Split estate, divided views: coalbed methane creates a stir above ground and below


Of The Billings Gazette Staff

SHERIDAN, Wyo. - John Dewey stood on the edge of a snow-covered, plastic-lined pond and watched as water spurted and gurgled out of a pipe.

"This I jokingly refer to as my Olympic-size swimming pool," he said.

The pond holds 5½ acre-feet of water - roughly 1.8 million gallons - that's pumped to the surface to release methane trapped in coal seams beneath Dewey's 248-acre property outside of town. Dewey's land has had five methane wells on it since 1999.

Although he's been paid some money out of the deal, Dewey said the water quality for the well that he uses for stock has suffered since drilling started.

"If you washed clothes with it, they'd come out dirtier than they went in," Dewey said.

On his neighbor's property, eight huge compressors whir noisily every time they're started up.

"It's a hell of a scream," he said, adding that when he moved on to the land in 1994 - in the days before coalbed methane - the land was quiet and peaceful.

"You could come out here and only hear a bird squawking," he said.

Over the years, Dewey said, he has come to distrust the gas companies that operate the wells on the property, especially when it comes to reaching an agreement over such things as handling the discharge of water.

"Tying them down is like trying to catch a greased pig," Dewey said.

Dewey's frustrations as a landowner in the coalbed methane boom aren't unique, but

Please see Views, 8A

they also aren't universal.

"We've had extremely good luck with coalbed methane," said Joanne Tweedy, who operates a 5,000-acre ranch about 20 miles southwest of Gillette.

The discharge at the surface from the dozens of coalbed methane wells on the ranch provides clean, drinkable water for 150 to 200 cattle. In the last two years, Tweedy said, they've sold the heaviest calves they've ever had.

"The water was so beneficial to our operation and the cattle didn't have to trail so far to get a drink," Tweedy said, adding that coalbed methane on neighboring properties provides water for thousands of other cattle and sheep.

Like other ranchers in the Powder River Basin, Tweedy said she was skeptical about the prospect of coalbed methane wells coming onto the ranch.

"We'd heard all the horror stories but it was mostly 'what if?' ... " she said. "We were a little tense but it turned out we had wonderful water to use."

Once production started in 1999, the water that was pumped to the surface was low in sodium – a metallic element in the water that varies in amounts depending on where the water is taken from.

Tweedy said six companies have methane wells on the ranch. She meets regularly with company officials.

"They come into the house and we sit down with them," she said. "We've had extremely good relations with them. They're trying to get to their gas and we need to operate the ranch, so we need to work together."

Split estate

The tapping of coalbed methane in Wyoming's part of the basin has transformed not only some of the landscape but also how people relate to the land.

In the past, coal extraction operations were concentrated in large areas that were often away from where people lived. But coalbed methane wells are widely dispersed across state, federal and private land.

"We've been so used to traditional oil and gas development on large acreage. Now, we're seeing this development come closer to our communities, our neighborhoods," said Rosie Berger, a Wyoming legislator from Sheridan.

Although the area around Gillette may be more accustomed to energy development, Sheridan is experiencing something new with coalbed methane, which has been identified as a key part of a developing national energy policy to get more from domestic supplies.

"As we demand more from natural resources because of consumption, developers come closer to where we live," Berger said. "With growth comes conflict."

Often, the friction arises between the landowner and the gas companies, especially in a "split estate" under which the rancher may own the land, but the federal government owns the rights to the minerals underground, which are often leased to extraction companies.

Although the original Homesteader Act gave settlers the right to the land and everything beneath it, the law was changed in 1916 so the federal government could retain the "mineral estate."

The result, Berger said, is that "the scales will always be tipped" toward mineral rights.

"We get calls from landowners all the time asking for help," said Gillian Malone with the Powder River Basin Resource Council, a Sheridan-based environmental and agriculture advocacy group. "Until you've been affected by it, you don't know how serious it is."

Clay Rowley, a rancher who sits on the council's board of directors, said many landowners feel overwhelmed by the parade of contractors and subcontractors coming onto the land, especially if more than one gas company has a mineral lease.

"It's just chaos, it's not organized," Rowley said.

He said it's difficult for a landowner to know who to talk to, what the rules are and how to navigate a complex regulatory system. Some ranchers are now focusing on simply trying to keep track of new roads, water discharge, pipelines, construction, permits and other items associated with coalbed methane on their land. They also worry about what the land will look like once the coalbed methane drive is over.

Often, Rowley said, they feel they're fighting an uphill battle in a climate where the companies and governments are determined to get to the natural gas and landowners end up suffering.

