Talk of gas wells draws crowd in Homer

Posted: Sunday, October 19, 2003

Alarmed at the prospect of gas wells popping up on their private property, a large crowd packed the Homer High School Commons on Thursday evening to hear from experts about what to expect if gas development takes off on the lower Kenai Peninsula.

Of most concern were problems associated with a particular style of gas production that taps the gas trapped in underground coal seams, typically by pumping away huge quantities of groundwater to relieve the pressure that tends to lock the gas in the coal. The method, which frees "coal bed methane," another term for natural gas, has proved damaging to the environment in other parts of the country, and especially to aquifers that supply residential and livestock drinking water.

Coal bed methane is at the center of a controversy in the Matanuska Valley where Evergreen Resources Alaska Inc. is experimenting with the production method. That controversy has produced gas of a different type already the heated rhetoric of shouting matches at recent public meetings.

Thursday's meeting in Homer was quite civil by comparison, but an undercurrent of unease was apparent, not only over the idea of gas wells in backyards, but because recent changes in state law (House Bill 69) have given the commissioner of the Department of Natural Resources veto power over local municipal environmental and land-use regulations if development is determined to be an overriding state interest.

Many in the Homer area, including Milli Martin, who represents the Southern Peninsula District on the Kenai Peninsula Borough Assembly, see HB 69 as effectively cutting off local control over development.

"We are here today because of the fears of the development we neither wanted nor knew about, and fears of the impact to the lands and the lifestyles that we hold dear," she said. "I've been monitoring the Mat-Valley and how HB 69 took away, in my view, our local voice."

Martin was one of an eight-member panel invited to Homer by the Homer Soil and Water Conservation District.

Monitored by Rep. Paul Seaton, R-Homer, the panel included Sen. Gary Stevens, R-Kodiak; Bill Popp, oil and gas liaison for the borough; Max Best, planning director for the borough; Gwen Lachelt, of the Oil and Gas Accountability Project in Colorado; Jack Scott, a New Mexico rancher with experience facing unwanted gas development on his property; and Wilma Subra, an environmental scientist from Louisiana.

Also on the panel was David W. Lappi, president of Lapp Resources Inc., an independent oil and gas exploration and development company that holds the subsurface rights to eight state leases on 20,637 acres generally south and east of Anchor Point and extending toward the head of Kachemak Bay. Lappi's "shallow gas" leases entitle the company to pursue gas deposits up to 3,000 feet deep.

Lappi has negotiated a deal with Unocal for the right to develop on six of those leases. Lappi still holds the leases. According to Popp, Unocal has no current plans to develop gas from coal beds on those leases.

Lappi told the audience he is a geologist who was raised in Alaska. He said he wants his company to become an Alaska-based player in the oil and gas development arena. He said there are, at present, no Alaska companies or individuals that actually own and operate their own resource production facilities.

"Outsiders come and do that for us," he said. "I think it is time to change that."

Across Alaska, he said, are about 200 small villages wholly dependent on diesel fuel delivered by barge, typically from Outside.

"Wouldn't it be a better solution if there were small gas wells near your village?" he said, adding that natural gas is cleaner and cheaper than other fuels.

Lappi said he began discussing the idea of tapping shallow gas deposits with lawmakers in 1995, an effort that eventually led to creation of the state's Shallow Gas Leasing Program. Lappi garnered his lower-peninsula leases in June.

Homer, which is not on a gas pipeline system, is an ideal small-niche market, Lappi said. Because it is on a road system, it is a good place to test the economic viability of shallow gas development.

"If it works in Homer, then we probably have a good technology to supply gas to those 200 villages," he said.

Lappi said it was important to define the terms being used in the debate over gas production on the lower peninsula. He said the state does not have a coal bed methane lease program, but a shallow gas lease program.

Depth parameters establish what is meant by shallow gas gas above 3,000 feet. Lappi said gas might be trapped in different ways, including coal beds, but also in layers of sandstone, where more conventional methods of extraction that don't involve pumping away and reinjecting groundwater and its associated environmental problems can be used.

"If you can find conventional gas, it's a much better target than coal bed methane," he said. "If I was able to find a conventional sandstone reservoir of natural gas in the Homer area, I'd be happy as a clam," because numerous problems would go away.

Lappi said he wants to supply Homer with natural gas. That would mean drilling scores of wells and linking them with a web of buried collection and distribution lines. His isn't the only idea that sees Homer as a potential market.

