Coal-Bed Methane in New Mexico

Goal-bedmethane in NewMexico by NeilH. Whitehead,///, NewMexico Bureau of Mines& MineralResources, Socorro, NM 87801

What is coal-bedmethane? Why is coal-bed methane important to 1989 for all reservoirs in the New Mexico Coal-bed methane or coal-seamgas is New Mexico? part of the San Juan Basin was approxi- natural gas found associated with coal The coal-bedmethane resourcebase for mately 15.3 TCF. In 1988, the first year beds. The gas is a product of the coalifi- the San Juan Basin of New Mexico and production recordsfor the BasinFruitland cation process whereby, through time, Colorado is estimated to be between 65 pool were kept, coal-bed methane pro- peat-like muck is converted to coal by the and 83 trillion ft3 (TCF) for the Fruitland duction from the San Juan Basin of New application of heat and pressure.After the and MenefeeFormations. The Raton Ba- Mexico was 14 billion ff (BCF, : 0.014 energy crisis of t973, geologistsbegan to sin of New Mexico and Colorado is esti- TCH from a vear-end total of 77 wells. look seriously at coal-bed methane, not mated to contain between 8 and 18 TCF Annual production in 1989 inceased to just as an explosive gas to be vented from of gas in the Raton and Vermejo Forma- 55 BCF from 323 wells and in 1990 was coal mines but as an enormous resource tions. The combinedresource base for these 131BCF from 734wells. In December1990, of high-quality, pipeline gas. In the last two basins is between 73 and 101 TCF. Fruitland coal-bed methane production five vears, vast amounts of methane have The percentageof gas produced from a made up aboul 3l% of the monthly gas been developed by drilling hundreds of well is called the recovery factor. This fac- production from the San Juan Basin and wells in coal beds too deep to mine in the tor for coal-bed methane is not well es- 1Zn of the monthly gas production from San fuan Basin and the Raton Basin of tablished becauseof the unconventional New Mexico. By the end of March 1991, New Mexico (Fig. 1). nature of these reservoirs.Assuming a 831 wells were producing from the Basin In conventionalgas reservoirs,gas oc- conservative recovery factor of 50Va,be- Fruitland pool. Production during that curs in interconnectedvoids (pores)in the tween 36.5 and 50.5 TCF of gas will be month made up about 38%of the gasPro- rock. Coal-bedmethane is an unconven- produced from these coal beds over the duction from the SanJuan Basin and22Va tional gas in that the methane is adsorbed next 20 to 40 years. of the total gas (associatedand nonasso- or attached to internal surfaceswithin the To place these amounts in perspective, ciated) production from New Mexico. coal. As the reservoir pressureof the coal natural gas consumption in the United Many additional wells are waiting to be is decreasedby removing water or gas, States in 1989 was 19 TCF. The annual connected to pipelines. Thus, the deliv- more gas desorbs from the coal and is production from New Mexico in 1990was erability of coal-bed methane is expected available to flow to the well bore. 0.95 TCF. Cumulative production through to increase.

107' 105'

Walsenburg

| . lff:) lgnacio COLORADOF o ! 37" - - .---= -NE 370 c"_o3l-a.#-Hin_{ierd -Btancounir ";" '. _ tj-

t;ool Farmington Bloomfield .\

I I SAN JUAN BASIN ,J ) l-_ ;Y ,l- I SANDoVAL I ,o*JUAN 36' 36" MCKINLEY

Crownpoint a

a Gallup Thoreau SANTA FE SAN MIGUEL a ---J1 - l, BERNALTLLo 0 10 20 3omi I craoLn \- t- - l-r# I oGrants 1 \ Albuquerque I 0 10 30 50km

107' 105'

FIGURE l-Index map showing that part of the San Juan Basin underlain by the Fruitland Formation (Dane and Bachman, 1965) and the Raton Basin underlain by the Vermeio Formation (Dane and Bachman, 7965;Tweto,7979).