"They realized this was going to be a bunch of tax dollars coming in so they didn't want to do anything to slow it up," he said.

When gas companies have the upper hand - especially in "split estate" ownership - ranchers and other landowners sometimes feel powerless to control how gas companies operate on their land, he said.

"If they can roll over you, they will," Rowley said.

New solutions

But the political climate Wyoming may be shifting slightly in landowners' favor.

On Dec. 15, the Joint House-Senate Judiciary Committee unanimously approved the Surface Owner Accommodation Act.

The bill would require, among other things, that oil and gas operators give a landowner 60 days' notice before starting work on the surface and provide compensation for damages to the land as a result of oil and gas operations.

Berger, the Sheridan representative who sits on the committee, said the bill is aimed at giving landowners more power when dealing with a few "bad actors" in the gas fields.

"I'd say 90-plus percent of mineral developers in Wyoming do a good job," Berger said.

About 70 percent of the developing area of the Powder River Basin is held in split estate, she said. With the massive push for coalbed methane, it's time that Wyoming find a way to accommodate both the producers and the landowners, Berger said.

"This is a very important issue," she said. "We're trying to make a level playing field for both the landowner and the developer."

At earlier hearings on the bill, representatives from both sides testified. The debate will continue when the Legislature takes up the bill in February, Berger noted.

Some in the industry worried that the bill will cut into their operating margins. Admittedly, companies could end up paying more to compensate for damage, Berger said, but those are the same costs that in the past had to be borne by landowners.

Ten other states have similar laws but Wyoming's puts an extra emphasis on encouraging the two parties to work out specific terms and conditions, with an emphasis on flexibility and fairness.

"I don't see this as something for industry to fear," Berger said. "We are an extraction state, this is how we balance our budget. We know how important it is to work with the mineral industry."

Bruce Hinchey, president of the Petroleum Association of Wyoming, said industry officials have offered their input on the bill. He worried that putting too many requirements on operators could make the process more cumbersome and more expensive, which could discourage some companies from investing in Wyoming.

"It may lead to not being allowed to develop without paying a huge amount of money," he said.

Ultimately, it may take more than legislation to ease the conflicts between landowners and gas companies.

Education, compromise and a search for common interests may provide the best long-term solution, said Karen Brown of the Coalbed Natural Gas Alliance, which is funded by gas companies along with ranchers, farmers and others, she said.

In 2004, the group is planning on producing a brochure for landowners that offers a step-by-step look at coalbed methane development, including photos and information about reclamation, surface impacts, water quality and other issues.

"If landowners felt like they had a little more information, if it's explained to them what actually happens, I think that would make a whole world of difference," Brown said.

Most ranchers and landowners in the Powder River Basin understand that if they have a split estate, there's a potential for coalbed methane drilling on their land, according to the Powder River Basin Resource Council. Kevin Lind, the group's director, said competition for the underground gas, coupled with rules that seem to favor mineral lease holders, can make for tough times even for ranchers already used to challenges in making a living.

"There are landowners who are fighting five companies who all want to get out there first," he said.

For her part, Tweedy, the Gillette rancher, is happy to have the coalbed methane operators stay as long as possible.

"I'm hoping they'll stick around for another two or three years," she said. "We've had good luck with it."

Natural gas in underground coal seams was recognized in the late 1990s as a huge, untapped energy resource. By pumping out groundwater that holds the gas under pressure, previously inaccessible supplies of clean-burning methane can be tapped.

As the century turned, an energy boom in the Powder River Basin of Montana and Wyoming loomed – as did serious environmental concerns, mostly having to do with the quality and volume of water pumped to the surface.

The two states lie over different parts of the basin, and development has proceeded at different paces, on different paths. After several years of exploration and environmental study and litigation in Montana, and large-scale production in Wyoming, where does the promise of coalbed methane stand now?

For five days, The Gazette examines the status of an industry that has been identified as a key part of Bush administration plans to expand domestic energy supplies, and has become a major battleground for conservation issues in the West.

Sunday – Ready, set ...
Montana takes a measured approach to methane development
Monday – Drilling discretion
Conservationists, tribes urge caution in Montana
Tuesday – A look at some of the lawsuits and players in the ongoing debate
The players
The lawsuits

Wednesday – ‘A world class supply’
Following busy year, Wyoming tries to cope with coalbed growing pains
Thursday – Split estates, divided views
Coalbed methane creates a stir above ground and below
Friday – A new way with water
A new way with water could help the industry


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