MEMORANDUM

Date: January 10, 2008 To: James Covington, III, U.S. EPA From: Anne Jones, ERG Subject: Compilation of Survey Universe Using HPDI, Inc., and State Data, with Summary

Information (Update2)

This memo presents the methods used to compile survey uni verse information along with summary data. ERG downloaded data from HPDI, Inc., and certain states, compiling these data in 20 separate databases, organized by state, due to the large size of some of the da tabases (HPDI data includes historic monthly production data for every well downloaded). A combined dat abase that includes all states with commercial CBM development has also been prepared that provides the ke y well descriptor fields from HPDI (or equivalent state data) along with two fields created p rimarily from querying the HPDI production databases for the downloaded wells in each state (or, in some case s, using data obtained from state sources). These two fields provide 2006 total water and gas production data ( where available) for each well in the combined database.

Section 1 of this memo summarizes the general data col lection/data cleaning approach to compiling the larger sets of databases. Section 2 discusses the spec ific details of specialized handling of data in certain states. Section 3 discusses the development of the more streamlined survey universe database that combines all of the state data collected by certain key data fields. Section 4 then presents several summaries of information extracted from the database. S ection 4.1 summarizes the numbers of active wells/leases in the survey universe database by state and, within each state, by basin. Section 4.2 summarizes the number of operators of active wells or leases in each state and basin. Section 4.3 presents the 2006 production by state and basin represented in the data base.

1. Data Collection/Data Cleaning

ERG licensed database information on historic well pro duction from HPDI, Inc. (HPDI, 2007a). HPDI, Inc., compiles information from nearly all of the oil and gas producing states and provides detailed data in a consistent format to clients accessed through a web-ba sed query system. For nearly all of the CBMproducing states, we collected the information by querying HPDI’s U.S. Historical Production Database. We entered the state and then selected both the CBM and COALBED METHANE flags. HPDI indicated that DOE provides information that helps HPDI create these flags (HPDI, 2007b), although the states often have their own flags in their data. This procedure, for the most part, generated all CBM well information available in the HPDI system, for all CBM wells in t he HPDI system whether actively producing or not. 1

The states for which HPDI provided some or all of the s urvey universe data include:

1) Alabama 2) Arkansas 3) Colorado 4) Kentucky 5) Kansas 6) Louisiana 7) Mississippi 8) Montana 9) New Mexico

1 HPDI, however, only maintains wells in their system for 5 years if no production activity has been reported, so this information is not useful for compiling a history of numbers of CBM wells ever producing.10) North Dakota 11) Ohio 12) Oklahoma 13) Pennsylvania 14) Texas 15) Utah 16) Virginia 17) West Virginia 18) Wyoming

Of most importance to the EPA analysis, this informa tion includes:

• Well identification information (such as API number, l ease name and number, well name and number, operator name, location, basin designation, 2 field, and reservoir/producing formation),

• Historic production information (including summary info rmation on first production, last production, cumulative production, and last 12 months producti on as well as detailed information on year-by-year production), 3

• Operator contact information (where available).

The HPDI system allows easy downloading to a variety of database types. ERG chose MSAccess for managing the database, and downloaded all of the data availab le for each state, typically including both active and inactive wells. A total of 9 files were a ssociated with each state’s download, although not all files contained data. At a minimum, these files cont ained the well descriptor information and the production information.

The next step in constructing the survey universe databa ses was to identify the actively producing wells, since the files contained both active producers, as well as plugged and abandoned and other inactive wells or leases. There is a status flag (e.g., active/ina ctive) that can be used in the HPDI data queries. Conversations with HPDI indicated, however, that the st ates generally do not update status very frequently. We discussed the approach of using any reported production fr om 2007 as an “active” flag. HPDI confirmed that this is how they generally identify “acti ve” wells when they report information. HPDI also indicated that some leeway for reporting lags needs to be m ade. A report of production any time during 2007 probably allows sufficient leeway for reporting lags in most states (see below for exceptions to this) (HPDI, 2007b). Thus, the final databases have an active fl ag created by ERG based on (with a few exceptions) whether the well produced at some time during 2007. ERG has selected wells most likely to have been producing during the potential time frame of the analysis to define the survey universe, since active wells will always point to an actively producing C BM project, but inactive wells could point to entire projects that are no longer producing, which woul d not provide useful survey information.

