[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]



 
THE ORDERLY DEVELOPMENT OF COALBED METHANE RESOURCES FROM PUBLIC LANDS
=======================================================================



                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION
                               __________

                           September 6, 2001
                               __________

                           Serial No. 107-58
                               __________

           Printed for the use of the Committee on Resources







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                         COMMITTEE ON RESOURCES

                    JAMES V. HANSEN, Utah, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,                   George Miller, California
  Vice Chairman                      Edward J. Markey, Massachusetts
W.J. ``Billy'' Tauzin, Louisiana     Dale E. Kildee, Michigan
Jim Saxton, New Jersey               Peter A. DeFazio, Oregon
Elton Gallegly, California           Eni F.H. Faleomavaega, American 
John J. Duncan, Jr., Tennessee           Samoa
Joel Hefley, Colorado                Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland         Solomon P. Ortiz, Texas
Ken Calvert, California              Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado              Calvin M. Dooley, California
Richard W. Pombo, California         Robert A. Underwood, Guam
Barbara Cubin, Wyoming               Adam Smith, Washington
George Radanovich, California        Donna M. Christensen, Virgin 
Walter B. Jones, Jr., North              Islands
    Carolina                         Ron Kind, Wisconsin
Mac Thornberry, Texas                Jay Inslee, Washington
Chris Cannon, Utah                   Grace F. Napolitano, California
John E. Peterson, Pennsylvania       Tom Udall, New Mexico
Bob Schaffer, Colorado               Mark Udall, Colorado
Jim Gibbons, Nevada                  Rush D. Holt, New Jersey
Mark E. Souder, Indiana              James P. McGovern, Massachusetts
Greg Walden, Oregon                  Anibal Acevedo-Vila, Puerto Rico
Michael K. Simpson, Idaho            Hilda L. Solis, California
Thomas G. Tancredo, Colorado         Brad Carson, Oklahoma
J.D. Hayworth, Arizona               Betty McCollum, Minnesota
C.L. ``Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana

                   Allen D. Freemyer, Chief of Staff
                      Lisa Pittman, Chief Counsel
                    Michael S. Twinchek, Chief Clerk
                 James H. Zoia, Democrat Staff Director
                  Jeff Petrich, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    BARBARA CUBIN, Wyoming, Chairman
              RON KIND, Wisconsin, Ranking Democrat Member

W.J. ``Billy'' Tauzin, Louisiana     Nick J. Rahall II, West Virginia
Mac Thornberry, Texas                Edward J. Markey, Massachusetts
Chris Cannon, Utah                   Solomon P. Ortiz, Texas
Jim Gibbons, Nevada,                 Calvin M. Dooley, California
  Vice Chairman                      Jay Inslee, Washington
Thomas G. Tancredo, Colorado         Grace F. Napolitano, California
C.L. ``Butch'' Otter, Idaho          Brad Carson, Oklahoma
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
                                ------                                











                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on September 6, 2001................................     1

Statement of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming, Prepared statement of....................     1
    Kind, Hon. Ron, a Representative in Congress from the State 
      of Wisconsin...............................................     2
        Prepared statement of....................................     4
    Rehberg, Hon. Dennis, a Representative in Congress from the 
      State of Montana...........................................     1

Statement of Witnesses:
    Blancett, Treciafaye (Tweeti) W., San Juan Basin Livestock 
      Association................................................    99
        Prepared statement of....................................   101
    Dobkins, Terrell A., Vice President-Production, Pennaco 
      Energy.....................................................    71
        Prepared statement of....................................    73
    Fulton, Tom, Deputy Assistant Secretary, Land and Minerals 
      Management, U.S. Department of the Interior................    15
        Prepared statement of....................................    17
    George, Gene R., Chairman, Coalbed Methane Committee, 
      Petroleum Association of Wyoming...........................    64
        Prepared statement of....................................    65
    Griebling, Richard, Director, Colorado Oil and Gas 
      Conservation Commission....................................    94
        Prepared statement of....................................    95
    Hemmer, Dennis, Director, Department of Environmental 
      Quality, State of Wyoming..................................    55
        Prepared statement of....................................    56
    Joswick, Josh, County Commissioner, La Plata County, Colorado    87
        Prepared statement of....................................    89
    Merschat, Walter R., Scientific Geochemical Services, Casper, 
      Wyoming....................................................    58
        Prepared statement of....................................    60
        Written Supplement to Testimony submitted for the record.    63
    Steward, D. G. Mickey, Ph.D., Coordinator, Coalbed Methane 
      Coordination Coalition.....................................    18
        Prepared statement of....................................    20
    Swartz, Edward H., Powder River Basin Resource Council.......    41
        Prepared statement of....................................    42
    Tweedy, Joanne M., Coalition for Responsible Development of 
      Coalbed Methane............................................   112
        Prepared statement of....................................   115
    Wallette, Don E., Jr., Rocky Mountain Region Manager, 
      Phillips Petroleum Company.................................   106
        Prepared statement of....................................   108
    Whitney, Dr. Gene, Supervisory Geologist, U.S. Geological 
      Survey.....................................................     5
        Prepared statement of....................................     6
Additional materials supplied:
    Fraley, Richard E., Vice President, San Juan Division, 
      Burlington Resources, Farmington, New Mexico, Letter 
      submitted for the record...................................   133
    Gallagher, Robert M., President, New Mexico Oil and Gas 
      Association, Letter submitted for the record...............   135
    Sparrowe, Dr. Rollin D., President, Wildlife Management 
      Institute, Statement submitted for the record..............   137
    University of Louisiana at Lafayette, University of South 
      Carolina, and BP America, Inc., Letter submitted for the 
      record.....................................................   140
















    OVERSIGHT HEARING ON THE ORDERLY DEVELOPMENT OF COALBED METHANE 
                      RESOURCES FROM PUBLIC LANDS

                              ----------                              


                      Thursday, September 6, 2001

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                         Committee on Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to call, at 10:10 a.m., in 
Room 1334, Longworth House Office Building, Hon. Barbara Cubin 
[Chairman of the Subcommittee] presiding.

STATEMENT OF THE HONORABLE DENNIS R. REHBERG, A REPRESENTATIVE 
             IN CONGRESS FROM THE STATE OF MONTANA

    Mr. Rehberg. Good morning. We wanted to get started. 
Chairman Cubin is at the White House.
    I thank the witnesses for taking the time to be with us 
today.
    And at this time, I would like to turn the mike over to the 
ranking member, Mr. Kind, for a brief statement.
    [The prepared statement of Mrs. Cubin follows:]

  Statement of The Honorable Barbara Cubin, Chairman, Subcommittee on 
                      Energy and Mineral Resources

    Today's oversight hearing continues the Subcommittee's inquiry on 
issues relevant to energy supply for our Nation from public lands and 
the outer continental shelf. Of course the full House has already 
passed an energy bill with several provisions respecting public lands, 
but the job isn't finished. Energy prices have declined in the last few 
months as the economy has slowed, but does anyone believe that our 
long-term energy needs can be met without a combination of supply 
increases and demand constraints?
    As for natural gas, wellhead prices which my constituents are 
receiving in Wyoming, have plummeted from last winter's highs. There is 
a feeling I detect in the oilpatch that demand factors will rebound and 
with it the spot and futures market prices. Gas-fired electric 
generation is still planned for the vast majority of new plants. When 
the Gulfstream pipeline reaches planned capacity in the next couple of 
years Floridians will be receiving 1.1 billion cubic feet of natural 
gas per day. That's Billion with a B.
    Where will the gas come from? The natural gas currently being 
produced in the Gulf of Mexico is already being shipped to midwest and 
northeast markets. New supplies from the Gulf are necessary just to 
offset the decline curve on the existing wells.
    My point? The search for natural gas must continue despite the 
short-term return to historic price trends. And that search will more 
and more mean developing natural gas deposits heretofore deemed to be 
``unconventional plays.'' Among these is coalbed methane, or CBM, the 
natural gas molecules which adhere to micro-cracks in coal seams and 
are released when the groundwater in the coal is pumped out.
    As recently as 1995, when the U.S. Geological Survey updated a 
nationwide assessment of oil and gas resources, coalbed methane wasn't 
even factored in except for a few producing areas. Now, CBM production 
constitutes 7.5% of our domestic supply of gas. CBM has come a long way 
from the days when it was called ``gob gas'' and considered a hazard to 
be vented from underground coal mines.
    CBM development isn't brand-new - its progress from hazard to 
energy fuel can be traced from the Sec. 29 tax credits legislation of 
twenty plus years ago intended to stimulate drilling for unconventional 
gas resources. In the West, first in the San Juan Basin of New Mexico 
and Colorado and followed by the Powder River Basin of Wyoming and 
Montana, CBM has boomed in the last decade.
    As with any resource, such an explosion of activity comes with 
``growing pains'' while individuals, communities, local and state 
government and public land managers attempt to plan for the costs and 
benefits associated with the extraordinary interest in CBM.
    As we will hear from our group of witnesses today, CBM development 
from western public lands has upsides and downsides atypical from many 
oil and gas operations. Perhaps the largest factor at work in my State 
is that the mineral ownership and the surface ownership in the Powder 
River Basin is often severed from one another, meaning that private 
land owners may or may not control access to CBM beneath their 
property.
    Split-estate mineral development is often contentious - and when 
conflicts arise they grab the headlines. Steady royalty income to a fee 
mineral owner happy with his check is a ``dog bites man'' story. When a 
rancher gets cross-wise with a driller seeking to access his federal 
lease, or other fee mineral ownership from which the rancher does not 
financially benefit, then that becomes a ``man bites dog'' story. When 
a lot of ranchers without minerals get upset, that's a Coverstory in 
Time Magazine.
    From the U.S. News to the Boston Globe, eastern media reporters 
have written tales of ranchers with new pick-ups paid for by CBM 
royalties, followed by tales of grazing lands ruined by the unregulated 
discharge of produced waters. On top of this are stories that Montana 
and Wyoming governments are ``at war'' with one another over surface 
water quality impacts in the Powder and Tongue Rivers from CBM wells.
    Well, I live out there, and if there is a war going on, it's about 
the federal government getting sufficient funding for the Bureau of 
Land Management to complete a cumulative impacts analysis of 
anticipated CBM development so that land-use plans can be updated, and 
mitigating measures drawn up, to allow federal lessees to drill and 
bring their gas to market. It is also about states exercising delegated 
authority from EPA under the Clean Water Act to regulate water 
discharges - a primary bone of contention between supporters and 
detractors of CBM development.
    We titled this hearing ``the orderly development of CBM from public 
lands'' in recognition that CBM will be produced from western basins 
underlain by federal mineral rights. No one disputes that. But the real 
question is ``how can we best mitigate these conflicts?'' Do ranchers 
need a ``surface owners'' Bill of Rights'', and if so, which level of 
government ought to be considering it? On the other hand, when surface 
owners acquired the title to their property did they not understand 
what it meant to have mineral rights reserved to the government or 
another individual?
    Among our witnesses are a scientist, a federal land manager, a 
coordinator of a coalition of state and local governments trying to 
harmonize CBM development, a state environmental regulator, a state oil 
and gas conservationist, several ranchers, and CBM industry 
representatives. I want to thank each and every one of you for taking 
the opportunity to enlighten us with your views. Most of you have come 
a long way to be here because you feel so passionately about this 
issue.
    Before I turn to our Ranking Democratic Member, Mr. Kind, for any 
opening statement he may wish to give, let me mention a procedural 
detail. Sometime before 11 am I must recess the hearing because the 
President of Mexico will address a joint session of Congress. House 
rules do not permit committees to sit during such sessions. I apologize 
for this delay but our hearing was scheduled before the joint session 
was announced. When President Fox is finished we will resume this 
hearing.
                                 ______
                                 

   STATEMENT OF THE HONORABLE RON KIND, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF WISCONSIN

    Mr. Kind. Thank you, Mr. Chairman.
    I want to just briefly welcome the witnesses and the 
testimony you are about to give today. We certainly appreciate 
your attendance.
    I know Madam Chairman will be here shortly. She is a little 
bit delayed at the White House at a very important meeting, so 
we thought we would just at least get started with the hearing. 
We have the president of Mexico's address to the joint session 
starting at 11:00, so I think we are going to have a brief 
recess during that time as well.
    But rather than delaying you any further, I thought we 
would get started.
    And I do have a brief statement I would like to read into 
the record at this time.
    The Subcommittee meets today to take testimony on the 
development of coalbed methane resources from public lands.
    Currently, the State of Wyoming, represented by our Chair, 
Representative Cubin, is experiencing a veritable boom in 
coalbed methane development, which has brought its share of 
triumphs and heartaches to Wyoming. As we will hear from 
individuals who have been good enough to travel here to testify 
this morning, the Powder River Basin is an area rich in 
wildlife, containing, for example, one of the last herds of 
plains elk. Most of the Powder River Basin is contained in 
Wyoming, although about 10 percent lies in Montana. The entire 
basin covers an area about one-fifth the size of Wisconsin, my 
home state. The basin also contains substantial coal, oil, and 
gas reserves, which is why it has been nicknamed the Saudi 
Arabia of coal.
    Coalbed methane is, not surprisingly, a byproduct of 
natural processes which create coal. The methane is maintained 
in the coal by water pressure. When that pressure is reduced, 
the methane escapes.
    The dangers associated with unintended release of this gas 
during coal mining have long been recognized by coal miners, 
who devise ways to safely vent the gas out of the mines rather 
than allow it to build up and result in explosions or fires in 
the tunnels.
    More recently, we have recognized the dangers associated 
with venting the gas into the atmosphere.
    From a global standpoint, then, the production of coalbed 
methane, as opposed to venting it, is a preferable alternative. 
However, the production of coalbed methane cannot be allowed to 
create other equally or more serious environmental 
consequences.
    As we will hear from our witnesses this morning, a number 
of coal field residents and local officials are deeply 
concerned and upset about the manner in which some coalbed 
methane operators are bringing their product to market. Others 
are concerned about the quality of their drinking water being 
adversely affected. Still others raise concerns about the long-
term impacts of this development on their way of life.
    Among the problems identified are some which I believe 
Congress can hopefully help resolve. For starters, I would 
suggest that the Subcommittee ask the General Accounting Office 
to investigate the questions arising from coalbed methane 
development.
    For example, are surface owners being adequately protected 
and compensated when Federal and state agencies authorize 
production of coalbed methane located beneath the surface 
estate? Is the Federal Government taking adequate steps to 
ensure that the health, safety and general welfare of coal 
field residences is not being diminished by coal, coalbed 
methane production? And if not, is this a failure of 
administration or legal authority? And finally, do adequate 
land restoration standards exist to ensure that surface owners 
will be able to return to ranching or whatever use the land was 
put to before coalbed methane production occurred?
    In closing, I want to thank the Chair for holding the 
hearing. While it is clearly a contentious issue among many of 
her constituents, I am confident that she will find a fair and 
equitable way of meeting these concerns.
    And I will yield back and look forward to the testimony. 
Thank you again.
    [The prepared statement of Mr. Kind follows:]

Statement of The Honorable Ron Kind, Ranking Democrat, Subcommittee on 
                      Energy and Mineral Resources

    The Subcommittee meets today to take testimony on the development 
of coal bed methane resources from public lands. Currently, the state 
of Wyoming, represented by our Chair, Representative Cubin, is 
experiencing a veritable ``boom'' in coalbed methane development which 
has brought its share of triumphs and heartaches to Wyoming residents.
    As we will hear from the individuals who have been good enough to 
travel here to testify this morning, the Powder River Basin is an area 
rich in wildlife, containing, for example, one of last herds of plains 
elk. Most of the Powder River Basin is contained in Wyoming, although 
about 10 percent lies in Montana.
    The entire basin covers an area about one fifth the size of 
Wisconsin, my home State. The Basin also contains substantial coal, oil 
and gas reserves, which is why it has been nicknamed the ``Saudi Arabia 
of coal.''
    Coal bed methane is, not surprisingly, a byproduct of the natural 
processes which create coal. The methane is maintained in the coal by 
water pressure. When that pressure is reduced, the methane escapes.
    The dangers associated with untended release of this gas during 
coal mining have long been recognized by coal miners who devised ways 
to ``safely'' vent the gas out of the mines rather than allow it to 
build up and result in explosions or fires in the tunnels. More 
recently, we have recognized the dangers associated with venting the 
gas into the atmosphere.
    From a global standpoint then, the production of coal bed methane, 
as opposed to venting it, is a preferable alternative. However, the 
production of coalbed methane cannot be allowed to create other equally 
or greater serious environmental consequences.
    As we will hear from our witnesses this morning, a number of coal 
field residents and local officials are deeply concerned and upset 
about the manner in which some coal bed methane operators are bringing 
their product to market. Others are concerned about the quality of 
their drinking water being adversely affected. Still others raise 
concerns about the long-term impacts of this development on their way 
of life. Among the problems identified are some which I believe 
Congress can help resolve.
    For starters, I would suggest that the Subcommittee ask the General 
Accounting Office to investigate the questions arising from coalbed 
methane development. For example,
     LAre surface owners being adequately protected and 
compensated when federal and state agencies authorize production of 
coalbed methane located beneath the surface estate?
     LIs the federal government taking adequate steps to ensure 
that the health, safety and general welfare of coal field residents is 
not being diminished by coalbed methane production?
     LAnd if not, is this a failure of administration or legal 
authority?
     LDo adequate land restoration standards exist to ensure 
that surface owners will be able to return to ranching or whatever use 
the land was put to before coalbed methane production occurred?
    In closing, I thank the Chair for holding this hearing. While it is 
clearly a contentious issue for her constituents, I am confident she 
will find a fair and equitable way of meeting their concerns.
                                 ______
                                 
    Mr. Rehberg. Thank you, Mr. Kind.
    At this time I would like to introduce and recognize the 
first of the panels. The first speaker is Dr. Gene Whitney, 
Supervisor Geologist, U.S. Geological Survey; Mr. Tom Fulton, a 
resident of the great State of Montana, Deputy Assistant 
Secretary for Land and Minerals--welcome, Tom--Department of 
the Interior; and Dr. D.G. Mickey Steward, Coordinator, Coalbed 
Methane Coordination Coalition.
    If we could begin with you, Dr. Whitney?

     STATEMENT OF GENE WHITNEY, SUPERVISOR GEOLOGIST, U.S. 
                       GEOLOGICAL SURVEY

    Mr. Whitney. Thank you. Mr. Chairman, distinguished members 
of the Subcommittee, thank you for the opportunity to 
participate in this hearing to discuss the results of the U.S. 
Geological Survey's assessment of coalbed methane resources of 
the U.S. This assessment of undiscovered coalbed methane 
resources is a fundamental part of the USGS national oil and 
gas assessment last completed in 1995, which has now been 
updated with recent reassessments of two important western 
basins.
    Traditionally, natural gas that forms and accumulates in 
coalbeds is referred to as coalbed methane. Although coal is a 
solid, it is quite porous. And the pores and fractures in coal 
may hold enormous volumes of methane.
    The methane in coal is generally held in the pore spaces by 
water pressure. As long as water is present, the methane 
remains in the coal. When the water pressure is reduced, the 
methane is released and may flow through the fractures in the 
coal to the surface or to a well bore. Therefore, production of 
coalbed methane generally requires the removal of water from 
the coal.
    Although coalbed methane forms in coal, not all coal is 
suitable for producing coalbed methane. Coal must be buried 
deeply enough for heat to generate the methane or it must be 
saturated with surface waters that contain bacteria that 
generate methane.
    In addition, certain coal compositions favor methane 
generation. And the coal must contain abundant fractures in 
order for the water and gas to migrate to a well bore for 
production to be successful.
    Not surprisingly, the major coalbed methane regions of the 
U.S. are within the major coal regions of the U.S., as shown on 
the map that I have displayed here.
    The U.S. Geological Survey has the responsibility to 
estimate the amounts of undiscovered oil and natural gas 
remaining in all onshore areas of the U.S. and in state-owned 
waters. USGS assessments are updated periodically as new data 
or technology becomes available.
    As of 1995, the USGS estimated that the U.S. had 
undiscovered resources of coalbed methane totaling 
approximately 52 TCF, or trillion cubic feet, and that is a 
mean value.
    The USGS has recently reassessed two important coalbed 
methane-bearing basins in the Rocky Mountain region, the Uinta-
Piceance Basin in Utah and Colorado, and the Powder River Basin 
in Wyoming and Montana.
    We estimate that the Unita-Piceance Basin contains, at the 
mean, 2.3 trillion cubic feet of undiscovered technically 
recoverable coalbed methane. This new estimate is a substantial 
reduction from our 1995 estimate of 10.7 TCF. In contrast, our 
estimate of undiscovered coalbed methane in the Powder River 
Basin has increased substantially. The USGS now estimates the 
Powder River Basin contains 14.3 trillion cubic feet of 
undiscovered technically recoverable coalbed methane, compared 
with 1.1 TCF reported in the 1995 national oil and gas 
assessment.
    Historically, the San Juan Basin has accounted for 
approximately 80 percent of U.S. coalbed methane production, 
but his picture is changing with the emergence of other Western 
U.S. coalbed methane basins, such as the Powder River Basin in 
Wyoming and Montana.
    In 7 years, between 1994 and 2001, there has been a 
hundred-fold increase in the gas production and a sixty-fold 
increase in associated water production in the Powder River 
Basin. The quantity and quality of water produced with the 
coalbed methane are both important. The water within the coals 
in the southeastern quarter of the Powder River Basin, for 
example, in east central Wyoming, is high-quality water, 
suitable for drinking and for agriculture. But the water in 
coals elsewhere in the basin and in other basins may not be of 
such high quality.
    In these cases, large volumes of co-produced water must 
undergo treatment if it is to be disposed of on the surface. Or 
it must be re-injected into a deep formation so that it does 
not contaminate the surface or groundwater.
    Because coalbed methane wells generally produce at lower 
rates than conventional natural gas wells, the expense of 
disposing of the co-produced waters becomes a serious economic 
issue for producers. The Bureau of Land Management and the USGS 
have recently initiated a cooperative project to collect 
technical data for analysis and evaluation of coalbed methane 
resources in reservoirs in the Powder River Basin, based 
primarily on coal cores provided by cooperating coalbed methane 
operators.
    Our intent is to provide BLM and other Federal land 
management agencies with best possible scientific information 
about the coalbed methane and the associated waters for their 
resource and land management decisions.
    Mr. Chairman, this concludes my remarks. I would be happy 
to respond to any questions that members of the Committee may 
have.
    [The prepared statement of Mr. Whitney follows:]

 Statement of Dr. Gene Whitney, Supervisory Geologist, U.S. Geological 
                                 Survey

    Madam Chairman and distinguished Members of the Subcommittee, thank 
you for the opportunity to participate in this hearing and to present 
the results of the U.S. Geological Survey's (USGS) assessment of 
coalbed methane resources of the U.S. This assessment of undiscovered 
coalbed methane resources is a fundamental part of the USGS National 
Oil and Gas Assessment, completed in 1995, which has now been updated 
with recent assessments of the Uinta-Piceance Basin, Colorado and Utah 
and the Powder River Basin, Wyoming and Montana.
The Nature of Coalbed Methane
    Coal is the most abundant fossil fuel, with global reserves 
estimated to be several trillion tons. In addition to minable reserves, 
coal is considered to be a source of fluid hydrocarbons, in particular 
the lightest hydrocarbon gas, methane. Methane is the dominant 
component in natural gas. The methane that forms in coal is produced by 
chemical reactions that proceed as a consequence of increasing 
temperature during the burial of the coal in a sedimentary basin, or 
may be produced by the action of bacteria that derive their nutrition 
from the coal and generate methane as a by-product.
    Although coal is a solid, it is quite porous, and the pores and 
fractures in coal may hold enormous volumes of methane. The methane in 
coal is generally held in the pore spaces by water pressure. As long as 
water is present, the methane remains in the coal. When the water 
pressure is reduced, the methane is released and may flow through the 
fractures in the coal to the surface or to a well bore.
    The buildup of methane gas in coal mines during the mining process 
was recognized very early in coal mining history. The fires or 
explosions that tragically proved the presence of the methane gas have 
historically posed chronic coal production problems and danger to human 
life. Only within the last few decades has methane in coal beds been 
recognized as a significant untapped energy resource that might be 
produced.
    Not all types of coal may be suitable for producing coalbed 
methane, however. If coal is too deep in a basin, it becomes 
effectively sealed and the gas cannot be released from the coal. In 
addition, deep coal would require deep drilling and the low 
productivity of coalbed methane wells (small volumes of gas per well 
per day compared to conventional natural gas wells) generally requires 
shallower, less expensive, development. Also, coal is highly variable 
in its chemical composition and physical structure. Certain types of 
organic matter are more prone to form methane, and the porosity of the 
coal must permit movement of the gas once it is released. Therefore, 
only certain coal beds, and perhaps in certain zones, are highly 
prospective for coalbed methane production.
DISTRIBUTION, ASSESSMENT, AND DEVELOPMENT OF COALBED METHANE RESOURCES
    The USGS has, as a major part of its mission, the responsibility to 
estimate, or assess, the amounts of undiscovered oil and natural gas 
remaining in all onshore areas of the U.S. and in state-owned waters. 
These assessments are estimates of the quantities of oil and natural 
gas that have not yet been discovered, but which might be added to the 
reserves of the United States in the future. These assessments are 
based on the identification of favorable geologic conditions for the 
formation and accumulation of oil and gas. Assessments are conducted by 
teams of geoscientists who possess a thorough understanding of the 
geologic processes and environments that produce oil and natural gas. 
The USGS periodically releases updated estimates of oil and gas based 
on the latest available data and the most refined assessment 
methodologies. An important component of the ongoing USGS National Oil 
and Gas Assessment is an estimate of the technically recoverable 
coalbed methane resources in the United States.
    The goal of the USGS National Oil and Gas Assessment is to 
anticipate the occurrence of undiscovered volumes of natural gas, 
including coalbed methane, and to estimate the volume of gas left to be 
discovered and recovered. By conducting geologic studies of the basins 
within the U.S., these assessments provide some indication of the 
future supplies of natural gas that may be produced within the next 
generation or so. The results of the coalbed methane assessment 
conducted in 1995 are shown in the Table 1, and key basins are being 
updated on an ongoing basis.
    The USGS has reassessed two important coalbed-methane bearing 
basins in the Rocky Mountains: the Uinta-Piceance Basin in Utah and 
Colorado and the Powder River Basin in Wyoming and Montana. We estimate 
that the Uinta and Piceance Basins contain, at the mean, 2.32 trillion 
cubic feet (tcf) of undiscovered, technically-recoverable coalbed 
methane (Table 2). This new estimate is a substantial reduction from 
our 1995 estimate of 10.70 tcf (Table 1).
    In contrast, our estimate of undiscovered coalbed methane in the 
Powder River Basin has increased substantially. The USGS now estimates 
the Powder River Basin contains 14.26 tcf of undiscovered, technically-
recoverable coalbed methane (Table 2), compared with 1.11 tcf reported 
in the 1995 National Oil and Gas Assessment (Table 1).
    New estimates of undiscovered, technically-recoverable coalbed 
methane resources reflect new information about the geology of the 
basin and the extent of the resources made available from recent 
exploration and drilling activity in these basins, combined with 
advances in gas recovery technology in the shallow deposits of the 
Powder River Basin.
    Nationally, the major coalbed methane provinces coincide with the 
major coal provinces. The geology of coalbed methane is based upon the 
geology of the coal in which it forms and accumulates. The USGS has 
also conducted regional assessments of coal resources, including 
detailed research on the accumulation, burial, and subsequent uplift of 
coal that occurs across the U.S. Although coalbed methane is a form of 
natural gas, its accurate assessment rests upon the assessment of coal 
in U.S. basins; coal assessment provides an ideal basis for the 
subsequent assessment of coalbed methane. Although the presence of 
abundant coal does not guarantee that coalbed methane will be 
economically recoverable, the presence of coal is an obvious 
prerequisite for coalbed methane formation and accumulation in economic 
deposits. Therefore, the major coal provinces, such as the Appalachian 
Basin, the Texas Gulf Coast, the Colorado Plateau, and the Tertiary 
basins of the Northern Rockies and Great Plains, provide the most 
prospective areas for coalbed methane production (see map).
    In addition to the undiscovered, technically recoverable coalbed 
methane volumes reported in Table 1, coalbed methane also comprises 
part of current U.S. natural gas reserves and production. Nationally, 
coalbed methane accounts for approximately 8% of total natural gas 
reserves and 7% of total natural gas production. Historically, the San 
Juan Basin has been the most productive coalbed methane basin in the 
U.S., accounting for approximately two-thirds of the known reserves and 
approximately 80% of the coalbed methane production (source, Energy 
Information Administration, (EIA), 2000). The second most productive 
area of the country, Warrior Basin in Alabama, accounts for 
approximately 8% of total coalbed methane reserves and 9% of U.S. 
coalbed methane production. (Table 3, EIA, 2000)
    This picture is changing, however, with the emergence of other 
western U.S. coalbed methane basins. In the Rocky Mountain region, the 
Powder River Basin in Wyoming is experiencing a coalbed methane 
production boom. The thick coals of the Powder River Basin in Wyoming 
and Montana are proving to be fertile areas for coalbed methane 
exploration and production. Coal beds with producible methane are often 
shallow in this basin, so wells are inexpensive to drill and operate. 
Although highly variable in thickness, the Tertiary coals in the Powder 
River Basin are commonly quite thick, reaching 300 feet thick in parts 
of the basin.
    Exploration and production activity in the Powder River Basin began 
to increase geometrically once coalbed methane developers understood 
the production techniques necessary to successfully produce the gas. In 
May of 1994, there were 110 coalbed methane wells in the basin, 
producing 6.5 million cubic feet of gas per day, as well as 949,637 
gallons of water per day. In May of 2001, seven years later, there were 
5,446 wells producing 642 million cubic feet of coalbed methane per day 
and 61,141,720 gallons of water per day. The large volumes of water are 
produced because it is the water that holds the methane in the pores of 
the coal, and water must be removed in order for the gas to be 
released. Therefore, the first stage of production in a coalbed methane 
well in the Powder River Basin is the removal of sufficient water to 
release the gas so that it can be produced.
Impacts and Issues of Coalbed Methane Development
    As a result of this water production, one of the major concerns 
associated with coalbed methane production in the Powder River Basin 
has been disposal of the co-produced water (water produced as a 
byproduct of the gas production). The coal beds in this basin are 
significant aquifers because of their high porosity and highly 
fractured character. Many local residents have historically taken their 
water supply from coal beds. However, the ground water table must be 
drawn down during coalbed methane production for the methane to be 
released from the coal. This draw-down requires many closely-spaced 
wells, sometimes pumping at high rates.
    The water within the coals in the southeastern quadrant of the 
Powder River Basin in east central Wyoming is high quality water, 
suitable for drinking and agriculture, but the water in coals elsewhere 
in the basin may not be of such high quality. In these cases, the water 
must undergo treatment if it is to be disposed of on the surface, or it 
must be re-injected into a deep formation so that it does not 
contaminate the surface or ground water. Even some highly dilute waters 
may be undesirable because of salts that may be concentrated during 
evaporation if surface disposal is used. Therefore, it is essential to 
understand the chemistry of waters co-produced with coalbed methane and 
to dispose of those waters appropriately.
    In the San Juan Basin, the water is rarely of sufficiently high 
quality that it can be disposed of on the surface. This is the 
situation in most other basins in the U.S. In addition, many states 
require that all co-produced fluids be re-injected into subsurface 
formations, regardless of the quality of the fluid. The production of 
large volumes of water and the need to develop appropriate methods for 
its disposal strongly affect the economic viability of coalbed methane 
wells. Because coalbed methane wells generally produce at lower rates 
than conventional natural gas wells, the expense of disposing of the 
co-produced waters may be economically prohibitive and could render the 
well uneconomic.
    In areas where the co-produced water is high quality, such as in 
portions of the Powder River Basin, the main issue may be the effect of 
surface disposal of large volumes of water. Even though the water is 
clean, it affects the environment in this semi-arid climate. Co-
produced water from coalbed methane development is presently discharged 
either directly into existing surface waters or to drainages. It is 
expected that surface disposal of co-produced water may result in 
erosion or drowning of drainages and associated vegetation within the 
area. Several companies have been experimenting with reinjecting the 
co-produced water into sandstones and coal beds in the Wasatch and Fort 
Union Formations. One company is reinjecting water into an aquifer used 
by the city of Gillette, Wyoming.
    Ground water withdrawal from aquifers is a particularly sensitive 
issue to landowners who ``beneficially use'' ground water for their 
livestock and for irrigation (in addition to drinking water). 
Generally, methane operators have cooperated with landowners by 
diverting co-produced water from coalbed methane wells into stock tanks 
or other holding areas for their livestock.
    Additionally, according to EPA, some citizens in areas with coalbed 
methane development have reported ground water well contamination they 
believe is due to hydrolic fracturing resulting from coalbed methane 
production. While no incidents of contamination allegedly due to 
hydraulic fracturing have ever been substantiated, EPA is currently 
conducting a study on possible impacts to ground water from hydraulic 
fracturing in coalbed methane reservoirs. USGS has agreed to provide 
assistance to EPA with that study.
    Another impact of coalbed methane development is the affect on 
local coal mining operations of ground water withdrawal from the coal. 
Although this does not affect the amount of coal that is produced, it 
reduces the available water for coal mining operations and accelerates 
oxidation of the coal, which may reduce its heat content and energy 
potential. In addition, because surface mining activities involve the 
drawing down of the water table, reservoir pressures can be reduced, 
resulting in the liberation of the methane from the coal, which may 
escape along the active face of the mine. For example, there are 18 
large surface coal mines along the eastern part of the Campbell County 
and the northernmost part of Converse County, Wyoming. Last year, these 
coal mines produced about 300 million short tons from the Wyodak-
Anderson coal zone. The Wyodak-Anderson coal zone is also being 
explored and developed for coalbed methane by about 80 methane 
operators basin wide. The coal produced from these mines made up about 
30 percent of the total U.S. coal production in 2000 and was shipped to 
more than 140 electric-power generating plants in the western, mid-
western, southern, and southeastern U.S.
    More than half of the lands in the Powder River Basin contain 
mineral rights owned by the Federal government, yet the majority of the 
surface in the basin is privately owned. As a result, the majority of 
coalbed methane wells are on state and private surface lands; only 14 
percent of the wells are on Federally-owned surface lands. Coalbed 
methane development on Federal lands creates impacts in the basin 
resulting from associated drilling, facilities, methane gathering 
systems (e.g., pipeline networks), access roads, and withdrawal and 
disposal of co-produced water from coalbed methane wells. The Bureau of 
Land Management (BLM) assesses the land-use management and impacts of 
drilling coalbed methane wells on lands where mineral rights are 
controlled by the Federal government.
    The BLM and the USGS initiated a cooperative project to collect 
technical data for analysis and evaluation of coalbed methane resources 
and reservoirs in the Powder River Basin, primarily from coal cores 
provided by cooperating coalbed methane operators. BLM and USGS use 
this opportunity for additional information and analyses of the coalbed 
methane resources to accomplish their agencies'' respective resource 
evaluation and management missions. The agencies have different, but 
complementary, goals and information needs. Their joint study also 
addresses public need for data regarding Powder River Basin coalbed 
methane resources.
SUMMARY
    Coalbed methane is different from other types of natural gas 
deposits in its distribution, in its production methods, and in its 
environmental impact. Coalbed methane occurs in coal, is economically 
producible where it is shallow, and requires dewatering of the coal 
prior to production. Water co-produced prior to and during gas 
production must be re-injected into a deep formation or, if the water 
is sufficiently good quality, disposed of on the surface. Consequences 
of surface disposal of fresh water include some potential chemical 
effects after evaporation, the introduction of water into a semi-arid 
environment, and potential ground water depletion.
    Madam Chairman, this concludes my remarks. I would be happy to 
respond to questions Members of the Committee may have.
                                 ______
                                 
    [Tables and maps attached to Mr. Whitney's statement 
follow:]
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    Mr. Rehberg. Thank you very much.
    We are going to time the testimony. We forgot to push the 
button on the first. You didn't go over your time, though. 
Thank you.
    [Laughter.]
    Welcome, Tom. Tom Fulton, formerly with Senator Burns' 
office, resident of Harlowton, Montana. For those of us who 
just traveled to Denmark to look at wind generation, you live 
in the area that has the greatest potential in the entire world 
for wind power. We welcome you and thank you for coming before 
us today. Tom Fulton.

