Pittsburgh-based CNX Gas Corporation is the leading producer of coalbed methane in the Appalachian Basin, and when combined with its conventional gas and shale gas production, is currently a very close second in total Appalachian gas production. Total company production in 2008 was 76.6 Bcf, of which about 73 Bcf was from coalbed methane. Over 96% of the company's 1.4 Tcf of proved reserves are coalbed methane.

CNX Gas is growing its production very rapidly. Last year's total production was 32% higher than the 58.2 Bcf produced in 2007. This year, the company recently raised its production guidance to 87 Bcf, which if achieved, will represent a 13 ½% increase.

CNX Gas is generally considered to be the world leader in coalbed methane production in association with active coal mining operations. In fact, CNX Gas has hosted energy officials from many different countries as, more and more, the world continues to realize the benefits of this valuable resource.

In a world that has increasingly focused on greenhouse gas emissions, CNX Gas also has a carbon credit aspect to its business that may make it unique in the entire E&P space: the company is a leading capturer of coalbed methane across all of U.S. industry. According to voluntary reporting statistics at the U.S. Department of Energy, CNX Gas is the second leading capturer of methane - behind only Waste Management.

CNX Gas captures methane - a gas with some 20 times the heat-trapping ability of CO2 - because of its association with active coal mining operations. The company drills gas wells into the coal seams that are eventually mined by CONSOL Energy, which owns 83.3% of CNX Gas. Under the assumption that the gas would have been liberated during the mining process, CNX Gas generates CO2-equivalent credits every time CONSOL Energy mines through a gas well.

CNX Gas has registered 8.4 million tons of CO2-equivalent credits with the Chicago Climate Exchange. The credits were independently verified prior to registration. Each year, CNX Gas expects to generate additional credits that could range up to 2-3 million tons, depending on the pace of mining operations.

The Chicago Climate Exchange is a voluntary exchange, although there is much discussion on the political front about moving the country toward a mandatory cap and trade system.

The heart of CNX Gas' coalbed methane operations are in its Virginia Operations, which has been liberating methane from coal seams since the early 1980s. The purpose was to increase the safety and productivity of CONSOL Energy's Virginia mines, which are very gassy.

Over the years, and with higher gas prices, this became a very profitable business on a stand-alone basis. CNX Gas was formed in 2005 to focus exclusively on gas production.

In southwestern Virginia, CNX Gas controls rights on nearly 300,000 acres, most of which are in the Oakwood Field and the Middle Ridge Field. A small portion is in the Nora Field. The three adjacent fields, if combined into one field, would rank among the top ten or twelve gas fields in the country. In 2008, CNX produced about 60 Bcf from its Virginia Operations from around 2,000 wells. The wells are mostly spaced on 40 acres, but the company has been experimenting with 30-acre spacing in the Middle ridge Field.

The target seam is the Pocahontas #3 seam, which is the mineable seam. This seam is approximately 2,000 feet deep, and is about 6 feet thick. The company uses vertical drilling to produce gas from this seam and other seams higher in the stratigraphic column. Total coal thickness in the column is generally between 25-40 feet.

Gas content is usually between 450 and 600 cubic feet per ton. Vertical wells in Virginia have recently cost about $300,000, with another $100,000-$140,000 for gathering. The wells are fraced, but do not need processing, as the gas is of pipeline quality.

Peak production rates in Virginia in 2009 are expected to average 70 Mcf per day, with EURs of 350 MMcf. CNX Gas will drill 175 coalbed methane wells in Virginia in 2009.

In 2006, CNX Gas began experimenting with producing gas in southwestern Pennsylvania and northern West Virginia in a play the company designates as Mountaineer from the more than 2 billion tons of coal owned in this area by CONSOL Energy. The total footprint here is nearly 800,000 acres. The target seam has been the Pittsburgh 8 coal seam, which is between 600-1,000 feet deep and about 6 feet thick. This coal is not nearly as gassy as the coal in Virginia. Also, unlike Virginia, this is typically the only seam targeted for gas production. The combination of these two factors meant that horizontal drilling was the most promising extraction technique.

The original well design called for a turkeyfoot pattern of three laterals each of which was 4,000 to 5,000 feet long. The total area to be drained was 640 acres per well.

The pattern evolved into one called an asymmetric quad, allowing for four laterals of varying length, but totaling 9,200 feet. The drainage pattern was reduced to 480 acres per well.

Peak production rates from these wells are about 360 Mcf per day, with EURs of 490 MMcf. CNX Gas produced about 12 Bcf from over 200 Mountaineer coalbed methane wells in 2008. CNX Gas will drill 19 of these wells in 2009, but will continue permitting at a more rapid rate. Total cost for a horizontal well is $900,000, with another $150,000 for gathering.

CNX Gas has also produced coalbed methane from over 100 wells in west central Pennsylvania in its Nittany play on over 250,000 acres. Vertical wells costing $200,000 in Nittany target the Kittanning and Upper Freeport seams, and are approximately 1,200 feet deep. While Nittany is a low-risk, high return play, CNX Gas has decided to defer additional drilling until the return of higher pricing.