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HomeMy WebLinkAboutPower River Basin Coal 2004Fo [ows be:eo chnologies z P)1625 Broadway Street/(Vv far L i Suite 2700 Denver,CO 80202 ph 303 534-4344 fx 303 534-1446 lucatechnologies.comEE|esJfF|Wa November 16,2004 NOV 22 2004 AIBEA/AEA Rural Energy Michael Harper AIDEA/AEA 813 Northern Lights Blvd. Anchorage,AK 99503 Dear Michael, I thought you might be interested in our work on the coals of the Powder River Basin. I've included a copy of our press release dated November 16,2004.Also included is a copy of our report covering some of the experiments conducted on the biogenesis of methane in the Powder coals. I thought that our company's efforts to make renewable methane from sub-bituminous coal through microbial action would be of interest to you given the massive deposits of coal in Alaska and the energy challenges of rural Alaska.If you are interested in learning more about our science or would like a personal tour of our Jab in Golden I'd be more than happy to set some time aside for you. Best regards, Zo B.Dodson VP of Legal &Intellectual Properties Attachments cc:file |LSGYers)technologies * Embargoed for release at 8:00 AM Mountain Time November 16,2004 New Discovery by Luca Technologies of Real-time Natural Gas Formation in the Powder River Basin Offers Prospect for Renewable Energy Resource for Generations to Come DENVER,CO (November 16,2004):Researchers at Luca Technologies,Inc.have made a discovery regarding natural gas production in Wyoming's Powder River Basin that could lead to a renewable source of energy for generations to come.The company today announced that laboratory evidence shows that the Powder River Basin (PRB)coals are generating natural gas in real time through the ongoing activity of anaerobic microbes (bacteria that live in the absence of oxygen)resident in those coal fields.The company has termed sites where this microbial conversion of hydrocarbon deposits (coals,organic shales,or oil)to methane occurs "Geobioreactors™,”and believes the careful management of such sites may offer a new long-term solution to U.S.energy needs. Robert Pfeiffer,LUCA Technologies president and chief executive officer commented,"Our research on native coal,water and microbial samples from the PRB has determined that PRB coals can produce natural gas in real time.This finding suggests that the gas in the PRB need not be an ancient remnant of microbial activity,as generally believed,but instead is being actively created today.Moreover,we can increase or decrease methane production by PRB microbes by altering their access to water or nutrients, or halt gas production entirely by exposing the organisms to oxygen or heat sterilization.This finding holds the potential of turning what is today thought to be a finite energy resource into a renewable source of natural gas that could potentially go on for hundreds of years.” LUCA believes that in order to attempt to maximize the ultimate recovery of methane from this potentially enormous natural energy resource it will be necessary to amend certain current operating practices as 'well as review current legal and regulatory underpinnings of energy development.The company is currently discussing its findings with Wyoming and U.S.national agencies,as well as with major energy companies working in the PRB region. Microbial Methane Production from Coal It has long been known that certain ancient microorganisms are "methanogens”-microbes that generate methane by metabolizing other hydrocarbon sources.While it has also been generally accepted that much of the methane resident in coal fields was produced by such organisms,most of this production was thought to have occurred millions of years ago,when the hydrocarbon deposits were less mature and closer to the surface of the earth. More recently,however,research has suggested that living methanogenic organisms may be present and actively forming methane within some major coalfields.LUCA scientists,employing the tools of modern biotechnology and genomics,have confirmed the presence of such microbes within anaerobic core samples from the PRB.In addition to demonstrating that methane production by these microbes can be stimulated by the introduction of additional nutrient compounds,or suppressed by heat sterilization or the introduction of oxygen,LUCA has shown that radio-labeled CO2 (carbon dioxide)introduced to these PWE core samples is converted to radio-labeled methane.This demonstrates that the methane formation is the result of a biological process occurring today. "The United States has enormous amounts of buried hydrocarbon reserves,many of which cannot be extracted in an economically or environmentally benign fashion with current technologies and production practices,”said Mr.Pfeiffer."Any of these settings,given the right set of conditions,has the potential to produce biogenic methane in a long-term,sustainable fashion.” A more detailed report of LUCA's research findings to date is available on the company's website at Http://www.lucatechnologies.com. About LUCA Technologies LUCA Technologies is a privately held company that is developing a novel,long-term biotechnology- driven solution to rising U.S.dependence on foreign energy sources.Addressing the $150 billion domestic natural gas market,the company is leveraging the ability of naturally occurring microorganisms to convert underutilized domestic oil,organic shale and coal resources to clean,renewable energy.For more information about the company,please visit the LUCA Technologies website at www.lucatechnologies.com. HHT Contacts: Christie L.Haas LUCA Technologies (303)534-4344 chaas @lucatechnologies.com Joan Kureczka or Jesse Fisher Kureczka/Martin Associates (415)821-2413 Jkureczka@comcast.net Active Biogenesis of Methane in Wyoming's Powder River Basin Glenn A.Ulrich,Roland P.DeBruyn,Mark Finkelstein,Jeffrey L.Weber Abstract Numerous coal cores were carefully obtained to limit exposure to air during the course of their extraction from the Powder River Basin (PRB)of northeastern Wyoming.These coal samples were examined for their indigenous microbial populations and their ability to support methanogenesis.Significant populations of anaerobic microorganisms and rates of active methanogenesis were detected in nearly all of the tested coals.Conditions were identified that stimulated or inhibited this microbial methane production. Extrapolated results suggest that a huge potential bioreservoir for natural gas production exists in these PRB coalfields. Introduction Natural gas is one of the most desired and environmentally benign sources of energy in today's world.While domestic production of natural gas in the United States plateaued over 30 years ago,demand continues to outpace supply.Until recently,most of the earth's methane was thought to be derived from long-buried carbonaceous materials subjected to intense heat and pressures over geologic time.More recent estimates indicate that between 20 and 65%of the earth's methane deposits,including hydrates,is biogenic (Rice and Claypool,1981;Claypool 2004,personal communication).Biogenic methane accumulations have been detected in coal seams,sandstone,shales,oil reservoirs,and as gas hydrates.The timing of gas generation and contribution of real-time biogenic methane formation (methanogensis)are not known.Nevertheless,recent reports detected geologically young methane in the Antrim Shale located in the Michigan Basin and significant rates of methanogenesis associated with marine gas hydrates and deep marine sediments (Wellsbury et.al,1997)which have generated considerable interest. The ability of microbes to survive and in some cases thrive in subsurface environments is well documented (Krumholtz et.al,1997).However,the consortia of microorganisms responsible for biogenic methane production as well as their specific pathways/genes are largely unknown.It is likely that conversion of complex sources of hydrocarbon substrate to methane is dependent on a consortium of cross-feeding microorganisms.The activity of these subsurface microbial consortia could be controlled by a number of” environmental conditions such as nutrient availability,carbon substrate heterogeneity, water availability and exchange,diffusion rates of gases and metabolic products,contact with the carbon substrates,consortium composition,communication between members of the microbial consortium,and combinations thereof. Both geologic studies and chemical characterization of the methane in the PRB coal seams indicate that it is biogenic in nature (Law et.al,1991).In the 1990's,geoscientists and petroleum engineers from a variety of companies began to exploit this source of natural gas.Luca Technologies has begun efforts to better understand the dynamics of biogenic gas production and characterize the microbial consortia present within various coal-beds in the PRB. The primary goals of the research were to evaluate the recent and ongoing biogenic methane formation in PRB coal seams and to identify some of the variables that may affect the creation of biogenic gas in these coals.The sheer size of the PRB coal-bed resource as substrate for biogenic methane creation is the primary incentive.The coal- beds of the PRB are thought to contain 580 billion tons of coal in contiguous seams at least 20 feet thick (DeBruin et.al,2001).Only a small portion of this coal is accessible for domestic use via mining.Although substantial quantities of methane exist in the PRB coal seams (estimated total resource of 37 TCF,DeBruin et.al,2001),this quantity of gas likely represents a small fraction of the methane that could be created through biogenesis supported by hydrocarbon substrates within the coals.For instance,the conversion of only 1%of the known PRB coal resource above would generate approximately 86 TCF of gas (Luca estimation). While stimulating biogenic gas production in the field is the ultimate goal of Luca's work,prudence dictates that a better understanding of biogenic methane production under laboratory conditions is necessary prior to application in the field.Experimental design, methodology development,sample characterization and research execution were performed in Luca's Golden,Colorado facilities.Luca has chosen to highlight a representative coal sample from the Dietz coal seam in this study,knowing that there are both more and less encouraging examples to cite. Materials and Methods Sample location.The Dietz 32D1-2183 well is located in northern Sheridan County, Wyoming at township 58N,Range 83W,Section 21,NE quadrant.The project area is situated in the northwest corner of the Tertiary Fort Union coal-bed methane-producing trend of the PRB.A geologic overview is available (De Bruin et.al,2001). Coring andfield sampling.Surface casing for the 32D1-2183 was set at a depth of 60 ft. The well was then deepened to the top of the Dietz coal-bed which was encountered at 296 ft.Casing was run to the top of the coal-bed and cemented.Plug and cement were drilled out and the Dietz coal was cored with a 3 %inch diameter by 20 ft in length Baker Hughes core barrel with a PVC inner sleeve using Dietz formation water produced from a nearby well as the drilling fluid.19.5 ft of core was cut of which 17.5 ft was recovered. Core was retrieved by tripping the entire assembly and the sleeve was laid on the ground and marked.Marked intervals were cut with a chop saw and placed in canisters pre- charged with argon,which were then sealed.The core was cut from 8:08 to 8:18 am,laid out on the surface at 8:38 am and completely canistered by 9:05 am on June 9,2001. Preparation of methanogenic activity experiments.The containers of core were opened inside an anaerobic glove bag filled with 98%nitrogen and 2%hydrogen under slightly positive pressure with controlled temperature (22C)and humidity (95%).Geological characterization,photography,and sample preparation all occurred inside the glove bag. Core samples had their external core surfaces (which were briefly exposed to air at the rig-site)pared away