 STATEMENT OF TOM FULTON, DEPUTY ASSISTANT SECRETARY FOR LAND 
            AND MINERALS, DEPARTMENT OF THE INTERIOR

    Mr. Fulton. Thank you very much, Mr. Chairman. It is a deep 
honor and a pleasure to be able to testify before a Chairman 
from Montana. I hope that in the future there is a Chairmanship 
in your future.
    I would like to have my testimony submitted for the record, 
if I might.
    Mr. Rehberg. Without objection.
    Mr. Fulton. I will attempt to summarize from there.
    Mr. Chairman, members of the Subcommittee, thank you very 
much for the opportunity to provide the Administration's views 
on coalbed methane development.
    I am accompanied today by Mr. Erick Kaarlela, who is the 
senior petroleum engineer with the Bureau of Land Management.
    I want to discuss briefly some of the challenges the 
industry and we in government face as demand for access to 
Federal coalbed methane continues to increase rapidly.
    The department views coalbed methane as a domestic energy 
resource with tremendous potential. And we pledge to allow the 
development of this vital national asset in an environmentally 
responsible way.
    While coalbed methane development exists in several Western 
states, a dramatic increase in new coalbed methane exploration 
and development is occurring in the Powder River Basin in 
Wyoming. Currently in Wyoming, there are more than 5,500 CBM-
producing wells. At the time of the original environmental 
impact statement for this area, no one anticipated or planned 
for the rapid development of this resource. Consequently, there 
is a need for a new EIS, which is currently scheduled for 
completion in May 2002.
    This EIS will analyze the effects of drilling over 50,000 
CBM wells and 3,000 conventional oil and gas wells over the 
next 10 years.
    In Montana, another state that has shown tremendous promise 
for the development of coalbed methane, the Bureau of Land 
Management is in the process of amending its Billings, and 
Powder River resource management plans, to address the 
development of CBM in these areas. These plans cover 
approximately 3 million acres in south-central and southeastern 
Montana. These plans were last amended in 1994 prior to large-
scale coalbed methane development. And the BLM and State of 
Montana are currently preparing a joint environmental impact 
statement, which will provide the foundation for decisions 
concerning oil and gas development made by each agency involved 
in this process. The final EIS for Montana is expected to be 
published in July or August 2002.
    Existing planning documents and the accompanying NEPA 
analysis do not fully address the specific impacts from CBM. In 
most cases, there was no analysis for CBM such as occurred in 
the San Juan Basin of New Mexico, Utah and Colorado; the Powder 
River Basin in Wyoming and Montana; and in central Utah. All of 
these states have had to make some planning amendments or 
revisions as well as initiate additional NEPA analysis, usually 
in the form of an EIS.
    As a result, the approval of some CBM operations has been 
delayed by as much as 1 to 2 years, with significant cost to 
operators and the bureau. In undertaking efforts to update land 
use plans, top priority has been given to areas with the 
highest potential for oil and gas occurrence, using 
information, as was mentioned, jointly collected by BLM and 
USGS.
    We have included funding for these plans in the 
Administration's budget and are pleased that Congress has 
acknowledged the need for coalbed methane development and its 
related planning, analysis, and documentation.
    Under the Secretary of Interior's four C's of 
communication, cooperation, and consultation, all with the goal 
of conservation, public involvement is another important aspect 
of this process.
    The NEPA process calls for public input as well and is, 
therefore, inherently open. Public scoping meetings are used to 
develop the EIS, and are considered an important part of that 
process. The BLM Montana has organized a CBM coordination 
group, for instance, composed of Federal, state, tribal, 
private landowners, industry, and environmental groups to 
discuss the issues and share information related to the CBM 
EIS.
    In addition, there are two specific issues I would like to 
address.
    One is the role of water, which is vital in the production 
of CBM. The coalbed methane extraction process involves pumping 
water from coal seams to the surface in order to reduce water 
pressure that traps the gas in the coal. Managing that water 
produced with methane is a challenge for the oil and gas 
industry as well as Federal and state regulators. We must work 
together to find innovative solutions to address the surface 
water issues and the potential impacts to the entire land and 
water system.
    I am glad to see that the states of Wyoming and Montana are 
working on a water quality memorandum of understanding.
    Finally, the BLM in Montana and Wyoming is presently 
discussing the appropriate model to use to assess cumulative 
impacts to air quality in the Powder River Basin. Wyoming 
selected Argonne National Lab as the contractor to do its air 
quality study. The contract may be expanded to include Montana.
    In conclusion, the Administration, the Department of the 
Interior, the Bureau of Land Management and other Federal 
agencies stand ready to work with members of the Committee and 
others to ensure that development of the CBM methane industry 
makes sense and takes into account the various pushes and 
pulls.
    With that, I conclude my remarks and stand ready to answer 
questions the Committee might have.
    [The prepared statement of Mr. Fulton follows:]

Statement of Tom Fulton, Deputy Assistant Secretary, Land and Minerals 
              Management, U.S. Department of the Interior

    Madame Chairman, members of the Subcommittee, thank you for the 
opportunity to come before you to provide the Administration's views on 
coalbed methane (CBM) development. I am accompanied by Erick Kaarlela, 
senior petroleum engineer with the Bureau of Land Management (BLM).
    I will provide you with a broad overview of the status of BLM's 
coalbed methane program. Additionally, I will discuss briefly some of 
the challenges we face as industry demand for access to Federal coalbed 
methane continues to increase rapidly. The BLM views coalbed methane as 
a domestic energy resource with tremendous potential and we pledge to 
allow the development of this vital national asset in an 
environmentally responsible manner.
    While coalbed methane development on the public lands occurs in 
several western states, a dramatic increase in new coalbed methane 
exploration and development is occurring in the Powder River Basin in 
Wyoming. Currently in Wyoming, there are more than 5,500 CBM-producing 
wells under an EIS completed in 1999 and a supplemental drainage 
environmental assessment completed in 2001. At the time of the original 
EIS, no one anticipated or planned for the rapid development of this 
resource. Consequently, there is a need for a new EIS which is 
currently scheduled for completion in May 2002, with a Record of 
Decision expected in July 2002. This EIS will analyze the effects of 
the drilling of 50,000 CBM wells, and 3,000 conventional oil and gas 
wells, expected to be drilled in the next 10 years.
    In Montana, another state that has shown tremendous promise for the 
development of coalbed methane, the BLM is in the process of amending 
its Billings and Powder River Resource Management Plans (RMP's) to 
address the development of CBM in these areas. These plans cover 
approximately 3 million acres in south-central and southeast Montana. 
These plans were last amended in 1994, prior to large-scale coalbed 
methane development. The BLM and the State of Montana are preparing a 
joint EIS, which will provide the foundation for decisions concerning 
oil and gas development made by each agency involved in this process. 
The Final EIS is expected to be published in July/August 2002.
    As the updates for the states of Wyoming and Montana reveal, 
decisions concerning oil and gas leasing and production are made by the 
BLM in the context of land use planning and appropriate environmental 
analysis. The original land use plans were developed at a time when it 
was not possible to foresee the extensive development potential of CBM. 
The Reasonably Foreseeable Development scenarios (numeric parameters 
for the analysis) did not contemplate the number of wells which are 
anticipated.
    Consequently, the planning documents and the accompanying NEPA 
analyses did not fully address the specific impacts from CBM. In most 
cases, there was no analysis for CBM. This has occurred in the San Juan 
Basin (New Mexico, Utah and Colorado), Powder River Basin (Wyoming and 
Montana), and in central Utah. All of these states have had to make 
some planning amendments or revisions as well as initiate additional 
NEPA analysis, usually in the form of an EIS. As a result, the approval 
of some CBM operations has been delayed by as much as 1 - 2 years, with 
significant costs to the operators and the BLM.
    As noted earlier, the BLM is undertaking efforts to update land use 
plans. Top priority has been given to areas with the highest potential 
for oil and gas occurrence, using information collected by a BLM and 
U.S. Geological Survey (USGS) cooperative project in the Powder River 
Basin. BLM and USGS have used this project to collect information and 
analyses of the coalbed methane resources to accomplish their 
agencies'' respective resource evaluation and management missions. We 
included funding for these plans in the Administration's budget and are 
pleased that Congress has acknowledged the need for coalbed methane 
development and related planning analysis and documentation.
    Public involvement is another important aspect of the NEPA process. 
As dictated by law, policy, and our desire to maintain an informed 
public, the NEPA process calls for public input and is therefore 
inherently open. Public scoping meetings are used to develop the EIS 
and are considered an important part of the process. Web sites and 
newsletters also serve to inform the public concerning this issue. The 
BLM Montana organized a CBM Coordination Group, composed of Federal, 
State and tribal agencies, private landowners, industry, and 
environmental groups, to discuss issues and share information related 
to the EIS. Comments will be sought on the draft EIS.
    The role of water is vital in the production of CBM. The CBM 
extraction process involves pumping water from the coal seams to the 
surface in order to reduce the water pressure that traps the gas in the 
coal. This releases the methane. Managing the water produced with 
methane is a challenge to the oil and gas industry, as well as Federal 
and State regulators. We must work together to find innovative 
solutions to address the surface water issues and the potential impacts 
to the entire land and water system. Current water disposal options 
include treatment prior to surface discharge, discharge to the surface 
and into drainage facilities (in accordance with applicable law), and 
on a limited basis, reinjection, back into the subsurface. Beneficial 
uses of the water also include dust abatement, stock watering, creation 
of wildlife watering areas, and enhancement of fisheries and riparian 
zones.
    The BLM in Montana and Wyoming are presently discussing the 
appropriate model to use to assess cumulative impacts to air quality in 
the Powder River Basin. Wyoming selected Argonne National Laboratory as 
the contractor to do its air quality study. The contract may be 
expanded to a comprehensive analysis of the EIS areas in both Montana 
and Wyoming. The BLM in Montana and Wyoming is committed to share all 
resource data with affected parties in the northern portion of the 
Powder River Basin that straddles the state line, such as soil, water, 
air, vegetation, wildlife, cultural, economic, etc., in order to better 
analyze cumulative impacts resulting from development in both states.
    Thank you for the opportunity to testify before you today. I 
welcome any questions the Committee may have.
                                 ______
                                 
    Mr. Rehberg. Thank you Mr. Fulton.
    Our last panel member in this segment is the representative 
of the Coalbed Methane Coordination Coalition, Dr. D.G. Mickey 
Steward.
    Dr. Steward?

STATEMENT OF D.G. MICKEY STEWARD, COORDINATOR, COALBED METHANE 
                     COORDINATION COALITION

    Ms. Steward. Good morning. My name is Mickey Steward. I am 
the coordinator for the Coalbed Methane Coordination Coalition 
in Wyoming.
    This coalition is composed of five counties and two 
conservation districts where coalbed methane development is 
occurring.
    Coalbed methane is growing rapidly in Wyoming right now, 
but it is a boom different from ones we have experienced 
before. The difference is that each CBM well is hardly 
noticeable, but there are thousands of wells expected, one to 
several on every 80 acre tract of coal. And the coal lies under 
several million acres. We are in effect platting the coal-rich 
portion of the Powder River Basin.
    In a sense, each lot has water, power, roads, and gas. The 
gas lines lead to compressors, one to every section or two in 
the developed area. Thus, in a real extent, this kind of 
development is very different from the impact of a coalmine or 
a power plant. It is extensive development, not intensive 
development. And surface use agreements between private 
landowners and operators, guiding the terms of this 
development, are being made in somewhat of an information 
vacuum.
    While the mineral rights are owned in large part by the 
Federal Government, the surface rights in the Powder River 
Basin are owned in large part by private parties, as many as 
several thousand. These private surface owners and the 
decisions they make with regard to their surface management as 
part of mineral development affect their neighbors and, in many 
cases, neighboring counties and even states. Their decisions 
often have transboundary effects; that is, effects that pass 
beyond the boundaries of their own property.
    Yet the private landowner typically does not have readily 
available the means to identify, analyze, and mitigate the 
possible outcome of his land-use management decisions with 
respect to CBM. Resources that can be affected include surface 
and groundwater, the coal and the methane itself, soils, air, 
wildlife, landforms, vegetation, and cultural resources.
    Despite the sweeping cumulative effects of individual 
decision-making, these decisions are very often made with 
limited information. This decision-making in the dark is 
probably the single largest effect on the surface environment 
to grow out of the CBM development.
    Conservation districts have the possibility of filling the 
information gap and significantly improving the effectiveness 
of the surface owner in making resource management decisions 
and surface-use agreements.
    GIS mapping and free flow of existing information from many 
sources will provide an information-rich environment within 
which surface use for mineral development can occur. Using 
information generated by the conservation districts, decision-
makers and managers can share a connectivity and thus a 
cumulative strategic effect without interfering with the right 
of each private person to make his own decisions. A network of 
information providers can lead to unified, positive 
development.
    But at this moment, the conservation districts do not have 
the resources to provide this service. The network of 
conservation districts exists, but the information source 
within each district needs to be developed.
    Fortunately, Wyoming is at the forefront of states that 
provide high-quality electronic information. We need to put 
information specialists in place in each conservation district 
office that is affected by coalbed methane and the flow of 
decision-making information can begin. The cost is only several 
technicians and some equipment purchase. This is a small price 
to pay for optimal development and strategic planning.
    The major mineral owner, which is the Federal Government, 
and thus all of us, should help pay for optimal CBM development 
by funding effective information transfer for rational 
development.
    What stands between good information and its ready 
availability to stakeholders? A lack of personnel and equipment 
at the local level; a deplorable lack of current soils 
information; poorly developed links between information 
sources, which are plentiful; lack of experience in 
interpreting and applying the information that is available. 
These deficiencies must be rectified and rectified quickly if 
CBM is to develop with maximum benefit and minimum impact.
    How can these deficiencies be rectified? The answer is 
straightforward: accelerate soil mapping, supply trained 
personnel to the conservation districts, advertise a 
conservation district program, and coordinate its application 
throughout the development areas. Provide the CBM Methane 
Coordination Coalition with sufficient resources to address 
issues of specific interest to the counties and to further 
facilitate the transfer of information.
    After a long discussion yesterday in Cheyenne, we would 
like to suggest that the mode of funding for this initiative 
that would be most applicable is via the USDA NRCS conservation 
technical assistance initiative.
    Thank you very much for this opportunity to speak on an 
issue that's important to the counties and the local 
landowners. And I will be happy to answer questions.
    [The prepared statement of Ms. Steward follows:]
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    Mrs. Cubin. [Presiding.] Thank you for your testimony.
    I apologize to all of you for not being here on time. I was 
at the White House.
    I will now defer to Mr. Kind for opening questioning. He 
has to leave early, so please go ahead.
    Mr. Kind. Thank you, Madam Chair.
    Thank you for your testimony.
    Mr. Whitney, let me start with you. USGS apparently is 
doing a comprehensive survey right now in regards to the 
availability of methane coalbed reserves. Is this geographic 
specific, just for the Rocky Mountain area, or it is national 
in scope, the survey that is being conducted?
    Mr. Whitney. In 1995, we conducted a national overview of 
coalbed methane resources. Because additional data and new 
technology will cause those estimates to change, we are 
updating our 1995 assessment on a basin-by-basin basis.
    So the first two basins that we have updated are the Powder 
River Basin and the Uinta-Piceance Basin. We are currently 
working on the San Juan Basin and the Green River Basin.
    Mr. Kind. How long is that going to take to complete?
    Mr. Whitney. I think the San Juan Basin results will be out 
this fall, and the Green River basin will be out a year from 
this fall.
    Mr. Kind. Thank you.
    Mr. Fulton, in regards to the EIS that the agency is 
working on, that was pushed back to the middle of next year? Is 
that the current estimate, as far as when you are going to 
complete that?
    Mr. Fulton. Yes, 2002.
    Mr. Kind. As you progress in the EIS statement, in the 
information that you are collecting, are you finding that the 
date is solid right now, or is it raising more questions as you 
move along, and that might be pushed back even further? Because 
wasn't it originally due this year, this summer?
    Mr. Fulton. The development in this area has been rapid and 
keeping up with new information has been difficult. But I think 
that the additional funding that was provided to allow us to 
staff up and get a handle on fast-changing events means that 
that EIS will be completed mid-year next year.
    Mr. Kind. Dr. Steward, let me ask you if you could be a 
little more specific in regards to the surface water challenges 
that are being posed right now in regards to the production of 
the coalbed methane. What specific challenges are you looking 
at?
    Ms. Steward. I am probably alone in the room in thinking 
that the surface water is not the largest issue facing us in 
coalbed methane development. But with respect to surface water, 
I think that the optimum beneficial use of that water has yet 
to be realized. That water is almost as precious of a resource 
in the West as energy. Although sometimes in the winter we 
wouldn't think so. And I would like to see some more focus on 
optimization of the use of that water.
    Mr. Kind. What is currently being done? It is my 
understanding that in order to extract methane, you have to 
pump the water up from a hundred to sometimes thousands of feet 
below the surface. What is currently being done with that 
discharged water?
    Ms. Steward. I think we will hear some testimony on that 
today. Typically the water is used primarily for livestock 
watering and wildlife. I have seen a lot of enhancement of some 
migratory waterfowl in the area. But the water, I think, could 
be used also for irrigated agriculture, but it will take some 
highly technical irrigation to do that. And we ought to be 
looking into that, I think.
    Mr. Kind. Is the pumping having any effect on current 
surface water supplies?
    Ms. Steward. I think that's a topic for open discussion. 
And there are many experts on that, of which I am not one. And 
I would defer to them.
    Mr. Kind. Your response kind of begged the question: You 
don't think surface water is the biggest challenge; what, in 
your view, is the biggest challenge with this production?
    Ms. Steward. I think that we need to look at the basin in a 
coordinated and integrated way, and also at our neighbors, and 
address all aspects, not only the surface water, but the air, 
the groundwater, the wildlife, and the general land use, and 
ensure that while we are extracting this valuable resource, 
that we also maintain our capacity to use the other resources.
    Mr. Kind. Mr. Fulton, in your opinion or estimation, do you 
think that enough is being done in order to adequately protect 
or even compensate the surface owners that are being effected 
by the production now?
    Mr. Fulton. Yes, I do. The scoping process in the EIS is 
meant to identify the conflicts and to attempt to find ways to 
mitigate those conflicts, to reduce the level of conflict, and 
to make sure that single uses aren't disadvantaging other uses. 
And in that way, we get a good handle on what it is the 
competition means and how to deal with it.
    Mr. Kind. And you think enough steps are being taken at 
this time in regards to the health and safety of surface 
residents in this area?
    Mr. Fulton. I believe that that is the case.
    Mr. Kind. Okay, thank you.
    Thank you, Madam Chair.
    Mrs. Cubin. The Chair now recognizes Mr. Gibbons.
    Mr. Gibbons. Thank you very much, Madam Chairwoman.
    And I want to tell our guests here, welcome and glad to 
have you here.
    I wanted to talk to Dr. Whitney a little bit about the 
potential coalbed methane areas. It seems that USGS is focusing 
on the Rocky Mountain region. Have you made an attempt to 
assess and inventory the potential for other coalbed methane 
areas, whether it is the Green River Basin, whether it is the 
Forest City Basin, whether it is the Northern Appalachian 
Basin? Have you done all that and provided that information to 
the appropriate agencies?
    Mr. Whitney. Yes. Our 1995 assessment includes all those 
basins. And in fact, there is a table in my written testimony 
that contains the results of that 1995 assessment.
    Also, in our update of the assessment of various basins, 
although we are concentrating on Rocky Mountain basins, because 
of the booming production activity there, we also look at the 
Appalachian basins, the Gulf Coast, and other coalbed methane-
bearing basins.
    Mr. Gibbons. Is there a great deal of activity going on 
with regard to the exploration and development of coalbed 
methane in the northern Appalachian region?
    Mr. Whitney. Coalbed methane has been produced for a long 
time, as you know, in the northern Appalachian region. I think 
there is a renewed interest there.
    The problem with the Northern Appalachian Basin is it is a 
very complex, geologically complex, basin. And exploration is a 
little more difficult there.
    Mr. Gibbons. Let me direct a question to Mr. Fulton.
    Knowing the number of applications that are coming forward 
with the production for coalbed methane by resource entities, 
that are private entities, and the number of people that are 
now applying for exploration of potential sites, do you feel 
that the 32 personnel increase is adequate to handle all of 
that?
    Mr. Fulton. Yes, I do. You have to balance not attempting 
to build the church to the size of the Easter crowd, and there 
is definitely a backlog that has to be addressed. But I think 
that the increase is adequate over the longer term to catch up 
with the backlog.
    There may be some continued backlog over the short term. 
But in the longer term, those added resources should catch up 
with the number of applications.
    Mr. Gibbons. Can you explain the difference between the 
application for permit to drill as processed by the BLM for a 
well on a private surface split estate and Federal surface? 
Tell me what the difference in the application process is.
    Mr. Fulton. I am afraid I am not technically very 
knowledgeable about that. I do have Erick Kaarlela here, who is 
the senior petroleum geologist for the Bureau of Land 
Management. And if you would like, he could offer an 
explanation. Or we could submit a written explanation.
    Mr. Gibbons. Let me ask you, basic knowledge, do you 
believe, to your knowledge that state oil and gas regulatory 
agencies and their laws and regulations, that they are required 
to protect the rights of surface owners as well as the 
environment?
    Mr. Fulton. It is my understanding.
    Mr. Gibbons. So your answer to that is yes.
    Mr. Fulton. Yes.
    Mr. Gibbons. Dr. Steward, let me go back and ask you that 
question. Do you feel that the Federal Government is adequately 
staffing its levels for the ability to handle the exploration 
needs of resources, whether it is coalbed methane or other 
resource development, from your industry's standpoint?
    Ms. Steward. I am not qualified to answer that question 
with respect to the BLM or the USGS, who both are doing a fine 
job, in my opinion. But I do think that because of the nature 
of coalbed methane, where the water resource is extracted at 
the same time as the gas resource, that we need to look 
carefully at the interaction of the water with the rest of our 
environmental resources, particularly the soil.
    And I don't think that we have the information at our 
fingertips to manage that properly. And I don't think we have 
the information necessary for private individual surface owners 
to properly manage the suite of resources that they are 
responsible for. I think they need some help. And I really 
think that the soil can be done by NRCS, and the conservation 
districts through the NRCS can help get information out to 
private landowners so that they are good land-use managers.
    They are in large part the surface land-use managers for 
the Federal underlying mineral in the Powder River Basin.
    Mr. Gibbons. Thank you, Madam Chairman.
    Mr. Carson. Thank you so much, and thank you for being here 
today.
    Let me ask a question to the panel, just to clarify some 
information that was in your testimony. I am not that familiar, 
coming from a state where we don't have a lot of federally 
owned lands, is the bulk of the coalbed methane production in 
Wyoming, let's say, in the split estate, where the surface 
rights and the mineral rights, the Federal Government will have 
the mineral rights but the surface rights will be owned by the 
private landowner? Anyone who is capable of answering that.
    Dr. Steward?
    Mrs. Steward. In the Powder River Basin, approximately half 
of the mineral estate is held by the Federal Government, but 
approximately 90 percent of the surface in the Powder River 
Basin is held by private landowners. In the southern part of 
the state, where coalbed methane is just starting to develop, 
in Carbon County, it is a very different situation because much 
more of the surface is owned by the Federal Government.
    So the answer to your question is, it depends.
    Mr. Carson. I understand. In say the Powder River Basin, 
when it becomes of interest to be able to exploit the mineral 
resources in that area, the surface landowners, what rights and 
what compensation do they received in those instances?
    Ms. Steward. In the Powder River Basin, the typical 
situation is that there is a mineral lease agreement made and a 
surface-use agreement made. It is probably the exception rather 
than the rule that only one individual makes both those 
agreements. And the terms of the agreements are, as part of 
free enterprise, made by the parties participating in the 
development of the enterprise.
    So the specifics of the agreements are somewhat specific to 
the agreement itself.
    Mr. Carson. I guess my question, though, is, the surface 
landholder, what rights does he have in the negotiating 
process; for example, the groundwater that he is relying on for 
livestock or for other uses, conservation uses perhaps. I mean, 
he has no rights, obviously, to stop the exploitation if he 
doesn't own the mineral rights. But what rights does he have? 
What compensation does he have, if any, for, say, the 
exploitation of water resources that he is relying upon, too, 
that are part of the coalbed methane production?
    Ms. Steward. Typically those types of questions are 
addressed in the surface-use agreement, and there are several 
people speaking this morning that can give you good information 
on that. But I think that the point I am trying to make is that 
sometimes the private landowner is not completely aware of the 
value of his other non-coalbed resources and the need to manage 
them. And I think that that is exactly what I am trying to 
stress here, that assistance is needed to help the private 
surface owner properly manage those agreements.
    But in direct answer to your question regarding wells, 
wells are typically addressed in the surface use agreement.
    Mr. Carson. In response to Mr. Kind, you implied that 
current usage of the water resources are not being optimized. 
But you didn't specify what, in your mind, the optimal uses of 
those resources might be. Can you give us some indication of 
that?
    Ms. Steward. There is a wide variation in water quantity 
and quality associated with coalbed methane development. And 
the use of the water needs to be tailored to both the quality 
and the quantity of the water. I think that in the Powder River 
Basin we could do more with respect to agriculture. We could do 
more with respect to focused development of wildlife 
opportunities. And I think that, given the diverse and 
extensive nature of the development, I don't think you are 
going to see one big one-size-fits-all use of the water.
    Once again, the surface owner and the operator, as part of 
their surface-use agreement, need to work out what is best for 
that particular area. The surface owner is the land-use 
resource manager for that particular piece of ground, so he 
needs to know what he could do and how he could do it in 
conjunction and working in partnership with the developer.
    Mr. Carson. Let me ask a final question, Mr. Fulton or Dr. 
Whitney. You talk a lot in your testimony about technically 
recoverable coalbed methane resources; what are the 
economically recoverable resources there? And if you could 
address what the economics of your typical natural gas 
production versus the coalbed methane production are.
    Mr. Whitney. I think I can try to answer that. The USGS 
does technically recoverable estimates. Technically recoverable 
means that there are resources that are in the ground that 
could be recovered using existing technology or foreseeable 
technology.
    We don't do economically recoverable resources for several 
reasons. As you know from recent experience, economics depends 
primarily on price of the commodity; in this case, natural gas. 
When you get to a fine scale in an area like the Powder River 
Basin, the economics of production will depend not only the 
depth of drilling, the rate of production of the well, but it 
also depends on the availability of pipeline infrastructure, 
gathering facilities, and so on.
    So when you get to economically recoverable resources, you 
have to specify a particular play or a particular piece of land 
and do the economics on that. It is very difficult if not 
impossible to do a one-size-fits-all economic analysis of a 
basin.
    Mr. Carson. Thank you very much.
    Mrs.  Cubin. We do try to run the Subcommittee in a more 
orderly fashion than we have so far today, but we do have to 
take a recess now. The president of Mexico will be addressing a 
joint session of Congress, and our rules do not permit us to 
sit during sessions, such as this.
    So we will recess right now. I expect that we will start 
the hearing up again at noon.
    I was hoping that we would be able to finish with this 
panel, so that you could relax. But unfortunately, we do have 
more questions.
    So now the Committee will recess until noon.
    [Recess.]
    Mrs. Cubin. The Subcommittee on Energy and Mineral 
Resources will come to order. I am going to go ahead and start. 
I realize it has been confusing. It is not quite 12:30 yet, but 
we do need to get through this work today.
    So since there aren't any other members here, I would like 
to pose a question. I would like to start with Dr. Steward.
    First of all, I want to remind you that this Committee 
authorizes legislation, but we don't appropriate any funds. We 
do make funding requests to the appropriators, and our success 
in getting the appropriations we want varies from time to time. 
It helps enormously, though, when the Administration supports 
the request that we make, or when the request comes from them.
    And I just wondered if you have made any requests of the 
Secretary of Agriculture to understand more of what your 
conservation districts' needs are.
    Ms. Steward. Mrs. Cubin, earlier in the summer, our 
coalition submitted to your staff and the staff of Senator Enzi 
and Senator Thomas a request for funding. And to be perfectly 
honest, we have been relying heavily on the staffers to advise 
us on the best routes to take. And we just now, I think, in 
Wyoming are ramping up to make a full presentation with respect 
to the soil surveys.
    However, with respect to the conservation districts, we are 
looking to your office for some advice about the best way to 
pursue this.
    Mrs. Cubin. And we have made our request, as you know, to 
the Secretary of Agriculture, asking for their support. But I 
guess some guidance that I would like to offer is that they get 
requests from congressmen all the time, and so the more you can 
weigh in and the more you can have other constituents weigh in 
with the Secretary, that is helpful in our getting their 
support and in our being able to actually get the 
appropriation.
    And as you said, the senators and I have been working on 
that, along with the staff. And we will try to make sure that 
all those needs are met.
    I had on the map here, I wanted to ask Dr. Whitney, on your 
map of the Powder River Basin, it says that there are 14.26 
trillion cubic feet of coalbed methane.
    Mr. Whitney. Yes.
    Mrs. Cubin. I thought that the state estimate of that is 
more like 25 trillion cubic feet. Do you know?
    Mr. Whitney. Well, the estimate that the USGS made is for 
technically recoverable undiscovered resources.
    I have heard that the State of Wyoming commissioned a 
contractor to do a similar assessment, and their number I 
believe was 25 TCF.
    There are serious differences in methodology used by 
different groups. The USGS methodology is well documented and 
open to the public. I don't know very much about the contracted 
assessment that the State of Wyoming did.
    Mrs. Cubin. Mr. Fulton, according to the requirements of 
NEPA and FLPMA, as well as the BLM's process for drilling 
permit approvals, those things have resulted in lands belonging 
to the United States being drained of CBM to nonfederal wells. 
And some of those estimates are up to $1.5 million a month. And 
half of that money is to go to the state. And so my feeling is, 
not only could the Federal treasury absolutely use that money, 
but the state treasury could as well.
    What is the Administration doing? What is the Department of 
Interior doing to try to minimize those losses from drainage?
    Mr. Fulton. The drainage issue is an important one in the 
Powder River Basin. And as we have worked to get through the 
backlog of permits, the focus has been to permit those wells 
that have the ability to address the drainage issue because of 
the royalty loss that you mentioned.
    Mrs. Cubin. Would you repeat that for me, please?
    Mr. Fulton. Yes, certainly.
    As we work to get the backlog of permits to drill up to the 
number required, our focus in the Powder River Basin has been 
to permit those wells where we can address the drainage problem 
because the royalty issue is important.
    Mrs. Cubin. There has been a lot of discussion, especially 
between our delegation, basically, on how to get--I think there 
is a backlog of something like 3,500 APDs in the Powder River 
Basin--on how to get those moving.
    I have suggested looking at--I am not proposing this, but I 
have suggested it is worth looking at a program like the pilot 
fee program that we have in parks, where the money is generated 
in a certain area and a certain percentage of that is kept to 
meet the needs of that area. And some people are in favor of 
that.
    Other folks think that we have enough personnel. Other 
folks think what we need to do is utilize technology like the 
state does so that those permits could be processed more 
quickly. What are you looking at in order to address those 
pending APDs?
    Mr. Fulton. Well, it is a matter of great concern to the 
Department of the Interior in getting this backlog up to speed 
and getting these permits approved. It is a balancing act in 
many respects. We are in competition for the trained personnel 
that we need to do these permits. When we get a good one, the 
industry is equally interested in hiring them.
    In addition, we very much appreciate the additional funding 
to ramp up our effort, but we want to be very careful and not 
simply waste the money carelessly. So we are looking at 
responsive efforts to meet the high demand while at the same 
time doing it in a rational way.
    And these processes are very open, and they involve a lot 
of public input, and we don't want to short that process 
either. So we are trying to balance competition for the 
dollars, for the personnel, for the public comment, and trying 
to get this done in a way that makes sense to everyone.
    Mrs. Cubin. Okay. So I guess I am asking, then, do you need 
more personnel?
    Mr. Fulton. I don't think so. I think that the Congress has 
been very generous in helping us get to the problem and the 
money. And as we ramp up with the additional personnel, we 
fully anticipate being able to meet this need. It will take 
awhile.
    Mrs. Cubin. That was my next question. How long do you 
think that will take?
    Mr. Fulton. Well, I would think we could probably have it 
up probably within 2 years. Within 2 years, we could have that 
backlog disappear.
    Mrs. Cubin. What about technology needs? Is there any 
intention in the Department of Interior to move to a system 
like the state has?
    Mr. Fulton. Well, there is a great deal of interest in 
making sure that we are aware of additional technologies that 
would make our work easier, better, more efficient. The new 
Secretary wants each and every individual in the Department of 
the Interior to take a fresh look at the way things are done. 
And if there are ways of doing it better, more cheaply, then 
that's something we'll take a hard look at.
    Mrs. Cubin. Dr. Whitney, it has been made clear, and will 
be made more clear later in the day, that water is certainly a 
major issue in the production of coalbed methane. What 
percentage of water in a coal seam is actually removed during 
the coalbed methane production?
    Mr. Whitney. Well, I am not sure that there is a maximum 
amount. The water is never removed until the coal is dry, of 
course. There is a production curve so that as the proportion 
of water is removed from the coal, the production of natural 
gas increases.But I am not sure I can put a percentage on it, 
but you don't have to remove all the water from the coal.
    Mrs. Cubin. What was your last sentence?
    Mr. Whitney. You don't have to remove all the water from 
the coal.
    Mrs. Cubin. Just a rough estimate: Would 5 percent be a 
reasonable guess?
    Mr. Whitney. I don't have any data to answer that question, 
so I hesitate to put a number on it.
    Mrs. Cubin. Okay. Well, thank you very much. Thank you for 
your patience. We don't intend to have any other interruptions, 
unless we have votes.
    So I do appreciate your testimony. I appreciate your 
answering questions. And you are now excused. Thank you.
    I would like to now call the next panel: Mr. Edward Swartz 
of the Powder River Basin Resource Council; Mr. Walter 
Merschat, Scientific Geochemical Services; Mr. Dennis Hemmer, 
the Director of the Department of Environmental Quality for the 
State of Wyoming; Gene George, Chairman of the Coalbed Methane 
Committee for the Petroleum Association of Wyoming; and Terry 
Dobkins, Vice President of production for Pennaco.
    Thank you so much. Thank you for your patience.
    The Chairman now recognizes Mr. Edward Swartz to testify 
for 5 minutes. The timing lights are on the table, and the 
yellow light indicates there is 60 seconds left, and the red 
light indicates that your time is concluded.
    I would like to remind you that your entire testimony will 
be entered in the record, and we limit the oral testimony to 5 
minutes.
    Mr. Swartz?

