EVERGREEN
RESOURCES (ALASKA) CORP.
A Subsidiary of
Evergreen Resources, Inc.
Dear Concerned
Resident,
February 25, 2004
Recently, you received a mailing
from the Willow Area Community Organization, discussing coal bed methane
development in the Mat-Su. Much of the information contained in the WACO
mailer is factually incorrect. Evergreen Resources (Alaska) believes very
strongly that all residents are entitled to accurate information about CBM
and CBM development. It is only with factual, accurate information that you
can make wise, thoughtful decisions for yourself and your community. This
letter will provide you with facts about CBM and correct the errors
contained in the WACO mailer.
Response:
By making a blanket statement that much of the information in the WACO
mailer is factually incorrect, Evergreen wants the reader to
believe that it is the sole source of "facts" about CBM. Yet, what
it corrects are a few minor errors while omitting and distorting facts that
are unfavorable to the industry.
CBM ... What does it mean for
Willow?
Evergreen Resources (Alaska), based
in Wasilla, holds shallow natural gas leases throughout much of the Susitna
Basin, including areas around Willow. We are currently exploring the region
and are in the process of drilling 5 geologic core holes in order to gather
much needed information about the geologic strata and coals in the Susitna
Basin. Evergreen Alaska has no current plans to drill pilot wells - those
wells potentially capable of producing gas - this year. We will not drill
additional wells until the geologic and geophysical information from the
core holes can be evaluated. To do this properly, we expect this evaluation
phase to take a while, probably most of this year.
Response:
The WACO flyer states that six "core holes" were being drilled in
the Willow area. Evergreen states that it is drilling five core holes but
does not mention that in 2003 it proposed drilling seven
"core holes" in the Susitna Basin.
What are my property rights
concerning gas development?
Much of the subsurface mineral
rights in the Mat-Su Borough and the Willow area are privately held. Not all
the subsurface rights in the area are held by the State of Alaska. Evergreen
Alaska has successfully negotiated numerous surface use agreements and
subsurface mineral lease agreements right here in the Mat-Su, and we
encourage landowners to be active participants in this process.
Response:
It is true that the subsurface rights to some of the land in the Valley
belong to the Mental Health Trust, Native Corporations and private owners who received a Federal patent prior to Statehood.
However, DNR owns the subsurface rights to 229,609 acres of land in the Mat-Su
which it has leased for CBM gas exploration. Many of these DNR leases
underlie Willow and the surrounding area. It was this
acreage the WACO flyer was referring to. To see if your property is included
in or near these DNR leases, see the Mat-Su Oil and Gas Lease Tract Atlas.
What is CBM?
Coal bed methane is natural gas. In
the case of CBM, the reservoir is a coal seam. Unlike conventional natural gas,
CBM has not generally required special treatment before sale - the
gas is merely put through a dehydrator to remove any remaining water and
then injected into a pipeline. The WACO mailer incorrectly states that CBM
must be sent to a processing facility.
Response: CBM
is often referred to as a sweet gas because it typically contains very few
impurities such as hydrogen sulfide and carbon dioxide normally found in
natural gas. In some cases, it can be input directly into natural gas
pipelines or other gathering systems with little processing. However, in
other cases, the few impurities present must be removed before being input
into a gathering system. Treatment depends on the nature of the produced gas
-- which is yet to be determined in the Valley.
The WACO mailer also incorrectly
stated that methane will remain trapped as long as the water table is higher
than the coal. CBM production has no impact on the water table, since it is
produced from coals that are much deeper than the static water table
associated with water wells. During production, the water held inside the
coal seam itself - not the static water table - is pumped put of the CBM
well and re-injected into deeper formations below the water table.
Response:
The WACO flyer tried to describe a complex
subject in simple terms. It would have been more accurate to state that methane will remain
trapped as long as the water pressure in a coal seam remains high. However, to claim that "CBM production has no
impact on the water table" assumes there is no
"communication" (underground faults or fractures) between geological strata and
ignores the impacts
on domestic water wells located near CBM
development Outside which range from dry
wells to methane
gas migration.
