Coalbed Methane Association of Alabama

Coalbed Methane In Alabama

 

The coalbed methane industry in Alabama began as part of an effort to improve underground coal mine safety.  The U.S. Bureau of Mines began testing methods to remove methane (natural gas) from the coal prior to mining.  The test sites in Alabama provided the best results, and a successful technology demonstration project in 1975 propelled the industry forward rapidly with commercial production beginning in 1980.

 

In 1984 the State Oil & Gas Board of Alabama established the first rules to regulate the production of natural gas from coal.  These rules have served as a model for other states and nations around the world.

 

The 80’s saw a significant increase in drilling and technology development with projects developed that were not connected to a mining operation.  By 1989, thousands of wells were being permitted and the Tuscaloosa area saw a surge of investment, development activity and the creation of thousands of high paying jobs.

 

The U.S. Department of Energy estimated 1.97 Trillion Cubic Feet (TCF) of natural gas could be produced from coal in Alabama.  By September of 2010, more than 2.3 TCF of natural gas had been produced. This is enough natural gas (at current consumption rates) to supply all Alabama residential consumers for more than 60 years!  The Department of Energy now predicts another 2 TCF remains. This makes the recoverable reserves of natural gas from coal almost equal to the reserves of natural gas in the Alabama offshore area.

 

One of the major challenges to successful economic development of the resource in Alabama was the efficient removal, treatment, and disposal of water from the coal seams.  The natural gas in coal seams is very low pressure and naturally occurring water in the seams holds the gas in place.  Removing the water allows the natural gas to flow to the surface to be collected, compressed and sent to the sales point.  Natural gas from coal, unlike the offshore natural gas production, does not need to be cleaned to remove impurities.

 

Alabama operators worked with the Alabama Department of Environmental Management to develop a comprehensive NPDES permit covering storm water, and the treatment and disposal of water pumped from the coal seam. The coalbed methane industry was the first to establish statewide guidelines to control storm water and prevent erosion.  All treated water discharged into Alabama waters is monitored real time by computers upstream and downstream of the discharge point.  This is a requirement found in very few NPDES permits.

 

The State Oil & Gas Board has permitted almost 10,000 coalbed methane wells over the past 33 years.  Not all wells permitted are drilled and not all wells drilled end up producing gas.  Currently there are about 6,100 active wells with 5,500 of those producing gas.  As of January of 2014, almost 43 percent of all natural gas production in Alabama came from coal.

 

The industry has invested more than $3 billion dollars developing the resource.  The annual economic impact in the Tuscaloosa/Jefferson County area is more than $250 million per year.  This includes income to the mineral owners, local, state, and federal taxes and direct and indirect employment of about 1,000 Alabamians.

 

Not only was Alabama a pioneer in the production of natural gas from coal, it is the only state with natural gas production from conventional formations, offshore reservoirs and coal seams in the nation.

 

History of Coalbed Methane In Alabama


1968

Farmington, W. Va., coalmine explosion kills 78 miners.

U.S. Bureau of Mines (USBM) begins research program to “degasify” coal 


1969-70

USBM conducts laboratory research on gas storage and flow mechanisms within coal seams.


1971

USBM installs five-spot well patterns at 11 locations across U.S., but production rates are disappointing. 


1973

USBM hydraulically stimulates one well at each of 11 sites.  Results are mixed with best performance obtained in Alabama at 50 Mcfd for several weeks.


1975

USBM enters a cost-sharing contract with U.S. Steel Corp. to demonstrate technology at the Oak Grove Mine.  Thirty-three wells are ultimately drilled.

Geological Survey of Alabama publishes Circular 96 “Occurrence of Iron Bacteria In Ground-Water Supplies of Alabama”

1978

Sustained production rates of 50 Mcfd per well demonstrated for a 17-well pattern.

Natural Gas Policy Act classifies coalbed methane as Section 107 gas.

In a time of rising gas prices, American Public Gas Association funds a three-well research program to produce coalbed methane at Pleasant Grove, Alabama.  This program is the first aimed at commercial recovery of gas rather than mine degasification.  It is also the first attempt to produce from more than one coal seam in the same wellbore.

A second mining company, Jim Walter Resources, initiates an independent research program in partnership with Kaneb Energy.


1980

Windfall Profits Tax Act established Section 29 Unconventional Energy Tax Credit.  Coalbed methane qualifies as “unconventional.”

State issues 8 new coalbed methane well permits.


1981

Pleasant Grove, U.S. Steel and Jim Walter Resources all begin recovery and sale of coalbed methane.

State issues 60 new coalbed methane well permits.  Total issued is 68.


1982

Second and third non-mining/multiple seam projects begin.

