Industry supports higher tax for Wyo. orphan wells

Published on NewsOK Modified: December 12, 2013 at 5:44 pm •  Published: December 12, 2013
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CASPER, Wyo. (AP) — The Petroleum Association of Wyoming is willing to support raising a special tax on oil and gas production to help pay for an ambitious plan to plug and clean up potentially thousands of orphan coal-bed methane wells in the Powder River Basin of northeast Wyoming, the organization's president told state lawmakers Thursday.

Wyoming is faced with remediating at least 1,220 and as many as 4,400 idle and abandoned wells in the wake of the basin's sputtering coal-bed methane boom. The smallest number is more than six times as many wells as the state has plugged over the past decade.

A plan requested by the Joint Minerals, Business and Economic Development Committee and released by Gov. Matt Mead's office this week outlines four-, five- and seven-year scenarios to finish the job. Bonds that companies have deposited with the state to reclaim wells don't nearly cover the estimated cost.

Committee members on Thursday discussed raising the conservation tax, a mill levy assessed on oil and gas production that supplies the bulk of the Wyoming Oil and Gas Conservation Commission budget. The state agency's responsibilities include cleaning up orphan wells not located on federal land or mineral rights.

"If they need to raise the mill levy, we support doing that," Bruce Hinchey, president of the Petroleum Association of Wyoming and a former legislator, told the committee.

The commission has authority to as much as double the conservation tax. That would bring in an additional $5.5 million a year based on current revenue. Mead's just-released proposed budget also would direct $3 million in existing commission funds to orphan wells.

The basin's coal-bed methane boom has been petering out for five or six years now. More than 19,000 coal-bed methane wells — one-third of the total drilled since the boom took off in the late 1990s — have ceased producing amid low gas prices and gradual depletion of the gassy coal seams.

Most of the idle wells haven't been abandoned. Many of the abandoned wells tapped federal minerals and are the U.S. Bureau of Land Management's responsibility. Wyoming officials have identified at least 1,220 orphan wells on state and private land that the state will have to plug and remediate.

The estimated cost is $7.7 million — a number that could rise. State officials will find out in the weeks ahead if bankrupt methane farming company Luca Technologies Inc. and subsidiary Patriot Energy Resources LLC will be able to pay for plugging and remediating 912 coal-bed methane wells at a cost of $5.9 million.

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