Rich gas deposits found in St. Clair

Thursday, February 08, 2007

RUSSELL HUBBARD
News staff writer

Energy companies are scrambling for drilling rights in St. Clair County, where geologists have discovered a natural gas formation with the potential to rival any in the country.

Drillers have bought gas rights on 500,000 acres in and around St. Clair during the past two years, paying up to $500 an acre plus a share of potential revenues. They now want state permission to begin widespread production on 40 square miles in and around Ashville, according to Alabama Oil and Gas Board records. The new find's proposed name is the Big Canoe Creek Field.

Geologists compare the area's potential to that of a legendary Texas natural gas field called the Barnett Shale, which has grown to 5,000 square miles and produces more energy than any other onshore gas field in the country. Shale formations in St. Clair County run 9,000 feet thick, dwarfing the 1,500-foot shales in Texas. Thicker shale means more gas per square mile.

"There are many billions of cubic feet of natural gas per square mile in St. Clair County," said Phillip Meadows, an independent geologist based in Hartselle who performed the original analysis of the area. "Once production methods are figured out, we are talking about wells that could easily be in operation for more than 100 years."

Wealth from the energy business can transform counties such as St. Clair, which has a population of 65,000 and a $15 million annual budget. State law mandates that drillers pay a tax on their energy production. Last year, for example, Tuscaloosa County collected $9 million from oil and gas companies. That's a drop in the bucket compared with what St. Clair is looking at if production pans out.

Large geologic formation:

The finds in St. Clair are part of a larger energy-rich geologic formation that runs north through Etowah County and into northern Georgia, said Meadows, who began studying the area in the late 1980s. The formation has been ignored until recent spikes in natural gas prices that have made it economical feasible to begin production.

The holdup has been the shale rock. The natural gas is compressed into it, and getting it out requires more expensive production techniques than are used to access gas that's not so tightly bunched.

But things are rolling again after price spikes in 2005 that sent natural gas to an all-time high of $15 per million British thermal units. Energy companies such as Virginia-based Dominion Resources have been paying landowners as much $500 per acre for the right to explore and produce, according to an adviser who represents property owners.

In addition, the companies are offering an 18.7 percent share of eventual production revenues. Traditional natural gas offers in Alabama have been for $150 an acre and a 12.5 percent share of production revenues, the adviser said.

There is also some secrecy. Birmingham-based Energen Corp., a gas and oil exploration and production company, has acknowledged in recent months that it has been buying shale land in Alabama. It now owns 126,000 acres, but won't say where, according to spokeswoman Julie Ryland. Last month, Energen Chief Executive Mike Warren told the Downtown Rotary Club in a speech that shale gas might be "the next big thing" in Alabama.

'Unknown quantity':

The scope of the new gas field is wide. Last month, the trade magazine Oil & Gas Journal reported that energy companies were also seeking leases from property owners in Cherokee and Etowah counties.

"Gas companies have been aggressively seeking leasing opportunities," said Tom Beaube, owner of Ashville's Braswell Realty, who has leased 80 acres to Dominion Resources. "Some people here think it could be as big as the Barnett, but it's still an unknown quantity for now."

Beaube said Dominion, which operates Virginia's largest electric utility, has been working his land for about two years. None of his wells is producing, Beaube said. But Dominion has asked the Alabama Oil and Gas Board for permission to begin widespread production. The board plans to hold a public hearing on the matter Feb. 16 at the St. Clair County courthouse.

Cascades of cash aren't right around the corner, though. It took many years for drillers to figure out how to get at the tightly packed Barnett Shale gas in Texas. Only recent improvements in using pressurized water to fracture the rock and release the gas made it profitable. Meadows, the geologist, said no one is yet really sure how - or if - that technique will work in Alabama.

What's for sure is that it has people thinking in St. Clair County. If it all works out, two-lane U.S. 411 will be jammed with roughnecks erecting wells and bulldozers clearing ground for a new pipeline. Ashville, population 1,700, will be expected to feed the workers and fuel the machines.

"There is no question that the economic impact would be great for our schools and our community," said Beaube, the Ashville landowner. "But we are concerned about the economic impact and the potential nuisance. I hope we can find an equitable balance."

E-mail: rhubbard@bhamnews.com

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