Coal Mine Methane Drainage Considerations. Sabinas Basin, Coahuila Mexico. for the. Presented to: M2M Technical Workshop Monterrey, Mexico

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Coal Mine Methane Drainage Considerations for the Sabinas Basin, Coahuila Mexico Presented to: M2M Technical Workshop Monterrey, Mexico Presented by: Jeff Schwoebel REI Drilling, Inc. January 28, 2009

Presentation Outline Background Geology and Reservoir Characteristics of the Sabinas Basin CMM Drainage Techniques Case Study and Results Considerations

REI DRILLING, INC. Operate 7 long hole directional drills and 2 core drills on a contract basis across North America. Provide methane drainage consulting and directional drilling training. Developed first US in-mine CMM recovery and sale project. Managed and participated in numerous international directional drilling projects. Expanded uses for directional drilling. e.g. exploration and dewatering 25 years experience.

19 Years Experience in Sabinas Basin 1990: Conceptualized & implemented Surface CBM test project at Pasta de Conchos Mine (IMMSA) 1990-91: In Mine Methane drainage (CMM) project at Pasta de Conchos Mine 1992-2000: In Mine Methane drainage (CMM) project at MIMOSA s Mine II, IV and VI 1993: In Mine Methane drainage (CMM) project at Pasta de Conchos Mine 1995: Discussion for CBM development with GAN 2004: Sale of drill & CMM training of MIMOSA personnel 2008: Fletcher Training for Mimosa personnel

Geologic Reservoir Characteristics

Ventilation vs. Methane Drainage

Olmos Reservoir Conditions Results of Field Tests (CNR): Depth: 170 m Coal Thickness: 3.9 m Coal Rank: High Volatile A (Ro = 0.99%) In-Situ Gas Content: 8.4 m 3 /t Desorption Time: 56.6 hours Permeability: 33.6 md Cleat Spacing: 1 mm Gas Composition: 89.97% CH 4 Under Pressured: 7 kpa/m

Observations A shallow single thick high gas content coal seam. Thick clay parting Double Seam Thick clay zone on top of coal Minimal gas bearing strata or other coal seams in overlying strata High Permeability Short Sorption times

Methane Drainage Techniques Pre-Mining Gob Degasification Longwall Gob Fracture Zone Coalbed 120 to 140 m Coalbed Coalbed Coalbed SHIELD Coalbed 20 to 40 m Coalbed 50 m 10 m 120 to 200 m

0-25 Methane Drainage 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 2500 2600 2700 Elevation (Ft Below Collar) 138 Ft "Little Gasy" 177 Ft "Gasy" 236 Ft "Gasy" 394 Ft "Gasy" 472 Ft "Gasy" 531 Ft "Good Gas" 787 Ft "Good Gas" 925 Ft "Lots of Gas" 1260 Ft "Good Gas" 1378 Ft "Lots of Gas" 1555 Ft "Good Gas!!" 2224 Ft "Good Gas" 872 Ft "White Stuff" "White Stuff" 1050 Ft "Rock" 1052 Ft "Rock" 1086 Ft "White Stuff" 1190 Ft Out of Roof & Back in Seam 1811 Ft Warm Water (5 Gal / Min) 2126 Ft Rock (Tan) 2110 Ft Rock (Tan) 2280 Ft Floor (Reddish) 2346 Ft Floor (Reddish) 2411 Ft Rock Chocolate, Hard / Lt Brown / Grayish Rods Stuck 2461 Ft Losing Circulation., Rock 2467 Ft Hit Floor, Red 2493 Ft Rock, Floor (Red) 2569 Ft Rock Gray / Reddish / Chocolate / Red / Tan / White / Tan Very Sticky 2638 Ft Rock -50 Pre-Mining - Long, In-Seam Boreholes: HDH-13 Profile Vertical Exageration: 4

Design of Vertical CBM and CMM Wells

Methane Drainage Gob Gas Vertical Gob Wells

Case Study Mimosa #1 and #2

Methane Drainage Approach

Mimosa Gas Production Gas Production (Cubic Meters Per Day) 20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 Average Daily Gas Production For In-Seam Boreholes MIMOSA Mina I Hole 12: 466 m Hole 13: 385 m Hole 14: 269 m 0 0 20 40 60 80 100 120 140 160 180 200 Day

Effect on Gate Road Development MIMOSA #1 Mine Methane Emissions, Airflow Requirements, and Advance Rate Before and After Degasification for 2 West Developments, Mine I 90 80 Advance Rate (10's of Meters Per Month) Methane Emissions (1000's of Cubic Meters Per Day) Airflow Rate (Cubic Meters Per Second) 80 80 85 Emisson/Airflow/Advance Rate 70 60 50 40 30 20 45 45 45 45 500 m Borehole on Production 55 70 10 0 October November December January February March April May June Months in 1994

Methane Drainage Results Mimosa Mine #2 Emisson/Airflow/Production Rate 200 180 160 140 120 100 80 60 40 20 Mine II Methane Vented, Drained, Airflow Requirements, and Production Rate Before and After Degasification in 1993 0 66 Methane Drained (1000's cubic meters per day) Methane Vented (1000's of Cubic Meters Per Day) Airflow Rate (Cubic Meters Per Second) Coal Production (10,000 tons per year) 0 0 86 86 0 95 0 60 39 39 78 78 39 39 69 69 0 1988 1989 1990 1991 1992 1993 1994 1995 1996 Years

Cretaceous Age Sub Basins Six (6) Sub-Basins ( sub-cuencas ): 1.Sabinas 2.Esperanzas 3.Saltillito 4.San Patricio 5.Adjuntos 6.Monclova Main Basin: Sabinas Most mine projects have been developed here. The Sabinas sub-basin has been well characterized with almost 80% explored

Sabinas Basin

Keys to Prospect Generation In-place resource Geologic and reservoir characteristics Land acquisition Market considerations Drilling and completion costs Economic viability Favorable surface culture Financing

Project Considerations Scale Business Climate. Pace Ownership issues. Clear title? Local perception Coordination of mining, drilling, and gas recovery operations Market? Pipeline? Need to create gas utilization alternatives Environmental factors

Ownership Issues International Background Unclear CBM ownership has stalled development in many countries - Different laws governs ownership of CBM in the USA - Concept of forced pooling Mexican Background Gas Associated to Mineral Carbon Deposits (gas grisú) mostly methane - Ministry of Energy and Ministry of Economy - Regulatory Law of Article 27 of the Mexican Constitution Regarding Oil and the Mining Law (Ley Minera) - Amendment 11/08 and regulations published on12/16/08 - Restricted use to self consumption by holder of mining concession or delivery to PEMEX through purchase Agreement - sale to third parties by concession holder is prohibited - Permit application guidelines include demonstrate the evidence of gas, utilization approach, recovery process, and financial analysis.

Coordination of Operations Mining Drilling

Coalbed Methane Utilization

Environmental Considerations Global attention on GHG mitigation projects Methane unique due to energy value High demand Monetization of credits CO2 Sequestration projects Public and private funding