How is the methane developed?
Coal bed methane is produced
from wells with an average spacing of 4 or 6 per square mile that's roughly
one well every 100 to 160 acres. Each well is situated on a gravel pad
covering approximately six-tenths of an acre and equipped with a pump,
meter, and an engine shed if the pump is powered by a natural gas fired
engine. In Evergreen Alaska's operations, they are enclosed in an engine
shed to reduce noise. Where possible, electric pumps are used because they
are more efficient and very quiet.
The WACO mailer incorrectly
stated that each well site requires its own access road and that a
compressor station is needed for every 20 wells. In reality, existing roads
are used as often as possible, and gas fields are designed so that as many
wells as possible can be serviced from each road. In the relatively sparsely
populated area of the Raton Basin west of Trinidad, CO, roughly 95% of the
roads Evergreen Resources uses to access more than 1000 wells were in
existence prior to CBM development.
Response:
Evergreen may claim that 95% of the roads
were
already in existence because they were one of the first companies in the
Raton Basin and, as in the Mat-Su, got leases on lands that already had
road access. But, the dozen or so companies that followed had to lease lands
with few or no roads, and had to build roads to access their leases. That's why the San Juan
Basin road system after CBM development looks like a web created by a
spider on LSD. Maps of O&G Facilities & Wells in the Raton Basin
indicate a similar situation.
Compressors are used to
"squeeze" the methane gas into pipelines for transport. The amount
of gas being moved and the pressure of the pipeline into which the gas must
be "squeezed" determine the size of the compressor. In the Raton
Basin, where Evergreen Resources has more than 1000 producing wells spread
over roughly 300,000 acres, only 8 compressor stations are used to handle
the gas.
Response:
Evergreen confuses the reader by not differentiating between small
compressors located near wells to gather CBM gas -- such as wellhead
& screw compressors (which is what the WACO flyer described) --
and "compressor stations" which are used on large pipelines to transport
the gas. The Wyoming Department of Environmental Quality, which permits CBM
compressor stations in Wyoming, reports that, on average, it takes one
compressor for every 7 or 8 wells to gather gas which is then piped
to a larger pipeline. In Wyoming, there are anywhere from 2 or 3 up to 20
large compressor units (e.g., 3,000 hp each) in a "compressor
station" for the large pipeline and these are located about every 2 or
3 miles.
How did all of this come about in
Alaska?
The WACO mailer stated that HB69
removed CBM gas development from conventional oil and gas regulations,
leaving virtually no regulations governing shallow gas development. This
statement is absolutely false. All of the regulations that govern
conventional oil and gas development in the state of Alaska are in full
force and effect on CBM development. Until there is a set of CBM specific
regulations in place, all of the existing laws and regulations apply
to CBM development.
Response:
Of course regulations are "in effect."
However, under HB 69 many of them can be exempted by the AOGCC without public notice
or a hearing. Also, no regulations
specific to CBM technology were ever developed for the shallow gas program
following its inception. For example, there are no setback,
noise, or reclamation regulations pertinent to CBM. Neither the agencies
nor the legislature ever acted even though Gov. Knowles instructed former DNR
Commissioner Shively to create CBM regulations. Evergreen likes to refer to the
rules already in effect. The trouble is, they helped craft legislation making
those rules obsolete for CBM (ADN: 9-21-03).
The statement that "All
of the regulations . . . are in full
force and effect on CBM development" is misleading for
another reason. It makes it sound as if little or nothing in Alaska Oil
& Gas law has
changed, thereby lulling the uninformed reader into complacency. However,
the law resulting from Ogan's HB 394 & Kohring's HB 69
made major changes to:
- the notification requirements for lease application & award (minimal),
- who initiates leases (a CBM developer or speculator -- not DNR),
- whether a "best interest" finding is required (it's not -- if DNR determines that CBM "would benefit the residents of an area,"
it's required to execute a lease -- the costs to residents are not
considered),
- how leases are awarded (competitive bids are no longer required -- it's first come,
first served),
- the term of lease (shorter),
- environmental safeguards (drilling was exempted from discharges of waste material or water discharges,
and exploration facilities were not required to have an oil discharge prevention & contingency
plan), and
- local governments' ability to regulate CBM development (DNR can waive local
ordinances & regulations).