inside the glove bag using sterile knives.Mechanical processing (such as crushing)of solid substrates was also performed inside the glove bag using sterile mortar and pestle. Slurry bottles were prepared within the glove bag by placing 5 grams of coal into each experimental bottle.Weights of coal are done without adjustment for water or ash content,although all core samples were subjected to vacuum extraction prior to commencement of experimentation to desorb endogenous methane.Anoxic formation water was added via a sterile 10 ml pipette using an automated dispenser.Sodium sulfide (to 0.5 mM)was added to the water to ensure strict anoxic conditions in the coal slurries during long-term incubation.The coal slurries were sealed with sterile butyl rubber stoppers,removed from the glove bag,vacuumed and purged with helium for three cycles.A small helium overpressure ( 3 psi)was left in the headspace of the bottles. Nutritional supplements were added to the coal slurries from anoxic sterile stock solutions.Most of the nutritional supplements tested are inorganic compounds needed in very low or trace concentrations.The purity of chemicals used was generally over 99.9%.Selected coal slurries were amended with '"C-bicarbonate (2 uCi/bottle,ICN Biomedicals)to track methanogenic activity supported by carbon dioxide reduction and to distinguish between biogenic methane formation and possible methane desorbing from the coal samples. Sterile controls consisted of samples that were autoclaved (121 C for 20 minutes,three times).Bromoethanessulfonic acid (BESA,Aldrich),a methanogenesis inhibitor,was added to selected incubations.Oxygen treated samples had their headspaces purged with pure oxygen and were left with a slight ( 3 psi)oxygen overpressure in the bottles. Unamended coal slurries (without chemical additions)were also prepared. Sampling and analysis of methanogenic activity.Over the course of an approximate five month incubation period the aqueous phase of the coal slurries were sampled for organic acid analysis and the headspace sampled for gas analysis (including methane,carbon dioxide,radioactive methane,and radioactive carbon dioxide)using sterile helium purged syringes and needles.Methane and carbon dioxide concentrations were determined with a Hewlett Packard 5890 gas chromatograph (GC)equipped with a thermal conductivity detector.Radiolabeled methane and carbon dioxide were determined using a gas proportional counter (Innus Systems,Tampa Fl.)in-line with the GC.Organic acids were determined by gas chromatography (Ram Model 3 detector with Alltech 267 column)from the aqueous phase of samples removed from the bottles. Results &Discussion Laboratory evidence for recent biogenic methane formation in the PRB Luca's research demonstrates that coal seams in the PRB are living bioreactors. Unamended coal samples in formation water produced methane in real-time.Adding certain compounds to either the liquid slurry or the gas headspace can accelerate or inhibit methane production.These results are discussed below. Gasproduction in unamended slurry bottles.Direct measurements of methanogenesis in carefully handled and processed coal cores from the Dietz coal seam within the PRB indicate that an active consortium of microorganisms capable of converting coal to methane exists in this coal seam.In Figure1,methane production in coal slurries containing just formation water and crushed coal (unamended)peaked at slightly over 3% of headspace after 135 days and remained essentially level for the remainder of the experiment. --Oxygen-*Sterile-*BESA -*Amendment 1 Amendment 2 ><Unamended 30 60 90 120 150 Figure 1.Comparison of methanogenic activities observed in Dietz coal samples under varying conditions. While the reason for the leveling off of methane production after 135 days is not known at this time,one could surmise that nutrient limitation or inhibitor build-up may be the cause.The cessation of microbial activities is commonly observed in closed system experiments.Encouragingly,in the absence of any potentially costly amendments, methane production was significant under imperfect conditions.We have made similar findings from approximately one dozen coal samples collected from four PRB coal seams. The sorbed gas content of PRB coals is typically in the range of 25 to 50 scf per ton of coal,generally increasing with depth.Using a correlation developed from public data for PRB coals (Crockett,2003,personal communication),the Dietz coal seam from which this sample was taken would be estimated to contain 17 scf per ton of sorbed gas in situ. The rates of methanogenesis observed in these unamended slurries would generate this volume in 2.3 years.The same rates of methanogenesis would produce 50 scf per ton in 6.8 years. Methane production in amended slurry bottles.Luca's work in stimulating and inhibiting methanogenesis from PRB coals is still in its early stages.Figure 1 shows results from several experiments in which a variety of compounds were added to the slurry bottles. Amendment 2 had a modest effect above the unamended sample whereas Amendment 1 had a significant stimulatory impact on methanogenesis. Negligible methane formation was detected in the coal slurry incubations that were sterilized,treated with BESA,or had oxygen added.Sterilization of coal samples kills all living microorganisms within the sample.BESA is known inhibitor of methanogenesis (Muller et.al,1993),and oxygen is a known inhibitor of methanogens (Zinder,1993).Importantly,methanogens are considered among the most oxygen sensitive of the anaerobes and short exposures have been shown to efficiently kill several species (Zinder,1993).Therefore it is not surprising that sterilization,BESA treatments, or exposure to oxygen will inhibit and perhaps destroy biogenesis. Effect of water on methanogenesis.Standard experimental conditions utilized sample bottles containing 14 ml of formation water to prepare coal slurries.Table 1 identifies several types and quantities of water that were used with unamended coal samples in addition to the standard conditions."Native”moisture samples denote slurry bottles containing coal samples without any additional water.Other experimental conditions include slurry bottles with deionized water or reduced amounts of formation water. Clearly formation water is more supportive of methanogenesis compared to deionized water.A threshold amount exceeding 0.2 ml of formation water per 5 gram sample is required for moderate methanogenesis.Two ml to fourteen ml of formation water yielded essentially identical amounts of methane. Overcoming potential moisture and free water deficiencies in the Dietz coal is not the primary mechanism by which the addition of formation water stimulates methanogenic activity since deionized water is a poor substitute.A critical volume of formation water is necessary for biogenesis to take place and a yet to be understood interaction between coal,formation water,and the indigenous microbial consortia is required for productive methanogenesis.It should be noted that negligible methanogenic activity has been observed in experiments consistingof formation water samples without coal (data not shown). Table 1.Average methane production after 159 days from incubations containing 5 g samples of crushed coal.Units of methane production in the coal samples is extrapolated to standard cubic feet (scf)of methane per ton ofcoal., %methane in Ava.Avg.Scf CH, Treatment headspace umol/bottle |mil/bottle |/ton coal Unamended (14 ml 3.04%20.29 0.49 3.2 formation water) Unamended (14 ml deionized water)0.63%4.08 0.10 0.6 Effect of process inhibitors Sterilized by heat 0.17%1.26 0.03 0.2 Oxygen in headspace 0.08%0.15 0.00 0.0 BESA treatment 0.00%0.00 0.00 0.0 Effect of water in slurry Native moisture only 0.13%1.53 0.04 0.2 Unamended (0.2 ml 0.52%5.85 0.14 0.9 formation water) Unamended (2.0 ml 1.91%20.76 0.51 3.2 formation water) Effect of nutritional amendments Amendment 2 3.61%24.39 0.60 3.8 Amendment 1 8.48%65.00 1.59 8.93 Figure 2 compares headspace methane content with headspace radioactive methane in individual replicates of the Dietz coal methanogenesis experiments after approximately four months of incubation.The experiments were designed to identify variables that support and/or stimulate methanogenic activity over a wide range of conditions.For reference,the headspace methane concentration in unamended incubations averaged 3%,which corresponds to 20 umol of methane.Several amendments (some not shown in Fig.1)increased methanogenic activity significantly above the unamended slurries while others decreased biogenic methane formation.A strong correlation between headspace methane and radioactive methane produced from added radioactive carbondioxide(as H'*CO3')attests to the biogenic methane production in these experiments and confirms that carbon dioxide reduction is an important pathway for methanogenesis in these coal samples.These findings are consistent with the isotopic studies of formationwaterandgassamples,which also attest to recent methanogenesis via the carbon dioxide reduction pathway in-situ. A AA 3 -ap "A:A A A Ary %methaneinheadspaceo>4-Awien24A A AA aAA0QAAsAAAATA T T 0 8 16 24 Labeled methane (x10'DPM)in headspace Figure 2.Correlation between methane and radioactive methane formation in coal slurry experiments. Phylogenic inferences Culture-independent identification of microbes provides a powerful tool to identify microorganisms in their natural environment.Polar (or phospo)lipid fatty acids (PLFA) have been elucidated for the measurement of microbial biomass,community structure, and metabolic status of environmental samples (Ringelberg et al.,1989).This method has become a benchmark indicator of general archae,bacterial,and eukaryotic families. 16S rDNA sequencing can help the phylogenic placement as homologues of this gene are present in all known organisms.However,these techniques have limited applications in determining specific microbial activities.Microbial Insights™has provided initial data binning the PLFA from Deitz coal-beds.The PLFA profiles revealed relatively highmicrobialbiomass(10°-10'cells/g)and diverse microbial communities in the four tested PRB coals.Large proportions of anaerobic biomarkers were detected in all of the samples,although significant difference in the major groups of microorganisms and their physiological status were observed between diverse samples:On the basis of PLFA content,the microorganisms in the coals were stressed to varying degrees.Interestingly, methanogenesis was detected at significant rates in the sample that showed the least stress.The detection of a significant population of diverse microorganisms including viable methanogens is consistent with laboratory experiments that illustrate active methanogenesis in the PRB coals. Conclusions Coal is the substrate for the microbial gas production observed in the above experiments. The biodegradable hydrocarbon substrate in these coals is adequate to support generation of significant volumes of newly formed methane (DeBruin et.al,2001,and Luca calculations).Although the attainable coal conversion efficiencies to methane are not yet known,there is,in theory,enough hydrocarbon in these coals seams to make a significant impact on U.S.domestic needs for the foreseeable future if this existing in situ bioreactor can be stimulated.Biogenic methane production can be rapidly and substantially increased by the addition of specific nutrients and other amendments in laboratory experiments.In addition,laboratory results suggest that formation water has an as yet unidentified role in stimulating biogenesis -perhaps acting as a conduit of nutrients to entrenched microbes within the coal.Data in Figure 1 also illustrate how methanogenic activity can be rapidly and completely inhibited upon exposure to oxygen.These results may have implications on production practices that produce water from coal-beds or utilize vacuum extraction techniques that may irreversibly damage coal biodegrading methanogenic