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Vol. 19, No. 30 Week of July 27, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

Usibelli exploring gas

Coal producer moving ahead with plan to search for coalbed methane near Healy

Eric Lidji

For Petroleum News

Usibelli Coal Mine Inc. is permitting a coalbed methane exploration program near Healy.

The Interior coal company is looking to drill as many as four wells along an abandoned airstrip seven miles east of Healy to explore shallow natural gas prospects in the region.

Usibelli holds a state exploration license over some 200,000 acres between Healy and Nenana, east of Denali National Park and Preserve. Earlier this year, the Alaska Supreme Court rejected an appeal against the license, allowing exploration work to proceed.

The work would begin this summer, with additional testing planning in 2015 if warranted by the results of initial testing. The goal of the program is to discover a nearby source of coalbed methane to power Usibelli mining operations in the area. The company has said it would consider exporting supplies for in-state use if it found large enough volumes.

A coalbed methane exploration program involves pumping water from relatively shallow coal seams to reduce pressure and release methane trapped within the formation.

Work this summer

In a plan of operations filed in late June, Usibelli proposed drilling this summer.

The schedule calls for trail maintenance this spring, which would occur anyway in preparation for coal mining operations. The company would drill and test one well between early August and October, and complete reclamation work by late October.

Depending on the results from the first well, Usibelli would return next summer to conduct additional testing of the initial well and drill as many as three delineation wells.

The program would require “no new ground disturbance,” according to Usibelli, because operations would occur on lands mined in the 1950s and again in the 1970s and would utilize existing roads to reach the proposed drilling pad. The pad would be situated at least 500 feet from major creeks in the region. The program would use Healy Creek, Cripple Creek and the UCM Hangar Pond as primary water sources for operations.

Usibelli said it planned to construct the 150-foot by 150-foot Healy Creek Site No. 1 pad on an existing fill area previously used as an airstrip to support mining operations. The dimensions of the pad are smaller than usual for natural gas exploration in Alaska because coalbed methane exploration wells are typically shallower than conventional exploration wells and therefore require a smaller drilling rig, according to the company.

Usibelli plans to drill the wells using either a 40,000 to 60,000-pound truck mounted rotary drill rig, or a 20,000 to 50,000-pound truck or skid-mounted diamond drill rig.

The wells would be vertical holes drilled to a total depth of approximately 1,500 feet. The company plans to drill to each coal seam and core through each seam to collect samples.

Energy markets

A local fuel supply could be a cost-saver for Usibelli. But the company also believes it would reduce demand on the electric intertie connecting the Southcentral and Interior.

The proposed well site is only 6.7 miles from a coal-fired Golden Valley Electric Association power plant in the region, one of the oldest plants in the GVEA system. The naphtha-fired North Pole Expansion Plant is capable of running on natural gas.

For both economic and environmental reasons, the Interior is eager for a reliable supply of natural gas to offset fuel oil. The Alaska Industrial Development and Export Authority is leading a state-backed effort to truck North Slope liquefied natural gas to the region, and two local distribution companies are currently building out area infrastructure.

Emil Usibelli founded Usibelli Coal Mine in 1943. The company now employs about 130 people and produces more than 2 million tons of coal per year. As the only operational coal mine in the state, Usibelli has long been a key component of the local energy market and currently supplies six Interior power plants. But the company also exports coal to customers in Chile, South Korea and “several other Pacific Rim destinations.”

Opposition

Previous coalbed methane exploration programs in Alaska have yielded opposition and the current Usibelli program follows a decade of legal and regulatory wrangling.

The company applied for shallow gas leases in the region as early as April 2003 and submitted its proposal for an exploration license in the region in April 2004.

The Denali Citizens Council opposed a final interest finding that the Alaska Department of Natural Resources issued for the program in 2010, saying it “strongly believes that gas exploration and development are inappropriate in settled areas and areas important for tourism” and requesting “stringent mitigation measures” to protect people and animals.

The council appealed the ruling, but the Alaska Supreme Court rejected the appeal.

Among its requests, the Denali Citizens Council had wanted the exploration license area to be restricted to the area east of the Nenana River. While the state ignored that request, and gave Usibelli an exploration license including lands on both sides of the river, the proposed Healy Creek Site No. 1 drilling pad would be located east of the Nenana River.

The Alaska Supreme Court decision explicitly required the Department of Natural Resources and Usibelli to consider the public costs and benefits of proposed mitigation measures, as well as the private costs and benefits, a wording not specifically mentioned in the best interest finding, according to the council. As such, “the public will need to remain vigilant to make sure the decision sticks,” the council said in February 2014.

The state is taking comments on the plan through Aug. 18.



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