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Petroglyph to close down CBM operations

by Bill Knowles
LA VETA- Petroglyph Energy, Inc., announced today that it will be shutting down its Coal Bed Methane operations in Huerfano County. The shutdown of the 52 CBM wells is expected to start within the next 30 days and will take six to nine months involving the removal of equipment, plugging wells and reclaiming surface disturbances.
Petroglyph holds about 65,000 acres of mineral leases and believes much of the acreage remains prospective for the deeper conventional gas development — natural gas.
“CBM requires the removal of large quantities of water, natural gas development doesn’t,” Executive Vice President and Chief Operation Officer, Paul Powell said during an interview with the Huerfano World Journal.
“ We found Phase I and II of our methane gas mitigation plan very successful. However when we began looking at Phase Three over the past few months, we found that the requirements we faced going into that phase didn’t add up,” Powell explained. “We have a fiduciary responsibility to our investors, so the requirements we faced indicated that choices had to be made.”
A press release issued by Petroglyph Energy, Inc. on April 19, also indicated that changes in state law in relation to produced water, discharge requirements and whether ground water is tributary or non-tributary had an impact on the project economics.
Before the Colorado Supreme Court ruling in the Vance versus Wolfe case, surface discharge of ground water, or produced water, was considered mining or wastewater. But Vance versus Wolfe changed that.
“After Vance we have to determine if ground water is tributary or non-tributary; we have to augment or replace the water in both time and space. For example if there is a loss of 10 acre feet of surface water, because the aquifer below is tributary, we now would be required to replace that water a hundred years from now,” Powell explained.
“They (the water courts and the legislature) are still working on those parts of the law, trying to figure them out. It’s still not clear and it adds a lot of complexity and costs that weren’t there before. It’s the same with the discharge requirements we saw.” Those requirements would have increased the cost of operations as the company entered Phase III of the operation.
The shutdown of CBM operations will result in the loss of five jobs. The employees were notified of Petroglyph’s plans last Tuesday morning in a meeting with Powell. They will stay with the company through the next six to nine months as wells are closed and equipment is shuttled out of the area and the land is reclaimed. But in the end there will be lay-offs according to Powell.
After the shutdown, Petroglyph will focus on areas of development in both Utah and North Dakota. In Utah alone Petroglyph is operating around 750 wells.
“The biggest thing to remember is that this shutdown is not the same as leaving the county,” Powell said. “We still have 65,000 acres of mineral leases and those acres could be prospective as far as natural gas is concerned.”