With bipartisan and administration support, the legislationcrafted by the Wyoming Congressional delegation last week to givecoalbed methane leaseholders and production companies some relieffrom a recent appellate court decision won rapid and unanimousapproval by the Senate Energy Committee on Wednesday. The bill isexpected to be taken up by the full Senate at any time, and thebill’s language is expected to also become part of a manager’samendment to the Interior Department’s appropriations bill, whichmust be approved before the end of the session next month.

The bill, S.2500, which was presented by Sens Craig Thomas(R-WY) and Jeff Bingaman (D-NM), would grandfather existing coalbedmethane leases (please see prior story Daily GPI, Sept. 22). It wascrafted in response to a ruling by the 10th U.S. Circuit Court ofAppeals 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 this case the Southern Ute Indian tribe – rather thanthe landowner (owner of the surface rights). The court’s decisioncast doubt over numerous coalbed methane leases throughout thecountry, but particularly in the Rocky Mountain region where thefederal government owns the majority of the coal resources onprivately-held land.

Similar legislation to protect existing leases has been attachedto the Parks bill in the House by Rep. Barbara Cubin (R-WY). TheParks bill is expected to be taken up by the full Senate next week,according to Cubin’s chief of staff.

Producers say without the legislation there could be asignificant downturn in coalbed methane production, particularly ingrowing areas such as the Powder River basin of Wyoming. “It reallyis going to cause some delays. It puts the whole atmosphere in thearea into confusion,” said Barrett Resources’ Frank Keller.Barrett’s drilling program this year has been reduced to 250 wellsfrom 400 because of the court ruling and lower gas prices,according to Keller. With the legislation, he said, Barrett intendsto accellerate drilling. However, there still will be someconfusion because the bill only affects existing leases.

“The production company will still be able to lease federallands because in most instances the feds own the land and the coaland there isn’t an issue of who owns the gas. But you’ll still havea lot of key leases there that you don’t know for sure whathappens,” said Keller.

“Lets say a rancher owns 5,000 acres that he wants to lease toan exploration company like Barrett to come in and explore forcoalbed methane. Well the reality now is he doesn’t own the rightsto the gas associated with the coal. So who do you lease that from.Do you go to the federal government? Well they don’t own theground. And because the rancher doesn’t get the royalties he mightnot be willing to lease the land.”

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