Montana gets a crash course in methane
The Powder River Basin doesn't end at the state line; about one-third of the sprawling basin lies in Montana. Though the coal seams are thinner here than in Wyoming, coalbed methane development is expected to explode in the northern third of the basin and in several other parts of Montana.
So far, private companies have drilled only 250 coalbed methane wells in the Treasure State. Almost all of them have been drilled by Fidelity Exploration and Development on 10,000 acres of federal, state and fee minerals in the Powder River Basin near Decker, Mont.
In early October, only one coalbed methane drill rig was operating in the entire state. Montana has all but prohibited additional coalbed methane drilling, probably until next summer. The moratorium on drilling is part of a June 2000 legal settlement between the Billings-based Northern Plains Resource Council and the Montana Board of Oil & Gas Conservation (HCN, 9/25/00: Colliding forces: Has Colorado's oil and gas industry met its match?).
In its lawsuit, Northern Plains said the state board was issuing coalbed methane drilling permits near Decker without conducting the environmental impact studies required by the Montana Environmental Protection Act. To settle the suit, the state established the moratorium on new wells and agreed to conduct a statewide environmental impact statement on coalbed methane. The settlement allows private companies to drill 200 exploratory wells, and permits Fidelity to drill a total of 325 wells on its lease near Decker.
The moratorium is giving Montana some breathing room. Activists around the state are using the hiatus to gear up for a projected boom in coalbed methane development, and at least one county is drafting new legislation to regulate coalbed methane drilling.
"It's been a crash course in coalbed methane for all of us," says Jennifer Madgic, a planner for western Montana's Gallatin County. In early July, the New Jersey firm J.M. Huber Corp. filed a permit application to drill an exploratory well on leased minerals in Gallatin County, among a cluster of residential ranchettes near Bozeman Pass. The state approved that application, but Huber bowed to local pressure and withdrew it prior to a review by the local zoning district.
"This issue probably has received more attention than anything in recent years," says Madgic. "This just brought people out of the woodwork."
Susan McGrath, an organizer with the newly formed Park (County) and Gallatin Citizens' Alliance, says 150 people showed up at a Montana Board of Oil and Gas Conservation hearing to oppose the Huber application. "I don't think the oil and gas board was used to that," she says. "They were floored."
Huber has leased mineral rights, mostly from private owners, on about 18,000 acres around Bozeman, and other companies have picked up leases on an additional 60,000 acres, although much of that may be for more traditional oil and gas drilling. The county is considering a variety of regulations, including restrictions on well placement, to protect health and safety and to control the impacts of coalbed methane development.
"We understand the mineral right is a property right," says Melissa Frost, a program staffer for the Greater Yellowstone Coalition in Bozeman and a Park and Gallatin Citizens' Alliance founder. "However, we would like to see surface owners have at least equal rights."
At the moment, about a half-dozen companies are working in Montana on coalbed methane, says Board of Oil and Gas Commission administrator Tom Richmond. They've spoken for all 200 exploratory wells, and half of those have been permitted.
One big unknown is how closely wells will be spaced in Montana. On Fidelity's lease near Decker, permits allow up to four wells per coal seam per 160 acres, or a de facto spacing of one well per seam per 40 acres. But well spacing in the rest of the state is typically set at one per section, or 640 acres. "I don't know if anybody thinks coalbed methane could be economically developed here for that," Richmond says.
Once the state completes its environmental impact statement, tentatively in July 2002, Richmond expects drilling to commence, but not so rapidly as in Wyoming. "There are some constraints, not the least being availability of pipelines to move the gas," he says. "I don't think we're going to see thousands of wells drilled every year. Maybe several hundred."