Annual coalbed methane production reaches 1.6 Billion Cubic Feet.

State issues 29 new coalbed methane well permits.  Total issued is 97.


1983

Fourth and fifth non-mining/multiple seam projects begin.

Success ratio of multiple-seam wells is less than 50 percent whereas similar ratio for mining related single-seam wells exceeds 95 percent.

Gas Research Institute (GRI) initiates its Warrior Basin Coalbed Methane from Multiple Coal Seams research project.

State issues 57 new coalbed methane well permits.  Total issued is 154.


1984

State issues 100 new coalbed methane well permits.  Total issued is 254.

State Oil & Gas Board approves first coalbed methane rules in the nation.


1985

Coalbed Methane production exceeds 8.6 Billion Cubic Feet for the year.

State issues 54 new coalbed methane well permits.  Total issued is 308.


1986

Pace of development begins rapid acceleration.

Coalbed Methane Association of Alabama incorporated.

State issues 73 new coalbed methane well permits.  Total issued is 381.


1987

GRI project successfully demonstrates multiple-seam technology.

GRI demonstrates benefits of cross-linked gel fracturing fluids.

State issues 129 new coalbed methane well permits.  Total issued is 510.


1988

First two large (>30 well) multiple-seam projects initiated.

Land leasing costs increase dramatically.

State issues 479 new coalbed methane well permits.  Total issued is 989.


1989

Development begins in Cahaba Basin.

Seven more large multiple-seam projects are initiated.

Annual coalbed methane production reaches more than 23 Billion Cubic Feet.

Coalbed Methane Association of Alabama opens office in Birmingham.

State issues 1,079 new coalbed methane well permits.  Total issued is 2,068.

Legal Environmental Assistance Foundation (LEAF) of Tallahassee, Florida questions Oil & Gas Board regarding hydraulic fracturing regulation.  LEAF places Alabama operator on notice for intent to file suit for violation of Safe Drinking Water Act.  The suit is never filed.


1990

U.S. Congress extends Section 29 unconventional tax credit for two additional years until January 1, 1993.

The Alabama Legislature establishes the Coalbed methane well plugging fund.

Annual coalbed methane production exceeds 36 Billion Cubic Feet. 

Seasonally adjusted average for spot prices during the year is $1.68 per MCF.

Warrior Basin Environmental Cooperative (WBEC) begins operating continuous water quality monitors along 150-mile stretch of Black Warrior River.

State issues 2,240 new coalbed methane well permits.  Total issued is 4,308.

State industry task force formed to examine the potential for groundwater contamination from hydraulic fracturing of coalbed methane wells.  The task force determined hydraulic fracturing posed a low risk for groundwater contamination and proposed guidelines for additional protection.


1991

Wells are being brought on line at a rate of 80 to 100 per month.

Annual coalbed methane production reaches almost 68 Billion Cubic Feet. 

Seasonally adjusted average for spot prices during the year is $1.44 per MCF.

GRI project demonstrates remedial fracturing technology for low production wells.

State issues 186 new coalbed methane well permits.  Total issued is 4,494.


1992

Average natural gas spot price for the Black Warrior Basin plummets to $1.02 per MCF for the month of February.

Seasonally adjusted average for spot prices during the year is $1.73 per MCF.

Annual coalbed methane production reaches almost 92 Billion Cubic Feet.

State issues 152 new coalbed methane well permits.  Total issued is 4,646.


1993

Average natural gas spot price for the Black Warrior Basin recovers to $2.63 per MCF for the month of February.

Seasonally adjusted average for spot prices during the year is $2.06 per MCF.

Annual coalbed methane production tops 105 Billion Cubic Feet.

State issues 88 new coalbed methane well permits.  Total issued is 4,734.

LEAF petitions State Oil & Gas Board and Alabama Department of Environmental Management to determine that hydraulic fracturing should be regulated as underground injection.  Both agencies decline to regulate the activity.


1994

Average natural gas spot price for the Black Warrior Basin peaks at $2.34 per MCF for the month of March.

Seasonally adjusted average for spot prices during the year is $1.85 per MCF.

Annual coalbed methane production tops 111 Billion Cubic Feet.

State issues 92 new coalbed methane well permits.  Total issued is 4,826.

On May 3rd, LEAF petitions the U.S. EPA to withdraw Alabama’s primacy for Class II underground injection wells because the state does not regulate hydraulic fracturing as underground injection.


1995

Average natural gas spot price for the Black Warrior Basin peaks at $2.25 per MCF for the month of December.

Seasonally adjusted average for spot prices during the year is $1.60 per MCF.