consortia in PRB coal. A better understanding of how this microbial community interacts with its environment and how we can effect it's well-being through prudent production practices is paramount in our efforts to produce clean energy from this vast methanogenic bioreactor. References: DeBruin,R.H.,Lyman,R.M.,Jones,R.W.,and L.W.Cook,2001,Coalbed methane in Wyoming,Wyoming State Geological Survey,Information Pamphlet 7 (Revised). Krumholz,L.R.,McKinley,J.P.,Ulrich,G.A.,and J.M.Suflita,1997,Confined subsurface microbial communities in Cretaceous rock,Nature,v 386,p 64-66. Law,B.E.,Rice,D.D.,and Flores,R.M.,1991,Coalbed gas accumulations in the Paleocene Fort Union Formation,Powder River basin,Wyoming:in Schwochow, S.D.,Murray,D.K.,and Fahy,M.F.,eds.,Coalbed methane of western North America,RMAG Denver,p.179-190. Muller,V.,Blaut,M.,and and Gottschalk,G.,1993,Bioenergetics of methanogenesis.In:J.G.Ferry (ed)Methanogenesis:Ecology,Physiology,Biochemistry &Genetics.Chapman &Hall Microbiology Series,New York.Rice,D.D.and Claypool,G.E.,1981,Generation,accumulation,and resource potential of biogenic gas:AAPG Bulletin,v.65,p.5-25. Rice,D.D.,1983,Relation of natural gas composition to thermal maturity and source rock type in San Juan basin,northwestern New Mexico and southwestern Colorado:AAPG Bulletin,v.67,p.1119-1218. Rightmire,C.T.,1984,Coalbed methane resource:in Rightmire,C.T.,Eddy,G.E.and Kirr,J.N.,eds.,Coalbed methane resources of the United States,AAPG StudiesinGeology#17,Tulsa,p.1-13. Scott,A.R.,Kaiser,W.R.,and Ayers,Jr.,W.B.,1994,Thermogenic and secondary biogenic gases,San Juan basin,Colorado and New Mexico-Implications for coalbed gas producibility:AAPG Bull.,v.78,p.1186-1209. Wellsbury,P.,Goodman,K,Barth,T.,Cragg,B.C.,Barnes S.P.,and Parkes,J.,1997, Deep marine biosphere fuelled by increasing organic matter availability during burial and heating,Nature,v 388,p 573-575. Zinder,S.H.,1993.Physiological ecology of methanogens,In:J.G.Ferry (ed) Methanogenesis:Ecology,Physiology,Biochemistry &Genetics.Chapman & Hall Microbiology Series,New York. |FF 04-11 | Petroleum reservoir characterization,source rock potential,fossil fuel resources,and basin analyses,Bristol Bay basin, Alaska Rocky Reifenstuhi (907)451-5026,FAX (907)451-5050,rocky@dnr.state.ak.us Paul McCarthy,UAF Department of Geology and Geophysics (907)474 6894,mccarthy@gi.alaska.edu Statement of Problem-The current state of geological knowledge of Bristol Bay is insufficient to attract private exploration investment,or to allow assessment of potential hydrocarbon resources.Characterizing and quantifying potential hydrocarbon reservoirs,defining stratigraphy,mapping outcrop geology,defining hydrocarbon source rock potential and kerogen typing are some of the most significant technical issues that challenge exploration and development of fossil energy resources in the Bristol Bay basin.These fundamental parameters are poorly constrained yet economically critical for Native,state and federal land-owners,and for the accurate assessment of the hydrocarbon potential by future resource lessees.No publicly available basin analyses exist that incorporate the outcrop geology,regional geophysics,17,100 feet-deep north Aleutian COST #1 well data,public seismic,limited micropaleontologic age data,and the well cuttings and core data.Lacking coherent basin analyses integration,the Bristol Bay basin remains enigmatic as a hydrocarbon basin.With only minor data available,and without application of modern geologic and geophysical techniques,the Bristol Bay basin will remain an unappealing target for explorationists.Fisheries in the Bristol Bay region are in recession and Bristol Bay Native Corporation (BBNC),many of the local village corporations,and the State of Alaska view hydrocarbon development as a catalyst for the area's future employment opportunities and economic success. Project Objectives-The fundamental project objective is to create a publicly available,modern,basin analyses and hydrocarbon assessment of the Bristol Bay basin (BBb).Reservoir characterization is critical in the BBb due to the island arc setting in which the Jurassic-to modern-age basin developed,and is a fundamental component of this proposal.Reservoirs will be quantified using petrophysics (porosity and permeability)and detailed petrographic analyses (point counting thin sections,grain size measurement,cement timing assessment),facies analyses,stratigraphic section measurements,and regional correlation of facies types and distribution.The majority of this raw data will be entered into a GIS-compatible Access database.Finally,all of these data will be incorporated into the meaningful context of new field mapping.Publicly available subsurface seismic and well-log data will be integrated to develop a projection of the regional subsurface nature and extent of the principle target reservoirs.Regional magnetics and gravity will be incorporated into the basin analyses,as will new local magnetic and gravity surveys.Specifically,this study will address about 300 samples from a representative suite of Tertiary and late Mesozoic rocks.Outcrop samples will comprise about 70 percent of this suite;and well samples the remainder. Additional objectives include collection of a suite of subsurface and surface rock samples for apatite fission tract analysis, which will provide a burial and uplift history.Organic geochemistry of source rock material from wells and from outcrop will provide details of thermal maturity,source rock affinity,and whether it is gas or oil 'prone'.Defining stratigraphy through facies analysis,depositional environment interpretation,and net sand assessment will be based on measured outcrop exposures.Modern interpretation of seismic,including digitizing at least one regional line will serve as an important tool for basin assessment.Tying the seismic to the several available wells further defines basin architecture and delineates potential hydrocarbon play types. Impact to Alaska of a Successful Project-These new,and modern,'baseline'data,analyses,and interpretations will yield the first publicly available quantitative hydrocarbon reservoir information.More importantly,this new information will be incorporated into an electronically available basin model.These data will codify the fundamental reservoir characteristics of potential basin targets,place the reservoir data in a stratigraphic and sequence stratigraphic framework,and summarize the hydrocarbon potential of this frontier basin.All data will be published in peer-reviewed DGGS reports and will be accessible on the DGGS website.Project data and reports will catalyze future lease interest,target models,and new exploration, particularly by small independent companies.Increased activity will yield economic benefit to the BBNC,the State of Alaska,and the federal government through both state and federal future lease programs. Statement of Work Plan-Basin analyses and hydrocarbon assessment components include:new geologic mapping,300 outcrop (and well)samples for porosity,permeability,petrography,and to a much lesser degree,geochemistry,micro-and macro-paleontological analyses,fission track analyses of outcrop belt and well samples (some of which reside at the State of Alaska Geological Materials Center).Some of these analyses will facilitate stratigraphic age control in the subsurface,and basin burial and uplift history.Chronostratigraphy will be supplemented by argon-argon age dating of tuffaceous layers.All samples will be integrated into a facies model,and sequence stratigraphic model where adequate details make that possible. Our new geologic mapping,existing geophysics,and new magnetics and gravity will be placed into the regional geologic framework.A final peer-reviewed report will be published by DGGS at project end;interim data releases will occur after each field season (2004,2005,2006).The geologic reports will be available from DGGS as paper copies and CD-ROMs,and as digital files from the DGGS website.Upon completion of this study all rock samples,with field locations and reports,will be archived at the DGGS Geologic Materials Center,Eagle River,Alaska.Matching inkind services from BBNC ($15,000 cash and $35,000 inkind/year)will be fundamental to successful and accurate completion of this program.We will rely heavily on an existing BBNC GIS database.AETDL costs include new geologic mapping,new land-based geophysics,field sample collection,well sample collection,porosity and permeability analysis,thin sections,point counting,geochemistry, various sample analyses,database entry and manipulation,GIS map production,travel for presentations at AAPG and other professional forums,project management,final data interpretation,and report generation. Karl Reiche From:Brent Sheets [Brent.Sheets@netl.doe.gov] Sent:Thursday,February 26,2004 1:07 PM To:Karl Reiche Subject:FF04-11 Reifenstuhl.doc FFO4-11 ifenstuhl.doc(31 KE Here's an overview of the Bristol Bay project. 2003 and is somewhat out of dat. Brent Sheets Arctic Energy Office .National Energy Technology Laboratory U.S.Dept.of Energy P.O.Box 750172 539 Duckering Bldg/UAF Campus Fairbanks,AK 99775-0172 Phone:907-452-2559 Fax:907-452-3345 This was prepared July 'Page !of 1 Karl Reiche From:PHIL ST GEORGE [philstgeorge@msn.com] Sent:Wednesday,February 25,2004 11:35 AM To:Karl Reiche Subject:Holitna Summary doc Hi Karl, Attached is the summary we discussed.Please call if you need any other info. Phil Phil St.George Holitna/Naniq Energy Co.LLC 9237 W.Parkview T.Lp. Eagle River,AK 99577 (907)694-8728 wk/hm (907 360-8728 cell (509)561-7732 fax 2/25/2004 Naniq Energy Co.LLC 37 W.Parkview,Eagle River,AK (907):3728 February 25,2004 Holitna Gas:Power and Jobs for Southwest Alaska Summary:Natural gas from the Holitna basin is potentially the least expensive power source for southwest Alaska and the Donlin Creek Mine.The region currently has very high unemployment,low wages and a high cost of living. Development of a gas supply in the Holitna basin would assist the region develop a healthy,sustainable economy.Not only would the development of a gas field provide jobs and less expensive energy,the field would ensure development of Donlin Creek creating over 500 jobs. Public funding would increase The Kuskokwim Corporation's (TKC)ownership of the project,from 10%up to 90%.If TKC can earn a greater percentage of the project it will allow local oversight,ensure local hire,responsible development and will empower the region to develop a robust economy. Business Arrangements:Holitna Energy Co.LLC (HEC)is the lease holder of the property and will retain a royalty.Naniq Energy Co.LLC (Naniq)is the development company.HEC will sublease the property to Naniq for an initial 90%of Naniq.TKC,the local village corporation (made up of 10 village in the middie Kuskokwim),will provide surface access to the property for 3 years in exchange for an initial 10%ownership of Naniq. TKC has the right to increase ownership in Naniq by bringing public funds into the venture,1%ownership for every $612,500.Without public financing,private financing will be necessary;this would dilute both current owners of Naniq. Holitna Development Plans:A cost estimate for developing the field is summarized in the following table.These costs are based on the development of a moderate coal bed methane field.Well costs have been based on Department of Energy numbers multiplied by an "Alaskan factor”(2.5X).Other costs are based on comparable Alaskan projects. Phase |Core Tests $1,750,000 Phase Il Production Tests $6,610,000 Phase Ill Field Development $42,190,000 Phase IV.Gas Transmission $17,000,000 Total $67,550,000 Core drilling tests the thickness,quality and gaseousness of coal.Production tests determine productivity of the field with a small cluster of holes.Field development involves drilling production holes and constructing gas handling facilities.Transmission involves building a 4 to 6 inch pipeline from the basin to Donlin Creek.Gas could easily be supplied to the intervening villages.The gas pipeline