CBM LEGAL ISSUES--THE WESTERN U.S.A. AND CANADA
| Jurisdiction | United States |
Lincoln Mitchell **
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Introduction
This article examines the issues that have arisen in the regulation of coalbed methane (CBM) development in the Western U.S. and Canada. Litigation arising from split-title estates, surface rights, and well spacing will be discussed. The regulatory frameworks for CBM produced water will also be analyzed. We employ a comparative law methodology as outlined by John Reitz1 that "involves drawing explicit comparisons" between aspects of the Canadian and American legal systems,2 and consideration of similarities and differences in the legal systems in regard to their functional equivalence.3 The intent is to ensure that the statutes or legal institutions being compared perform the same functions in the legal systems.4 We compare and contrast state and provincial statutes, U.S. and Canadian federal legislation, regulations, regulatory approval processes, codes and guidelines adopted in leading CBM producing jurisdictions. Analysis of the differences in the legal systems and their rationale can provide insights and guidance for lawmakers to minimize CBM development disputes in the future.
In the first section we provide an overview of the legal issues which have arisen from CBM exploration and production in both countries. Litigation arising from split title estates is reviewed in the second section. Surface access and well spacing issues are considered in the third section. In the fourth section, the regulation of CBM produced water, one of the most contentious issues. We examine the approaches to CBM well water quality standards and or permitting requirements, including the statutory and regulatory conditions a developer must satisfy in order to obtain legal approval to drill a CBM well and dispose of the produced water.
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In regard to split-title estate litigation, we note that U.S. judicial precedent has been influential in determining CBM ownership in Canada. Our analysis reveals that provincial regulators in the province of Alberta where most of the Canadian CBM production has occurred to date have learned from the CBM regulatory experience in the Western United States. Controversial issues such as the surface discharge of produce water, hydraulic fracturing and split title ownership disputes have arisen in both countries. The regulatory approach in Alberta has been tailored to avoid the produced water disputes reported in Wyoming, New Mexico, Colorado and Montana by emphasizing stakeholder consultation and alternative dispute resolution. When there is limited public access to information and involvement in the planning and approval process for CBM development, affected parties and environmental groups have litigated issues in the U.S.A. The article considers other types of land use disputes and the creation of CBM best management practices in both countries to avoid the litigation reported in several states. We argue that with the advantage of analyzing the events that have prompted more litigation in the United States, guaranteed compensation to Alberta residents affected by CBM development for surface access, nuisance and damage under the Surface Rights Act and the emphasis on meaningful public consultation with regard to well spacing, surface disturbance and produced water impacts, has minimized the litigation surrounding CBM development in Canada.
Section 1
In both the United States and Canada, unconventional CBM production has emerged to replace dwindling conventional natural gas reserves.5 Some major CBM producing areas in the United States include the San Juan basin in Colorado and New Mexico and the Powder River basin in Wyoming and Montana.6 Alberta is the main CBM producing jurisdiction in Canada.7 Through joint ventures with Canadian companies and the creation of U.S. subsidiaries, American developers have tested and applied technology in Alberta that has been successful in U.S. sedimentary basins
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to facilitate CBM production.8 Wyoming, Montana, Colorado, Utah, New Mexico and North Dakota account for most of the CBM production in the U.S.A. In its analysis of the environmental impacts from CBM production on water resources, the United States Geological Survey in 2000 reported that "scientific understanding of, and production experience with, coal-bed methane are both in the early learning stages ... Much has yet to be learned about the environmental implications of developing the resource."9 The American CBM development experience in the last two decades provides a useful context for Canadian regulators to evaluate the CBM development issues that are arising in Canada. In 2001, the first Canadian commercial CBM production was observed in Alberta from "dry coals"10 and in 2008 production from "wet coals" was reported.11 Media coverage about the negative environmental impacts from CBM development in the United States has prompted concern from Canadian landowners, ranchers, farmers and environmental groups that similar problems will arise north of the 49th parallel.12
Since the mid 1980's, as CBM development has intensified on the U.S. plains, disputes between land owners and CBM developers have arisen. One of the most controversial issues pertains to the reported negative impacts from CBM exploration and production on water resources and the land surface.13 In the Western United States, concerns have been expressed by some landowners, ranchers, and environmental groups about the impact of CBM exploration and production activities on water quality, the volume of water that will be available for future use in ranching and agriculture, and the impact of the surface discharge of produced water in Wyoming and Montana.14 Other significant issues arising from CBM drilling and
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production include aquifer and potable well contamination, protection of wildlife from produced water discharges, destruction of wildlife habitats and ecosystems, and increased erosion from produced water discharges. Some landowners and residents have also objected to CBM development due to the impacts from drilling on the land surface. These impacts are similar to those arising from conventional oil and gas development, but more intense given the larger number of wells drilled to produce an economically viable volume of gas and include land surface disturbance from new roads, drill pad sites, water disposal sites and other facilities. CBM development prompts increased traffic and vehicle noise levels, increased noise from compressors, and increased air pollution. Finally, some residents are concerned that methane migration from CBM wells has resulted in contaminated soils and groundwater.15 In light of the reported impacts, it is not surprising that some parties in the U.S.A. have sought relief from the courts. Thus far, the U.S. has experienced more litigation associated with CBM development than in Canada. The Alberta government, after monitoring the CBM legal experience in the Western U.S. for several years, has adopted a well licensing and approval process that emphasizes meaningful consultation with ranchers, farmers and residents that may be directly affected by proposed CBM development, to avoid litigation. Both the provincial government and CBM developers in Alberta have focused on minimizing the environmental impacts from CBM exploration and production. Public disclosure is facilitated in development plans available for public viewing, public notification through advertising and information sessions, multi-stakeholder advisory committees, automatic compensation for surface access, and mandatory baseline waterwell testing before drilling a CBM well is approved. The provincial government's efforts to understand and avoid many of the problems reported in the U.S., is reflected in an Alberta Department of Energy (Alberta Energy) representative participating in the creation of best CBM management practices adopted by the Western Governors Association. In addition industry groups such as the Canadian Society of Unconventional Gas (CSUG) and the Canadian Association of Petroleum Producers have been proactive in promoting stakeholder consultation and have developed a detailed set of best industry practices which are more detailed than those adopted by the Western Governors Association.16 The development of
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solid environmental regulations and strong, transparent relationships between CBM operators and the public in Alberta has allowed the province to avoid much of the U.S. litigation.
Section 2 -- Split Title Estate Disputes
The question of whether the holder of the coal rights or natural gas rights owns the methane in a coal seam has been the subject of numerous lawsuits in the United States during the last two decades and in the last few years is now emerging as an issue in Canada. Where minerals belong to a private or freehold owner in Alberta (there are approximately 26,000 such titles in the province),17 the title to coal underlying a tract of land is often separate from other mineral titles, such as natural gas. To date, the U.S. courts in numerous states have ruled that the CBM belongs to the holder of the natural gas title. The Canadian courts have yet to render a decision on the split title issue although a case in the system may provide some clarity in the future.18 We will first review the relevant U.S. precedents and then consider the influence of American judicial decisions on emerging Canadian law.
In 1981, after considering the relevant statutes, the solicitor for the U.S. Department of the Interior (DOI) determined that federal coal leases did not include CBM rights, whereas federal natural gas leases did include CBM found in coal deposits.19 The DOI solicitor clarified that the coal leasing...
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