Following the identification of active wells, ERG determ ined that duplicate API numbers (generally indicating one well bore with more than one completion or a side track) were present in some instances. Some of these duplicates involved a completion that was cu rrently active and a completion that was either flagged inactive or had been reporting 0 production for at l east the last 12 months. 4 ERG assumes that because one of the completions is active, the producer p rovides information for all completions, even if not producing. Thus, in some cases, the duplicates appear to indic ate wells that were recompleted, with production from only the most recent completion. Because the active completion is effectively the

2 Basin definitions based on HPDI data are made on a count y basis; there may be some discrepancies from geological definitions, if operators make this distinction

. 3 Month-by-month production information can be accessed, b ut for EPA purposes, ERG considered yearby-year production data to be sufficient.

4 Where duplicates are not a concern, a well reporting 0 p roduction is not considered inactive; short shutins are common due to a variety of factors, so this doe s not necessarily mean that the well or its economic unit are inactive.producing well from EPA’s perspective, only this completi on is marked active and used in the universe

database. Other duplicates are all active, particularly i n the New Mexico portion of the San Juan Basin. These duplicates are kept in the main universe database, b ut are not counted as separate wells in reporting summary information. The production from the all complet ions is, however, summed into the 2006 production data summary.

Prior to or during the HPDI data acquisition, ERG also o btained data from some of the states. These data were used to augment, check on, or complete the data colle ction for the survey universe database. These activities are discussed further in Section 2.

2. Data Compilation Issues By State

The following sections present issues that we encounter ed in developing a state’s survey universe database, where issues arose. If no issues arose, and we used HPDI ’s data as discussed in Section 1, no discussion is presented.

Alabama

Alabama recently updated their site to provide data on wel ls specifically flagged as CBM (previously, wells in the Pottsville Coal Interval could be called up to appr oximate wells considered CBM wells). These data included a number of wells that were newly permitted (aft er HPDI’s most recent acquisition of production data in May 2007). Of these, 15 were flagged as currently pro ducing in the State’s status field (the remainder may be in the process of drilling or are permitted but not yet active). As these are new wells, it is assumed that the status report is up-to-date and that t hese producing wells should be added to the HPDI group, even though we have no actual production data at this time.

Additionally, there are 12 actively producing wells that a re found in the HPDI database that are not reported as CBM wells in the Alabama state data. One of these is clearly an offshore well, based on all data in the record, with the exception of the CBM flag. We deleted this record from the Alabama data. There were also 3 wells identified with production data that includes oil. CBM wells might be assigned liquids (oil or condensate) production at a point of sale, while not actually producing liquids. It is useful to note, however, that most of the state permits for CB M wells listed by the state are appended with a “-C” after the permit number. None of these wells has a “ -C” permit number. We are keeping these wells in the database, however, unless the state confirms that if the permit does not have a “-C” designation, it is not a CBM well. Possible Action Item: Check with Alabama about whether the lack of a “-C” designation means that the well is clearly not a CBM well.

Arkansas

Arkansas data from HPDI are reasonably consistent wi th state data; the HDPI data appear to be newer than the state data. One operator, XTO operates a 2-complet ion well marked as CBM. This well is questionable, since it is in the middle of one of XTO’s major gas f ields. The remaining CBM wells are all operated by CDX. The state data indicates only CDX as the active CBM producer in the state. DOE does not list the field, Cecil, as a CBM field in the Oil and Gas Field Master List. The record has not been deleted, however. Possible Action Item: Contact XTO to enquire about this well prior to sample selection.

Kentucky

None of the wells listed as CBM wells has produced in t he last several years, according to HPDI data. Kentucky at this time is considered a state with no comm ercial production, but CBM development-ready. Other states such as this include Mississippi, North Dakota (see below), Oregon, and Alaska, among others that will be researched separately from this survey database effort. Surveying operators using the type of questionnaire currently under development that are involved st rictly in noncommercial pilot operations or exploratory drilling will provide very little useful infor mation, and a different approach for assessing impacts on newly developing regions is likely to be needed. Action Item: Contact with Kentucky (andother similar states) might be useful to determine the status of CBM development. Further direct contact

with any identified operators undertaking exploration efforts may also be useful.

