White Paper:
Coalbed Methane Legislation and Recovery
in Alabama, Pennsylvania, Virginia, and
West Virginia
November 1997

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ACKNOWLEDGMENTS
This white paper was prepared under Work Assignment 3-1 of the U.S. Environmental
Protection Agency Contract 68-W5-0017 by Alternative Energy Development, Incorporated.
This report is a technical document meant to be used for information dissemination. The views
represented here do not necessarily reflect the views of the U.S. Environmental Protection
Agency.

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1.0 Introduction
Coal is a major energy resource in the United States, accounting for 44 percent of all
electricity generation (EIA, 1995). A significant byproduct of coal formation is coalbed
methane (CBM), a natural gas resource comprising five percent of total United States gas
reserves. CBM remains trapped in undisturbed coal seams. Penetration of a coal seam
through mining or gas well development releases CBM. Coal mines vent the majority of
CBM they encounter to the atmosphere. Unburned methane is a significant greenhouse
gas, second only to carbon dioxide in overall global warming impact. In fact, on an
equivalent mass basis, methane has a global warming potential twenty-one times that of
carbon dioxide.
This paper reviews the correlation between state-sponsored legislation and CBM resource
recovery in four major coal mining states - Alabama, Pennsylvania, Virginia, and West
Virginia. These states have the highest methane emissions from coal mines in the United
States (EPA, 1997). The data indicate that state-sponsored legislation designed to alleviate
barriers to CBM resource recovery contributes to the development and implementation of
CBM projects. Section 2 provides an overview of CBM legislative history for each state and
the Federal Energy Policy Act of 1992's role in CBM use. Section 3 shows CBM reserves
and production levels, and the resulting economic benefits for each state. Section 4 presents
the key conclusions of the paper.
What is CBM?
As stated above, CBM is natural gas trapped in coal seams. The majority of CBM remains
trapped in un-mined coal reserves. CBM released during coal mining, generally seeps into
the mine mixing with the ventilation air. For safety reasons, coal operators must keep the
concentration of CBM in a mine to within one percent of total air volume. Operators install
ventilation systems and sometimes employ degasification technology to rid the mine of the
CBM. Ventilation systems consist of large fans that dilute the mine air with air from the
surface. Degasifcation technology generally involves drilling wells either vertically from the
surface or horizontally within the mine to exhaust the methane prior to the mining of the coal.
In most cases, coal mine operators vent CBM into the atmosphere. Mine operators and gas
developers can, in many cases, economically recover this CBM for processing and
marketing. CBM can be sold to natural gas distribution companies, used for electric power
generation, consumed at the mine, or sold to local industry. Capturing and utilizing CBM
from active mining operations cost-effectively reduces emissions of greenhouse gases, while
simultaneously providing local jobs and tax revenue. Alabama and Virginia both have
enacted CBM legislation and have significant CBM industries.
Why do States Enact CBM Legislation?
A gas developer cannot produce CBM without accessing the coal seam. Likewise, the coal
operator must remove the CBM in order to mine coal. This unique relationship between coal
and CBM has lead to many legal disputes. These disputes have arisen because separate
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parties often own land rights, coal rights, and gas and oil rights, and often none have clear
legal ownership of the CBM. Several states have passed laws clarifying the relationship
between coal, gas, oil and CBM, which have had a major impact on CBM resource recovery.
State legislatures pass CBM legislation to reduce the barriers to developing and
implementing projects. The primary issues addressed by these laws include:
•	Ownership: Several parties may have legitimate claims to CBM rights.
Claimants may include the coal rights owner, oil and gas rights owner, and/or the
landowner. To date, all CBM legislation examined in this report includes a "forced
pooling" provision, which allows development of the project while the parties
resolve an ownership dispute. A claimant may apply to the state for a pooling
order. If the state acts on the request, in some cases it may designate an
operator to develop the site and will set up an escrow account for the costs and
proceeds. Once the claimants settle the dispute, either judicially or voluntarily, the
state typically issues a revised division order distributing all amounts from the
escrow account to the legally entitled owner(s) (McClanahan, 1995).
•	Well Spacing: States regulate spacing between wells, buildings, or property
lines. These regulations ensure that wells produce efficiently without interfering
with the production of neighboring wells or posing a threat to nearby property.
Most states establish standard distance requirements. The regulatory agency
often allows exceptions to these standards based on the unique characteristics of
a particular gas field.
•	Protection of Coal Seam: Protecting the integrity of the coal seam assures coal
operators that gas producers will recover the CBM without damage to coal
resources. Most CBM legislation mandates public hearings to provide coal
operators and others the opportunity to object to the project during the application
process. Most legislation also requires the gas producer to notify nearby coal
operators prior to drilling.
•	Coal Mine Safety: To ensure miner safety, all CBM projects, operating near an
active coal mine, must observe state and federal mining regulations. Gas
producers drilling within 300 feet of an active mine, must submit a map showing
the drilling site and a safety plan to the federal Mine Safety and Health
Administration (MSHA). Depending on the state, the gas producers also must
notify the mine operator during various phases of CBM drilling and production.
2.0 CBM Legislation
A History of CBM Legislation
CBM production began in the early 1980s, fueled primarily by Section 29 of the Federal
Windfall Profits Act of 1980 (Non-conventional Fuels Tax Credit) for wells drilled between
1980 and 1992. In 1997, the act provided a tax credit of $1.02 per million British thermal
units (Btu) of CBM recovered, almost half the price of gas (Walker, 1997). Figure 1 presents
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data which indicate that developers in regions without state-sponsored CBM legislation did
not benefit from the federal tax credits.
The first state to act was Alabama in 1983, and it experienced dramatic growth in production