November 7991. Nrw Mexico Geology Nonconventional fuel tax credit in sandstones. Additionally, strong gas TABLE l-Operators of producing Fruitland coal-bed methane wells as -An important force in the exploitation shows were encountered in areas where of March 31, 1997 of coal-bedmethane in New Mefucois the there were large volumes of water in the (New Mexico Oil Conservation Commission, 197). *, San producing nonconventional fuel tax credit. This tax coal. In conventional gas reservoirs,high Juan properties sold to Conoco,Inc., April 30,7997. credit, enactedby Congressas part of the water production indicates the reservoir Crude Oil Windfall Profit Tax Act of 1980, is watered out or depleted,another rea- rewards producers faced with high initial son for ignoring the coal-bed reservoirs. Company Wells The first costs in developing unconventional en- well specifically for coal-bed Meridian Oil Inc. 365 ergy sources, such as oil from shale and methane in New Mexico was drilled in Nassau Resources,Inc. 62 tar sand and gas from geopressuredbrine 1977by Amoco Production Co. in the Ce- Blackwood & Nichols Co. 62 and Devonian shale. Coal-bedmethane dar Hill field northeast of Aztec. The ma- Amoco Production Co. 6l development projects in the north-central jor push for coal-bed methane Phillips Petroleum Co. ffi part of the Sanfuan Basinhave been com- development wells began in the mid- Union Oil Company of Califomia 48 pared to offshore venfures in terms of in- 1980's.The prime benefactorsof the boom Southland Royalty Co. (Meridian) 38 itially high capital requirements (e.g., are the original and successorcompanies Giant Exploration & Prod. Co. 26 Marathon pumping units, that drilled wells as much as 30 or 40 years Oil Co. t1 water storageand settling McKenzie Methane tanks, ago and establishedproduction 9 separatorsand other surfaceequip- irom Hallwood Petroleum Inc. 8 ment, gathering lines for both gas and deeper horizons beneath the Fruitland Mesa Operating Limited produced brine, and deep brine-disposal coals. The two largest players by acreage Partnership NW* 7 wells) and long lead times involving plan- are Amoco Production Co., an original Arco Oil & Gas Co. 6 ning, design, and regulatory agenty ap- company/ and Meridian Oil Inc. (a wholly Robert L. Bayless 6 proval. owned subsidiary of Burlington Re- Richmond Petroleum Inc. 6 The nonconventional fuel tax credit had sources), which purchased El Paso Nat- TexacoInc. 6 been scheduledto expire ural Gas in 1983 and Southland Rovaltv Dugan Production Corp. 5 January1,1990, Merrion but was extended in 1985.Amoco's Oil and Gas Corp. 5 to January L, 1991,and position was strength- D. Simmonset al. ened in late J. 5 f9!9ntly was extended again to fanuary 1, 1988when it acquiredfor 9900 BHP Petroleum 4 million 1993.The tax credit for 1990was 90.855/ the Rocky Mountain properties JoeI B. Burr, Jr. 4 MMBTU (million British Thermal Units, (90Voof which are in the San fuan Basin) Northwest Pipeline Corp. approximately1 MCF (thousandft3 of gas)) of Tenneco Exploration and Production. Union TexasPeholeum Corp. 4 as determined by the inflation adjustment In mid-1990 Meridian acquired for 9399 Falcon SeaboardGas Co. factor_andreference price for calendaryear million all the producing leasesof Unicon Maralex Resources,Inc. J 1990(Intemal RevenueService, 1991). The Producing Co. (Union TexasPetroleum), Morgan-RichardsonOperating Co. 2 tax credit will apply to gas produced most of which are in the San Basin. Simmons Engr. & Consulting Co. 2 until |uan Orville l, 20f'3 Table1 listscompanies S. Slaughter,Jr. 2 January from wells drilled before and Fruitlandcoal- Basin Minerals, Inc. |anuary 1,, 7993.The credit is subhacted bed methanewells in operationas of March Conoco, Inc. from the tax liability and must be taken 31, 1991. Other companieswith coal-bed Great Western Drilling Co. in the year of production. The average methane drilling activity in New Mexico Curtis J. Little New Mexico well-head price in 1990wis include: BasinFuel Ltd., BonnevilleFuels, Manana Gas Inc. $1.7344CFof gas (NewMexico Taxation Caulkins Oil Co., Columbus Energy,Fair- |erome P. McHugh and RevenueDepartment, 1991),so al- play Oil & GasCo., Incline Reserves,Koch Total 830 lowing for the costsof lifting gas from the Exploration, Mitchell Energy Corp., Par- well, producers will net by-the tax credit ker & Parsley Petroleum Co., and Quin- a significant part of thefuincome from coal- oco Petroleum Inc. in BCF/mi'z(after Ayers and Ambrose, 1990, bed methane properties. fig. 27) shows the highest values in the Gas in the Fruitland Formation northem part of the basin, reflecting the Fruitland gas: a thirty-year-old Volumetric determination of gas in place presenceof thick coal beds, high thermal discovery is rediscovered in the Fruitland Formation involves mak- maturity, and high reservoir pressures The Fruitland Formation gasplay is un- ing a map of coal thicknessfrom well logs, (which allow more gas to be adsorbedper usual in that this immensereservoir was determining drillable acres,obtaining coal unit of coal). The northwest-southeast "found" about thirty yearsbefore the plav density (tons/acre-foot)values frorn well elongation of gas-in-placecontours (Fig. was "discovered."fhe first thorough, f3'- logs, and measuringthe gas content (ft3l 2) reflects the trend of thick coals that sin-wide subsurface study of thtFruit- ton of coal)from desorptionof coal sam- tended to form shoreward (southwest) of land Formation published n1-9Zt contains ples.These values are multiplied to arrive the northwest-southeast-trending shore- theseprophetif passages: at a gas-in-place(ft3) value. The parameter line sands of the Pictured Cliffs Forma- tion, which underlies the Fruitland Gasshows in theKirtland most difficult to determine accurately is andFruitland Formation and intertongues to the north- are ignoredduring mostdrilling gas content (fPlton). The best procedure in the eastwith the Fruitland (Fassett SanJuan Basin. In partsof thd basin. is to-placewell core,as soonas itis brought and Hinds, however,it has becomecustomarv foi to the surface, in a desorption canister r97r\. drilling,companiesto take pr""ur'r[io.r, and measure the methane gas given off. a-gainstblowouts before penetrating the An estimateof the gasthat escapedwhile Overpressured and underpressured Kirtlandand Fruitland, since at Ieaslfive the core was being drilled is added, and reservoirs in the Fruitland drilling rigs have beenlost by firesow- gas content (fflton) is then calculated. Ayers et al. (1991) demonstrated ing to gas blowoutsfrom these that strati- Choate et al. (1984)calculated a gas-in- the Fruitland Formation graphicunits. (Fassett and Hinds, 1971, in the San |uan place value of 31 TCF P.a) for the San Juan Basin (Fig. 2) is divided into two distinct Basin;Kelso et al. (1988)estimated 50 TCF. domains exhibiting different reservoir and Bgginning in the early L950's, thou- Ayers and Ambrose (1990),using the gas production characteristics.The northem sands of wells were drilled through Fruit- content and coal density of Kelso et al. part is overpressured, the rest is mostly land coalsto deeper gas and oil re-servoirs (1988),with mean coal-ashcontents of 30% underpressured. Overpressured (or un- in the San Juan-Basin.However, geolo- and,20Vo,calculated gas resourcesof 43 derpressured)means that the pressure in gists and petroleum engineersdid not ex- TCF and 49 TCF. the reservoir is greater than (or less than) plore for gas in coal, ga1 was to be found The gas-in-placemap Gig. 2) contoured

