Coalbed methane leaseholders in Wyoming and across the nationhave been saved from “suffering extensive economic trauma,” Sens.Craig Thomas and Mike Enzi and Rep. Barbara Cubin said in a jointstatement yesterday.

The Wyoming lawmakers succeeded in passing legislation (S. 2500)that will grandfather coalbed methane lease contracts and block thepotential negative impact of a July appellate court order in thecase of the Southern Ute Indian tribe in Colorado v. AmocoProduction Co. The coalbed methane legislation was cleared by theDepartment of the Interior and is expected to be signed by thePresident early next week.

“This legislative fix is going to keep the gas flowing andfacilitate a chance for the coal bed methane leaseholders tocontinue their work under the law that they began with,” saidThomas.

“A lot if people worked very hard to move this bill throughCongress in a relatively shore time frame and every time we raninto a road block we just directionally drilled around it, as thenatural gas industry would say,” said Cubin. “The bill we have nowsent to the President is a pragmatic solution to the 10th CircuitCourt’s recent opinion and the ensuing coalbed methane ‘gridlock,’and I have every confidence the president will sign it into law.”

The legislation was crafted to soften the impact of a courtdecision that changed 80 years of federal policy by concluding thegas within coal is part of the coal itself and is owned by the coalowner – in the case in question, it was the federal governmentdirectly and the Southern Ute Indian tribe indirectly – rather thanthe landowner. The decision reversed a 1994 ruling by a lower courtthat was in favor of key defendant Amoco and about 3,000 gasroyalty owners. The defendants have taken their fight to theSupreme Court, but the circuit court’s decision cast doubt overnumerous coalbed methane leases throughout the country,particularly in the Rocky Mountain region where the federalgovernment owns the majority of the coal resources.

Producers said without the legislation there would have been asignificant downturn in coalbed methane production, particularly ingrowing areas such as the Powder River basin of Wyoming. BarrettResources, one of the largest leaseholders in the basin reduced itsdrilling program to 250 wells from 400 wells this year because ofthe court ruling and lower gas prices.

The Wyoming delegation estimated 11,900 individual royaltyowners from all 50 states would be affected by drilling delays inthe Powder River alone, with each owner losing nearly $1,046 permonth per well. But the legislation holds valid all leases signedprior to its passage.

Some uncertainty remains, however, for property owners andproduction companies. The court decision still transfers coalbedgas ownership to the coal owner going forward and that could changethe plans of many drillers. Private landowners probably will beless willing to let a gas company drill on their land now that theyno longer own the rights to the gas.

Enzi’s Chief of Staff Flip McConnaughey said the senators”intend to look at” crafting legislation next year that would dealwith the impact of the court decision going forward. “They havediscussed that issue and will be making a final decision on how toproceed after visiting with people during the work period betweennow and the start of the next Congress.

“We first said we had to address the immediate issue. There maybe some concerns from other places with going forward and we didn’twant to get those two tied up going forward. I mean if you’re goingto go forward, there’s going to be a need for hearings and thatkind of thing,” said McConnaughey. “There are conflicting groups.There are issues relative to potential future revenue loss. I’msure you’ll have groups that feel it’s more appropriate it betreated as a federal mineral. The senators feel that should beaddressed in hearings with a full review.”

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