Coalbed methane

Several interesting energy bills were dangling as the U.S. Congress rushed to adjourn last week. Legislation to protect operators holding federal leases for coalbed methane gas appeared to be assured of passage. Wyoming's congressional delegation (Sens. Craig Thomas and Mike Enzi and Rep. Barbara Cubin) has been pressing for relief for months. In July, the 10th U.S. Circuit Court of Appeals in Denver ruled for the Southern Ute Indian Tribe against Amoco Production Co., declaring coalbed

Oct. 19, 1998

3 min read

Patrick Crow
Washington, D.C.
[email protected]

Several interesting energy bills were dangling as the U.S. Congress rushed to adjourn last week.

Legislation to protect operators holding federal leases for coalbed methane gas appeared to be assured of passage.

Wyoming's congressional delegation (Sens. Craig Thomas and Mike Enzi and Rep. Barbara Cubin) has been pressing for relief for months.

In July, the 10th U.S. Circuit Court of Appeals in Denver ruled for the Southern Ute Indian Tribe against Amoco Production Co., declaring coalbed methane part of the coal, despite an 89-year-old practice of treating the gas as a separate commodity.

The latter interpretation had been upheld by Department of Interior Office of Solicitor General opinions in 1981 and 1990. But the appeals court ruled the mineral rights for and royalties from the methane belong to the federal government, the same as they do for coal.

The Wyoming delegation said that could mean financial ruin for hundreds of private coalbed methane leaseholders.

Impact

The Senate passed Thomas's and Enzi's legislation Sept. 23. It would merely protect existing lease agreements, not prospective ones.

Rep. Cubin was attempting to get the same language inserted into the omnibus parks bill, but Rep. Scott McInnis (R-Colo.) had raised concerns about that. The Clinton administration does not object to the bill.

The Wyoming delegation said the court ruling could harm the economies of Campbell, Johnson, Sheridan, and Converse counties, in addition to the damage it could do to the Wyoming economy as a whole.

The delegation said that, in 1997, there were 269 producing coalbed methane wells in the Powder River basin and a potential for 15,600.

Coalbed methane is an increasingly important gas source. The Energy Information Administration recently reported coalbed methane production is responsible for more than 5% of U.S. gas output.

Other issues

A coalition of U.S. congressmen has vowed to press legislation next session to direct half of the federal offshore oil and gas revenues to coastal states, primarily for recreation and wildlife conservation programs (OGJ, Oct. 12, 1998, Newsletter). But sponsors will need to find about $2.5 billion/year in offsetting revenues, unless an exception is made to the budget laws.

The contentious royalty reform issue apparently will carry over to the next Congress.

The Minerals Management Service wanted to issue its complex oil royalty valuation rule this month but was blocked by provisions in appropriations bills (OGJ, Sept. 21, 1998, p. 42).

Just before adjournment, negotiations were under way to declare an 8-month moratorium on the rule and require MMS to consult with other federal agencies about the regulation.

In the final days, Congress passed, and the President was expected to sign, another economic sanctions bill. It would prevent the U.S. Export-Import Bank and Overseas Private Investment Corp. from providing financial aid for projects in countries deemed to persecute religious minorities.

The National Association of Manufacturers said the law could complicate U.S. relations with allies such as Saudi Arabia, Turkey, and Pakistan.