Illinois

Illinois data are not available from HPDI. ERG conta cted the Illinois State Geological Survey, which prepares data at public request. The data do not include an y current production information, but do include information on initial production. The contact at the Ge ological Survey provided a group of 442 wells that were flagged as coalbed methane related (Illinois State Geological Survey, Illinois_header_442.xls). The status code of CBM or CMM (coal mine methane) were identi fied as the key status codes (the other status codes generally indicated plugged, abandoned, unknown, coa l test wells, vents, dry holes, and other unproductive wells, and a search for ever productive wells showed that only CBM, CMM, or plugged CBM or CMM wells were considered ever-productive, according to initial production numbers). ERG identified 50 CBM or CMM wells that apparently were ever productive. To be conservative, however, 6 wells that were permitted and completed in 2007 were also considered potential producers, to account for reporting lags. Many of these 56 wells, however, may not have produc ed within the last year. Nineteen wells showing initial production, however, were permitted since 2000 and are likelier to be currently active. The Excel file was converted to Access and field names renamed to match the field names in the HPDI databases for inclusion in the combined survey universe d atabase (permit date in this file was renamed completion date, since this was the only approximately equi valent date field in the HPDI database field names).

Indiana

Indiana well information is not available from HPDI. The Indiana Geological Survey website database ( http://igs.indiana.edu/pdms ) was queried, and all wells meeting query checks of “act ive” and “Penn. Coal Gas Wells” were downloaded (if “active” was not checked, 5 additional wells would have been downloaded). Production information by well is not availabl e (production is only available on a field basis), but the data identifies the operator. This file, originally downloaded in Excel, was converted to Access and field names were renamed to match those in t he HPDI databases for inclusion in the combined survey universe database.

Louisiana

HDPI data did not have a CBM flag available for Louisian a data. ARI, Inc., provided the name of an operator producing CBM, and they believed the operator was producing only CBM (Southwestern Energy Production Company) (ARI, 2007). This company was noted as h aving 10 active wells. These were all producing from the Reynolds Coals. Additionally, severa l other wells (17) were identified as producing from coals (Wilcox Coal or Wilcox Coals, in the data fi eld “RESERVOIR”). These were added to the 10 wells, for a total of 27 wells. This number roughly match ed the number of CBM wells ARI recalled producing in Louisiana.

Mississippi

Mississippi shows no production for 3 wells listed as CBM wells. The status recorded in the database is drilling.

North Dakota

HPDI lists one well with inactive status in North Dakota. No production is reported for this well.

Ohio

Ohio reports only at the end of each calendar year, so active wells were identified in this state on the basi s of reporting production as of 12/2006. The data appear similar to, but more complete than, data identified on a West Virginia site summarizing Appalachia Basin CBM development( http://ims.wvgs.wvnet.edu/website/pttc/viewer.htm ) and an Ohio website database of oil and gas (which

lacked the CBM flag at the time of downloading) (files ca n now be found at ftp://ftp.dnr.state.oh.us/Geological_Survey/POGO/

.

West Virginia

Active wells were identified in West Virginia on the basis of merging data on CBM production in 2006 by operator and API number, 5 which were provided by WVDEP (Martin, 2007), into well identi fication data provided by HPDI, since HPDI had not yet obtained the 2006 data from West Virginia and the HPDI database does not have an adequate CBM flag. A total of 337 wells were found in the HPDI database, out of a total of 453 wells listed by the WVDEP as producing in 2006 (reduced to 449, once duplicate API numbers were accounted for). The 112 wells that were not found in the HPDI database are included in the merged database, although they have less complete inform ation. Operator, 2006 production, and API number are all available, however.

Virginia

For Virginia, HPDI did not have a CBM flag. The Virgi nia Department of Mines, Minerals and Energy, Oil and Gas Division operate an online database from whic h several groupings of coalbed related wells can be flagged ( http://www.dmme.virginia.gov/dgoinquiry/frmMain.aspx?ctl=1 ). The only two flags associated with any records were those for coalbed metha ne wells and coalbed methane wells with pipelines (others, such as for horizontal coalbed methane wells and dual completion gas/coalbed methane wells, had no records). ERG downloaded the data for all of the wells identified as “completed” CBM producing wells in the online database. Because this inf ormation did not indicate which wells were active, we then uploaded the API numbers for these wells into th e HPDI database to identify the CBM wells within that database, using reported 2007 production to identif y active wells. Out of 496 completions, 325 wells were considered active given 2007 reported production. We then downloaded all HPDI information for these wells. We also downloaded all Virginia well an d production information from HPDI because of our concern that there could be additional CBM wells in th e state. CNX has many leases/wells named with CBM in the name that are not flagged as CBM in the Virgi nia database. We compiled a list of wells with either a well name or lease name with CBM somewhere within the name. If these wells are actually CBM wells, we would have a count of 1,606 active wells. One is sue to note for Virginia is that a number of identified CBM wells have missing API numbers in the HPD I database. These wells can be identified by well names, however. Possible Action Item: Since we have a contact with CNX establi shed through the Virginia site visit, it would be useful to ask our contact at CN X about the wells/leases with CBM in the name. It would also be useful to talk with the state about how they are flagging CBM, if these additional CNX wells are actually CBM wells.

