12/02/2007

Associated Press

In the wooded hills south of Coos Bay, Steve Pappajohn points to a rich black seam in a cutaway hillside. Coal.

That and a capped well represent his hopes that hundreds of millions of dollars' worth of fuel--not coal, but methane gas--could be deep below, trapped by water in the coal beds.

Pappajohn, a geologist by training but an explorer at heart, is president of Coquille-based Methane Energy Corp. The well and some others are the company's first forays into potentially large and profitable gas fields.

Natural gas accounts for almost a quarter of U.S. energy consumption. Methane Energy, a subsidiary of Colorado-based Torrent Energy, estimates its Coos County reserves could supply 1.5 million homes for 10 years. It hopes to make its first deliveries next year and to drill as many as 300 wells that could pump methane for 30 years.

It's early and nothing is certain. Recovering the gas is a complex prospect and fraught with environmental concerns.

So far, investors have spent $25 million to secure mineral rights, drill test wells, take core samples and map coal seams.

Pappajohn admits it's a "wildcat" play. But he says the potential payoff is in the hundreds of millions of dollars.

The potential gas yield is tiny compared with the huge wells in Wyoming, Colorado, New Mexico and Utah. But advances in drilling techniques and rising natural gas prices make the prospect attractive for small-scale explorers going after overlooked or hard-to-get energy reserves. And Coos County has a pipeline to transport gas to market.

A byproduct is underground water laced with copper, salts and other minerals, which poses a problem of what to do with hundreds of thousands of gallons of the tainted water without damaging drinking water supplies or salmon habitat and estuary.

Initially the company will filter the water and has a five-year permit to dump it into the estuary. It has permits for 22 wells and had drilled 12. One has been resealed.

It plans to drill the remaining 10 next year.

Local residents and environmental groups want greater oversight than the self-monitoring called for in the permit.

In the late 19th and early 20th centuries, Coos County supplied coal to San Francisco, and while there is no mining in the county today, large deposits remain.

For nearly a century wildcatters looking for oil and natural gas tried their luck there but couldn't make a profit.

But during the 1970s energy crisis methane that was always a danger to coal miners became attractive. Drilling technologies have caught up.

Methane Energy has mineral rights on 118,000 acres in Coos County, about a third of it on public land.

Pappajohn said testing shows an estimated 1.2 trillion cubic feet of gas stored in the coal. "How much of that gas we can get, we still don't know," Pappajohn said. "Looking at other projects, they've gotten 30 to 50 percent."

If Methane Energy recovers 30 percent of the gas it figures there it would be about 360 billion cubic feet, nearly six times the amount drawn from the Mist field in Columbia County.

It would be worth about $3 billion.

In written testimony the Northwest Environmental Defense Center and the Oregon Shores Coalition urged the DEQ to deny the water discharge permit, saying the state is far from achieving federal clean water standards.

Many are concerned that the state's regulatory agencies can't handle such a large project. Oregon lacks a comprehensive environmental review and decision-making process that brings all regulatory disciplines together.

The DEQ permit allows Methane Energy to monitor itself and submit monthly reports to the agency - a common practice, which angered residents at a hearing in North Bend.

The DEQ goal is to do its own tests of small facilities every three years, although agency officials admit this doesn't always happen on schedule.

"Industry will do whatever it can get away with," warned Coos Bay resident Bill Rosencrantz, who fishes for salmon and crab. "DEQ is woefully underfunded. You have become a friendly fox guarding the chicken house."

Bill Mason, a DEQ hydrologist, said the agency's worry that it can't handle 300 wells prompted regulators from a handful of agencies to assemble a unique task force.

"We recognize that there are overlapping authorities and that a lot of things can fall through the cracks," he said.

___

Information from: The Oregonian, http://www.oregonlive.com