Homer Alaska - Business

Cook Inlet Region Inc. has field work under way on its proposed underground coal gasification project on coal-bearing lands the Alaska regional corporation owns about 40 miles west of Anchorage.

It would be the nation's first underground coal gasification project.

CIRI is now nearing completion of the first of six test wells, according to Ethan Schutt, CIRI's lands and energy vice president.

Schutt briefed Commonwealth North's energy study group Feb. 26.

The six-well program, a geologic reconnaissance, is scheduled to be completed by April and will be followed up by a more focused drilling program in the fall after a specific site for the project is selected, Schutt said.

CIRI will apply for permits for developing the gasification project and the power plant in December 2010, and hopes to have the project operating by 2014.

The project would involve a controlled combustion reaction in deep coal seams to produce a synthesis gas that would fuel a 100-megawatt combined-cycle power plant.

Compressed air or oxygen will be injected from the surface to control the combustion, but hydrogen and oxygen released from water in the coal also play a part in the reaction that produces the synthesis gas, Schutt said.

The project is attracting a lot of attention in Alaska, where there is concern over declining supplies of conventional natural gas for power generation, although Alaskans hope to someday tap large North Slope gas reserves.

The state also has large coal resources and CIRI feels underground gasification may be a way to commercialize coal without building a mine.

CIRI is an Alaska Native-owned regional corporation, covering the Southcentral area, and has diversified holdings in real estate and telecommunications, as well as natural gas and coal.

The company has been engaged in studies of demonstration-scale coal gasification projects in several countries, including South Africa and Australia. The process was originally developed in the Soviet Union in the 1930s, and there is one Soviet-era project still operating in Russia, Schutt said.

CIRI expects the coal gasification part of the project to cost between $25 million and $30 million, and for the power plant to cost between $150 million and $180 million. The company would be an independent power producer, selling electricity to Southcentral Alaska electric utilities.

Shutt said CIRI's studies indicate the project can be viable at current natural gas prices in Southcentral Alaska, which range from $6 to $8 per thousand cubic feet.

CIRI also is exploring options other than a power plant for using synthesis gas, including upgrading to pipeline-quality methane suitable for use by Enstar Natural Gas Co., the regional gas utility, or as feedstock for gas-based manufacturing, such as a gas-to-liquids plant using the Fischer Tropsch process.

A production-scale development would involve two or three wells to inject compressed air or oxygen, and six to eight wells to produce synthesis gas. About three acres of an underground seam would be consumed yearly to produce enough synthesis gas for a 100-megawatt power plant. At that rate, it would take about 90 acres of coal to feed the plant for 30 years. CIRI has large coal resources on its lands, enough to sustain a coal gasification project for decades.

As a seam is depleted, the production operation would shift laterally along the coal seams, with new wells being drilled.

Schutt said four of the test wells are being drilled to 1,500 feet and two are being drilled to the 2,700-foot level. CIRI's lands in the area have extensive coal seams that were shown by well logs from oil and gas exploration wells to which CIRI has access.

One exploration well drilled near the project site, Coffee Creek No. 1, shows the presence of a 60-foot coal seam at the 1,800-foot depth, Schutt said.

Potential contamination of water aquifers is the main risk of underground coal gasification, Schutt said, but it can be avoided by selecting sites with impermeable rocks isolating the deeper coal seams.

"The only significant risk is groundwater contamination, and we certainly don't want to pollute a freshwater aquifer. There is a risk if these projects are not deployed properly," he said.

Ensuring that overlaying rock has structural integrity sufficient to prevent subsidence also is important, he said.

"Depth is the most important factor in minimizing environmental risks. We need strong rock to prevent subsidence and impermeable rock layers to prevent contamination. Having a nice, thick clay layer is important," Schutt said.

CIRI encountered a clay layer in its first test well, a positive sign. The clay would block contaminants left in the coal seam from combustion from reaching water aquifers at shallower levels, he said.

CIRI is targeting coal seams from 600 feet to 3,000 feet, which is sufficiently deep to prevent contamination of aquifers or causing subsidence.

Schutt acknowledged there were problems with water aquifer contamination and subsidence on two coal gasification demonstration projects done in recent years in the continental U.S., but these occurred because the projects were done at shallow depths.

In meetings with public groups, there were concerns voiced about a runaway underground combustion reaction in the coal seam, but Schutt said the reaction is controlled by air or oxygen injected from the surface. An uncontrolled reaction can be extinguished by simply cutting off the air supply, he said.

A challenge for the project, however, is the disposal of carbon dioxide that would result from the gasification process. Depleted gas reservoirs in the area represent one opportunity for storage, and carbon dioxide could be used in enhanced oil recovery in the mature Cook Inlet oil fields.

CIRI has approached operators of the Cook Inlet fields and has found them to be reluctant about enhanced oil recovery possibilities, however. "We haven't had a lot of traction working with the existing (Cook Inlet) oil producers," he said.

Tim Bradner is a reporter for the Alaska Journal of Commerce.