New Merico Geology November 1991 1080w I 07ow gas-strippingplants to meet pipeline gas I I specifications. Montezuma The underpressuredarea of the Fruit- land reservoirhas receivedless attention in the rush to completehigh-volume wells before the tax credit drilling deadline. The J underpressuredareas are characterLedby little or no produced water, low reservoir pressures,and thinner coals. The pro- co( duction from thesewells is generally low, Jd) 370N \M/ '----=-^l although the initial production values San Juan V overlap those in the lower range of the overpressured Fruitland reservoirs (Kai- ser,Ayers, Ambrose, Laubach, Scott, and Tremiin, 1991).The CO, gas content is generally <1% while ethane and other natural gasliquids generallyresemble those found in the underlying Pictured Cliffs Sandstone (Scott et al., l99l). The production mechanismseems to be one of producing gas from gas-saturatedfrac- tures in the coal, which then lowers the reservoirpressure and allowsmore methane to desorbfrom the coal matrix. Underpressuredreservoirs tend to have Fruitla nd- low reservoirpressures that requireinitial PicturedCliffs compressionto overcomegathering-line co nIact pressures.Favorably, underPressured reservoirs generally have small amounts Sa ndovaI of produced water and shallow drilling rvrxi;Cy depths to approximately 1,000 ft; pro- gradient I low in and thus is gen- \ oressrre ) 44 \psi/lti duced gas is CO, with existing gas- zs BCF/mi2 [I # tion from deeperhorizons is depleted.In 10 O 20 3Okm addition, many areasmay offer shallow drilling targetsin acreagenot held by pro- I l duction. I 080w 1070w (conventional) FIGURE 2-Gas-in-place map for the Fruitland Formation coal beds, calculated on the basis of Hvdraulic-f racture 20Vo mean ash content in coal (modified from Ayers and Ambrose, 1990, fig. 27), and the extent vs. open-holecavity (unconventional) of overpressuring in the Fruitland Formation (modified from Kaiser, Swartz, and Hawkins, 1991, well completions fig. 6). In the overpressured Fruitland reservoir area, two different completion methods are used. The conventionalmethod the pressure exerted by a column of fresh gas reservoirsin which high initial-pro- involves drilling through the Fruitland water the height of the drilling depth to duction ratesdecline over time. Coal-bed coals,setting and cementingcasing, per- the reservoir. methane wells where the coal beds are forating the casing, and then hydrauli- Overpressured reservoir conditions in initially 100%water saturatedrequire the cally fracturing the well. The hydraulic- the Fruitland Formation result from an reservoir pressure to be lowered by fracturing process createsvertical frac- artesian system (Kaiser, Swartz, and pumping out water, allowing the gas to tures extending from the well bore into Hawkins, 191). Watea recharged by rain desorb.The production pattem then shows the coals,overcoming loss in permeability or snowmelt at a high elevation along the a declinein water productionrate with an from formation damage caused by plug- Fruitland outcrop southwest and east of increase(or negative decline)in the gas ging by drilling mud and casingcement. Durango, Colorado, moves basinward production rate. At some point, the in- The open-holecavity method was pio- within the Fruitland coal seams. The sub- creasein production begins to level off neeredby Meridian in 1985(Logan et al., surface limit of overpressuring coincides and then declineas in a conventionalwell. 1989)during developmentof their 30-6 closely with the pinch-out or truncation Gascomposition (Scott et al., 1991)in the SanJuan Unit (Fig. 1). The procedurein- of the thick coal seams. Production of both overpressuredarea is commonly >3% CO, volves: setting seven-inchcasing at the gas and water is generally high in wells and is very dry (low in ethaneand heavier top of the Fruitland coal zone; drilling the drilled in this area. High gas-in-place val- hydrocarbons). Fruitland underbalanced (the weight or ues per section (Fig. 2) have led to exten- In overpressuredreservoirs, the large hydrostaticpressure of the drilling mud sive development drilling in this part of volume of produced brine usually re- is slightly below the reservoir pressure) the San fuan Basin in New Mexico. quires a pipeline gathering systemto be to prevent the drilling mud from plugging Wells in the overpressured area may tied to a central,deep-disposal well. The fractures in the coal; and then unloading show the highly publicized negative-de- high CO, content (>3V") of the coal-bed the well bore by pumping in air or foam cline production curve in contrast to de- methane also requires a separategas- to decrease well-bore pressure with re- cline production curves from conventional gatheringsystem and constructionof CO, spectto reservoirpressure, thus inducing

