Analysis:A newly published, highly detailed United States Department of Energy (DOE) study says the low-sulfur coals of Wyoming/Montana's Powder River Basin probably hold a great deal more trapped methane than previously estimated by others.
But if that methane is to be produced economically over the next few years in order to add to much-needed domestic gas production, operators will need to use the simplest, most direct disposal method for water produced from coalbed methane (CBM) wells. That means discharging it directly into nearby rivers and streams.
And that's the federal government talking, folks. Even the Environmental Protection Agency (EPA) and Bureau of Land Management (BLM) agree.
The DOE's Office of Fossil Energy through its National Energy Technology Laboratory commissioned the report, called the Powder River Basin Coalbed Methane Development and Produced Water Management Study, in April 2002. Advanced Resources International (ARI) of Arlington, VA, a leading CBM consultant, prepared the report, which was released in mid-December.
In the study, ARI researchers conclude that more than 29 trillion cubic feet (tcf)—or nearly 75 percent of its estimated 39 tcf of technically recoverable gas in the basin area—could be produced economically using the surface discharge water disposal method. What's more, operators would need a Powder River Basin price differential range due to transportation costs of about $1.80 to $2.00 per thousand cubic ft (mcf) based on an average Henry Hub market price of $3.00/mcf assumed for the next few years (and somewhat higher-than-current averages).
The study admits that the 39 tcf total is among the highest in a range of resource estimates for the Powder River Basin from other sources, including federal, state, and industry organizations. Due to methodology differences, geologic models, and assumptions, says the study, the other current estimates vary significantly, in some cases by a factor of 5, ranging as low as 8 tcf. For example, the U.S. Geological Survey only recently assessed technically recoverable CBM in the Powder River Basin (PRB) at 14.3 tcf, which is a substantial increase from its previous 1995 estimate of 1.1 tcf. The DOE estimate is much higher, say DOE officials, because it added deep coals prevalent in the PRB, included new data on coals located on the basin's western edge, and brought in Montana's portion of the basin, none of which were included in the other studies. Free gas in certain PRB coal formations also was attached, further swelling the estimate.
To put this all in perspective, the DOE says current proven reserves of all natural gas supplies throughout the lower 48 states—including the Gulf of Mexico—amount to a tad over 180 tcf. Of that total, about 7.5 percent comes from so-called "unconventional" sources, dominated by gas from coal seams. Nearly 4 billion cubic ft./day (bcf/d) of CBM currently is being produced in the U.S., with about 20 percent of it coming from the PRB area.
But look for CBM to increase its percentage of total gas production to 10 percent or more during the next few years. In fact, the DOE expects that as much as 75 percent of domestic CBM growth during the next 10 years will occur in the PRB area. As many as 39,000 new, relatively inexpensive CBM wells could be drilled in the basin during that period, says the DOE, with 23,900 of them on federal lands. That compares to a total of 12,000 CBM wells drilled there so far, with 9,000 wells actually flowing, either on private or public lands. Add to all that the current U.S. gas consumption of about 22 tcf per year, and it's pretty obvious that CBM development in the PRB seems poised for a quantum leap. It's crucial.
Most typical CBM wells yield high initial water production with little to no gas. As the water rate declines and reservoir pressure decreases, the methane is desorbed from the coal and moves through the coal matrix by diffusion, then through the coal cleat system to producing wells. There's a lot more to it, of course, but depending on reservoir and development conditions (and assuming no free gas, which speeds things up somewhat), it may take three months to a year to observe significant rates of gas flow. Expected total gas recovery from PRB-area CBM wells ranges from 1 million cubic ft (mmcf) to 1 bcf; and water recovery varies 20-fold, ranging from 100,000 to 2 million barrels per well.
In the PRB area, direct produced water discharge currently is allowed by state permits since, says the DOE, the water quality is considered generally as good as normal drinking water. And that, of course, is the rub. Not everybody believes that. Enviro groups, for example, dispute the quality question totally, and further cite that drilling into coal seams allows some methane and other gases, as well as harmful constituents of the drilling and completion process, to enter freshwater aquifers, ostensibly causing all kinds of mischief—from exploding toilets to possible genetic risk both to humans and livestock. Also, some ranching and farming interests in that arid part of the country don't like to see any underground water source emptied purposefully into waterways, presumably to disappear downstream, either into aquifers beneath other states or worse, into the Gulf of Mexico or Pacific Ocean.
And, since most of the land in the PRB is in federal government hands, the growing attractiveness of CBM development has created differences between state leasing agencies and the BLM as to equity in terms. Also, private landowners, many of whom already have leased their minerals for CBM development, believe state lease terms should be liberalized to at least match those of federal leases, which are higher both in bonus payments and long-term royalties. What's more, the BLM itself is concerned that unless coal seams beneath federal lands are leased uniformly and soon, particularly in areas where development already is high, taxpayers could be short-changed by CBM production being drained by existing wells already drilled. These are only a few of the issues that must be settled.
Meanwhile, other produced water disposal methods exist for CBM wells. But, as the study points out, each has an increased cost—and a price in terms of total resource recovery.
Building infiltration impoundments with associated evaporation equipment—a practice that exists today in certain Rockies-area CBM plays—is the next most economically attractive water disposal option, the study finds. However, this would result in potential economic recovery of 28 tcf of CBM—a full 1 tcf less than with direct discharge.
Reinjecting the water into shallow freshwater zones—another method that has been attempted, but with only limited success—likely would lead to economic recovery of about 27 tcf of gas. If this were accompanied by treating the produced water with a process called "reverse osmosis," however, the total of economically recoverable gas would be cut to around 18 to 22 tcf.
The report didn't even consider a final method—deep reinjection—since it likely would be significantly more expensive and probably would cause the produced water to become more saline, removing it as a potential future resource altogether.
So, in sort of a nutshell, that's it for the best way to develop Powder River Basin CBM, at least in the DOE's eyes. Luckily, the salinity of produced water in that area is very low. It differs from that in other geographical areas of the country; however, the DOE study is pretty strongly in favor of accelerated CBM development in the PRB. And it has the approval of both the BLM and of the EPA, both of whom the DOE says indicated that the data will be "of great value" in their efforts "to promote responsible, environmentally sound development" of the CBM resource in the PRB.
Assuming that the progress so far can withstand ongoing and future court challenges by environmental groups, farming and ranching interests, and certain Wyoming and Montana state agencies with higher ad valorem taxes in mind, operators developing the Powder River Basin's coalbed methane resources may soon begin to add significantly to the nation's domestic natural gas supply, and other areas with significant CBM reserves might get the attention they deserve.
For a copy of the 213-page study, in .pdf format, go to the DOE's fossil energy office website at: www.fe.doe.gov and click the "read more" link, then follow the story to the report's .pdf file link.
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