One morning in mid-August, Christopher Caskey, a Paonia-based scientist and entrepreneur, stood up on a picnic bench outside the post office in Somerset, an unincorporated town of 55 in the West Elk Mountains northeast of Paonia, Colorado. Caskey corralled a group of people in front of him into a caravan to drive up to the Elk Creek Mine, one of several coal mines surrounding the town. Most of them, including this one, have shuttered in recent years as the coal industry has struggled, but Elk Creek Mine has remained active in other ways. A decade ago, a system was installed to capture methane — a potent greenhouse gas that the mine vents to protect workers — in order to both destroy it and to generate electricity.
Caskey is managing director of MethaneRX, formerly known as Vessels Carbon Solutions, a pioneer in the capture and utilization of coal mine methane in the United States. For years, Elk Creek Mine had been MethaneRX’s flagship project, designed to showcase how a notoriously dirty industry could contribute to climate solutions — if the right incentives are in place.
Caskey stopped his pickup at the end of a gravel road beside a pile of rusted chains. Where the mine entrance used to sit stands MethaneRX’s facility, which consists of a large assortment of pipes coming out of the earth and a 40-foot-tall metal cylinder that looks like a small grain silo. In 2012, Elk Creek Mine became the first coal mine in the U.S. to adopt a methane capture and utilization system. Aspen Skiing Co. had provided most of the capital investment for the system, which was generating 3 megawatts of baseload power — enough to cover what company uses annually across its ski resorts, restaurants and hotels in Aspen and Snowmass. But things didn’t turn out exactly as Caskey and the rest of the project partners had hoped, which was why he had organized this tour.
The group reassembled behind Caskey’s pickup, where he laid out a map of the mine. The methane-capture project was designed to work in an operating coal mine when mining activity was releasing an enormous amount of methane, about 25% of which powered the generators that made electricity with the other 75% burned in the metal cylinder housing the flare. (Oxidizing methane converts it to carbon dioxide, reducing the climate impact.) Caskey noted that he was using the past tense. The mine had to shut down unexpectedly soon after the project was up and running, leading to a slow decline in methane levels, which forced an end to the electricity-generation portion of the project in July 2022. Going forward, the project will instead focus on flaring the methane still leaking from the mine and then selling the associated carbon offset credits to generate revenue for the project partners.
Electricity or no electricity, Caskey reminded the group that the Elk Creek Mine project was still preventing several thousand cubic feet of methane per day from entering the atmosphere. According to the Environmental Protection Agency, methane accounts for about 20% of global emissions. It is a powerful greenhouse gas and is short-lived compared with carbon dioxide, trapping far-larger quantities of heat in the first decade after being released, before breaking down. Methane’s short lifespan means that achieving significant reductions in its emissions could have a rapid and significant effect on atmospheric warming potential.
“The best thing you could do globally is to flare it everywhere immediately,” said Auden Schendler, SkiCo’s senior vice president of sustainability. “A lot of people in the environmental community think it’s wasteful or polluting to flare it. They need to get over it.”
A bounty on methane
In 2009, Tom Vessels, the late president of what was then Vessels Coal Gas, and Randy Udall, the late clean energy activist and analyst, saw a new opportunity for climate action amid Somerset’s coal industry. The methane emissions from its coal deposits are 84 times more potent as a heat-trapping gas than carbon dioxide over a 20-year period and a major source of air pollution — but they’re also a usable energy resource. In Germany, Vessels had toured coal mines that were capturing their methane and using it to generate electricity. In the U.S., where regulations were far weaker, nothing like that existed, because the coal industry was not required to address the methane produced by its operations.
In 2012, Vessels and Udall spearheaded the idea at Elk Creek Mine, whose owner, Oxbow Mining, agreed to let Vessels install equipment at the mine. SkiCo provided $5.34 million — out of $6 million in startup costs — to support “a meaningfully large-scale clean energy project and model a solution on methane in the country,” Schendler said. Holy Cross Energy signed on to pay slightly above-market rates for electricity from the project in exchange for a 15-year contract and a new, cleaner source of electricity. The final member of the partnership was Gunnison Energy, Oxbow’s sister company, which contributed some of its gas drilling rights. (At the time, the oil and gas regulations were not clear about how to treat methane, so the project partners thought it prudent to have some drilling rights associated with the project.) The four partners — Oxbow, Vessels Carbon Solutions, SkiCo and Gunnison Energy — would share in the revenue generated by selling the power and the carbon credits.
California’s cap-and-trade market provided the revenue stream for the offset credits. “California put a bounty on methane,” Caskey said. “They said, ‘Hey, anyone who will destroy methane, which is not otherwise required to be destroyed, we will pay you for that.’” Nevertheless, he added, at Elk Creek Mine, “the coal company is doing the right thing.”
