A few months ago, executives at Golden-based Luca Technologies thought they were set for a breakout year — but the markets and the federal government had other ideas.
In April, a planned initial public stock offering was canceled, and in May, so was Luca’s federal permit application to use its biotech coal-to-gas process in a Wyoming natural-gas field.
Two weeks ago, about 20 of its 70 employees were laid off, and the company has gone through $80 million of the $100 million it has raised from investors, according to Brian Cree, Luca’s chief operating officer.
“We’ll be looking for additional private capital,” Cree said.
Luca and federal Bureau of Land Management officials are trading verbal blows about who is at fault, but one thing both sides agree on is how difficult it is to launch a cutting-edge technology.
“When they first applied, we just didn’t know what to do with” the application, said Duane Spencer, manager of the BLM field office in Buffalo, Wyo.
Luca’s sought to demonstrate its technology in Wyoming — a brew of minerals, vitamins, yeast and other nutrients that is pumped into old coal-bed gas wells to stimulate microorganisms to eat more coal and release more natural gas than they ordinarily would.
“Luca is a cross between a biotechnology company and an oil and gas company,” Cree said. “We’ve developed a technology to enhance and accelerate what nature does more slowly.”
Microorganisms living in coal seams naturally break coal down into methane gas. It is the reason mines have to be vented to prevent explosions and drillers poke wells into the seams to pump out the natural gas.
These coal-bed-methane wells are relatively easy to drill but usually peter out quickly.
Luca injects its nutrient solution into these played-out wells to stimulate the growth of the microorganisms and generate more natural gas.
The process doesn’t require drilling more wells, adding new roads or building any new facilities, Luca officials say.
The startup company, founded in 2003, attracted top investors, including Kleiner, Perkins, Caufield & Byers, one of the major Silicon Valley venture-capital firms; and BASF Venture Capital, an investment arm of the world’s largest chemical company.
To test the technology, Luca headed to Wyoming’s Powder River Basin — one of the country’s four largest coal-bed methane fields.
In 2006, Luca ran a pilot project with the approval of the Wyoming Oil and Gas Conservation Commission, the company said.
Then it was time for the main event: a commercial-scale test of the technology.
Luca obtained the oil and gas rights on 17,818 acres of mostly private and state land with 283 aging natural-gas wells.
The project was presciently named “Rough Draw.”
While Luca had the rights to the oil and gas, the BLM still holds the federal rights to the coal, and often after a coal seam is drilled for a gas, it is mined.
In 2009, Luca began discussions with the BLM to resolve issues between natural-gas and coal “estates,” the company’s Cree said.
The company thought it had cleared its path — even getting a state law passed giving oversight of the new process to the Wyoming Oil and Gas Conservation Commission.
The BLM, however, wasn’t sure whether to permit it as a coal project or a gas project and ended up using a catch-all “2920” permit, the bureau’s Spencer said.
That didn’t set well with environmentalists.
“If you want to put an outhouse on federal land, you’d get a 2920,” said Shannon Anderson, an organizer with the Powder River Resource Council, an environmental group.
Spencer said he wasn’t sure whether outhouses had been permitted, but the 2920 has been used to site apiaries and Hollywood film crews on public land.
“You have this new technology going right through drinking-water aquifers — it needs more review,” said Anderson.
Cree said the nutrient solution is nontoxic and can even be drunk. “The BLM has tried to fit us into one of their boxes,” he said.
But a bigger problem turned out to be concerns voiced by the mining industry.
“We aren’t opposed to this kind of thing,” said Marion Loomis, executive director of the Wyoming Mining Association. “We are just concerned about what will happen to the quality of the coal reserve.”
Luca submitted test results showing a minimal impact on the quality of the coal and offered to put up a bond to cover any damage to the reserve, Cree said.
“We really struggled to address the coal issue,” Spencer said.
The BLM came up with an alternative plan that called for expanding baseline testing from the two wells Luca proposed to 111 wells to start, Cree said.
Luca estimated cost of the test program at $30 million. “That makes our project completely uneconomical,” Cree said.
Spencer said he did not know how much the testing regime would have cost.
What happened next is in dispute. Cree said the company asked that the project be put on hold. Spencer said Luca did not pay the $40,000 needed to keep the application in process, and so it was canceled.
Luca has invested more than $20 million in Wyoming, Cree said.
Still the company is considering moving to coal-bed methane fields, such as Alabama’s Black Warrior Basin or New Mexico’s Raton Basin, where the BLM does not hold the mineral rights to coal and natural gas, Cree said.
And as for the initial public offering, it was done in by natural-gas prices, which have hit a 10-year low, and “the fact we hadn’t been able to implement our technology since 2010,” Cree said
Mark Jaffe: 303-954-1912 or mjaffe@denverpost.com
