Mention methane gas to a farmer and
you think of emissions from cows.
Mention it to a miner and the first reaction is danger. But, what if methane
gas was not only the source of a new industry of natural gas but also one of the greener sources of energy, as well?
“Up until about 25 years ago, coal bed
methane (CBM) was considered to be
more of a nuisance than an actual
resource,” says William Schmitt, an officer
of Greensfelder, Hemker & Gale, P.C.,
whose practice includes representing
clients in the coal, oil and gas industries. “It
was considered unwanted, unusable and
unsafe; a dangerous part of the mining
process.”
Smart Business talked to Schmitt about
how all of that has changed today as the
country looks for additional sources of
energy.
How has extracting methane gas from coal
beds changed in the last 25 years?
CBM is a component of the coal itself. It is
found in actual underground seams of coal
as well as in the rooms and passageways of
coal mines that have been mined out.
Due to the development of appropriate
technologies, the actual recovery of this
gas as an industry began primarily in the
western states and has more recently
emerged as a significant industry in the
coalfields of the Midwest and the eastern
United States. Of course, this coincides
with the increasing demands for natural
gas and the fact that natural gas is considered to be ‘greener.’
How much methane gas is used today as an
energy source?
I think it’s safe to say that today more
than 10 percent of the natural gas produced is methane gas. While there are
other sources of methane gas, a substantial
portion of that percentage is CBM gas.
What are some of the legal issues involved in
extracting methane gas?
One of the initial and most important
issues in extracting CBM has been the ownership of the gas. That is, who has the
right to recover the gas or transfer that
right of recovery to a third party?
For example, where the owner of the surface land has deeded or leased the right to
mine the coal, and perhaps has conveyed
the oil and gas rights to another party, who
has the rights to the CBM? Both of these
parties may claim the right to recover the
gas. In addition, the surface owner may
claim that he or she still owns the right to
the CBM, as it was never intended to be
deeded or leased to the other owners of the
mineral rights.
Some courts have decided these issues
by attempting to determine the intent of
the parties at the time these mineral interests were deeded or leased. This is interesting because most of these deeds/leases
are very old and the development of CBM
is of relatively recent vintage so that the
parties to these transactions probably
never even contemplated the possibility of
CBM.
There has been a tendency by the courts
to hold that the right to recover the CBM
belongs to the holder of the coal rights
since methane is really part of the coal.
However, the decisions of the courts have
not been uniform from state to state.
What happens to the water used to extract
CBM?
To release CBM from underground, first
the pressure has to be reduced by removing the underground water so that during
the drilling process both the gas and the
water moves through the coal beds and
eventually up the wells. And we are talking
about a lot of water. Once this discharge is
on the surface, it raises a variety of legal
and environmental concerns.
This water often has a high salt content,
which can affect soil and plant life, including agricultural crops. If it’s discharged into
rivers and streams, there are arguments
that it can pose a danger to fish and other
aquatic life in the area.
In addition, since the removal of this
underground water can reduce the amount
of available groundwater, there have been
claims by rural landowners that CBM
recovery has reduced the water available
to their wells, forcing them to drill deeper
or find alternative sources of water.
Any other thoughts?
Perhaps as a result of CBM recovery, and
as other technologies develop, there is an
increasing interest in the question of who
owns the voids created underground after
the coal has been removed and the mine
closed. Is the empty space owned by the
coal operator or does it revert to the owner
of the surface land? These voids could
serve a valuable purpose as a storage container for usable materials or a permanent
disposal site for environmentally undesirables such as carbon dioxide.
As is typical with any emerging industry
or technology, identifying and resolving the
legal issues lag behind the industry and
technology themselves..
WILLIAM SCHMITT is an officer of Greensfelder, Hemker & Gale, P.C. Reach him at [email protected] or (618) 239-3610.