could then be extended to Bethel and intervening villages. Naniq Energy Co.LLC,37 W.Parkview,Eagle River,AK (907)2..3728 February 25,2004 Local Benefits:The direct benefits of developing a gas field are lower energycostsandjobs.The indirect benefits would include ensuring the development oftheDonlinCreekMineandtheapproximate500jobsassociatedwithit. These benefits would be accompanied by the typical trickle-down effect to support industries and re-circulation of new wealth in the local economy.The trickle-down effect is reported to have a multiplier effect of 5 times the original money.Another indirect benefit is the possibility of other mines or industries opening in the region once an inexpensive power supply is available. Basin:Placer Dome paid for a third party evaluation of the basin.That report states the basin has fair to good potential for conventional gas and fair to good potential for coal bed methane. Tertiary aged coal exposed to the northeast of the Holitna basin indicates the strong likelihood of coal in the Holitna Basin.The exposed Tertiary section is 7800 feet of sediments with over 537 feet of coal.These coals are the same age and quality of the coals in Cook Inlet,which are the source of >80%of the gas there.The basin has potential for free flowing gas,but coal bed methane is more assured.Less than 77 feet of coal is required to develop the power necessary for the region and Donlin for generations beyond the expected 20 year mine life. Power Beneficiaries:Donlin Creek is the forth largest undeveloped gold deposit in the world and has a measured,indicated and inferred resource of 259M tonnes of 3.1 g/t gold which is over 25M ounces of minable gold.The project has a minimum 'expected life of 20 years.Donlin Creek has an average power requirement of 60 megawatts or 4.6 bcf per year., Southwest Alaska currently produces heat and electricity from diesel fuel brought in on small river barges.Cost for this fuel has been as low as $1 gallon,but typically much higher,diesel was $1.84 per gallon during the last barge season. The villages that could be connected to a gas pipeline from Holitna currently consume approximately 8.6 megawatts of electricity and 2.6M gallons of heating fuel.Natural gas could replace 100%of the electricity merely by converting existing generators to gas,and could replace approximately .61 bef equivalent of the heating fuel in the area. Current Needs Electricity (MW)Heating Fuel BTU BCF/yr SW Alaska 8.6 2.6 M gal 61 Donlin 60 46 Total 68.6 5.21 Property:HEC has a State of Alaska shallow gas lease,currently in application, it encompasses 31 square miles.The lease allows development of any gas field found at least partially above 3000 feet of the surface.The lease is subject to a 6%state royalty.There are no other claims,licenses,royalties,or other Naniq Energy Co.LLC 37 W.Parkview,Eagle River,AK (907)%_.3728 February 25,2004 encumbrances.The lease area has no known surface or subsurface work and thus no environmental liabilities Access:The property is 10 miles from the village of Sleetmute,Alaska.Current access is via boat,snowmobile,helicopter or float plane.The northern edge of the property is 5 miles from the Kuskokwim River.The Kuskokwim River is typically open to barge traffic from May to October. History:Sometime in the 1970's the area was determined to be a lowlands associated with a major regional strike slip fault,similar to other inland Tertiary basins in Alaska.This setting was known as a possible source of oil and gas. An initial gravity survey was accomplished soon after.A more detailed gravity survey paid for by the state of Alaska and was accomplished in 1981.In October,1983 Arco and several other companies shot two lines of seismic along the gravity low,but east of the lease area.The state then paid for and accomplished an aeromagnetic survey in 1987. Conclusion:The Holitna basin has a good to fair chance for natural gas or coal bed methane.Production from this field would benefit the region in several ways, primarily in the creation of high paying jobs and the creation of a long term power supply. The mine's requirements justifies the development costs of the Holitna Basin. Transmission to the mine is the obvious first step in the region (see first illustration).Once the mine has power,the transmission of power can be extended to any justifiable location,such as Bethel and the intervening villages. TKC dominates the land ownership of the corridor of land along the river,where logic dictates transmission of the power (see the second illustration).TKC is the obvious choice for involvement in the project and public funding would allow them to opportunity. Overall this project has the potential to have a huge impact on a region that has chronic economic hardship and the resulting social problems.Development of the field will assure 500 high paying jobs at the mine but probably more importantly it empowers a native corporation to control it's economic destiny. Naniq Energy Co.LLC,__37 W.Parkview,Eagle River,AK (907)¢3728 February 25,2004 ads e route for a gas pipeline. kilometers Private Lands .. Land status of the Holitna Basin and Donlin Creek areas. Naniq Energy Co.LLC,37 W.Parkview,Eagle River,AK (907)2 3728 February 25,2004 Holitna Gas:Power and Jobs for Southwest Alaska Summary:Natural gas from the Holitna basin is potentially the least expensive power source for southwest Alaska and the Donlin Creek Mine.The region currently has very high unemployment,low wages and a high cost of living. Development of a gas supply in the Holitna basin would assist the region develop a healthy,sustainable economy.Not only would the development of a gas field provide jobs and less expensive energy,the field would ensure development of Donlin Creek creating over 500 jobs. Public funding would increase The Kuskokwim Corporation's (TKC)ownership of the project,from 10%up to 90%.If TKC can earn a greater percentage of the project it will allow local oversight,ensure local hire,responsible development and will empower the region to develop a robust economy. Business Arrangements:Holitna Energy Co.LLC (HEC)is the lease holder of the property and will retain a royalty.Naniq Energy Co.LLC (Naniq)is the development company.HEC will sublease the property to Naniq for an initial 90%of Naniq.TKC,the local village corporation (made up of 10 village in the middle Kuskokwim),will provide surface access to the property for 3 years in exchange for an initial 10%ownership of Naniq. TKC has the right to increase ownership in Naniq by bringing public funds into the venture,1%ownership for every $612,500.Without public financing,private financing will be necessary;this would dilute both current owners of Naniq. Holitna Development Plans:A cost estimate for developing the field is summarized in the following table.These costs are based on the development of a moderate coal bed methane field.Well costs have been based on Department of Energy numbers multiplied by an "Alaskan factor'(2.5X).Other costs are based on comparable Alaskan projects. Phase |Core Tests $1,750,000 Phase Il Production Tests $6,610,000 Phase Ill Field Development $42,190,000 Phase IV Gas Transmission $17,000,000 Total $67,550,000 Core drilling tests the thickness,quality and gaseousness of coal.Production tests determine productivity of the field with a small cluster of holes.Field development involves drilling production holes and constructing gas handling facilities.Transmission involves building a 4 to 6 inch pipeline from the basin to Donlin Creek.Gas could easily be supplied to the intervening villages.The gas pipeline could then be extended to Bethel and intervening villages. Naniq Energy Co.LLC 37 W.Parkview,Eagle River,AK (907):8728 February 25,2004 Local Benefits:The direct benefits of developing a gas field are lower energycostsandjobs.The indirect benefits would include ensuring the development of the Donlin Creek Mine and the approximate 500 jobs associated with it. These benefits would be accompanied by the typical trickle-down effect to support industries and re-circulation of new wealth in the local economy.The trickle-down effect is reported to have a multiplier effect of 5 times the original money.Another indirect benefit is the possibility of other mines or industries opening in the region once an inexpensive power supply is available. Basin:Placer Dome paid for a third party evaluation of the basin.That report states the basin has fair to good potential for conventional gas and fair to good potential for coal bed methane. Tertiary aged coal exposed to the northeast of the Holitna basin indicates the strong likelihood of coal in the Holitna Basin.The exposed Tertiary section is 7800 feet of sediments with over 537 feet of coal.These coals are the same age and quality of the coals in Cook Inlet,which are the source of >80%of the gas there.The basin has potential for free flowing gas,but coal bed methane is more assured.Less than 77 feet of coal is required to develop the power necessary for the region and Donlin for generations beyond the expected 20 year mine life. Power Beneficiaries:Donlin Creek is the forth largest undeveloped gold deposit in the world and has a measured,indicated and inferred resource of 259M tonnes of 3.1 g/t gold which is over 25M ounces of minable gold.The project has a minimum expected life of 20 years.Donlin Creek has an average power requirement of 60 megawatts or 4.6 bcf per year. Southwest Alaska currently produces heat and electricity from diesel fuel brought in on small river barges.Cost for this fuel has been as low as $1 gallon,but typically much higher,diesel was $1.84 per gallon during the last barge season. The villages that could be connected to a gas pipeline from Holitna currently consume approximately 8.6 megawatts of electricity and 2.6M gallons of heating fuel.Natural gas could replace 100%of the electricity merely by converting existing generators to gas,and could replace approximately .61 bcf equivalent of the heating fuel in the area. Current Needs Electricity (MW)Heating Fuel BTU BCF/yr SW Alaska 8.6 2.6 M gal 61 Donlin 60 4.6 Total 68.6 §.21 Property:HEC has a State of Alaska shallow gas lease,currently in application, it encompasses 31 square miles.The lease allows development of any gas field found at least partially above 3000 feet of the surface.The lease is subject to a 6%state royalty.There are no other claims,licenses,royalties,or other Naniq Energy Co.LLC 37 W.Parkview,Eagle River,AK (907)<--3728 February 25,2004 encumbrances.The lease area has no known surface or subsurface work and thus no environmental liabilities Access:The property is 10 miles from the village of Sleetmute,Alaska.Current access is via boat,snowmobile,helicopter or float plane.The northern edge of the property is 5 miles from the Kuskokwim River.The Kuskokwim River is typically open to barge traffic from May to October. History:Sometime in the 1970's the area was determined to be a lowlands associated with a major regional strike slip fault,similar to other inland Tertiary basins in Alaska.This setting was known as a possible source of oil and gas. An initial gravity survey was accomplished soon after.A more detailed gravity survey paid for by the state of Alaska and was accomplished in 1981.In October,1983 Arco and several other companies shot two lines of seismic along the gravity low,but east of the lease area.The state then paid for and accomplished an aeromagnetic survey in 1987. Conclusion:The Holitna basin has a good to fair chance for natural gas or coal bed methane.Production from this field would benefit the region in several ways, primarily in the creation of high paying jobs and the creation of a long term power supply. The mine's requirements justifies the development costs of the Holitna Basin. Transmission to the mine is the obvious first step in the region (see first illustration).Once the mine has power,the transmission of power can be extended to any justifiable location,such as Bethel and the intervening villages. TKC dominates the land