3. Compilation of Final Universe Database

For ease of use, ERG compiled a smaller, more manageabl e database for use in survey stratification and sample selection, using only those data needed for possibl e stratification purposes. The database includes data from all states with active (2007) wells. Data fiel ds used include state, basin, API number, field, reservoir, whether the information represented a we ll or lease, the lease number, the well name, the operator name, first production date, last 12 months of production of water and gas (Mcf), longitude, latitude, location (township-range) and 2006 production of wa ter and gas (Mcf).

5 API number is a unique well identifier at the 10-digit lev el. It is composed of a 2 digit state identifier, a 3-digit county identifier, and a 5-digit well identifier. Additional digits may also identify completion/production zones in an individual well bore. W here the state provides data on lease production only, the API number represents either the only well or one of the wells operating on that lease (HPDI, 2007).4. Data Summary Information

4.1. Counts of Active Wells or Leases

Based on the work completed as discussed in Sections 1 thr ough 3, Table 1 summarizes the numbers of active CBM wells or leases in each state, by basin. N ote that in Kansas and Oklahoma, data are provided by the states only at the lease level; there may be more than one well on a lease in these states, so the total count of wells may understate wells due to this factor.

States and basins are listed even if no active wells or leases were found if the wells/leases listed in the HPDI database were classified as CBM wells. This has been done so that EPA might know where some exploratory activity is taking place or where more info rmation gathering might be needed. These states were discussed briefly in Section 2.

As the table shows, over 43,000 wells were active CBM p roducers in the U.S. as of mid-2007.

4.2. Operators of Active Wells in Each State by Basin

Using the databases developed as outlined in Sections 1 thro ugh 3, Table 2 presents a count of operators of actively producing CBM wells by state and basin. The to tal number of operators shown for each state and overall are not additive, since many operators operate C BM projects in several basins and states. Given the numbers of duplicates, the number of unique operators is expected to be approximately 400.

4.3. 2006 Production by State and Basin

ERG undertook a database query of the downloaded state datab ases determining the total 2006 production from all wells active in 2007. These results are shown in Table 3. Production data are not available for Indiana and Illinois; production data from Pennsylvania a re from 2001. Total production for the active 2007 wells totaled 1.77 trillion cubic feet (Tcf) in 2006. The se figures show an increase over the reported 2005 production of 1.73 Tcf (EIA, 2007), even before other 2006 pro duction from wells not producing in 2007 and the wells in states not reporting production is counte d.

References

ARI, Inc., 2007. Meeting among ARI, ERG, and EPA to disc uss CBM Survey effort, November 13.

EIA, 2007. Energy Information Administration, http://tonto.eia.doe.gov/dnav/ng/ng_enr_cbm_a_EPG0_r52_Bcf_a.htm , downloaded December 11.

HPDI, Inc., 2007. Data downloaded from HPDI’s U.S. Histo ric Production databases, October 18, 2007 through November 17, 2007.

HPDI, Inc., 2007b. Telephone call between ERG and HPDI helpline staff, October 25.

Illinois State Geological Survey, 2007. Data provided to ERG as Excel file, named Illinois_header_442.xls.

Martin, 2007. Email from James Martin, WVDEP, to Anne Jo nes, ERG, dated September 28.Table 1. Number of Active CBM Wells or Leases State Basin Number of Active Wells/Leases Black Warrior Basin 4,771 Cahaba Basin 313 Alabama

Alabama/Florida/Mississippi Salt Dome Basin 6 Arkansas Arkoma Basin 46

Raton Basin 2,119 San Juan Basin 1,736 Uinta-Piceance Basin 137 Colorado

Green River Basin 7 Illinois Illinois Basin 56 Indiana Illinois Basin 85

Cherokee/Forest City Basin 2,365* Anadarko Basin 2* Kansas

Salina Basin 3*

Appalachian Basin 0 Kentucky Illinois Basin 0 Louisiana Arkla Basin 27 Mississippi Alabama/Florida/Mississippi Salt Dome Basin 0