throughout the 1980's and 1990's, as shown in Figure 1. CBM represents 22% of total 1995
gas production in Alabama, the seventh largest United States gas supplier. In 1990, Virginia
enacted the "Virginia State Oil and Gas Act." In 1990, CBM production was negligible in
Virginia. Just five years later, CBM was Virginia's largest source of natural gas, representing
66% of their gas production. In 1994, West Virginia adopted a CBM article into law which
created guidelines for CBM development. West Virginia's growth in CBM drilling permits
tripled from 1992 to 1996. It is too early for published materials to record the growth in gas
production, but recent projections indicate growth in the production of CBM from West
Virginia.
The U.S. Congress used Virginia's legislation as the basis for CBM statutes in the National
Energy Policy Act of 1992 (EPACT). The federal government limited Section 1339 of
EPACT, titled Ownership ofCoalbed Methane, to "Affected States," where either the U.S.
government owns a significant amount of coal resources or no CBM legislation existed.
EPACT designated Illinois, Indiana, Kentucky, Ohio, Pennsylvania, Tennessee, and West
Virginia as affected states. EPACT allowed these states three years to develop CBM
legislation of their own, otherwise, the CBM provisions of the federal legislation would
become effective in the affected states. Thus, EPACT effectively created a default program,
by which the federal government would enact CBM ownership legislation if an affected state
did not implement its own program (McClanahan, 1995).
The legislatures of affected states could formally request removal from EPACT's list of
affected states by establishing state CBM guidelines or by simply opting out of EPACT's
CBM provisions. In 1994, the federal government granted removal from affected state status
for West Virginia because the state established CBM legislation. In 1995, Indiana, Ohio, and
Pennsylvania used the option clause to request removal from the list of affected states just
before the federal government implemented the law. None of the latter states enacted a
CBM law or program (McClanahan, 1995).
Table 1 summarizes the major statutes contained in federal and state CBM legislation. The
first two types of provisions are key issues for CBM development - statutory CBM guidelines
and pooling provisions. Statutory CBM guidelines create a legal framework for CBM
development that gives CBM developers a basis for legal recourse. Specifically, if competing
CBM interests arise, pooling provisions allow CBM drilling and recovery activities to continue,
while the mineral ownership issue is legally resolved. Provisions of well spacing, protection
of coal operations, coal mine safety, environmental protection, and well plugging address
technical mineral recovery and resource issues that are important to CBM development.
3.0 Impact of Legislation on CBM Resource Development in
Alabama, Pennsylvania, Virginia, and West Virginia
Section 2.0 illustrated that CBM legislation preceded substantial increases in new CBM
development. Figure 1 shows the dramatic rise in CBM recovery that occurred in Alabama
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and Virginia after these states enacted CBM legislation. The growth of the CBM industry
yields positive regional economic benefits, including the creation of jobs in gas production,
infrastructure development, indirect support services, and the generation of revenue for state
and local economies (EPA, 1994). Areas with CBM development also benefit from increased
investments in expanded support services, better gas recovery capabilities, more energy for
economic growth, and savings in coal production costs from reduced levels of methane in
pre-drained mines (Gunther, 1989). In the case of Alabama, Gary Wilson, Deputy Director of
the Alabama Oil and Gas Board, offers this observation: "I can state without hesitation that
the development of the CBM industry has been very positive to Alabama. The numbers
speak for themselves, and we are very pleased to be a part of the development of this
industry by being in the forefront in the enactment of CBM legislation."
States that take legislative action to define CBM and address ownership issues benefit
economically. As Table 2 shows, EPA conservatively estimates that Alabama and Virginia
now offer 700 and 200 new CBM related jobs, respectively (EPA, 1994). The growth of the
CBM industry creates a basis for further regional economic and job growth, especially in rural
areas where unemployment levels tend to be high. Additionally, CBM tax revenues in
Alabama and Virginia are estimated at $10.3 and $1.7 million, respectively. The CBM
industry represents a new source of tax revenue for state and local governments.
States that have not enacted CBM legislation show little benefit from the commercial
development of CBM resources. West Virginia and Pennsylvania have marginal CBM
industries. However, recent data indicate that developers are implementing more CBM
projects in West Virginia as evidenced by the increase in drilling activity since the passage of
recent CBM laws.
Estimates of CBM reserves in Alabama, Pennsylvania, Virginia, and West Virginia
demonstrate the potential for growth in CBM production. The technically recoverable CBM
reserves in Alabama and Virginia are estimated at 2.5 trillion cubic feet (Tcf) and 1.0 Tcf,
respectively, while the estimated reserves for Pennsylvania and West Virginia are 4 Tcf and
5 Tcf, respectively1. While Alabama's recoverable CBM resources are approximately one-
fourth that of Pennsylvania's and West Virginia's combined, Alabama's 1996 commercial
production of CBM was approximately 100 times greater.
1 The U.S. Geological Survey estimates the CBM reserves in the Appalachian Basin at 11 Tcf (Lyons,
1997). Of this 11 Tcf, Pennsylvania is estimated to have 4 Tcf, West Virginia has approximately 5 Tcf,
and Kentucky and Ohio make up the remainder. This distribution represents preliminary estimates, as
exact state data on the distribution of the CBM reserves is presently not available.
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Figure 1
Legislative Impact on CBM Production
Production (Bcf)
120
100
60
40
Alabama
Virginia
20
West Virginia
CO
O)
CO
O)
LO
CO
O)
Pennsylvania
CO
O)
CD
CO
O)
CO
O)
CO
CO
O)
CD
CO
O)
S <*> M ^
1994, West Virginia
Passes CBM Legislation
O)
O)
O)
O)
1983, Alabama Passes
CBM Legislation
CD
O)
O)
1990, Virginia Passes
CBM Legislation
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Table 1
Summary of Coalbed Methane Legislation in
Alabama, Pennsylvania, Virginia, West Virginia, and EPACT
Provision
Purpose
Alabama
Pennsylvania
Virginia
West Virginia
EPACT
Coalbed Methane
Development
Legislation
Recognizes CBM as a unique
resource, addresses ownership,
spacing, and coal mine protection.
1983