Another gas project entirely separate from Lappi's is an Enstar-Northstar partnership that is penciling out the viability of building transmission lines from North Fork deposits to Anchor Point and then to Homer where it would be distributed along a service network.

Today, there are no guarantees either idea will come to fruition, Lappi said.

"No one has determined that a shallow gas resource is profitable and commercially viable in any part of Alaska yet," he said.

Asked how many wells might be required to make shallow gas pay off on the lower peninsula, Lappi said he didn't know how many homes might one day use the product. But he said he uses a rough rule of thumb that on the coldest of winter days, a typical house uses about 1,000 cubic feet (one "mcf") of gas. Thus a well that produced 100 mcf per day could supply 100 homes.

Environmental scientist Wilma Subra warned residents that there were hazardous and toxic waste streams associated with coal bed methane production, including chemicals known to be or suspected of being carcinogenic.

"These are the kinds of materials that will be on the surface and subsurface of your property," she said.

She warned that drinking water supplies could be compromised and said it all came down to "a balancing act" between whether people wanted access to an inexpensive fuel and at the risk of losing their water.

Jack Scott, the New Mexico rancher, was taken aback by the beauty of Alaska.

"You definitely need to protect what you have here," he said.

He noted the peace and quiet of the Homer area could be seriously disrupted when gas well compressors are running 24-hours a day.

"In some places it sounds like a freeway," he said.

As for regulatory controls, Scott said they don't mean anything if not vigorously enforced. He also warned that suing to protect your property or recover damages might prove too costly for individuals.

There are things people can do, however, to get ahead of the "potential drilling frenzy" and urge responsible development, said Gwen Lachelt of the Oil and Gas Accountability Project.

She said the private property rights of surface owners must be preserved. That might take enforcing and strengthening existing laws to pressure companies to do things right.

She advised promulgating local oil and gas regulations an idea that might run up against the effects of HB 69. She also advised that people be careful when negotiating surface-use agreements with subsurface leaseholders and developers (required by state law before developers can enter private property).

Lachelt said people should be given adequate notification and compensation. She also said residents should try to put a stop to further rollbacks of state environmental regulations.

Bill Popp has been following the issues closely since assuming his job as the borough's liaison to the industry. He provided some basic facts about Cook Inlet natural gas.

The residents and industries of the Cook Inlet Basin consume some 220 billion cubic feet of natural gas per year. The basin holds known reserves of about 2 trillion cubic feet, making for a life expectancy of about nine years, unless new reserves are brought on line.

"Do the math," he said.

Popp said he was not at the meeting to endorse coal bed methane as an answer to the problem, but rather to offer information the borough has identified as relevant.

The borough provided a set of maps showing where the state leases were. Popp noted there are a host of owners of subsurface rights beside the state. They include the Mental Health Trust, Native corporations, the federal government and some individuals who secured subsurface rights before statehood.

State law gives subsurface rights superiority over surface rights, he said.

But that doesn't mean subsurface developers can run roughshod over surface owners. For instance, state law requires leaseholders to enter agreements with surface owners prior to coming on their land and to pay for damages.

"That's been the case for decades," he said.

If no agreement can be reached, property owners can testify before a Division of Oil and Gas hearing where they can argue against the need to tap resources through their property and developers would be required to show why there was no other way.

Popp said it would be good for residents to become educated about all aspects of shallow gas production, including coal bed methane, and to be familiar with the experiences of those living Outside.

"But you should also remember that those experiences don't necessarily transplant to the Cook Inlet Basin and Alaska," he said.

Shallow gas may not prove viable in Alaska, he said. Evergreen has eight wells in the Matanuska Valley; an experiment, Popp called them.

"The jury is still out whether this is a viable source of gas in Alaska. My guidance to you is to not think shallow coal bed methane is going to take place in 2004. I don't even believe it is going to take place in 2005. I think there is a question mark as to whether it will actually take place on the southern peninsula."

Popp said beginning later this week, perhaps by Wednesday or Thursday, interested residents should be able to access a new Web site full of information about oil and gas projects in the borough. It will be at www.cookinletoilandgas.org.

A meeting on the future of gas development on the lower peninsula is scheduled for Nov. 10 at the high school from 6 to 9 p.m. Representa-tives from the Alaska Department of Natural Resources Division of Oil and Gas, the Department of Envi-ronmental Conservation, the Depart-ment of Revenue and the Alaska Oil and Gas Conservation Commission are expected to be there.



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