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Washington, D.C. --Wyoming's Congressional Delegation is working with coal bed methane lease holders in the state to quickly finalize legislation designed to stabilize the chaotic situation created by a recent court decision.

In July, the 10th U.S. Circuit Court of Appeals in Denver ruled for the Southern Ute Indian Tribe against the Amoco Production Company, declaring coal bed methane part of the coal itself. This ruling ravages the 89-year-old practice of treating the gas as a separate mineral. This practice was supported by two recent Department of Interior Office of Solicitor General opinions. The ruling says the mineral rights for and royalties from the methane belong to the federal government, the same as coal. If the ruling stands this could mean financial ruin for hundreds of private coal bed methane leaseholders and those associated with the industry in Wyoming.

Legislation being put together by Sens. Craig Thomas, Mike Enzi and Rep. Barbara Cubin would "grandfather" any lease agreements in effect at the time the legislation is passed from the effects of the court ruling. Amoco is expected to appeal the court decision to the Supreme Court and it could be months or years before a final decision is made. The delegation said that without "grandfathering" legislation, coal bed methane gas producers and leaseholders are in limbo and the entire industry crippled.

Other conditions being considered for the legislation include:

  • limiting application of the legislation to land where the federal government owns the coal;
  • excluding contracts or leases under dispute in court at the time the legislation is enacted;
  • excluding leases executed after the legislation is enacted.

Thomas, a member of the Senate Energy Committee that would first consider the legislation said, "Because of the potential impact this decision could have on Wyoming jobs and royalties to local communities we need to move quickly to find an equitable solution. While under appeal, leaseholders who worked under the existing rules should at least expect that their rights will be protected and current policy should apply."

Enzi said it is going to take agreement at a number of levels for this legislation to work.

"Cooperation and understanding from leaseholders, producers, Department of Interior officials and lawmakers on both sides of the aisle is what it's going to take to make this happen this year," said Enzi. "Governor Geringer has been working hard with the delegation on this. We all realize it's vital to give people some breathing room while we work on a long-term solution, but everyone has to be convinced how vital it is. We can't do it alone."

Cubin, Chairman of the House Subcommittee on Energy and Mineral Resources which has House jurisdiction over coal bed methane, said legally binding contracts must be respected, and impacts to local jobs and economies must be taken into consideration before the federal government moves ahead on this court ruling.

"It's neither wise nor fair to pull the rug from beneath people who have invested their faith and fortunes in a royalty and mineral rights policy that has been legally accepted for the past 90 years. I want to do what I can to protect the interests of the coal bed methane royalty owners and leaseholders who entered into contracts in good faith prior to the court decision. I am hopeful that the Interior Department will work with the delegation and governor to make that possible," said Cubin.

In a letter last week to Interior Secretary Bruce Babbitt, the delegation and governor asked that the department rely on current federal policy that distinguishes methane gas from coal. The delegation and governor wrote that the 10th Circuit decision was "completely contrary to past interpretation and practice, and will severely impact CBM leaseholders in Wyoming."

The delegation is attempting to move the measure before Congress adjourns in October, but the task is extremely difficult. Thomas, Enzi and Cubin are working with Governor Geringer's office and the group of Wyoming residents most affected by the legislation to finalize language of the bill. The delegation is also working with key Congressional committees the legislation could go through and is working to garner wide bi-partisan support. The delegation noted that Department of the Interior support of the measure would greatly aid its success this year and again encouraged it to continue to follow the guidelines its own office of solicitor general has affirmed.