Ken Silverstein EnergyBiz Insider Editor-in-Chief

Coal-bed methane is a form of natural gas that is embedded beneath coal reserves and held in place by water pressure. When the gas is removed, sodium and other salty substances contained in the water must be released. And while there are some promising technologies to purify or isolate the dirty water, it now goes mostly into rivers. That's' harmful to farmers who are now at odds with producers over the matter.

The United States has one of the largest supplies of coal on earth and an estimated 700 trillion cubic feet (tcf) of coal-bed natural gas, although only about 100 tcf is now economically recoverable. Coal-bed methane accounts for about 7.5 percent of U.S. natural gas production, the U.S. Geological Survey says. The Rocky Mountains, the San Juan Basin of New Mexico and Colorado and the Powder River Basin in Wyoming are rich with coal-bed methane resources.

"Coal-bed natural gas provides an outstanding opportunity to mitigate the price fluctuations and volatility of the international natural gas supply," says Wayne Greenberg, CEO of WellDog, a chemical sensing company.

Roughly 13 percent of the land in the lower 48 states has coal in the ground. Practically all of that has methane in it. The goal is to make a greater use of that resource. The Bush administration wants to increase natural gas production over the next 15 years by 40 percent. Coal-bed methane would comprise about a quarter of that increase.

But, several protests tied to the drilling of such coal-bed methane wells are now underway. Wyoming's Red Desert, where 9,000 oil, gas and coal-bed methane wells are proposed, is host to protests. If the wells are drilled, it would include 2,500 miles of new roads, not to mention the accompanying infrastructure such as power lines and pipelines.

The U.S. Department of the Interior expects more than 66,000 new coal-bed methane wells in Wyoming's Powder River Basin alone in the coming years. The extraction process in just one state -- Wyoming -- would result in the discharge of 700 million gallons of potentially contaminated groundwater per day, say regulators.

In Montana, there is strict oversight as it relates to monitoring and the compensation of landowners and water right holders for any damage caused during the development of coal-bed methane. But oil and gas companies in neighboring states are suing Montana regulators to overcome what they say are restrictive laws that inhibit the development of coal-bed methane. They say that their processes have no affect on local surface waters and they are unfairly targeted.

Water Resources

Marathon Oil, Devon Energy, Nance Petroleum and Yates Petroleum are suing the Montana Board of Environmental Review and the Montana Department of Environmental Quality saying that more than 20,000 coal-bed methane wells have been drilled in the Powder River Basin and rivers have not been degraded. The companies, which do business in Wyoming, say that Montana seeks to restrict their right by designating salinity -- the salty substance in the coal-bed methane water -- as harmful.

The litigants want Montana's 2003 standards overturned, which also require authorization from the state to dispose of the water. In their suit, they say that the streams may be polluted but that none of this is from the coal-bed methane industry. They say that Montana law lacks "sound science" and has disregarded evidence that the problems are from irrigation and natural causes.

To deal with the matter, Montana farmers and ranchers petitioned regulators there to have producers re-inject the salty water into aquifers where it is feasible. If it can't be re-injected then it should be treated. At least one company, Anadarko Petroleum, has poured $50 million into a pipeline that will carry millions of gallons of water from the Powder River Basin to the Midwest where it will be re-injected back into the ground.

Despite the hope that water from methane wells can be re-injected, the Montana Department of Environmental Quality has suggested that any requirement to do so be denied. That's because it estimates that only 20 percent of the water could be re-injected and that 80 percent would qualify for waivers and be subject to treatment rules. Existing rules don't even require that the water be treated, although some developers do just that.

"We're going to fight for our water," says Gayle Small, a rancher in Montana, at a public hearing on the matter.

Regulators are sensitive to all concerns. Nationally, the parties agree that if more sites are permitted then better monitoring is essential. Beyond making sure water supplies are not polluted, regulators are concerned with limiting the drilling footprint and any subsequent methane releases once production has begun. The goal is to harness a much-needed natural resource while limiting any ecological harm.

Indeed, coal-bed methane can be developed faster and cheaper than traditional sources of natural gas that can be found both on land and off-shore. And rising natural gas prices are giving developers the incentive they need to explore for new sources of energy.

Coal-bed methane is one of those alternatives. Already, consumers are seeing the benefits of this fuel source. But, if it is to be fully developed, then more attention must be paid to conservation and particularly, the maintenance of clean water supplies

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