Fidelity Exploration and Production Co., Montana's only current producer of coalbed methane, is seeking to enlarge its existing field near Decker by 178 wells.
The company has applied to the Montana Board of Oil and Gas Conservation for permission to expand its field operations and has submitted a plan of development. The applications are the first requests the board has received since the March adoption of a record of decision for an environmental analysis of coalbed methane gas development in the state.
The Bureau of Land Management issued a similar decision for the same study on April 30. The Montana Department of Environmental Quality also is expected to issue a final decision. The three agencies jointly prepared the study.
A public hearing on Fidelity's request will be Thursday at the board's regular meeting. The meeting will begin at 8 a.m. in the conference room of the Billings Professional Club on the 22nd floor of the Sheraton Hotel in Billings.
Fidelity is a subsidiary of MDU Resources Group Inc. and is based in Denver. The company has 240 producing coalbed methane wells in the Decker area and about 20 exploratory wells.
Bruce Williams, Fidelity's vice president of operations, said the company hopes to drill another 178 wells this year. The wells would be on private, state and federal mineral interests. About 92 of the wells fall under the Board of Oil and Gas Conservation's jurisdiction.
The land is owned by several private landowners with which Fidelity has agreements, Williams said. One area involves a state-owned section. Fidelity will be seeking an agreement with the State Land Board for that parcel, he said.
The development plan contains what is required by the board's record of decision for the environmental review, Williams said.
The plan provides the "big picture" look at the project and contains surface-use, water-management and reclamation plans. The surface-use plan shows where the wells will be located, the route of gas and water pipelines, the location of compressors and metering stations and the location of power lines, Williams said.
The water-management plan describes what will happen with ground water that is brought to the surface while drilling for the natural gas. Williams said the water plan proposes a combination of activities, including discharging to the Tongue River, delivering water to the Decker coal mine for dust control and storing water in reservoirs during the winter and using it for irrigation in the summer. The water would irrigate forage crops that Fidelity will plant for ranchers and, in this case, will be applied on land the company owns.
Williams said Fidelity will continue to operate under its existing water-discharge permit issued by the DEQ. The permit allows the company to discharge up to 1,600 gallons a minute into the Tongue River.
Williams said the company is discharging at about half that rate.
"We absolutely won't exceed the permit limit," he said.
The reclamation plan describes how Fidelity intends to restore and reclaim the land when it is done.
Bitter Creek Pipeline, the company that gathers and compresses Fidelity's gas, will apply to the DEQ for air-quality permits for compressors.
Williams said Fidelity hopes to drill one well every 160 acres, a density that will test a concept developed by the company.
"We've done some engineering and have some predictions that say that will work. But we don't know that for sure," he said.
The idea is to drain the same amount of gas reserves with fewer wells, which reduces capital costs and decreases the amount of land disturbance.
"It would be a positive both ways," he said.
At present, the company may drill four wells per 160 acre-unit under existing rules at its CX Ranch field. But, in reality, Fidelity has drilled two wells per 160 acres to drain the gas reserves.
The board sets the unit spacing, which is the amount of property that a well will drain economically. The spacing also establishes how the revenue is shared because everyone with a mineral interest shares in the production from wells in a unit.
Williams said Fidelity hopes the board will approve its plan of development this week. Drilling could begin in June or July.
Tom Richmond, board administrator, said the board typically makes a decision the day of a hearing. Richmond said his office will conduct an environmental assessment after it is reasonably certain the board will accept Fidelity's development plan. The agency then can start processing individual drilling permits.
Richmond said Fidelity is seeking to enlarge its field by nine sections on the eastern side and to drill wells in its existing field. The expansion area is near the Wyoming border.
How four lawsuits filed recently in federal court in Billings in response to the BLM's record of decision may affect Fidelity's plans is unclear. The suits were filed by conservation groups and the Northern Cheyenne Indian Tribe. The cases generally allege that the agencies did not adequately study the issues or potential environmental effects.
Williams said, if the groups get injunctions, that would stop anything from happening on federal minerals until the issues are resolved.
"I think that's exactly the objective of the people that filed the lawsuits," he said.
If there are no injunctions, the BLM could go forward while the case is litigated.
BLM's record of decision allows companies to progress to the next environmental review based on specific proposed projects, Williams said.
He said the study process has been thorough and involved extensive public comment.
"To just say it isn't adequate and we need to stop it all and go through this process again is, in my mind, anti-development or obstructionist," he said.