Natural gas exploration and production skyrockets in San Juan

by Buckley Jensen

During the past year, while the resurrection of the uranium industry in San Juan County has been grabbing most of the headlines, another energy boom has been quietly growing. There have been new natural gas finds, millions of dollars spent on new gas pipelines, and thousands of acres leased for future gas exploration.

Leasing of land for gas exploration began in earnest two years ago. Many land owners east and south of Monticello leased tracts of land for fees ranging from $40 to more than $200 per acre, depending on location.

The terms of most of the leases were for five years, with the option to renew for an additional five years. Leases vary, but most stipulated a doubling of the lease fees if the exploration companies exercised their five year renewal option. Most leasees will receive a 15 percent royalty on anything produced on their property.

Drilling on leased land has produced several major gas finds. Explorations companies are close-mouthed about what they find. Why invite more competition and higher lease fees are two reasons for not advertising what is going on.

However, the proof of what is being found is in the money being spent to build new pipelines to carry the gas from the well heads to the Encana plant in Lisbon Valley.

Encana is a major employer in San Juan County, with 70 employees who earn some of the best wages and benefits in the area. The Encana plant was built in the 1960s by Pure Oil and expanded in the 1990s by Unocal at a cost of over$ 100 million.

Encana, a multi-billion dollar energy giant in Canada, purchased the Lisbon facility in 2001. The plant has the capacity to process more than 50 million cubic feet of natural gas daily. Gas production in Lisbon Valley has dropped since the processing plant was built due to ageing wells. Last year it was down to 40 million cubic feet per day. With these new gas finds, and the volume of gas steadily rising, it is expected that the Encana operation will become more profitable and will hire more workers.

For the last 30 years, Encana has been using the largest steel pipeline to send oil from the Lisbon Oil Field to the Aneth Oil Field in southeast San Juan County, where it is put into the interstate pipeline grid.

A year ago, the volume of gas from these new finds increased to the point that Encana decided to convert the Aneth pipeline from oil transmission to natural gas.

This required a major capitol investment. After getting the oil out of the pipeline a “smart pig” was sent through the pipeline in the area. This ultrasound metal detection system checked for any problems in the line, and any that were found required expensive repairs.

Natural gas comes out of the ground containing all manner of impurities , including dangerous poison gases. Before it can be used in homes and industry, it has to be cleaned and a “perfume” added so people can smell it if it escapes.

In order to clean the gas coming out of the new wells, expensive high pressure steel pipelines have been installed. They range in size from 4” to 10” diameter.

In the past year, millions of dollars have been spent in San Juan County to install six new gas pipelines to take the gas from the wellheads to the pipeline, which runs between Lisbon and Aneth and thence to the Encana plant for purification.

Anyone driving the farm roads east of Monticello many have seen the pipelines under construction. It was a tough winter to lay pipeline, and much of it was done in wet, muddy, snowy conditions.

Pipelines completed in the last year include the Eastland Spur, which runs east of Eastland to the main line north of Monticello covering 19 miles. Other pipelines are at Horsehead Point, Bradford Canyon, Horse Canyon and Bradford Summit.

While the exploration companies are not providing details on the amount of gas being found, the amount of money being spent to transport it is indicative that it is significant and of a long term nature.

Encana has recently announced that the entire assets in the Paradox Basin, are for sale. It is anticipated that a new owner may be in place by the end of the year.