When Life Gives You Coal Bed Methane, Make Lemonade
Jerrold A. Long
January 25, 2002

This paper examines the problems and potential solutions associated with produced water from coal bed methane development in Wyoming’s Powder River Basin. Although speed and extent of the coal bed methane development in the Powder River Basin have created a variety of complications, the production and disposal of water from coal bed methane wells gives rise to the most severe practical and legal issues. Several options exist for disposing of water produced by coal bed methane activities, each with its own benefits and detriments. This paper summarizes those various options and the problems associated with each.

However, rather than analyze in detail each option for disposing of produced water, the paper proposes that the most effective means available to resolve the issues surrounding produced water may be to ensure that all involved parties receive some benefit from the water production. Consequently, this paper will analyze the potential for applying produced water to a beneficial use, as well as the problems and pitfalls associated with such an approach.

Coal Bed Methane Production
As the name indicates, coal bed methane is found trapped in the vast coal formations underlying much of the country, and particularly Wyoming. During the coalification process, wherein organic matter is progressively converted into coal, large quantities of methane gas are produced. Due to the porous nature of the coal, coal formations are able to hold much larger quantities of methane than exist in conventional gas reservoirs of equal volume. The coal’s porous nature also allows it to hold large quantities of water in addition to methane gas.

In order to extract methane from coal formations, a developer must reduce the pressure that holds it in place. Where large quantities of water are also present in the formation, as is common in the Powder River Basin, it is the water that exerts the most pressure on the formation. Consequently, that water must be removed prior to accessing the methane. The quantity of water present in a coal formation generally decreases with the depth of the formation. However, as water quantity decreases with depth, so does water quality.

It’s the Water, Stupid
Coal bed methane development, like any other form of natural resource extraction and development, suffers from a variety of controversies and problems. In the Powder River Basin, the surface and mineral estates are often severed, and developers who wish to access the large quantities of methane just a few hundred feet below the surface must consider the impacts to surface land owners and users. However, despite the controversies inherent in attempting to create a large scale industrial complex in one of the most empty and independent parts of the country, one issue stands out above all other: water. Mining and other mineral extraction practices often produce water together with the target mineral. In the Powder River Basin, coal bed methane activities produce water in impressive proportions.

Keeping track of the number of operating wells in the Powder River Basin, and the consequent water production, is akin to rounding up the proverbial cat herd. Each month, hundreds of new wells are completed or begin production. From December 2000 to December 2001, 9,110 applications for permits to drill were submitted to the Wyoming Oil and Gas Conservation Commission. Currently, more than 10,000 coal bed methane wells operate in the basin, with the potential for up to 60,000 more wells in the next ten to fifteen years. Each coal bed methane well produces approximately 12 gallons per minute of water. In the Wyodak Drainage Coal Bed Methane Environmental Assessment (“Wyodak Drainage EA”), the Bureau of Land Management estimated that the approximately 4,093 wells in operation by November 2000 were producing 50,416 acre-feet of water per year. As coal bed methane development continues, the total amounts of water will continue to increase.

If the BLM’s estimates are accurate, and average water produced per well has remained constant, current water production in the Powder River Basin could exceed 100,000 acre-feet per year. For those not familiar with the area, Wyoming is a dry state. Although somewhere in geologic history the Powder River Basin was covered by dense swamps and vegetation, that landscape has long since given way to miles of uninterrupted grasslands, dry winds, and inconsistent water sources. Precipitation in the Gillette, Wyoming area, in the center of the Powder River Basin, averages approximately fourteen inches each year. The 100,000 acre-feet of water potentially being produced by coal bed methane activities far exceeds the total existing groundwater consumption in the basin. The Wyodak Drainage EA indicates that 32,300 acre-feet of groundwater are consumed each year in the basin.

According to the Wyoming State Engineer’s Office, total annual surface water use for all industrial and municipal uses in the state amounts to 200,000 acre-feet of water. One acre-foot of water is sufficient to supply a family of four for one year. Consequently, at the estimated 100,000 acre-feet, the current amount of water produced by coal bed methane development in the Powder River Basin would be sufficient to supply domestic water to over 80% of Wyoming residents.