November 7991 Nao Mexico Geology a large amount of caving and sloughing is still subject to vigorous debate, mainly vented about 7.7 BCF of CO' (Meridian of the coal into the well bore, forming a because it is so early in the production Oil Gathering Co., 1990).These figures cavity. These caved fragments are en- history of this giant, unconventional res- indicate the coal-bedmethane supplied to trained in the foam and carried up out of ervoir. As a compromise, the 320-acre this plant containsapproximately 70Vo CO2. the well bore. As the cavity is created, spacing was maintained but, in a hearing Operators of the Val Verde plant and the stress relief occurs in the coal as the coal before the Oil Conservation Division ex- Milagro plant may convert a waste prod- fails and moves towards the well bore. aminer, individual operators may apply uct (CO) to a marketable commodity by The stress-reliefeffect, which allows cleats to drill a secondwell on the 320-acrespac- installing a compressorand a pipeline to and other natural fractures to open wider, ing unit. Thus, the effect of this rule will connect to the Cortez line onlv 8 mi away. can extend as much as 300 ft around the make the Basin-Fruitland pool unique in The Cortezpipeline, operated by ShellOil well bore (Logan et al., 1989).Wells are New Mexico by having different spacings Co., transports CO, from southwestern completedby running an uncementedliner in the samepool. Colorado to west Texasfor CO, flooding with predrilled perforations. Initial pro- of oil fields. Carbondioxide producedfrom duction rates greater than 20 MMCFGPD Gas gathering and gas-treatmentplants the Bravo dome areain northeasternNew (million ft3 of gas per day) have been Pipelines for gathering gas and brine Mexico was valuedat an averageof $0.31/ achievedby the open-hole cavity method. produced from coal-bed methane wells MCF in 1990(New Mexico Taxation and In the Northeast BlancoUnit (Fig. 1) op- have been built or are under construction RevenueDepartment, 1991).At this value, erated by Devon Energy,eight wells were along approximately 700 mi of right-of- the CO, vented at the Val Verde plant was completed conventionally with flow rates worth at least$2.387 million. way (ROW) in the San Juan Basin of New of 0.145to 1 MMCFGPD. Nearby redrill- Mexico. The first ROW for thesegathering Produced-brine disposal ing of the sameeight wells using the open- lines was granted by the Bureau of Land hole cavity method achieved initial flow Management(BLM) on November 1, 1988. Coal-bed methane production in the (Petzet, rates of 5.0 to 22.9 MMCFGPD Over much of this distance, gas and pro- overpressuredarea (Fig. 2) commonly in- 1eeo). duced-brine pipelines are buried in the volves large amounts of produced water. same ditch; thus, the actual mileage of In 1989,4.5 million barrels of water (BW) Regulationof coal-bed pipe laid is considerably more than 700 were produced from 323 Basin-Fruitland methane production mi. Pipeline sizes range from 2" O.D. wells. In 1990,14.9 million BW were pro- The agency with the primary respon- (outsidediameter) to22" O.D. Major proj- duced from 734Basin-Fruitland wells. The sibility for regulating gas and oil produc- ects have been completed or are nearing cost is significant to the producer to dis- tion in New Mexicois the Oil Conservation completion by Meridian, Blackwood & pose of this water by tank truck or pipe- Division, Energy, Minerals and Natural Nichols, Amoco, and Williams Field Ser- line conveyance to an evaporation pit or ResourcesDepartment. Important goals vices. Approximately 275 mi of ROW for brine-disposal well. Over time the cost of of this agency include the prevention of gathering lines are being permitted or are disposal by pipeline is much lower than surfaceor subsurfacewaste of gas and oil awaiting construction in the near future by trucking. Some operators have gam- and the protection of correlative rights of by Meridian, Amoco, and Phillips Petro- bled that they can haul water for a year all owners within a contiguous reservoir leum (Bureauof Land Management,1990). or two until the coal beds are dewatered, or common sourceof supply. Beginning with the permitting of the and thus avoid laying a pipeline. In October 1988 the Oil Conservation Fruitland coal gas-gatheringpipelines, the Abotrt 90Voof the produced water is Division (1988a)created the Basin-Fruit- BLM changed its philosophy on pipeline injected into brine-disposalwells. Twelve land coal-gaspool consistingof all the coal construction methods to lessen the im- wells in the New Mexico part of the San seamswithin the Fruitland Formation.The pact of pipelines on the environment (Bu- fuan Basinare exclusively or partiallyused horizontal (plan view) extent of the pool reau of Land Management,1990). Cross- to dispose of produced water from coal- encompassesall of the subsurfaceextent country constructionis not to be the norm, bed methane wells. Wells drilled specifi- of the Fruitland Formation. Well spacing at least 90 of every 100miles of pipeline cally to disposeof coal-bedmethane brines was set at 320acres (2 wells/mi'?).The ex- are to be laid adjacentto existingroads or are 9,000 to 10,000feet deep and usually isting Cedar Hill-Fruitland Basin coal-gas pipelines. Blasting of rim rock is to be have perforationsacross the Entrada,Bluff, pool, establishedin 1984,was allowed to done sparingly, and rock saw and hy- and Morrison Formations. stand. In a separateorder (Oil Conser- draulic wheel ditchers are to be used to SouthwestWater DisposalInc., Farm- vation Division, 1988b),20 pools produc- minimize surfacedisturbance. ington, and Basin Disposal,Inc., Bloom- ing primarily from Fruitland sandstones Coal-bed methane gas is conveyed field, operate commercialevaporation and seven pools producing from the through the gathering system by com- ponds. By using aerationon a hot sum- Fruitland-Pictured CIiffs interval were pressorbooster stations through succes- mer day, thousandsof barrelsof water can contractedwithin the Fruitland portion to sivelylarger diameter pipelines to two main be evaporated. However, in the wintet include only the sandstones within the treatment plants where the gasis stripped subfreezing temperatures can cause op- Fruitland Formation. of CO, in an aminetreatment process. The erationalproblems. The order (Oil Conservation Division, Val Verde plant, operated by Meridian at 1988a)noted that severaloperators rec- Bloomfield, went on stream in 1988and Moving gas out of the San ]uan Basin: ommendeda l.6G-acrewell spacing(4 wells/ has an inlet capacity of 420 MMCFGPD. laterals and loops mi2) over part of the Basin-Fruitland coal- The Milagro treatment plant, also at Three pipeline systemsserve as outlets gas pool. The Oil Conservation Division Bloomfield, is operated by Williams Field for gas in the New Mexico part of the San establishedthe 320-acrespacing, but it ac- Services (a subsidiarv of The Williams fuan Basin. El PasoNatural Gas Co. (a knowledged a lack of detailed reservoir Companies).This plani was placedon line fully owned subsidiary of Burlington Re- information on this unconventional gas in March 1991.A second unit was added sources)primarily servesmarkets in Ari- pool. in May 1991increasing the capacityto 360 zona, Nevada,and California;Northwest After a two-year promulgation of the MMCFGPD. A third unit will be added Pipeline Corp. delivers gas primarily to order, the final rules for the Basin-Fruit- (AlbuquerqueJournal, 1991)to bring the Oregon and Washington;and SunterraGas Iand pool were issued in fuly 1991 (Oil daily processcapability of the plant to 500 Gathering Co. (an affiliate of Gas Com- Conservation Division, 1991). However, MMCFGPD. pany of New Mexico) servesthe intrastate determination of the minimum number of The Val Verde plant took in about 74 market in New Mexico. wells required to drain a certain number BCF of gas from February 1990 through In February 1990El Pasoput in service of acres in the Basin-Fruitland reservoir December1990 and in processingthis gas,