What are the potential impacts?
This section of the WACO mailer
was filled with inaccuracies. The facts about potential impacts are this:
Economic:
The numerous jobs that would result from CBM development do not all require
specialized training. Everything from secretary/ receptionists, drivers and
equipment operators to computer draftsmen and engineers would be needed.
These jobs and the gas wells that support them would be long-term - as the
life of most CBM fields averages 25 years of [sic] more. Additionally, the
dollars flowing to the local economy as a result of the payroll and
taxes would be significant. In 2003, Evergreen Resources paid over $10.7
million dollars in payroll in the Trinidad, CO area, and paid over $2.9
million dollars in taxes to support the local government and schools.
Imagine the benefit this level of new tax revenue could have on the Mat-Su
Borough!
Response:
It's not uncommon for corporations to exaggerate the economic benefits
they'll provide a community. Any CBM development significant enough to
affect Mat-Su's employment or finances will be a long time coming --
Evergreen has been in the Trinidad, CO area for years. To generate the
$2.9 million in property taxes that we are asked to "imagine" --
at Willow's mill rate of 15.631-- CBM facilities would require an assessed
value of $185,529,000. However, Evergreen reported a total of $7.0 million
to the SEC in capital expenditures in Alaska in 2003 (which has yet to be
added to the borough's tax rolls). And, they have plans for only $2.3
million in outlays for 2004 (ADN: 2-20-04).
We should never lose sight of
the fact that along with "benefits," CBM development brings
significant economic, health, safety and environmental "costs" to our Alaskan way of
life. Evergreen
doesn't mention these, but both "costs" & "benefits" must be weighed.
Some of the economic "costs" were listed in the WACO informational
flyer: decrease in property values (a "taking" by the State for
the benefit of the private CBM industry); negative impacts on local
recreational and tourism based businesses; increased expenditures for local
infrastructure due to increased traffic use, and; loss of access to
recreational areas.
Note:
Mat-Su legislators have certainly benefited financially from Evergreen's
presence. Sen Scott Ogan was paid about $100,000 over 3 years by Evergreen
as a
"consultant." In addition, Sen Ogan received $1,748 in campaign
contributions between 2000 & 02, Sen Lida Green $999 between 2001
& 02, Rep Beverly Masek $1,248 between 2001 & 02, Rep Vic Kohring
$1,688 in 2002 & 04, Rep Bill Stoltz $749 in 2002, and Rep Carl Gatto
$749 in 2002 from Evergreen employees (President &
CEO Mark Sexton, Director of Public and Governmental Affairs, Jack Ekstrom,
and/or former employee John Tanigawa) according to APOC. Large contributions are a legal way to buy access
and influence.
The WACO mailer referenced
an editorial run in the Anchorage Daily News that cited a decrease in
property values of nearly 22%, in the areas of CBM development. This figure
was originally taken from an advertisement run by the San Juan Citizen's
Alliance, an anti-CBM development group in Colorado. The ad stated that
nearby CBM wells decreased property values by 22%. This ad was later
retracted due to false statements. The La Plata County Impact Report cited
in the ad actually states, …"overall property values in the study
area have not been significantly (less than 1 %) affected by CBM wells…."
A survey of property values in Las Animas County, CO, where Evergreen
operates, shows that properties near CBM operations actually appreciated at
a higher rate than the county average.
Response:
Ask yourself whether you'd choose to buy
property with a CBM lease or without one.