STATEMENT OF EDWARD SWARTZ, POWDER RIVER BASIN RESOURCE COUNCIL

    Mr. Swartz. Thank you, Madam Chair and members of the 
Committee.
    I am a full-time rancher from Campbell County, Wyoming, the 
third generation doing that. My son is a full-time rancher. He 
is the fourth generation on the ranch. And that ranching is all 
we do for a living.
    And regarding this coalbed methane issue, I am downstream 
from where water is being dumped. And that water is coming down 
the creek, and it is loaded with salt. And it is pulling alkali 
out of my soil, which natural water never did. And it has 
destroyed all the vegetation in my creek bottom, and I don't 
have any grazing there for the winter months.
    And when that salt gets out on my hay meadows, which it 
probably will with flood, I am going to wind up losing my hay 
meadows. And without the hay meadows, that ranch is not a 
viable economic outfit.
    It has been a good ranch for years and years, and treated a 
lot of generations of the Swartzes pretty fair. But it is being 
threatened by water being dumped. There is no production 
whatsoever of coalbed methane or water being dumped from my own 
ranch. It is coming from up the creek, and it is really, really 
damaging me.
    Last winter, the ice froze over the top of that coalbed 
methane water; it caused a lot of erosion in the creek channel 
as well as leaving the deposits of salt, which you will see on 
the first two pages of pictures in your handout there. And that 
creek used to be full of grass that I grazed all winter long. 
The natural water didn't kill it; methane water does.
    The State of Wyoming refuses to stop that water from being 
dumped. They say I have to prove damages to my meadows. Well, 
if my meadows get damaged like that, I won't have a viable 
operation.
    Also, I have a lot of water rights on that creek, going 
back to 1901. And they have built a bunch of reservoirs above 
me that are storing CBM water, but they are also storing my 
natural water. If that was good water, I am a good rancher, so 
I would be saying, ``Dump those reservoirs. I have water 
rights. Send me that water.'' But those reservoirs are mostly 
full of CBM water, and I don't dare put it on my meadows.
    The amount of salt coming out of these wells is just 
unbelievable. I don't think the State of Wyoming is even aware 
of how much salt is pumped because of the quantities of water. 
The State of Montana DEQ wrote Wyoming DEQ a letter January 2, 
2001, stating that since each coalbed methane well produces 20 
tons of salt per year, we are concerned that this water stay 
out of the Powder River drainages and we are concerned that the 
reservoirs that are holding these waters not leak and leach 
this water into Powder River.
    Twenty tons of salt per year: If you don't remember 
anything else that I say today, remember that each well puts 
out that much salt. And plug your own figure in. There are 
10,000, 12,000, 15,000 wells drilled. They aren't all producing 
yet, but they are talking 50,000, 70,000, 90,000 wells over the 
next 20 years, 20 tons of salt per well per year. Those are 
Montana DEQ figures.
    I can see the salt on my place. You can see the salt in 
those pictures. Trees are dying along my creek. We don't have 
many deciduous trees, and I really, really like them. I like 
the box elder trees and the cottonwood trees, and they are 
starting to die on my creek.
    I am not the only one that is having this problem. There 
are other ranchers that are having problems with water coming 
down the creek. It has killed some of their meadows. It has 
killed several hundred-year-old cottonwood trees on Bill and 
Marge West's places. There are all these other problems, too. 
There is the noise problem, compressor noise put out, a 
compressor built 8 miles in the country where there is a large 
subdivision, and it ruined those people's peace and quiet. It 
is just kind of like there was a jet motor running 24 hours a 
day, 365 days a year, that they had to sit and listen to.
    One retired gentleman, a retired school administrator named 
Ron Moss, has everything he has invested in there. He wanted to 
have a peaceful, quiet place in the country, and then here 
comes the methane and the compressor. It has really bothered 
him.
    Some of the surface damage--as you can see on some of the 
pictures in there, the lady walking down the road there up at 
Sheridan--have just been extensive and major. And I don't know 
if they have been remediated.
    The split ownership of the surface and the mineral estate 
has been really hard to live with for a lot of people. And I 
think Mickey Steward mentioned it, but there is 10 percent of 
the land in the Powder River Basin that is federally owned. 
That leaves 90 percent privately owned, but the Federal 
Government owns about 57.86 percent of the minerals in the 
Powder River Basin. This can lead to problems also.
    There is a gentleman with a trailer park that had a well go 
dry in that trailer park from when they started pumping 
methane, and then they started filling the reservoirs with 
water, and it has raised the water table, inundated his sewer 
system. He has had to start a suit.
    I personally have spent over $33,000 of my own money, with 
nobody to repay me, trying to get a lawyer and soil scientist 
to back up my contention and to be heard.
    Anyway, I want to thank the Committee and testify that not 
all is well in the business. Thank you very much for letting me 
be here.
    [The prepared statement of Mr. Swartz follows:]

 Statement of Ed Swartz, Rancher, Powder River Basin Resource Council, 
                           Sheridan, Wyoming

    Madam Chair and members of the subcommittee on behalf of myself and 
the Powder River Basin Resource Council I would like to thank you for 
the opportunity to speak to you about coalbed methane or CBM 
development. My name is Ed Swartz, I am a third generation rancher, who 
has successfully operated a cattle ranch in Wyoming's Powder River 
Basin. I hope to pass this ranch onto my son and grandson to continue 
operating this great ranch, unfortunately, myself and other ranchers 
and landowners in the Powder River Basin are facing very real and 
destructive impacts from CBM development. The Powder River Basin of 
Wyoming is, according to industry, the site of the largest gas 
development in the country. Unfortunately, there has been nothing 
orderly about this development, with the possible exception of the 
collection of revenues. While I and fellow ranchers have faced bad 
economic times, drought and other mining booms, nothing has presented 
the kind of challenges and damaging impacts to our soil, water and 
lifestyle as the CBM development.
    While this hearing is entitled the, ``Orderly development of 
coalbed methane on public lands'' you must understand it is not that 
simple. In my experience, it is rare to have the same entity owning 
both the surface and the mineral rights. This includes the federal 
government. This split estate issue of different owners of the surface 
and minerals is the root of many problems and inherently inhibits 
orderly development. We have many cases where private lands overlie 
federal minerals, in a few cases we have public minerals under public 
lands, and we have many cases where the minerals are owned by one 
individual and the surface by another. And finally what seems to be the 
minority, private minerals owned by same person who owns the surface. 
These various situations can exist adjacent to each other and cause 
overlapping impacts. Again, trying to proceed with orderly development 
on this foundation is an oxymoron.
    Let me explain. First off, some background. The Powder River Basin 
Resource Council was founded 29 years ago by myself and other ranchers 
threatened by the rapid expansion of strip mining and the proposal for 
several mine mouth coal fired power plants. We joined together to 
protect our land, water and air from the potential abuses and impacts 
of coal strip mining. At that time, in 1973, many landowners and 
citizens around the country were at the mercy of individual coal 
companies that desired to develop the coal beneath our property. We, 
along with landowners from other states, banded together to educate and 
work against the innumerable cases of unconscionable land abuse and 
destruction at the hands of unregulated coal-mining companies. Our 
efforts, and the leadership of many elected officials, lead to the 
passage of the Surface Mining Control and Reclamation Act. The 
promulgation of SMCRA was the beginning of land bonding, environmental 
reclamation, a comprehensive mine permitting system, and most 
importantly, rational control and the orderly development of coal mine 
operations to mitigate effects on land, surface and groundwater, and 
land owners.
    Today, surface owners and citizens of the Powder River Basin and 
other states where coalbed methane development is occurring, or will 
soon occur, are again at the mercy of an under regulated and 
uncontrolled mineral development industry. Furthermore, coalbed methane 
development, which requires the dewatering of freshwater aquifers, is 
proceeding with minimal understanding of its long-term consequences and 
with little regard by either State government or industry for its 
short-term side effects. Unfortunately, most of industry will not 
regulate itself and those companies that are willing to do the 
development in more responsible ways that will not damage the land and 
water resources of the surface owner or neighbor are penalized in the 
economic arena by companies that are cutting corners. Coalbed methane 
companies are not required to maintain adequate bonds that would cover 
the costs of reclamation of the surface or water, despite the fact that 
we have thousands of miles of new roads bulldozed across the prairie, 
the spread of noxious weeds, the construction of hundreds of noisy 
compressor stations, thousands of miles of gas pipelines, and hundreds 
of miles of new powerlines. Incidentally, we have over 80 companies in 
the CBM production business in the Powder River Basin.
    We also have the construction of large reservoirs that are damming 
up natural drainages which impede the flow of natural runoff used for 
irrigation. We also have severe erosion, salinization and ruination of 
soils from the discharge of millions of barrels of water a day to 
extract the gas. To this, I can personally attest as I have had the 
creek upstream dammed by several reservoirs. Consequently, the soils in 
the creek bed on my ranch are now loaded with salt deposits, which 
killed the vegetation in the creek and eroded the creek bed. This is 
now threatening to destroy my hay meadows. Without the hay meadows I do 
not have a viable ranching operation and I am not the only landowner in 
this situation. According to the state of Montana DEQ in a letter dated 
January 2, 2001 to the Wyoming DEQ, each CBM well in the Powder River 
Basin produces an average of 20 tons of salt a year.
    Furthermore, regarding water quantity issues, we do not understand 
the long-term impacts of the depletion of the aquifers the industry is 
pumping from in order to extract the gas. Most of us in the Powder 
River Basin rely completely upon these aquifers for stock, wildlife and 
domestic water supplies. As of March of this year, according to the 
Wyoming Oil and Gas Commission, there were just over 44 million barrels 
of water per month being discharged (42 gallons in a barrel of water). 
According to the Coal Bed Methane Coordinatior, that is enough water to 
supply 300,000 people per day which would be 2/3 of Wyoming's 
population or 2.5 million cows per day. This is water that we are 
pumping out and letting run away. Yes, this is water that is suitable 
for livestock and wildlife and for people who are not on a sodium 
restricted diet. In fact, it is water that most of us in the Powder 
River Basin rely upon for stock and domestic water. The problem comes 
when you start to dump this water on the surface on our clay soils and 
in our drainages and streams. It does not mix well with the soil and 
hay, trees and native grasses are destroyed.
    Where are the protections for those of us bearing the brunt of the 
impacts for the development of this energy? The extraction of coalbed 
methane development is mostly experimental and the Powder River Basin 
has actually been referred to by industry representatives as a 
laboratory. Why should we, who call this place our home be guinea pigs? 
We are watching our homes and ranches transformed into an industrial 
gas field. There are about 14,000 CBM wells permitted, around 6,000 
producing and the BLM predicts up from 80,000 to 100,000 wells by 2010. 
The development of CBM is primarily being carried out on the backs of 
landowners that have essentially no say in how the development can 
proceed. We are being required to sacrifice our ranches, our water 
resources, our soil, our privacy, the wildlife--which also provides an 
income to many landowners - and our livelihoods.
    As I mentioned before, the two groups of landowners that are 
primarily adversely affect by CBM development are: 1.) The surface 
estate landowners who do not own the minerals beneath their land; and 
2) Adjacent or downstream landowners who have no legal tie to the 
resource being extracted or the surface of the land where the 
extraction is taking place. The natural runoff water that traditionally 
flowed through our land is now oftentimes impeded and impaired by the 
discharge of CBM water and our soils and land are being damaged by the 
CBM discharge water.
    The direct, indirect and potential impacts to landowners is 
requiring us to spend thousands of dollars on attorneys and experts to 
try and protect our property. Currently, under the federal law there is 
no obligation to compensate the surface owner for the reasonable use of 
an easement that must be given by the surface owner. Even if the oil 
and gas operation causes substantial damage to the surface estate, in 
most jurisdictions in the West there is no obligation for adequate 
compensation by the gas company to the surface owner. A landowner must 
show excessive, wanton or negligent use of the easement by the gas 
developer, which means thousands of dollars in attorney fees. As a 
matter of justice and fairness, no oil and gas development should occur 
until the surface owner has given his/her written consent.
    While the current practice by CBM companies is to generally get a 
surface use and damage agreement signed with the landowner that will 
preclude legal action down the line, how good that surface agreement is 
depends on how much the landowner knows, how good their lawyer is and 
how much money they have to pursue the issue in court. Those who have 
the money and knowledge might get a fairly good agreement while those 
who don't will not. The point being there is no governmental oversight 
to require an agreement that protects the rights of the surface owner. 
Various states have varying requirements for surface damage payment but 
there is not an overlying requirement by the federal government. In the 
West, the mineral estate seems to be granted more dominance allowing 
the gas developers far greater rights than is necessary to develop the 
resources. What is needed is a federal protection that requires the 
industry to act in a disciplined and fair manner: requiring landowner 
consent, the negotiation of a surface use and damage agreement from the 
surface owner and prohibiting impacts to downstream or adjacent 
landowners.
    The immediate benefits being reaped from the coalbed methane 
industry are obviously not to be ignored. From the individual mineral 
owner to the local merchant to county, state and federal governments, 
the prosperity from gas development is being widely enjoyed. And yes, 
it is clean energy for urban areas--unfortunately, the production end 
in rural areas is not clean. We should not let the glitter of ten to 
twenty years of affluence blind us to the impacts and damages being 
felt very directly by others that are not reaping the benefits. We 
should also not let it blind us to the long-term impacts that we will 
be paying down the road. Coalbed methane is finite, and with the end of 
our reserves come the end of the boom. The faster we allow industry to 
develop, the quicker we'll be suffering the bust!
    Despite industry claims that the Surface Mining Control and 
Reclamation Act (SMCRA) would put the mining industry out of business, 
the set of controls and regulations the Act encompasses have insured 
surface owner protection and environmental reclamation. Meanwhile, 
Wyoming's coal mines continue to set production records to this day. 
Incidentally, the coal mines cannot just discharge their water they 
pump out of the pit, the same water as CBM discharge water, into creeks 
and drainages. This is just one example how the coal industry must 
conduct their operations to ensure environmental protection and 
reclamation. We need a similar set of regulations and controls, 
including equitable and realistic bonding, limitations on water 
discharge, treatment of low quality water, and requirements for 
reclamation for the coalbed methane industry. At the very least, we 
will probably need a fund established like the Abandoned Mine Lands 
Fund for messes that will be left to clean up.
    A set of rules to insure that coalbed methane development is 
maximized as a beneficial industry for the United States and controlled 
to preclude its potential problems to the people living with the 
development is only logical, fair and just. We hope and believe there 
is a way to proceed slowly, thoughtfully and scientifically with the 
development of CBM gas. We need you as leaders to step up to the plate 
and address the failures in current laws and regulations and provide 
the protections for surface owners and safeguards for land, air and 
water resources impacted by coalbed methane development.
    Thank you again for this opportunity to testify on this important 
issue.
    The Powder River Basin Resource Council is a grassroots, membership 
based organization in Eastern Wyoming. Founded in 1973 our mission is, 
The preservation and enrichment of our agricultural heritage and rural 
lifestyle; The conservation of our unique land, minerals, water and 
clean air consistent with responsible use of these resources to sustain 
the livelihood of present and future generations; and the education and 
empowerment of our citizens to raise a coherent voice in the decisions 
that will impact Wyoming residents'' environment and lifestyle.
                                 ______
                                 

    NOTE: Pictures and articles attached to this statement have 
been retained in the Committee's files.

    [Supplemental testimony submitted for the record by Mr. 
Swartz follows:]
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    Mrs. Cubin. Thank you very much.
    I now recognize Mr. Dennis Hemmer, the State of Wyoming 
DEQ.

      STATEMENT OF DENNIS HEMMER, DIRECTOR, DEPARTMENT OF 
            ENVIRONMENTAL QUALITY, STATE OF WYOMING

    Mr. Hemmer. Madam Chairman, my name is Dennis Hemmer, 
director of the Wyoming Department of Environmental Quality.
    For the past years, my state and my agency in particular 
have been the focus of a great increase in coalbed methane 
production. This boom is very parallel to the one the Powder 
River Basin experienced at the beginning of my career with the 
development of coal.
    Then as now there were great controversies about the 
development. The primary issue related to coalbed methane 
development is produced water, both quantity and quality.
    When describing the water, we must be careful about 
generalizations, even if it is just within the Powder River 
Basin. Both quantity and quality vary with area.
    The quality of the water being discharged is generally 
good. It is very typical of the water of the region. And in 
fact, it is the same water often used for watering stock and 
drinking.
    In article after article, I read about the water being 
salty. The water is not salty. Some of the water does have an 
elevated sodium adsorption ratio, or SAR. While sodium is a 
component of salt, the sodium adsorption ratio is not a 
measurement of salinity. Rather, it is a ratio of sodium to the 
calcium and magnesium in the water.
    A water can be very low in salinity, which is measured by 
electrical conductivity or total dissolved solids, and have a 
high SAR, if the ions in solution are predominantly sodium. 
Likewise, water can be very high in salinity and be low in SAR, 
if the ions are predominantly calcium and/or magnesium.
    Sodium adsorption ratio is a measure of the suitability of 
water for irrigation on soils with significant clay content. 
The effect of adding water with a high ratio of sodium to clays 
is to displace the ions on the clay lattice with sodium. That 
sodium has a high affinity for water, causing the clays to 
swell and limiting infiltration.
    While SAR is a very real issue, we must remember it relates 
only to irrigation. It does not affect the water's capability 
for other uses, such as drinking and supporting fish. It also 
does not affect sandy soils. We have addressed high SAR waters 
in a variety of ways. In some areas, where the SAR are low 
enough, very little management is needed. In others, discharges 
must be managed such that they are not used for irrigation. And 
there is one drainage where the SAR is such that we currently 
do not allow direct discharges and other means must be found to 
deal with the water.
    Being a headwater state, Wyoming drainages flow into 
adjacent states. We have recently entered into an agreement 
with Montana to ensure that the Powder River and Little Powder 
River maintain a quality acceptable to both states.
    Unfortunately, over the past decades, both state and 
Federal Governments have decreased their water quality 
monitoring. When we negotiated with Montana, we found we had 
little current data on water quality at the state line and 
throughout the basin.
    Wyoming has established an extensive water quality-
monitoring program in the Powder River. Our ultimate goal is to 
have sufficient data to allow Montana and Wyoming to apportion 
the assimilative capacity of the rivers to allow coalbed 
methane production in both states.
    We have contracted with the USGS to perform the monitoring 
for us. USGS brings a high level of credibility to the area.
    While Wyoming is funding this monitoring, an increase in 
funding to the USGS efforts is needed if we are to 
intelligently address coalbed methane development. To ensure 
that coalbed methane is addressed in a cohesive and coordinated 
fashion, Governor Geringer created the Coalbed Methane Working 
Group composed of the heads of the agencies dealing with 
coalbed methane. The group has worked extremely well.
    Where there have been problems--and there have been 
problems--the agencies have coordinated to assure that the 
issue is addressed.
    We have also had great cooperation from industry. They have 
cooperated and coordinated to a level that I have not seen in 
my years of dealing with the petroleum industry.
    It is very easy to dwell totally on the negative of coalbed 
methane in my business, because that is what I see. However, 
there are positive aspects as well. During the past 2 years of 
drought, coalbed methane discharges have frequently been a 
welcome source of water for many ranchers. Over the past year, 
I have gotten far more complaints from ranchers wanting us to 
hurry up and issue the permit so they can get the water to fill 
their reservoirs than from landowners upset with the water. The 
discharges have also allowed ranchers to use new areas that 
previously didn't have water.
    Where the quality allows, the water has been used for 
irrigation. Produced water is being re-injected into the 
aquifer as far as the city of Gillette with its drinking water, 
and there are many new wetlands from the discharges.
    While admittedly a little biased, I firmly believe Wyoming 
has done coalbed methane development right. We have done it a 
pace that allowed us to address each issue as it has arisen. We 
have gathered enough information to make informed decisions. At 
the same time, we have progressed at a pace that has allowed 
the coalbed methane to become a significant source of clean 
energy.
    I see no reason why coalbed methane production in Wyoming 
cannot be a sustainable source of energy far into the future. I 
expect to see coalbed methane development spread to other parts 
of Wyoming. In those other areas, we will be faced with new 
challenges. However, I am confident we can address those 
challenges.
    Wyoming will continue to develop coalbed methane. It may 
not be as fast as industry desires or as restricted as others 
might like, but we will continue to do it right.
    Thank you.
    [The prepared statement of Mr. Hemmer follows:]

      Statement of Dennis Hemmer, Director, Wyoming Department of 
                         Environmental Quality

    Madam Chairman, members of the Committee, my name is Dennis Hemmer, 
Director of the Wyoming Department of Environmental Quality. For the 
past few years, my state and my agency in particular have been the 
focus of a great increase in coalbed methane production. This ``boom'' 
is very parallel to the one the Powder River Basin experienced at the 
beginning of my career with the development of coal. Then as now, there 
were great controversies about development.
    The primary issue related to coalbed methane development is the 
produced water, both quantity and quality. When describing the water, 
we must be careful about generalizations. Even within the Powder River 
Basin, both quantity and quality vary with area.
    When people describe the quantity of water being discharged, it 
sounds huge, however, you must realize that the area over which this 
water is being discharged is also large. We have monitored the 
drainages into which this water is being discharged and have found very 
little actually flowing. Most of the water has infiltrated back into 
the various formations.
    Another quantity concern is the effect on adjacent private wells. 
The State Engineer has had relatively few complaints regarding impacts 
on private wells. We believe this is primarily due to the companies'' 
willingness to replace wells, many of which had other problems before 
the operators came.
    The quality of the water being discharged is generally good. It is 
very typical of the water in the region and is in fact the same water 
often used for watering stock and drinking. In article after article, I 
read about the water being salty. The water is not salty. Some of the 
water does have an elevated Sodium Adsorption Ratio or SAR. While 
sodium is a component in salt, the Sodium Adsorption Ratio is not a 
measurement of salinity. Rather, it is a ratio of the Sodium to the 
Calcium and Magnesium in the water. A water can be very low in 
salinity, which is measured by Electrical Conductivity or Total 
Dissolved Solids, and have a high SAR if the ions in solution are 
predominantly sodium. Likewise, water can be very high in salinity and 
be low in SAR if the ions are predominantly calcium and/or magnesium.
    The Sodium Adsorption Ratio is a measure of the suitability of the 
water for irrigation on soils with a significant clay content. The 
effect of adding water with a high ratio of sodium to clays is to 
displace other ions on the clay lattice with sodium. That sodium has a 
high affinity for water causing the clays to swell and limiting water 
infiltration. While SAR is a very real issue, we must remember it 
relates only to irrigation. It does not affect the waters capability 
for other uses such as drinking and supporting fish. It also does not 
affect sandy soils. We have addressed high SAR waters in a variety of 
ways. In some areas the SARs are low enough, very little management is 
needed. In others, discharges must be managed such that they are not 
used for irrigation. There is one drainage where the SAR is such that 
we currently do not allow direct discharges and other means must be 
found to deal with the water.
    Being a headwaters state, Wyoming's drainages flow into adjacent 
states. We have recently entered into an agreement with Montana to 
assure that the Powder River and the Little Powder River maintain a 
quality acceptable to both states. Unfortunately, over the past 
decades, both the state and federal governments have decreased their 
water quality monitoring. When we negotiated with Montana we found we 
had little current data on water quality both at the state line and 
throughout the basin. Wyoming has established an extensive water 
quality monitoring program in the Powder River. Our ultimate goal is to 
have sufficient data to allow Montana and Wyoming to apportion the 
assimilative capacity of the rivers to allow coalbed methane production 
in both states. We have contracted with the U.S. Geologic Survey to 
perform the monitoring for us. The U.S.G.S. brings a high level of 
credibility to the data. While Wyoming is funding this monitoring an 
increase the funding going into U.S.G.S efforts is also needed if we 
are to intelligently address coalbed methane development.
    To ensure that coalbed methane is addressed in a cohesive and 
coordinated fashion, Governor Geringer created the Coalbed Methane 
Working Group composed of the heads of the agencies dealing with 
coalbed methane. The group has worked extremely well. Where there have 
been problems, and there have been problems, the agencies have 
coordinated to assure the issue was addressed.
    We've also had great cooperation from the industry. They have 
cooperated and coordinated to a level I have not seen in my years 
dealing with the petroleum industry.
    It's very easy to dwell totally on the negative impacts of coalbed 
methane discharges, however there are positive aspects as well. During 
the past two years of drought, coalbed methane discharges have 
frequently been a welcome source of water for many ranches. Over the 
past year, I have gotten far more complaints from ranchers wanting the 
water to fill reservoirs than from landowners upset with the water. The 
discharges have also allowed ranchers to use new areas that previously 
didn't have water. Where quality allows, the water has been used for 
irrigation. Produced water is being reinjected into the aquifer that 
supplies the City of Gillette with its drinking water. There are also 
many new wetlands from the discharges.
    While admittedly a little biased, I firmly believe Wyoming has done 
coalbed methane development right. We have done it at a pace that has 
allowed us to address each issue as it has arisen. We have gathered 
enough information to make informed decisions. At the same time, we 
have progressed at a pace that has allowed coalbed methane to become a 
significant source of clean energy.
    I see no reason coalbed methane production in Wyoming cannot be a 
sustainable source of energy far into the future. I expect to see 
coalbed methane development spread to other parts of Wyoming. In these 
areas we will be faced with new challenges. However, I am confident we 
can address those challenges. Wyoming will continue to develop coalbed 
methane, it may not be as fast as industry desires or as restricted as 
some would like, but we will continue to do it well and do it right.
                                 ______
                                 
    Mrs. Cubin. Thank you.
    The Chair now recognizes Mr. Merschat.

STATEMENT OF WALTER MERSCHAT, SCIENTIFIC GEOCHEMICAL SERVICES, 
                        CASPER, WYOMING

    Mr. Merschat. Thank you, Madam Chair, and thank you, 
Committee.
    My name is Walter Merschat. I am with a company called 
Scientific Geochemical Services, which is my own company. I do 
exploration and environmental geochemistry.
    I understand the oil business. I work in the oil business. 
I work with the oil companies. But it gets to a point in your 
life sometimes when you as a scientist see something you think 
is being developed improperly. And I believe that the coalbed 
methane operation in particular in the Powder River Basin is 
not being developed properly.
    I have a series of concerns that I will go through, and 
questions afterward would be great.
    First of all, I think that one of my major concerns is 
water. I just added up, I think, on the Web site, we have 
produced about 1 billion barrels of coalbed methane water to 
date.
    And, madam, your question, I think it is about 5 percent or 
8 percent of the reservoir.
    In my opinion, the water is gold in Wyoming. Without water, 
we have nothing. And drawing down coal aquifers 200, 300, 400 
feet and throwing away, disposing of, 1 billion barrels of 
water so far and how many in the future with 80,000, 90,000 or 
100,000 wells over 10 to 20 years I think is a totally 
inappropriate use of groundwater.
    Other aspects of the coalbed methane operation that I don't 
see eye-to-eye with is coal fires. I think there might be some 
further discussion about that. But as you dewater the coal, the 
water level goes down. If the coal is close to the outcrop or 
near the surface where oxygen can infiltrate or impregnate or 
move into the porosity of the coal, you can have spontaneous 
heating or combustion and burn coal.
    According to phone calls and reports that I have read, 
there are new coal fires in the San Juan Basin in the Fruitland 
Formation, and I fully expect coal fires to be a problem in the 
peripheral edges of the Powder River Basin.
    There have been coal fires in the past. The clinker beds, 
the 1,600 square miles of clinker beds all over northern 
Wyoming, are a result of past burned coal. Now with new fuel, 
with the dewatering of the coal, I think we are going to have a 
problem. I believe we are not monitoring that correctly or 
taking that seriously enough.
    Another concern is compaction and subsidence. Around the 
world, the use of groundwater removes the water as part of the 
fabric of a sediment or a rock. And if you remove that water, 
you can have compaction. It is projected that there will be a 
little bit of compaction or minor compaction in the coal 
because coal is crystalline in the Powder River Basin. But any 
kind of compaction, according to some of the engineering 
reports, could cause problems with construction, the sewer 
lines, waterlines, and et cetera.
    So I think what I am leading up to is that probably my 
greatest concern is that of methane venting. In my business, I 
go around the world looking for seeps. I look for methane 
coming out of the ground, and other gases, because that is part 
of doing exploration geochemistry.
    When Rawhide Subdivision, which was north of Gillette, was 
evacuated about 10 or 12 or maybe 15 years ago because of 
dewatering of the coal underneath the subdivision and gases 
venting to the surface, I worked on that project. And the 
entire subdivision was declared unsafe, and it was purchased by 
Amax Coal Company, who was responsible for the dewatering and 
the causing of the venting of the methane under the 
subdivision.
    I attended a meeting several years ago, 4 years ago, in 
Gillette, when I said as coalbed methane operations proceed and 
the dewatering of the coal underneath Gillette continues, you 
are going to have seeps. You are going to have a problem in 
Gillette.
    I was chastised for it and received quite a series of hate 
mail for my position. But nevertheless, I continue to say that 
methane venting is going to occur and it is a very serious 
problem we are going to face in Gillette.
    Well, finally, and more recently, a company by the name of 
CE&MT has produced a document, an engineering company saying 
that, yes, methane venting in Gillette is possible and probable 
and could be a problem.
    My big fear is that it is going to be more than a problem. 
I am a geologist. I understand methane. I understand a lot of 
the hydrodynamics of it. I was up at a ranch south of Gillette 
where a fellow by the name of Orrin Edwards took me to the 
Belle Fourche River, and the river has two spots in it where 
the methane is coming up and boiling. I mean, I have seen seeps 
around the world and there is nothing comparable to this.
    That type of methane underneath a building will blow up and 
kill people if ignited. That I could only see because it was in 
the river and you could see the bubbling coming up through the 
river. How many of those vents are around the countryside, 
where methane is coming to the surface, that you can't see 
because it is colorless, odorless, and tasteless?I think there 
is going to be tremendous problem in Gillette. I think part of 
the problem can be solved, but I do not believe that industry, 
the government, state and Federal level, have properly 
addressed the potential hazards of seepage, especially in 
Gillette and, probably, in Buffalo and Sheridan and any other 
area on the fringing edges of the development.
    Thank you very much.
    [The prepared statement of Mr. Merschat follows:]

   Statement of Walter R. Merschat, Scientific Geochemical Services, 
                            Casper, Wyoming