Nm Mexico Geology November 1991 L4 mi of 30-inch gas pipeline to complete 3) Gas Company of New Mexico is adding reservoir, which consists of, in descend- a Iine from Ignacio, Colorado,to its Blanco approximately 2,000 compressor horse- ing order: Cliff House, Menefee,and Point plant at Bloomfield,New Mexico.In April power to allow the delivery of as much Lookout Formations. Dugan and Wil- 1991El Pasocompleted a 922million pioj- as 40 MMCFGPD through-its San fuan liams (L988)noted that between 1948and ectwith two pipelineloops (new pipe laid gathering system via the Rio Puerco in- 1955, most wells in this reservoir were adjacentto and tied to the existing line) terconnection southwest of Albuquerque completed open hole by shooting with so- along their Bloomfield-to-Gallup literal. to either the Transwesternor El Pasomain lidified nitroglycerine throughout the en- These loops allow a 155-MMCFGPDin- line. The gathering system of the Gas tire shatigraphic interval. creasein the takeaway capacity from the Company of New"trrt6xico is underutil- Maximum drilling depths to the baseof juan San Basin (Gas Marketing Bureau, ized, especially in the summer, and this the Menefee Formation are about 6,000ft, 1990a).In February 1990Northwest Pipe- expansion, scheduled for completion in compared to about 4,000 ft for the Fruit- line Corp. completed a 33-mileJong, 30- August 1991,will move additional gasout land Formation. Other aspectsof the Me- inch pipeline from its Ignacio plant in of the San |uan Basin (Gas Complny of nefee that contrast to the Fruitland Colorado to connect with El Pasb at the New Mexico, 1990). Formation are an increasein target-inter- Blancohub near Bloomfield, New Mexico. -When thesepipeline expansionsare in val thickness,a decreasein indMdual seam This million expansion 928 will deliver 300 place, ,producers will have greatly in- thickness,and a decreasein reservoir con- MMCFGPD to El Paso'sSanJuanTriangle 9re1s9dflexibility to ship gas to markets tinuity (Crist et al., 1990). pipeline system (Gas Marketing Bureiu, in California, thb Midcont'inent, and the leeob). PacificNorthwest. PermianBasin and San Raton Basin: Pennzoil's bonanza? At present, producers are curtailed by fuan Basingas traditionally have been im- The New Mexico part of the Raton Ba- the lack of pipeline capacityresulting from portant gas sourcesfor Califomia. How- sin (Fig. 1) lies mostly in Colfax County. a surge in gas deliverability. New pipeline ever, in the next several years major Pennzoil Co. is the dominant player in construction and increasedcompressor pipgling projects will be completed that this county becauseit owns the mineral horsepowerin existinglines will result in will link western Wyoming gis and Ca- rights on 780,000acres and surfacerights greatly increasedcapacity, which may in- nadiangas to the Californiamarket. While on 547,000 acres. Much of this acreage creasecompetition, allowing higher well- the Sanluan Basinwill continue to supply was acquired early in L989through pur- head prices to the producer. California, long-term declines in deliv'ei- chaseof certain assetsof Kaiser Coal Co. The following projects are underway or ability of 5.4Volyrfor the Permian Basin Relatively little is known publicly about are in the regulatoryapproval process: and 5.3%lyr for onshoreGulf Coast(Spie- the coal-bedmethane resourcesof the Ra- 1) El Paso received final approval for its gel et al., 1990)suggest that the SanJiran ton Basin.furich and Adams (1984)esti- $241.5million SanJuan Basinand main- Basin will become-animportant supplier mated 8 to 18.4 TCF of gas in place for line expansion project from the Federal to points east. the entire basin. In New Mexico, drilling Energy Regulatory Commission (FERC) depths for coal beds in the Raton and Ver- in July 1991.This projectadds 12,000com- Menefee coal: a giant unknown mejo Formations range from approxi- pressor horsepower and 54 mi of loop gas reservoir? mately 1,000to 2,400ft. pipeline to the San |uan Basin lateral that In the SanJuan Basin, the MenefeeFor- From 1989through early l99L Pennzoil ties to the El