COALBEDCOALBED METHANEMETHANE----AA NONNON-- CONVENTIONALCONVENTIONAL ENERGYENERGY SOURCESOURCE WHAT IS IT AND WHY IS IT IMPORTANT

ROBERT A. LAMARRE LAMARRE GEOLOGICAL ENTERPRISES

Fueling The Future 25th Annual North American Conference of the USAEE/IAEE

Sept. 20, 2005 Natural Gas Production, Consumption, and Imports, 1970 - 2025 (trillion cubic feet)

History Projections Net Imports 35

30 Consumption

25 Natural Gas Net Imports, 2001 and 2025 20 (trillion cubic feet) Production

6

15 5 4 2025 10 3 2 2001 1 5 0 Pipeline Liquefied Natural Gas

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

(EIA) Major Growth in Production from Unconventional Resources

Tight Gas 12,000 CBM Approx. 42% growth 10,000 Conventional Gas expected across the

8,000 Rockies

6,000 2005 - 2010 4,000 Gas Production (mmcfd) Production Gas

2,000 CBM offers the greatest potential 0 with 116% volume growth 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

• Tight Gas - 2.3 bcfd in 2004 to 4.1 bcfd in 2010 • CBM - 1.8 bcfd in 2004 to 3.9 bcfd in 2010 • Conventional Gas - 2.5 bcfd in 2004 to 2.3 bcfd in 2010 Wood Mackenzie Woodmac.com Scott Tinker, Director Bureau of Economic Geology August 4, 2003 Why Natural Gas? Efficiency

Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023 NATURAL GAS IS A CLEAN BURNING FUEL

PREFERRED ENERGY SOURCE

COAL-FUELED ELECTRICITY-GENERATING PLANT AND CBM WELL IN UTAH METHANE GAS PRODUCED FROM UNDERGROUND COAL BEDS COALBEDCOALBED METHANEMETHANE ISIS FORMEDFORMED DURINGDURING THETHE CONVERSIONCONVERSION OFOF PEATPEAT TOTO COALCOAL

Coal is formed from peat over time by heat and pressure

Expelled By-Products • Water • Methane Pressure It all starts with • Carbon Dioxide (CO2) Organic Debris or • Peat in a Swamp

Residual Products • Coal Coal • Methane Heat • CO2

TimeTime PEAT SWAMP

ALL Consulting 2/04 PRESERVED TREE TRUNK

COAL GAS CONTENTS OF VARIOUS ROCKY MTN. BASINS

IDEAL RANK

(Scf/t)

Natural Resources Law Center 7/02 CBM HAS BECOME AN IMPORTANT SEGMENT OF US GAS PRODUCTION

Conventional Natural Gas 74%

Tight Gas Sands 14% U.S. CONSUMES 19 TCF OF GAS Coal Bed ANNUALLY Gas Shales Methane 2% 10 % U.S COALBED METHANE PROVED RESERVES, 1989-2003

18.7 TCF ROCKIES BUSINESS UNIT U.S. CONTAINS 703 TCF OF CBM RESOURCES W. WASH 0.7 TCF FOREST CITY/CHEROKEE N. APPAL. ILLINOIS 2.4 TCF 11.5 TCF 1.6 TCF POWDER RIVER CENTRAL APPAL. 25 TCF 3 TCF

WIND RIVER 0.4 TCF

GRN. RIVER PICEANCE 3.9 TCF 7.5 TCF

BLACK WARRIOR RATON 1.8 TCF PRODUCING UINTA 3.2 TCF EMERGING PLAYS SAN JUAN ARKOMA 7.5 TCF 2.6 TCF IDENTIFIED POTENTIAL GRI U.S. CBM RESOURCES

• Greater Green River Basin 314 Tcf • Piceance Basin 99 Tcf • San Juan Basin 50 Tcf • Powder River Basin 30 Tcf • Uinta Basin 10 Tcf • Raton Basin 10 Tcf

