It's been over 25 years since pioneers with the U.S. Bureau of Mines in Pittsburgh began to study European technology designed to de-gas coal mines, the first steps toward tapping a new and potentially significant natural gas resource.
Initially, coalbed methane research and development was slow going -- but projects undertaken by the Bureau of Mines, the Gas Research Institute and some forward-looking companies steadily grew into what is today an important new industry segment.
Those first steps started in Alabama's Black Warrior Basin, where U.S. Steel formed a company to investigate the potential of coalbed methane on its properties, according to Denver consultant Keith Murray.
Murray was one of the pioneers who has been active in coalbed methane research and development almost since its inception.
Pioneering independents, working in conjunction with the Bureau of Mines and later with the Gas Research Institute, were successful in establishing some coalbed production in the Black Warrior.
At about the same time, the San Juan Basin in New Mexico and Colorado was the site of early pioneering work by Amoco Production, which drilled its first coalbed methane well there in 1977-78 at the Cedar Hill Field. That first field came on line in 1979 with significant production figures, Murray said.
Unfortunately, natural gas prices were soft and coalbed completion techniques were far from perfected, making progress very slow.
But companies continued to further the science of coalbed methane drilling and production through the 1980s -- through persistence and the financial boost of Section 29 tax credits for unconventional natural gas sources -- and by the early 1990s the San Juan Basin coalbed play was an unqualified success story.
Still, even the success of Amoco, Burlington Resources and others in the San Juan didn't immediately lead to large coalbed methane exploration projects.
"That play (San Juan) became the analog everyone was looking for elsewhere," Murray said. "The problem with that approach is that coalbed methane plays are all different and have their own unique characteristics.
"It was a slow process convincing people that we couldn't just think in terms of what worked in the San Juan."
Conventional thinking also held that coalbed methane was an anomaly and once the tax credits ran out new drilling would dwindle to nothing.
"Of course, by that time Amoco and other operators in the San Juan had discovered this was a very lucrative play with or without tax credits and continued to develop their holdings," Murray said.
"Also, expiration of the tax credits was a tremendous opportunity for some companies who were suddenly able to pick up leases for next to nothing."
Ignoring Conventional Wisdom
Bruce Kelso, a consulting geologist in Denver, said by the mid-1990s stronger gas prices bolstered coalbed methane activity.
"Companies saw what coalbed methane could add to the reserve base," he said. "Coalbed methane plays typically have such a high reserve base on a per-well basis that it can add tremendous economic value to a company's bottom line."
Coalbed methane truly came into its own in the 1990s:
♦ River Gas and Texaco began to successfully develop the Drunkards Wash play near Price, Utah. Although this field differs in many respects from the San Juan, it is a significant discovery that could result in the drilling of hundreds -- maybe thousands -- of commercial CBM wells.
♦ After the tax credits expired Evergreen Resources moved into Colorado's Raton Basin and picked up leases from Amoco and others under favorable terms. The firm worked a deal with Colorado Interstate Gas that called for CIG to build a pipeline into the basin if Evergreen proved up enough reserves.
In the past several years Evergreen has been one of the biggest success stories in the U. S. oil business, and the company's entire holdings consist of coalbed methane.
♦ About three years ago the coal seams in Wyoming's Powder River Basin became what is now the country's hottest natural gas play, thanks to the persistence of some small independents who ignored conventional wisdom that the Powder River coals would never be productive. (Coming next month, coalbed methane activity in the Powder River.)
It's been these successes in areas that have not resembled the San Juan Basin that's helped coalbed methane turn the corner -- forcing industry to rethink the parameters necessary for a successful coalbed methane play, Murray said.
"The most important revelation for coalbed methane was when people realized this is a play specific resource," Kelso added. "The coal and completion techniques are different in every play and the companies that are successful are those that step outside the box and approach each play from a different angle.
"Trying to take the round peg model of the San Juan Basin and put it in a square hole somewhere else just isn't going to work," he added.
"Eight years after the tax credits expired, coalbed methane development is more active than ever, thanks in large part to the success in the Powder River Basin where few people believed there was a chance for coalbed methane production," Murray said.
In the United States, companies are busy developing plays all over the Rocky Mountain region, in Oklahoma, Alabama, Kentucky, Virginia -- where coalbed methane production has outstripped conventional gas production -- and West Virginia.
"Also, people are beginning to look overseas once again, with encouraging production being developed in places like Australia and China," Murray added.
Kelso agreed.
"I honestly think the Powder River Basin success will expand coalbed methane development significantly," he said. "I'm watching companies investigate Alaska and western Canada, generating a tremendous amount of interest today.
"In addition, there are other basins in the Rockies waiting for their time," Kelso continued. "The Piceance Basin is a classic example where there is a huge amount of gas-in-place but the coals have very low permeability, so it will take additional technology advances to release it."
"I'm more encouraged than ever that there are tremendous opportunities in coalbed methane around the world," Murray said. "This is a resource whose time has come."