    Dear Honorable Subcommittee Members:
    Thank you for the opportunity to present my testimony at this 
hearing entitled, ``The Orderly Development of Coalbed Methane 
Resources from Public Lands.'' I am a professional geologist with over 
25 years of experience working for major oil companies as well as 
conducting my own geologic/geochemical consulting business in Casper, 
Wyoming. During those years I have worked throughout the United States 
(with an emphasis in the West) as well as many foreign countries. I am 
familiar with the vast distribution and ownership of federal lands in 
the western United States and especially in Wyoming. Coalbed Methane 
Development (CBM) is not only new to Wyoming, but it is a rather new 
extractive technology to industry. Companies are ``learning as they 
go'' and are often times surprised with the outcomes. Impacts to 
federal land are of great concern and are addressed in numerous 
Environmental Impact Statements (EIS). The vast amount of federal land 
intermingled with state and fee lands in the CBM areas of Wyoming 
somewhat bind all impact findings together. This is especially true 
when it comes to the subsurface. The continuous nature of the 
underground coal beds and the methodology used to extract the coalbed 
methane transcends surface or mineral ownership. Recently, the Bureau 
of Land Management (BLM) obtained approval to drill CBM wells on 
federal lands since CBM wells on neighboring state and/or fee 
properties were draining methane and revenue from federal lands.
    CBM operations have been ongoing in the San Juan Basin of New 
Mexico and Colorado for over a decade. I had the opportunity to work in 
a portion of that basin where adverse impacts were surfacing due to the 
CBM operations. The geologic conditions in the San Juan Basin are 
different from those in Wyoming; however, the methane extractive 
techniques are similar. Simply put, by removing the water from the 
coal, reservoir pressure is lowered and the methane gas that is within 
the coal is liberated and produced. Similar adverse impacts resulting 
from CBM operations in the San Juan Basin are happening in Wyoming. 
Federal, state and fee lands are affected. In my opinion, due to the 
different geologic conditions in Wyoming, the impacts will be more 
severe.
Water
    The phrase ``water is gold'' use to mean something in Wyoming and 
the West. Without water, you had nothing. ``First in right, first in 
might'' settled many water allocation disputes. Today, Wyoming water is 
being wasted at rates never thought possible in the past. Hundreds upon 
hundreds of millions of gallons of water are being sacrificed for 
methane profit. Untold numbers of wells have gone dry as both sand and 
coal aquifers are drained. Groundwater experts inform us not to worry 
because 30% of the water will return to the aquifers. That number has 
two problems. First, it implies the remaining 70% will be lost, a 
totally unacceptable waste of water. Second, upon discussions with the 
experts regarding the 30% that will return to the aquifers, we find out 
it will take from 50 to 150 years to recharge the aquifers. The problem 
is that the dewatering is and will continue to cause aquifer 
degradation that can impede or cease water infiltration thus 
permanently damaging the reservoirs. Water may not be able to get back 
into the aquifers. Even if we accept the formula that recharge will 
occur, the 50 to 150 years for recharge is an unacceptable time frame 
to impose on any land (federal, state, or fee) and it's inhabitants.
    Storing the water in artificial ponds or reservoirs is a short-term 
fix with long-term problems. This type of temporary water storage 
appears environmentally sound by creating wildlife habitat, fishponds, 
recreation areas, and other surface storage uses. For the short term, 
this may be an acceptable use of water. But, what happens when the 
methane play is over? Water production will decline, ponds and 
reservoirs will dry up, and the green areas will turn brown. Creating 
and then destroying environs in this callous fashion is an unacceptable 
impact to the land.
    Additional consequences related to the temporary storage of water 
on the surface have developed recently near Gillette, Wyoming. Produced 
CBM water both stored in ponds and discharged into drainage systems has 
seeped into near surface sediments and filled them to capacity. Certain 
shallow sediments cannot transmit the discharged CBM water fast enough 
to depth so surface swamping results.
    We are experiencing severe droughts throughout the West. In a 
recent article in a Wyoming newspaper, a district conservationist at 
the federal Natural Resources Conservation Service discussed the 
serious nature of the current drought and that not only were stock dams 
down in water levels, but many ranchers had to deepen their wells from 
40 to 60 feet or deeper. CBM dewatering wells are nearby. Even though 
the ranch wells are in strata above the coal, recent information 
indicates that shallow sand aquifers are in communication with the 
coal. Dewatering (drying-up) of shallow sand aquifers and stock ponds 
is in part due to the vertical continuity of the water column. 
Continued dewatering and depletion of shallow aquifers degrades the 
value and usefulness of surface lands.
Coalbed Fires
    In addition to wasting groundwater by massively dewatering 
aquifers, the lowering of groundwater in the coal exposes the coal to 
oxygen and coal fires are possible. Lightning strikes, grass fires, or 
spontaneous combustion can ignite coal seams. The areas most likely to 
be a target for coal fires would be along the edges of the basin where 
coal is close to the surface and oxygen can enter the coal when the 
water is removed. One (possibly more) coal fire is burning north of 
Sheridan, Wyoming near Decker, Montana. This old fire could expand as 
dewatering lowers the groundwater level thus exposing more coal (fuel) 
to oxygen. If new fires start or old fires expand, the loss of coal 
resources as well as surface damages could be extensive.
Methane Seepage/Venting
    Methane seepage/venting is the most disastrous problem facing 
communities or individuals living over CBM operations especially along 
the edges of the Powder River Basin. Several years ago I attended a 
meeting in Gillette, Wyoming where concerned citizens, industry, local 
and state officials, and others discussed the upcoming CBM operations 
and how they might impact Gillette. I was asked to attend the meeting 
as a speaker and discuss my concerns regarding consequences of CBM 
operations. I showed slides and answered questions related to my 
earlier work pertaining to the dewatering of the aquifers and methane 
venting in and around Rawhide Village (north of Gillette) and how 
upcoming CBM dewatering might impact Gillette. The relationship was 
clear; dewatering coupled with structural and stratigraphic geologic 
conditions caused methane to vent to the surface and collect in 
explosive levels in homes. Rawhide Village was evacuated. The 
groundwater drawdown maps presented in the U.S. Department of the 
Interior's May, 1999 ``Wyodak Coal Bed Methane Project Draft 
Environmental Impact Statement'' indicate water levels will be lowered 
by several hundred feet in and around (beneath) the Gillette area. 
Gillette is located in a precarious position.
    I expressed my concern at that meeting and later in letters and 
interviews to state, federal and industry representatives of the 
potential for methane seepage in Gillette. Responses ranged from 
denial; ``it can't happen here, the geology is different'', to name 
calling; ``you ------ environmentalist'' to threats. In a June 2001 
report by Consolidated Engineers & Materials Testing, Inc. (CE&MT) 
titled ``Subsurface Investigation of the City of Gillette Planning 
District Area, Gillette, Wyoming'', CE&MT reported that the combination 
of dewatering coupled with structural and stratigraphic geologic 
conditions have created methane migration pathways within Gillette. 
CE&MT recommended ``the City of Gillette continue on its proactive 
approach to potential impacts from coal bed methane production''. 
Several recommendations (which I believe fall short) were proposed to 
monitor the potential seepage problems. I applaud the City of Gillette 
if they continue on this course, but I fear it's too little too late.
    On July 17, 2001, I visited a site southeast of Gillette where 
extremely voluminous amounts of methane were erupting through the Belle 
Fourche River. Given its geologic and geographic setting (surrounded by 
CBM operations), it's a good bet that this is a methane seepage/venting 
area. By all accounts, this was an extremely large seep and probably 
not one of the historic seeps noticed in the Powder River Basin. A long 
time rancher of the area that accompanied me does not remember ever 
seeing the seep before. The seep was checked again on August 24, 2001; 
it continues to erupt through the river. This seep is simply too big to 
go un-noticed. The seep was evident because the bubbles were visible as 
the gas passed through the water interface. Additional seepage in the 
area probably exists, but without the aid of the water to see and hear 
the bubbling, the venting goes undetected. The large amounts of venting 
gas surely indicate hydrologic conditions are altered. The strongest 
venting in the Belle Fourche River was in two spots each covering an 
area about five feet across. Numerous other small seeps are evident on 
the river and near shore. How many of these seeps dot the landscape? 
Where are they? The volume of gas venting in the Belle Fourche River 
would fill a building to explosive levels in minutes. As dewatering 
continues, more methane will vent and increase in it's aerial extent. 
People and homes in Gillette as well as other areas where dewatering 
and geology make for a dangerous combination are in jeopardy. The City 
of Gillette, the Wyoming Department of Environmental Quality, Federal 
Agencies, and Industry should study the venting problem more seriously. 
It's only going to get worse.
Compaction/Subsidence
    Water is part of the fabric of a rock or reservoir that helps 
preserve the rocks integrity, i.e., holds the rock open. By removing 
water from the rock, the pore spaces are without water and the rock can 
collapse. Transmitting this loss of rock volume to the surface results 
in compaction or subsidence. The removal of enormous quantities of 
water from shallow aquifers in other parts of the world (Mexico City, 
California, Saudi Arabia, and many others) has caused the land surface 
to drop (subside) as much as 40 feet. Utility lines (gas, water, 
sewage, and electric) have ruptured, buildings have been toppled, and 
roads have been damaged. The compaction/subsidence resulting from the 
CBM dewatering operations is anticipated to be minimal. This is due to 
the expectations that the coal is crystalline (rigid) and confined 
(dewatering will only affect the water in the coal). We now know the 
coal is not confined and that the overlying shallow sediments (sand and 
shale) are in hydrologic communication with the coal. Dewatering of 
these non-crystalline rocks will result in more compaction/subsidence 
than estimated. The surface impacts from this future compaction/
subsidence are unknown. Also, the compaction/subsidence impacts reduce 
porosity and permeability (ability of a material to transmit fluids) 
thus further aggravating the water recharge rate.
Conclusions
    The widespread nature of public lands in Wyoming and the West and 
the apparent wealth of income from CBM operations has made the orderly 
development of coalbed methane resources from public, state, and fee 
lands a difficult if not impossible task.
    The Scottish geologist, James Hutton, whose Theory of the Earth, 
published in 1785, maintained that the present is the key to the past 
and that, given sufficient time, processes now at work could account 
for all the geologic features of the Globe. In other terms, what is 
happening now in geologic time reflects what happened in the past, and 
visa-versa. The present mode of CBM operations is that of ``full speed 
ahead'' without adequate concern to what consequences this brings. In 
my opinion the race for CBM income has not given ample time or 
consideration to the lessons we have already learned and the penalties 
we have been and will continue to pay for this uncontrolled 
development.
    Again, thank you for the opportunity to discuss my concerns,
                                 ______
                                 
    [Supplemental testimony submitted for the record by Mr. 
Merschat follows:]
[GRAPHIC] [TIFF OMITTED] T5015.035

    Mrs. Cubin. Thank you.
    The Chair now recognizes Gene George.

STATEMENT OF GENE GEORGE, CHAIRMAN, COALBED METHANE COMMITTEE, 
                PETROLEUM ASSOCIATION OF WYOMING

    Mr. George. Thank you, Madam Chairman, members of the 
Committee.
    My name is Gene George. I am a Wyoming professional 
geologist. My license number is 8, thanks to Mrs. Cubin's help 
when she was in the Legislature.
    I also have a bachelor's of science degree from the 
University of Kansas, master's degree from Oregon State 
University. I am a former Wyoming oil and gas conservation 
commissioner. I am currently a board member of the Petroleum 
Association of Wyoming, and the current Coalbed Methane 
Committee chairman of that association. I am also the Chairman 
of the Wyoming Department of Environmental Quality Water and 
Waste Advisory board. And I have been an independent geologist 
in the oil and gas business since 1971.
    I am here today to represent the Petroleum Association of 
Wyoming, who represents the majority of the operators that are 
operating in coalbed methane in the Powder River Basin, and 
that goes all the way from major oil companies to the smallest 
independents.
    I am also here today to try to dispel some of the myths 
that you have heard and you have just heard.
    First of all, the water is great. The water is good for 
livestock. It is good for wildlife. The majority of it is 
drinking water quality. In fact, as Mr. Hemmer mentioned, 
Gillette is currently using some of the water for their 
drinking water, restoring their reservoirs, and they plan to go 
for a larger development.
    One of the questions you have asked today in your title is, 
is the development orderly? And I come here to tell that it is 
very orderly and is strictly regulated. The Bureau of Land 
Management has done seven environmental assessments, two 
environmental impact statements, and is currently doing an 
impact statement on Sheridan, Johnson, Campbell, and the north 
half of Converse counties. That is over 8 million acres.
    There is only 2 percent of that entire area that is 
expected to be disturbed by coalbed methane development. The 
Wyoming Oil and Gas Commission has gone from 40-acre spacing to 
80-acre spacing as an orderly method of regulating the activity 
in coalbed methane.
    We currently are required to get permits from the Wyoming 
Oil and Gas Conservation Commission, the Wyoming Department of 
Environmental Quality, both the Water Quality Division and the 
Air Quality Division, the State Engineers Office, the Corps of 
Engineers, the State Land Board. And we are bonded by the 
agency that has jurisdiction over the particular minerals on 
which we drill.
    There are some other myths going around about, ``We need 
more study.'' Again, I mentioned all of the EAs and EISs.
    The Wyoming Water Development Commission also has several 
projects. The Conservation District have several projects. The 
University of Wyoming has several studies. The State Engineer 
is involved in a study. The Wyoming Geological Survey is 
currently putting together a water quality list in conjunction 
with the USGS and other Federal agencies. And even the EPA is 
currently conducting a study on best management practices.
    We talked about flooding. The only flooding that anyone is 
aware of is occasionally in meadows. One was described today. 
There are four of those, according to the Oil and Gas 
Conservation Commission. Two of them have been resolved by 
changing the channel to allow the water to easily pass through. 
The other two are still in negotiation, and the Oil and Gas 
Commission has those wells shut in while that negotiation is 
going on.
    The next thing I would like to address would be subsidence, 
underground fires, and methane leaks. You don't have to trust 
me; we have a working model that has been going on for 25 
years. The coal mines extract a majority of the water out of 
the coal out in front of them. There are no underground fires 
in that area, there is no subsidence in that area, and there 
are no methane leaks that anyone has detected out in front of 
those coalmines.
    Not only that, the Wyoming Geological Survey has published 
an article, saying spontaneous combustion does not occur under 
the conditions in which coalbed methane is produced. And they 
also have a study out that is on their Web page that says the 
maximum subsidence would be one-half of an inch and would 
probably not be translated to the surface. There are currently 
pipelines, roads, houses, and other facilities out in front of 
the coalmines, and they have not been affected to date.
    As far as the Belle Fourche goes, the Oil and Gas 
Conservation Commission has investigated the one flow that they 
can find in the Belle Fourche, and there are no coalbed methane 
wells working in that area. The three wells that were drilled 
have been plugged and abandoned.
    So, as final things I would like to talk about, it is great 
water, it is clean gas--we are talking up to 2 billion cubic 
feet a day coming out of that area. And the estimate that the 
State has come up with is 25 trillion cubic feet of ultimate 
reserves, providing clean power and lower energy bills to the 
people of the United States.
    The environment is fully being protected by our best 
management practices and by strict regulations.
    Thank you for the opportunity to testify. I would be more 
than happy to answer questions.
    [The prepared statement of Mr. George follows:]

  Statement of Gene R. George, WPG8, Petroleum Association of Wyoming

INTRODUCTION
    Madam Chairman Cubin and distinguished members of the Subcommittee 
on Energy and Mineral Resources of the Committee on Resources of the 
House of Representatives, my name is Gene R. George. I am here on 
behalf of the Petroleum Association of Wyoming (PAW). I am a Wyoming 
Professional Geologist, license number Wyoming No. 8. I have a 
Bachelors Degree in Geology from the University of Kansas and a Masters 
Degree in Geology from Oregon State University. I have been an 
independent in the oil and gas industry since 1971. I am a past 
President of the Wyoming Geological Association and a former two-term 
Commissioner for the Wyoming Oil and Gas Conservation Commission. I 
serve as the current Chairman of the Wyoming Department of 
Environmental Quality Water and Waste Advisory Board. I am a board 
member of the Petroleum Association of Wyoming and am the Chairman of 
the PAW Coalbed Methane Committee. PAW represents coalbed methane 
producers who account for the vast majority of drilling and producing 
activity now occurring in Wyoming and particularly in the Powder River 
Basin of Wyoming. These producers range in size from major oil 
companies to small independent producers.
ORDERLY DEVELOPMENT OF COALBED METHANE RESOURCES FROM PUBLIC LANDS
    The subject at hand is the orderly development of coalbed methane 
(CBM) resources from public lands. First, nearly 82% of the CBM 
activity in the Powder River Basin of northeast Wyoming has occurred on 
private and Wyoming State minerals. This is due in great part to the 
National Environmental Policy Act (NEPA) and Federal Land Policy and 
Management Act (FLPMA) constraints on issuing permits on federal 
minerals. The Buffalo Field Resource Management Plan's Reasonably 
Foreseeable Development does not account for the extent of the CBM 
activity and surface disturbances. Although the actual short-term 
disturbance for CBM will be two (2) percent of the surface area 
analyzed, it was deemed necessary to analyze the entire CBM area of 
Johnson, Sheridan, Campbell and the north half of Converse Counties in 
a new Powder River Basin Oil and Gas Environmental Impact Statement. 
The Wyoming Oil and Gas Conservation Commission (WOGCC) has changed 
well densities from 40-acre spacing (16 per square mile) to 80-acre 
spacing (8 per square mile) to assure the prevention of waste of 
natural resources and to protect correlative rights. This density 
reduction further reduces surface disturbance.
    Since 1986, there have been a total of 11,658 CBM wells drilled. 
Two thousand fifty four (2,054) CBM wells were drilled on federal 
minerals. Of the 5,890 wells analyzed by the Wyodak EIS only about 
1,000 wells were drilled on federal minerals. The rest of the wells 
were drilled on private and state minerals while waiting on the Wyodak 
EIS process. The same situation currently exists in that many wells are 
being drilled (eleven per day) on private and Wyoming State minerals 
while the Powder River Basin Oil and Gas EIS is being completed. The 
Record of Decision for that document should be completed by July of 
2002. BLM is permitting CBM wells at the rate of 1,250 wells per year 
while the Wyoming Oil and Gas Conservation Commission is approving 
permits at the rate of over 700 per month or 9,000 per year. The BLM 
completed the Wyodak Drainage Coal Bed Methane Environmental Assessment 
in March of 2001. This allows for 2,500 wells to be drilled in the 
Wyodak EIS area to protect federal minerals from drainage from wells on 
private and state minerals. To date, the BLM has approved 900 new 
federal drainage protection wells. The BLM is staffing up in the 
Buffalo Field Office and hopes to be able to approve and monitor 3,000 
well permits per year.
    Between the NEPA and FLPMA requirements and the slow process for 
approving drilling permits on federal lands, the activity on federal 
lands is being tightly controlled and is extremely orderly. The problem 
is that the Federal Government and the people of the United States of 
America are losing the battle to capture their fair share of the 
methane. It is suggested that the rapid pace of activity in the CBM 
play will slow down as the play approaches the central portion of the 
Powder River Basin where federal minerals dominate. As operators run 
out of private and state minerals to develop, the federal minerals will 
become the focus of activity.
    The second major pace-controlling factor is in securing NPDES 
permits from the Wyoming Department of Environmental Quality (WDEQ). 
Although the water is of very high quality, the antidegradation 
requirements and the sodium issues to protect agricultural uses 
dominate. The severe restrictions being faced for discharge permits 
particularly on the Powder, Little Powder and Tongue Rivers and their 
tributaries have caused operators to reduce the drilling pace and cut 
back on expenditures. Most of the water produced from the coal in the 
aforementioned drainages will be held onlease in total containment 
ponds. The recent agreement between Montana and Wyoming for the Powder 
and Little Powder Rivers will ease some of the restrictions. The WDEQ 
is attempting to expedite the process by the use of General Permits for 
these structures. It has been taking 4 to 6 months or more to obtain 
permits in these areas. It is estimated that over 1,000 currently 
drilled wells are waiting on NPDES permits. These wells could represent 
over 250 million cubic feet of gas per day in production.
    Coalbed methane activity in the rest of Wyoming is limited 
currently to a few pilot projects and is occurring primarily on private 
and Wyoming State minerals. There are two Environmental Assessments and 
one Environmental Impact Statement involving federal lands for CBM 
pilot projects in south central Wyoming that are being conducted by the 
BLM. CBM success is still a question and the water quality issues are 
even greater outside of the Powder River Basin of Wyoming.
    The members of the Petroleum Association of Wyoming believe that 
development is orderly and even overly restricted by regulation and the 
slow pace of the NEPA requirements. In order to drill a coalbed methane 
well, the following items are required:
    1. Wyoming Oil and Gas Conservation Commission Application for 
Permit to Drill
    2. Wyoming State Engineer's Office Water Well Appropriation Permit
    3. Wyoming Department of Environmental Quality NPDES Discharge 
Permit
    4. Wyoming State Engineer's Office Reservoir Appropriation Permit
    5. On federal Lands a BLM Application for Permit to Drill
    6. On federal Lands a Water Management Plan
    7. Wells on state minerals must meet an eight-point water 
management plan
    8. On federal lands a water well agreement with every water well 
owner within one-half mile
    9. Notification for some pipelines to the U.S. Corps of Engineer's 
98-08 General Permit
    10. All wells require bonds for surface restoration either by the 
BLM, the WOGCC or State Land Board
    11. Wyoming Department of Environmental Quality Air Quality Permit 
for compressor engines
    To further show that the development is orderly, a number of false 
perceptions concerning the CBM play of Wyoming need to be exposed to 
the bright light of scientific analysis. The following discussion 
concerns these perceptions.
COALBED METHANE PERCEPTIONS
Activity ``Out of Control''
    The current coalbed methane activity particularly in the Powder 
River Basin of northeast Wyoming is often portrayed as ``out of 
control''. The primary reason for this perception is that the wells are 
shallow (500 to 2,000 feet) and are drilled by small truck-mounted rigs 
and are drilled in 2 to 5 days. Conventional drilling for a single well 
usually occurs from weeks to months. Therefore, the number of coalbed 
methane wells drilled and hooked up for production and the surface 
owners affected by those wells appears to occur at random and covers a 
lot of area quickly. It is true that a lot of wells can be quickly 
drilled, but it is not random, and it is not ``out of control''.
    Orderly development is exactly what is happening today. All wells 
are drilled on lands for which an oil and gas lease has been secured 
from the holder of the mineral estate. The operator must negotiate or 
competitively bid for the right to drill for coalbed methane. Then the 
operator must negotiate with the surface owner (if different from the 
mineral owner) on paying for surface disturbances and for gaining 
access. Wyoming case law has long established that the surface owner is 
entitled to actual surface damage payment. Because the mineral estate 
dominates over the surface estate, if an agreement cannot be reached, 
the mineral lease owner can gain access by putting up a bond in the 
amount of the estimated surface damage costs and proceed. The final 
agreement will be set by court action. No one can go on someone's 
surface without permission or an agreement unless court action has 
taken place. To date, court action has never had to be taken by an 
operator.
    Next, the operator must get a permit for all wells from the Wyoming 
Oil and Gas Conservation Commission. If the lease is on federal 
minerals, the operator must also get a permit from the Bureau of Land 
Management. The BLM permit also requires a water management plan and an 
agreement with any water well owner within one-half mile of the well 
even if they are off the operator's lease. The BLM also does a site 
specific Environmental Assessment for each group of 32 wells. A permit 
from the Wyoming State Engineer's Office is also necessary before 
drilling starts. Wells drilled on Wyoming State Minerals must meet an 
eight-point water management plan. The State Engineer also approves all 
reservoirs or other appropriations of the water. Then a permit to 
discharge any water must be obtained from the Wyoming Department of 
Environmental Quality/Water Quality Division through the National 
Pollutant Discharge Elimination System (NPDES) process.
    Until all of these permits are approved and are in hand and until 
the lease is secured and the surface access is obtained, the operator 
cannot move a single spade of dirt nor discharge a single drop of 
water. This process may take a few months, or even in some cases, a 
year. This is hardly a case of uncontrolled activity!
The Powder River Basin is Being Flooded with Water
    There are no creeks, rivers, or streams that are or ever have been 
in flood stage due to CBM discharges. Four instances of minor short-
term, site-specific flooding occurred when the surface owner and 
operators of upstream discharges failed to clean out the tree debris 
dams or to bypass the man-made silted-in hay meadows or spreader dikes. 
Two cases have been resolved and the other two are being negotiated. In 
these negotiated cases, the wells have remained shut in. In most 
places, the water is kept on location by reservoirs and dams. What 
water is directly discharged to the Belle Fourche and Cheyenne Rivers 
adds little to the natural flows due to percolation and transpiration 
of plants. Some ice damming in the winter has occurred where shallow 
gradients in the creek are insufficient to allow the water to move 
through the area. These areas have been put in pipe or channelized. The 
water management plans by the BLM and the Watershed Plans for Dead 
Horse, Spotted Horse and Wild Horse Creeks all show that the creek 
channels have the capacity to handle all CBM discharges without 
flooding. Virtually all of the receiving creeks are normally dry most 
of the year. The only streams that flow most of the year under normal 
conditions are the five major rivers and four small creek tributaries. 
Currently, the second year of drought conditions exist in northeast 
Wyoming. Ranchers are asking the WDEQ to issue permits to the operators 
to gain water for livestock. The gauging station on the Belle Fourche 
River shows no increase over the last several years where CBM 
development has been intense. The area is certainly not awash with 
water!
    Water production from CBM wells occurs at predictable rates. The 
initial rate for an average well is very high and may range between 5 
and 100 gallons per minute. The average well also declines by at least 
50% in the first year and will decline by another 50% in the second 
year. The rates continue to decline until they stabilize at a very low 
rate as gas depletion is achieved. Estimates in the Wyodak EIS were 
that an average well would produce 12 gallons per minute. The 
statistical average as of May, 2001 with 5,771 wells producing is 7.3 
gallons per minute. It is not reasonable to apply a flat rate of water 
production to the total number of wells to be drilled. All estimates of 
water production must take into account the rapid decline in water 
production rates as a well ages through its short five to ten-year 
average life. The BLM EIS models will predict the total discharges from 
wells relative to the sequence of drilling, production and abandonment 
and for specific drainages. Flooding of drainages will not occur. The 
current practice of retaining the water on lease by total containment 
will further ease any concerns about excess water. In fact, the City of 
Gillette, Wyoming recently announced that flooding was greatly reduced 
in the City by CBM reservoirs during a major thunderstorm event.
    As of May 2001, 5,771 wells were producing over 50 million gallons 
of water per day. Even with this large number, the individual wells are 
so spread over the area that no flooding is occurring. In fact, the 
water is not leaving the State of Wyoming and in many cases up to 90% 
of the water is lost through percolation, evaporation and transpiration 
by plants.
Need for More Study
    Since 1990, the Bureau of Land Management has written seven 
environmental assessments (EAs), two environmental impact statements 
(Gillette South and Wyodak) and is in the process of completing a new 
Powder River Basin Oil and Gas Environmental Impact Statement due out 
in July of 2002 that covers the entire CBM play in the Wyoming portion 
of the Powder River Basin. Montana is also conducting an EIS for the 
entire Powder River Basin in Montana. The BLM requires a site specific 
Water Management Plan for each 32-well Plan of Development (POD) that 
it approves on federal minerals. Watershed studies have been completed 
by the CBM operators for Dead Horse Creek, Spotted Horse Creek and Wild 
Horse Creek. The operators and the Wyoming Department of Environmental 
Quality (WDEQ) have prepared studies on Barium, Conveyance Losses, Main 
Stem Flow Quality. The University of Wyoming is completing studies on 
CBM water toxicity on plants, Plant/Soil/Water interactions and erosion 
in Burger Draw. The Wyoming Water Development Commission (WWDC) is 
planning Powder-Tongue Rivers Basin Watersheds, Northeast Wyoming Basin 
Watershed, and Tongue River Watershed Management plans. The WWDC is 
also funding a Digital Elevations Model study, a Channel Fluvial 
Morphology Study and a GIS erosion model. The Wyoming Geological Survey 
is conducting a State/Federal water quality project involving numerous 
State agencies, the BLM and the U.S. Geological Survey to be funded by 
the WWDC. The WDEQ requires analysis of all downstream irrigation areas 
for each NPDES permit. Montana and Wyoming have reached an agreement 
requiring monitoring for the Powder and Little Powder Rivers based on a 
baseline analysis. The Conservation Districts are doing Watershed 
studies on Dead Horse, Wild Horse and Spotted Horse Creeks. The Wyoming 
Geological Survey has published articles on underground fire potential, 
subsidence and has a great information pamphlet for public use. Many 
studies and plans are on-going. It is currently impossible to know all 
of the studies that are being conducted at any one time. Even the EPA 
is conducting a CBM Best Management Practice study.
More Monitoring is Needed
    Currently, the operators are required to monitor each NPDES 
discharge point and submit complete water analyses monthly to 
quarterly. WDEQ also requires point of compliance monitoring which 
sometimes is daily. The BLM is requiring operators to drill and equip 
monitoring wells with federal mineral development. The BLM has more 
than 40 monitor wells in operation. The Wyodak EIS mandates up to 280 
monitor wells be drilled at operator cost and equipped by operators for 
BLM use. The Wyoming State Engineer's office has monitoring wells 
spaced throughout the CBM area. The Wyoming State Engineer's office 
also requires separate water volume reports. The Wyoming Oil and Gas 
Conservation Commission (WOGCC) requires that total gas and water 
production be reported on a monthly basis. The WOGCC has monthly 
hearings on spacing and compliance issues. What else is there to 
monitor? The water quality does not change with time or volume.
Withdrawing Water from the Coals Will Cause Subsidence
    First, the BLM EIS states that only about three to five percent of 
the total groundwater resource will actually be withdrawn. The coals 
are not totally dewatered. The Wyoming Geological Survey published a 
document on their web site (wsgweb.uwyo.edu/oilandgas/subsidence.html) 
entitled Subsidence potential related to water withdrawal in the Powder 
River Basin. This article concludes that up to + inch of subsidence may 
occur but it may not be transmitted to the surface. To date, no surface 
subsidence has been associated with other equally significant water 
withdrawals in the Gillette area. This means that even at the coal 
mines, where the coal is nearly dewatered before mining, there has been 
no subsidence recognized at the surface.
Withdrawing Water from the Coals Will Cause Underground Fires
    The coal mines near Gillette have been active for over twenty years 
and even though they nearly dewater the coals, there have been no 
underground fires. The Wyoming Geological Survey has published Coal 
Report CR 01-1 March 2001. The title is Pryophoricity (spontaneous 
combustion) of Powder River Basin coals - considerations for coalbed 
methane development. This paper concludes that ``During the production 
phase of CBM activity, conditions necessary to foster spontaneous 
combustion of coal are not present. After the coal seam is depleted of 
economic methane resources, wells must be plugged and sealed. Unlike 
abandoned mines, CBM wells leave no underground voids susceptible to 
further subsidence and associated spontaneous coal ignition.'' Finally, 
oxygen is required for combustion. All pipelines have oxygen sensors 
that will shut in wells if any oxygen is recorded. Without oxygen fire 
cannot exist.
As Pressure in the Coals is Drawn Down, Methane Leaks Will Occur at the 
        Surface
    As nature erodes the surface and brings the coals near the surface, 
methane has been known to escape. Rawhide village was just such a case. 
The erosion breached the overlying confining shale layer and allowed 
the gas to escape. When homes were placed in the ground where the 
overlying shale had been breached, gas did escape into those homes. The 
gas seeps in this area were historic and known to predate the homes. 
Currently, the coal mines, which nearly dewater the coal in front of 
the highwall, have some methane pass out of the coal mine face to the 
atmosphere but until the overburden is stripped, no methane escapes out 
in the area in front of the mining pit. When coalbed methane wells are 
drilled and completed (cased), they maintain the overlying sealing 
layers which confine the water, the formation pressure and the methane 
in the coal. As water is pumped from the coal bed, a cone of depression 
is created around the well. All water and gas flows from high pressure 
to low pressure. Therefore, because the confining layer is maintained, 
and because the gas flows to the lower pressure wellbore, methane does 
not escape to the outcrop and does not migrate to the surface.
    The City of Gillette, Wyoming contracted a subsurface investigation 
by CE&MT, Inc. This study found no actual faulted well in the area of 
study but concluded that because of changes in dip that faulting was 
inferred. It states that ``These ``faults'' are interpretive only''. 
The study then suggests that these inferred faults may be paths of 
water and gas migration as CBM wells are drilled and produced in the 
vicinity of Gillette. The Ayers article cited in the American 
Association of Petroleum Geologists Bulletin, Volume 70 deals with 
wells in which coals are not present by faulting in well logs and where 
faulting is seen on the surface many miles north of Gillette. No such 
evidence of faults exists in the Gillette area.
    Methane seeps in the Belle Fourche River have been cited as 
evidence that CBM causes gas to escape to the surface. The Wyoming Oil 
and Gas Conservation Commission investigated one report of seepage in 
the Belle Fourche River which is about 3 miles from the Cordeo Rojo 
coal mine. The WOGCC field inspector reports that gas has been seen 
seeping from this area for many years according to oil field pumpers in 
the area with RIM. There are no coalbed methane wells anywhere close to 
the seep. The seep is very low volume and the surface disturbance of 
the water is easily masked by a slight wind or breeze.
Domestic Water Wells are Being Ruined by CBM Production.
    The BLM monitoring wells show that there is little connection 
between sands above and below the coal beds. The BLM and the Wyoming 
State Engineer's Office monitor wells suggest that water wells in zones 
other than the coal will show little affect from CBM production. The 
BLM requires that an agreement be made with owners of all water wells 
permitted with the Wyoming State Engineer's Office within one-half mile 
of the CBM well. Operators generally provide the same agreement when 
drilling on fee and State lands. These agreements are voluntary. To 
date, the Wyoming State Engineer's office has no reports of wells being 
damaged by CBM production that have not been taken care of by 
responsible operators.
    A photograph has been shown of a water well in front of a house on 
an old farm on land owned by P&M Coal Company near Sheridan, Wyoming 
with gas and water blowing out of the well. This is an old livestock 
water well drilled in 1982. The water in the coal from which the well 
was producing had been drawn down by both the nearby coal mining just 
across the border in Montana and by CBM wells operated by Redstone Gas 
Partners. Redstone voluntarily plugged the well and checked the house 
for safety. Once the well was plugged, the house was declared safe. The 
person to whom P&M rented was not evicted.
COALBED METHANE FACTS
    The members of the Petroleum Association of Wyoming would prefer 
that the title of this play be: ``GREAT WATER, CLEAN NATURAL GAS AND A 
SAFE ENVIRONMENT''.
Great Water
    The water produced by CBM is near drinking water quality, is 
generally higher in quality than the shallow groundwater and even the 
surface water and is beneficial to livestock, wildlife and to most 
agricultural operations. Attached are photographs of water discharged 
to the Belle Fourche River and to reservoirs for livestock and wildlife 
use. The primary water quality issue is Sodium. While the Sodium 
content meets drinking water standards, the lack of Magnesium and 
Calcium in the CBM water to offset the Sodium may negatively affect the 
irrigation of crops. There is no harm to creek bottoms, to livestock or 
the wildlife. Most of the water is being retained on the surface for 
agricultural use. Some CBM water has already been injected into the 
City of Gillette's sandstone aquifers to recharge those zones. Gillette 
is considering a large-scale CBM water injection project.
Clean Natural Gas (Methane)
    In May, 2001, 5,771 wells produced over 653 million cubic feet per 
day of coalbed methane (natural gas). It is projected that the maximum 
production will reach 2 billion cubic feet of natural gas per day. The 
ultimate reserves are expected to be 25 trillion cubic feet of natural 
gas. The revenues to the Federal and State Governments will be in the 
billions of dollars for twenty or more years. The demand for natural 
gas is driven by the Clean Air Act requirements. Wyoming will greatly 
aid in increasing the supply of natural gas to help maintain a 
reasonable price for home heating and electrical supply to the 
consumer.
Safe Environment
    There are no oil liquids with this gas and no natural H2S with the 
methane. The wells do not emit any volatile organic compounds to the 
atmosphere and the compressor engines are lean-burn natural gas fired. 
This is the cleanest project that the oil and gas industry has. The 
disturbance of the entire three and one-half county area will only be 
2% of the total area on a short-term basis and about 1% on a long-term 
basis. An average well only disturbs about one-half an acre. The water 
is of high quality and discharges must meet protection for wildlife, 
agriculture, drinking water and groundwater uses.
CONCLUSION
    The members of the Petroleum Association of Wyoming represent the 
majority of the CBM activity in Wyoming. The development of CBM on 
federal lands is controlled, regulated and orderly. The water is of 
good quality and is beneficial to the surface user and to wildlife. The 
product is clean-burning natural gas which is beneficial to America's 
air quality and our citizens'' health. The methane supply is 
immediately needed to supply electrical generation demand and to lower 
home heating costs. Our environment is fully protected by operator best 
management practice and by strict regulation. Thank you for this 
opportunity to make the truths of Coalbed Methane known.
                                 ______
                                 
    Mrs. Cubin. Thank you, Mr. George.
    I now recognize Mr. Terry Dobkins.