Annual coalbed methane production increases slightly to 112 Billion Cubic Feet.  May 95 production of 9.7 BCF largest on record.

State issues 203 new coalbed methane well permits, more than any year since 1990.  Sonat Exploration begins White Oak Field development.  Total permits issued is 5,029.

Chloride levels in Black Warrior River continue to remain just above background at an average of 17 mg/lt.  Environmental regulators begin discussion of reduction in monitoring requirements for coalbed methane operators.

On May 5th, U.S. EPA denies LEAF petition to withdraw Alabama’s Class II UIC program. LEAF wants Alabama to regulate hydraulic fracturing as underground injection. On October 11th, LEAF appeals EPA administrative action to the 11th Circuit Court of Appeals in Atlanta, Georgia.


1996

Average natural gas spot price for the Black Warrior Basin peaks at $3.81 per MCF for the month of December.

Seasonally adjusted average for spot prices during the year is $2.55 per MCF.

Annual Coalbed Methane Production passes 95 production slightly to almost 113 Billion Cubic Feet.

State issues 117 new coalbed methane well permits.  Total permits issued is 5,146.

Chloride levels in Black Warrior River continue to remain just above background at an average of 18 mg/lt.  Environmental regulators begin implementation of reduced monitoring requirements for coalbed methane operators.


1997

Average natural gas spot price for the Black Warrior Basin drops to $2.50 per MCF for the month of December.

Seasonally adjusted average for spot prices during the year is $2.50 per MCF.

Annual Coalbed Methane Production passes 96 production slightly to almost 114 Billion Cubic Feet.  Highest production on record of almost 10 BCF reached in December.

State issues 149 new coalbed methane well permits.  Total permits issued is 5,295.

Chloride levels in Black Warrior River continue to remain just above background at an average of 18 mg/lt.  Environmental regulators implement reduced monitoring requirements for coalbed methane operators.  Warrior Basin Environmental Cooperative monitoring system shut down in August.

On August 7th the U. S. 11th Circuit Court rules in favor of the LEAF on underground injection control issue related to hydraulic fracturing of coalbed methane wells in Alabama.  The issue is sent back to the EPA for further action.


1998

Average natural gas spot price for the Black Warrior Basin drops to $2.07 per MCF for the month of December.

Seasonally adjusted average for spot prices during the year is $2.07 per MCF.

Annual Coalbed Methane Production passes 97 production increasing to almost 117 Billion Cubic Feet.  Highest production on record of more than 10 BCF reached in May and December.

State issues 148 new coalbed methane well permits.  Total permits issued is 5,443.

On November 28th the Legal Environmental Assistance Foundation petitions the Federal 11th Circuit Court to order EPA to begin withdrawing Alabama’s primacy for the Class II UIC program. The Court issues that order in early 1999.


1999

Average natural gas spot price for the Black Warrior Basin increases to $2.11 per MCF for the month of December.

Seasonally adjusted average for spot prices during the year is $2.24 per MCF.

Annual Coalbed Methane Production decreases slightly to almost 115 Billion Cubic Feet.

May 1999 marks the cumulative production of 1 TRILLION CUBIC FEET from coalbed methane resources in Alabama.

State issues 166 new coalbed methane well permits.  Total permits issued is 5,609.

U.S. EPA conducts three public hearings considering withdrawal of primacy for the OGB UIC Class II program.  Alabama OGB adopts unprecedented regulations on hydraulic fracturing in order to retain primacy.  EPA gives notice in December of their intent to approve the new Alabama program.

Alabama coalbed methane operators begin to comply with regulations that are not required in any of the 12 other states with coalbed methane development.


2000

Average natural gas spot price for the Black Warrior Basin rockets to $5.97 per MCF for the month of December following a series of price spikes caused by storage, supply and demand issues.

Seasonally adjusted average for spot prices during the year is $3.84 per MCF reflecting a sharp upward trend in monthly prices.

Annual Coalbed Methane Production declines 112 Billion Cubic Feet.

State issues 237 new coalbed methane well permits.  Total permits issued is 5,846.

U.S. EPA approves modified Class II UIC program to include hydraulic fracturing regulations.  No other state is required to adopt similar regulations.

LEAF files appeal of EPA approval of Alabama program to the U.S. Court of Appeals for the 11th Circuit.  LEAF objects to industry intervention and succeeds in shutting out regulated community from case.

Total state oil and gas severance taxes almost double from 1999 to $68.3 million.


2001

Average natural gas spot price for the Black Warrior Basin rockets to $9.88 per MCF for the month of January. Prices continue to hit more than $4 per MCF through May.

Seasonally adjusted average for spot prices during the year is $4.21 per MCF.

Annual Coalbed Methane Production increases to 113 Billion Cubic Feet.