The large quantities of water produced by coal bed methane development in the Powder River Basin creates complexities not previously experienced in the mineral extraction industry. Although much of the water produced is of sufficient quality for stock watering and some domestic uses, attempts to use the water for irrigation can have severe consequences. Water produced by coal bed methane activities is often highly saline. The high salinity of the water, combined with the particular nature of the soils and vegetation in the Powder River Basin, can have dramatic impacts on the potential for the soil to support vegetation in the future. Consequently, without treatment, the produced water is often of a quality unusable as an irrigation resource.

Coal bed methane produced water also creates substantial problems with respect to water quantity. Many of the drainages into which water is discharged are ephemeral or intermittent, and would not typically experience water flow year round. The advent of coal bed methane development has changed many of these drainages into perennial streams, which can have substantial impacts on ranching operations. For ranchers in the area, the constant flow of water can impact long-used stream crossings and diversion structures. In addition, the infiltration of produced water into shallow aquifers may impact the water quality in existing domestic wells. Finally, increased surface water flows may substantially increase erosion.

Management Options and Problems
Despite the problems associated with disposing of produced water, coal bed methane development continues. To date, coal bed methane development has produced approximately 470,516,300 Mcf of methane in the Powder River Basin. This indicates, of course, that notwithstanding the various complexities, developers have found the means to dispose of water produced by that development. Several options exist for disposing of water produced by coal bed methane development activities, though a single method is most often employed in the Powder River Basin. This section will briefly discuss each of those options, and will outline the problems associated with each.

Surface Discharge
Virtually all coal bed methane operations in the Powder River Basin discharge produced water into existing surface drainages. This strategy requires the developer to obtain a National Pollutant Discharge Elimination System (“NPDES”) permit from the Wyoming Department of Environmental Quality (“DEQ”). While the DEQ is not currently issuing NPDES permits for discharge into the Tongue river and its tributaries, and the recent agreement between Montana and Wyoming limits the potential to discharge into the Powder and Little Powder rivers, surface discharge remains the most simple and cost effective means of disposing of produced water.

However, as development continues and the quantity of produced water increases, and as the opposition to coal bed methane development grows more aware of the issues, the potential to continue discharging into surface drainages will decrease.

Several factors could severely impact the ability to continue discharges into surface drainages. As noted above, Montana and Wyoming entered into a Memorandum of Cooperation in early September 2001. That agreement established salinity and sodium standards for the Powder and Little Powder Rivers at the Montana/Wyoming border. If the water quality exceeds these standards, Wyoming is required to determine the cause of the exceedance. Should the problem be traced to coal bed methane activities, Wyoming is required to “initiate steps through its regulatory mechanisms” to return the water to the standard required by the agreement. Although no specific steps are outlined, Wyoming might be required to severely restrict surface discharges, including perhaps existing discharges, should water quality exceed the agreements standards.

In addition, Wyoming’s Water Quality Rules and Regulations establish an anti-degradation policy that requires the state to maintain the water quality necessary to protect existing water uses. The Wyoming rules further require the state to ensure that all surface waters with the potential for agricultural use retain a quality sufficient for that use:

All Wyoming surface waters which have the natural water quality potential for use as an agricultural water supply shall be maintained at a quality which allows continued use of such waters for agricultural purposes. Degradation of such waters shall not be of such an extent to cause a measurable decrease in crop or livestock production. Unless otherwise demonstrated, all Wyoming surface waters have the natural water quality potential for use as an agricultural water supply.

As noted above, the produced water’s salinity, and/or sodium content, prohibits its use for irrigation in many circumstances. Although existing surface flows may dilute produced water to usable levels, during late summer and fall, when water is increasingly important for agricultural users, surface flows are substantially diminished and may be unable to adequately dilute the produced water.

Finally, the Federal regulations governing produced water from oil and gas operations also contain specific requirements for surface discharges. The provisions of 40 C.F.R. § 435 subpart E allow for surface discharge of produced water in the western states where “the produced water has a use in agriculture or wildlife propagation[.]” In order for discharges to be allowed under these provisions, the produced water must be “of good enough quality to be used for wildlife or livestock watering or other agricultural uses” and must “actually put to such use during periods of discharge.”

Notwithstanding the problems associated with discharging produced water into surface drainages, it remains the lowest cost alternative for disposal. However, as this discussion indicates, the ability to continue discharging produced water in this fashion may decrease as the number of wells, and produced water, increase.

