State gives CBM operator 4 months to turn on wells despite overwhelming doubts
— July 16, 2014
State officials gave Ed Presley another chance on Tuesday.
They did it despite having no confidence in his financing scheme, his ability to meet bonding requirements or minimum well safety and environmental requirements, little confidence in his knowledge of the condition of the coal-bed methane wells that he owns, and little confidence that landowners will allow him access to his wells.
Despite all of these doubts, landowners in the South Kitty Field area west of Gillette may very well expect to find Presley and a hired crew driving from idle coal-bed methane well to well flipping switches on as early as August 1.
The Wyoming Oil and Gas Conservation Commission (OGCC) granted Patriot Energy Resources and High Plains Gas — of which Presley is CEO — 120 days to post an additional $6.6 million in bonding and pay a total $20,000 in fines. Failing this, the state agency will force forfeiture of existing bonds — approximately $8 million that the OGCC holds.
By Presley’s own estimate, his companies are at least $50 million in debt, and his preliminary plan to rectify the situation was submitted to the OGCC staff on the Sunday before Tuesday’s hearing.
“We feel we’ve been extremely patient with High Plains over the year. We have very low confidence they will get their plan implemented in a timely manner,” Lucas Keeler, OGCC natural resource analyst, testified to the five-member OGCC commission.
If Presley should fail to produce enough gas from these derelict wells in 120 days in order to gain more financing, the OGCC’s pending action to demand $6.6 million more in bonding would likely add another 2,011 idle fee (private mineral) coal-bed methane gas wells to the state’s orphaned wells cleanup list, which is already at more than 1,200 wells. It would set in motion Presley’s “belly up” scenario of knocking his companies completely out of business, adding another 906 state and federal mineral wells to the state’s orphaned well list (all of which are out of compliance as well).
In a hearing that lasted nearly 4 hours on Tuesday, the OGCC staff laid out why Patriot and High Plains are not deserving of another chance. OGCC staff recommended the commission impose the fines and extra idle well bonding, and only 30 days for compliance — not 120 days.
Eric Easton, Wyoming Attorney General counsel to the OGCC, testified that Presley’s “preliminary” plan to put wells back into production and come into compliance — which Presley promised would be amended over and over again — is “so lacking it’s hard to even contemplate what’s going on.”
Easton iterated that for well over a year High Plains and Patriot had failed to conduct any mechanical integrity testing on its wells as required by state regulation, failed to put any wells back into production as promised, and failed to meet additional idle well bond requirements demanded by the commission.
“Clearly this has been going on for a long time. … The plan proposed by High Plains and Patriot is nowhere close to a complete (plan),” Easton testified.
Commissioners seemed to agree.
“I do not doubt your sincerity,” commissioner Mark Doelger told Presley. “I do not think you have a detailed plan,” he said, adding that Presley admittedly has little knowledge of the wells that have remained idle with no engineering analysis, mechanical testing and other vital information.
“Mr. Presley, you tried your best,” said commissioner Tom Drean, Wyoming’s State Geologist. “But quite frankly I don’t think you’ve got a plan. … If you don’t know which wells you’re going to turn on in a couple of weeks, it’s not likely they’re going to get turned on.”
Both the commissioners and the OGCC staff said they relied on information provided to the agency by the Sheridan-based landowner advocacy group Powder River Basin Resource Council — particularly for details of alleged debts to mineral royalty owners, which include public and private entities, and regarding the companies’ ongoing compliance issues with the Wyoming Department of Environmental Quality.
After the OGCC staff’s recommendations, testimony, and after a four hour hearing that included Presley’s rebuttals and an executive session to hear more details of his financing plan, not one of the five members of the OGCC commission — including Gov. Matt Mead — believed Presley and his companies are up to the task of turning on coal-bed methane wells to produce enough cash flow to finally begin making good on debts and regulatory requirements. But they gave him 120 days to give it a go anyway.
After the commission’s decision, commissioners Doelger and Drean told WyoFile they saw no harm in granting Presley more time to come up with cash and credit to post additional bonding within the next 120 days, expecting he likely will fail.
Commissioner Bridget Hill, who also serves as director of the Wyoming Office of State Lands and Investments, said the commission will not entertain another hearing of the Patriot and High Plains case. The matter is in the hands of the OGCC staff with the direction of the commission that the companies will pay $20,000 in fines within 30 days, post upward of $6.6 million in additional bonding in 120 days, or lose their wells.
“It’s not coming back in 120 days to talk to us more.” Hill told Presley.
For more perspective on this evolving story, read: “Broke, out-of-compliance CBM operator asks for another chance.” For deeper background info, check out this WyoFile report from 2011.
— Dustin Bleizeffer is WyoFile editor-in-chief. He has covered energy and natural resource issues in Wyoming for 15 years. You can reach him at (307) 267-3327 or email firstname.lastname@example.org. Follow Dustin on Twitter at @DBleizeffer
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