ownership of the corridor of land along the river,where logic dictates transmission of the power (see the second illustration).TKC is the obvious choice for involvement in the project and public funding would allow them to opportunity. Overall this project has the potential to have a huge impact on a region that has chronic economic hardship and the resulting social problems.Development of the field will assure 500 high paying jobs at the mine but probably more importantly it empowers a native corporation to control it's economic destiny. Naniq Energy Co.LLC,..37 W.Parkview,Eagle River,AK (907)<3728 February 25,2004 )ral Lands Red Devil Private Lands ... Land status of the Holitna Basin and Donlin Creek areas. ee "Photos by R.A.Dillon/Tundra DrumsBethel's Nate David collides withJareth Boyscout of Chevakin Saturday's Bethel 75-37 victoryoverChevak. nne Saddler battles for th Barrow's Trinna Pili, BetheloverpowersByR.A.Dillon Tundra Drums Chevak never stood a chance. _That didn't stop the division 2A boys,though,from squaring off against big- ger division 3A Bethel on Jan.30-31.. -Bethel easily walked away with wins in both games,trouncing Chevak 62-34 Friday and 75-37 on Saturday.But Chevak put up a fight to the end. Both teams set a fast pace early in "hevak left both teams a little bewildered,The:hail-Mary plays turned the game into a track meet with Chevak players darting down court in hopes of catching a wildpassandcarryingittothebasket.It sel-dom worked.By halftime,Chevak's players were"trying to catch their breath and hide theirfrustration.Chevak was limited both in height and depth,but still managed to 'rack up a number of clean steals as 'Bethel tried to rush the ball down court .vice Oyagak in Saturday Barrow.Saturday's game,with Chevak regularly -to add to the scoreboard. opting for wild,full-court passes that. council even through its 56 _village members have sover- eign immunity. The council was sued sev- eral years ago by a Native family who claimed its child had been sexually abused by another child at the council's _Head Start program.A sec- ond Native family sued after its child's finger was cut by adoorattheHeadStartbuild- ing.The families claimed Head Start's employees were negligence in both cases. _The nonprofit council .administers government and social service programs to 56 Native villages in the Yukon- Kuskokwim Delta. .The council claimed sover-eign immunity as a defense in 'See story on page 15.See Boys,page 14oo rence of Alaskans asked isider fate of Permanent Fundlaamong55AlaskansenceinFairbanksbeginningFeb.10 to dechicit u Financing for gas drilling .the Alaska Permanent Fund should be used t6ttendFeb.|O0 meeting fa IS tOcore througByJonGrover.balance the state budget.'Organizers of Gov.Frank Murkowski's Conference of Alaskans announced the names. of the delegates Jan.29.The chosen delegates are a diverse group,with members coming from all across Alaska,including Theresa John andGenePeltola,both of Bethel.Other delegates from rural areas included Kotzebue,Barrow,Kiana,St.George Island, Tundra Drums Naniq Energy Corp.,the compa- ny that holds permits to drill exploratory wells in the Holitna Basin,-has had to change its plans. 'sidents were among a group of 2cted to participate in a confer- i-DIGIT 99503\UTHORITY 'PROGRAMS "RN LIGHTS BLVD (99503-2407 See Meeting,page8 |Native Association's 15th annual Plans for Holitna Basindrillingputonhold Phillip St.George,president of | Naniq,addressed the Kuskokwim . See AVCPpage20ooa -tribal gathering Ja ancing that Naniq expected to pay for the exploratory drilling did not materialize,St.George told -those gathered at the meeting. 'Without the financing,Naniq won't 'be able to drill the wells this winter as stated in the permit application.- Compounding Naniq's financing issues,the Alaska Division of Oil and Gas has decided to temporarily stop issuing permits for shallow - ;See Drilling,page 13 7]\eaLSentM71)elp OWLSetsypererreapnetee ae oral'gas wells.pending:areviewof.the public:noticeprocewTheleasehasnotbeenissuedbecauseoftheprotestsinthe'Matanuska-Susitna Valley with the Evergreen Resources project,”said Gene Pavia,of AES LynxEnterprises,the firm hired to handlepermittingfortheNaniqproject.The protests are over the fasttrackpermittingforwelldrillinghastakenmrecentmonths.The depart-menthasissued gas leases for morethan300,000 acres across the state, someof it private property.Companies drilling for gasdon'tneed to get permission fromprapertyownersbeforeusingthe land to access wells because the state still owns the mineral rights. Protests in the Matanuska-Susitna _Borough,organized by Friends oftheMat-Su,prompted state offi- cials to reconsider the loose regu- lations on what is a relatively new-process in Alaska,Several publicmeetingsarescheduledaround the state to hear concerns.°St.George feels the industry iisalreadyregulatedenough,but wel- comes any oversight if it means _concerns over.environmerital 'impact would be diminished. "You can't spill a drop of diesel"in this state without having to doanenvironmentalimpactstudy,” St.George said."We are partners in this with the Kuskokwim Corp.,which is pretty good insur-ance that we're going to do thisthingright.” St.George told those at the meeting that the project would specifics.Naniqis.a partnership bebetweentheKuskokwimCorp.and Holitna Energy,which was formed by St.George to explore for gas in the region.St.George,a former vice president of expio- ration for NovaGold Resources, was the project manager for exploratory drilling done at the Donlin Creek site. Nanig,which was formed spécifically for the Holitna Basin project,has never undertaken a coal-bed methane drilling opera- tion.That was a point of concern 'among several villagers at themeeting.The methane gas that Naniq 'hopes to extract from the Basin .would be used to accommodate _the immense power needs of the Donlin Creek gold mine,a joint _ venture between NovaGold Resources,Placer Dome and Calista Corp.The mine would approximately .65.require - megawatts of electricity.Finding a cheap source of energy is one of the main roadblocks to develop-_ment of the gold mine. Holitna wells would produce -enough natural gas to power com- -Munities on the Kuskokwim River "* from Donlin Creek to Bethel.The area,not including the potential « mine site,currently uses about eight megawatts of electricity...» '..Gregg Bush,general manager "for Donlin Creek,was also on hand at the Kalskag meeting.. 'Placer Dome is considering sev- eral options to power the mining project,he said.One alternative.to natural gas is a coal-firedpow- BNC SHAREHOLDERS Bethel Native Corporation is :,soliciting nominations for itsBoardofDirectors.Any shareholder whois at least 18 years of age,and who would like to be a candidate for one of the three .available Board seats must complete an application:form.Each Board seatis for a three year term._This term will expire in the year 2007. Application forms are available at the BNC office,-460 Ridgecrest Drive,Suite 2/1,Bethel,AK If you would like an application mailed to you, -please call (907)543-2124,or mail your requestto"Bethel Native Corporation,PO.Box 719,Bethel,AK 99559_Completed applications must be physically received iintheBNCofficeby5:00 p.m.,March 5,200 __Elections will be held at the Process. erplant in Bethel with powerlinesrunningup-river to the mine site. Critics of coal-bed methane complain that the drilling process could contaminate the headwaters of the Kuskokwim River.The drilling process requires large © amounts of water,which often contains high amounts of salt,to be pumped to the surface from deep wells.There's also concem about the possibility of toxicheavymetals,deposited deep..underground,being brought to thesurfacewiththewater."«"What they've foundin 'theLower48,is that when you pumplargequantitiesofwaterit's usu- ally really high in saline which can contaminate vegetation and '-y affect-.wildlife,”'said MaraAccordingtoSt.George;the Bacsujlaky,a geologist with the .Northern Alaska Environmental CenterinFairbanks.-Though the coal-bed methane :process isa controversial one,St._George insists that there is littlerisktotheenvironment.-:This is not going to be a North :Slope-type operation.Really,itslikedrillingdeepwaterwells,”St”George said.Naniq has no plans to submit a new lease application until the State clarifies the permitting Photos by Jon Grover/Tundrd DrumsRep.Carl Morgan addresses the 15th annual gathering of the Kuskokwim Native Associationin Kalskag. Si 6 eat zefriendinsisotdrivingdrunkdowhateverit takes to'stop him.Because ithe k'Killsinnocentnocent people,hobhow.willyorlive with;urself?SA telFRIENDSDON'T LET FRIENDS DRIVE DRUNK. PT ee ee a -_aii 4 RARE magC Ma ade yoo2P Call your local ATS agent today-for.all.of your shipping nneeds. ATS is a native-owned company,leading the way in Innovative freight services in rural Alaska. :Why Wait? ANIAK BETHEL EMMONAK KOTZEBUE NOME ST.MARY'S UNALAKLEET 675-4295 543-3652 949-1377 442-3347 443-5482 438-2033 624-3200 : "ANCHORAGE __907-562-2227 Naniq Energy Co.LLC,9237 W.Parkview T.Lp.,Eagle River,AK 99577 (907)360-8728 Holitna Shallow Gas Development Costs Naniq Energy Co.LLC was formed in August 2003,for the purpose of developing a regional power supply.Naniq is co-owned by Holitna Energy Co.LLC (HEC)and The Kuskokwim Corporation (TKC).This partnership will ensure the field is developed in a way that both benefits and satisfies local shareholders and ensures local jobs. HEC brings to the partnership its State of Alaska shallow gas leases,which were applied for in May,2003,as well as its Alaskan management and development experience.TKC brings its nearby surface estate,construction and environmental expertise,its local shareholder work force,and a substantial!local knowledge base. The region currently has high unemployment,low annual wages,a high cost of living,including very high power costs.Development of a possible shallow gas supply in the Holitna basin would assist the region recover from many of its long- term economic woes.Not only would the development of a gas field provide jobs and less expensive energy,the field would likely ensure the development of the nearby Donlin Creek gold project,one of the largest undeveloped gold deposits in the world. A core drilling program,planned for March 2004 will assess the natural gas potential in the basin.With successful results from these first wells,the next step is production well testing.To accomplish this,a production drill and completion equipment will need to be brought into the basin along with a support camp and facilities. A budget for developing the field is summarized in the following table.These costs are based on the development of a moderate coal bed methane field.Well costs have been based on Department of Energy numbers used in the 1992 Annual EIA assessment multiplied by an "Alaskan factor.”Other costs are based upon Donlin Mine experience.This budget assumes the spring 2004 drill program is funded. 