Inevitable development

Coalbed methane opponents say that if demand for natural gas stays high, major development is going to roll forward in the Powder River Basin.

The only event likely to short-circuit Wyoming's latest energy boom is a drop in gas prices, and by early autumn, that seemed to be happening. Prices for natural gas fell from a high of $10 last winter to a little more than $1 per thousand cubic feet. The number of coalbed methane drill rigs in the basin dropped from 130 in July to 105 on Oct. 2, starting rumors that Wyoming officials were facing a 2002 budget deficit.

Though an extended economic recession could slow gas production in the Powder River Basin, industry analysts say a rebound is likely: In August, the U.S. Environmental Protection Agency announced it wants coal-burning generating plants to cut emissions by up to 80 percent, a rule likely to push power producers - which now rely on coal to generate half the nation's electricity - toward cleaner-burning methane.

"We're not going to have the rolling blackouts," says Miles Keogh, who manages the 27,000-acre Fence Creek Ranch near the Montana border. "We'll pay the price, do whatever it takes, and it's going to happen. As far as standing up and saying, 'Hey, we're going to fight this thing,' forget it."

"The whole thing will become a giant Superfund site," Dale Ackels predicts bitterly. "I spent my life in godforsaken Army posts all over the world, and one of the things that kept me going was the idea that I was coming back to the Rockies. This is where I wanted to be."

When the coalbed methane wells play out in 10 or 20 years, Ackels expects them to be abandoned. Most companies have few assets and are required by the state of Wyoming to post a mere $75,000 bond for all their operations on fee lands, and a maximum of $100,000 for drilling on state lands. It's enough money to plug a few wells, no more. With abandonment will come a host of environmental problems, including poorly sealed wells and gas pollution in soils.

"There's a reason they're limited liability companies," Ackels says. "They're going to be off to Ulaan Baatar saying, 'Thanks, Wyoming, give us a kiss, don't forward our mail.' "

They will also leave behind a permanently altered landscape. Though Anglo-Americans have been running cattle and sheep and drilling and digging here for more than a century, there is a wild beauty in the basin. Away from the coalbed methane wells, there is no noise, few power lines or vehicles, no pollution, and almost no one else.

"This is country where normally I could spend months out there and never see anybody," says Dave Clarendon, a Powder River outfitter and rancher. "It's never going to be the same."

Mickey Steward, the county consultant, believes that ranchers can place a dollar value on their quiet, lonely landscape. "I think for people to communicate they have to have a common language," Steward says. "How much is the wildlife worth, how much is the view worth? Those are all quantifiable."

Yet Clarendon scoffs at such an approach. "How much is a 400-year-old ponderosa worth?" he asks rhetorically. "It will never come back in our lifetimes."

An answer of sorts

Despite the widespread fatalism in the ranching community about this new energy boom, Miles Keogh, the manager of Fence Creek Ranch, is optimistic about coalbed methane. Ranchers can't count on state or federal regulations to protect them, says Keogh, but those who understand how they want their ranch to look and function can hold drilling companies responsible for that outcome.

He refuses to accept the conventional wisdom that surface owners don't have power here. "Those guys have power that is unbelievable," he insists. "And they're the only ones that have the power, because everybody else wants the money."

That philosophy underpins an extraordinary surface agreement Keogh wrote with a drilling company called First Sourcenergy, a wholly owned subsidiary of the Canadian company Gastar Exploration Ltd. It specifies who gets access to the wells, when and how (on four-wheelers, since there will be no roads to the wellheads), and how the company may use the excess water (for cattle-watering, riparian restoration and native forage production). It also details how the company will site, construct and camouflage its wells, and it requires the company to manage them remotely, using telemetry.

The agreement creates a company-funded cash account, rather than the usual bond, that Keogh can draw upon to fix any problem the company doesn't deal with. And it promises a steady revenue stream for the ranch, a percentage of gross income from gas sales in lieu of surface-damage payments.

Keogh says contracts should hold drillers responsible for a better outcome, not set out this rule and that rule.

"Ranchers should not grab the money to the point of getting greedy," he says, "but they should do so to the point where they're doing really well, and the land above the methane has better integrity than it does today in terms of water, wildlife, raising cows, the whole works. (This should be) a better ranch after methane and during methane than it was before methane.

"It's not going to be the old ranch that you rode out on and there was nothing on it," he concedes. "Those days are gone. But you can do a lot to mitigate that."

Buck Brannaman, sitting easily in his saddle at his Sheridan ranch, agrees that ranchers should get a bigger piece of the pie. "Everybody knows they (drilling companies) are going to make a million dollars a year per well," he says. Ranchers should get at least 5 percent of the gross, he says, so they can do reclamation work themselves if the drilling companies don't.

Keogh is preparing to share his approach with other landowners. By hanging together and hanging tough, he says, ranchers can set a standard for how coalbed methane production will happen in the Powder River Basin.

But other ranchers wonder if the ranching community's traditional independence will make it hard for them to cooperate - as they will need to cooperate - in the face of this latest energy boom.

Like coalbed methane development itself, Miles Keogh's outcome-based strategy is a grand experiment. Even if ranchers can force the coalbed methane industry to take care of surface owners, the landscape of the Powder River Basin - and the lives of the people who work on it - will be changed forever.

 

Hal Clifford writes from Telluride, Colorado, and is a frequent contributor to High Country News and Writers on the Range.

 

You can contact ...

  • Bureau of Land Management, Buffalo Field Office, 307/684-1100, www.wy.blm.gov/Directory/fo_map/buff_fo.html;

  • Powder River Basin Resource Council, 307/358-5002, www.powderriverbasin.org;

  • Oil & Gas Accountability Project, 970/259-3353, www.ogap.org;

  • Wyoming Oil & Gas Conservation Commission, 307/234-7147, wogcc.state.wy.us;

  • Wyoming Department of Environmental Quality, 307/777-7937, deq.state.wy.us;

  • Mickey Steward, CoalBed Methane Coordination Coalition, 307/684-7614, cbmcc@vcn.com;

  • Mark Gordon, Ucross Ranch, 307/684-7139;

  • Miles Keogh, Fence Creek Ranch, 307/684-0532.

Copyright © 2001 HCN and Hal Clifford