1990
1994
1992
Ownership Protection
Reduces barriers to CBM development
caused by disputes of CBM ownership
rights.
X

X
X
X
Forced Pooling
Part of ownership statutes, pooling
allows production to continue as the
parties adjudicate ownership disputes.
X

X
X
X
Well Spacing
Prevents production interference
between wells and protects
surrounding property.
X
X
X
X
X
Protection of
Coal Operations
Ensures that the operator extracts the
CBM without damaging current or
future mine operations.
X
X
X
X
X
Coal Mine Safety
Ensures that CBM development will
not endanger the safety of miners
working nearby.
X
X
X
X
X
Environmental
Protection
Protects nearby streams, wetlands,
and ground water.
X
X
X
X

Well Plugging
Requires the operator to seal (or plug)
wells after completing production.
X
X
X
X
X
Note: Pennsylvania regulates CBM as a natural gas. The state has no CBM-specific legislation recognizing its unique relationship with coal and
taking into account ownership issues. Sources: Alabama Administrative Code, section 400.4, Rules and Regulations Governing the Permitting,
Drilling, and Production of Coalbed Methane Gas (1996); Pennsylvania Oil and Gas Operators Manual (Department of Environmental Protection,
1997); Virginia State and Oil Gas Act (1990); West Virginia Coalbed Methane Wells and Units Article of the Environmental Resources Act (1994).
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Table 2

Estimates of CBM Production and Resulting Benefits

CBM
1996 CBM
Resulting Revenue

Legislation
Production
Resulting ($ millions)
State
Passed
(Bcf/yr)
Jobs
Alabama
1983
112.9
700 10.3
Pennsylvania
No
0.4
<10 <0.1
Virginia
1990
34.2
200 1.7
West Virginia
1994
0.7
<10 <0.1
Assumptions:



The number of jobs is based on 6 jobs per billion cubic feet (Bcf) of coalbed methane per
year (EPA, 1994).