2004 2005 2006 2007 2008 2009 Total Personnel 555,000 525,000 500,000 500,000 500,000 500,000 Camp 663,000 658,000 508,000 458,000 440,000 440,000 Project Support 900,500 872,500 712,500 665,500 247,500 170,000 Fuel 165,000 235,000 215,000 175,000 175,000 175,000 Geophysics 750,000 Surveying 25,000 50,000 Air Transport 100,000 120,000 60,000 50,000 50,000 50,000 Heavy Equipment 785,000 350,000 50,000 60,000 70,000 70,000 Drilling 2,000,000 10,000,000 10,000,000 10,000,000 600,000 600,000 Environmental 149,000 240,000 205,000 205,000 205,000 205,000 Administration 90,000 345,500 335,500 300,000 300,000 300,000 Total $5,432,500 $14,146,000 $12,586,000 $12,413,500 $2,587,500 $2,510,000 $49,675,500 Approximate costs for developing shallow gas in the Holitna basin. Page lo Company hopes to find gas to fuel Western Alaska power plant ANCHORAGE --An Anchorage company and its Native corporation partner have applied to lease 31 square miles for shallow gas development on state land,in an area in Western Alaska. Holitna Energy Corp.seeks development in the Holitna basin,an area of moose-and fish-rich lowlands along the Holitna River about 300 miles west of Anchorage. News of the application came as a surprise to villagers along the nearby Kuskokwim River.Under state regulations,notice of the proposed lease was published in Anchorage and on the Department of Natural Resources Web site,and in a legal advertisement last May in a Bethel weekly newspaper. Villagers from Stony River to Bethel say the 60-day public comment period expired before most had heard of the plan. The leases must be approved,however,if the state Division of Oil and Gas finds they will "benefit the area."That could come this fall,a division spokeswoman told the Anchorage Daily News. The gas field developer promises to be sensitive to local concerns,such as protecting water quality and wildlife habitat.Phil St.George,co-owner of Holitna Energy Corp.,expects local support once people understand his plan. The ultimate goal of the development is to power the Donlin Creek gold mine 50 miles away. "I'm doing this to help get the mine going,"said St.George,who until this spring worked for NovaGold Resources Inc.,the company developing the mine.Donlin Creek is expected to bring as many as 500 jobs to the chronically impoverished region,he said. Neighbors will have to be convinced. The nearest residents are in Sleetmute,an Athabascan village about 15 miles northwest of the proposed gas fields.Pete Mellick,president of the Sleetmute Traditional Council,said village residents don't want the Holitna basin fouled. Holitna Energy hopes to explore this winter,St.George said,and could be in production within five years.The company is optimistic about finding free- flowing natural gas because the area appears to have the same geology as the gas-rich Cook Inlet basin,he said. Holitna has applied for leases on 31 square miles,but the development would http://www.oilandgasreporter.com/cgi-bin/printme.pl 1A/RII0N: Page 20 be confined to a smaller area,St.George said.Although it could take as many as 22 wells to power Donlin Creek Mine,shallow gas wells are usually spaced every quarter mile,St.George said. Once the field is developed,Holitna and the Aniak-based Kuskokwim Corp., a Native corporation representing 11 villages in the region,propose to build a 70-megawatt power plant adjacent to it,with power lines linked to the mine. Donlin Creek will require about 60 megawatts,leaving enough excess to power villages from Sleetmute to Bethel,St.George said. The field,power plant and transmission lines are expected to cost $75 million to $80 million. Click here to return to story: http://www.oilandgasreporter.com/stories/100703/ind_20031007012.shtml http://www.oilandgasreporter.com/cgi-bin/nrintme.nl tnininene nthorage Daily News |Gas develop - t plans take Kuskokwim residents by "rise Page 1 of 3 ad n .<om Print Page Close Window | Anchorage Daily News jas development plans take Kuskokwim residents by surprise ''ONCERNS:Holitna Energy Corp.applies to lease 31 square miles. y JOEL GAYnchorageDaily News Published:September 25,2003) ,popular moose hunting area in Western Alaska could be dotted with drill rigs and criss-crossed by pipelines if an AnchoragecompanyanditsNativecorporationpartnerfindnaturalgasneartheKuskokwimRiver. jolitna Energy Corp.has applied to lease 31 square miles of state land for shallow gas development in the Holitna basin,an rea of moose-and fish-rich lowlands along the Holitna River some 300 miles west of Anchorage. 3ut as was the case near Sutton,news of the 20,000-acre application came as a surprise on the Kuskokwim.Under state 'egulations that smooth the way for shallow gas development,notice of the proposed lease was published in Anchorage andyntheDepartmentofNaturalResourcesWebsite,and in a single legal advertisement last May in a Bethel weekly newspaper. Villagers from Stony River to Bethel say the 60-day public comment period expired before most had heard of the pian. The leases must be approved,however,if the state Division of Oil and Gas finds they will "benefit the area."That could come this fall,a division spokeswoman said. The gas field developer promises he will be sensitive to local concerns,such as protecting water quality and wildlife habitat.But Phil St.George,co-owner of Holitna Energy Corp.,expects villagers'fears will turn into support once they understand his plan.The ultimate goal of the development is to open the Donlin Creek gold mine some 50 miles away.- "I'm doing this to help get the mine going,"said St.George,who until this spring worked for NovaGold Resources Inc.,the company developing the mine.With Donlin Creek expected to bring as many as 500 jobs to the chronically impoverishedregion,he said,"It's really a good cause." Neighbors will have to be convinced. The nearest are in Sleetmute,an Athabascan village about 15 miles northwest of the proposed gas fields.Pete Mellick, president of the Sleetmute Traditional Council,said village residents have hunted,fished and picked berries in the Holitnabasinforgenerations,and they don't want it fouled. "That's where our main source of food comes from,”Mellick said."All the fish go that way.We've been hunting there for thousands and thousands of years." Sleetmute residents learned of the proposal the way most others on the Kuskokwim did,by word of mouth.Holitna Energy published one notice of its plans.The legal ad in the Tundra Drums on May 29 asked for comments on "the potential benefits”natural gas would have locally. With subsistence season just beginning atthe time,the ad slipped past almost everyone,said Greg Roczicka,director of natural resources for a Bethel-based tribal organization. "If you had purposely chosen a time with the intent of avoiding or limiting input,"he wrote to the division,"you could nothavedonebetter.This portrays either a huge lack of knowledge,disregard or complete insensitivity to life in rural Alaska." tase there adn cam/feanthy nrintarlotam:/ANNI1TA1nW_ANIAAANe html AMSINNNA Arthorage Daily News |Gas development plans take Kuskokwim residents by s»rnrise j Page 2 of 3 The state received six letters in the 60-day public comment i i iperiod,all in the final two i iticommenttimeorpublichearingsweredenied,said Jim Hansen,leasing director for the hision of Ol and Geen Unlike the Sutton area,where the comment period was extended,"There's no active drilling going on out there (on th e Holitna),so it didn't seem like (additional comment time)wa "i drilling around people's homes,”he said. )was necessary,"Hansen said.In the Mat-Su,"We're talking about Instead of providing public hearings,"We sent all the letters to Holitna Energy Corp.,recommending (St.George)hold to.wn meetings,"Hansen said.The meetings are not required,Han "age.do.It's just common courtesy,really.,sen added,"but we strongly suggested he do that.Most The state will make its leasing decision without additional j iinput,Hansen .ibenefitanarea,the law says the (division)director shall issvie the lesee if discovery of @ local source of gas would The division can put conditions on the leases,Hansen said." Tt | 'id."If the local people i inst i iit's a good idea for certain reasons,we're going to work with them and make sure its done night”against thy yer we think Holitna Energy hopes to explore this winter,St.George said,and could be in production within five years.The company is optimistic about finding free-flowing natural gas becaInletbasin,he said. g use the area appears to have the same geology as the gas-rich Cook Free-flowing gas is cheaper to develop than coal bed methane,h i,he said.G ipumpinggas-bearing water out of the ground,then separating the gas and water.in coal seams must be extracted Py If coal bed methane is found,the state could require Holitn inj fo 'a to reinject the wate i id hicompanywouldnotreinjectthewater,however,if it is drinking quality,and if the tare dows not demand it George sald his Holitna has applied for leases on 31 square miles,but th'e development would be confined to a small iitcouldtakeasmanyas22wellstopowerDonlinCreekMine,shallow gas wells are usually spaced ev or aan mee eeGeorgesaid.Laid out in a grid,that would cover less than two square miles very quarter miley St. Each well requires a gravel pad several hundred fe aa possibly water. et square for the well head,pump and pipeline connections for gas and Drilling the wells,building the facilities and installin ipeli i i , | g the pipeline will require roads.Although some SI 'resiwarnedthatpartsoftheHolitnabasindon't freeze,St.George said he doubts that will be 2 sroblem,ond that Tnuch of theconstructionwillbedoneinwinter.The company wil i : reused,he said. pany will use either gravel or temporary material that can be removed and Once the field is developed,Holitna and the Aniak-based K i 'd,uskokwim Corp.,a Native corporation repre i i itheregion,propose to build a 70-megawatt power plant adjacent to it,with power lines running some 60 mits to theenine Donlin Creek will require about 60 megawatts,leavi i said.g ,leaving enough excess to power villages from Sleetmute to Bethel,St.George The field,power plant and transmission lines are expected to cost $75 million to $80 million,said Kuskokwim Corp.chief executive officer Trevor Smee.He hopes to tap federal ua;; and mine jobs. P al grants and loans,citing the creation of more than 500 construction "This region is basically starving,"Smee said."There's n : to turn that around.” ever been an economy here since the Ice Age,and this is an attempt The Holitna group could find competition for federal funding.Calista Corp.,the region's Native corporation,last fall said it hoped to get federal aid to help build a coal-fi i i i Creek. p ired plant in Bethe!and run power lines 200 miles up the Kuskokwim to Donlin Both corporations say they're hunting for the least expensive way to open the gold mine and don't care who finds it http://www.adn.com/front/v-printer/story/4002101p-4023340c.html amenanr Anchorage Wally News |Gas development plans take Kuskokwim residents by surprise Page 3 of 3 Hunters and fishermen may be harder to convince that building an industrial complex in the heart of the Holitna basin is agoodidea.Smee said they need not worry. "This project is Only going to go forward if we can do it in an environmentally safe and sound manner.The last thing we'regoingtotolerateishavingthatlandspoiled." Daily News reporter Joel Gay can be reached at jgay@adn.com or at 257-4310. Print Page |Close Window Copyright ©2003 The Anchorage Daily News (www.adn.com) http://www.adn.com/front/v-printer/story/4002101p-4023340c.html | an«innna 'Energy Central-Printer Friend]Page 1 of 3 P ENERGY CENTRALROFESSIONAL Coal Bed Methane Emerges as Natural Gas Source By Dan Piller,Fort Worth Star-Telegram,Texas June 30 Natural gas explorers,seeking to drill their way out of a growing shortage of the fuel,are finding a new source in the coal beds they once punched through in search of the deeper reservoirs. Coal bed methane,which can be found as close as 2,000 feet below ground -compared with 10,000 feet or deeper for most conventional gas reservoirs -is emerging as a new source of natural gas at a time when North America is confronting the possibility of price-raising shortages of natural gas in the foreseeable future. "For years we drilled right through the coal beds,and now we realize that the growth in this industry might be very close to the surface,"says Glenn Darden,president and CEO of Quicksilver Resources of Fort Worth. Quicksilver has taken the lead in drilling for coal bed methane gas in Alberta.Last year Quicksilver pumped andmarketeditsfirsttestmethanegasandthisyearexpectstoputdown175newwellsonits500,000-acre lease.Those wells will add up to 15 million cubic feet to Quicksilver's 135 million cubic feet of gas production from its fields in Michigan and Indiana. Darden says he expects both the number of wells and production to increase significantly in the forseeable future. Nationally,8 percent of U.S.natural gas production is coal bed methane.Most of it comes from the San Juan Basin in northem New Mexico and