   STATEMENT OF TERRY DOBKINS, VICE PRESIDENT OF PRODUCTION, 
                         PENNACO ENERGY

    Mr. Dobkins. Thank you, Madame Chairman. I appreciate being 
here today.
    As you said, my name is Terry Dobkins. I am vice president 
of production for Pennaco Energy. Pennaco was a company formed 
to develop the coalbed methane in the Powder River Basin.
    Last February, we were bought by Marathon Oil Company. We 
are now a wholly owned subsidiary of Marathon Oil. We have been 
the most active driller in the basin over the last 2 and a half 
years. We have drilled over 1,400 wells that we operate.
    Our focus has been to do this in an environmentally and 
socially responsible manner. We feel like we have done that.
    I have been involved with this project from the very 
beginning, from the first well that Pennaco has drilled.
    I have a degree in chemical engineering. I have worked in 
the oil and gas business for 25 years, most of it in the State 
of Wyoming.
    Mr. George has already talked about the importance of the 
resource. You are already aware of the 25 TCF and how important 
that is to us, that it is a clean fuel, so I will skip to what 
I see as the primary issues there.
    And first is that we in the industry recognize that Wyoming 
is a beautiful place to live and beautiful environment. We 
appreciate it, we respect it, we take care of it just as anyone 
else would want to. We are not there to damage it, so we are 
doing the best job that we know how to find a balance between 
the country's need for energy and the need to do this 
correctly.
    And I say that for Pennaco, but I think I can speak for the 
rest of industry, that we recognize the need for this important 
balance.
    We respect the right of the surface owners. We work with 
them continually to find solutions.
    So the issues that need to be covered out here are 
groundwater, the impact on the groundwater, what to do with the 
surface water, and the issue of surface impact and the surface 
owners themselves.
    Studies have been done of the impact of coalbed methane 
development on the groundwater. And I reference in my written 
testimony the most recent study published shows that 1.75 
percent of the coal seam water will be impacted in Montana out 
of all the water in the coal seam. That ignores completely the 
water in the rest of the aquifer in the sands. So that is, we 
will only touch 1.75 percent of the coalbed methane water.
    In the studies in the EIS done last year, those numbers 
were under 10 percent of the total aquifer will be impacted. 
The new report coming out will give more detail. We will know 
what that is.
    We do expect to impact water in the zones where the coal is 
and where the coalbed methane is. We will impact that, so if 
the ranchers and the city and residents have their water wells 
in that zone, we will impact it. But all of us as operators 
have voluntarily agreed to enter into agreements with surface 
owners to remedy that problem.
    We monitor their wells, and we have contractually agreed to 
take care of any problem that they have run into on their water 
wells. The state engineer's office continues to report that 
there are no legitimate outstanding claims that have not been 
settled by operators in regard to water wells.
    We are taking care of those issues.
    Surface impacts. Again, this water is fresh. If it were not 
freshwater, we would not be discharging it. Sodium contents are 
low. Saltwater is 30,000 parts per million. We are down 
somewhere around 500 to 1,500 parts per million.
    This is drinking water. In many cases, it is good for 
irrigation. We have done irrigation projects on Harry and Ruth 
Wolff's place, Leonard and Myrna Swanson, Chuck Rourke. So we 
do irrigation.
    We have spent millions and millions of dollars as an 
industry studying water quality, soils, topography, what the 
best use of the water is, the impact on the surface, where does 
the water go, what is the water balance. All of this 
information is available.
    And we put this water on the surface. We take it out of the 
subsurface, out of the groundwater, put it back on the surface. 
The studies are showing that upwards of 90 percent of that 
water re-infiltrates the surface before it ever reaches a 
stream or a river. This water is going back into the subsurface 
and is recharging. This is not being wasted.
    There is much less water being produced than we thought 
there would be. These numbers start out at an average of say 12 
gallons a minute per well. By the second year, it is about half 
that. By the third year, about half again. So when you start 
talking about how much water is being produced, remember that a 
high number is a temporary issue. It stops quickly.
    It is critical to all of us to have good surface owner 
relationships. In a split estate, that is no different. All of 
us recognize the importance of having a good relationship. We 
pay as much in fees on a per acre generally as much or more as 
that land is appraised for as its value every single year. So 
in essence, we are buying that land at its appraised value 
every year that we are out there.
    Where we run into a problem is that if a surface owner 
wants no change period, it is hard to deal with. We cannot do 
this business without creating a change. What we hope to do is 
make it a positive change.
    The rules and regulations are in place. We need to develop 
practical policies to enforce those rules and live with them, 
and we need to add the staff and resources to the regulators to 
increase their effectiveness and efficiency to get the job 
done.
    This operation is working. The rules are working. Industry 
is working with landowners. And it is the best I have seen in 
25 years of oil and gas experience.
    [The prepared statement of Mr. Dobkins follows:]

  Statement of Terrell A. Dobkins, Vice President-Production, Pennaco 
           Energy, Inc (wholly owned by Marathon Oil Company)

Executive Summary
    Pennaco Energy is a wholly owned subsidiary of Marathon Oil 
Company, and is one of the three most active drillers in the Powder 
River Basin Coal Bed Methane Project. Over the last three years, 
Pennaco has drilled over 1400 coal bed methane wells in the project 
area, with over one thousand wells on production at this time. 
Pennaco's sole focus has been the development of coal bed methane in 
the Powder River Basin. I have worked in the Oil and Gas Industry for 
over twenty five years as an engineer, most of that time spent in the 
Rocky Mountain region. I have been closely involved with Pennaco in 
that development from the drilling of the first well and I am quite 
familiar with virtually all aspects of the technical, environmental, 
regulatory and political aspects of the activity throughout the Powder 
River Basin. Pennaco has been a leader in developing and using 
environmentally responsible methods of dealing with the impacts of coal 
bed methane development in the Basin. Therefore, I feel qualified to 
address these issues before this subcommittee.
    The Coal Bed Methane resource development currently underway in the 
Powder River Basin of Wyoming is one of the most important sources of 
natural gas available to the United States today. The estimated 25 TCF 
of gas reserves in the basin make it comparable to the remaining 
natural gas reserves in the Texas offshore Gulf of Mexico. Although 
current gas production from the Powder River Basin is a healthy 220 BCF 
per year, the potential exists for the production to increase to 1 TCF 
per year. This production increase would accelerate the recovery of the 
reserves to about 30 or 40 years, recognizing that rates tend to 
decline over time. This resource is located in the center of the 
country and the gas is connected to pipelines capable of transporting 
it to both east and west coasts. The gas is poised to not only be a 
reliable and secure resource, but will also play a key role in the 
clean energy needs for the U.S. over the next 30 years.
    Development of coal bed methane in the Powder River Basin has 
accelerated over the last three years due to a combination of factors, 
including enhanced technologies, new gas pipelines and favorable 
natural gas prices. As a part of this development, producing companies 
have spent millions of dollars on environmental studies and surface 
improvements. All of this work was done to monitor the impacts, using 
that information to minimize the damage and to maximize the benefits. 
We are using the information gained during the drilling and production 
of the first 10,000 wells in the basin to improve operations in the 
remaining development over the next 30 years. This development is being 
done in a responsible and environmentally sensitive manner.
    The rules and regulations needed to protect the environment and to 
provide for orderly development of this vast natural resource are 
already in place and being implemented. The next step is to give the 
state and federal regulatory agencies the funding and directives to set 
forth and enforce reasonable policies to comply with existing rules and 
regulations. Support for states' departments of environmental quality 
and the federal BLM offices must be increased to handle the tremendous 
technical and personnel demands being placed on them. We must not 
stifle billions of dollars of development by inadequately funding the 
regulatory agencies responsible for controlling this critical natural 
resource. Specific examples include: 1) the current EIS documents being 
prepared in both Wyoming and Montana must be both timely and usable; 2) 
the BLM staffs must be increased in the Powder River Basin field 
offices to handle the huge demands being placed on them; and 3) 
procedures for processing permits to drill must be streamlined and made 
more efficient to reduce duplication of efforts for both the BLM and 
the operators.
    Especially at a time when the President is developing a national 
energy strategy, it is critical that the industry and its governing 
agencies work together to ensure that this important natural resource 
be developed to help meet the needs of the Nation, while at the same 
time addressing the concerns of the local landowners.
    Over the last three years, considerable attention has been given to 
issues surrounding the development of reserves in the Powder River 
Basin. Some of the criticism that has been voiced has been justified, 
while a great deal of it has no basis of truth. However, for those who 
are not intimately involved in the process, it is difficult to discern 
the difference. Thus, a continuing educational effort has been underway 
for the last two years to allow interested parties to make decisions 
based on sound and factual information. This document is an attempt to 
summarize the issues and comment on how those issues are being 
addressed. It is important to understand that this development, like 
any other, is a learning process. As better ways of doing things are 
identified, those improvements are incorporated into everyday practice.
Primary Issues
    There are three primary issues surrounding coal bed methane 
development in the Powder River Basin. These issues are:
    1. Impact on the Ground Water Resources
    2. Impact on the Surface Resources, including water, soil, 
vegetation and animals
    3. Surface Owner Rights and Compensation
Impact on the Ground Water Resources
    Three studies on the impact of coal bed methane development on 
ground water resources are either complete or underway. The most 
recently published study is the ``Water Resources Technical Report'' 
for the Montana Statewide Oil and Gas Environmental Impact Statement 
and Amendment of the Powder River and Billings Resource Management 
Plans, prepared for the BLM, Miles City Field Office. The report was 
prepared by ALL Consulting (Tulsa, OK) and CH2M HILL (Boise, Idaho). 
The report states on pages 40 and 41 and exhibit 27 and 28, that 
``these figures add up to an estimated 249.73 billion cu. ft. of ground 
water for the projected CBM area of the PRB. This total does not 
include the volume of all the coal seams in the PRB, instead only those 
coals in the CBM potential development area. This total does not 
include waters held in non-coal aquifers. The total water production 
for all CBM wells in all the watersheds is 4.4 billion cu. ft. per year 
or approximately 1.75% of the water in the coal seams of the Montana 
PRB Watersheds.''
    The calculations of water volumes in those studies indicate that, 
even though this is an arid climate, there are vast amounts of water in 
the subsurface. The numbers that have been reported show the production 
of water from coal seams for methane production will impact a very 
small percentage of the water in the aquifer. Even though the volumes 
of water withdrawn in coal bed methane development are significant, the 
huge amount of water left after the methane has been extracted appears 
to be very adequate for all current and foreseeable future uses of the 
ground water. Additionally, the water extracted with methane production 
and subsequently discharged will gradually be replaced over time by 
infiltration of the discharged water; rain and snow melt back into the 
subsurface. This will provide continuing water resources for future 
generations. The water discharged to the surface is not wasted.
    A very thorough study, to be completed as part of the Wyoming 
Powder River Basin Environmental Impact Statement, should be ready for 
review by Spring 2002. The study will provide the operators an 
opportunity to review the important conclusions of the scientists 
involved. In the meantime, industry and governmental agencies will 
continue to monitor and document development impacts on the aquifers.
    Another important issue related to ground water is the impact of 
coal bed methane development on water wells used by residents of 
Wyoming. Many of the water wells in the basin, both stock water and 
domestic water, are completed in the same coal zones being developed 
for methane production. It has been common for many years for people to 
report that they could light their household water. This was long 
before anyone knew what coal bed methane was and was certainly long 
before any development of that methane had begun. Now that the methane 
is being produced from coal zones, the impact on water wells completed 
in that same zone can be substantial. As a part of doing business, 
every coal bed methane producer in the basin has agreed to voluntarily 
negotiate a contract with the surface owner on the mineral lease that 
will define the terms of replacing any impacted water wells. The 
replacement of water supplies, either through a new well or other 
mutually acceptable means, has become common practice. To date, the 
State Engineer's office in Wyoming continues to state that no cases 
exist in its office of a legitimate complaint that a producer has not 
remedied an impacted water supply. This issue is important to all 
parties involved and has been handled by cooperative efforts between 
landowners and producers.
Surface Impacts on Water, Soil, Vegetation and Animals
    There are two components to be discussed when it comes to surface 
waters. One is water quality and the other is water quantity. Both need 
to be discussed.
    The quality of water produced from coals varies dramatically across 
the Powder River Basin; however, in almost all cases it can be 
considered fresh water that meets federal drinking water standards. The 
issue is not whether the water is suitable for drinking. The issue is 
whether it can be used for the irrigation of pastureland and crops.
    The key issue of water quality has now been reduced primarily to 
the quantity of various salts in the water. All of the surface water, 
including coal bed water, contains some amount of salts. The most 
critical salts for irrigation decisions are sodium, magnesium and 
calcium. In this case, it is not the quantity of salt so much as it is 
the relative combination of the salts to each other. This leads to a 
discussion of a term now common to the Powder River Basin known as SAR, 
or sodium adsorption ratio.
    The SAR is important because is it is an indicator of whether the 
water will be compatible with certain soils and plants. Technically, 
the SAR is the ratio of the sodium ion concentration to the square root 
of the sum of the magnesium and calcium ions. In simple terms, if the 
sodium ions concentration is much higher than the magnesium and calcium 
ion concentrations, the SAR is high. If all the ions are present in 
similar amounts, the SAR is low. If the SAR of the water and the soil 
is low, say 10 or below, there should be no problems in most types of 
soils. As the SAR get higher, more care must be taken to match soils, 
water, plants and irrigation methods. The SAR and water quality vary 
considerably from one part of the basin to another. The attached map, 
Exhibit 1, shows the Powder River Basin with its various river 
drainages and the variations in SAR values from one end to the other. 
The operators and landowners must understand this variation and apply 
the knowledge to the specific sites being developed.
    Operators have done many soil studies for landowners in an effort 
to match water and soils for irrigation. In general, irrigation is not 
effective on soils high in clay. The best soils are loamy and sandy 
loam. This type of soil tends to be away from the creek bottoms and 
into the hilly terrain. Soils in Wyoming and Montana tend to be high in 
natural salts also and this must be taken into account. The higher the 
salt content of the soil and the water, the more difficult it is to 
irrigate. In those cases, special methods must be used. Operators are 
keenly aware of these issues and work cooperatively with the landowners 
to find the best use for the water in the given terrain and soil type. 
It is important to remember that many ranchers in Wyoming are not used 
to having much water and have never irrigated and do not intend to 
start now. We often hear that ``my father and my grandfather never 
irrigated and I am not about to start now. I am a rancher, not a 
farmer''. Thus, we must fit the solutions to the desires of the 
landowner in addition to what works for the water, soil, terrain and 
vegetation.
    A second issue is the quantity of the water produced from coal bed 
development. The water quality and quantity must be considered together 
in any decisions made regarding how to handle water on the surface. 
Industry has spent well over a million dollars studying the impacts of 
coal bed produced water on streams and rivers. The primary purpose has 
been to assure that water discharges do not negatively impact 
agriculture downstream. We have addressed all aspects of water quality, 
including constituents such as iron, manganese, barium, arsenic and 
salts. A large part of these studies deal with quantity of water in 
addition to quality. As a result, we believe we have a good 
understanding of the water and its impact on the surface. We have used 
this information, as well as knowledge gained from landowners and 
hydrologists, to customize the methods of handling water to fit the 
specific situations.
    Experience in the basin has shown very clearly that the quantities 
of water produced vary considerably from area to area and from one coal 
zone to another. The quantities of water also change dramatically over 
time. For instance, an average coal bed methane well will produce 12 
gallons of water per minute over the first year. The second year the 
volume will drop in half and then drop to half again in the third year. 
We are seeing a number of cases in which the water flow drops to near 
zero, yet the well still produces gas. These water volumes are often 
lower than what was anticipated prior to drilling, so impacts caused 
from discharges turn out to be less than expected. This is both good 
and bad. The change from normal has been less than expected, but the 
landowners who wanted to water livestock and irrigate have not been 
able to do as much as they had hoped.
    Nearly all of the operators have gone to great lengths to work with 
the landowners to use the water on the surface for agricultural 
purposes. Operators have cooperated with landowners to build stock 
tanks, reservoirs, water distribution lines, power lines and roads to 
help in the management of their livestock. Those ranchers who have used 
the water on the surface have increased crop yields, stock carrying 
capacity and livestock production as a result of the additional water. 
Those wells and facilities can be used by the ranchers long after the 
methane production has ceased. Discharge points for the water are 
designed to prevent erosion and deposition of any residue on the stream 
banks. Examples are shown in the photos in Exhibit 2. Often, enough 
reservoirs are built to keep all produced water on the lease where the 
water is produced. Stock tanks and water lines have been installed to 
carry water up to the highland areas away from the stream bottoms. This 
allows cattle to move up into better grass and lets the stream banks 
re-vegetate with grass and brush. This in turn increases the habitat 
for wildlife. Ranchers have been able to increase their income by 
selling additional permits for hunting on their property. When the 
landowner desires, the reservoirs have been built to allow for the 
stocking of trout. The operators have cooperated with the landowner to 
establish the food chain and then stock the trout.
    There are several examples of creative ways that have been used to 
put the water to use. As one example, Pennaco worked closely with the 
City of Gillette to develop pipelines and pumping stations so the coal 
bed methane produced water could be chlorinated and then injected into 
the partially depleted aquifer used by the city for its domestic water 
supply. Although this is not a method that can be used in other areas, 
it was a very effective way to put the water to good use and has been 
operational for one and a half years. A second case is a cooperative 
effort between the Wyoming Highway Department, Natural Resource 
Conservation Service, Pennaco and the landowner. The parties worked 
together to plant hundreds of trees along Highway 59, south of 
Gillette, to form a natural show fence. Pennaco piped coal bed methane 
water to the site for a constant water supply. Exhibit 3 is a photo of 
that project. Other projects have included sprinkling, center pivot 
irrigation and several other methods of applying coal bed methane water 
onto the grasslands and cultivated crops to increase the agricultural 
yield for the ranchers. All this is done with soil testing and 
monitoring to assure long term benefits.
    The other side of the coin is when a landowner does not want any 
change at all in his surface. Even though that is certainly his right, 
it makes a difficult situation for the operators. Coal bed methane 
cannot be developed without some change in the surface. Therefore, if a 
landowner is unwilling to help in the planning, the operator must make 
those decisions alone. This is the least desirable situation for an 
operator. We go to great lengths to avoid an antagonistic relationship 
with our landowner and constantly seek ways to cooperate.
Surface Owner Relationships
    It is very important for operators to have good relationships with 
surface owners, whether the owner has mineral rights or not. A commonly 
heard statement is that the surface owner is completely ``out of luck'' 
if he does not have the mineral rights, leaving him susceptible to 
being run over by the operator. This is far from the truth.
    The mineral estate has precedence to the surface estate, but this 
does not mean the surface owner is without rights. Operators realize 
that we can either get along with the surface owner and get things done 
the easy way, or we can fight constantly and spend more time and money 
than it would have taken to cooperate in the first place. Subsequently, 
the operators go to great lengths to get surface owner agreements in 
place before any activity takes place on the surface. This agreement 
defines in detail what the responsibilities of the operator are and 
what the expectations of the landowner are. The agreement also defines 
what fees will be paid to the landowner in return for the use of the 
surface. These agreements are very common and are the rule, not the 
exception. For instance, Pennaco has operations with over two hundred 
landowners. At this time, there is only one landowner that we have been 
unable to reach agreement with. As a result, we have held up drilling 
and production for over a year in an attempt to reach an agreement. In 
this particular case, the owner does not need money and wants nothing 
to do with us. So, he continually requests fees several times greater 
than those that his neighbors have received. Additionally, he asked for 
conditions that, if implemented, would make drilling and production 
uneconomic. We are still working with the courts to secure the ability 
to move forward with development. Fortunately, the vast majority of 
landowners and operators are able to reach agreement and go forward in 
a cooperative manner. This is good for both parties.
    A number of landowners have asked for overriding royalties in the 
production rather than accept annual fees for access to their land. The 
general concept that if the landowner gets a share of the profits, he 
will be more cooperative, seems logical on the surface. However, this 
concept continues to be disputed by the producers. The reasons for not 
giving royalties in lieu of surface damage fees vary from operator to 
operator; but a few reasons are common. First, coal bed methane is 
inherently a risky business and may or may not be an economic venture. 
As the industry moves into deeper and more remote areas, it may take 
two or more years of pumping water from wells to get the first gas 
sales from a project area. Even though landowners may believe they will 
be much better off with a royalty, the reality could be quite the 
opposite. The activity on the surface could go on for some time with no 
revenue generated from gas production and sales. This leaves the 
operator in an awkward position of having a landowner receiving little 
or no compensation for the disturbance on his land. Additionally, coal 
bed methane tends to be produced in largest amounts in the second year 
after gas sales begin, and then the rates drop dramatically. Again the 
landowner is left in later years with little or no compensation. 
Finally, a royalty is a mineral assignment and can be separated from 
the title of the land. If the surface owner sells the royalty or the 
surface separately, the operator is again in a situation in which the 
surface owner gets no compensation for the disturbance. This is not 
perceived as a good way to do business in the long run with surface 
owners.
    Another issue is whether surface owners who do not have mineral 
rights are being adequately compensated for the presence of methane 
operators. Operators believe that surface owners are being compensated 
at a higher level than in any other oil and gas basin in the country. 
The agreements over the last three or four years allow for an initial 
payment and an annual payment that is quite substantial in relation to 
the value of the land. In addition, operators have been paying for new 
roads, power lines, water wells, stock tanks, reservoirs, trees, fish, 
soil testing and water well monitoring. These are expenses the operator 
bears that the surface owner could not afford nor justify in this arid 
land. Additionally, the operators agree to reclaim any of the surface 
and facilities after production is uneconomic. Consequently, the owner 
has the choice of taking over the improvements or having the land 
reclaimed to its original condition. This includes the wells 
themselves, so the owner can assume ownership and responsibility for 
any of the wells he wants as water wells, all with power supplied. Once 
the gas operation is finished, the landowner can also use the gathering 
pipelines for water storage and distribution on his ranch. For 
additional insight, read the attached news article from the August 23, 
2001, Miles City Star, Exhibit 4.
    As an example of the magnitude of fees paid to surface owners, I 
will give details of a specific case that is representative of 
Pennaco's payments in general. I am not revealing the name of the ranch 
or individual owners, but the numbers are those actually paid or are 
estimated to be paid. On this ranch in the Powder River Basin, Pennaco 
is actively drilling a total of 70 wells with one well per 80 acres. On 
average, each well site will disturb 4.0 acres initially and 1.9 acres 
in the long term. This includes the well site, access roads and 
pipelines. If power lines are not installed in the same trench as the 
pipeline, additional payments and disturbances should be considered. We 
have paid out approximately $70,000 of well damage payments to date and 
expect to pay out a total of $110,000 this year in initial damage 
payments. This amounts to an average of $390 paid per acre of actual 
surface disturbed. On an annual basis, Pennaco expects to pay 
approximately $80,000 per year for an estimated $615 per acre actually 
disturbed. The annual payments per acre are higher than the initial 
payments because the acreage disturbed drops as pipelines and well 
sites are reclaimed, but fees are still paid. As a reference point, the 
average value of the land, if valued as an entire ranch, should be in 
the $200 to $400 per acre range. The value of the land varies somewhat, 
depending on the proximity to Gillette or other population centers. 
However, the bottom line is that landowners are generally receiving 
more per acre disturbed every year than the appraised per acre value of 
their land.
    Again, there is another side of the story. The people of the West 
tend to be very independent and private. Some of them have lived out in 
the country away from people due to the solitude and wide open spaces. 
Coal bed methane development is definitely an infringement on that 
privacy. It is difficult for an operator to put a price tag on that 
loss of privacy, so it can create a tough situation for both parties. 
There are also issues of erosion control, dust, low water crossings for 
cattle, ice in winter, fences left open and similar ranch operational 
problems to be addressed. This is a situation in which it is best for 
the two sides to spend time together to understand each other's 
position and try to find common ground. This can be time consuming and 
frustrating, but can usually be resolved.
    Overall, the industry is working in good faith with landowners to 
cooperatively develop water and coal bed resources while compensating 
them for the inconvenience and loss of agricultural and hunting income. 
If the landowner desires to use the water, due to increases in crop 
yield and livestock carrying capacity, there should be an increase in 
income for the rancher rather than a loss. The bottom line is that 
there is not a single way of dealing with water that fits all 
situations. In every project, the operator must design the water 
handling plan to fit the water quality, water quantity, soils, terrain, 
vegetation and wishes of the landowner. The first choice is to use the 
water on the surface to benefit the landowner for his agricultural and 
domestic uses. If and when there is a case in which it is not 
appropriate to discharge the water on the surface, other solutions are 
explored, such as shallow injection. The industry and landowners must 
be able to use the full range of tools available to reach the best 
solutions.
Secondary Issues
    There are a number of smaller issues that arise from time to time 
that are being dealt with continually. I will touch each of those 
briefly.
    (1) ``Bad Operators''. In every industry there are operators or 
companies that cut costs or take short cuts. The coal bed methane 
industry is no different. Occasionally, there are one or two operators 
that cause problems for the rest of us. To minimize that, the operators 
formed a trade organization called the ``Methane Operator's Group'' or 
MOG. The purpose of the MOG is to educate and communicate with all the 
operators in the basin to improve methods and procedures. Subcommittees 
are operating at this time to address safety, environmental, community 
relations and best practices issues. As new issues arise, new 
subcommittees will be assigned to address them.
    (2) Safety. Safety has become a concern in the Gillette area due to 
the number of accidents that have occurred over the last three years. 
On a per man hour basis, the safety record is average compared to other 
industries and areas. However, one injury is too much. As a result, a 
safety committee was formed through MOG that is establishing standards 
for operators and contractors. Educational programs are underway in 
cooperation with the local fire department.
    (3) Potential Hazards. Some individuals and groups have expressed 
concern over the potential for three types of coal bed methane hazards: 
1) gas migration to the surface, 2) subsidence and 3) underground 
fires.
    The issue of gas migration was addressed by two studies done near 
the town of Gillette. The first study was funded by Pennaco, the second 
by the City of Gillette. The conclusions were similar: 1) gas migration 
through faults or old wells could occur, 2) monitoring should be done 
and 3) the solution is to produce the coal bed methane gas from under 
the city to prevent any future migration problems.
    The issue of subsidence was addressed in a report done by the 
Wyoming State Geological Survey as published in December, 2000. The 
conclusion was that ``minor aquifer compression up to + inch may occur 
in the coal beds being developed in the Gillette area. That entire 
compression, however, may not be transmitted to the surface. To date, 
no surface subsidence has been associated with other equally 
significant water withdrawals in the Gillette area.'' This one half 
inch potential subsidence is much less than the actual shift in surface 
soils documented in the Gillette area due to rain and snow fall.
    The issue of underground coal fires was addressed in report 
prepared by the Wyoming State Geological Survey, published in April 
2001. The report stated ``during the production and post-production 
phases of a coal bed methane well, conditions necessary to foster 
spontaneous combustion of coal are not present--The likelihood of 
completely dewatering a coal bed and exposing large areas of fine coal 
particles to oxygen seems extremely remote''. These two WGS reports are 
included as Exhibit 5.
Summary
    It is our belief that the appropriate rules and regulations are in 
place to control and monitor the activity of the Powder River Basin 
Coal Bed Methane Development. The operators and pipeline companies are 
working responsibly with the regulatory agencies and the landowners to 
develop the assets in an environmentally sound manner. The stories and 
reports of ``environmental sacrifices'' are exaggerated or often simply 
untrue.
    The obstacles left to work through are related to establishing 
practical policies to enforce the rules and then adequately staff and 
fund the State and Federal agencies to implement them. Especially at a 
time when the President is developing a national energy strategy, it is 
critical that the industry and its governing agencies work together to 
ensure that this critical natural resource be developed to help meet 
the energy needs of the United States, while at the same time, 
addressing the concerns and needs of local landowners. Only by working 
together can we reach the full potential coalbed methane development 
has for the State of Wyoming, its citizens and for the people of this 
nation.
                                 ______
                                 
