Chief Editor-Exploration and Economics
HOUSTON, Dec. 17 -- Methane from coal seams could provide an increasing share of US natural gas supplies for years to come, according to several reports and studies.
Low-sulfur coals in the Powder River basin of Wyoming and Montana, the country's fastest growing coalbed methane play, appear to contain much more gas in place than estimated earlier, concludes a study prepared for the US Department of Energy.
The DOE study identified 61 tcf of gas in place in Powder River coals more than 300 ft deep and 20 ft thick, of which 39 tcf is considered technically recoverable. Main reasons for the increase are that the study included extensive information on the deeper Paleocene Fort Union coals, new data on Eocene Wasatch coals on the western side, and coals in Montana.
The 61 tcf is also based on reservoir modeling and the construction of 142 "type wells" representative of what DOE called "the distribution in well performance (gas and water production) for 12 distinct coal seams in 12 basin partitions."
The cost of alternative water management options other than surface discharge "are significant and can make an otherwise profitable CBM project uneconomic," the workers found. The portion of gas that will ultimately be produced will depend largely on the choice of disposal method for water produced from the same wells, researchers found.
Separately, the US Geological Survey in mid-December issued a 2002 assessment of undiscovered, technically recoverable gas in the Powder River basin of 16.5 tcf, nearly all of which is unconventional (www.usgs.gov).
US CBM status
US production of CBM averaged 4.4 bcfd in 2001, or 7.9% of US gas production, DOE figures show. Almost all of that came from the San Juan, Powder River, and Black Warrior basins.
Powder River CBM production is approaching 1 bcfd from 10,000 wells, and cumulative production likely will reach 1 tcf in 2003.
CBM is produced from 3,500-4,000 wells in the San Juan, 3,500 wells in the Black Warrior, 800-1,000 wells in the Raton, and 450 wells in the Uinta basin, said a report prepared for IHS Energy Group, Denver. It put finding costs at 11-25 cents/Mcf.
If the Powder River play develops similarly to the San Juan play, which has produced 8 tcf of gas, peak output of 2.5-3 bcfd is not unreasonable in the Powder River, said Petrie Parkman & Co., Denver. Issuance of a record of decision for an environmental impact statement, expected in the first quarter of 2003, could result in approval of 39,000 Powder River basin CBM drilling permits, including 23,900 on federal lands.
Meanwhile, operators recovered 40 bcf of coalmine methane (CMM) in 2001, mostly in Appalachian states, and the US Environmental Protection Agency said significant potential exists to recover CMM from western mines.
Powder River water
Discharging water produced with CBM into rivers and streams or impoundments for benefit of agriculture, livestock, and grasslands is the lowest cost option and will result in the largest estimate of economically recoverable Powder River gas, said a study (www.netl.doe.gov/scng) produced for DOE by Advanced Resources International Inc., Arlington, Va.
States permit such discharge because the water quality is generally as good as that of drinking water. Water recovery varies from 100,000 to 2 million bbl/well.
Water production, 1.4 million b/d at yearend 2001, was up from 229,000 b/d at yearend 1998. With progressive CBM development and dewatering, however, water production has declined to 177 b/d/well at the end of 2001 from 396 b/d/well 2 years earlier.
DOE's Office of Fossil Energy commissioned the study through its National Energy Technology Laboratory to help federal and state agencies plan for future CBM development.
Of 39 tcf of technically recoverable gas estimated in the study, researchers found operators could produce 29 tcf with surface discharge disposal and at the study's assumed gas prices. Recovered gas volumes might be somewhat less because the study did not assess the amount of produced water that would meet state permitting standards for this type of disposal.
The next most economically attractive disposal option was constructing infiltration impoundment ponds with associated evaporation equipment. This would result in 28 tcf of gas recovery.
Reinjecting the water into shallow fresh water zones could yield 27 tcf, but the method has met with limited success.
Requiring reverse osmosis treatment of the water likely would yield 18-22 tcf.
Deep reinjection wasn't studied because of great expense and loss of the water as a resource for the arid west.
At today's volatile gas prices and unfavorable Wyoming basin price differentials, only using surface disposal of produced water is economic and then only in highly productive parts of the basin.
Other gas factors
The study's 39 tcf estimate of technically recoverable reserves is among the highest of a range of resource estimates by federal, state, and industry organizations, the lowest of which is 8 tcf.
Future CBM operations will need fewer wells and may discharge substantially less water than previously estimated by other studies, ARI found.