southern Colorado,as well as fields in northern Wyoming and into Montana. But the U.S.Geological Survey says that up to 90 percent of the undiscovered natural gas in the continental United States is likely to be in the form of methane derived from coal.Most of that gas is in western and Rocky Mountain states.Another large coal bed field lies in Alabama. For years the methane gas trapped in coal was a liability,frequently the cause of deadly underground mine explosions.Miners typically vented the gas out of the mine shafts as a safety precaution. It was only in the past two decades that geologists,looking for new sources of natural gas,perceived that the methane in the coal could be extracted and added to the nation's natural gas supply. Coal bed methane gas has the same fuel quality as the gas taken from deeper reservoirs.It can be put in the same pipelines,run through the same processors and burned in the same generators and home furnaces and cooking stoves as conventional gas. And because the coal beds from which the methane is taken lie anywhere from 5,000 to 10,000 feet closer to the surface,an average well costs only about $150,000 to drill versus the $1 million or more for a well drilled to a deeper conventional reservoir., Quicksilver's investor relations director John Gremillion says the company thinks it is sitting on as much as 2 trillioncubicfeetofmethanegasreservesinits175-mile long tract in western Alberta. Quicksilver is betting a substantial part of its future on coal bed methane,and investors seem to like it.J.P.Morgan analyst Shannon Nome calls Quicksilver's Canadian operation a "company maker.”' Another analyst,Irene Haas at Sanders Morris Harris in Houston,says that "Quicksilver is capturing the niche for unconventional gas,which will be a catalyst for the company's growth.” Haas forecasts that Quicksilver's earnings per share,which were 69 cents last year,could jump to $1.45 this year and http://pro.energycentral.com/professional/news/gas/news printer friendly.cfm?id=3957321 7/1/2003 "Energy Central-Printer Friend Page 2 of3 $2.07 in 2004. Quicksilver stock traded in the $15-$17 range last October but has stretched to $24 in recent weeks. Quicksilver is enjoying a good run with its Canadian leases.But expansion of coal bed methane operations in the lower 48 still awaits a significant public policy debate over drilling on public lands. Of the 183 trillion cubic feet of natural gas yet to be discovered in the United States,more than 90 percent of it is so- called "unconventional”gas of the type Quicksilver is mining from coal in Canada,according to the U.S.Geological Survey's 2002 Oil and Gas assessment. But much of that untapped gas lies under public lands in Rocky Mountain states,where drilling has been prohibited. Darden and Quicksilver aren't getting out front on the public lands issue.But chairman Larry Nichols of Devon Energy of Oklahoma City,a major player in the San Juan Basin,said at a special natural gas summit conducted last week in Washington,D.C.,that "we are not running out of natural gas,and we are not running out of places to explore.What we are running out of is places where we are allowed to explore for natural gas." Opposition to drilling on the public lands is based on potential spoilage of the aesthetics of America's mountain wonderland and some environmental worries. In conventional oil and gas drilling,the oil and gas lie on top of water and the fuels can be extracted while leaving the water in place. But coal beds generally are permeated with salt water.Extracting the salty water creates disposal problems for the fluid,which can kill plants and contaminate waterways,environmentalists contend. The Oil and Gas Account-ability Project,an alliance of 16 environmental and natural resources groups centered inColorado,Wyoming and Montana,has formed to oppose coal bed methane drilling. In a statement,the group describes the effects of the early coal bed methane drilling:"Thousands of wells and roads have scarred vast landscapes,denuded wildlife habitat,contaminated drinking water,and methane and hydrogen sulfide seeps have forced some families from their homes.Domestic and stock wells have dried up and billions of barrels of produced water (often high in sodium,arsenic,and other contaminants)are being dumped on the surfaceandintorivers.Underground coal fires are the latest problem among a laundry list of devastating impacts.” Darden says the environmental question is solvable."This is really a simple matter,"he says."The water is reinjected back into the well after drilling.The techniques are proven." The qualms of environmentalists haven't prevented large-scale methane drilling in New Mexico,Colorado and Wyoming on lands that aren't protected. Wyoming alone has more than 5,000 coal bed wells drilled in the Powder River Basin.Another 2,200 wells have been drilled in southern Colorado around Trinidad and Durango. Texas,with little coal reserves except for the lignite in east Texas that is mined conventionally,is not likely to be part of the methane boom.But Quicksilver is eager to expand its activities. "|would anticipate that we will ramp up our activities in Canada and will be looking for other opportunities,”said Darden. To see more of the Fort Worth Star-Telegram,or to subscribe to the newspaper,go to http:/Awww.dfw.com (c)2003,Fort Worth Star-Telegram,Texas.Distributed by Knight Ridder/Tribune Business News.KWK, TOP httn://pro.energvcentral.com/nrofessional/news/gas/news printer friendlv.cfm?id=3957321 7/1/2003 Page 1 of 1 Karl Reiche From:PHIL ST GEORGE Sent:Monday,June 30,2003 6:11 PM To:Bob Charles Ce:Greg Bush;Karl Reiche Subject:request for text clarification Hi Bob, Gene and |enjoyed the meeting with you but we might have made it a little too brief,we would just like to confirm some of our discussions.It was mentioned there maybe state money available for the seismic survey and drilling.You requested detailed information on the operations needed to acquire this data.We would like to provide the text requested but need further clarification on the needs. We would like to know what agencies the lobbyists are approaching. We are interested in pursing public funds jointly with Calista for evaluating energy options in the Southwest region.You replied that this appropriation request is better accomplished through Calista or Nuvista and its'lobbyists.As every agency has told us,we need to come up with a unified plan and appropriations request,which is agreed upon by all the parties involved.Will this appropriation request be coordinated through the ADA Coordination Committee? We thought you stated that HEC would manage the data acquisition,which is essentially the expenditure of these funds.If the funds flow through Calista/Nuvista,how do you envision accomplishing this? You stated these funds will be through a research appropriation.We are unsure how to reconcile that statement with the request for operational details.What is the approach for research funds that you are seeking?This will better help us provide you with the text that is most appropriate and perhaps we can even help better develop the research goals. We understand you need this text by July 3.We will certainly be able to work within that time frame,|will be working on the text and will just await your reply to the above issues. Thanks,Phil 7/1/2003 \on |\-S. \\4 fyoERState=greens,Native=purples,(=dots)2|Federal=reds,gravity stations ((black lines).-7 ae4) >.J G-Il-o= Holitna Energy Corp.200 W.34th,Ste 1042,Anchorage,AK 99503 (907)360-8728 ph:I stgeorae.@ msn.Cor Holitna Basin Shallow Gas Summary May 23,2003 "$Medtrag.QLFWAYMTNae' 3 Sc ety £.'.a Psining tpociteafFees'chal.S6 cio cret”Q.ane.Be ef ek axed Oh!KMSrornySepeemberQ- yo ChE oa."yw3268.Turd L RY ioe.SHOT 'shhh ra13388"|BUTCH MIN, Sta tty "29634 @REAT "4580 Cha:te InsPye>RIDGE1f*Ssconarurpry:(XSOnoSeegaipe”MEay Summary Holitna Energy Corporation (HEC)was formed in April 2003,for the purpose of developing an energy supply for the Donlin Creek gold project,nearby settlements and potentially the region.HEC has applied for a state of Alaska Shallow Gas Lease.This lease will allow HEC to do seismic work and drill for any gas accumulations that exist,at least partially,within 3000 feet of th surface. The Donlin Creek gold project has a minimum and continuous power requirement of 50 megawatts.The Holitna basin is the most logical source of power for the project.A gas field would be the least expensive and most environmentally sound method of producing power.Diesel generation could be developed within the same time frame as developing a gas field and power plant,but other power alternatives would significantly increase the development timeline.for Donlin Creek.Diesel generation would have higher cost risks (long term contracts are not available).Other power alternatives would have longer development times and greater cost risks. Thick Tertiary coal horizons exposed to the northeast of the Holitna basin indicate the strong likelihood of coal in the Holitna Basin.Exposures of coal!beds as thick as 70 feet occur along a narrow but.continuous basin between two fault splays (branches)of the lengthy Denali Fault system.The Holitna basin is formed by a flexure (bend)in this fault system,the flexure opened a much deeper and more defined basin then those exposed to the northeast.Much older rocks,of Paleozoic age,exposed to the east and southeast of the basin probably also underlie the Holitna basin.These rocks are a potential source of kerogen and suggest the added potential for natural gas within the Holitna basin. Holitna Energy Corp's initial goal is to conduct a seismic survey over the lease area.Drilling will follow positive seismic survey results.Discovery of coal bed methane and/or natural gas will provide two choices for HEC.The company could sell gas for power generation,or generate and sell power. The cost of power generation is dependent on the gas field.If only an average- producing coal bed methane field is discovered,power could be generated and sold for approximately ¢7/KW/hr.A more productive coal bed methane field or natural gas field could lower the sale price of electricity. Donlin Creek is approximately 50 miles from the Holitna basin.Transmission of electricity to the project could be by conventional high voltage lines,or by less expensive single wire or direct current transmission.Land ownership between Donlin Creek and Holitna is favorable for rapid permitting and construction (figure 4).Power could be provided to several villages along the transmission route. 