As fossil fuel prices rise, companies worldwide are adding Washington to their short lists for promising gas, oil and coal reserves.
The U. S. subsidiary of Comet Ridge Ltd. of Sydney, Australia, said last week it signed a $1 million lease option for 420,000 acres in the Grays Harbor basin area southwest of Seattle to explore for oil and gas.
The Comet Ridge deal is only the latest in a series of moves by the energy industry to either find or secure gas, coal and oil reserves in the state. Those initiatives include:
- The large open-pit coal mine east of Centralia, Wash. Its owner, Alberta, Canada-based TransAlta Corp., wants to expand the operation.
- Torrent Energy Corp., another Alberta company, plans to drill exploratory coal methane gas wells, also in the Centralia area.
- EnCana Corp., also from Alberta, is drilling two exploratory natural gas wells in the Columbia River Basin in Eastern Washington.
- Delta Petroleum of Denver has increased its leasehold ownership in the Columbia Basin to 375,000 acres.
- Competitors say that Anadarko Petroleum of The Woodlands, Texas, is exploring natural gas fields in Eastern Washington, although a representative of that company declined to comment.
These projects weren't economically viable a decade ago, but with prices of oil, coal and gas now trending upward, and the most easily accessible deposits developed, exploration companies are widening their searches.
"There's no question that higher energy prices are driving much of the exploratory activity in Washington," said Tom Deacon, president of Cascadia Energy Corp. in Lynn-wood, a subsidiary of Torrent. "The higher prices give companies encouragement and economic incentives to look at areas like Washington and Oregon."
In the past three years, the number of active gas rigs nationwide has climbed 30 percent while production dropped slightly, according to Houston-based Oil & Gas Investor, a trade publication. The energy industry is now under pressure to develop "unconventional" gas fields to replace its diminishing gas fields, the publication said.
The state's new projects are far different from the coal mines that dotted Washington in the late 1800s, when coal was a key industry that gave rise to towns with such evocative names as Black Diamond and Carbonado.
Now various companies are looking to drill for coal methane gas trapped in seams thousands of feet underground in Western Washington, or are hoping to develop natural gas fields trapped beneath hard layers of basalt in the eastern half of the state.
Cascadia Energy, which is a wholly owned subsidiary of Torrent Energy Corp. in Calgary, Canada, is trying to put together 100,000 acres of leased and purchased land to develop a large field of methane gas wells east of Centralia.
Cascadia's Deacon said his company hopes to start drilling four to six exploratory and coring wells by the end the summer to determine if the coal methane gas is sufficient for development. If enough gas is found, the company could develop as many as 100 methane gas wells, he said.
Coal methane is chemically the same as natural gas, except that it was created in the process of coal formation. In Western Washington, the gas is trapped in coal seams 1,000 feet to 3,000 feet underground, too deep to mine with current technologies. The company drilled exploratory wells in the 1990s that discovered gas pockets, but nothing large enough to develop at the lower prices at the time.
But natural gas prices have been rising steadily, from about $1.70 per million BTUs (British Thermal Units) in 1995 to about $7 today.
Higher energy prices are spurring natural gas drilling in Eastern Washington, where EnCana Corp., headquartered in Alberta, Canada, is drilling a well in Grant County and another in Yakima County.
EnCana is a big industry player, with $14.3 billion in 2005 revenues and proven reserves of 10.5 trillion cubic feet of natural gas, according to Hoover's Inc., an Austin, Texas-based financial consultant.
Doug VanSteelandt, EnCana team leader for Western USA new ventures, said his team started drilling one of the wells in 2004. He added that the project has required new technology and is "very challenging" because the company is drilling through as much as 14,000 feet of basalt, a hard volcanic rock.
VanSteelandt said EnCana currently is the only company currently drilling in Eastern Washington, but "other competitors" are looking.
"We think there's some potential there, although we're very early in the exploration phase," he said.
Another big petroleum exploration company expected to become active in Washington is Delta Petroleum Corp. of Denver, which said in an SEC filing on March 7 that it increased its leasehold ownership in the Columbia River Basin by 300 percent, to more than 375,000 acres.
The report called the basin, and another site in Utah, "areas with exceptionally large reserve potential."
The effect of rising energy prices is evident in Delta's financial reports. The company's revenue jumped 55 percent to $62 million in the six-month period that ended Dec. 31.
Competitors say that Anadarko Petroleum of The Woodlands, Texas, also is exploring a natural gas field in Eastern Washington, although spokeswoman K. Leonard declined to discuss the company's plans.
In Western Washington, Lewis County officials are closely monitoring the plans of TransAlta Corp., the $2.4 billion, Alberta-based company that operates a power plant east of Centralia. The 1,400- megawatt, coal-fired facility is Western Washington's largest power plant.
Most of the coal that powers the plant comes from an adjacent open-pit mine, operated by TransAlta on 15,000 acres the company either leases or owns.
As coal deposits are exhausted, the company expands the mine, and now TransAlta is seeking permits to open "Pit Seven" sometime next year, said Doug Jackson, Centralia-based president of TransAlta USA.
Looking further ahead, the company is considering expanding the mine onto 7,000 to 8,000 adjacent acres that have not yet been secured or permitted, Jackson said.
"We need to think about what we need to do five or 10 years ahead ... so we can keep the mining operation going," he said.
Glenn Waugh, a senior regulatory program specialist for the Office of Surface Mining in the U.S. Department of Interior, said his agency has met with the company over its expansion plans.
"They've been mining there for quite a while, and it's a finite resource," Waugh said of TransAlta. "They're reaching the limit of their known reserves."
The department regulates surface coal mines in the state, making Washington one of only two states nationwide where the mines are regulated by the federal and not state government. The other state is Tennessee.
Robert Johnson, Lewis County director of development, said the county urgently wants to keep the TransAlta mine and its generating plant, with its 600 high-paying jobs. The facility is the county's largest private employer, he said.
"Our biggest concern is that the relicensing and any expansion is done in a timely manner, because that represents a large portion of our work force, specifically the higher paying jobs," he said.
Johnson said he's worried that conditions sought by the state Department of Ecology, the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers could derail the TransAlta project.
"The county just recently jumped into the fray, because we're really concerned with the potential for losing jobs," he said. "It was the feeling of the county that the federal government is perhaps asking for things that they wouldn't ask for if the county wasn't involved, and somebody needed to be on TransAlta's side for mitigation."
But environmental groups have a different perspective, including Northwest Environmental Advocates in Portland. The organization in 1996 sued the Washingtonstate Department of Ecology and the EPA to force the mine's prior owner, PacificCorp of Portland, to install smokestack scrubbers.
Those scrubbers have been long in operation, but the environmental group's executive director, Nina Bell, said she has reservations about using coal to generate electricity.
"It's important that the emissions of the plant got cleaned up, but coal contributes to global climate change, and that's a reason to wean oneself from it," she said.