History of Oil and Gas Exploration and Development in the San Juan Basin

Cretaceous Age rocks have been important to the development of oil and gas in the Four Corners (common state corner shared by Colorado, New Mexico, Utah, and Arizona) Area. These stratigraphic horizons include: the Morrison, Dakota, Mancos Shale, Lewis, Pictured Cliffs, Fruitland and Kirtland (Sandstone Member) Formations and the Mesaverde Group including the Point Lookout, Menefee, and Cliff House Formations (Appendix B: Maps and Cross-Sections 3).

Conventional oil and gas reservoirs include the Dakota, Point Lookout, Cliff House, and Pictured Cliffs Sandstones. Source rocks (providing the organic material) for the hydrocarbons in these reservoirs are probably the Lewis and Mancos marine shales, each several thousand feet thick. Coalbeds, which have generated their own hydrocarbons and which lack the production characteristics of conventional reservoirs, are considered “unconventional” gas reservoirs. Found locally in the Fruitland and Menefee Formations, coalbeds have played a significant role in the history of oil and gas development in the San Juan Basin. In the early stages of natural gas exploration the coalbeds were penetrated in search of conventional gas reservoirs that lay deeper. Problems associated with extraction of coal gas in comparison to conventional natural gas reservoirs, coupled with the fact that methane from coal seams typically has a lower heating value (BTU), made the Fruitland coal seam gas uneconomical to produce. Business risks were considerable due to high startup costs associated with pumping, storage, disposal, and corrosion potential (linked to a significant carbon dioxide content), of the produced water, coupled with a lack of sufficient historical data to establish production trends. With legislation (the production tax credit, a part of the Crude Oil Windfall Profits Tax Act of 1980) that offered lucrative tax incentives to explore unconventional fuel production, the potential for producing coalgas by water removal stimulated the oil and gas industry to invest in more research.

Estimates indicate that gas-in-place in the coalbeds may equal or exceed the gas in the conventional reservoirs of the San Juan Basin. Coalbed methane resources estimated for the San Juan Basin include 50 trillion standard cubic feet (Tscf) in the Fruitland Formation and 34 Tscf gas in place in the Menefee Formation (Mavor, 1997). Similar figures are quoted for the Fruitland (50-56Tscf) and the Menefee (34Tscf) by the Gas Resources Institute (GRI, 1997). Compared with other major coalbed methane reserves of the U.S. in the lower 48 states, the San Juan Basin ranks third in reserves (Greater Green River Basin 134 Tscf; Piceance Basin, 99 Tscf, San Juan Basin 90 Tscf; Northern Appalachian Basin, 61 Tscf; Powder River Basin, 39 Tscf; Black Warrior Basin, 20-23 Tscf; Western Washington Basin, 24 Tscf; Illinois Basin, 21 Tscf; Raton Basin, 10 Tscf; Uintah Basin, 10 Tscf) (Schwochow, 1997; Nelson, 1999). Huge coal reserves in Alaska have been identified with a gas-in-place content estimated at 1000Tscf (Smith, 1995), but no commercial exploitation has occurred to date.

In 1992 the American Gas Association. reportedly predicted recoverable coalbed methane reserves in the Fruitland coalbeds of the Ignacio-Blanco Field (the northern portion of the San Juan Basin located in La Plata County, Colorado) to be 1.5 Tscf. Actual production has already surpassed that estimate with 1.7 Tscf produced by the end of 1998 (Bell, 1999). When the New Mexico portion of the San Juan Basin in included, the production to date exceeds 6 Tscf (Nelson, 1999). In 1998, CBM production from the San Juan Basin was eight times that of the second-ranked Black Warrior Field (Nelson, 1999), which has a cumulative production tally of 1 Tscf. Very little coalgas has been produced from the larger Greater Green River Basin shales and the Piceance Basin due to the extreme depth of burial and low permeability of the coals. CBM production from the San Juan Basin is rivals or exceeds CBM production from any basin worldwide to date. Appendix C: Chart 1 shows La Plata County gas production through 1998. La Plata County gas production accounted for 57% of the total 1998 gas production in Colorado. Expectations are for CBM production to peak in 1999 and level off in 2000, with declining production anticipated for 2001 and beyond.