Powder River Basin 877 Montana Sweetgrass Arch Basin 1

San Juan Basin 4,746 New Mexico Raton Basin 617 North Dakota Williston Basin 0 Ohio Appalachian Basin 22

Arkoma Basin 1,373* Oklahoma Anadarko Basin 1,211* Pennsylvania Appalachian Basin 221

Permian Basin 6 Texas Gulf Coast Basin 2 Texas

Ft. Worth Basin 1 Utah Uinta-Piceance Basin 831 Virginia Appalachian Basin 324-1,606** West Virginia Appalachian Basin 449

Powder River Basin 19,313 Green River Basin 280 Wind River Basin 20 Wyoming

Big Horn Basin 1 Total (wells plus KS and OK leases) 43,250+ *Count of leases, not wells. **Virginia is presented as a range because of the issues discuss ed in Section 2. +Includes 1,606 Virginia wells. Source: Survey universe database compiled using HPDI, Inc., a nd some state data.Table 2. Count of Operators by State and Basin State Basin Number of Active Operators

Black Warrior Basin 14 Cahaba Basin 2 Alabama/Florida/Mississippi Salt Dome Basin 2 Alabama

All Basins 18 Arkansas Arkoma Basin 2

Raton Basin 8 San Juan Basin 20 Uinta-Piceance Basin 13 Green River Basin 3 Colorado

All Basins 35 Illinois Illinois Basin 11 Indiana Illinois Basin 10

Cherokee/Forest City Basin 49 Anadarko Basin 2 Salina Basin 3 Kansas

All Basins 54

Appalachian Basin 0 Illinois Basin 0 Kentucky

All Basins 0 Louisiana Arkla 4 Mississippi Alabama/Florida/Mississippi Salt Dome Basin 0

Powder River Basin 3 Sweetgrass Arch Basin 1 Montana

All Basins 4

San Juan Basin 57 Raton Basin 2 New Mexico

All Basins 59 North Dakota Williston Basin 0 Ohio Appalachian Basin 2

Arkoma Basin 53 Anadarko Basin 67 Oklahoma

All Basins 111 Pennsylvania Appalachian Basin 12

Permian Basin 1 Texas Gulf Coast Basin 1 Ft. Worth Basin 1 Texas

All Basins 2 Utah Uinta-Piceance Basin 8 Virginia Appalachian Basin 4 West Virginia Appalachian Basin 18

Powder River Basin 79 Green River Basin 17 Wind River Basin 6 Big Horn Basin 1 Wyoming

All Basins 103 Total* 457 *Total reflects many possible duplicate operators across multiple states. Source: Survey universe database compiled using HPDI, Inc., a nd some state data.Table 3. 2006 Production from All Wells Active in 2007 by St ate and Basin.

State Basin Total Annual 2006 Production (MMcf) Black Warrior Basin 113,235 Cahaba Basin 2,755 Alabama

Alabama/Florida/Mississippi Salt Dome Basin 7 Arkansas Arkoma Basin 2,454 Raton Basin 95,256 San Juan Basin 413,309 Uinta-Piceance Basin 5,393 Colorado

Green River Basin 2 Illinois Illinois Basin NA Indiana Illinois Basin NA Louisiana Arkla 138 Cherokee/Forest City Basin 23,503 Anadarko Basin 32 Kansas

Salina Basin 45 Appalachian Basin 0 Kentucky Illinois Basin 0 Mississippi Alabama/Florida/Mississippi Salt Dome Basin 0 Powder River Basin 11,712 Montana Sweetgrass Arch Basin 17 San Juan Basin 505,516 New Mexico Raton Basin 26,399 North Dakota Williston Basin 0 Ohio Appalachian Basin 322 Arkoma Basin 36,398 Oklahoma Anadarko Basin 11,203 Pennsylvania Appalachian Basin NA Permian Basin 169 Texas Gulf Coast Basin 5 Texas

Ft. Worth Basin 14 Utah Uinta-Piceance Basin 76,664 Virginia Appalachian Basin 34,004 West Virginia Appalachian Basin 19,020 Powder River Basin 374,090 Green River Basin 14,026 Wind River Basin 1,856 Wyoming

Big Horn Basin 19 Total 1,768,794 Source: Survey universe database compiled using HPDI, Inc., a nd some state data. Note: This does not represent all CBM production in 2006. S ome production is not reported because of wells producing in 2006 that did not produce in 2007. Additionally , 2006 production data are not available from Pennsylvania, Illinois, and Indiana. Virginia productio n reflects the 1,606 well-count figure.