Natural gas reefs spark activity in East Texas

ATHENS, Texas -- Nearly 70 years after the great oil strikes that transformed East Texas from a hardscrabble farming area into a mother lode of oil wealth, natural gas formations called Cotton Valley pinnacle reefs are renewing activity in parts of a region whose better days seemed past.

"It's definitely a play that's revitalized exploration in the whole East Texas basin," says Scott L. Montgomery, a petroleum consultant in Seattle who has studied the area. "It's brought attention to areas that were previously deemed past their prime."

Pinnacle reefs, named for their characteristic spire shape rising from a large base, formed in the seas that covered the region during the dinosaur-friendly Jurassic Period 180 million years ago. Their depth -- 2 to 3 miles down -- and skyscraper-like shape makes them hot, overpressured, hard to find and expensive to drill, with wells costing $1.5 million to $5 million apiece. But the rewards can be colossal. A successful pinnacle reef well produces at least 12 billion cubic feet of gas over its lifetime, and the best ones produce upwards of 40 billion. These days, one billion cubic feet of natural gas is worth about $1 million after operating expenses, royalties and taxes. Good wells can generate $50,000 per day after expenses. The high returns have made feasible the use of a technology called three-dimensional seismic surveying, in which workers map out grids covering hundreds of square miles, then drop explosives into holes drilled along the grid and record the vibrations. The process generates three-dimensional computer-driven sketches of rock formations far beneath the earth's surface. Brad Bacon, project manager for seismic surveyor Schlumberger Geco-Prakla, concedes the process is expensive -- amounting to tens of thousands of dollars per square mile. But surveyors and drillers alike say 3-D dramatically increases the odds of puncturing one of the elusive reefs. A few gas wells drilled around Robertson, Leon and Freestone counties in the early 1980s yielded impressive results, but their owners didn't realize what kind of structures they had hit and had trouble replicating their outcomes. "We looked at our success rate and said `We don't understand what makes this work. This is like gambling at the casinos,'" said John Applegath, who oversees activity in the region for Union Pacific Resources of Fort Worth. "We decided it's not for us until there's something more scientific about it than just rolling the dice." Three-dimensional seismic surveying already had helped reveal large deposits in West Texas and the Gulf of Mexico but was new to East Texas, where the shape of the oil basin had made it unnecessary. Eventually it showed the new gas wells had been lucky reef strikes. The current "fairway," or main area of activity, is 6 to 10 miles long and up to 75 miles long stretching northeast through Robertson, Leon and Freestone counties. As of July, 26 discoveries had been reported out of 47 wells drilled on reef targets, for a 55 percent success rate, Montgomery said. That's good but not as great as initially forecast, leading some operators to revise their expectations downward. But given the overall numbers, hopes are still high. Initial production rates have varied from 4.3 million cubic feet of gas a day to as high as 57.5 million. Overall, at least 550 billion cubic feet have been discovered. Some citizens worry about the health effects of removing hydrogen sulfide, also known as sour gas, from such high volumes. The lethal gas, known for its distinctive rotten-egg odor, can be unleashed through improperly secured wells, pipelines and natural gas treatment plants. Pinnacle Gas Treating, a subsidiary of Denver-based Western Gas Resources, seeks a state permit to increase emissions of sulfur dioxide in Anderson County from 4,400 pounds daily to 572,000 pounds, according to the Texas Natural Resources Conservation Commission. Sulfur dioxide, a sour-gas processing byproduct, is a heavy, colorless suffocating gas used as a bleach, disinfectant and preservative. The plant is only about two miles from a campus of 650 students and 100 teachers, worrying school officials and others in the unincorporated community of Cayuga. But Lee Hinman, Pinnacle's environmental manager shepherding the permit through the approval process, says he doesn't think the plant poses a hazard. "A lot of people are concerned about things they don't know about, and we try to give them as much factual information as we can," he said. A hearing is set for Oct. 21.

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