    [Exhibits referred to in Mr. Dobkins' statement have been 
retained in the Committee's official files.]
    Mrs. Cubin. Thank you very much.
    I will start questioning with Mr. Swartz.
    You say that the current laws and regulations do not 
provide protections for surface owners or for the environment. 
But you did not elaborate whether it is Federal, state, or even 
county ordinance or what particular laws there are, because I 
know that the BLM will only approve a CBM permit on Federal-
leased minerals when all the requirements are met. And that 
includes environmental studies, water discharge permits, a 
water management plan, a water well agreement with every water 
well owner within a half a mile of the well, bonding and so on.
    So could you elaborate for me, or give me specific 
regulations that you are referring to, that don't provide 
protections to the landowners or the environment?
    Mr. Swartz. On the water discharge permits, I was never 
given a chance to protest those. When they were issued on 
private--this is private minerals and private surface up above 
me. But there is so much Federal that is going to be permitted. 
If just a little bit of private minerals can damage my creek 
like that, when they start dumping big quantities of water, if 
they insist on issuing these discharge permits from the Water 
Quality Division of the DEQ, I am going to be absolutely 
inundated with water. And as soon as it gets out of that creek 
and onto my meadows, all of my alfalfa hay is dead, and I don't 
have a viable economic unit anymore. I cannot make that ranch 
work if I have to go out and buy hay. And that ranch is paid 
for.
    But anyway, the DEQ issued these water discharge permits 
without ever consulting downstream landowners, downstream water 
rights owners. They just granted them willy-nilly to start 
with. Nothing was done to see that somebody downstream wasn't 
hurt.
    And they have taken the position that until I can prove 
damage on my meadows, I don't have a gripe.
    Mrs. Cubin. You said in your written statement that, ``As a 
matter of justice and fairness, no oil and gas development 
should occur until the surface owner has given his or her 
written consent.''
    Mr. Swartz. Yes. We did that in the Strip Mine Act, when we 
worked on the Strip Mine Act in 1977. The surface owner consent 
was required before they could come in on that. And it wouldn't 
be a bad idea to have it again, because the split estate 
problems lead to some real anger.
    Mrs. Cubin. Yes, that is absolutely true. I can see how the 
mineral estate holder would say the same thing, that maybe no 
development should take place on the surface until the mineral 
rights were produced as well. So it is kind of a Catch-22 when 
you get into a situation like that.
    Mr. Hemmer, I have worked with you for 16 years or 18 years 
and have admired your work. And I am familiar with your 
commitment to your job and to the State of Wyoming. I know that 
you listened to Mr. Swartz, to his testimony.
    Did you get a copy of his testimony so that you could look 
at the pictures?
    Mr. Hemmer. I did not, no.
    Mrs. Cubin. I would like him to get a copy of that. And 
also ask you for any of your comments in rebuttal, I assume, to 
what Mr. Swartz had to say.
    Mr. Hemmer. Mr. Swartz and I don't necessarily disagree on 
the facts. We kind of disagree on where it comes out.
    I actually have seen these pictures before. We have 
investigated Mr. Swartz's area. There are discharges coming 
down there. We have looked at the salt that he shows in the 
pictures here. Actually, there was a sample taken to the state 
geologic survey lab.
    Mrs. Cubin. Mr. Merschat, you stated that subsidence, while 
unknown due to the dewatering of coal, will be more than the 
half an inch estimated by the Wyoming Geological Survey. My 
question is, how much more and how do you justify your 
conclusion, especially when there is no recognized subsidence, 
even over the coal mines where the coal is almost completely 
dewatered before the produce it.
    Mr. Merschat. Madam Chair, I have studied subsidence by 
reading about it a lot in the literature. And I know that 
groundwater when removed causes the soils to compact. And I 
believe I mentioned in my testimony that Mexico City and other 
parts of the world, San Joaquin Basin in California, the 
surface has gone down as much as 40 feet.
    That is a significant amount of compaction. And I know 
that--
    Mrs. Cubin. Is that due just to the water removal?
    Mr.  Merschat. Yes, ma'am.
    Mrs. Cubin. Or due to the coal removal as well?
    Mr.  Merschat. No, that is just from the removal of water 
from an aquifer.
    Mrs. Cubin. Okay.
    Mr. Merschat. And the aquifer is different. It is not the 
rigid coal. It is not the crystalline coal.
    But the removal of water from an aquifer or any reservoir 
rock will cause compaction. And as I said, Mexico City, there 
are many articles about the surface going down 40 feet. The San 
Joaquin Valley of California, 25, 30, 40 feet lower, simply 
because they have watered so much, irrigation water for 
vegetables, et cetera. Saudi Arabia, across Europe.
    And the point of all that is, is in the past, whenever I 
talked about the compaction and dewatering and subsidence, the 
argument was that the coal was confined and that since the coal 
was confined, only the water would be taken out of the coal and 
it had no effect on the surface. Well, now we know that the 
coal is not totally confined, that there are shallower sands 
and shields that will be dewatered because they are in 
communication with the coal.
    Well, I will give a little bit on the argument that coal is 
crystalline and it won't compact that much. That is fine, and 
it depends on what model you want to use, you can predict how 
many inches you want the model to show.
    But if we start dewatering the sands and shales, which are 
the stratographic units above the coal, compaction that can 
occur is more serious than in the coal itself. So I base the 
fact that compaction, we don't know enough about it, we don't 
know where it is going to occur, but we do know that it has 
occurred in the past. And the past is telling us what may 
happen in the future. So we have models. I think we are just 
not recognizing it.
    Mrs. Cubin. A half an inch to 40 feet, though; how could 
the Wyoming Geological Survey be so far off? I mean, that is 
not even--
    Mr. Merschat. In my opinion, it depends on what you want 
the answer to be. If you change a few of the parameters--the 
coal, the permeability, the crystalline structure of the coal. 
I have seen models of recharge, of the water going back into 
the coal that we have been talking about, anywhere between 20 
and 100 and 30 or 140, 150 years to take the water to go back 
into the coal. I have heard 30 percent of the water goes back; 
I have heard 90 percent goes back. I have heard we are going to 
have 80,000 wells; I have heard we are going to have 136,000 
wells. I heard 14 trillion cubic feet, and I heard 25 trillion 
cubic feet.
    The answer is simple. A lot of times you can come up with 
answer with whatever numbers you want to put into the formula 
to have that answer to come up.
    Mrs. Cubin. So basically it is lack of information that you 
are afraid of, right? I mean, you are citing all of the 
different situations that you have heard about, but we really 
need a scientific model instead of just things that we have 
heard about.
    A half an inch to 40 feet difference is pretty astounding, 
960 times different. That is just pretty astounding. That is 
hard for me to see how there could be that much difference.
    You concluded in your testimony, ``The orderly development 
of coalbed methane resources is difficult if not impossible 
task.''
    Mr. Merschat. Yes, ma'am.
    Mrs. Cubin. Tell me what your recommendations are.
    Mr. Merschat. Pardon me?
    Mrs. Cubin. What your recommendations are: stop producing, 
don't--
    Mr. Merschat. As far as the entire industry or in a 
particular area, I think--am I restricted to 5 minutes?
    Mrs. Cubin. Well, answer the best you can.
    Mr. Merschat. Let's just talk about--I think what we should 
do right away, immediately, is stop pumping the water out from 
underneath Gillette. I think that that is a major mistake 
occurring. I think we ought to have monitor wells around the 
City of Gillette and make sure that we maintain a hydrostatic 
level in the coal underneath Gillette to prevent any seepage or 
any possibility of explosion or evacuation of any buildings 
because of methane buildup.
    I get into conversations, I go to meetings, and some of the 
friends that I have left--I have lost most of them in the 
Casper community because of my position on coalbed methane--but 
I believe that we should develop in a pattern where we 
shouldn't let the dollar bill drive the development. We should 
have an orderly development, which I think would be taking the 
coalbed methane out of certain areas. And with that water, 
putting that water back in the coal instead of dumping the 
water.
    I know it is impossible because nobody wants to go first, 
nobody wants to try it, but an orderly development of the 
minerals, where you would develop one area and take the water 
and put it into another area that was already developed and 
sort of hopscotch would, I think, save a lot of water.
    Mrs. Cubin. Mr. George, your testimony was pretty clear 
that there are actually very few problems out there. In 
reality, there are very few problems in terms of landowners and 
working out the situation. Would you comment on the concerns 
that have been raised by Mr. Swartz and Mr. Merschat?
    Mr. George. Yes. I have not been out to examine Mr. Swartz 
personally, his land and whatnot. I have read the same analysis 
that Mr. Hemmer put forward on the white material, that it was 
not salt as in sodium chloride, and that it was salt that would 
be difficult to get from coalbed methane water.
    I am involved in some permitting that is occurring upstream 
of Mr. Swartz, and the SAR values of that water are about 8, 
which is generally low enough to not be a problem, and that the 
permits that we are trying to issue at the moment, that are 
issued through DEQ, are total containment, so that the water is 
totally contained.
    And it is contained off-channel, so that it does not catch 
the rainwater that Mr. Swartz is worried about with his water 
rights. He does have senior water rights. And that means, if we 
were to hold that rain water or storm runoff water upstream, he 
could make a call on that through the State Engineers Office.
    And all of our permits, all of the wells and all of the 
reservoirs are permitted with the state engineer's office, who 
has jurisdiction over those calls.
    And so there isn't an attempt to take Mr. Swartz's water or 
do anything else. We are trying to do it through legal and 
proper permitting.
    As far as some of the other issues, a comment about the 
City of Gillette: There is an engineering report, and I have it 
with me. I have examined it.
    They examined all of the water wells and all of the coal 
wells around the City of Gillette and underneath the City of 
Gillette. They did not find a single fault in any of the wells.
    What they did is they statistically analyzed the dip or the 
change in the slope of the coalbeds within that, and they made 
an assumption that once the rate of slope passed a certain 
percentage, that that must be due to a fault.
    The article that they refer to in that study, in the 
American Association of Petroleum Geologists, is a study that 
was done some considerable distance north of Gillette, about 25 
miles, in which there is faulting on the surface and in which 
faulting has been seen in wells that penetrate the coal.
    And so we are going from, again, assuming that there might 
be something there. And so until we know there is something 
there, it is difficult to know how to go about analyzing that 
or how to prevent something to happen when you are not even 
aware by the current scientific evidence that faulting does 
exist.
    The subsidence issue that Mr. Merschat talks about and the 
examples that he cited are primarily sandstone aquifers in 
which huge amounts of water have been withdrawn. And there are 
cases throughout the world where we can show subsidence by 
withdrawal of oil from oil fields and water from aquifers. And 
those are very unique situations.
    This is not the same situation that occurs in the coal in 
the Gillette area. We would not have under any circumstance 
subsidence that would reach 40 feet--there is no way 
geologically you could calculate that.
    As far as the communication between the other intervals, 
the intervals, the shales and the sands that are above the 
coal, in which some people do have a water well, there are 
pairs of monitoring wells between the coal and between the 
aquifers to determine what that communication is. And in some 
places there is a moderate communication. Where the coal may be 
drawn down, water level that rises in a well may be down 200 to 
400 feet, the Bureau of Land Management EIS predicted that they 
would have about 18 feet of drawdown in some of the shallower 
aquifers. But that is a very tortuous connection. It is not a 
direct connection. And it would not increase subsidence.
    If it did, the sands are generally thinner than the coals, 
and you would be looking at fractions probably less than the 
half an inch that I cited from the literature.
    So although there may be some, again, we have that working 
model where the coalmines do take more of the water out of the 
coal than coalbed methane production does. In fact, when they 
wind up shipping it, they have something like a moisture 
content of between 25 and 30 percent. But that doesn't relate 
totally to water in pore space. But they take virtually all of 
the water out, and there isn't subsidence out in front of that.
    And you would think that would also affect those shallower 
aquifers and sands and shales. And so, if it were going to 
occur, I think we would have already seen it on Highway 59, the 
power lines, the pipelines that run up and down there. And 
there are numerous homes out in that area also.
    Mrs. Cubin. I would appreciate it if you would supply a 
copy of the study that was done on the water wells in Gillette 
for the record.
    Mr. George. I will.
    Mrs. Cubin. Thank you.
    [The report submitted for the record by Mr. George entitled 
``Subsurface Investigation of the City of Gillette Planning Area 
District'' has been retained in the Committee's official files.]
    Mr. Dobkins, one of the things that, as you know, we 
continue to hear--we heard it a lot today and I hear it a lot--
is how the split estate surface owner has very little say on 
how CBM operators treat his land. And I imagine that the 
complaints that I hear are from people that are bad operators. 
I imagine that there are some out there.
    Could you elaborate on how the methane operators group was 
formed and provide us with an indication of what activities you 
pursue and how effective those activities have been?
    Mr. Dobkins. Yes, thank you, Madam Chairman.
    The methane operators group was formed 2 years ago to 
create an educational and communicative process between 
operators and the public and regulatory agencies. It is 
comprised of all of the operators in the Powder River Basin. 
And we meet periodically. I am going to say monthly, but 
sometimes it is more frequent, sometimes less, depending on 
what the issue is at hand.
    We have Subcommittees formed within that group to study 
various issues. Right now the main issues are safety, 
environmental issues, best practices. And those are meetings 
that are going on every month.
    The intent of that is to find out what the best way is of 
developing this asset and encouraging all of us to use those 
best methods.
    Let's turn this around. Another company that doesn't think 
I am doing the best job can't force me to do a better job or do 
things the way they think it ought to be done, but they can put 
some peer pressure on me to do things differently. And that is 
part of what we do through the methane operators group. If we 
do have someone that we feel like is causing problems for the 
rest of us, it gives us a forum to go to them either privately 
or as a group and say, ``This is creating some problems for the 
rest of us, and here are some suggestions.'' So it does give us 
a peer pressure mechanism. And we have used that on a few 
occasions.
    The regulatory agencies also have that ability, whether it 
is through the Oil and Gas Commission or through the DEQ, to 
apply pressure to do things differently.
    There are always going to be those that do things 
differently, whether it is on the landowner side or the 
developer side, and that can create some problems for the rest 
of us. But it gives us a mechanism to try to fix that.
    Mrs. Cubin. As you know, the Buffalo BLM field office has 
added new staff. And I think they have implemented some 
innovative processes for processing and approving drilling 
permits.
    With your knowledge of those operations, and taking into 
consideration the planned increases in appropriations and 
staffing that will take place with the BLM, do you think that 
that is enough to meet the industry's need for processing these 
permits in the Powder River Basin?
    Mr. Dobkins. What we see on our side is that they are 
making movement toward that direction. Our hope is that they 
will have adequate people in place by the time the EIS is 
finished a year from now, so that those people are, first, 
hired; second, trained. I don't know the current situation in 
terms of whether they have hired all of the people that we 
need. But we currently see a really tough time of them keeping 
up with all of the process involved in permitting these wells.
    There is a very extensive process. It is not just looking 
at a permit. It is multiple trips to the field and working out 
all of these issues. And we lose a lot of effectiveness when 
there is a new person who comes out one time and a different 
person comes out the next time. We end up redoing things.
    And Mr. George is much more familiar than I am with that, 
because he is more involved in that piece of it.
    But in answer to your question directly, I think they are 
headed the right direction. I don't think they are there. We 
need to see them go from the ability to process a thousand 
permits a year to probably 3,000 permits a year. They are aware 
of that in the Buffalo office. There are things that they can 
do still from a technological standpoint and a streamlining 
standpoint that they can do. And we are happy to work with them 
and want to work them so that they are not redoing the same 
things and that we, as an industry, are submitting better 
permits, more complete permits, in a way that is quicker to 
use. So that is a cooperative effort that we are doing.
    But we need to stay with the increase in staff and 
technology.
    Mrs. Cubin. Could either you or Mr. George tell me some of 
the technological improvements you would like to see be made? 
What is possible out there? I have read some articles about 
what the State of Wyoming, how the Oil and Gas Conservation 
Commission processes permits, and it seems that it goes a 
little faster.
    Mr. George. So you are speaking specifically to the BLM or 
the oil and gas permitting process.
    Mrs. Cubin. Right. Would that same sort of thing work here, 
I guess is what I am asking.
    Mr. George. That is a difficult question. The BLM is bound 
by the NEPA policy. And each 32-well grouping of wells has to 
go through that NEPA analysis. They write an internal 
environmental assessment. And so that process is something that 
the State of Wyoming does not do.The implication from that 
could be that the State of Wyoming doesn't do as good a job. 
However, when you are dealing on private and you are dealing on 
state minerals, you are dealing directly with the owner of that 
surface or the lessee of that surface. And we have a couple of 
examples of ranchers today that aren't afraid to give you their 
opinion. And I think you will find that they are pretty good 
stewards. And we have not seen a big problem with how the Oil 
and Gas Commission permits wells versus how BLM permits wells. 
So they do require a lot more analysis, and they have to have a 
lot people. And these people have to be trained in wildlife, in 
cultural resources, in soils, in geology, and in a variety of 
facets that the Oil and Gas Commission doesn't go through that 
process.
    The BLM will tell you, and we have to agree, they made 
great strides. Their greatest innovation was going from a 
single well APD to 32 wells per APD or for each development. 
That helped a great deal.
    They went from processing approximately 180 permits per 
year to almost 1,200 permits per year. So it was a monumental 
increase. But the State of Wyoming approves permits at the rate 
of almost 700 per month. And so the comparison there is pretty 
difficult. And it does slow down what the operators are trying 
to do.
    I think the biggest thing that Mr. Dobkins mentioned was 
that there are at least three trips to the field. The 
information is brought in all handled in paper. Some of the 
operators are not capable of delivering the material 
electronically, but a lot of them would be. The major operators 
certainly could. And that needs to be a technology that we 
could work a little better.
    You can fill out applications and whatnot off of the Web 
site from the Oil and Gas Conservation Commission and submit 
them.
    It would also be a value if we could ever arrive at a 
production form that the State of Wyoming Department of 
Environmental Quality and the State Engineers Office and the 
Bureau of Land Management would all agree upon, instead of 
sending an individual one to all of those agencies.
    So it is the kind of thing where I have looked internally 
with the manager of the Buffalo field office of trying to find 
efficiencies. There are still some to be found. I think there 
needs to be less nitpicking excruciating detail on the process, 
because, I remind you, we do have reclamation bonds for 
everything we do, and they do have the ability to call on those 
bonds to reclaim the surface if the operator weren't willing to 
do it.
    And virtually all the operators do that at any rate, 
reclaim the process. So even if there is some surface 
disturbance, it is going to get fixed in the end. Our activity 
is a temporary activity.
    Mrs. Cubin. I would like to just give anyone an opportunity 
to make any last statement.
    Mr. Swartz, you are at a disadvantage when I ask you first 
and then they respond to what you said. If you have anything 
you would like to close with, that is fine.
    Mr. Swartz. I remember pretty well. I have been on that 
ranch 61 years. I remember pretty well 50 of it. Never has that 
creek channel ever had that white residue.
    They pick me apart and tore me apart when I said it was 
salt. That water came down that creek, the CBM water, the last 
two winters.
    The first winter it came down, it started in October 1999 
and ran through April of 2000. Then it started again January 8 
of 2001 and ran to between the 20th and 25th of May. Our 
natural water has never caused a loss of vegetation in my creek 
channel all winter long. They say I have to prove damage? I 
lost grazing in that creek channel. I never lost it during my 
entire life, my dad never lost it, my grandpa never lost it 
from natural water. But two winters of CBM water, and that is 
what my creek channel looks like.We are in an absolute drought 
time. We have had a very minimal amount of water this spring. 
The natural water that has come over the years has never, never 
hurt that creek channel and I have always not been afraid to 
kick every bit of water out on my meadows using my water 
rights. I am afraid to kick the water out of that creek now 
because of that white residue.
    Maybe it is not salt, but whatever it is, it isn't 
something that natural water caused because natural water has 
never caused since 1904, at least, when my grandpa started that 
place.
    And I wanted a chance to respond to that. Maybe I don't use 
the terminology right, but I have lived there and I am not a 
scientist, but I have lived there and I have worked there every 
day of my life basically, and I know what will work and won't, 
and that CBM water won't work. And the only reason it can be is 
from two winters of CBM water.
    Mrs. Cubin. I thank you. And I thank all the witnesses for 
the answers to the questions and their testimony, and you are 
now excused.
    And I would like to call the next panel forward: Mr. Josh 
Joswick, La Plata County Commissioner; Mr. Richard Griebling, 
director of the Colorado Oil and Gas Conservation Commission; 
Ms. Tweeti Blancett, San Juan Basin Livestock Association; Mr. 
Don Wallette, Manager of the Rocky Mountain Region of Phillips 
Petroleum; and Joanne M. Tweedy, Coalition for Responsible 
Development of Coalbed Methane.
    I would like to welcome the panel.
    Before recognizing any witnesses, I understand there is a 
very important person here. Ms. Blancett's granddaughter is 
with her today. And if she would like to move up to the table 
with her grandmother, that is fine, or she can stay where she 
is, whatever she wants to do.
    And one other thing: This side of Mr. Wallette's card says 
``Ms. Wallette,'' and I don't know what that side says.
    [Laughter.]
    But we know the difference.
    [Laughter.]
    The Chair will now recognize Mr. Josh Joswick.

    STATEMENT OF JOSH JOSWICK, LA PLATA COUNTY COMMISSIONER

    Mr. Joswick. Thank you, Madam Chair.
    You have that all taken care of, Mr. Wallette?
    [Laughter.]
    Thank you for giving me the opportunity to talk to you 
today, to address you today. I am Josh Joswick. I am a county 
commissioner from La Plata County, Colorado.
    And the reason that we are here today is to talk about the 
orderly development of coalbed methane resources from public 
lands. But what I think you also need to consider are the 
consequences of Federal energy policy on affected communities--
in this case, La Plata County--because the development on 
public lands cannot be separated or divorced from the impacts 
on private lands, on nonpublic lands.
    A little history: La Plata County is at the northern edge 
of the San Juan Basin. It is in southwestern Colorado. We have 
a little different set of circumstances than they do in 
Wyoming. Approximately 44,000 very well-governed people call La 
Plata County their home. And if you have never been there, I 
would encourage you to come down for a visit, because it is one 
of the finer places on Earth.
    In the late 1980's, coalbed methane development began in La 
Plata County because of one thing and that was the initiation 
of Federal tax credits. La Plata County was at ground zero when 
the coalbed methane experiment came out of laboratories and hit 
the real world. People didn't really know it was going to 
happen when they started doing it. And they found out in La 
Plata County.
    In La Plata County, we get roughly $5 million a year from 
coalbed methane production, and that comes as 50 percent of our 
property tax base that comes into our budget. So it is a 
significant amount.
    But in addition to that, there have been lawsuits, 
environmental degradation, people have been displaced from 
their homes because of it. If there is an upside to this, it is 
that myths such as self-regulation and the dominance of the 
mineral estate have been exposed for what they are, which are 
myths.
    La Plata County has asserted its statutory rights as a 
county to exercise its land-use authority over the development 
of the mineral estate. And La Plata County maintains that land 
use is a matter of local control, and that the surface aspects 
of coalbed methane fall within its purview. And the result of 
that, of our taking that stance, is that one of the most 
powerful lobbies in not only the state, but the nation, the oil 
and gas lobby, as well as the State of Colorado, are now pitted 
against the residents of La Plata County.
    In the late 1980's, coalbed methane came to town. And then 
in the early 1990's, people came to town. We were discovered by 
the outside world as a pretty nice place to be. Residential 
development and industrial development are by their very 
natures not very compatible, and the two have collided, 
because, first of all, the nature of the split estate, the 
surface estate and the mineral estate, and that coalbed methane 
has a greater impact on a community than does sand gas 
production.
    No one contests the fact that county government can and 
should manage and direct residential growth. We will continue 
to assert that county government does have a role to play in 
the development of the resource. And we will continue to do 
what is right for the surface owners of our county.
    To get basic about this, the surface is where people live. 
And that is where the impacts are taking place, most of them. 
And La Plata County will see to it that development is done to 
minimize the impacts on those people. And that is about as 
important as it gets, in our view, is protecting our people.
    I want you to remember the tax credit. We stand atop one of 
the largest coalbed methane reserves in the nation, and we 
realize that that resource will be extracted. What we ask is 
that the Federal Government not exacerbate our problems by 
spurring development of a resource that does not need any 
incentive to be developed. The marketplace has provided all the 
incentive that the industry needs in order to make a profit on 
this.
    There was nothing unconventional about coalbed methane back 
in 1987, and it is less unconventional now, 14 years after 
having been developed, than it was back then. We are a county 
of 44,000 people in a nation of 280 million. Do our people 
matter to the Federal Government, because they matter to me and 
my fellow commissioners, and that is why we have fought the 
fights that we fought and that is why I am here today, to do 
what I can to make sure that our people are not run over 
roughshod by Federal policy.
    What you recommend will affect us. As one of my fellow 
commissioners, Fred Klatt, has said, we will not be a national 
sacrifice area. We will not see our drinking water aquifers 
destroyed and our land torn apart by well pads. We will have a 
voice in what happens in our community.
    I am here representing the residents of La Plata County, 
and my residents do not need to endure the onslaught that will 
come with the next wave of tax credits. The residents of La 
Plata County deserve better than to be under siege because the 
Federal Government has thrown an unnecessary bone to an already 
prospering industry.
    I invite you, Madam Chair, and the rest of the Committee, 
who are not here today, but if you would convey it to them, 
take a trip down to La Plata County, come see firsthand what 
happens when the Federal Government acts without considering 
the consequences, come and talk to our people, hear their 
stories, they can tell it probably better than I can.
    And I look forward to any questions that you might have of 
me. Thank you.
    [The prepared statement of Mr. Joswick follows:]

   Statement of Josh Joswick, County Commissioner, La Plata County, 
                                Colorado

                        The State of the County:
                     The Not-So-Orderly Development
                                   of
                  Coal bed Methane in La Plata County
    La Plata County is a county of 44,000 well-governed people, 
situated in southwest Colorado, approximately 330 miles from Denver. It 
sits atop the northern boundary of the Fruitland Formation, the largest 
repository for coal bed methane in the United States. These two facts 
are the basis for La Plata County's concerns and how it became involved 
in dealing with coal bed methane development.
    Coal bed methane (cbm) drilling first began in the mid-late 1980's 
in La Plata County because of one simple act: the initiation of federal 
tax credits. At that time, coal bed methane was classified as an 
unconventional fuel. The consequences of this act would not be simple; 
in fact, the consequences of this act would be down right confusing. 
Although it was federal action that spurred development, development 
would not occur just on federal land. There were essentially three 
classes of land on which cbm development would occur: federal land, 
private land and the land on the sovereign nation of the Southern Ute 
Indian Tribe. This meant that oversight and regulation of exploration 
and drilling was split between the Bureau of Land Management (BLM) on 
federal and tribal land, and the Colorado Oil and Gas Conservation 
Commission (COGCC) on private land. Since the impacts of drilling do 
not recognize political boundaries, the bifurcation of regulatory 
authority would prove to be troubling. Also, on private land, the 
ownership of the surface and the mineral estates was quite often split; 
this meant that the surface owner might not own the minerals underlying 
his property. The ``split estate'' aspect of this project would prove 
to be one of the most complicating.
    In 1991, due mainly to this split estate, La Plata County adopted 
regulations that addressed the orderly development of oil and gas as it 
pertained to the surface estate. These regulations dealt with the land 
use aspects of development, and applied to both major facilities such 
as compressor stations, and minor facilities such as individual well. 
The subsequent lawsuit, Bowen-Edwards v. La Plata County, went to the 
Colorado Supreme Court and in 1992, La Plata County prevailed; the 
legal basis for local control of oil and gas development was 
established. The Court found that counties can exercise their land use 
powers in this area, provided that county regulations do not create an 
``operational conflict'' with COGCC regulations. To date, La Plata 
County regulations have not created an operational conflict. Roughly, 
2000 wells have been permitted under the county system, and under that 
system, not one well has been denied.
    It is important to understand that the state of Colorado is an 
industry-friendly state. Its governor is the former head of the Rocky 
Mountain Oil and Gas Association. Its COGCC is predominantly comprised 
of people with ties to the oil and gas industry. Their task is to 
promote the development of Colorado's oil and gas natural resources, 
and they take their charge very seriously and pursue it with great 
vigor.
    It is also important to understand that La Plata County is a 
resident-friendly county. In the early 1990's, around the time when cbm 
development was beginning in earnest, La Plata County was discovered by 
the outside world, and the residential boom that is still with us 
began. By their very natures, industrial and residential development 
are not compatible, and much of this residential boom took place in the 
area where the drilling was occurring. Cbm development has a much 
greater impact on a community than does the production of tight sand 
gas and it did not take long for residents to feel that impact. County 
roads, designed as farm-to-market roads, were being blown apart by 
heavy truck traffic; because of this increased traffic on gravel roads, 
air quality suffered. Drinking water aquifers were being contaminated 
and depleted. There were vegetation die-offs because of gas seeps at 
the Fruitland Formation's outcrop. Pump jacks were put into 
neighborhoods and the county had no ability to deal with something as 
basic as regulating the noise levels coming from this equipment.
    Then in 1993, it was discovered that residences in the Pine River 
Ranches were in danger because of these gas seeps. (This is explained 
more thoroughly on Page 2 in the ``Environmental and social Impacts of 
Coal Bed Methane Development La Plata County, Colorado` section of this 
report). Subsequently, five families were re-located from their homes. 
While natural gas might be considered a relatively environmentally 
friendly, clean-burning fuel on the consumption end, it is anything but 
that on the production end.
    Because of the lack of any substantive response from either the BLM 
or the COGCC, people looked to county government to help them deal with 
these problems. Cbm development was affecting their lives; it was 
affecting their homes, their property values, their security. Cbm 
development does not occur in a bubble. It occurs where people live; it 
occurs in subdivisions. Most of the COGCC and BLM regulations deal with 
technical aspects of extraction; they do not address the problems 
people were facing. La Plata County regulations do address these 
problems.
    In 1995, La Plata County began the process of revising and adding 
to our regulations. The question that was repeatedly asked by industry 
and the state was ``Why are you doing this?'' The answer was that we 
knew the next round of drilling at 160 acre spacing (down spacing) was 
inevitable, and we wanted to take what we had learned from the first 
round of drilling and adapt our regulations to fix the problems before 
they happened at 160 acre spacing. Over the next 18 months that it took 
the task force to draft regulations, the county was told repeatedly 
that this effort was unnecessary because there was nothing on the radar 
screen about down spacing. Less than six months after the regulations 
were adopted, the state of Colorado joined the Colorado Oil and Gas 
Association (COGA) in a lawsuit against La Plata County. Less than six 
months after the regulations were adopted, the first application for 
160 acre spacing was processed by the COGCC. It is that kind of 
collusion and deception that has created the atmosphere of distrust and 
skepticism that currently exists in La Plata County toward both the 
industry and the state.
    As has been stated previously, La Plata County is over 300 miles 
from Denver. While that generally works in our favor, when dealing with 
legislative matters it puts us at a disadvantage. The oil and gas 
industry has one of the strongest lobbies in the state, and is present 
on a daily basis to advance its position. Consequently, the range of 
legislative understanding of the oil and gas issue generally runs in 
the vein of: ``gas clean; gas cheap; gas good.'' The myths that any 
regulation, and especially local regulation, is detrimental to the 
industry, that local regulation will drive the industry out of the 
state, that local regulation is driving up the cost of gas and will 
result in people starving to death in the dark are propagated daily, 
and like anything, if repeated often enough, become common knowledge. 
It is a constant source of amazement to listen to good solid 
conservative legislators, advocates for personal freedom, believers 
that government should be as close to the people as possible, not 
support the idea of local control when it comes to this issue. Having 
gotten little or no support from the COGCC, people have repeatedly 
turned to the Colorado Legislature for help. Efforts to reconfigure the 
composition of the COGCC to make it less a ``puppet of the industry'', 
efforts to bring the rights of surface owners up to the same level as 
those of the mineral estate, efforts to compensate surface owners for 
damages incurred by drilling operations have all been defeated. It is 
very difficult to fight the fight when you are 300 miles away from the 
battleground.
    It is even more difficult to deal with changes that come from 
Washington. We have been fortunate in La Plata County in recent years 
in that we have cultivated a positive working relationship with the 
local BLM office. This was not always the case. In the early 1990's, 
regional BLM administrators viewed their mission to be one of getting 
the resource out of the ground. While it was our hope that the federal 
government would bring some accountability into the mix and establish 
``best practices'' standards at least on its own land, the reality of 
the situation was that BLM policy did not acknowledge that it affected 
our community, nor was there acceptance of responsibility for the 
impacts of those policies. Roughly 49% of the wells in LPC are under 
BLM oversight. Our concern is that could happen again. It is not just 
development on federal land over which BLM has jurisdiction; BLM also 
has jurisdiction on Southern Ute Tribal lands, and dealing with a 
sovereign nation can be even more problematic. For example: if the BLM 
decides, for whatever reasons, that it wants to set well spacing at one 
well per 80 acres or one well per 40 acres, technically, the BLM can 
set that spacing. While there is an Memorandum of Understanding between 
the BLM and the COGCC which says that for such things as spacing orders 
on federal or tribal land, the BLM shall go through the COGCC's 
docketing and hearing process and that it shall concur with the 
proposal of the applicant, there is nothing that mandates the BLM to 
comply with the MOU. It can pull rank over the COGCC, as it has in one 
instance involving an application by the Southern Ute Indian Tribe, and 
proceed over the objections of the COGCC. It is that ability of the 
federal government to act unilaterally and spur development that has La 
Plata County most concerned.
    If there is one thing La Plata County wants to make sure the 
members of this Committee understand, it is this: the development of 
the coal bed methane resource affects people's lives. That is something 
that Colorado's governor, the Colorado Legislature, and the Colorado 
Oil and Gas Conservation Commission have all turned a deaf ear to and 
hopefully you will not. This cannot be viewed strictly as an exercise 
in the profitable extraction of the resource. It cannot be strictly a 
matter of gas-in-place estimates, and hydraulic fracking gels, and 
production water disposal zones, and debates over which is more 
efficient---progressive cavity or traditional pump jacks. If it has 
come to that, then we as a nation are in deep trouble. What we ask is 
that the federal government not exacerbate our problems by spurring 
development of a resource that does not need any incentive to be 
developed. The market place has already provided all the incentives 
that the natural gas industry needs in order to profit. There was 
nothing unconventional about coal bed methane back in 1987, and it is 
less unconventional in 2001 after fourteen years of development than it 
was back then.
    We are a county of 44,000 in a nation of 280 million. Do our people 
matter to the federal government? They matter to me and my fellow 
commissioners. That is why we have fought the fights we have fought. 
That is why I am here today: to do what I can to make sure that our 
people are not run over roughshod by federal policy. What you will 
recommend will affect us. As my fellow commissioners have said, We will 
not be a national sacrifice area. We will not see our drinking water 
aquifers destroyed and our land torn apart by well pads. We will have a 
voice in what happens in our community.
                                 ______
                                 

    [Two attachments to Mr. Joswick's statement follow. 
Additional attachments submitted for the record by Mr. Joswick 
have been retained in the Committee's official files.]
[GRAPHIC] [TIFF OMITTED] T5015.019

[GRAPHIC] [TIFF OMITTED] T5015.020

    Mrs. Cubin. Thank you.
    The Chair now recognizes Mr. Griebling.

STATEMENT OF RICHARD GRIEBLING, DIRECTOR, COLORADO OIL AND GAS 
                   CONSERVATION COMMISSIONER

    Mr. Griebling. Thank you, Madam Chairman.
    I am the Director of the Colorado Oil and Gas Conservation 
Commission, and we are very similar to the agency that 
regulates Wyoming State oil and gas matters. But in addition to 
their responsibilities, we also have responsibility for 
groundwater in relation to oil and gas development; that is, 
groundwater quality.
    I would like to draw your attention first to the last page 
of my testimony, which is a red bar chart, and it shows coalbed 
methane production in Colorado from 1990 to 2000. And it is a 
very constant increase and a dramatic one.
    It started out at about 27 BCF per year of coalbed methane 
production in 1990 in Colorado, and grew very steadily, to the 
point now where it is over 400 BCF per year or over an order of 
magnitude increase.
    In Colorado we have two CBM-producing basins.The San Juan 
Basin is where CBM production really started in a commercial 
scale in this country, and that was in the late 1980's. In that 
basin, production is still increasing, but it has leveled off 
to a slower rate. It is increasing about 3 percent per year 
there.
    The Raton Basin, in the south central part of the state, 
started production in the mid-1990's, and it is growing very 
rapidly. We are seeing about 25 percent per year growth in 
production there.
    Most of my testimony today will focus on San Juan Basin, 
because that is where we have the most experience and that is 
where we have dealt the most with some of the issues that you 
are faced with in the Powder River Basin.
    Under the topic of methane gas and groundwater, our focus 
has been on monitoring. And I want to emphasize that there are 
numerous historic records of naturally occurring methane gas in 
both surface water and groundwater, dating back to the 1800's. 
And that was long before CBM development began, of course, and 
they are spread out through all of the San Juan Basin, in many 
parts of La Plata County.
    Under the topic of biogenic and thermogenic methane gas, we 
have been able to analyze gas samples from groundwater and from 
coalbed methane wells. And we have determined that all the 
produced coalbed methane from the Fruitland Formation can be 
categorized as thermogenic in nature. And that is different 
from most of the methane gas in groundwater in La Plata County, 
water wells, which is of biogenic origin. So the methane gas in 
those water wells was established to be from naturally 
occurring processes entirely unrelated to CBM development.
    We have implemented a Bradenhead testing program in the San 
Juan Basin, and we started that in the early 1990's. We did 
that to eliminate the potential migration of shallower 
Fruitland coalbed methane into deeper old conventional well 
bores and upward into groundwater.
    As a result of this very successful program, the potential 
for groundwater contamination from CBM development has been 
essentially eliminated in Colorado. Methane contamination from 
naturally occurring sources has been documented historically 
long before CBM development began and will continue long after 
CBM development is completed.
    We started a $1 million-plus three-M project in the San 
Juan Basin a few years ago. The three M's stand for geologic 
mapping of the Fruitland Formation outcrop, computer simulation 
modeling of the Fruitland CBM reservoir, and monitoring of the 
Fruitland Formation outcrop for potential changes in 
hydrostatic level for methane seepage.
    The three-M reservoir computer simulation model has proven 
to be a very valuable tool for us. In order to evaluate 
potential impacts of increased well density, the three-M model 
was run to calculate methane seepage at the outcrop for both 
320- and 160-acre development schemes. The results showed a 
slight reduction in outcrop methane seepage as well density was 
increased from 320 to 160 acres. So the important point here is 
to realize that additional wells actually recovered gas 
themselves that would have otherwise seeped to the outcrop, and 
it reduces hazards, from that standpoint.
    Finally, we have the three-M monitoring wells at the 
outcrop, and they will be completed in a few months. They are 
being drilled right now. And some of them are already 
completed.
    While we don't expect any adverse impacts attributable to 
CBM development, these monitoring wells would allow us to 
detect the potential impacts at an early stage. And then we 
could use the reservoir computer simulation model to evaluate 
potential mitigation alternatives.
    That is all I will comment on at this point. Thank you, 
Madam Chairman, for the opportunity to testify.
    [The prepared statement of Mr. Griebling follows:]

Statement of Rich Griebling, Director, Colorado Oil & Gas Conservation 
                               Commission

History and Status of Coalbed Methane Development in Colorado
    Coalbed Methane (CBM) was first successfully and economically 
developed in Southwest Colorado in the San Juan Basin in the late1980's 
and in South Central Colorado in the Raton Basin in the mid 1990's. 
Statewide CBM production steadily increased from 27 billion cubic feet 
per year (Bcf/Yr) in 1990 to 417 Bcf/yr in 2000 (see Figure 1).
    After over a decade of continuous growth CBM production in the 
Colorado portion of the more mature San Juan Basin grew at 3% per year 
in the year 2000. In the more rapidly developing Colorado portion of 
the Raton Basin CBM production in the year 2000 increased at 25% per 
year.
    In addition to its CBM production in the year 2000 Colorado also 
produced an additional 336 Bcf of conventional natural gas yielding a 
total of 753 Bcf of gas production in the year 2000. This is equivalent 
to a daily rate of over 2 Bcf of total gas production per day.
    Coalbed methane in the Piceance Basin of Northwest Colorado remains 
in the exploration and demonstration project phases. While vast 
quantities of CBM have been documented to be present in the Piceance 
Basin, commercial CBM production has yet to be established there. (The 
Piceance Basin also holds very substantial reserves of conventional 
natural gas in the tight sands of the Williams Fork Formation which are 
currently being actively and successfully developed. Continued access 
to federal lands in the Piceance Basin will be essential to fully 
develop the enormous potential of conventional natural gas there.)
    Since Colorado CBM production has been long established in the San 
Juan Basin, the remainder of my testimony will focus on some of the 
unique conditions existing there and the experience we have gained in 
regulating CBM development there. Ownership of the Colorado portion of 
the San Juan Basin includes Southern Ute Tribal, private, BLM, Forest 
Service, and State lands.
Methane Gas in Groundwater in the Colorado portion of the San Juan 
        Basin
    The Colorado portion of the San Juan Basin includes portions of La 
Plata and Archuleta Counties. There are numerous historic records of 
naturally occurring methane gas in both surface water and groundwater 
in these counties dating back to the 1800's, long before CBM 
development began.
    In the early and mid 1990s the Colorado Oil and Gas Conservation 
Commission (COGCC) and the Bureau of Land Management (BLM) worked 
together to acquire and analyze hundreds of water well samples from 
domestic water wells in the San Juan Basin portion of La Plata County.
Biogenic and Thermogenic Methane Gas
    Methane gas can be classified as either biogenic (i.e., originating 
from the metabolism of organic material by certain types of organisms 
known as ``methanogenic'' bacteria) or thermogenic (i.e., originating 
from the thermal ``cracking'' of organic debris as it is buried deep 
below the earth's surface by geologic processes). Coalbed methane 
produced from the Fruitland Formation in the La Plata County was 
extensively sampled and analyzed and consistently shown to be of 
thermogenic origin. Since most of the methane gas in groundwater from 
La Plata County water wells tested to be of biogenic origin, the 
methane gas in those water wells was established to be from naturally 
occurring processes entirely unrelated to CBM development. An 
approximately 15 mile wide east-west trending region of La Plata County 
that begins about 5 miles east of Durango and includes the towns of Gem 
Village and Bayfield has substantial quantities of naturally-occurring 
biogenic gas in groundwater.
    Ironically, many of the residents who regularly testify about the 
alleged impacts of coalbed methane to groundwater in La Plata County 
consistently fail to disclose that the methane in their water wells has 
been tested to be of biogenic origin. This water well methane is 
unrelated to the Fruitland Formation CBM which is of thermogenic 
origin. Their testimony sometimes also conveniently omits the fact that 
methane gas was documented to exist in the groundwater near their homes 
long before CBM development began.
    Methane in groundwater also occurs naturally from thermogenic 
sources in other portions of La Plata County. We have extensively 
sampled and analyzed methane gas from groundwater and both CBM and 
deeper conventional gas wells in an approximately 10 mile long north-
south trending region that begins about 9 miles south of Durango and 
includes the towns of Sunnyside and Bondad. This area corresponds with 
a major geologic feature along the Animas River which is expected to 
have allowed the upward migration of methane from deeper geologic 
formations over time.
    Our groundwater sampling and analysis showed that methane in water 
wells from this area occurs over a broad range of thermogenic values, 
some of which are equivalent to gas from the Fruitland Formation, some 
of which are equivalent to gas from deeper conventional natural gas 
producing formations, and finally some of which were more thermally 
mature than any produced gas and is expected to originate from deeper 
formations that have not been developed for natural gas production.
Bradenhead Testing
    While much of the methane in groundwater in the Sunnyside-Bondad 
area is probably naturally occurring, the COGCC implemented a 
``bradenhead testing program'' in the early 1990's to eliminate the 
potential migration of shallower Fruitland CBM into deeper old 
conventional wellbores and upward into groundwater. In the early years 
of implementation bradenhead testing resulted in the repair or plugging 
of over 200 older conventional wellbores in the La Plata County. 
Bradenhead tests are repeated regularly, and any wells that fail the 
test are repaired or plugged.
    In recent years we have experienced only a handful of bradenhead 
test failures each year which have been promptly addressed. The 
potential of groundwater contamination from CBM development has been 
essentially eliminated in Colorado. Methane contamination from 
naturally occurring sources has been documented historically before CBM 
development began and will continue long after CBM development is 
completed.
The ``3M'' Project
    In the late 1990's we initiated the ``3M Project'' in the Colorado 
Portion of the San Juan Basin. The 3 M's stand for: geologic Mapping of 
the Fruitland Formation outcrop; reservoir computer simulation Modeling 
of the Fruitland CBM reservoir; and Monitoring of the Fruitland 
Formation outcrop for potential changes in hydrostatic level or methane 
seepage. Geologic mapping of the outcrop and reservoir computer 
modeling have been completed. Some of the monitoring wells have been 
completed and the remainder are expected to be completed by yearend.
The ``3M'' Reservoir Computer Simulation Model
    The ``3M'' reservoir computer simulation model covers the Fruitland 
Formation over the entire Colorado portion of the San Juan Basin and is 
the largest of its kind. The model established a good history match 
with CBM production and reservoir pressure to date and has been used to 
predict the effects of future CBM development. The ``3M'' model has 
demonstrated that a small portion of the San Juan Basin known as the 
``Fairway'' near the eastern edge of the Colorado portion of the basin 
can be adequately developed at one well per 320 acres. It also showed 
that at least one well per 160 acres was needed to adequately develop 
CBM in the remainder of the Colorado portion of the San Juan Basin.
    In order to evaluate potential impacts of increased well density, 
the ``3M'' model was run to calculate methane seepage at the outcrop 
for both 320 and 160 acre well density. The results showed a slight 
reduction in outcrop methane seepage as well density was increased to 
one well per 160 acres. The ``3M'' model can be used to evaluate a 
broad range of future alternatives and potential impacts.
The ``3M'' Outcrop Monitoring Wells
    The ``3M'' outcrop monitoring wells allow monitoring of both 
hydrostatic pressure and methane seepage. These wells will be monitored 
for several years after they are completed later this year. While we 
don't expect any adverse impacts attributable to CBM development, these 
monitoring wells would allow potential impacts to be detected at an 
early stage. The reservoir computer simulation model described above 
could then be used to evaluate potential mitigation alternatives.
                                 ______
                                 

    [Figure 1 follows:]
    [GRAPHIC] [TIFF OMITTED] T5015.021
    
    Mrs. Cubin. Thank you.
    I have a vote right now. I will go over there as quickly as 
I can and come back as quickly as I can. So if anybody has an 
emergency or an urge, you have time for that. But I will be 
right back. So if you would just stay here, that would be 
great.[Recess.]
    Mrs. Cubin. The Committee will please come to order.
    The Chair will now recognize Ms. Blancett for 5 minutes of 
testimony.

