Usibelli Coal Mine Inc. encountered natural gas in a coal-bed methane test well drilled in the Healy area in 2014 and is deciding how to proceed with its exploration program.
“It was successful in confirming the existence of gas in the basin, but it’s inconclusive on a commercial level,” Usibelli representative Mitch Usibelli told Petroleum News.
The company drilled the HC No. 1 stratigraphic test well in September 2014 to follow up on natural gas encountered in a portion of the basin during coal mining activities.
The well encountered natural gas in multiple seams, according to Usibelli. He compared the results to some early wells in the Powder River basin but acknowledged that, like that Wyoming play, proving up the Healy prospect would require additional exploration.
The Healy exploration program is currently in a holding pattern while Usibelli decides how best to proceed and waits to receive exploration tax credits that were submitted to the appropriate agencies before changes to the program went into effect, Usibelli said.
The HC No. 1 well satisfied a $500,000 work commitment attached to the Healy basin exploration license Usibelli had acquired over the acreage it explored, meaning that the company is under no obligation to conduct any more exploration activities in the license area before it expires at the end of 2020. “We’re currently evaluating whether we want to do an multi-well program,” Usibelli said. “By satisfying the work commitment, we also satisfied the full term of the license. So we have more time to figure that out.”
In its 2014 plan of operations for the program, Usibelli described plans to drill one well that year and as many as three wells the following year, depending on the results of the initial well. The plan proposed operations for 2014 and 2015, and Usibelli would likely need to file a new plan of operations if it decided to drill additional wells in the future.
Deepest seam
The HC No. 1 well passed through six seams in the Suntrana formation and had the most luck with the deepest seam - called seam No. 1. (The seams were numbered from deepest to shallowest.) “With the absence of gas in seams No. 6 through No. 2 and low volume observed in seam No. 1 the Suntrana formation in this location it is suggested that this area requires further study for gas content,” a contractor for Usibelli wrote in a report included in a file recently released by the Alaska Oil and Gas Conservation Commission.
Except in rare cases where it grants extended confidentiality, the AOGCC makes well reports and other drilling information available two years after the completion of a well.
Of the six seams, “seams no. 4, no. 2 and no. 1 were cored and desorbed for gas content. Both in seams 4 and 2 no visual degassing could be observed. The resulting desorption results of essentially zero gas evolved on both samples agree with this observation,” Arkansas-based Acme Geologic Consulting concluded in a well site report included in the public file. “On seam no. 1 gas was observed bubbling from the coal and desorption was observed in the testing of the 13 samples taken from bottom seam. Desorption results of seam 1 showed a formation low in gas volume. Three core runs were performed and of the three the second core showed the highest reading of gas content. Due to the close proximity of the out crop the gas content observed on this location was very low. Both the gas detection and desorption recorded levels below 500 units of gas and no more than 30 ml of gas evolved at one time. With the absence of gas in seams no. 6 through no. 2 and low volume observed in seam no. 1 the Suntrana formation in this location it is suggested that this area requires further study for gas content.”
A decade in the works
Usibelli Coal Mine Inc. has been mining coal in the Interior region since 1943. The company decided to venture into natural gas exploration in 2003, after encountering natural gas within coal seams during the course of its normal mining operations.
Usibelli saw coal-bed methane exploration as an opportunity to reduce its internal fuel costs, although the company said it might export excess supplies, if volumes warranted.
The company applied for an exploration license from the Alaska Department of Natural Resources in April 2004. The exploration license program is a process of accommodating exploration activities on lands not included in regular lease sales.
The state issued a favorable preliminary best interest finding for the project in August 2005, just as a different company was abandoning a coal-bed methane program in the Matanuska Valley over concerns about the potential for environmental harm.
Based upon similar concerns, the Denali Borough Assembly in 2006 banned gas exploration over some 40 percent of the proposed exploration license area. Even though the state considered the action to be illegal, the ordinance delayed the program. After the Department of Natural Resources approved the program under its original specifications, in June 2010, the Denali Citizens Council appealed the ruling to the Alaska Superior Court. The court rejected the appeal in February 2014, allowing Usibelli to proceed.
The state approved the Healy basin exploration license for a 10-year term starting at the beginning of 2011, which gives Usibelli until the end of 2020 to conduct activities.
Even though commodity prices have fluctuated greatly over the past decade, the original goal of addressing power costs remains relevant, according to Usibelli. “We’re a retail purchaser of power. … We’re always looking for ways to reduce our costs,” he said.