Paso main line at Gallup. mation contains the second largest coal drilled approximately 30 wells, of which This combinationwill add 835MMCFGP-D reserves after the 245 billion tons (Ayers 22 werc completed and produced. These takeaway capacity for El Paso from the and Ambrose, 1990)in the Fruitland For- wells were cased, perforated, and hy- SanJuan Basin. Other parts of the system mation. Much less is known about Me- draulically fractured. Initial production expansion not only will add 40d- nefee coals than Fruitland coals. Shomaker ranged from 1 to 390MCFGPD with 20 to MMCFGPD capacity to the main line to and Holt (1973)estimated 12.3 billion tons 580 BWPD (barrels of water per day). move gas to California but also will install of Menefee coal deeper than 500 ft in the Through December1990, cumulative pro- bidirectional flow capability to allow east- Ute Mountain Ute and SouthernUte tribal duction from these wells was approxi- erly gas flow as much as 429 MMCFGPD areas of Colorado and New Meico. In mately 253 MMCF and 596,000BW. As from the San Juan Basin to west Texas. New Mexico, 10.5billion tons of Menefee there are no pipelines in this area, the gas This will permit San |uan Basin gas to be coal between 500 and 4,000 ft deep were is flared or used on location to power lease marketed for the first time in thi cenhal reported by Shomakerand Whyte (1977). equipment. Produced water is placed in and easternUnited States.El Pasoplans Crist et al. (1990)estimated the Menefee evaporation pits at the well sites. As of to havethis expansioncompleted byApril coal resourcesat 138billion tons for New April 1991the Oil Conservation Division L, L992(El PasoNatural Gas Co., tgSO; Mexico and Colorado; no explanation is reported 18 wells inactive and four pro- Gas Marketing Bureau, L991;PennWell given why their estimate is at least five ducing. Initially, the company had stud- Publishing Co., 1991). times the combined tonnage values of ied "the economic feasibility of developing 2) TranswesternPipeline Co. (a subsidiary Shomaker and Holt (1973)and Shomaker approximately 22,W acresbelieved geo- of Enron Co.p-) received pteiiminuty ap- and Whyte (1977). Crist and others cal- logically favorable for methane gas pro- proval from FERC in December f990 to culatedthe coal-bedmethane resource base duction" (Pennzoil, 190). Then, in fuly construct a San |uan lateral pipeline from to be between 22 and 34 TCF. The lower 1991 Pennzoil announced plans to plug Bloomfield to Transwestern'smain line at value (22 TCF) was calculatedby exhap- all their wells in the Raton Basin. Long- Thoreau, New Mexico. A compressorsta- olation from five desorption samples range plans still include drilling 140to 340 tion will be built at Bloomfield, and 100 available from Menefeecoals, and the up- additional wells and reentering the pre- mi of 30-inch pipeline will be taid. This per value (34TCF) was calculatedby treat- viously drilled wells (Petroleum Infor- lateral pipeline has a capacityrated at 520 ing the Menefee coalsas equivalent in gas mation, 1991).Low gas prices certainly MMCFGPD. Final regulatory approval was content to similar rank (thermal maturity) had a major impact on the decision by granted in July 199L, and Transwestern coals from the Fruitland Formation. Pennzoil not to proceed with develop- expects to have the line in serviceby the No wells in the Menefee Formation in ment at this time. Spot gasprices dropped 199L-92heating season. The projectis es- New Mexico have been specifically com- below $1.00/lvICFin many areas of the timated to cost $93 million. Additionally, pleted as coal-bed methane wells. How- United Statesin luly 1991. Transwesternwill expand the capacity6f ever,considerable volumes of gasmay have Along the western edge of the Raton its main-line system to California by 340 been produced already from Menefeecoal Basin in the Valle Vidal area, Pennzoil in MMCFGPD (Enron Corporation, i990, as part of the vertical shatigraphic inter- 1977gave 100,000acres to the U.S. Forest 1991). val contained in the Blanco Mesaverde Service (before the value of coal-bed

