In the meantime, the fight in Montana has heated up. Under the state’s previous governor, Republican Judy Martz, Montana’s Department of Environmental Quality held that coalbed methane water is not a pollutant covered by the Clean Water Act. But in 2003, the Northern Plains Resource Council, a coalition of ranchers and environmentalists, won a federal circuit court ruling that it is a pollutant.

Last June, the Northern Plains Resource Council petitioned the state’s Board of Environmental Review to strictly regulate water from coalbed methane wells. Under the current governor, Democrat Brian Schweitzer, the atmosphere is more conducive to environmental regulation. "The governor is quite concerned about the quality of the water available for irrigation and other uses," says his chief policy advisor, Hal Harper.

The petition has drawn the Energy Department out into the open. In December, the department sent John Veil, the water policy program director at its Argonne National Laboratory, to testify against Montana’s proposed regulations at a board hearing. Veil questioned the scientific validity of the rules and argued that they overstepped Clean Water Act authority.

The Energy Department also released a pair of unfavorable reports targeting the regulations. One asserts that Montana’s proposed rules could decrease methane production in the Powder River Basin by 90 percent within five years. The other predicts potential losses of $5.3 billion to $21 billion worth of gas. That would translate into substantial losses in royalties for both states.

Bad science, bad economics

But some analysts question the Energy Department’s conclusions, noting that high gas prices are generating record profits and should make water treatment comparatively affordable.

The department "has ginned up some very unusual and flatly uneconomic techniques and they get some absurd results," says Michael Kavanaugh, an economist hired by the Northern Plains Resource Council. According to engineer Jim Kuipers, who also analyzed the report for the group, the department grossly overestimates the costs of drilling and water treatment. Kavanaugh says that both the EPA and the private firm Lookout Mountain Analysis have shown that aggressive water treatment will result in "no lost gas," even at relatively low prices.

Under the Clean Water Act, states have authority to implement strict pollution controls, but the Department of Energy could still prevail, if the fight ends up in Congress or the Supreme Court. In January, Wyoming’s entire congressional delegation, all Republicans, sent a letter to the Montana board, asserting that because the regulations will affect Wyoming, they "may impermissably regulate interstate commerce," a violation of the U.S. Constitution.

Montana also looks ready to fight. In January, 59 of the state’s Democratic legislators sent a letter encouraging the Board of Environmental Review "to move forward with this important solution to ensure protection of Montana’s water for future generations." The board will make its final decision March 23.

The author is an HCN intern.