Gas exploration planned in Houston area

Colorado-based Evergreen Resources Inc. plans to drill six to eight gas exploration wells in the Houston-Big Lake area by the end of 2002.

Evergreen has been buying up leases from companies that have drilled test wells in the area in the past, and last month the company purchased new leases from the Alaska Mental Health Trust.

"This experimental well drilling has been going on for eons out here but no one has been as aggressive as they're being now," said Steve Totten of the Big Lake Chamber of Commerce.

The neighborhood has noticed drilling in the past when lease holders built roads, drilled wells, capped the wells and left. Gas exploration has come and gone over the years. People who live in the Houston-Big Lake area take the news with a collective shrug when told that yet another company is showing up to drill.

Evergreen spokesman John Kelso said the company plans to spend between $3-5 million on its exploration project. The plan is to drill six to eight wells starting sometime next year. One of the leases Evergreen acquired from a previous Houston area prospector requires the company to drill six wells by the end of 2002.

"If those results look good then we will begin stepping up our efforts," Kelso said.

Kelso said his company has proven its expertise in coal-bed methane production, and might be better positioned than larger companies to make use of natural gas in the Valley.

"We didn't invent coal bed methane production. But we have really refined and improved on the techniques that are used to refine and produce it." Kelso said. "The nature of coal bed methane is that it takes attention to detail, and a willingness to experiment."

Evergreen has been growing fast in the past decade because of its success producing gas in Colorado's Raton Basin.

The Raton Basin operation makes up 100 percent of the company's current production, and the gas there, like the gas underneath the lower Susitna Valley, is coal bed methane.

Evergreen's proven gas reserves (the amount of gas the company knows it can produce for sale) have grown from 63 billion cubic feet of gas to 1 trillion cubic feet since 1996. About a third of that growth is from new acquisitions, Kelso said, but the rest is from new wells and better production at existing wells.

"We have been popular in the investment community," Kelso said of the company, which is publicly traded on the New York Stock Exchange.

The Raton Basin operation is growing rapidly, even while the company explores for similar gas sources in Alaska, Ireland, Northern Ireland, and Chile. Evergreen drilled 52 coal bed methane wells in the Raton Basin during this year's second quarter, bringing the total number of wells there to nearly 1,000. Evergreen estimates it has at least 1,000 additional wells to drill in the Raton Basin.

Demand for natural gas in the western states is what drove the growth in the Raton Basin field. Kelso said Evergreen is targeting Southcentral Alaska as the potential market for the gas under the Susitna Valley. There are no plans for export -- the gas will be sold through Enstar's pipeline grid.

It follows then, that only growing local demand could turn the Lower Susitna Valley into another Raton for the company.

In the meantime, locals might notice a drilling rig in their neighborhood next summer. Kelso said the Evergreen crews use a drilling rig that is truck mounted and "extremely mobile." He also said the company's experience in Colorado has made it expert at communicating with landowners and limiting the amount of disruption the drilling operation has on locals.

"We have been operating there for seven years, and we've even changed the location of some of the drilling sites occasionally," he said.

Locally, land-use regulations that might affect Evergreen's drilling sites vary from place to place. Some parts of the Mat-Su Borough have no restrictions at all, others require land-use permits from the borough or the state.

City boundaries for both Wasilla and Houston overlap Evergreen's gas rights holdings, so the company may be going through the public process there as well.

Kelso said he didn't know at this time the location of any sites that were certain to be drilled.

The September lease sale was the first ever by the state's Mental Health Trust, which was granted land and subsurface claims at statehood, and charged with parlaying those claims into income for programs that serve the mental health needs of all Alaskans.

The Trust offered about 200,000 acres of land in the Cook Inlet Basin at the lease sale, and received $365,000 in bonus bids for the right to explore and develop about 40,000 acres. The Trust stands to earn royalties from the gas should it ever go into production. The Trust also plans to offer similar sales on the Kenai Peninsula in the

future.