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Yahoo - Rockies seen as key to U.S. natural gas growth
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Thursday October 25, 3:56 am Eastern Time
Rockies seen as key to U.S. natural gas growth
By Andrew Kelly
HOUSTON, Oct 25 (Reuters) - As U.S. natural gas production declines in traditional strongholds such as Texas and the Gulf of Mexico, the Rocky Mountains are widely viewed as the best bet for boosting domestic supplies to meet rising demand for gas.
	


The Rockies have loomed large in several recent U.S. energy industry acquisitions as companies bet that they will be able to overcome technical obstacles and environmental opposition to unlock the region's rich reserve potential.
``Most of the supply growth in the United States has been disappointing, but we've seen extremely strong growth in the Rockies,'' said Jennifer Snyder, Director of North American Natural Gas at Cambridge Energy Research Associates (CERA).
The Rockies could contain over 300 trillion cubic feet of recoverable reserves, or almost one quarter of all onshore and offshore reserves in the lower 48 states, according to a report by the National Petroleum Council.
However, not everybody wants to tap that hydrocarbon wealth. The Montana Wilderness Organization, for example, is campaigning to keep the Rocky Mountain Front -- recognized as an important wildlife habitat -- closed to oil and gas drilling.
``This is one of America's national treasures and one of our greatest conservation stories. To try to undo that for a small amount of natural gas doesn't make a lot of sense,'' said Mark Good, a field organizer with the association.
POWER GENERATION DRIVES GROWTH
U.S. gas consumption rose five percent to 22.8 trillion cubic feet in 2000 and despite current concerns about the weak economy, further growth is forecast in the long term, driven largely by increased use of the clean-burning fuel to generate electricity.
Until quite recently there was scant interest in Rockies gas because it was tough to get at, prices were low and there were not enough pipelines to take the gas to market, according to Fred Meissner, a petroleum geologist at the Colorado School of Mines.
But that has changed as the environmental benefits of gas and the development of efficient new combined-cycle gas turbines have spurred increased use of the fuel for power generation.
The lack of pipeline capacity in the Rockies has also eased as big companies such as Williams Cos. (NYSE:WMB - news) and El Paso Corp. (NYSE:EPG - news) have committed themselves to expansion projects.
Phillips Petroleum Co.(NYSE:P - news) gained a foothold in the Rockies by buying gas assets in Wyoming's Powder River Basin last year.
``If you look at total U.S. production to reserves, it's a decline story, but it's exactly the opposite in the Rockies,'' said Don Wallette, Phillips' regional director in the Rockies.
Rocky Mountain gas was also a key driver behind Kerr-McGee Corp's (NYSE:KMG - news) recent acquisition of HS Resources.
Oil giant Royal Dutch/Shell quote from Yahoo! UK & Ireland: SHEL.L) launched a hostile takeover bid for Rockies gas producer Barrett Resources this year, but was thwarted when its offer topped by Williams Cos.
TAPPING ``UNCONVENTIONAL'' GAS
Interest in the Rockies has been spurred in part by technologies that allow ``unconventional'' gas resources, such as coalbed methane, to be exploited economically.
Coal can hold several times as much gas as the rock in conventional reservoirs and it can be extracted by drilling relatively shallow wells into the coal seam, then releasing the gas by pumping out large volumes of water.
First seen on a meaningful scale in the San Juan basin of New Mexico and Colorado in the 1980s, coal bed methane development has spread in recent years to the Raton basin in Colorado and the Green River and Powder River basins in Wyoming.
``The beauty of coalbed methane is that you don't have to discover it, so you eliminate a lot of the traditional risk. It isn't very expensive, compared to setting up an exploration effort offshore,'' said Wallette of Phillips Petroleum.
Coalbed methane draws considerably less enthusiasm from environmentalists who are concerned by the Bush administration's plans to open more federal land in the Rockies to drilling.
Pollution problems associated with the disposal of saline water, released as a byproduct of coalbed methane production have led to protests in some Rockies communities.
Another unconventional resource that can be tapped in the Rockies is ``tight gas'', found deep below the earth's surface in low permeability sandstone that restricts the flow of the gas.
``A few years ago people became aware that there is a lot of gas in these very tight Cretaceous sands but the economics were minimal because you couldn't get it out economically. Hydraulic fracturing turned that around,'' said Professor Meissner.
Fracturing involves injecting a fluid into a rock formation, causing it to crack and making it easier for the gas to flow.
Phillips is mainly focusing on coalbed methane in the Rockies but has drilled some tight gas wells in Utah, said Wallette. 
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