The "La Plata County Impact
Report" cited by Evergreen found that for "properties
sold with wells on them, there was an estimated net reduction in selling
price of about 22 percent." Evergreen fails to mention this, but
prefers the figure which averages all properties in the study area. What's
happening in other areas? Near Bozeman,
Montana, where CBM development is proposed, property values have been
negatively affected. A realtor in Homer,
Alaska, has reported negative impacts on property values where CBM leases
exist. Mark Foster, an Alaska energy consultant, stated at the Northern
Susitna Valley CBM Forum (3-31-04) that "if development proceeds,
adjacent high value residential property owners are likely to see
substantial declines (1/3) in resale value relative to market."
Water:
In the early stage of gas production, some CBM wells may produce as much as
12,000-15,000 gallons of water per day. However, the amount of water
produced is not the same for every well, and water production
decreases over time, as the pressure within the coal seam falls and gas
begins to flow freely.
Generally, produced water, which
comes from deep coal seams, is somewhat salty - about 1 % the salinity of
seawater. In Alaska, Evergreen re-injects all produced water back into the
ground. State law requires this practice, and Alaska's Oil and Gas
Conservation Commission certifies all disposal wells. The produced water is
pumped into deep strata and kept below all fresh drinking water sources by
impermeable layers of rock. This practice, which has an excellent 40-year
track record in Alaska, helps ensure that produced water doesn't affect
streams, lakes and rivers.
Response:
Currently, Alaska state law does not
require produced water from CBM wells to be reinjected into the ground. The
Evergreen letter was cited and this question was raised at the last DNR Coal
Bed Methane Workshop held in Willow (2-28-04) and Pat Galvin, CBM program
coordinator at DNR, stated that this was not true.
Additionally, production activities must obtain a wastewater discharge
permit (18 AAC 72.500) for the disposal of wastewater generated during
the operation, if the wastewater is discharged to groundwater, surface
water, or land surface.
The laws of Alaska are very clear
when it comes to protecting our water, and they govern both conventional and
CBM operations. Alaska Oil & Gas Conservation Commission Regulation 20
AAC 25.030, Section (A)(6) states, "a well casing and cementing program
must be designed to prevent contamination of freshwater" and
Section (C)(2) states, "surface casing must be set below the base of all
strata known or reasonably expected to serve as a drinking water source
for human consumption." All wells, both production wells and injection
wells, are engineered and built to protect fresh water sources.
Methane Seeps:
Methane seepage occurs naturally in many Mat-Su locations. Contrary to the
WACO mailer, there is no evidence that CBM development causes methane to
seep into domestic wells or homes, or that it increases natural seeps. If
methane seeps were that commonplace, coal seams would naturally de-gas and
there would be no methane gas for production!
Response:
There is
an abundance of evidence that CBM development causes methane seepage
into domestic wells & homes. Walter R. Merschat,
Petroleum Geologist, addresses this at length in his comments on BLM's Draft EIS
for the Powder River Basin Oil and Gas Project.
Or, simply do a Google search to evaluate this claim yourself. The
last sentence is both a non-sequitur and nonsense.
Wildlife and Scenic Value:
Wildlife surveys in Colorado have found that wildlife species in the Raton
Basin actually thrive in the area of CBM development. Habitat has been
enhanced, not destroyed, and wildlife populations have increased, not
decreased. Roads in the gas field west of Trinidad, CO have not fragmented
habitat. Nor has there been any adverse impact on wildlife due to the daily
activities of CBM production.
Response:
A common
industry tactic is to deny or spin the facts. It would
have been appropriate for Evergreen to cite the "wildlife surveys" it
describes so they could be evaluated. A report by Trout
Unlimited, "Gas and Oil Development on Western Public Lands -
Impacts on Fish, Wildlife, Hunting and Angling provides a very different
perspective. And, a recent Washington
Post article reports that many hunting groups are objecting to accelerated coal-bed methane drilling in Wyoming and New
Mexico because of the potential adverse impacts on wildlife habitat. Among
the environmental & recreational costs to the Willow area could be the
degradation of "world class" salmon,
trout and moose habitat.
