A Method of Appraising Lost Production for Mined-Through Coal-Bed Methane Wells

Abstract

The coalbed methane industry has become a prominent source of domestic natural gas, with its technology having evolved over the past 30 years. Whereas most coalbed methane wells are able to produce without major interruption over their economic lives, wells operating in an underground mining area are subject to being mined-through. If mine-through occurs, the productivity of the well is at least compromised, and may even be terminated. The economic consequences of mine-through may be relatively simple if mineral ownership and extraction rights are common for the coal and coalbed methane. However, if ownership is not common and a superior coalbed methane lease exists, the coalbed methane ownership must be compensated for lost production caused by mine-through. This paper presents a relatively straightforward method to calculate the value of the lost production caused by the mine-through. It uses technology from mining and petroleum engineering, as well as simple economics and financial management techniques. © 2006 Canadian Institute of Mining, Metallurgy and Petroleum. All rights reserved.