STATEMENT OF TRECIAFAYE ``TWEETI'' W. BLANCETT, SAN JUAN BASIN 
                     LIVESTOCK ASSOCIATION

    Ms. Blancett. Thank you, Madam Chairman. I am Treciafaye 
Blancett. I represent an eighth generation farming and ranching 
family in the Animas Valley of San Juan County, New Mexico. We 
have been there for over 100 years, and we farmed the same 
grazing land for all that period of time.
    We definitely believe in multiuse. We definitely believe 
that oil and gas should have the right to exercise their 
leasehold rights.
    What we are having a little bit of problem with is the 
surface damage that is occurring on both the grazing permit, 
which is Federal, the state permits, and the private permits. 
You go from one to the other, and you can't tell a bit of 
difference.
    Also, I would add that we hold our minerals. We hold our 
surface rights, and we have received these tax credits. And 
probably my family for the next 10 years will not be paying 
Federal income tax as a result of it.
    The industry in San Juan County has developed to the point 
where they can have the gas in the line in a 2-week period from 
the time they drill. I mean, we have this down to a science. We 
started it.
    We have better than 25,000 wells in San Juan County. That 
is 25,000 wells. On my 75-section permit, Madam Chairman, I 
have 1,500-plus. And they are getting ready to double that.
    Now, that doesn't sound like a lot if you think every well 
site is 220 feet by 295. Trust me, they aren't.
    That isn't a lot of wells if you forget to add in the space 
that is taken for a road that is supposed to be 14 feet and 
always exceeds that.
    Those aren't a lot of wells, if you eliminate the 
pipelines. There has to be at least one pipeline for every well 
to deliver the gas. In our county, there is two for most of the 
coalbed methane wells because we are delivering the water to be 
processed.
    Madam Chairman, I don't know of a single well that is 
producing water in San Juan County that is potable. The BLM 
will not even allow us to use this water on the roads.
    I will tell you, when we started out 10 years ago, our 
water wasn't that bad; 25,000 wells later, it isn't good.
    Industry in our area runs the show. BLM is totally out of 
compliance on all the surface regulations. They have not 
reclaimed. They have not reseeded. They have not maintained the 
roads. They have not maintained the pipelines. That is not just 
on Federal; that is on private and that is on state.
    I know those issues do not concern you, but 75 sections, 68 
of those 75 sections, Madam Chairman, are Federal. BLM on 
Tuesday, along with representatives, staff people from Senator 
Domenici's office, Senator Bingaman's office, and 
Representative Udall's office, were on our ranch. Every one of 
them said, ``This is a travesty.''
    I don't need to say anymore. Come and see it. You have in 
your bulletin an open invitation. I will put you up at my 
hotel. I would like to show you what we are doing.
    Trust me, you do not want happening in the rest of the 
Rocky Mountain States what happened in northwestern New Mexico. 
Thank you.
    [The prepared statement of Ms. Blancett follows:]
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    Mrs. Cubin. Thank you.
    The Chair now recognizes Mr. Wallette.

  STATEMENT OF DON WALLETTE, MANAGER, ROCKY MOUNTAIN REGION, 
                       PHILLIPS PETROLEUM

    Mr. Wallette. Thank you, Madam Chairman. And thank you for 
the opportunity to come before you today to present the views 
of Phillips Petroleum Company with regard to the safe and 
orderly development of coalbed methane from this country's 
Federal lands and primarily from the Rocky Mountain region.
    My name is Don Wallette, and I am the Rocky Mountain Region 
Manager of the Americas Division of Phillips Petroleum Company 
located in Denver, Colorado. I have with me today our 
Environment, Health, and Safety Manager from the Rocky Mountain 
Region, Mr. Steve d'Albuquerque.
    In the interest of time, I will condense the biography of 
Phillips' interest in coalbed methane that is contained within 
the written testimony. Suffice it say that we do have a long 
history of CBM development and are currently active in most of 
the major producing basins in the U.S. and are involved in new 
CBM exploratory efforts, both domestically and abroad.
    Coalbed methane is playing major role in meeting the 
domestic natural gas needs of this country and has the 
potential to play an even greater role. Phillips appreciates 
the work of this Committee and the House in your recent passage 
of H.R. 4. This proposal provides a good first step in 
addressing America's long-term energy needs.
    According to a recently released report on the national 
energy policy, the shortfall between projected energy supply 
and demand in the year 2020 is expected to be nearly 50 
percent. Electrical power generation is a key focus of this 
demand increase.
    In this same time period, natural gas is projected to 
constitute about 90 percent of all added electrical generation, 
tripling today's gas contribution. To meet the year 2020 
demand, total natural gas wells drilled annually will need 
double the 1999 level, requiring staggering investments by 
producers.
    The contribution that coalbed methane will play in this 
supply and demand scenario will largely be determined by the 
future regulatory impediments it may face and by access related 
issues. Coalbed methane stands ready to be a major contributor, 
if it is allowed to do so.
    Madam Chair, I appreciate the invitation to appear before 
the Committee to discuss the policy initiatives needed to 
achieve adequate CBM production from Federal lands and 
impediments to timely development of CBM.
    Today I will highlight three areas of constraint to our 
development of CBM in the Rocky Mountain region: access, 
environmental considerations, and infrastructure development.
    The first issue concerns timely access to Federal acreage 
under which much of the coal resource lies. The availability of 
government lands to oil and gas producers is critical to meet 
the nation's growing needs for abundant clean, efficient 
natural gas. Since 1983, access to Federal lands in the Western 
United States has declined by 60 percent.
    In addition to lease withdrawals and often onerously 
restrictive lease stipulations, access to Federal lands is 
often significantly delayed while NEPA requirements are being 
completed. These delays often manifest themselves in drilling 
moratoria. An example of this type of moratoria on new drilling 
exists today in the Powder River Basin. We are concerned and 
impacted by continuing delays in completion of the Powder River 
Basin EIS.
    The development of the coalbed methane in the Powder River 
Basin has been hampered by a drilling moratorium since early 
2000 and will continue to be delayed until such time as the EIS 
is completed. Meanwhile, we wait for the results of the EIS, 
which will determine whether and how the industry will proceed 
with the some 50,000 CBM wells expected to be required to fully 
tap the gas resource.
    Some of the expected impacts of lengthy Powder River Basin 
EIS delays would include continued drainage of Federal acres by 
nonfederal activity, reduction of Wyoming State revenues from 
Federal royalties, underutilized capacity by pipeline companies 
that are investing millions of dollars to meet the anticipated 
demand, and lost jobs throughout the service industry due to 
lack of activity.
    Phillips believes that the country has benefited greatly 
from the NEPA process and will continue to as we move forward. 
As with most processes, it could stand improvement. We believe 
the consistency and predictability with respect to timing are 
two areas where focused attention is required.
    Phillips works closely with the BLM field offices on a 
daily basis. We know them well and have a high regard for their 
professional competence and their commitment. Our sense is that 
the projected growth of natural gas activity in the West, 
particularly with respect to CBM, will soon outpace BLM's 
ability to respond in a timely manner.
    Obviously, cycle times are critical in a capital-intensive 
industry such as ours. It is interesting to consider some 
statistics that would seem to validate the concerns that 
industry has related to the level of BLM staffing. From the 
2002 budget justification from the BLM, we find that key 
workload metrics, such as drilling permits, process, and 
drainage cases reviewed are increasing at the rates of 50 to 90 
percent, whereas staffing planned to increase a mere 4.7 
percent. We support increased funding for the BLM.
    The second area that I would like to address involves 
environmental considerations associated with CBM. In my 
testimony, I refer to two issues: hydraulic fracturing, which 
is not the focus of the Powder River, it is not an issue in the 
Powder River; the second is water. And I would like to move 
quickly to the second issue.
    There has been much testimony and much discussion already 
with regard to water in the Powder River Basin today. There is 
probably little that I could add technically that would be 
insightful. I will say this, though, Phillips has benefited by 
being involved in many diverse CBM developments from Alabama to 
China. In the Rockies, we produce in the San Juan, the Uinta, 
and the Powder River Basin.
    Our experiences lead us to certain conclusions as to the 
similarities and differences of CBM developments. The one 
common element is that coal must be de-pressured through 
groundwater production and a plan must be developed to manage 
that water.
    There is no unique singular management strategy applicable 
across all basins or sometimes even within the same basin, such 
as in the Powder.
    I would like to move quickly to the last point, which 
relates to markets and infrastructure, and just to make the 
point that in the West, we do have world-class natural 
resources, energy resources, with vast amounts of proven and 
potential reserves, that the natural gas produced in the Powder 
River Basin commands the lowest price of any gas produced in 
the nation today, with significant discounts to NYMEX-type 
pricing. The reason for this is not due to the quality of the 
gas; it is due to bottlenecks in the transportation system 
which exist.
    In Utah, our gas production has been curtailed 
significantly this summer, while we wait on needed expansions. 
It will do little good to resolve the issues associated with 
the development of CBM unless the impediments associated with 
the transportation of gas are simultaneously addressed.
    Because my time is more than short, I won't review our 
recommendations, but point out that they are cited in the 
written testimony.
    In conclusion, Madam Chair, Phillips is excited about the 
potential the gas from coalbed methane has to offer American 
consumers. As our nation's reliance on clean natural gas 
resources continues to grow, coalbed methane can and will play 
a major role. That role can be enhanced greatly if access and 
other development impediments are adequately addressed.
    Again, I thank you and the Committee for this opportunity 
to present Phillips' views on this important resource and would 
like to extend an open offer to tour Phillips' CBM facilities. 
We are proud of our operations and welcome the opportunity to 
show you and the Committee and staff what we are doing. Thank 
you.
    [The prepared statement of Mr. Wallette follows:]

   Statement of Don E. Wallette, Jr., Rocky Mountain Region Manager, 
             Americas Division, Phillips Petroleum Company

    Madam Chairwoman and Members of the Subcommittee, thank you for the 
opportunity to come before you today to present the views of Phillips 
Petroleum Company with regard to the safe and orderly development of 
Coalbed Methane from this country's federal lands, and primarily in the 
Rocky Mountain Region.
    My name is Don Wallette, Jr. I am Rocky Mountain Region Manager of 
the Americas Division of Phillips Petroleum Company located in Denver, 
Colorado. Phillips Petroleum is a major multinational integrated oil 
company headquartered in Bartlesville, Oklahoma, with just over 13,000 
employees worldwide. Phillips is involved in every facet of the oil and 
gas business, including exploration, production, refining, marketing, 
and transportation as well as research and development. We are also 
major players in the chemicals and gas gathering and processing 
businesses through joint ventures with Chevron and Duke Energy, 
respectively.
    In the Rocky Mountain Region of the United States, Phillips has a 
major operating unit which focuses on the exploration and production of 
non-conventional natural gas resources with a primary focus on coalbed 
methane (CBM) and other tight formation gas resources. We have been 
actively engaged in the development of coalbed methane since 1989. 
Today, we produce CBM from over 1660 wells in the San Juan, Uinta, 
Black Warrior and Powder River basins in New Mexico, Utah, Alabama, and 
Wyoming, respectively, and also have active ongoing CBM exploration in 
unexplored areas in Wyoming, Colorado and China. Phillips has close to 
one-half billion dollars invested in CBM activities in the West. 
Phillips has a significant interest in federal lands in the American 
West that contain much of the country's known reserves of natural gas 
and oil.
    When I joined Phillips many years ago, one of the key issues being 
debated in Washington was the need for a national energy policy. 
Phillips applauds the Committee and the House in your recent passage of 
H.R. 4. This proposal provides a good first step in addressing 
America's long-term energy needs.
    Coalbed methane is playing a major role in meeting the domestic 
natural gas needs of this Country and has the potential to play an even 
greater role. According to the recently released report on a National 
Energy Policy, the shortfall between projected energy supply and demand 
in the year 2020 is expected to be nearly 50 percent. Electrical power 
generation is a key focus of this demand increase. Currently, about 16 
percent of domestic electrical generation comes from natural gas. 
Between now and 2020, natural gas is projected to constitute about 90 
percent of all added electrical generation, tripling today's gas 
contribution. This supply/demand scenario was also confirmed by a 
recent study on natural gas by the National Petroleum Council (NPC). An 
update of that study recently revealed that natural gas reserves in the 
United States are not being added at the pace anticipated in last 
year's original study. To meet 2020 demand, total natural gas wells 
drilled annually will need to double the 1999 level, requiring 
staggering investments of some $658 billion by producers in the 1999-
2015 timeframe.
    The National Energy Policy Report and many other industry experts 
point out that gas from non-conventional sources is the fastest growing 
resource base and is expected to make a major contribution to America's 
growing energy needs. While I cannot verify that it is true, many 
industry experts believe that non-conventional gas resources, primarily 
coalbed methane, has moved into the California electric generation 
market to the degree that it has been a key factor in helping to lessen 
that State's anticipated summer supply/demand problems.
    The report also correctly points out that the contribution of this 
resource will, largely, be determined by the future regulatory 
impediments it may face and by access related issues. Regardless, 
natural gas is clean, safe, efficient and reliable and is destined to 
play a vital role in meeting our Nation's energy needs. Coalbed methane 
stands ready to be a major contributor, if allowed to do so. We commend 
the work of this subcommittee in acknowledging the potential for 
increased production from CBM and its efforts to recognize those areas 
that may hinder the development of this resource.
Impediments to CBM Development
    Madam Chair, I appreciate the invitation to appear before the 
Committee today to discuss the policy initiatives needed to achieve 
adequate CBM production from federal lands and impediments to timely 
development of CBM resources in the United States. The first and 
foremost policy initiative necessary to achieve adequate CBM production 
from federal lands is, simply put, timely access to federal lands under 
which much of the coal resource lies.
Access to Federal Lands
    The availability of government lands to oil and gas producers is 
critical to meet the nation's growing needs for abundant, clean, 
efficient natural gas. America has vast natural gas reserves to help it 
meet its future requirements (1,200 to 1,600 trillion cubic feet (Tcf) 
including resources in coal seams and tight sands formations). But we 
must have greater access to government lands to produce this energy in 
an environmentally responsible manner.
    Many government lands that should be open for leasing are in fact, 
off limits, or severely restricted from responsible development. Since 
1983, access to federal lands in the western United States--where an 
estimated 67 percent of conventional onshore oil reserves and 40 
percent of our natural gas reserves are located--has declined by 60 
percent. According to DOE's Energy Information Administration, an 
estimated 40 percent or 137 Tcf of potential natural gas resource in 
the Rockies is either closed to exploration (29 Tcf) or is open to 
development under restrictive provisions (108 Tcf).
    Congress has directed the Bureau of Land Management (BLM) and the 
Forest Service (USFS) to allocate non-wilderness lands for resource 
use, identify areas that are available for oil and gas leasing and 
identify important wildlife habitat areas, and inventory wilderness 
candidate lands among other uses.
    Each agency has completed land use plans for the lands they 
administer, including lands that are candidates for wilderness 
designation. Yet, many lands not selected for wilderness designation 
are managed as ``wilderness study areas.'' In effect, these lands 
become de facto wilderness and are removed from all mineral entry for 
the unforeseen future. Further, these agencies often dictate lease 
stipulations as conditions of approval for exploration and production. 
Stipulations are intended to protect resource values in conjunction 
with proposed projects, such as exploratory wells, yet many conditions 
required, such as ``no surface occupancy,'' essentially preclude 
exploration and production from occurring. Often excessively 
restrictive surface use stipulations, most often associated with 
wildlife, are imposed on exploration prospects or within existing 
producing fields, causing improper management of resources, unnecessary 
drilling delays and lengthy seasonal closures. Phillips pays lease 
rentals for 12 months of access but often we are only granted access 
for one to three months of the year because of lease stipulations or no 
surface occupancy restrictions. Both agencies are required to manage 
lands they administer under the congressionally mandated concept of 
multiple use. Yet, BLM and USFS discretionary actions have withdrawn 
federal lands from leasing and long delayed other leasing decisions and 
project permitting.
    Access to federal lands is also often significantly delayed while 
National Environmental Policy Act (NEPA) requirements and associated 
documentation is being completed. These delays often manifest 
themselves in drilling moratoria. An example of this type of moratoria 
on new drilling exists today in the Powder River Basin. We are gravely 
concerned and significantly impacted by continuing delays in completion 
of the Powder River Basin CBM Environmental Impact Statement (EIS). The 
development of the coalbed methane in the Powder River Basin has been 
hampered by a drilling moratorium since early 2000, and will continue 
to be delayed until such time as the EIS is completed.
    In an effort to protect public resources which are being drained by 
non-Federal CBM wells, the BLM completed a Drainage Environmental 
Assessment (EA) in March of this year that authorized the drilling of 
up to 2,500 wells on public lands in the Powder River Basin. To date 
about one-third of the drainage permits have been issued and the 
remaining balance most likely will be permitted by year-end.
    Meanwhile we wait for the results of the EIS, which will determine 
whether and how industry will proceed with the 50,000 CBM wells 
required to fully tap the gas resource. The BLM's 2002 Budget 
Justification document stated ``A draft EIS will be submitted for 
public review by July 1, 2001 and a final EIS and Record of Decision 
(ROD) will be issued by March 1, 2002.'' Here we are fourteen months 
later and the draft document has still not been issued and according to 
the BLM, a ROD is not expected until late July 2002, at the earliest.
    The expected impacts of lengthy Powder River Basin EIS delays 
include:
     LPublic resources will continue to be drained by non-
Federal activity;
     LWyoming state revenues from federal royalties will be 
negatively impacted;
     LProducer volumes will not materialize as expected, 
detrimentally impacting returns;
     LPipeline transmission companies, who are investing tens 
of millions of dollars to expand capacity, will realize under-utilized 
capacity; and
     LThe service industry, which has worked hard to respond to 
the needs of the industry, will have to adjust to the anticipated lull 
in activity and will likely be unable to retain employment at current 
levels.
    What are the government agencies doing in response to these 
unexpected delays in order to mitigate the potential impacts? Are they 
crashing resources on critical path activities? Are they considering 
``bridging'' solutions, such as a supplemental EA for another one or 
two thousand wells? Are they making the tough management decisions that 
are necessary to run a major project according to plan? I don't have 
the answers to these questions, but perhaps they should be asked.
Streamlined Permitting, Budget & Staffing
    In the same study referenced earlier by the National Petroleum 
Council (NPC), it points out that vast reserves of natural gas in the 
form of coal bed methane (CBM) lie beneath federal lands, especially in 
Wyoming and Montana. However, BLM's inability to grant drilling permits 
or complete their required National Environmental Policy Act (NEPA) 
evaluations in a timely manner has greatly hindered CBM development, 
and may contribute to further shortfalls in necessary future gas 
production. These NEPA delays are often compounded by the fact that 
many agency land and resource plans are outdated and in need of 
revision.
    Regional oil and gas permitting program inconsistencies exist 
between BLM offices throughout the West. Varying, inconsistent, and 
subjective approaches to NEPA analysis, or levels thereof 
(environmental assessment verses environmental impact statement), often 
cause confusion as well as inefficient use of time, personnel and 
funding. Redundant permitting efforts often exist between the state oil 
& gas permitting agency and the BLM. The State of Utah has recognized 
this redundancy and has worked well with the Utah BLM to streamline the 
process.
    Phillips works closely with the BLM field offices on a daily basis. 
We know them well and have a high regard for their professional 
competence and their commitment. Through our day-to-day interaction 
with the BLM we can also draw conclusions about the scope of their 
activities and associated workloads. Our sense is that the growth of 
natural gas activity in the West, particularly with respect to CBM, has 
far outpaced the BLM's ability to respond in a timely manner. 
Obviously, cycle times are critical in a capital-intensive industry 
such as ours.
    It is interesting to consider some statistics that would seem to 
validate the concerns that industry has related to the lack of 
appropriate BLM staffing. From the 2002 Budget Justification from the 
BLM, we find that activity in the Oil & Gas Management sector has 
increased significantly and is projected to continue. For example, in 
2002, the BLM expects:
     LAPDs (application for permits to drill) processed are 
expected to increase 58% from 2001.
     LReservoir Drainage Cases are expected to increase 92% 
from 2000.
    Meanwhile staffing, which should be activity-related, is expected 
to increase 4.7% from 2000 to 2002 - a total of 32 jobs focused on one 
BLM field office in Buffalo, Wyoming.
    It is difficult to reconcile the nation's needs for energy, the 
billions of dollars and thousands of people the industry is devoting to 
developing the needed resources, with the government's response of 
adding 32 jobs. This seems to be either a lack of understanding of the 
scope of work or a disregard for the impact that governmental agencies 
have by continually residing on the critical path.
    In terms of overall agency performance, opportunities exist to 
streamline the permitting process, improve inter-office and inter-
agency coordination, and consistency. In some instances we recognize 
that individual BLM offices may be understaffed or not appropriately 
funded, and therefore, are simply unable to efficiently process 
permitting requests. We, therefore, support increased funding for BLM 
to adequately address these critical permitting backlogs and NEPA 
documentation efforts.
Environmental Considerations
    Two separate environmental issues regarding the production of 
coalbed methane are currently the topics of discussion at the state and 
federal levels. The first pertains to the process of hydraulic 
fracturing of coalbed methane formations to stimulate production, and 
its potential effect on underground drinking water sources. The second 
issue relates to the water issues associated with producing coalbed 
methane in the Powder River Basin.
    The Eleventh Circuit Court ruled in 1977, in Leaf v EPA, that the 
process of hydraulic fracturing to stimulate certain types of gas 
wells, constituted ``underground injection'' under the Safe Drinking 
Water Act (SDWA). This ruling apparently is based on a technical 
reading of the statute as the court did not identify any environmental 
concerns with the practice. The effect of this ruling was to require an 
onerous state program requiring the certification that fluids being 
injected meet SDWA standards for drinking water. There is currently a 
challenge to this ruling that seeks national regulation of the 
practice. States currently oversee this practice and have in place a 
superb regulatory process to protect state aquifers. The protection of 
our drinking water sources is Phillips highest priority when producing 
coalbed methane. We believe that the practice of hydraulic fracturing 
certain gas wells to stimulate production is an environmentally sound 
practice, as analysis demonstrates. Any review of the process as it 
relates to coalbed methane production should ensure that the states 
continue to have the lead role of protecting and ensuring the quality 
of their aquifers.
Access to Markets--Infrastructure Development
    I'd like to speak for a moment about infrastructure--pipes and 
wires. We have, in the West, a world-class resource base with vast 
amounts of proven and potential reserves. In America, we are blessed 
with world-class markets--strong, efficient and growing. Unfortunately, 
large distances typically separate the two. At times it seems that our 
infrastructure is far closer to third-world rather than world-class.
    The impediment to development of CBM resources in the West is, and 
will be, profitability. Today, natural gas produced in the Powder River 
Basin commands the lowest price of any gas produced in the nation, with 
discounts to NYMEX approaching $1/mmbtu. The reason for this is not 
because the quality of the gas is inferior, but because there are 
significant bottlenecks in the transportation system creating gas-on-
gas competition. In Utah, our gas production has been curtailed 
significantly while we wait on needed expansions to be completed in the 
transmission system. It will do little good to resolve the issues 
associated with development of CBM unless the impediments associated 
with marketability are simultaneously addressed.
    Infrastructure deficiencies not only impede commerce, but also 
introduce high levels of volatility in the price of the commodity. The 
impacts of this are obvious, and except, perhaps, for certain commodity 
traders and speculators, are un-welcomed. It leaves consumers angry, 
capital providers insecure, regulators and politicians perplexed and 
concerned, and producers frustrated that our products are unable to be 
delivered.
    Our concerns are not limited to impediments affecting gas 
transmission. As large consumers of power and suppliers of fuel to 
electrical generators, we are also affected by impediments to efficient 
electricity generation and transmission.
Recommendations
    Among the many constraints that confront the timely development of 
CBM resources, we believe an attempt to address the following areas 
would greatly enhance our ability to bring these resources to market.
     LIncreased funding for BLM to address critical permitting 
backlogs, NEPA documentation efforts, and to revise agency land and 
resource plans.
     LModernize and streamline permitting process and 
incorporate a 45-day Application for Permit To Drill, Right-of-Way, and 
expressions of interest to lease processing requirement.
     LComplete a focused reevaluation of the effectiveness and 
present application of common wildlife lease stipulations and 
associated timing windows.
     LConsider the Utah permitting approach in other western 
states.
     LExpedite wilderness inventories, with an emphasis on 
Wilderness Study areas, and monument designation reviews with 
consideration and protection of prior valid existing rights.
    We applaud this Committee's passage of legislation enacted in the 
last Congress directing the Departments of the Interior and Energy and 
the Forest Service to conduct an inventory of oil and gas resources on 
federal lands and the restrictions that prevent access to these 
critical resources. We urge Congress to fully fund this inventory in 
the fiscal year 2002 appropriations process so that adequate 
information will be available on resource availability.
    In conclusion, Madam Chair and Members of the Committee, Phillips 
is excited about the potential that gas from coalbed methane has to 
offer America's consumers. As our nation's reliance on clean, natural 
gas resources continues to grow, coalbed methane can and will play a 
major role. That role can be enhanced greatly if access and other 
development impediments are adequately addressed.
    Again, I thank the Committee for this opportunity to present 
Phillips'' views on this important resource.
                                 ______
                                 
    Mrs. Cubin. Thank you very much.
    The Chair now recognizes Joanne Tweedy from the Coalition 
for Responsible Development of Coalbed Methane. Joanne is from 
Gillette, Wyoming, and not only is she here on behalf of 
coalbed methane responsible development, but she contributes a 
lot to the State of Wyoming and to her community as a volunteer 
and is just an all-around good citizen. Joanne, welcome.