Over the past several months, local
anti-development groups have displayed pictures of CBM development in the
Powder River Basin of Wyoming, claiming that the pictures show what CBM
development in the Mat-Su would look like. If you look closely at the
pictures of Wyoming, you notice that there are no trees and the topography
is generally flat. There are no natural landforms with which to camouflage
gas wells and facilities. At no time have we seen a picture of the Raton
Basin in Colorado, where Evergreen Resources has worked very hard to blend
wells and facilities into the landscape, making them virtually invisible to
the casual observer. Here in the Mat-Su, Evergreen Alaska has already used
natural visual barriers like trees and hills to shield our pilot operations
from view. We have won awards for these efforts in the Raton Basin, and this
will continue to be Evergreen Alaska's standard practice.
Response:
we are
supposed to be reassured that the spider web of roads and pipelines
required by CBM development will run thru our forests, rivers &
streams rather than semi-arid country? The development will be, at
minimum, an eyesore to anyone above it in the hills, mountains or aircraft. It will
disgust tourists on flight seeing tours and passengers
departing Anchorage International Airport to the North. The existing CBM
facilities off the Parks highway near Houston are readily apparent -- not
"virtually invisible" -- especially during winter when
trees & vegetation have lost their leaves and green tanks stand in
stark contrast to the snow. Has Evergreen
posted any aerial photos of its Raton Basin development on its website
for the public to see?
Web sites and other sources:
One of the information sites listed
in the WACO mailer is the CBM Information Center located in the lobby of the
Willow Community Building. At this information site, a picture of gas
operations near Rifle, CO has been on display for quite some time. This
photo has a caption stating that Evergreen Alaska plans to drill 1000 wells
between Houston and Willow, and further makes the claim that recreational
trails will be cut off by the spider-web of drilling roads."
The gas operations shown in the
photograph posted on the CBM Information Center bulletin board in the Willow
Community Building are not coal bed methane operations. Rifle, CO is home to
tight sands gas development, not CBM. The wells are closely spaced because
of the nature of tight gas sands and because directional drilling is being
employed in the area.
Response: The
Rifle, CO, aerial photo is labeled "Methane gas wells at a 20 acre spacing test area
along I-70 . . ." -- it is not labeled "coal bed methane
operations." The photo shows what 20 acre spacing looks like in a gas field
and gives folks an understanding how "downspacing" can look. Of course,
Evergreen doesn't want anyone to think they'll ever get down to 20 acre
spacing -- but who knows how tight the spacing may one day be?
It is far too early in Evergreen
Alaska's exploration program to know where our development efforts will be
focused, and to say that we have plans to drill 1000 wells between Houston
and Willow is wrong. We don't know where the best drilling areas will be. If
Evergreen Alaska does decide to expand drilling operations in the Willow
area, we will be working with you to make sure we do it right.
Recreational trails, as noted in the photo, are just the type of community
assets that we seek to protect, not destroy, by asking for guidance
from members of the local community.
Response: Six of the seven core holes proposed by Evergreen
in 2003 lie between Houston and Sheep Creek, 20 miles north of Willow.
This certainly indicates a substantial interest in the Willow area which lies
at the center of this
corridor.
Evergreen Alaska encourages all
residents with an interest in CBM development to seek out as much
information as possible. Look for a variety of sources that are reliable,
accurate, and that can be supported by the facts. The Kenai Peninsula
Borough website at http://www.cookinletoilandgas.org is an excellent
information source. Also, answers to many of the questions posed to
Evergreen Resources during the 2003 Town Hall meetings can be found at
http://www.evergreen-res.com.
If you have any questions about the
information contained in this letter, please don't hesitate to call us at
Evergreen Alaska, (907) 357-8130. We welcome your comments and inquiries.
Thank you for your time and attention.
Sincerely,
Evergreen Resources (Alaska) Corporation
Corri Feige
Manager, Governmental Affairs and Public Relations
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