TOTAL 513 TCF

Meissner CBM IN U. S. LOWER 48 STATES

• 13 TCF PRODUCED • 18.7 TCF PROVED RESERVES • 42.3 TCF ECONOMICALLY RECOVERABLE • 101.2 TCF UNDISCOVERED • 703 TCF TOTAL RESOURCE ESTIMATE • >14,000 WELLS • 1.6 TCF PRODUCED IN 2003 • >10% OF U.S. NATURAL GAS PRODUCTION

Data as of 12/03 Gas Molecule

ADVANTAGES OF COALS AS RESERVOIRS

5 Large gas storage capacity 5 Shallow depths 5 Relatively low cost 5 Very good economics 5 Most coal basins have been mapped 5 Abundant data from logs of older wells PRODUCTIVE STAGES OF A COALBED METHANE WELL

(2) STABLE (1) PRODUCTION (3) DEWATERING STAGE DECLINE STAGE STAGE VOLUME

TIME TYPICAL PUMPING UNIT ON A CBM WELL Exh. # 9 COMPARISON OF GAS PRODUCTION CURVES

GAS PRODUCTION CURVES FOR CBM & SANDSTONE

Schwochow, Oil & Gas Investor Supplement Coalbed Methane, Dec. 2003, page CBM-11 EXAMPLEEXAMPLE OFOF SUCCESSFULSUCCESSFUL DRUNKARDDRUNKARD’’SS WASHWASH CBMCBM PROJECTPROJECT

1200 200 Water Gas # Wells MEANS MORE $$ 180 1000 NOTE INCREASING 160 GAS RATES 140 PER WELL 800 120 NOTE DECREASING 600 WATER RATES 100

MEANS LOWER # Wells 80

MCFD, BPD OPERATING COSTS 400 60

40 200 20

0 0 0 1020304050607080 PRODUCTION MONTH 6666 MCFD

From Sproule NUMBER OF WELLS AND DAILY PRODUCTION VERSUS TIME IN POWDER RIVER BASIN

365 BCF/YR

No. of Wells vs Time MMcfd vs Time

www.eia.doe.gov/ CBM PRODUCTION IN UTAH

120,000,000MCF

100,000,000 102.2 Bcf

80,000,000

60,000,000

40,000,000

20,000,000

0 1995 1997 1999 2001 2003 04

Thru April THE CRETACEOUS SEAWAY CONTAINS THE CBM PROJECTS IN THE ROCKIES

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RYER, 1988 TYPICAL COAL DEPOSITIONAL ENVIRONMENT FOR CRETACEOUS ROCKS IN THE ROCKIES

Swamp/Lagoon

Coal

Shoreline Sandstones Marine

Horne, RMAG 2003 POTENTIAL FUTURE COAL BEDS AND CBM MAJOR COAL-BEARING BASINS IN THE ROCKIES

Natural Resources Law Center 7/02 www.wsgsweb.uwyo.edu/ O O N N

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R E E V V O O COAL-BEARING AREAS IN THE FOUR CORNERS REGION

FERRON PLAY PICEANCE BASIN

CBM POTENTIAL IN SAN JUAN BASIN BLACK MESA BASIN (No Tests)

USGS PP1625B, 1999 Kirschbaum et al COAL-BEARING CRETACEOUS FORMATIONS 10,000 FEET

Horne, RMAG 2003 COAL

PRODUCTIVE COAL SEAMS IN THE VERY SUCCESSFUL FERRON CBM PLAY OF EAST-CENTRAL UTAH

Ryer, T. SCHEMATIC CROSS SECTION MESAVERDE DEPOSITIONAL SEQUENCE AN IDEAL “GAS MACHINE”

Top Seal

COALS Source & Reservoir

Bottom SANDSTONE Seal Reservoir

Meissner THE FUTURE LOOKS BRIGHT FOR CBM

ANCIENT SWAMPS

COAL

COALBED METHANE

ENERGY SUPPLY AND