Red Dog wants to replace diesel with gas

Other mining projects may be jumping on the bandwagon, but Teck Cominco still leads the race to find local gas reserves to feed the voracious appetite of a large-mine power plant in Alaska.

Seven years after discovering gas deposits in shale near the Red Dog lead/zinc mine, the owner of the huge Northwest Alaska mine is ready to drill a two-well exploration program in hopes of replacing costly diesel fuel it must barge in every year.

Though oil companies have developed gas reserves to power production facilities on the North Slope and on Cook Inlet platforms for years, Teck Cominco is the first mining company to attempt it, Alaska Division of Oil and Gas petroleum land manager Patrick Galvin said June 9.

Companies associated with two other mining projects, Usibelli Coal Mine near Healy and Donlin Creek in the Yukon-Kuskokwim Delta, are also investigating the possibility of using local natural gas reserves for power generation.

"Red Dog is the farthest along in that they have begun to do some exploratory drilling to analyze what they actually have up there," Galvin said.

The huge transportation costs associated with operating remote mines in Alaska gives a local resource like shallow gas a "great advantage," he said.

And with diesel fuel costs up 30-40 percent, the State of Alaska believes a gas discovery on the Alaska Peninsula would spark interest in nearby mining sites and provide an affordable fuel for the fishing industry to make ice, Galvin said.

Developing gas remains a challenge

Natural gas near Red Dog was discovered on NANA Regional Corp. land in the late 1990s by the mine's mineral exploration crews doing small-diameter core drilling.

"We know gas is in the rock, the question is whether it can be extracted economically," Red Dog mine general manager Rob Scott said June 8.

Teck Cominco has budgeted nearly $4 million for this year's drilling along with six weeks of flow tests and construction of a one-mile access road. But it will likely take another 5 to 7 years to bring the gas to production, according to Scott.

A follow-up program to determine the size of the field in 2006 and then 3-5 years for permitting and drilling development wells means first gas could be anticipated in the 2010-2012 timeframe, he said. With 25 years of defined ore reserves left to mine at Red Dog, plus other nearby lead/zinc deposits still in the exploration phase, Teck Cominco will need plenty of fuel.

But Teck Cominco has yet to determine whether the gas can be developed, Scott cautioned.

He declined to say how much gas Teck Cominco believes is locked in shale formations near the mine. An earlier company estimate pegged the gas resource in just one basin at more than 160 billion to 200 billion cubic feet of gas in place.

Teck Cominco would like to replace the 18 million gallons of diesel fuel that Red Dog currently uses to produce 25 megawatts of electricity annually at the mine and in the mine fleet, which delivers up to five barge loads of goods and equipment to Red Dog and hauls out lead and zinc ore during the short ice-free shipping season between June and October.

Replacing the diesel would require about 3 bcf of natural gas per year, Scott said.

Gas offers environmental benefits

Developing the gas also would provide significant environmental benefits, including reducing emissions and the handling of diesel fuel.

Teck Cominco has four shallow gas leases covering 23,040 acres of land north and east of the mine. Issued in 2000, the leases were extended for a second three-year term in 2003. Teck Cominco pays the state annual rent of 50 cents per acre.

This year, drilling is scheduled to start in early July. Each hole will be six inches in diameter, and relatively shallow at about 3,000 feet, Scott said. "We'll be looking at the 2,600-foot to 2,700-foot horizon," he added.

A drill rig operated by NANA Dynatec will be shipped in with the mine's first barge delivery in early July and will be sent back this fall. Consultant Advance Resources International will oversee the drilling program, Scott added.