Other Disposal Options
Several other options exist for disposing of produced water, though they are used only on a limited scale in the Powder River Basin. The method most common in other areas of the country, primarily in the San Juan Basin, is the reinjection of produced water into deep aquifers. Reinjection has several qualities that decrease the likelihood that it will be applied in any large scale in the Powder River Basin. First, and perhaps most obvious and problematic, is the substantial cost associated with reinjection. This is particularly troublesome in the Powder River Basin, where the coal bed methane wells often do not produce methane in sufficient quantities to economically support reinjection. In addition, injection of any substance requires a permit from the Environmental Protection Agency to ensure adequate protection of drinking water aquifers.

Coal bed methane developers have also employed various means of evaporating produced water so as to avoid the need to discharge into surface drainages. The most advanced method of evaporation is a technique known as atomization. Atomization disperses produced water in fine droplets with the intent that it will evaporate prior to reaching the ground. Produced water may also be discharged into evaporation ponds isolated from surface drainages. While these methods may obviate the need to obtain an NPDES permit in some circumstances, a permit from the state is still required to construct an evaporation pond. In addition, should an evaporation pond leak or otherwise discharge water into a surface drainage, or should atomization not fully dispose of produced water, an NPDES permit may still be required. Finally, these methods are only capable of handling limited quantities of water, and may not be feasible for very large quantities of water.

Application of Produced Water to a Beneficial Use
The potential to apply water produced by coal bed methane development to a beneficial use provides an attractive solution to the quagmire of problems surrounding the issue. Unfortunately, finding a use for which the produced water is suitable, and then negotiating the myriad federal and state regulatory requirements necessary to get the water to its intended use has to date substantially diminished the potential for using the water in this fashion. However, given the substantial quantities of water that will be produced over the next decade by coal bed methane development, and the arid nature of the landscape in which the development occurs, significant thought should be given to finding some mechanism by which the methane developers can dispose of produced water in a cost effective manner while still providing some benefit to the region’s residents and environment.

Unfortunately, several impediments exist which restrict the potential to use water produced by coal bed methane activities for the typical beneficial uses. First and foremost is the water quality. As noted above, the produced water is of a quality that makes it unusable for irrigation purposes in many instances. As is typical of Western states, the majority of water used in Wyoming is applied to agricultural uses. Wyoming uses approximately 2,900,000 acre-feet of surface water each year. Of that amount, 2,200,000 acre-feet, or 76%, are applied to agricultural uses. Although the 100,000 acre-feet currently produced by coal bed methane development activities would only satisfy approximately 5% of existing irrigation needs, that water might have a substantial impact on a local scale. However, the inability to readily use the produced water for irrigation diminishes it attractiveness to those end users.

In addition, coal bed methane development produces water year round, whereas agricultural activities typically only require irrigation water during the summer months. Consequently, irrigators would only be able to seasonally utilize the produced water, leaving up to a nine-month period where the water could not be applied to the intended beneficial use. The only remedy to this problem would be to store the water during the periods of non-use. This approach would have obvious economic limitations.

Further, the coal bed methane development in the Powder River Basin is not of infinite duration. The water produced by this development may not be available in 20 years, which further reduces the likelihood that developers will expend substantial funds constructing a water storage or distribution system that might be obsolete soon after completion.

Finally, the Powder River Basin and those areas downstream from the Basin are sparsely populated. Therefore, the absolute number of end users that might wish to use the produced water is limited.

Notwithstanding these problems, the arid nature of the Powder River Basin, and the likely increasing limitations on other options for disposing of produced water, suggest that coal bed methane developers may be forced to consider additional options for disposing of produced water, including the potential for applying that water to a beneficial use. The following sections outline the problems associated with attempting to apply produced water to a beneficial use.

Acquiring Water and Getting it to the End User
Prior to pursuing any strategy to apply water produced by coal bed methane development to a beneficial use, the water must first be legally acquired. Ground water appropriation in Wyoming is relatively simple. In Wyoming, the overlying landowner does not own the ground water beneath his or her property. Rather, the State controls the time, location, and terms of conditions of use, allocating such use on a priority system. Consequently, a prospective water user applies for a permit to use ground water from the State Engineer’s Office. These permits are generally granted as a matter of course if the State Engineer’s Office finds that the proposed use is beneficial and the means of diversion and construction are adequate. Coal bed methane wells are required to obtain ground water permits prior to commencing construction of the well. The beneficial use is generally identified as mineral development.

