key issues: unpaid minimum royalties, rents, penalties and interest on the 780 wells under the Bureau of Land Management’s jurisdiction.
Money is still a sticking point for the companies. Summit has to provide the $2 million they promised for bonding, $700,000 of which will cover Summit’s own bonding deficit to the state.
The remaining $1.3 million will be applied to the idle Storm Cat wells that Summit will bring back on line. Summit will have to return electricity to the site, drain water from the wells and rehabilitate those that have been sitting idle for two years.
Though the deadline for the bankruptcy and sale has now passed, the companies will not come before the state commission at the regularly scheduled meeting Tuesday, a spokeswoman for the commission said.
They still have two requirements to meet: surface agreements and bonding.
Should they fail, staff can pull whatever bonding is in place, declare the wells, pits and infrastructure orphaned and begin reclamation.
Information from: Casper (Wyo.) Star-Tribune, http://www.trib.com