'seaueyoolosYul|uUOgPUeBUP|OHay}Jodewsnjeyspue",ounBi4\ 'Donlin ' i !; yw Reg Devil®2 oe .FederalLands -re °State Lands |:4 '_aa a Pox 4 miles kilometers t ' 4:Native Lands:yop!ae--rh i.';:eo.te "2-Stony Villagei"Sleetmute®o a i Ee, «JOARYBUYOHUseasoeHEC Shallow |Gas lease \:| Corporate Information Holitna Energy Corporation is an Alaskan "C”corporation formed with 10,000 shares.Approximately 3,000 shares will be distributed to the initial shareholders. The remaining 7,000 shares will be held in trust,to be used for future financing. The officers and directors consist of Phil St.George as CEO and Presidert, Eugene Piekenbrock as Vice President Exploration,David St.George,James St. George and John H.Alexander. An economic forecast for development of the field is in Appendix A.Costs were generated from government figures of other fields.Some comparisons were made to the Huntington and Orangeville coal bed methane fields,moderate sized producing fields in Utah. Donlin Creek Project Donlin Creek is one of the largest undeveloped gold resources in the world with over 25 million ounces of gold grading approximately 0.1 oz per ton.The economics of the project have been studied at two levels of production (milling/processing),20,000 tonnes (metric tons)per day and 30,000 tonnes per day.The 20,000 tonnes/day scenario has an estimated electrical load of 53.6 megawatts.The mine has probable life of over 20 years. The most likely alternatives for a power source other then Holitna are;1) constructing a diesel generation plant at or nearby the mine,2)constructing a coal fired plant in Bethel and 175 mile transmission line to the mine,3) constructing a 385 mile transmission line from Nenana and the existing power grid.Of these three,a diesel plant on or near the site is the most likely scenario. Constructing a diesel plant would have the shortest timeline of the three alternatives. Construction of a coal fired plant in Bethel requires construction of a 175 mile transmission line and the Nenana power grid option requires construction of a 385 mile transmission line.Both options will cross difficult land ownerships.This could result in significant delays for the project.Financing for these two projects would run the added risk of possibly competing with a nearby gas field (the Holitna Basin)undercutting their power cost. Other Power Consumers The current power consumption of the region,including Bethel,is approximately 5 megawatts.Power is primarily supplied by small diesel power plants in each town and village.These small plants are subsidized by the state and federal government. Holitna Basin The Holitna basin is located approximately 50 miles from Donlin Creek.The basin is defined by a 1983 gravity survey.A 1998 magnetic survey provides added information on the basin,but no surface exposures of rocks of the basin are known and no drilling in the basin has taken place yet.The gravity survey suggests the sediments within the basin are up to 15,000 feet deep.The basin is developed along the Denali fault,a regional strike-slip fault that extends for over 900 miles.The deepest portion of the Holitna basin has always held the greatest potential for oil,natural gas and coal. A deep basin,like the Holitna,forms from continuous and at times rapid down- drops which allows for both burial and preservation of abundant organic material. Deep burial of this organic material creates pressure and temperature conditions that are conducive to oil,natural gas and coal formation.Measurements of vitrinite reflectance in nearby coal and coal from other similar basins suggests the Holitna basin was probably not heated enough to create oil,so oil is not a primary target. Several government reports refer to graptolitic shales in Paleozoic rocks exposed east of the Holitna basin,these shales probably underlie the basin.Graptolitic shales are associated with gas formation.Natural gas could develop from these and other rocks and the coals within the basin and be trapped by geologic structures and formations. The depth of the basin suggests that significant coal could have formed in a sequence of down-dropping sediments and the coal should have undergone sufficient burial (pressure and temperature conditions)to create coal that could produce significant coal bed methane.Saturated ground conditions should preserve the gas within the coal seams. The Denali fault has coal beds exposed along it to the northeast at Cheeneetnuk Creek,Windy Fork River,Deepbank Creek,and Little Tonazona River.The fault system is apparently made up of two splays(branches),forming a graben (basin) between the two faults.Most of the coal occurrences are within the graben (figure 2).The width of the graben is variable,but the widest portions of the graben and the deepest basins,as suggested by gravity data over the Holitna and Minchumina basins are associated with flexures (bends)in the fault systems. These flexures form openings which continue vertically downward,and allow deep basins to form (figure 3).Seismic data in the Fort Yukon basin and anticlines exposed at Cheneenuk Creek and Little Tonzona suggests that compression within the basin is primarily accommodated by folding against thesoutheastedgeofthegraben(figure 4). 0 15 3000 NN PO Se sss \ :=Virorath «est "Roe eee,»miles Morty ts :iG02040”">4i kilometers ere 9 hoe Se ; :AS aAAC|;ss -ine ry )"5 Soy °.Ke>.D \Vnh _gravity anomalies.fs pS gSf}y (ie One is \ONS SeaPiINSSePORAeNESS J ,_\.&inferred graben\"2°"@e-/\ |{i.vf >sa Inferred graben'.Rs JN f (eh B/S.coal occurrences),44 \aePeON, Bey |hy|)ACD=A Zz\,I "4a,nee £g avityanomalies/Ss S_'(uiseq)usqeJBpeueyulyy'AyewoueAAeJ6puesaouainoo0|e09'Zzaunbi4 Denali fault,right lateral strike-slip movement. Graben formation from transtensional pressure. Cross faulting,causes offset on Denali. Continued movement on Denali fault system causes compression near cross faults. Northwest Southeast -Figure 4.Cross section of Fort Yukon Basin,from seismic interpretation. The presence and quality of the coal in the Holitna basin is unknown.But in the exposures to the northeast,the quality is variable from low grade to high grade bituminous.Coal in the Holitna should be comparable,but deeper burial,asexpectedintheHolitnawouldonlyupgradetheexistingcoal. Other Analogsin Alaska The Pioneer Unit,Alaska's first Coal Bed Methane (CBM)Unit;has just completed 8 wells for its preliminary development.It is located on the other side of the Alaska Range in similar setting in Tertiary beds were a graben with coals exists,the structure is an anticline bound by 2 reverse faults.Drilling has shown the gas formed in this basin is biogenic,and with depth vitrinite reflectance increases suggesting a minor thermogenic component. The Yukon Flats basin and Pioneer Unit are also being tested for coal bed methane and drillingis currently taking place in Yukon Flats,with rumors of free gas in at least one hole.The Yukon Flats and the Pioneer Unit,are along or near major strike slip faults that had transtensional conditions when these pull apart basins were formed and the coal deposited. In these basins the transtensional pressure regime went to transpressional in the late Tertiary forming anticline features along reverse faults by reactivating faults within the grabens and inverting the structure in these grabens from basin to anticlines.The inverted graben features forms an anticline in the Yukon area,as attested to by seismic data and are similar to gravity features we see in the Holitna basin.While it is not necessary to have flexures and inversion of the coal basin for coal bed methane,it does bring the coal closer to surface and provides for traps for free gas.Structural complexity also increases porosity which increases gas flow rates. In CBM reservoirs the trap for the gas is the coal itself wnere micro-pores retain the methane regardless of the structure of the coal beds.The necessary hydraulic head to keep the methane in the coal is all that is needed,Reservoir seals and hydraulic head conditions as good as those found in Yukon Flats and the Pioneer Unit are expected to be found in the Holitna basin. Recommendations A seismic survey should be conducted over the deepest portion of the Holitna basin with detailed focus on the southeast margin (Appendix B).The seismic survey should be designed to resolve coal horizons above 3000 feet.If possible the survey should also resolve natural gas reservoirs at greater depth. Concluding Statement Resource development,in Alaska,has been my vocation and avocation for the past 23 years.|was part of the discovery and development team for the Red Dog Mine during most of the 1980's.In 1987,I discovered Pebble Copper,and was project manager during the first attempt at development,when economic conditions shut down the effort.|was the driving force of NovaGold's purchase of Alaska Gold Company and its current efforts to develop Rock Creek.During these years |have been keenly aware of the successes and failures of development efforts at Greens Creek,Valdez Creek,the AJ Mine,Independence Mine,Fort Knox,True North and Pogo.This wide range of fist-hand experience expanded my knowledge of the process of resource development in Alaska, including social,economic,legal and permitting elements as well as the logistics and politics of working in remote parts of Alaska. As project manager of the Donlin Creek Project for the past two years,|became friends with many people in the region.Through intimate knowledge of the project |realized that the lack of power generation is the biggest issue preventing rapid development.This combination of a bond with the local population and desire to see Doniin Creek move forward,drives my interest in developing the Holitna basin.This clean,inexpensive source of energy will help improve the socio-economics of the region through sustainable development. Sincerely, ft GungePresident,Holitna Energy Corp Appendix A:HOLITNA ENERGY CORP.ECONOMIC FORECAST CAPITAL Government Capital Assistance Lease Acquistion »32 sq miles $65,000 Seismic Survey 30 line miles $1,100,000 (1,100,000.00) Number of Wells 20 wells $200,000 $4,000,000 Other capital yes $4,975,929 Reinjection Wells 1 wells $200,000 Generating Plant 50 MW $30,000,000 (15,000,000.00) Transmission Line 50 miles $25,400,000 (12,700,000.00) Total $36,940,929 Amortized Total Years 20 $74,157,295 Depreciation rate 8% OPERATING Production $/yr Cents/Kw/hr cost/yr Well Maintenance 11.66 Mmef/day $700,000 $0.0016 Generating Plant 50 MW $931,388 $0.0130 Transmission Line 50 miles $242,000 $0.0006 KVWV/hr per year 438,300,000 Total $37,467,750 $0.0152 $6,646,117 Amortized Total 20 $75,214,866 $0.0304 REVENUE Sales price of power Cents/Kw/hr Profit per KW/hr Profit/year Payback (yrs) 6 $0.0296 $12,956,211 5.7 7 $0.0396 $17,339,211 4.3 8 $0.0496 $21,722,211 3.4 9 $0.0596 $26,105,211 2.8 10 $0.0696 $30,488,211 2.4 Note:MW =megawatt,mcf =million cubic feet,KW/hr =kilowatt per hour,. Depreciation and amortization were calculated in very simple formulas,with no scheduling. ***These figures are based on development of a moderate sized coai bed methane (CBM)field,a more productive field,or free flowing natural gas would have lower capital costs,lower operating costs and improved revenue figures. Appendix B:Holitna Basin Proposed Seismic Survey -4--gravity stationsae" og_-<<6Stimated basin _é__, depthcontours,a '. ne kilometers Page 1 of 8 THIS SEARCH THIS DOCUMENT GO TO Next Hit Forward New Bills Search Prev Hit Back HomePage Hit List Best Sections Help Contents Display S.14 The Energy Policy Act of 2003 (Placed on Calendar in Senate) SEC.972.COAL TECHNOLOGY LOAN. There are authorized to be appropriated to the Secretary $125,000,000 to provide a loan to the owner of the experimental plant constructed under United States Department of Energy cooperative agreement number DE-FC-22-91PC90544 on such terms and conditions as the Secretary determines, including interest rates and upfront payments. Subtitle H--Management SEC.981.AVAILABILITY OF FUNDS. Funds authorized to be appropriated to the Department under this title shall remain available until expended. SEC.982.COST SHARING. (a)RESEARCH AND DEVELOPMENT-Except as otherwise provided in this title,for research and development programs carried out under this title,the Secretary shall require a commitment from non- Federal sources of at least 20 percent of the cost of the project.Cost sharing is not required for research and development of a basic or fundamental nature. (b)DEMONSTRATION AND COMMERCIAL APPLICATION-Except as otherwise provided in this subtitle,the Secretary shall require at least 50 percent of the costs directly and specifically related to any demonstration or commercial application project under this subtitle to be provided from non- Federal sources.The Secretary may reduce the non-Federal requirement under this subsection if the Secretary determines that the reduction is necessary and appropriate considering the technological risks involved in the project and is necessary to meet the objectives of this title. (c)CALCULATION OF AMOUNT-In calculating the amount of the non-Federal commitment under subsection (a)or (b),the Secretary may include personnel,services,equipment,and other resources. SEC.983.MERIT REVIEW OF PROPOSALS. Awards of funds authorized under this title shall be made only after an impartial review of the scientific and technical merit of the proposals for such awards has been carried out by or for the http://thomas.loc.gov/cgi-bin/query/F?c108:1:.temp/ c108gdBQ65:e468000:6/11/2003