Should an entity decided to gather coal bed methane produced water in an attempt to apply it to a beneficial use, it would likely need to do so before the water is discharged into a surface drainage. In Wyoming, produced water that is discharged into a surface drainage becomes part of that stream subject to appropriation by downstream water users. Consequently, anyone attempting to divert produced water from a surface drainage would be required to obtain a surface water right, and would be required to provide downstream water users their full appropriation prior to diverting. In addition, water discharged into a surface drainage immediately suffers a significant degradation in quality. Given that the greatest impediment to applying coal bed methane water to a beneficial use is the quality of the water, allowing the target water to reach a surface drainage would merely increase the already substantial complexities faced in using this water.

Prior to discharge into a surface drainage, the well owner retains control of the produced water. Therefore, should an entity decide to capture coal bed methane produced water in an attempt to apply it to a beneficial use, it would first need to make arrangements with well owners to collect the water as it is discharged from the well prior to disposal into surface drainages. There is a process in the statutes that allows a person other than the well owner to acquire the rights to water that is a by-product of the well. The entity seeking to acquire the produced water must satisfy two conditions. First, the water must be intercepted before it commingles with any other water of the state, including streams, lakes, reservoirs and any groundwater aquifers; and second, if the permit applicant is not the developer of the water, an agreement between the developer and the applicant granting permission to use the produced water must be filed with the State Engineer’s Office at the time of the application.

A change of use, from coal bed methane discharge to municipal or industrial use, would likely require following the change of use statute. A petition is filed with the Board of Control and the Board must hold a hearing. The water right can be changed provided there is no increase in the amount of water historically used and no other appropriator is injured.

Of course, acquiring the right to produced water is the simplest step in this approach. Once the produced water is acquired at the well, it must somehow be transferred to the end user, whether it be an irrigator or a domestic or industrial user. As noted above, conveyance in existing stream systems, although the most cost effective means of transferring water, is unavailable for several reasons. First and foremost, use of surface stream systems would only further reduce the water quality. In addition, allowing produced water to reach the stream system creates certain complexities over who has control over the water, as noted above.

Effect of Interstate Water Compacts on Use of Produced Water
The Powder River Basin, in which the dramatic coal bed methane development is occurring, lies within four major drainages, the Yellowstone, Belle Fourche, Niobrara, and Cheyenne River basins. With the exception of the Cheyenne, each of these River Basins is governed by interstate compacts, which control the allocation of waters between Wyoming and its neighboring downstream states.

The interstate compacts have the potential to substantially impact ground water appropriation in Wyoming. Wyoming’s downstream neighbors have yet to complain about the large quantities of groundwater being produced by coal bed methane activities, likely because this water is discharged into surface drainages and eventually reaches the downstream states. An attempt to consumptively use the produced water might change that pattern.

None of the compacts at issue specifically discuss ground water appropriation, nor suggest that ground water should be governed by the compacts’ provision. Notwithstanding this fact, the United State Supreme Court has indicated in cases involving similar compacts that ground water may be included, even where it is not specifically mentioned. In Kansas v. Colorado, 514 U.S. 672 (1995), interpreting the Arkansas River Compact, and Texas v. New Mexico, 462 U.S. 554 (1987), interpreting the Pecos River Compact, the United States Supreme Court held that the respective Compacts should take in to account groundwater consumption that affects the surface flows within the river basins in question. These rulings rest on the principle that, although each of these compacts apportion surface waters and do not expressly regulate groundwater, any appropriation of groundwater that may be found to be hydrologically connected to such surface water flows reduces the basin’s streamflows. Thus, it would be possible that post-compact groundwater pumping could materially deplete the allocable flow of surface waters in violation of the compact.

Use of Appropriated Coal Bed Methane Water for Drinking Water Purposes
As discussed previously, the amount of water currently being produced by coal bed methane activities could provide domestic water to 80% of Wyoming’s residents. Although the drinking water needs of much of the state have already been satisfied, and water quality is generally not an issue, that is not the case in the Powder River Basin. The City of Gillette is infamous for the quality, or lack thereof, of its drinking water. Further, Gillette has grown dramatically since the coal bed methane boom began, and should continue to do so in the near future. The inability to obtain a quality source of water may have significant impacts on the quality of life in Gillette and surrounding communities.

Consequently, the section discusses requirements of the Safe Drinking Water Act (“SDWA”), 42 U.S.C. § 300f, et seq, and how that statute might impact the ability to utilize coal bed methane produced water for domestic purposes.

