Muddy waters 

Coal bed methane operations hung up by interstate dispute

Sizeable coal reserves, ideal for methane extraction, sit in a pair of river basins straddling the Montana-Wyoming border east of the Crow Reservation. The taxation rights to the commodities themselves depend on the exact location of the field, but the water necessary for extraction was spoken for long before the coal bed methane industry arrived in the Northern Rockies.

In a landmark decision authored Dec. 15, the Montana Supreme Court upheld new state standards for coal bed methane wastewater that sets sodium thresholds at a fraction of current discharge levels. The regulations force the removal of sodium from considerable amounts of water drawn up while extracting the gas from natural seams in the coal bed. Justices affirmed a recent ruling by a district court judge deflecting protests from petroleum giant Marathon that the salinity standards—approved by the feds in 2007—lacked appropriate justification. The coalfields in question, many owned by Marathon subsidiary Penneco, occupy Wyoming turf.

The ruling puts a new-age energy twist on an age-old battle over Rocky Mountain snowmelt.

“Penneco literally challenged the ability of the state to regulate the discharge of coal bed methane water,” says Montana Attorney General Mike McGrath. “That would have been a very significant blow to water quality.”

While McGrath says the Supreme Court’s decision impacts water quality rather than water rights, to Montana farmers it’s pretty much the same thing. Montana’s salinity standards measure the sodium content of the water (relative to other ions) and, since sodium is an electrolyte, its electro conductivity. At pre-ruling levels, agriculturalists complain that the non-toxic effluent affects southeastern Montana clay soil in such a way that significantly damages crop yields.

“The last three years our tonnage has been on a steepening downhill slope,” says Miles City irrigator Roger Muggli. “It’s cost us, this winter, over $250,000 to replace hay that we’ve lost. It’s about high time that something happened.”

Farmers, along with the state Water Pollution Control Advisory Council, began pressuring Montana regulators to adopt new salinity thresholds as far back as 2000. The Board of Environmental Review eventually began applying the standards in 2007, but Penneco refused to comply at its Wyoming operations that discharge into the Tongue and Powder rivers of southeastern Montana. When Wyoming declined to follow suit on the salinity issue, Penneco and two smaller exploration companies took Montana to court.

Montana also has a case before the U.S. Supreme Court for water rights to southern tributaries of the Yellowstone River. The state accuses Wyoming of taking an unfair share of groundwater in violation of a 1951 compact. McGrath explains the two lawsuits are indelibly tied since Montana wishes to not only control its water quality, but to get in on the coal bed methane game. Obviously, that prospect seems difficult when water coming across the border already registers above agriculture-safe groundwater standards.

Fidelity Exploration, operator of the CX Field of Bighorn County, engineered a creative solution to this problem by donating its wastewater—roughly 3,000 annual acre-feet—to ranches and local coalmines. According to company spokesman Tim Rasmussen, the effluent, despite its sodium content, can be used to water livestock. The mines use it for dust control.

The rub is that Fidelity doesn’t actually own the water, according to a state judge in a different Dec. 15 ruling. The company argued in court that because the water is a byproduct from the extraction of methane that it is “pipeline water” and not groundwater subject to the water rights under the Montana Constitution. District Judge Thomas Honzel deflated that reasoning in no uncertain terms.

“The statute does not lead to an inference, much less a conclusion of law, that the water which is pumped from the ground in the course of extracting coal bed methane gas, automatically becomes something different than ground water,” Honzel writes.

The cumulative rulings leave no visible option for coal bed methane explorers along the interstate border except to integrate costly practices of either treating their wastewater or repeatedly injecting it back into the coal bed seams. Industry leaders say Montana’s standards make profitability exceedingly difficult.

“Marathon believes the Montana [Board of Environmental Review] rules will have a negative impact on its coal bed natural gas operations in Wyoming, and likely will result in reduced production of this much needed, environmentally friendly energy resource at a time when maximizing the availability of domestic energy resources is of key national concern,” says an official statement from the corporation.

Asked to clarify the impact of the ruling on Penneco’s operations, as well as specify the company’s next legal move, Marathon spokesperson Leslie Hiltabrand says it’s too soon after the decision to offer details.

Beth Kaeding of the Northern Plains Resource Council considers the industry’s response to the ruling a form of strategic posturing. “We think that there are lots of ways industry could fully treat its water,” Kaeding says. “It’s just that sometimes industry really has to be pushed into a corner before they do it, and then they find that they can.”
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