Under pressure to push gas

Race for CO2 is producing dividends, environmental issues

The towering silhouette of Kinder Morgan’s drilling rig stands out among the rolling hills northeast of Cahone. The company operates about 100 carbon dioxide wells in Dolores and Montezuma counties and plans to drill two more wells this year. The company has two drilling rigs in Southwest Colorado and may soon bring in a third completion rig, said Coy Bryant, the company’s carbon dioxide production manager. Enlarge photo

JERRY McBRIDE/Durango Herald

The towering silhouette of Kinder Morgan’s drilling rig stands out among the rolling hills northeast of Cahone. The company operates about 100 carbon dioxide wells in Dolores and Montezuma counties and plans to drill two more wells this year. The company has two drilling rigs in Southwest Colorado and may soon bring in a third completion rig, said Coy Bryant, the company’s carbon dioxide production manager.

CAHONE – Coy Bryant had to raise his voice over the din of construction humming away behind him. Welders threw sparks in the air as they worked near a new compressor machine that will soon rev up to pressurize billions of cubic feet of carbon dioxide flowing from underground reservoirs here and push it along a 500-mile pipeline to Texas.

Bryant is the carbon dioxide production manager for Kinder Morgan’s Cortez office. The $115 billion pipeline company is also the largest producer and transporter of carbon dioxide in the nation. In Southwest Colorado, the company extracts and pumps 1.4 billion cubic feet of the gas per day from reservoirs in Montezuma and Dolores counties to oil fields in Texas and Utah.

Carbon dioxide injection has become a promising tool to revive production in aging oil fields, and with oil prices booming, Kinder Morgan’s business here is thriving. The company is currently undertaking a multimillion-dollar set of infrastructure upgrades, new construction and exploration initiatives that will allow it to increase and prolong production from local reservoirs. But in the race to supply more carbon dioxide to thirsty oil fields, the company has racked up dozens of environmental violations that have brought hundreds of thousands of dollars in fines.

“The operator was not hitting on all cylinders with regards to enforcement compliance,” Peter Gowen, an enforcement officer for the Colorado Oil and Gas Conservation Commission, said at a hearing Monday where Kinder Morgan was fined $220,000 for 30 environmental violations.

The gas’ promise

The sight of Kinder Morgan’s buzzing construction operations – new compressor stations and towering drill rigs – has become rare in this natural gas-dominated end of the San Juan Basin. It’s a striking visual of the local repercussions felt by a roaring oil market versus a sagging natural gas one.

While the carbon dioxide market has reached new heights, the technology has been around for decades. The use of the gas to boost oil production was pioneered in West Texas in 1972. Carbon dioxide is injected underground in between producing oil wells and serves to sweep through and loosen viscous oil so it flows more easily – like adding sparkling water to soda syrup, Bryant said. The technology, called carbon dioxide flooding, is a way to breathe new life into oil fields that have been producing for decades.

Carbon dioxide-enhanced oil recovery is now being used in oil fields in several Gulf Coast states, the Rockies and Oklahoma, spurring a demand that now outpaces carbon dioxide supply. The process produces 6 percent of total crude oil in the United States.

In Southwest Colorado, companies have been drilling for carbon dioxide for almost 30 years. Kinder Morgan took over the operations here in 2000. It oversees drilling and production in two units that together are estimated to contain almost 17 trillion cubic feet of carbon dioxide – one of the largest known supplies in the nation.

The 200,000-acre McElmo Dome Unit in Montezuma County encompasses about 80 wells, two-thirds of which are located in the Canyons of the Ancients National Monument. About six miles north, the 50,000-acre Doe Canyon Unit encompasses 17 wells.

Driven by booming carbon dioxide demand, Kinder Morgan is now looking to expand production capacity in the Doe Canyon Unit with a $250 million investment in new drilling, flow lines and new compressor stations. Company officials estimate the expansion will bring in $900,000 to $1.6 million additional property tax revenues to Dolores County, according to an article in the Four Corners Free Press.

Two 20,000-square-foot buildings near Cahone are the most visible evidence of Kinder Morgan’s new expansion. The buildings house two standard compressors and one booster compressor that are needed to squeeze the gas into a pressure high enough to push through pipelines to Utah and Texas. The facilities use 50 megawatts of power.

The company also is spending $6 million to perform 3-D seismic testing to better map the underground geography in the Doe Canyon Unit, helping the company pinpoint new drilling locations. It plans to drill 19 additional wells during the next 10 years, according to a 2012 financial report.

“We’re looking for anything to get us more CO2,” Bryant said.

Current estimates for the potential of carbon dioxide to boost oil production are impressive.

According to an analysis by the U.S. Department of Energy’s National Energy Technology Laboratory, carbon dioxide-enhanced oil recovery has the potential to unlock 24 billion barrels of technically recoverable oil in the lower 48 states, potentially doubling U.S. reserves, which are estimated at 25 billion barrels. The laboratory’s estimate must be verified through field testing, but the number has caused heads to turn.

“It’s potentially a really big deal,” said Judi Greenwald, vice president of technology and innovation with the Center for Climate and Energy Solutions, a nonprofit that focuses on the issues of energy and climate change.

Problems with compliance

On its website, Kinder Morgan proudly advertises its progress on a Target Zero initiative – zero safety, health and environmental incidents companywide.

Recent environmental violations, however, suggest the company’s Southwest Colorado operations are far from that goal. In February and March, the Colorado Oil and Gas Conservation Commission, which regulates drilling in the state, issued the company four notices of alleged rule violations outlining problems ranging from inadequate storage of drill cuttings to drill-pad sizes that exceeded their permitted area. The pattern of issues suggested the problems extended to other well sites as well, said Karen Spray, the COGCC’s Southwest environmental protection specialist.

The COGCC’s Gowen characterized Kinder Morgan as “not being particularly diligent to compliance issues,” before the notices were issued.

Since it was called out by the COGCC, Kinder Morgan has hired five new employees to oversee environmental compliance, drilling engineering and regulatory compliance. It also has implemented new pre- and post-drilling meetings, permitting meetings, new drilling and spill procedures and weekly rig inspections. The company added that several violations reflected temporary site conditions that were a result of moving to a closed-loop drilling system.

However, Bryant acknowledged that many of the notices of alleged violations identified areas where the company needs to improve.

“As in anything, there is always room for improvement,” he said. “We’re adding more oversight and more manpower. These things are not taken lightly.”

ecowan@durangoherald.com