March 2009
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Concern and excitement about the potential of shale gas

By Jim Mimiaga

Concerns about a new type of natural gas discovered in Southwest Colorado attracted a crowd of citizens, public officials and federal land managers to a presentation held at Fort Lewis Mesa Elementary School in La Plata County on March 2.

Shale gas is experiencing a boom in the region, and is being profitably tapped using a revolutionary technique involving horizontal drilling. The recent success extracting the gas by the Bill Barrett Corporation has prompted public-lands managers to increase permits for drilling in the area and adjust planning documents to accommodate the industry and protect landowners.

But landowners, most of whom ranch and farm on so-called split estates – where the surface is private but minerals deep underground are federally owned and leased to private gas companies – are worried about negative impacts.

Gothic tale

The Paradox Basin is the remnants of an ancient ocean some 300 million years old that stretches from southeast Utah into Dolores, Montezuma and La Plata counties. The layer is buried at sea level 6,500 to 8,000 feet below the surface.

Deep geologic time, sediment loading over eons, heat and pressure has transformed the organic muck of this shallow sea into what it called gothic shale, explained Pam Leschak, a geologist with the San Juan Public Lands Center.

“Gothic shale is what we call an unconventional (gas) reservoir in that it contains hydrocarbons that are locked up inside hard, heavy, tight rock,” she explained. “A more conventional reservoir such as coal-bed methane or oil will pool into large pockets between layers of rock.”

Releasing shale gas from the rock is a technical marvel pioneered by Peter Moreland, a geologist who meticulously documented the Gothic shale locations and then devised a unique technique for breaking the gas free from the rock.

The rock, formed from organic-rich deltas along the former ocean’s shorelines, are the richest in natural gas. But reaching the resource has always been unprofitable because the layer is only 200 feet thick, which is problematic for vertical drilling.

“Horizontal drilling that can stretch up to 4,000 feet is what makes it fly,” Leschak said. “Then multi-stage hydraulic fracturing pulverizes the rock around the horizontal bore hole and releases the gas, which then cleanly flows up the pipe.”

The advantages of the new technique are that toxic cement is not required, typically used in vertical drilling operations. Also adding chemicals to the water for the fracturing process is not needed, as it is with more conventional drilling operations, she said. Water must be brought in or sold to the company for use at the well.

Recent wildcat wells drilled by Bill Barrett Corporation yielded impressive amounts of gas in the last two years. Three discovery wells between Dove Creek and Dolores produced 6 million cubic feet of gas per day, and “we’re permitting more wells in the area,” Leschak said.

Spacing of wells for horizontal drilling has less impact than conventional drilling, said John Pecor, a BLM petroleum engineer. “You don’t need as many wells. What you could produce in three to five conventional wells can be accomplished in a single horizontal well.”

Typically, shale gas wells will be spaced on 1,280 acres, divided into two sections with four well pads containing two wells each, mineral officials said.

Split estate

Sub-surface minerals are mostly held by the federal or state government, and are leased to oil companies for energy development, explained Jamie Sellar-Baker, a manager with the San Juan Public Lands Office. The result is a split estate, where the surface owned by one party, the ground underneath by another. Private companies who successfully purchase auctioned-off government leases for minerals have a right to drill, regardless of private property on the surface. Permission to access these properties for well construction cannot be denied by the landowner, but surface-use agreements with the oil and gas company work to minimize impacts and reclaim the area when drilling is completed. Surfaceoccupancy rules require drilling for minerals under residences be done horizontally from an adjacent location.

The process of notification of landowners when leases are sold under their feet needs improvement, Sellar-Baker said. Currently lease sales are published quarterly by BLM and posted on its website for 45 days before the sale. Protests can be filed as well as appeals. But there is not a process where each individual landowner is notified of the sale.

“That is a point of contention. Not everyone watches publications when posted so we are looking for better ways to do that,” she said. “If mineral estates under your property are leased, we make sure the landowner is engaged in the good-faith negotiations for surface-use. It behooves folks to talk to their neighbors so that one useplan does not conflict with another property nearby.”

“What if I don’t want a gravel road through my property?” asked a landowner. “Then be prepared for them coming in on muddy ruts,” responded Baker-Sellar. “Gravel is a better way to protect the land in this case.”

Performance bonds are required by the oil and gas company operating the lease to ensure wells are properly plugged and private land is restored. Minimum bonds are $10,000 per well, but is that enough, asked one landowner and what if they leave without completing the reclamation?

Sellar-Baker stated that “if there is even a hint (the lessee) is going to walk, there is action we can take. If a surface owner detects non-compliance we will investigate so that everything is put back based on conditions of the surface agreement before bond is released.” She advised landowners to be very involved in the compliance process of the gas company.

“You know better than us the agreement of how they are supposed to use that surface,” she said.

Landowners do not receive royalties unless they own part of the mineral estate, which is rare. Compensation for private property use is sometimes negotiated with the oil and gas company. The federal government, however, takes a 12 percent royalty of gas profits extracted, 50 percent of which goes to the state coffers.

Government mineral officials emphasize that oil and gas wells are a temporary use of the land, although the definition of temporary can seem questionable. Leases are for 10 years, but if the well is producing at a certain economic rate the lease is extended. Estimates that some shale gas wells could stay in production up to 50 years did not sit well with landowners.

“A 50-year lease when you’re 50 years old is not temporary,” said one in the crowd.

WSAs exempt

Shale gas is thought to lie below proposed wilderness areas south of Mancos in the Menefee Mountain area. Some mineral parcels up for lease showed up in that area, but will be deferred, effectively keeping them offlimits to oil and gas drilling, explained Tom Rice, a natural-resource specialist with the BLM.

Wilderness study areas are in a protectionist political limbo awaiting official action by Congress to either become wilderness areas, or be taken off the WSA list. Until then they must be protected as default wilderness areas, explained Rice.

“So anything that impacts the natural values there is not allowed. If Congress takes them off the list, then those leases could become more available,” he said. Leases that showed up in designated state wildlife areas and wild and scenic river designations were also removed.

Sellar-Baker added that the public-lands management plan needs adjustment for shale gas because “situations exist that did not 15 years ago. For example, we deferred parcels for mineral lease where the Gunnison sage grouse lives until we can determine how to protect that bird. We want to manage minerals while protecting the attributes on the surface.”

A supplemental land-use plan to address the impacts associated with the recent shale-gas boom is in the works, explained Richard Rymerson, the minerals staff chief for the San Juan Public Lands Center.

Proposals for gas-well development have shot up from 300 to 1,700 in the Paradox formation, prompting the public- lands office to adjust the plan, and give the public opportunity to comment on it, he said. Some requirements in the supplemental draft are for protecting wildlife habitat, such as avoiding compacting snow relied on by the threatened Canada lynx, and timing limitations for elk wintering grounds. A network of new wells, pipelines, traffic and roads also impacts air quality, which will be addressed in the new plan, officials said.

At the end of the three-hour presentation, Jack Schirard, a La Plata County resident who owns land in the crosshairs of the shale-gas boom, shook his head. “What can we do?”

“Do some heavy negotiating,” Leschak advised. “Get together with other landowners so you can negotiate with more leverage. It could be more profitable for you and you would have more control.”

The next public meeting on the shale gas boom will be April 16 at 6 p.m. at Fort Lewis Mesa Elementary School. It is located on Highway 141, south of Hesperus, a few miles past Breen, on the left.


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