The US consumes 22 tcf/year of gas from proved reserves of 180 tcf.
The DOE study identified free gas in some coal formations and established higher gas content values for the coals, both increasing the gas in place compared with previous estimates.
Powder River gas recovery is 100 MMcf to 1 bcf/well from coals at 300-3,000 ft.
Big George fairway
Several operators have had success in producing CBM from Big George coals at pilot projects in a 40 by 15-mile fairway west of the main Wyodak play area, said Petrie Parkman.
Production exceeded 50 MMcfd in December 2002 from Big George coals, part of the Tongue River member of Fort Union. Operators appear to have mentally moved several Big George pilots to the development stage.
Natural uncertainty surrounds specific production profiles and recoveries, ultimate developable acreage, and water disposal issues especially east of Sheridan, Wyo., near the Montana line.
Legal challenges to EIS content are also possible. Release of the record of decision could be delayed or an EIS supplement might be required.
Petrie Parkman's economic assumptions imply a 35% pretax internal rate of return and a pretax NPV10 of about 35 cents/Mcf for both Wyodak and Big George developments.
Big George pilots mentioned in the analyst's report are Anadarko Petroleum Corp.'s County Line project at 17 MMcfd with plans for 35 MMcfd from more than 300 wells; Williams-Western Gas Resources All Night Creek project with 17 MMcfd; Marathon Oil Corp.'s House Creek project at 9 MMcfd from nearly 400 wells; and Williams-Western's Pleasantville project with 90 wells and production to ramp up in 2003.
Pipeline capacity limits have held CBM prices down for 18 months. CBM operations should derive relief from a 900 MMcfd expansion of the Kern River pipeline from Opal, Wyo., to California by mid-2003 and the 540 MMcfd Cheyenne Plains pipeline an El Paso Corp. unit plans to lay from Cheyenne, Wyo., to Greensburg west of Wichita in Kiowa County, Kan., by early 2005, the analyst said (OGJ Online, June 29, 2001).
DOE released its report at a time producers in the Rockies face new legal and regulatory challenges.
The Department of the Interior's Land Appeals Board this fall upheld an earlier ruling to void 3 Powder River Basin leases owned by Marathon Oil Corp. because it faulted the Bureau of Land Management's environmental review (OGJ, Nov. 4, 2002, p. 34).
BLM in early 2002 issued draft Wyoming and Montana environmental impact statements and is expected to complete both in February 2003. In a related effort, EPA's Region 8 office is conducting a study of general permit requirements for produced water on Native American lands in the region. That study is due for release this month.
DOE said it is also sponsoring CBM studies on development of best management practices, electronic mapping of environmental and well data, a primer for the public, a handbook for the development and review of environmental documents required for CBM projects, analysis of the options for beneficial use of CBM produced water, and research on technologies for produced water treatment.
All CMM projects, those that drain gas in advance of underground coal mining, are in the eastern US, but great potential exists in western basins if three key barriers can be overcome, EPA said.
CMM has been produced profitably in Appalachian basins since the 1980s. An EPA report said 10-12 bcf of the 110 bcf/year produced from Alabama coals is from CMM wells. One third of Virginia's 60 bcf of coal seam gas produced in 2001 came from CMM wells. Nearly half the 4 bcf of coal seam gas produced in southwestern West Virginia came from CMM wells.
Very little CMM has been recovered in the Rockies due mainly to limited operations experience, infrastructure limitations, and property and mineral rights.
Western mine operators have limited experience draining and recovery CMM, but this is slowly changing, EPA said (www.epa.gov/coalbed).
The gas pipeline network is less widespread in the west, and limited capacity stymies transport even of gas close to pipelines. Western mines are often 5-10 miles from gathering systems, and transmission costs are higher. Electricity generation may be feasible in some cases.
Ownership of the gas is a common and contentious barrier. Acquisition of gas rights has been difficult for eastern and western developers, EPA noted.
"Much of the land in the west is federal property rather than private property and managed by such agencies as the US Forest Service and BLM. This can necessitate additional reviews and authorizations for facilities, equipment, and operations."
Government data show that from 1997 to 2001, at least 10 of the gassiest 75 underground coal mines in the US were in Colorado, Utah, and New Mexico. Based on 2001 ventilation emissions data, four of these mines are among the top 59 gassiest mines and are excellent CMM development candidates.
Candidate mines are in the Uinta, Piceance, Raton, and San Juan basins in Colorado, Utah, and New Mexico.
Contact Alan Petzet at firstname.lastname@example.org