Resulting revenue is based on the following assumed tax rates, natural gas prices:
Alabama: 5%, $1.82/thousand cubic feet (mcf); Pennsylvania: 4%, $2.80/mcf; Virginia: 5%,
$1.70/mcf; West Virginia: 6%, $2.20/mcf (EPA, 1997a and El A, 1997).
Source: EPA, 1994, 1997b. Information adapted from recent EPA CBM mine profile
documents.



4.0 Conclusion
Opportunities for economic growth abound in coal producing states with significant CBM
reserves. Coal operators must vent CBM from coal mines. Gas developers can capture and
market this CBM as a clean energy source. States benefit through job creation and
increased tax revenue. The global environment benefits from a reduction of greenhouse
gases.
The data presented in this paper suggest that legislation addressing ownership and other
issues can help foster the development and implementation of CBM projects. The passage
of CBM legislation in Virginia and Alabama preceded a dramatic increase in CBM resource
recovery. Other states with similar CBM reserves have the opportunity to develop this
valuable resource, create jobs and protect the environment through legislative initiatives they
design to reduce barriers to CBM project development.
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References
Alabama State Oil and Gas Board. 1996. Rules and Regulations Governing the Conservation of
Oil and gas in Alabama.
Energy Information Agency. 1995. International Energy Outlook.
Energy Information Agency. 1996. Natural Gas Annual 1995, Volume 2.
Environmental Protection Agency. 1993. Report to Congress. Opportunities to Reduce
Anthropogenic Methane Emissions in the United States. EPA 430-R-93-012.
Environmental Protection Agency. 1994. The Environmental and Economic Benefits ofCoalbed
Methane Development in the Appalachian Region. EPA 430-R-94-007.
Environmental Protection Agency. 1997a. Federal and State Tax Policies for U.S. Coalbed
Methane Projects, (forthcoming).
Environmental Protection Agency. 1997b. U.S. Mine Profiles Report, (forthcoming).
Federal Register. 1995. Proposed Regulations - Ownership ofCoalbed Methane -As Required
by Section 1339 of the Energy Policy Act of 1992. Federal Register. Volume 60. Number 179.
Gunther, William D. and Ahmad Ijaz. 1989. The Economic Impact of Coalbed Methane
Development on Jefferson and Tuscaloosa Counties. The University of Alabama.
Lewin, Jeff L., Hema J. Siriwardane, Samuel Ameri, Syd S. Peng. 1992. Unlocking the Fire: A
Proposal for Judicial or Legislative Determination of the Ownership of Coalbed Methane. West
Virginia Law Review Volume 94. Number 3.
Lyons, Paul C. 1997. "Central-northern Appalachian coalbed methane flow grows." Oil and Gas
Journal. July 7.
Markowski, Antonette K. 1997. Personal communication on November 7, 1997. Pennsylvania
Department of Environmental Protection, Oil and Gas Division.
McClanahan, Elizabeth A. 1995. Coalbed Methane: Myths, Facts, and Legends of its History and
the Legislative and Regulatory Climate into the 21st Century. Oklahoma Law Review. Volume 48.
Number 3.
McClanahan, Elizabeth A. 1995. Comparison ofCoalbed Methane Statutes in the Federal,
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Morgan, M. Jill. Elizabeth A. McClanahan. 1990. Competing Ownership Claims to Coalbed
Methane in the Appalachian Basin. The Landman. July/August.
Pennsylvania Department of Environmental Protection. 1997. Oil and Gas Owners Manual.
Streit, Theodore. 1997. West Virginia Coalbed Methane Ownership. Presentation at EPA's
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Methane Opportunities. Pittsburgh, PA. April 22.
Virginia Department of Mines, Minerals, and Energy. 1996. Virginia Gas and Oil Act.
Walker, Jerry. 1997. Personal communication. Browning Ferris Industries. November.
West Virginia coalbed Methane Review Board. 1996. West Virginia Coalbed Methane Wells and
Units Article of the Environmental Resources Act (WV ACT).
Wright, Thomas J. Date unknown. Ownership ofCoalbed Gas. Legal Analysis: USS v. Hoge and
Rayburn v. USX. Reed, Smith, Shaw, & McClay.

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