The Interior Department’s Board of Land Appeals (IBLA) has ruled that the federal government illegally awarded three leases for coalbed methane (CBM) development in the Powder River Basin in Wyoming in early 2000, a decision some believe could affect other existing leases in the basin and hobble the Bush administration’s plans for expanded CBM production in the West.

The board reversed and remanded the BLM’s action on the grounds the agency failed to carry out the required analysis under the National Environmental Policy Act (NEPA) before offering the leases for sale. The BLM wrongly relied on outdated environmental documents that were issued in 1985, which “fail[ed] to even identify, much less independently address, any of the relevant areas of environmental concern or reasonable alternatives to the proposed action,” the board said.

Two environmental groups, the Wyoming Outdoor Council (WOC) and Powder River Basin Resource Council, had challenged the BLM initial decision, claiming that the environmental analysis of the leases was defective and did not assess the impacts of CBM extraction. The leases covering more than 2,500 acres were owned by Pennaco Energy Inc., which was bought by Marathon Oil.

“This decision sends a direct jolt to the entire coalbed methane industry in the United States,” said Tom Darin, WOC’s director of public lands and lead counsel. Since most leases in the Powder River region were based on the same outdated (1985) environmental analyses, he estimated that the IBLA’s ruling could render thousands of leases on the four million acres of federal lands in Wyoming invalid as well.

In the wake of the ruling, CBM producers have to be asking themselves whether they are “sitting on a time bomb,” he noted. The IBLA just handed environmental groups the “ammunition to go into court” to undo existing producer leases. The gas industry reportedly was pressuring Interior Secretary Gale Norton to overturn the board’s ruling, Darin said last week, adding that such action by Norton would be both “arbitrary and capricious.”

The same concern also could apply to leases in the San Juan Basin, which he said also were predicated on old environmental plans.

Darin said the WOC group hasn’t decided yet whether it will seek to invalidate existing Powder River leases in court. He noted the group probably would prefer to work with the BLM and producers to propose a “more balanced” plan for CBM development in the basin.

“We really just got this decision,” said Wyoming BLM spokeswoman Beverly Gorny, and “we don’t know yet” what impact, if any, it could have on existing or future CBM development in the Powder River Basin specifically or in the greater western region.

Her initial read of the ruling was that “it is specific to certain parcels that were leased in 2000,” Gorny told NGI. She said she doesn’t believe the board’s decision will thwart the BLM’s current plans to allow more than 50,000 methane wells to be drilled and producing in the Powder River Basin by 2010.

“My belief is that there probably isn’t a correlation” between the ruling on the three leases and BLM’s current effort to promote CBM production, which she noted will be predicated on a new environmental impact statement (EIS) that focuses on methane gas development.

The BLM still is receiving comments on a draft EIS issued in January on a proposal for 51,444 CBM wells and 3,200 oil wells for the Wyoming portion of the Powder River Basin. This is the largest natural gas project ever studied by BLM. A separate EIS has been proposed for the development of up to 26,000 CBM wells in the Montana section of the Powder River Basin.

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