Data compiled by North Carolina Geological Survey (NCGS) researchers about shale gas prospects in the Deep River Basin of North Carolina has sparked a land rush in yet another potentially big onshore gas play.

NCGS researchers Jeffrey C. Reid and Kenneth B. Taylor explained why the basin holds the potential to provide modest competition with the big daddy shale plays in their report, "Shale Gas Potential in Triassic Strata of the Deep River Basin, Lee and Chatham Counties, North Carolina with pipeline and infrastructure data."

The basin has long been a draw for the energy world -- but not for gas. However, NCGS chief Kenneth Taylor said gas deposits surely run through the basin. "There's gas out there," he said.

His certainty comes from the basin's history. The Egypt Coal Mine, which was the oldest of several mines built in the Deep River Basin, opened in 1852, and the coalfield ran through Lee, Moore and Chatham counties. During the Great Depression many families sold the mineral rights to their property to help pay for taxes, and additional coal mining operations were established in the 1930s. By 1952 most of the mines had closed and they were remediated in 1987.

The coal mining exploration data has opened a window for exploration of natural gas. The NCGS is using the coal mining data first because wells were drilled in 1998 to test for oil, said Taylor. Nothing came from the oil exploration, but the NCGS tested a couple of the shut-in wells and found that total organic carbon of the shale gas in Lee County averages around 2.5%, "in the good category," he said. "It's prime for gas."

The Deep River Basin runs along a 150-mile fault in central North Carolina across Lee and Chatham counties in what was once a swath of rich tobacco fields. The basin is divided into three sub-basins, Durham, Sanford and Wadesboro. The Sanford Formation contains red and gray siltstone and shale; the Cumnock Formation is a black shale with some beds of gray shale, sandstone and coal; and the Wadesboro (Pekin) Formation has gray sandstone and shale.

According to the NCGS, the Cumnock Formation includes an 800-foot thick interval of Upper Triassic (Carnian) organic-rich black shale extending across 25,000 acres, at depths of less than 3,000 feet in the Sanford sub-basin, Lee and Chatham counties.

"Organic geochemistry and thermal maturation analyses indicate that the black shale in the Cumnock Formation is gas-prone," said Reid and Taylor. "The Cumnock Formation contains systematic fractures that are observable in outcrop, in drill cores and on 1:24,000-scale geologic maps...The primary fractures trend northwest, whereas the conjugate fractures trend northeast."

"Six of 28 wells (including old coal holes) drilled in the Cumnock Formation have reported natural gas and oil shows, and two shut-in wells have reported pressures of 900 pounds/square inch (psi) and 300 psi," said the researchers. One of these shut-in wells (Butler #3) is located within 3.5 miles of a six-inch natural gas distribution line to an industrial park with large volume gas users. Well drilling preceded acquisition of 75 miles of seismic lines that provide 3-D control in the Sanford sub-basin and parts of the Durham sub-basin."

The NCGS now is working with the U.S. Geological Survey to estimate how much of the gas may be recoverable in the Deep Basin. Their work could be finished in 2011. The NCGS acknowledges that there is gas -- but it is refuting reports that there may be a 40-year supply of gas, said a spokesman. How much can be recovered and for how long is unknown.

"It's not a matter of what we think," state geologist Jim Simons told North Carolina's Fayetteville Observer. "The companies that are down there leasing land, that's the biggest thing that tells me this is not a wild scheme."

State records indicate that at least four exploration and production companies, or their proxies, have begun to buy up mineral rights. By the end of July more than 62 landowners had registered with gas companies, according to the Lee County Register of Deeds. The registrations totaled about 6,000 acres of the overall 135,000 acres in the county that had been identified as gas-prone.

Currently area landowners are signing leases for $3-4/acre in Lee County, with royalties of about 12.5% on gross revenue if gas is produced, according to state records. By comparison, leases in the Marcellus Shale -- a proven gas play -- are going for as much as $3,000/acre.

North Carolina officials now are working on ways to ensure there are rules in place to ensure any future drilling is done safely, said Simons. "We still have a lot to learn," he said, "but we're on a fast curve."

One hold-up for drillers certainly would be North Carolina's current laws. Hydraulic fracturing (hydrofracing), used on about 90% of the gas wells drilled in unconventional plays, currently is not allowed in the state. Because hydrofracing has to date offered the best gas shows in the big domestic shale plays, legislators would have to revise the laws -- and the political wooing already has begun, a source told NGI.

In June the Lee County Cooperative Extension Service held an informational meeting for landowners. The meeting drew a capacity crowd of 250 people, so many that the fire marshal had to turn some away, said an official. Extension service officials explained landowners' rights and their legal risks before signing leasing deals with drillers.

"A lot of forest landowners were being contacted by gas companies," said extension service agent Stephanie Romelczyk. She said the extension service wanted to ensure landowners understood their options.

According to state records, Denver-based WhitMar Exploration Co., a private explorer, appears to have invested the most into obtaining leases. Also on the books are Tar Heel Natural Gas of Charlotte, NC, North Carolina Oil and Gas, and the Old North State Energy Co.

©Copyright 2010 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.