In December 1994, there were approximately 200 wells in the Powder River Basin producing coal-bed methane gas. Since 1994, over 15,000 gas wells have been drilled in this area and the State of Wyoming and the U.S. Bureau of Land Management, or BLM, have the authority to grant over 15,000 additional drilling permits. Production in 1994 was 2.4 billion cubic feet, and production in 2003 was 3.46 billion cubic feet, according to the Wyoming Oil and Gas Conservation Commission. The average well-life of a coal-bed methane well is estimated by the BLM to be eight to ten years and the average production is approaching 900 million cubic feet per day. The BLM forecasts that 80,000 new wells will be drilled in this area over the next eight years.

Gas produced from Powder River Basin coals is almost 100% methane. The gas is generated during the coal forming process and is trapped in the coal-beds by water. In order to produce the coal gas, the formation must first be dewatered. As the water is removed from the coal, the gas is desorbed from the coal. All of the coal-bed reservoirs are low pressure and require compression in order for the gas to be delivered to a pipeline transportation system.

Natural gas wells in the Powder River Basin area typically experience sharp declines in production volume in the first several years of production. Production then stabilizes and declines more ratably over a gas well’s average life of approximately eight to ten years.

The Company’s TOP system consists of 4.5 miles of 8-inch coated steel pipeline. The pipeline services producers of coal-bed methane in the Powder River Basin and is currently gathering from 56 wells operated by three independent natural gas companies, transporting approximately 4 million cubic feet of gas per day.

The approximately 200 mile gathering lines service 12 producers of natural gas in the Powder River Basin area of Wyoming. The Bear Paw gathering systems’ original capacity was approximately 60 million cubic feet of gas per day. Recently there was a reconfiguration of a portion of the system to reduce the operating expenses, including compression facilities, which reduced the capacity to approximately 27 million cubic feet per day.

Gap gas gathering system consists of approximately 25 miles of 12 to 20-inch steel pipe and 127 ditch miles of low pressure poly pipe. The gathering system services nine producers of coal-bed methane in the Powder River Basin. This system gathers gas from approximately 300 coal-bed wells.

Bone Pile gas gathering system consists of approximately nine miles of 8-inch and 16-inch pipeline and 25 miles of low pressure poly pipe. The system services producers of coal-bed methane in the Powder River Basin and is currently gathering from 125 wells owned by one producer and approximately 20 wells from three other producers. After the gas is gathered, it is compressed, dehydrated and delivered to the Company’s Antelope Valley line.

South Kitty delivery line consists of 6 miles of 12-inch pipeline. The line services the South Kitty coal-bed methane development area. Certain shippers move gas down this line in order to sell gas in the local market. The South Kitty line delivers gas into the Bone pile gathering system and is then sent to the Company’s Antelope Valley line.

Operating expenses totaled $1,314,392 for the year ended December 31, 2004 compared with $1,221,983 for the year ended December 31, 2003, an increase of $92,409, or 8%.

Depreciation and amortization totaled $655,763 for the year ended December 31, 2004 compared with $521,945 for the year ended December 31, 2003, an increase of $133,818, or 26%.