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Court Not Swayed in Bill Barrett's Case Against Coal Explorer

Bill Barrett Corp. (BBC) has failed to convince a U.S. district court that BTU Western Resources Inc.'s coal exploration, which is to be conducted adjacent to the producer's coalbed methane (CBM) operations in Wyoming's Powder River Basin, would cause irreparable harm.

The Denver-based producer in January filed a lawsuit in U.S. District Court for the District of Columbia under the Administrative Procedure Act (Bill Barrett Corp. v. U.S. Department of the Interior et al., No. 2009-0019). BBC requested a preliminary injunction to prevent BTU's coal exploration. BTU in late 2007 was granted a coal exploration license by the U.S. Bureau of Land Management (BLM) in Wyoming.

BBC operates 108 CBM wells in the Porcupine Field of the Powder River Basin. Adjacent to Barrett's operations is BTU's coal-mining operation, which extracts coal from the North Antelope Rochelle Surface mine. In February 2007 BTU applied to BLM for a federal coal exploration license that would allow it to explore for coal reserves underlying the Porcupine Field.

Under federal law, BLM may grant permits or leases to develop any one mineral on public land, but it may issue multiple use permits or leases to develop other minerals on the same land -- as long as there are "suitable stipulations for simultaneous operation."

BLM issued BTU the coal exploration license, granting the company the right to drill "numerous small core holes into the field's coal bed" as "a necessary precursor to a competitive bid process for a coal lease," the court noted.

BBC did not object to multiple use of the Porcupine Field. However, it claimed that the coal exploratory drilling would "irreparably harm" the CBM operations. Because of the Porcupine Field's geologic makeup, specifically the permeability and porosity of the coal, BBC said the coal exploratory drilling would cause "oxygen contamination" to the field's CBM.

BBC voiced its concerns to BLM's Wyoming office in October 2007 and the two traded data over the next nine months at BLM's request. After considering all of the data, BLM concluded in August 2008 that the risk of oxygen contamination "was too uncertain to warrant denying BTU's application altogether."

BLM instead crafted a phased drilling approach and stipulated in BTU's license that the coal miner would compensate BBC for "any verified damage as a result of its exploratory drilling."

BBC appealed BLM's decision to the Interior Board of Land Appeals. However, the appeals board failed to act within the regulations' allotted time period, and BLM's decision was rendered final in October 2008. BLM formally issued BTU a coal exploration license in December.

A few days later BBC filed a motion for a preliminary injunction, but the court was not swayed.

"The court finds that the weight of the evidence is, at best, inconclusive as to whether oxygen contamination is likely to occur," wrote District Judge Richard J. Leon in a memorandum issued last Wednesday. "While BBC's evidence establishes oxygen contamination as a possibility, BLM, in its expert judgment, determined, after evaluating BBC's evidence and inquiring into the experiences of other CBM operators, that the risk of oxygen contamination 'does not appear to be proven with any certainty'...

"Giving BLM that deference, this court is not persuaded that BLM's judgment was in error," said Leon. "...[I]n the absence of new evidence at this stage establishing that the harm BLM alleges is likely to occur, BBC has failed to establish the requisite risk of irreparable harm to warrant a preliminary injunction."

In addition, wrote Leon, "it bears noting that BBC has also failed to establish that the harm it contends will occur is of an irreparable nature." Leon said the company "has not established that the exploratory drilling will irreparably destroy BBC's ability to produce CBM. Indeed, BBC has been able to return contaminated wells to production in just over nine days..."

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