   STATEMENT OF JOANNE M. TWEEDY, COALITION FOR RESPONSIBLE 
                 DEVELOPMENT OF COALBED METHANE

    Ms. Tweedy. Thank you, Madam Chairman, members of the 
Committee.
    It is an honor for me to address this Committee concerning 
one of our nation's most promising new sources of clean, 
environmentally friendly energy, coalbed methane. My name is 
Joanne Tweedy. I am a Wyoming rancher, I am a mineral owner, 
and I am the Chair of the Coalition for Responsible Development 
of Coalbed Methane.
    I am not here to advocate for or against methane 
development on public lands, but I do want to offer you my 
perspective on coalbed methane development as a private land 
and mineral owner.
    First, let me stress that I am a working rancher. Our ranch 
is located in the heart of Wyoming's Powder River Basin and it 
is medium-sized by Wyoming standards. It has been home to my 
family since my uncle homesteaded it in the early 1900's. And 
it is our pride and our joy.
    Of all the groups involved in this development, those of us 
who actually make our living by the land are the most acutely 
aware that coalbed methane must not be allowed to destroy the 
grass, the croplands, the water, the wildlife, and, yes, the 
beauty of Wyoming.
    From an economic standpoint, coalbed methane has been a 
godsend to much of the Wyoming ranching community. Like many 
other ranchers, my husband and I long ago began subsidizing our 
ranching operation with outside jobs. At many times, that had 
not barely been enough.
    Coalbed methane has changed all of that for many of the 
ranchers in my coalition. Surface-use payments royalty on gas 
production has restored these ranches to self-sufficiency. In 
our neighborhood alone, two ranches have avoided economic 
extinction thanks to coalbed methane development. I doubt we 
would have to look very far to find others.
    Water discharge has become the lightening rod issue of 
coalbed methane development, so let me speak to that question. 
I won't pretend to speak for everyone, however, most of the 125 
members of our coalition are land and mineral owners, and I can 
speak for them. We see coalbed methane as a boom and benefit to 
ranching. Let me use our ranch just as an example.
    Before coalbed methane development, our ranch had three 
pastures, which could only be used in the spring and the early 
summer before the water reservoirs went dry. Over the past 4 
years, coalbed methane operators have built new reservoirs on 
our ranch, they have cleaned and enlarged others. They have 
worked with us to hold as much of the methane water runoff as 
possible in these reservoirs. We are capturing nearly all of 
our water, and we are filling our reservoirs and keeping them 
full. We now have reservoir water in every pasture and we can 
use every pasture to its fullest advantage.
    I believe that the Wyoming Game and Fish Department will 
agree with me that water availability and dispersion are the 
controlling factors in wildlife production, just as they are 
for livestock. Obviously, increased water resources benefits 
waterfowl. Some ranches stock their methane water reservoirs 
with fish, deer and upland game birds, to name a few species 
that benefit from increased water supply.
    One more point: My perspective on energy is based on more 
than just coalbed methane. Twenty-five years ago, 
environmentalist opponents of coal development spun out 
prophecies of devastation and ruin resulting from surface 
coalmines in the Powder River Basin. Come to Wyoming and judge 
the outcome of that scenario for yourself. You will see a coal 
industry which produces almost one-third of the United States' 
coal yet regularly wins awards for its outstanding land 
reclamation and its treatment of the environment. Today, we 
hear many of the same ``sky is falling'' prophesies about 
methane development. I respect the sincerely held views of my 
friends and neighbors who disagree with me on the coalbed 
methane water issue. I respect solid scientific evidence and 
rational discussion of the water issue. Above all, I respect 
policy decisions which are based on good science and good 
intentions. But I do not respect attempts by special interest 
groups to distort the coalbed methane water issue and to 
exploit it for political advantage.
    I hope that this Committee will make its decisions about 
coalbed methane development based on fact and not on political 
rhetoric. Coalbed methane offers us one way to secure our 
nation's energy future. We in Wyoming and especially our 
Department of Environmental Quality prove every day that we can 
develop our energy resources without destroying either our 
environment or our way of life.
    As a state and as a nation, we must develop coalbed methane 
responsibly, with care for our people and for our environment, 
but without political exploitation.
    Thank you, Madam Chairman.
    [The prepared statement of Ms. Tweedy follows:]
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    Mrs. Cubin. Thank you, Joanne.
    One observation I have made since I have been in Congress, 
and particularly on this Committee, before I came to Congress, 
I toured the Powder River Basin open-pit coal mines. And truly, 
you can't tell where the reclamation begins and the virgin land 
ends. There is wildlife there, there is water, there is grass. 
It is beautiful. You can't tell the difference.
    And then I saw some mines in Kentucky and they were older 
mines. We have an oil field in midwest Wyoming that was 
developed 100 years ago. And by today's standards, that field 
never could be developed like it is.
    And so the point that I want to make is that I understand 
and accept the problem that you are dealing with in the San 
Juan Basin and think that Wyoming is probably the beneficiary 
of that problem, because we don't have to make the same 
mistakes, we don't have to follow the same path, just as we 
didn't with our coal development and just as we didn't with our 
other natural gas and oil development. That is the advantage of 
being the youngster on the block, I guess.
    Because I have been up and I have looked at the fields in 
Wyoming, of the coalbed methane development. And it is hard to 
see big problems, although there definitely are some.
    Mr. Joswick, I wanted to ask you, you made a statement that 
Federal policy runs over the citizens of La Plata County. When 
you are talking about that the U.S. Government has thrown an 
unnecessary bone to an industry that really doesn't need it, 
are you talking about the Section 29 tax credit?
    Mr. Joswick. Yes, I was.
    Mrs. Cubin. Okay. I just wanted to make sure that everyone 
understood that that tax credit applies only to wells that were 
spudded by December 31, 1995. So if they weren't spudded by 
then, that tax credit does not apply. So I don't think that 
that is something that we will be dealing with in Wyoming. And 
I guess I wanted to ask you, is your recommendation, then, 
that--or all of you; Ms. Blancett as well--that we repeal that 
tax credit. I don't exactly understand what the problem is with 
the Federal Government.
    Mr. Joswick. Okay, just to back up a little bit.
    Mrs. Cubin. Sure.
    Mr. Joswick. What I did say that I wanted to make sure that 
our people were not run over roughshod by Federal policy. I 
didn't say that they were being run over.
    Mrs. Cubin. Okay, good.
    Mr. Joswick. Okay.
    In terms of the tax credits, I guess I need some more 
information about that. I had been told--and once again, I 
guess it is rumor--that they had been extended on those wells 
that were already in place, the wells you referenced, as well 
as they were going to be put on new production wells as well. 
And that was what I was referring to, was that I think that 
there would be no need to put them on new wells.
    Now, if that's not happening, so much the better.
    Mrs. Cubin. Thank you.
    And we need to look at--
    Mr. Joswick. But I do have a question: So you are saying 
that is not going to be on new wells?
    Mrs. Cubin. Well, the law that is in place right now, the 
Section 29 tax credits, apply only to wells that were spudded 
by December 31, 1995. Now, in H.R. 4, the President's energy 
bill, I need to look and see if there are some tax credits for 
coalbed methane in there. I am not sure as I sit here right 
now, so I will check into that.
    Mr. Joswick. Okay, if you would, because that is the 
information that I had.
    Mrs. Cubin. Okay.
    La Plata County's efforts in dealing with surface owner 
issues involving oil and gas development on split estate lands 
is to be commended, I think. There has also been discussion of 
a surface owner's bill of rights to deal with the split estate 
lands. It appears that one of the concerns is that real estate 
is sold and the people who buy the real estate don't realize 
that they are not buying the mineral estate at the same time. 
Is that part of the problem?
    Mr. Joswick. That is part of the problem.
    Mrs. Cubin. Then, again, trying to sift out between 
Federal, state, county jurisdiction, it seems to me that that 
should be either a state issue or a county issue, that there 
should be a requirement of a seller to disclose that or a buyer 
to ask.
    Mr. Joswick. Yes, I believe the State Legislature addressed 
that, and there are now requirements legislatively. They went 
ahead and addressed just what you are talking about.
    Mrs. Cubin. Okay. You talked about the Federal regulations 
on CBM development being different than La Plata County 
regulations and state regulations. Could you tell me how they 
are different? Or what you would like this Committee to do, 
other than what we already talked about with the tax credit, if 
in fact that is the case? How can we help?
    Mr.  Joswick. Okay, I don't know if I said that, if I 
referenced that, as far as BLM and state. The biggest problem 
that we have now--and not to jump on Rich, because he and I 
have gone round and round and round about this for years, so we 
are old nemeses here--is with the state and the conflict 
between the state's perception of what we can regulate and our 
perception what we can regulate. So, you know, it is more of a 
conflict there. I think the biggest problem that we have had 
historically--I have been involved in this thing before I 
became a county commissioner, so it kind of goes back. I know a 
lot more about it than I ever thought I would care to know 
about it. And when we first started getting involved in this, 
the BLM was very reticent to get involved with anything that 
had to do with seeing what would happen because of doing EISs, 
seeing what would happen because of coalbed methane 
development. And that changed. We have a fairly decent working 
relationship with the BLM. Now that has changed over the years.
    Mrs. Cubin. Right.
    Mr. Joswick. We have worked to cultivate that, and I think 
that we have done a pretty good job of that. You have to 
understand that in our county, we actually have three 
jurisdictions. We have Federal jurisdiction. Then, of course, 
we might have some, not very much, Federal mineral under 
private land. We have private land development. And then we 
also have development on the Southern Ute Indian Tribe 
Reservation.
    So it gets pretty maze-like, in terms of who is responsible 
for what. What we have tried to do is work with the BLM. And 
they have gotten better about doing best practice standards and 
being responsive to the needs of the community and to the 
concerns of the community.
    So I don't think I was really trying to jump on the BLM 
about too much. I don't know if I answered your question or 
not.
    Mrs. Cubin. Yes, you did. Thinking about the surface 
owners' bill of rights that you referred to, the mineral owner 
has rights, too. And the mineral estate is just as valuable to 
that owner as the surface estate is to that owner. So how do 
you balance that out?
    Mr. Joswick. Well, through local regulation; how about 
that? No, I was being facetious.
    One of the things that has been promoted from the beginning 
is the dominance of the mineral estate. What we have tried to 
work at is equating the estates. And there was a case in 
Colorado where the Colorado Supreme Court said that neither is 
dominant and neither is subservient to the other, that they are 
equal and they must respect the rights of the other in 
developing. And that, I think, goes a long way toward doing 
what you are saying.
    All we have been saying all along is please respect the 
fact that you are probably, because of the nature of the split 
estate, going on somebody's property who really isn't going to 
benefit from your being there. Now, you can work out a surface-
owners agreement, whatever it is that you can work out with 
these people, but you can't just go on there and say, ``Get out 
of the way. Here we come. Tough.'' You have to work with them.
    Mrs. Cubin. Although it seems to me that they should have 
known when they brought the property and access to private 
lands. And stranded land in Wyoming is a big deal.
    But it is the purchaser's responsibility to know whether or 
not there is access to the land, to know whether or not the 
mineral estate is theirs, and what the rules are going in. It 
seems like you have to have a date and time, and everything 
that goes before has to follow the law before. Then if you want 
to change that, okay, for the future, so that everybody goes 
under the same set of rules.
    But it seems like you shouldn't be changing the rules when 
the game is half over.
    Mr. Joswick. Yes, that was kind of our perspective, too. 
Are you familiar with spacing?
    Mrs. Cubin. Yes.
    Mr. Joswick. In La Plata County, spacing began at 320-acre 
spacing, so it was one well per 320. And that was the rule that 
most people bought their property under. Well, the rules 
changed. And then they went down to 160. And I will guarantee 
you that I was even told that that was not going to happen.
    So you are right, rules shouldn't change, but they do. And 
you are also right that people do have a responsibility to find 
out what exactly is going to happen, but it is a changing 
field. And that is where we get some of the conflicts, is that, 
you know, perhaps it would go to 80 or perhaps it would go to 
40-acre spacing. And that is an unknown. You know, the industry 
will say, ``No, it is not going to.'' The state will say, ``No, 
it is not going to.'' And then it happens.
    So, you know, how do you tell someone that? If you are a 
realtor, the best you can do, probably, would go on, if you are 
showing a piece of property, would be to go there and say, 
``Currently, you do not have development. Does that potential 
exist? Yes, it does.''
    I will guarantee you, most realtors aren't going to be 
saying that. And that is very difficult for us to monitor--for 
anybody, the state, the feds, or us--to monitor what a realtor 
is telling a client.
    Mrs. Cubin. How about on the title? How about on the title 
insurance? Couldn't that be mentioned on the title insurance?
    Mr. Joswick. That the possibility for development exists?
    Mrs. Cubin. Yes. It seems like the state could require that 
through the insurance commission.
    Mr. Joswick. Yes. I don't know. Did they put that in the 
new legislation? Yes, okay.
    Mrs. Cubin. Mr. Griebling, thank you for sharing your 
experience in dealing with the many aspects of CBM development 
in Colorado. You guys seem like you are about 5 years ahead of 
us, like I said.
    I understand that the Colorado Oil and Gas Conservation 
Commission responded to concerns over the affect oil and gas 
well spacing has on surface issues by instituting public 
interest meetings. I would think, then, that you have met the 
needs of local governments, landowners, and special interests 
groups, since, seemingly, they all had the opportunity to 
participate. Do you feel that that process has been successful?
    Mr. Griebling. I think it has been very beneficial to get 
local input. And we have actually held the local forums that 
you referenced a number of times in the past. But more 
recently, we are trying to get our commission hearings held in 
the areas where the concerns are.
    And as an example, this September hearing is going to be 
held in the San Juan Basin, in the neighboring county to La 
Plata County, because one of the matters that the commission is 
considering is spacing that area of the San Jan Basin at one 
well per 160. And when we get our commissioners down there and 
have them hear the comments directly, it is going to be very 
beneficial and the people appreciate that.
    Mrs. Cubin. Because of lower drilling costs in the Powder 
River Basin, it appears that some operators are small 
companies, which might not have been able to finance drilling 
deep wells in the Green River Basin, for example. Others like 
Phillips are quite large. Does your state regulate small 
companies differently than it does the large companies?
    Mr. Griebling. We regulate them all the same, but we do 
have a diverse makeup of small and large companies. We have 
about 600 operating companies in Colorado.
    Mrs. Cubin. In your opinion, is the CBM industry under-
regulated and uncontrolled, as some people claim it is?
    Mr. Griebling. In Colorado, it is very appropriately 
regulated. And we often are basically compared to other states. 
And a recent study by a contractor that was funded by the state 
found that we are pretty strict in regulation in relation to 
other states, I guess.
    Mrs. Cubin. Do you have any idea on the relationship to 
Wyoming?
    Mr. Griebling. I don't specifically. I know that we are 
comparable in many ways. I work closely with my counterpart up 
there, and we have good communication. But I am not aware of 
any major differences in the level of regulation between the 
two states.
    Mrs. Cubin. Thank you.
    Mr. Wallette, you mentioned in your testimony that you 
think that the BLM needs more people to process the APDs in the 
Powder River Basin. I asked Al Pearson, when we were in Wyoming 
over the August break, that question, do you need more people, 
what can we do speed it up? Either approve them or deny them, 
but get them out the window.
    He said that he didn't think they needed more people. I 
take it that you disagree with that?
    Mr. Wallette. Well, I can understand how it could be a 
source of frustration and a Committee such as this to have 
industry sitting here saying that BLM or Department or Interior 
needs more people, yet the people within the department say 
that, ``No, we are fine. We can administrate this.''
    I was just really pointing to some of the workload activity 
statistics that were including within their own budget 
submission. And there seemed be a disconnect between their 
anticipation of growth in drilling permits and drainage cases 
to be reviewed and their staffing level increases, contrasting 
50 to 90 percent increases with a 5 percent or 4.7 percent 
increase in staffing.
    I think I share the same concerns that Mr. Dobkins 
expressed, that today we are concerned about the delays in the 
permitting, the backlog of permitting, the continuing delays on 
NEPA-type documents and the EIS. I think that is evidence as 
well.
    But we are more concerned about when the next EIS is 
actually approved and the next wave of permits are being 
requested to be processed. Are they thinking ahead to the 2002, 
mid-2002 time period? I think that is the issue.
    Mrs. Cubin. Can they get the people trained so that they 
will be able to make decisions at that time, instead of hiring 
them at that time and then having to train them and the whole 
process, I guess.
    Mr. Wallette. I would hope that they are anticipating that 
and are taking action. I don't see the evidence reflected in 
the budget submissions, though. And that is a little bit of a 
concern.
    Mrs. Cubin. And that is what I thought, too.
    You heard the witness for the BLM say that he thought all 
of those 3,500 that are pending now would be done in 2 years. 
Is that time reasonable or does that cause too much expense? 
What is your opinion about the 2 years?
    Mr. Wallette. Well, I am a little surprised by the 2-year 
estimate. I mean, we are talking about around 12 months from 
now having another approved EIS. And I would anticipate that 
there would be an awful lot of permits that would be issued as 
a result of that, not to mention the 3,500 or whatever permits 
that are backlogged today. So, yes, I would like to see them 
issued in a more timely manner. We are impacted by that.
    Mrs. Cubin. You stated in your testimony that the Utah BLM 
has been working with the state to eliminate the redundancies 
and streamline the permitting process. For instance, in 
Wyoming, the state approved over 7,6000 APDs for CBM, of which 
almost 1,900, or 25 percent, were on Federal land, during this 
last year. Doesn't it seem logical that if the BLM accepted the 
approvals done by the state, that it would free up staff so 
that they could devote their time and efforts to processing and 
approval of surface aspects of drilling permits and monitoring 
and compliance and things like that?
    Mr. Wallette. Madam Chairman, I do believe that there are 
areas of synergy, although I haven't really looked at the 
processes, state and Federal, and compared them. We do know 
that there are redundancies. And I think that is what we were 
trying to express, relative to how Utah is handling the 
permits.They don't typically ask for duplicated material. They 
say, ``Well, if the BLM is asking for this, then that is fine. 
Just send us that.'' I mean, that is the general approach.
    But we do recognize that the BLM in Wyoming is taking steps 
to streamline their processes. They share the same interest, as 
we do in this regard.
    I believe they are planning on moving toward an e-
permitting type process, general permits. So we are not 
disappointed with that, but we do think that there are areas 
for improvement.
    Mrs. Cubin. Are they moving toward electronic filing at 
all?
    Mr. Wallette. I believe that is what I heard at a meeting 
in Casper last week.
    Mrs. Cubin. Good.
    Ms. Blancett, you made a statement that I didn't 
understand, that BLM was not in compliance with regulations for 
the environment, and I just don't understand what you meant by 
that. Would you elaborate? I think you said that the operators 
weren't in compliance and that nobody was in compliance on your 
land.
    Ms. Blancett. It is not just my permit. It is that every 
permit in San Juan County is out of compliance.
    The surface reclamation has not been done on the permit, as 
the APD calls for. And BLM has not enforced compliance, and 
they will admit that they haven't enforced compliance.
    I would love to have you come look at your Phillips wells 
on my permit. I have Phillips wells on both deeded land and on 
Federal land and on state land, along with Burlington and Amoco 
and 17 other producers. They are not in compliance. They have 
not handled their reclamation like they should have.
    That is wonderful they have that, and we had it 10 years 
ago. We were not out of compliance 10 years ago, before we have 
25,000 wells, Madam Chairman.
    What I am saying is that when things move too fast, the 
surface gets ignored, watershed gets ignored, wildlife gets 
ignored, and forage is diminished. And that is what has 
happened in northwestern New Mexico.
    But don't take my word for it. Come and look at it. I truly 
mean that. You cannot understand the problem by me telling you. 
You can't understand the problems by looking at pictures. 
Please just come and see it, because we don't want this in the 
rest of the Rocky Mountain states.
    Mrs. Cubin. And I appreciate that, because we certainly 
don't want what you have described in the rest of the Rocky 
Mountain states. And how to prevent that and still be able to 
produce the resources is the challenge, and I think it can be 
done.
    Ms. Blancett. I do, too. If industry and BLM and the 
private landowner will work together, it can be done. There is 
no doubt in my mind.
    Mrs. Cubin. I know that there has to be bonds before the 
permits are issued. Have any of the bonds been called to 
remediate the damage?
    Ms. Blancett. Until last month in the Farmington district, 
there had been no penalties issued in 5 years.
    Mrs. Cubin. That is no Federal, no state.
    Ms. Blancett. No nothing. We have instances of salt spills 
that are 5 years old that everybody was informed about. The 
producer was informed about it. The pipeline company was 
informed about it. The BLM was informed about it. The reason I 
said the producer and the pipeline company is because they are 
one in the same people on this.
    And I am not singling out anybody in the industry. Please 
understand, they are all marching to the same drum. And it is 
not surface reclamation, and it is not care of the environment, 
because they are extracting the minerals as their leasehold 
rights give them the right to do.And BLM is not enforcing their 
own regulations. And they will admit that they aren't. The oil 
and gas companies will tell you, ``We are out of compliance.'' 
But we are moving way too fast to take care of it.
    But, again, come and look.
    Mrs. Cubin. I don't even know that it is appropriate for 
this Committee to try to step in a situation like that, but 
certainly I think that it is appropriate that the congressman, 
Mr. Udall, who is on this Committee, it is appropriate for him 
to approach the BLM and demand and explanation of why that has 
not been required. I just cannot imagine that people would 
stand by and allow this to go on and on and on.
    And so I will offer my help. Do you have any suggestions 
for this Committee to help you, how we should proceed. 
Obviously you said not too fast, and I think we all agree with 
that.
    Ms. Blancett. Madam Chairman, it isn't what I can suggest 
to you, probably, because I am one person, and I am 
representing, you know, 1.5 million acres today, because we 
don't have a BLM person with us from our area. But I can assure 
you that if that BLM person was sitting here, and if I had my 
Phillips counterpart, or if I had my Burlington counterpart 
sitting over here, they would tell you that we have some 
problems, and that we haven't been working on them in a good, 
neighborly, stewardship manner.
    Now, maybe it is Representative Udall's place to work on 
it. Maybe it is Senator Bingaman's and Senator Domenici's. I 
will tell you, they have sent people. They have done it. Things 
are not happening.
    But that is not the reason I was trying to talk to you. I 
am trying to tell you that when coalbed methane came to San 
Juan County, that was when we saw this tremendous surface 
damage across the board, because things moved so fast.
    Surface reclamation wasn't done. Our science in New Mexico 
wasn't in play.
    So don't make those same mistakes as you move into the 
West. Again, we are not opposed to drilling. We think it is 
wonderful. I want America to stand on its own and get away from 
the Mideast. I think everybody in this room agrees with that. 
But the environment is so important to families that use it as 
a sustainable resource. The farming and ranching will be there 
many years, we hope, after the other resources are depleted.
    If it is not, then the wildlife, the fauna and the forage, 
the beauty of northwestern New Mexico will be there, as well as 
Wyoming and Montana and the Dakotas and southeastern Colorado 
and northeastern New Mexico, because we are getting ready to 
open fields there, too.
    So, please, just don't make the mistakes we have made in 
northwestern New Mexico. That is all I am asking.
    Mrs. Cubin. I appreciate that very much. And I appreciate 
your passion about it. Eighth generation on the land, it shows 
and it shows well. Thank you.
    Joanne Tweedy, I am delighted to hear about your positive 
experiences. And I know that a lot of ranches actually have 
been saved. With low prices for cattle and all of the problems 
that the agriculture industry has been facing, I know that 
coalbed methane has saved a lot of private ranches.
    Let me ask, do you have any split estate lands on your 
Federal oil and gas lease operation?
    Ms. Tweedy. Yes, Madam Chairman. Very little, though. We do 
have some. Probably 16 percent of the total of our ranch would 
be a split estate. We have been into coalbed methane for 
approximate 4 years, and we just haven't experienced any of the 
negative, other than dust.
    I mean, you know, when you have a development and it is 
dry--we have had a drought--we have extreme dust. And if you 
want to call that a negative. I mean, calves can get dust 
pneumonia, that sort of thing.
    We have not seen the lack of reclamation. We have pipelines 
that are not reclaimed due to the fact that it is so dry that 
if you put in the grasses into the pipeline to reseed them, 
which the oil companies hire to be done, it wouldn't come up 
anyway. We have asked that they not do it. Why spend the money 
to do it when it has just been so dry, it won't come up. We are 
going to try to do, again, some this fall, providing we have 
rain. Once again, they can spend millions of dollars reclaiming 
that, and if there is no rainfall, I don't know how it is going 
to come up.
    We have not experienced the lack of reclamation around the 
wells. In my testimony, you see a picture of our ranch with the 
small well. We don't have very much land that has not been 
reclaimed there. In other words, where they worked on the 
methane well, they didn't take out four acres and park their 
trucks and et cetera, et cetera.
    Now, sure, there has been a time when someone has parked 
their truck on our land, versus the one acre they were supposed 
to have. And yes, it is dry. Yes, it probably hurt the grass. 
Yes, it is development. And, yes, we were paid for it. And I 
believe that we need to work with the companies. And we have 
tried desperately to do that.
    Now, I am accused that, of course, if we weren't getting 
compensation, that I wouldn't feel that way. Maybe not. But the 
truth is the truth. And our split estate, they have done just 
as well. Maybe we didn't have the clout with the split estate 
that we have with the private mineral estate, where we can 
say--and it was in our lease.But we have surface-use 
agreements. They were done by attorneys that knew how to set up 
a surface use. We worked with them. And we go back to that. 
They don't do what they are supposed to, we say, ``Okay, we 
have a problem here. Let's sit down and talk about it.''
    Mrs. Cubin. Would you have any advice for the PRBC members 
in dealing with coalbed methane operators, so that they could 
get a better outcome? You heard a rancher that you know, Mr. 
Swartz. Do you have any advice for how some of the people who 
feel they are not getting treated fairly by the companies?
    Because what I hear from most all of the people there, it 
is more like your testimony, that they are fair, that they are 
compensating us for damages and for occupancy and so on.
    Ms. Tweedy. Madam Chairman, I have not seen Mr. Swartz's 
ranch and the condition that he is explaining. I grew up in the 
same town that Ed did, and I know that, what he has talked 
about, I have not seen, so I can't comment. I do not have a 
degree in hydrology. I don't know what the problem is.
    As for who he could go to, I think probably the state 
people, and I think they have tried to help. I don't know what 
the bottom line is.
    I know in some of the smaller 40-acre plots around town, 
that is a problem. They are getting no compensation. It is a 
half mile away, the well is producing dust maybe, they would 
like to have a new road built and have the oil company build 
them a road for maybe $1 million, and the wells are producing 
maybe $.5 million total. It may not be any good.
    And so what their wants are from the oil company is kind of 
like an entitlement. And I don't work for an oil company, but I 
know that is the way they must feel. If an oil company came on 
my place and I said, ``Would you please, Mr. Exxon or Mr. 
Phillips Petroleum, give me $10,000 per well surface damage,'' 
I would smile all the way to the bank. I suspect that they 
would never drill on my place, because it wouldn't be economic.
    There is only so much you can do. I don't know what is 
wrong with the water up there. We have no problem with our 
water. Our cattle are drinking it. Our water is as good as the 
well that produces in our house. There is nothing wrong with 
it. There is no white. There is no salt.
    Now, there may be. Where it has dried up and the water is 
gone, you can go in to the bottom of the creek bed and there is 
still no white, so it is a different kind of water, I guess. I 
don't know. It is clean, coal-purified water. That is what it 
is, Madam Chairman.
    Mrs. Cubin. Another complaint I have heard is about 
compressor noise. And you are right, those complaints have come 
from people who have smaller parcels of land. But I can really 
sympathize with that.
    Would any of you like to talk about the noise and what you 
do to mitigate it? How do you deal with people who can't take 
the noise? They thought they were buying a place out in the 
country and 100 yards from them is a compressor that makes 
noise 24 hrs a day.
    Mr. Wallette. Madam Chair, I guess I am the only operator 
represented at this panel, so perhaps I should try to address 
it. But I am going to have difficulty because I believe--and 
the rest of the panelists can correct me if I am wrong--but I 
believe most of the noise complaints usually revolve around gas 
gathering and compression type sites, usually fairly large 
booster stations with multiple engines in place.
    Typically, at least in the Powder River Basin, you don't 
have the pump jacks and pumping units, typically, so you don't 
have very much noise at all around the producing lease. So I 
don't believe that we had any gas gatherers present today, so I 
don't think that I can really address what is being done from 
their aspect.
    Mr. Blancett. Madam Chairman, we have the royalties on 
wells that producing--they are on the 320 spacing, each one of 
them. And they all have huge compressors on them. And what the 
company has done--Amoco is one company; the other two belong to 
Burlington--is they have come in with huge panels to diffuse 
the noise either up, straight up, or they send it down an area 
that is not populated. In some areas, that just isn't 
acceptable.
    Then in Colorado we have a wonderful, wonderful example of 
where they have taken the compressor unit and completely put it 
underground, so there is no noise, and they are irrigating on 
top of it. It is a wonderful example of how this problem can be 
solved if the landowner, the regulatory agency, and industry 
work together.
    But we have, I would say, probably with very few 
exceptions, every well in our area, which is a boom area for 
producing this gas, has a compressor on it. It is very noisy.
    Mrs. Cubin. Thank you.
    The Chair now recognizes the ranking member, Mr. Kind.
    Mr. Kind. Thank you.
    Mr. Joswick, did you have something you wanted to add?
    Mr. Joswick. If I could, in terms of the noise. Thank you.
    I guess that has been one of the major frustrations that we 
have had in La Plata County, because--and this is one of the 
areas where Rich and I have gone round and round about, who 
exactly is it that deals with noise regulations. The county 
decided that we did need to have a regulation, a local 
regulation, county reg, that dealt with noise because we deal 
with noise in other areas, whether it is a gravel pit or any 
other industrial sort of application.
    What we found was, we were precluded by state law from 
dealing with that as it pertains to the oil and gas industry, 
so it is up to the state to set those noise levels and to deal 
with that.
    What we have found, however, in La Plata County is that the 
gas industry is well aware that people are watching them, and 
that they are being observed as to how good an operator they 
are. And in those cases, like Tweedy said, if there is problem, 
we have gotten so that the operators are probably a little more 
amenable to dealing with us, in terms of voluntarily putting up 
sound baffles, sound walls, redirecting the noise somewhere. 
But it is not anything that we can regulate.
    And that is a frustration, because it is one of those areas 
where we feel that that is well within our rights to do that, 
because we do it for other operations, but we can't do it for 
the oil and gas. So that is what our situation is with that.
    Mrs. Cubin. Thank you.
    Mr. Kind. Thank you, Madam Chair.
    I apologize for not being here in person. But due to the 
advent of modern technology, we have the luxury of having the 
testimony piped into our offices, so I have been able to catch 
a substantial portion of it, and I appreciate your testimony 
today.
    And it has been a fascinating hearing, Madam Chair. It is 
amazing to listen the testimony and hear such completely 
contradictory or diametrically opposed views of what even the 
facts are in the area, which gets a little bit confusing for 
us. And we are trying to weed through it and sift through it.
    But it is my understanding that there are some groups in 
Wyoming that have leveled allegations that Wyoming's Division 
of Water Quality hasn't been reviewing data or scientific 
information in regards to the permit-granting process and the 
discharge of water. Does anyone have information about that, or 
an opinion in regards to the substance of those allegations of 
what Wyoming's--I think it is the Division of Water Quality is 
doing and what they are reviewing?
    Mrs. Cubin. Mr. Kind, Dennis Hemmer with the Wyoming DEQ is 
here, if he wouldn't mind, and if you would like him to 
respond, that would be all right with the Chair.
    Mr. Kind. That would be wonderful. He might be able to step 
up to the microphone.
    Sir, if you can identify yourself for the record?
    Mr. Hemmer. Pardon me?
    Mr. Kind. If you could just identify yourself briefly for 
the record.
    Mr. Hemmer. Yes, I am Dennis Hemmer. I am the director of 
the Wyoming Department of Environmental Quality.
    You are correct that there has been a complaint filed with 
the Environmental Protection Agency regarding our issuance of 
the permits. I don't think that that complaint gets into issues 
that affect the scientific validity of the permit. Most of the 
portions of that complaint follow procedure and are complaints 
on procedure. I believe that we have been procedurally issuing 
those correctly. However, there is an independent evaluation by 
the Environmental Protection Agency. We will see what comes out 
of that.
    Mr. Kind. I believe also one of the allegations is that the 
department is arbitrarily lowering the water quality standards 
that have been used. Is that part of the basis of the 
complaint?
    Mr. Hemmer. Sir, I don't believe that there is a basis of 
the complaint that we have arbitrarily lowered any standards. 
We do not set standards arbitrarily. We have an administrative 
procedure process much like Federal agencies and most state 
agencies have, and water quality standards are only changed 
after notice and after public comment and after deliberation.
    In our case, actually the agency doesn't set the standard. 
The standards are set by an independent board, by the 
Environmental Quality Council.
    We did, when coalbed methane began, review some of our 
standards. We had some standards in terms of some of the 
receiving streams that were protections that exceeded the 
ambient quality of the exceeding streams. We did adjust those 
standards so that they were more inline with the quality of the 
receiving streams. That was done through an administrative 
procedure process. It was done through full rule-making and 
full public comment.
    Mr. Kind. And that, I assume, is what the groups are 
identifying as the alleged lowering of the standards, the 
change in standards you just described?
    Mr. Hemmer. I believe that if they are suggesting that 
there was a lowering, it would have been through that. It was a 
full public process. It was actually done by our citizen 
council.
    Mr. Kind. Thank you for your testimony.
    Does anyone else have anything to add, on the panel?
    Let me just ask, in regards to some of the confusion after 
today's hearing, in regards to the commensurate level of 
mineral extraction rights versus private landowners' rights, is 
that a perceived problem right now with a lot of the 
landowners, that they are not on a level playing field when it 
comes to mineral extraction rights on their land?
    Mr. Joswick, do you want to answer?
    Mr. Joswick. I don't think that is a perceived problem; I 
think it is a real problem, because the playing field is not 
level. We have been working at leveling it, and it has gotten 
better. It is not there yet.
    One of the biggest problems, I think, is that, say, if I 
own the surface and you own the minerals and you come and you 
want to extract it, you know, we can try to work out some sort 
of surface agreement. The problem is that the hammer that you 
have is that you can always say, ``Look, I am just going to 
post a bond with Rich and go ahead and drill. Now let's come to 
an agreement.''
    Well, you know, that is perhaps not the negotiating 
position for me to be in.
    Mr. Kind. Right.
    Mr. Joswick. So I think that that is a very real concern 
that people have, that the playing field is not level. And once 
that well is there, I realize the some people have said that it 
is a temporary use. Well, temporary use being 40 or 50 years, 
20 years, whatever it is. It is a long time. It is going to be 
there for a while.
    Mr. Kind. So how does it get fixed, at what level?
    Mr. Joswick. I am sorry; say again?
    Mr. Kind. How does that get fixed?
    Mr. Joswick. Well, we have tried to deal with that 
legislatively and haven't had much luck with that, you know, 
once again, within the statehouse of Colorado, to try to do 
that.
    What we have done locally is we have adopted what we call a 
surface owner discretion regulation, and we have had to redo 
this, but what we are trying to do is say, if they are coming 
on my place, that I should have the option within a certain set 
of guidelines to determine where the well goes.
    And then we work on mitigations, sound mitigation, if we 
can; visual mitigations; and in conjunction with neighbors as 
well. This is a neighborhood thing. It is not just you want to 
go on my place, because what we are having now is the wells 
going into subdivisions, so it is not just wells being putting 
on larger acreages.
    Mr. Kind. Yes, go ahead.
    Mr. Griebling. Sir, I would like to add a little bit to 
that. In La Plata County, where Commissioner Joswick is from, 
the largest operator is BP Amoco. And they drill most wells in 
that county, and they have a good way of dealing with the issue 
that you raised, and that is that they try, almost at any cost, 
to negotiate a surface-use agreement, between them as the 
operator and the surface owner. And I think about 95 percent of 
the wells they have permitted with us, they permitted with 
agreements in place.
    And we strongly encourage that. We see that as the best way 
to resolve those issues.
    Mr. Kind. Anyone else on the panel have anything to add?
    Mr. Wallette?
    Mr. Wallette. Well, I can't speak for the San Juan Basin, 
because that is outside my area of responsibility, but as far 
as the Powder River Basin, we have reached surface-use 
agreements for every well that we drilled up there. Now, we 
recognize that we won't always be able to do that. We will run 
into unreasonable situations, but it is certainly the large 
exception to the rule of condemning, I guess, and going forward 
without an agreement with the surface owner.
    Mr. Kind. Ms. Blancett?
    Ms. Blancett. Yes, Madam Chairman, Mr. Kind. The thing that 
I would say about surface agreements is that they are wonderful 
on paper. The problem is that when you have a problem and you 
ask them to fix it, and it is part of the surface agreement, 
and they don't fix it, you go to court. You don't have any 
other alternatives, if the industry is not wanting to be a good 
neighbor.
    And that is what is happening in San Juan Valley, because 
things, again, are moving too fast.
    Mr. Kind. How realistic of an option is that, though, for 
the private landowners? I would imagine that is a very 
expensive litigation process they have to go through, with the 
discovery that has to take place and everything else.
    Ms. Blancett. Again, I would speak from a personal thing on 
private land, it is a big problem. But where it is even 
greater, since 96 percent of the land of San Juan County is 
Federal, that it is the surface agreements that they have with 
the Federal Government are out of compliance, because there are 
certain things they are supposed to do according their APDs 
that are not being done.
    And BLM, again, is not enforcing.
    Mr. Kind. All right.
    Anyone else? Anything to add?
    Great. Well, thank you again. Those are all the questions I 
have, Madam Chairman.
    Mrs. Cubin. Thank you.
    One point that I do want to finish with is that, yes, I 
agree, we don't want to go too fast and endanger the 
environment. But as I pointed out earlier, to the State of 
Wyoming alone, $750,000 a month is being lost to the state 
treasury because of drainage from Federal minerals. And I think 
that speaks to the need to do the permitting, to do it 
correctly, to have the people in place to monitor for 
compliance, and so on.
    But this will go on and on. We will keep losing Federal 
dollars and we will keep losing state dollars until we get the 
permits processed, because state lands and private lands are 
producing and they are draining the Federal mineral.
    And I think that point can't be made too seriously.
    The hearing record will be held open for 10 days for any 
additional information that you would to submit and for the 
purpose of answering questions that any members of the 
Committee may send to you in writing.
    I do thank you very much for your testimony. I thank you 
for traveling all the way here, and the answers that you 
provided us with.
    Mr. Kind. We should also mention, for the record, that a 
couple of our colleagues who serve on the Resources Committee, 
both Tom and Mark Udall, have a very strong interest in this, 
obviously affecting many of their constituents in both Colorado 
and New Mexico. I have noticed that some of their staff have 
been sitting in throughout the course of the hearing today, and 
they, too, want to be very engaged in regards to the 
deliberations of this Committee. And I just wanted to recognize 
the work and the involvement that they have shown on this very 
important issue.
    So thank you again. Thank you all again. I yield back.
    Mrs. Cubin. The Subcommittee on Energy and Mineral 
Resources is now adjourned.
    [Whereupon, at 3:13 p.m., the Subcommittee was adjourned.]

    [Additional material submitted for the record follows:]

    1. A letter submitted for the record by Richard E. Fraley, 
Vice President, San Juan Division, Burlington Resources, 
Farmington, New Mexico;
    2. A letter submitted for the record by Robert M. 
Gallagher, President, New Mexico Oil and Gas Association; and
    3. A statement submitted for the record by Dr. Rollin D. 
Sparrowe, President, Wildlife Management Institute.
    4. A letter submitted for the record by The University of 
South Carolina, The University of Louisiana at Lafayette, and 
BP America, Inc.
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