New Mexico Geology Ayers, W. B., Jr., Kaiser, W. R., Laubach, S. E., Am- brose, W. A., Baumgardner, R. W., Jr., Scott, A. R., mean New Mexicooil orice Tyler, R., Hawkins, G. J., Swartz, T. E., Schultz- $30,/Bbl Ela, D. D., Zellers, S. D., Tremain, C. M., and s3/MCF Whitehead, N. H., III, 1991, Geologic and hydrologic conhols on the occunence and producibility of coalbed methane, Fruitland Formation, San Juan Basin (topical report, August 1987-July 1990): Gas Research Institute, Rept. GRI-91/0072, 314 pp; Na- $20,/Bbl tional Technical Information Semce, Reot. PB97 2M s2/MCF 425. mean New Mexico gas price Bureau of Land Management, 190, Fruitland coal- gas update, third edition (December, 1990): Bureau of L,and Management, Farmington Resource Area, 72 pP Choate, R., Lent, j., and Rightmire, C. T., 1984,Upper Cretaceous geology, coal, and the potential for methane recovery ftom coalbeds in San Juan Ba- s5oo.ooo.ooo sin-Colorado and New Mexico; in Rightmire, C. T., Eddy, G. E., and Kin, J. N. (eds.), Coalbed methane resources of the United States: American As- sooation of Peholeum Geologists, Studies in Geology No. 17, pp. 1.85-222. ] Crist, T. E., Kelso, B. S., and Boyer, C. M., 1990, A s400,000,o001 geologic assessment of natural gas from coal seams gross receiptsfrom retail trade in the Menefee Fomation, San Juan Basin (topical report and final geologic report): Gas Research In- stitute, Rept. GRI-88/0303, 68 pp.; National Tech- all wells completedin San Juan & RioArriba Counties nical Information Seruice, Rept. PB91 1,14518/GAR. Dane, C. H., and Bachnan, G. O., 1965, Geologic map of New Mexico: U.S. Geological Suruey, scale -:::,::] Fruitlandcoal bed methanecompterions 1:500,Offi. I Dugan, T. A., and Williams, B. L., 1988, History of l- gas produced from coal seams in the San Juan Basin; in Fassett, J. E. (ed.), Geology and coal-bed meth- rF ane resources of the northem San fuan Basin, Colo- rado and New Mexico: Rocky Mountain Association lllllL=hhll of Ceologists, pp. 1-9. El Paso Natural Gas Company, 1990, El Paso Natural files expansion plans which would help reduce oil imports: Press release, September 17, 190, El Paso, 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Texas. Enron Corporation, 1990, Transwestern Pipeline Company to build San lateral and expand main FIGURE Juan 3-The economic benefits of coal-bed methane development. Sources of data: mean oil line system by 340 million cubic feet per day: Press and gas prices in (New New Mexico Mexico Taxation and Revenue Department, Oil and gas release, July 79,7990, Houston, Texas. accounting rePort-summaries for years 1980-1990: unpublished reports); gross receipts from Enron Corporation, 1991, Transwestern Pipeline retail trade, San Juan County (New Mexico Progress Economic Review, 7980-7990, Sunwest Fi- Company receives FERC approval & breaks ground nancial Services Inc., Albuquerque, New Mexico); all wells completed in San Juan and Rio Arriba on pipeline expansion & San ]uan lateral; Press release, August 2, 1991, Houston, Texas. Counties. and Fruitland coal-bed wells completed in San Juan, Rio Arriba, and Sandoval Counties (Oil Conservation Division, Santa Fe, New Mexico). Fassett, J. E., and Hinds, I. S., 1971,Geology and fuel resources of the Fruitland Formation: U.S. Geoloe- ical Suruey, Professional Paper 676,76 pp. Gas Company of New Mexico, 190, San fuan pro- methane was realized). In 1989 Pennzoil area would have remained at a much lower ducers to gain firm service and market access: Press obtained coal and coal-bed methane rights level of economic activity. The unique de- release, August n, 199o, Albuquerque, NM. on these acres through the purchase of sorption process in coal-bed methane wells Gas Marketing Bureau, 1990a, FERC approves draft Kaiser Coal Co. and now wants to drill make them very long lived, thus these order for El Paso/San Juan Expansion: New Mexico for Energy, Minerals and Natural Resources Depart- coal-bed methane. Attorneys for the wells will continue to produce and benefit ment, Oil Conseruation Division, Gas Marketing U.S. Department of the Interior have re- New Mexicans for another 20 to 40 years. Newsletter, v. 4, no. 10, p. 5. Ieased an opinion (The Taos Naus, 7990) AcxNowrnocvrrurs-I thank William F. Gas Marketing Bureau, 1990b, Northwest mainline stating that rights to the methane are not Hoppe of R. L. Bayless; Charles E. Har- expansion to add San Juan service by January 1: included in New Mexico Energy, Minerals and Natural Re- the rights to the coal. This raden, Giant Exploration and Production murces Department, Oil Conreruation Dvision, Gas opinion is now being reviewed by Penn- Co.; and Frank E. Kottlowski and Ronald Marketing Newsletter, v. 4, no. 72, pp. 8-9. zoil. F. Broadhead, New Mexico Bureau of Gas Marketing Bureau, 1991, El Paso back on track: Mines and Mineral Resources, for review- New Mexico Energy, Minerals and Natural Re- sources Department, Oil Conservation Dvision, Gas Economic benefits of coal-bed ing and making helpful suggestions to im- Marketing Newsletter, v. 5, no. 5, pp. 2-3. methane development prove this paper. Word processing was lnternal Revenue Service, 1991, Nonconventional The exploration, discovery, drilling, done by Lynne McNeil and figures were source fuel credit, publication of inflation adiust- drafted by Kathy Campbell and ment factor and reference price for calendar year production, and pipelining of coal-bed fan 1990: Federal Register, v. 56, no. 62, p.73,357. Thomas. methane from Fruitland coal has created |urich, D., and Adams, M. A., 1984, Geologic over- much wealth for the people, companies, view, coal, and coal-bed methane resources of Ra- and government in northwestern New ton Mesa region-Colorado and New Mexico; in References Rightmire, C. T., Eddy, C. E., and Kin, f . N. (eds.), Mexico. New Mexico oil prices peaked in Coalbed methane resources of the United States: 1981 (Fig. 3) and gas prices peaked in 1983. Albuquerquelourml, 1991,,Third unit plannedat gas American Association of Petroleum Geologists, San juan County began an economic de- plant,May 22,7991.. Studies in Geology No. 17, pp. 153-184. Ayers,W. 8., Jr., andAmbrose, W A., 190, Geologic Kaiser, W. R., Ayers, W. B., Ambrose, W. A., Lau- cline, as expressed by gross revenues from fr., controls of the occunence of coalbed methane, bach, S. E., Scott, A. R., and Tremain, C. M., 1991,, retail sales, that only improved in 1988 Fruitland Formation, San Juan Basin; ln Ayers, W. Geologic and hydrologic chdacterization of coalbed because of coal-bed methane activity. B. et al., Geologic evaluation of aitical production methane production, San Juan Basin; ln Ayers, W 8., Without these wells, in the face of con- parameters for coalbed methane resources, Part 1: Jr. et al., Geologic and hydrologic controls on the San Basin: Gas Research Institute, Rept. GRI- tinued low oil and gas prices, it is likely Juan mcunence and producibility of coalbed methane, W001.4.7, pp. 9-72; National Technical Information Fruitland Formation, SanJuan Basin (topical report, that Farmington and the San Juan Basin Seruice, Rept. PB9() 183 2291GAR.