State issues 260 new coalbed methane well permits. The most permits in a year since 1990.  Total permits issued is 6,106.

State Oil & Gas Board imposed hydraulic fracturing fee by regulation.

Oral arguments conducted in Federal Court on second LEAF lawsuit. U.S. Court of Appeals for the 11th Circuit rules that EPA approval of Alabama UIC program for hydraulic fracturing is not arbitrary or capricious.

Total state oil and gas severance taxes take another dramatic leap to set a record of $95 million.


2002

Average natural gas spot price for the Black Warrior Basin plunged to $1.99 per MCF for the month of February. 

Seasonally adjusted average for spot prices during the year is $3.18 per MCF.

Annual Coalbed Methane Production increases to 115 BCF continuing the upward trend started in 2001.

State issues 430 new coalbed methane well permits.  This is the fourth highest year for permits in the 22-year history of the industry.  Total permits issued is 6,536.

LEAF petition to the United States Supreme Court to hear the hydraulic fracturing case is denied.

EPA issues draft report finding that hydraulic fracturing poses a low risk and further study of the issue is not warranted.


2003

Average natural gas spot price for the Black Warrior Basin spiked at $9.13 per MCF for the month of March. 

Seasonally adjusted average for spot prices during the year rockets to $5.35 per MCF.

Annual Coalbed Methane Production increases to 119 BCF breaking the one-year production record of 116 BCF set back in 1998.

State issues 441 new coalbed methane well permits.  This is the fourth highest year for permits in the 22-year history of the industry.  Total permits issued is 6,977.

The Center for Business and Economic Development at the University of Alabama completes economic impact study for the coalbed methane industry.  Study shows industry is responsible for more than $3 BILLION in economic impact through 2002.


2004

Average natural gas spot price for the Black Warrior Basin spiked at $7.88 per MCF for the month of December. 

Seasonally adjusted average for spot prices during the year rockets to $6.11 per MCF.

Annual Coalbed Methane Production increases to 121 BCF breaking the one-year production record of 119 BCF reached in 2003.

State issues 420 new coalbed methane well permits.  This is the fifth highest year for permits in the 23-year history of the industry.  Total permits issued is 7,397.

The Alabama Legislature imposes a one-year increase in the oil and gas privilege tax of one half percent for some wells.  The tax begins on July 1, 2004 and ends on June 30, 2005.

EPA issues final report finding that hydraulic fracturing poses little or no threat to underground sources of drinking water and recommends no further regulation.  LEAF drops the fight to require more fracturing regulation.  EPA re-approves Alabama’s Class II UIC program.


2005

Average natural gas spot price for the Black Warrior Basin spiked at $14.22 per MCF for the month of October following hurricane activity in the Gulf of Mexico.

Seasonally adjusted average for spot prices during the year increases to $9.43 per MCF.

Annual Coalbed Methane Production decreases to 116.48 BCF.

State issues 445 new coalbed methane well permits.  This is the fourth highest year for permits.

The 2005 Energy Act is passed in Washington.  It contains specific language to remove hydraulic fracturing from the definition of underground injection.


2006

Highest monthly average Black Warrior Basin spot gas price is $11.60 per MFC in January. 

Seasonally adjusted average slips to $7.25 per MCF as the natural gas supply problems created by the 2005 hurricanes moderate.

Annual Coalbed Methane Production slightly increases to 116.55 BCF.

State issues 612 new coalbed methane well permits.  This is the third highest year for permits.

U.S. EPA give notice that work will begin on nationwide Effluent Limitation Guidelines (ELG) for the discharge of coalbed methane produced water.


2007

Highest monthly average Black Warrior Basin spot gas price is $7.64 per MFC in June.

Seasonally adjusted average slips to $6.89 per MCF.

Annual Coalbed Methane Production falls to 114.89 BCF.

State issues 410 new coalbed methane well permits.

State Oil & Gas Board and industry complete revisions to the state rules covering hydraulic fracturing to conform with 2005 Energy Policy Act.

St. Clair County project begins in area previously abandoned.

U.S. EPA begins stakeholder teleconferences regarding the development of nationwide Effluent Limitation Guidelines (ELG) for the discharge of coalbed methane produced water.  EPA conducts a field visit to tour water collection, treatment, disposal and monitoring systems in Alabama.

 

2008

Alabama Legislature approves legislation to allow more than one well to be drilled on a coalbed methane or gas shale unit.

EPA gives public notice on industry Information Collection Request.  The ICR will be used to gather technical, environmental and financial industry information as a part of the development of nationwide Effluent Limitation Guidelines (ELG) for the discharge of coalbed methane produced water.