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Coal gas plans under scrutiny

Thursday, July 12, 2018  
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Coal gas plans under scrutiny

DENNIS WEBB  July 12

 

An oil and gas company is continuing to insist that its interest in leasing oil and gas rights on coal mine acreage near Paonia is related only to producing methane from the mine, despite environmentalists' fears that its real goal is hydraulically fracturing geological formations there.

Gunnison Energy has nominated more than 5,000 acres overlying the Bowie mine north of Paonia for oil and gas leasing. The Bureau of Land Management has proposed including that land and nearly 3,000 more acres in the North Fork Valley in an oil and gas lease sale in December. That sale could include some 236,000 acres, much of it in northwest Colorado.

Some environmental and citizen activists are upset at the proposed inclusion of any North Fork acreage, after the BLM previously had deferred offering tens of thousands of acres for leasing in the valley so the agency's Uncompahgre Field Office could complete a new resource management plan.

Gunnison Energy also nominated other North Fork Valley acreage that is proposed for inclusion in the lease sale. The company seeks to do horizontal drilling and fracking of oil and gas wells in the Paonia Reservoir area and more than 10 miles north of Paonia.

However, Gunnison Energy President Brad Robinson says in the case of the mine acreage closer to Paonia, if the leases were acquired the company would simply be looking to develop the gas that was liberated during mining at the facility, which Bowie Resource Partners idled in 2016. He said the project, if it ever went forward, might involve drilling only one shallow well into the mine to tap the gas.

Jeremy Nichols, with the group WildEarth Guardians, questions the company's assertion. He points to an Interior Board of Land Appeals ruling about a decade ago in a Utah case that he says found the BLM isn't legally authorized to lease coal mine gas through its oil and gas leasing program because gas from coal mines isn't considered a leasable mineral under the Mineral Leasing Act.

He thinks Gunnison Energy is talking about a coal mine methane project to build support for leasing that would have nothing to do with coal mine methane.

"The leasing would, however, convey the right for Gunnison Energy to develop whatever geologic formations they want for oil and gas not related to the coal mine," Nichols said. "Given this, I think Gunnison is trying to pull one over on people so it can more easily get the rights to access other formations in the region."

BLM spokesman Jayson Barangan said the agency evaluates coal mine waste methane on a case-by-case basis. He said the Utah case involved an active coal mine, whereas the North Fork parcels would involve sealed mines not in production.

"While coal waste methane cannot be leased under our coal leasing regulations, under these conditions, developing methane deposits would be allowed under BLM's oil and gas leasing regulations," he said.

Nichols still thinks there are a lot of similarities between the two situations and a lot of reason for skepticism. He said that although the Bowie mine isn't active, it also isn't permanently shut down and being reclaimed, and coal leases remain in place.

"It's not an apples-to-apples comparison for sure but I don't know if it's so far as to say it's apples and oranges," he said.

Said Robinson, "I have never met Mr. Nichols. I think it (is) quite unprofessional of him to speak for Gunnison Energy or to express an opinion that we are deliberately misleading anyone. I reiterate my earlier remarks … that we have no intention of doing conventional drilling or fracking in the area around the Bowie mine."

Robinson said he doesn't believe the laws and regulations related to the ownership of or right to extract coal mine methane "are completely settled or clear," but he agrees that coal mine methane isn't a separately leasable mineral at this time.

"Typically, Gunnison Energy attempts to have both a coal lease and a standard natural gas lease when it intends to extract what some may call 'coal mine methane gas.' By doing so, we avoid questions of ownership or our rights to the gas," he said

Gunnison Energy is involved with an existing coal mine methane recovery project at Oxbow's former Elk Creek Mine in the North Fork Valley. That project entails burning methane to generate electricity bought by Holy Cross Energy, and also flaring methane, a greenhouse gas, to destroy it and sell credits to entities wanting to offset carbon and other greenhouse gas emissions.

Gunnison Energy, which is part of Oxbow, owns the oil and gas leases involved in that project. The project began while the mine was still operating and it continues to produce power from residual methane even though the mine has been permanently closed.

Tom Vessels is chief executive officer of Denver-based Vessels Coal Gas, which was a party in the Utah case and also is involved in the Elk Creek Mine methane project. He said that although he's not an attorney, his understanding of the ruling in the Utah case is that in situations where there is an active mine — and federally owned coal, oil and gas — the mine controls the methane coming into the mine. After the mine closes, that methane is treated the way oil and gas typically is, and a company with an oil and gas lease can develop it.

Vessels said his understanding is that if someone wants to extract coal mine methane involving federally owned oil and gas, the BLM requires an oil and gas lease, "even if all you're interested in is going after methane in a coal mine."

One concern for Nichols and Natasha Leger, interim executive director of the Paonia-based group Citizens for a Healthy Community, is that even if Gunnison Energy is only interested in the coal mine methane, the pertinent leases could go to someone else interested in drilling and fracking wells because the leases would be auctioned off in a competitive sale.

"Fracking under a coal mine is inherently dangerous given the already unstable geology," Leger said.

Nichols believes the BLM could amend Bowie's coal lease language to allow for methane capture rather than offering leases that could open the door to substantial oil and gas development near Paonia.

Robinson said he doesn't believe the acreage involved has geological potential for conventional natural gas development or drilling for gas in shale formations.

"That's not why we're looking at it," he said.

Robinson has said it’s not certain that a methane-capture project at the Bowie site would be commercially viable even if Gunnison Energy gets the leases.

Vessels said his company isn’t a partner in the project at this point although he is “very interested in it,” and he said he thinks the project has promise.

“I think it is probable there is some economic value in capturing methane out of the Bowie mine. I don’t think it’s like a gold mine but I think there is some probable economic value,” he said.

He thinks that value would come not from selling the methane or using it for producing electricity, but instead through the capture of methane emissions that qualify for offsets under a carbon cap-and-trade system in place in California. And he’d like to see Colorado create a similar system.

“I think the state of Colorado should encourage the capture of waste methane from wherever it comes from because it’s an exceedingly potent greenhouse gas, and the atmospheric scientific community says it’s the number one greenhouse agent to control and capture,” Vessels said.


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