For almost a decade, the methane capture facility at Elk Creek Mine was a poster child for dealing with what Schendler calls “a massive climate problem.” The project also boosted SkiCo’s brand as a green company, willing to make a real effort in mitigating the climate impact of its operations.
In late 2012, a month after the methane-powered generators were up and running, a large “spontaneous combustion” event occurred deep in the mine when a ventilation failure allowed oxygen to enter, reacting with the high-pressure methane-rich air and causing an underground fire. The mine tried to recover from the incident, but another fire occurred soon after, stranding a longwall miner, a piece of equipment worth $80 million, deep underground — and it’s still there.
At the time of the fires, the mine was planning to operate for another decade, said Julian Huzyk, chief operations officer at MethaneRX and a former mining engineer. “We certainly didn’t expect this to happen within the first few months of putting in our facilities,” he said. Fortunately, no one was hurt, but Oxbow — facing the risk of another fire and declining prices for coal — was unable to justify the expense of replacing the equipment, so it shut down mining operations in 2013.
Restructured partnership
Before the mine closed, the air that the pipes sucked out was 90% methane, but after active mining ended, the concentration dropped to 60% to 70%. It was still more than enough to generate roughly an equivalent amount of electricity consumed across SkiCo’s operations. The company sold the energy to Holy Cross, earning as much as $100,000 to $150,000 per month.
“There was certainly enough motivation for Holy Cross at the time to pay a slight premium for renewable energy, especially a project like this that had additional climate values,” said Brad Davis, a power supply analyst at Holy Cross.
In total, Caskey said the project generated $2 million per year from two revenue streams: the electricity sales and carbon-offset sales from destroying methane. Knowing that methane concentrations would decrease over time, Huzyk had built flexibility into the system, but by 2021, the methane concentration had dropped to 25% and the generators were frequently cutting out. Electricity generation was deemed too unreliable to continue much longer.
With the end of electricity-generation looming, the original partnership structure — with SkiCo keeping most of the power revenue until its investment was paid off — no longer made sense. Because SkiCo owned the generator, while Vessels Carbon Solutions, Gunnison Energy and Oxbow owned the flare, SkiCo was not receiving any revenue from destroying the methane, although it still needed to recoup the remaining $500,000 on its investment.
After a year of negotiations, the partners reached a new deal in early July that would see the project abandon significant electricity generation in favor of methane destruction. (The facility still generates enough electricity to power the methane flare.) Holy Cross would no longer be part of the project, which, at its peak, represented 2% of the utility’s renewable-energy portfolio. According to Davis, that loss does not affect the utility’s goal of reaching 100% renewable energy by 2030. “For the last year or two, we’ve kind of conservatively planned on living without it to get to 100%,” he said, noting that Holy Cross has some large-scale renewable projects coming online in the next couple of years that will “dramatically shift our power supply landscape.”
Meanwhile, the four initial partners, now called North Fork Energy, will share revenue roughly equally from the carbon-offset credits generated by destroying the methane — with 2,400 cubic feet of methane destroyed equal to 1 ton of carbon dioxide, or one carbon credit. As of press time, a carbon credit was trading at $29.33 on California’s cap-and-trade market, although offsets created outside California are priced lower. According to Caskey, the project is destroying 20 million cubic feet of methane per month, generating approximately 8,000 carbon credits, or $160,000 in revenue monthly.
Those numbers will go down over time as the pumps suck up more and more methane from the mine, which Caskey said was “good for the climate, but maybe bad for the project’s finances.”
Solutions at hand
Caskey recognizes that there’s an inherent tension in the ways capitalism both contributes to the climate crisis and also purports to solve it. Before we left the Elk Creek Mine site, we walked over to the metal cylinder housing the flare, where the methane is destroyed. The air above shimmered from the heat radiating from the inferno inside. “Flaring” methane, Caskey said, had an unfortunate parallel to the open flames found in the gas patch, which are wasteful and destroy methane with much less efficiency. “We’ve been trying to get the term ‘thermal oxidizer’ to take hold for years,” he said. So far, no luck.
Caskey is feeling pressure in other areas as well. He had hoped to install methane-to-electricity projects on other abandoned coal mines, including in Coal Basin, near Redstone, where tests have been underway this summer to see if the leaking gas is potent enough to generate power. But first, he needs to prove that these projects are financially viable. “The fact is, if you take a hard look at this case study, no one’s going to write a check for that,” he said, noting that SkiCo still hadn’t made its money back on its investment in Elk Creek Mine.
Despite the challenges, Caskey and Schendler believe that this next phase of the project could prove that market solutions do exist for climate change. Unlike some types of carbon credits, which have proved ineffective at actually reducing emissions, this project represents a meaningful form of carbon offset, since the methane would not get destroyed otherwise.
“It’s a strange capitalist way to tackle the climate crisis,” Caskey said, “but that’s what we have.”