New Mexico Ceology November 1991 August 1987-July 1990):Gas Research Inshtute, Rept. GRI-91/0072, pp 273-301: National Technical in- fomation S€ruice, Rept PBgl 206 425 Summaryof NewMexico state taxes on Kaiser,W R,Swartz,T E,andHawkins, G J, lDl, natural production Hydrology of the Fruitland Formation, San Juan resource as0f July 1, 1991 Basin; in Ayers, W. 8., Jr. et al., Geologic and hy- compiledby James M. Barker,New Mexico Bureau ol Minesand Mineral Resources drologic controls on the occunence and produii- bility of coalbed methane, Fruitland Formatlon, San (topical Juan Basin report, August 1987-July 1990): Commoditv Tax Rate and base Gas Research Institute, Rept. GRI-91/0072,pp. 195- 241; National Technical lnfomation Service, Reot. Potash Resource 0.507oof taxable value PB91 206 425. Processor; Service* 0 725% of taxable value Kelso,B S, Wicks,D E, andKuuskraa,VA, 1999, Severance 2.5% of taxable value A geologic assessment of nahrral gas from coal seams in the Fruitland Formation, Sanluan Basin (topical report, September I 986-September I 982): ICF-t-ewin Molybdenum Resource 0.3337oof taxable value Energy, Cas Research Institute, Rept. GRI-87/0341; Processor; Service* 0.757oof taxable value National Technical lnformation Seruice, pBgg Rept. Severance taxable 232 632, 56 pp. 0.l25%oof value Logan, T L, Clark, W F, and McBane, R A, 19g9, Comparing different coalbed methane completion Other taxable resoutces Resource; Processor; 0.757oof taxable value techniques, hydraulic fracture and open hole'cavity, (except potash and Service* at the Northeast Blanco pro- Unit, San Juan Basin: molybdenum) ceedings of the 1989 Coalbed Methane Symposium, The - Univenity of Alabama/Turalan, pp.26S_272. Meridim Oil Gathering Co., 1990, Gas irinsporters, Copper Severance 0.507oof taxable value monthly report, Oi.l Conservation Division form C- Service; Processor* 0.75Vaof taxable value 111 (February 1990-December 1990): New Mexico Ad valorem Depend on local county and Energy, Minerals and Natural Resources Depart- school ment, Oil Conservation Division, Aztec Dishiit of- district (see HB 428) fice files New Mexico Oil Conservation Commission. 1991. Gold, silver Severance 0.207oof taxable value Monthly statistical report, northwest New Mexico, March 1991, v lV and IVA; New Mexico Oil & Gas Engineering Committee, Hobbs, New Mexico Lead, zinc, molybdenum, Severance 0.l25Vool taxablevalue New Mexico Tuation and Revenue Department, 191, manganese, thorium, rare- Oil and Gas accounting report-summary for 1990: earth, and other metals Unpublished report, issued March 29, 1991. Oil Conseruation Division, 1988a,tn the matter of the hearing called by the Oil Conseruation Dvision Clay, sand, gravel, gypsum, Severance 0.125% of taxable value (OCD) on its own motion for pool creation and pumice, and other special pool rules, San Juan, RioAniba, McKinlev and Sandoval Counties, New Mexico: New Mexico nonmetals Energy, Minerals and Natural Resources Depart- ment, Oil Conseruation Division, Case No. i420. Coal: Order No. R-8768, 14 pp. surface Severance $1.17per short ton until July 1, 193 underground Oil Conseruation Division,'1988b, In the matter of the Severance $1.13per short ton until July 1, 1993 hearing called by the Oil Consewation Dvision on $0.57 exempt (surface) (see HB 283) its own motion for an order contractinq the vertical $0.55 exernpt (underground) (see HB 283) limits and redesignating certain pools in San Juan and RroAniba Counties, New Mexico: New Mexico Energy, Minerals and Natural Resources Depart- Uranium Resource 0.757oof taxable value ment, Oil Conseruation Division, Case No. 9421. Severance 3.57ooI 50Voof salesprice Order No. R-8769.6 pp Oil Conseruation Divisi6i, 1991,In the matter of case 9420 being reopened pursuant to the provisions of Oil, gas, and carbon dioxide Severance 3.75Voof taxablevalue division order no. R-8768, which order created the Ad valorem Many rates (counties certify annually on Basin-Fruitland coal gas pool in San Juan, Rio Ar- September 1 to Taxation and Revenue riba, McKinley and Sandoval counties and pro- Department) mulgated temporary special rules and regulations therefor: New Mexico Energy, Minerals and Natural Resources Department, Oil tonsewation Dvision, Oil, gas, geothermal energy, Conservation 0.787oof taxable value Case No. 9420 (reopened), Order no. R-825S_A, z carbon dioxide, coal, and School 3.1,57oof taxable value PP uranlum PennWell Publishing Co., 799I, San Juan gas line capacity due sharp jump: Oil and Gas Jouhal, v. g9, no 32, pp 42-44 Gas and hydrocarbons Natural gas processor 0 457oof taxable value Pennzoil 1990, Third 9-o-p1n! quarter report, Sep- incidental to processing tember 30, 1990: Pennzoil Company, Housfon, Teni, 16 PP. Petroleum Information Corporation, 1991, News item *Subject on Pennzoil's plan to plug coalbed methane wells to only one of thesetaxes at a time Data source:Taxation and RevenueDepartment, PO Box 2308, -2Jf,B in the Raton Basin: Rocky Mountain Region report, SantaFe, New Mexico 87504 (il5/827-2700) For information about severanceand resourcetaxes contact lulv 11, 1991. Cindy Lovato (5051Y7-M12); for oil and gas taxes contact Michael Holden (505/827-0805);for copper ad '19D0, Petzet, G A , Devon pressing Fruitland coal valorem tax contact Richard Martinez (fl5t827-08951. seam-program: Oil & Gas Journal, v 88, no 45, pp 28-30. tN. Scott, A. R., Kaiser, W. R., Ayers, 8., Jr., 1997, Thermal maturity of Fruitland coal and composition and distribution of Fruitland Fomation ind pictured Cliffs Sandstone gases; in Ayers, W. 8,, Jr. et al., Ceologic and hydrologic controls on the occur- rence and producibility of coalbed methane, Fruit- eruations, Colorado and New Mexico: New Mexico Spiegel,E, E, and Viscio,A, 1990,New land Fomation, San (topical Johnson, Jr., Juan Basin report, Bureau of Mines and Mineral Resources, Circular U S gas lines will restructureNorth American grid August 1987-July 1990): Gas Research lnstihrte, Rept. r34,22 pp. flows: Oil & Gas v 88, no 50, pp 33-39 GRI-91/0072, pp. 243-270; Journal, Narional Technical in- Shomaker,J. W., andWhyte, M. R., 7977,Geologic The TaosNaos, 1990,Pennzoil faces fight, December formation Seruice, Rept pB91 206 425. appraiml of deep coals, San fuan Basin, New Mex- 20,7990 Shomaker, W., and Hoit, R. D., J 197j, Coal resources ico: New Mexico Bureau of Mines and Mineral Re- Tweto, O., compiler, 1979,Geologic map of Colorado: of Southern Ute and Ute Mountain Ute Indian Res- sources, Circular 155, 39 pp U.S. GeologicalSuruey, scalel:500,000 D

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