History of Coalbed Methane Production in the San Juan Basin of Colorado

Methane in the San Juan Basin has been acknowledged as a resource for over 100 years. Professor Arthur Lakes in 1892 reported that “…coal oil and natural gas can be found within four miles…of Durango.” (Amoco, 1994). Coal miners encountered methane in several early mines in La Plata County. One encounter in 1924, ten miles northeast of Bayfield, Colorado, was reported this way: “What is believed to be a million foot gas gusher was opened up in the former Tendrick Mine, 10 miles northeast of Bayfield on Wednesday…We predict that the discovery of this gas is going to cause quite a flurry in oil circles, and we may expect to see some real development take place next spring and summer.” (Amoco, 1994).

Despite the discovery of methane gas in 1924, and the subsequent rejoicing about its economic impact to the region, over 20 years passed before the first coalbed wells were drilled and completed to produce methane. Beginning in 1948, several wells were drilled into the coal-bearing Menefee and Fruitland Formations. The first recorded methane production from coalbeds was in 1951 at the Pan American Petroleum/Stanolind/Amoco Ute Indian D-1 well located in the Ignacio area of the Southern Ute Indian Reservation (Amoco, 1994). Yet, extensive coalbed methane development did not flourish in the San Juan Basin until the mid-1980’s (Appendix C: Chart 3). This development was encouraged by the passage of the Crude Oil Windfall Profits Tax Act of 1980 (Chafin, 1994). This act was scheduled to expire in 1990, but was extended through 1992. The definition of deregulated natural gas addressed in this Act included occluded gas - naturally occurring natural gas released from entrapment from the fractures, pores, and bedding planes of coal seams. Also specified were (1) gas produced from deep (greater than 15,000 feet), high cost natural gas reservoirs, (2) natural gas dissolved in an over-pressured brine and (3) natural gas produced from Devonian shale. Fruitland coalbed methane production met the criteria as an occluded gas. Provisions of this bill including subsidies, which will expire in 2002, gave gas operators tax incentives to overcome technical problems associated with coalbed methane production from this unique “unconventional” resource. After a brief lull in the early 1990’s, Fruitland coalbed development steadily increased (Appendix C: Chart 3, Chart 4). Appendix B: Maps and Cross Sections 5 gives a geographical representation of cumulative CBM production in the northern San Juan Basin of Colorado. Since the late 1980’s coalbed gas development has been the focus of natural gas development in the Basin.