The SDWA is the major federal statute governing water quality for human consumption. The SDWA prescribes limitations on the amount of certain chemicals and other pollutants that may be present in water provided for human consumption. The Act applies to water supply systems that are classified as “public water systems”:

The term ‘public water system’ means a system for the provision to the public of water for human consumption through pipes or other constructed conveyances, if such system has at least fifteen service connections or regularly serves a least twenty-five individuals. Such term includes (i) any collection, treatment, storage, and distribution facilities under control of the operator of such system and used primarily in connection with such system, and (ii) any collection or pretreatment storage facilities not under such control which are used primarily in connection with such system.

Pursuant to the SDWA, the Administrator of the Environmental Protection Agency possesses broad authority to promulgate regulations to enforce the SDWA and to establish maximum contaminant levels for any substance if the Administrator determines:

(i) the contaminant may have an adverse effect on the health of persons; (ii) the contaminant is known to occur or there is a substantial likelihood that the contaminant will occur in public water systems with a frequency and at levels of public health concern; and (iii) in the sole judgment of the Administrator, regulation of such contaminant presents a meaningful opportunity for health risk reduction for persons served by public water systems.

Accordingly, the Administrator has promulgated an extensive set of regulations governing public water systems and provided maximum contaminant levels for a broad range of contaminants. Those regulations are found at 40 C.F.R. Parts 136 to 149. Parts 141 and 142 establish the national primary drinking water regulations and their implementation. The national primary drinking water regulations apply to all public water systems in each state, with the following exception:

such regulations shall not apply to a public water system— (1) which consists only of distribution and storage facilities (and does not have any collection and treatment facilities); (2) which obtains all of its water from, but is not owned or operated by, a public water system to which such regulations apply; (3) which does not sell water to any person; and (4) which is not a carrier in interstate commerce.

The SDWA provides the states primary enforcement responsibility for public water systems where the state has satisfied certain requirements. Generally speaking, the state must promulgate regulations that are “no less stringent” than the national primary drinking water regulations. Only two jurisdictions do not have primacy over SDWA enforcement: the District of Columbia and Wyoming. Therefore, SDWA implementation in Wyoming will be regulated by the EPA’s Region 8 office in Denver, Colorado.

The SDWA requires that any person seeking to construct or expand a public water system notify the state prior to so proceeding:

Before a person may enter into a financial commitment for or initiate construction of a new public water system or increase the capacity of an existing public water system, he shall notify the State and, to the extent practicable, avoid locating part or all of the new or expanded facility at a site which: (a) Is subject to a significant risk from earthquakes, floods, fires or other disasters which could cause a breakdown of the public water system or a portion thereof; or (b) Except for intake structures, is within the floodplain of a 100-year flood or is lower than any recorded high tide where appropriate records exist.

In Wyoming, this provision would likely require notice to the EPA by any city or entity attempting to use coal bed methane produced water for domestic purposes prior to construction.

The SDWA provides several general requirements on all public water systems. First, public water systems must provide water for human consumption that satisfies the maximum contaminant levels for all contaminants specified in 40 C.F.R. Part 141, Subpart G. Second, 40 C.F.R. Part 141, Subpart C provides specific monitoring schedules and analytical requirements for all public water systems. The monitoring frequency varies for type of contaminant and population served by the system. The SDWA also establishes reporting requirements wherein the public water system must report the results of all analyses, as well as any violations, to the jurisdiction with primary enforcement responsibility within a specified time period. Finally, the SDWA requires public water systems to provide public notice for all violations of the primary drinking water regulations, maximum contaminant level standards, monitoring and analysis requirements, among others. The public notice requirements are divided into three tiers, with different requirements for speed and type of notice, depending on threat to human health. Where one public water system provides water to another (“consecutive systems”), each public water system must provide notice to its own customers:

Each public water system must provide public notice to persons served by the water system, in accordance with this subpart. Public water systems that sell or otherwise provide drinking water to other public water systems (i.e., to consecutive systems) are required to give public notice to the owner or operator of the consecutive system; the consecutive system is responsible for providing public notice to the persons it serves.

Where consecutive systems exist, each system is subject to the requirements of the SDWA and its implementing regulations. However, those regulations provide that in certain situations consecutive systems may be treated as a single system for monitoring purposes:

When a public water system supplies water to one or more other public water systems, the State may modify the monitoring requirements imposed by this part to the extent that the interconnection of the systems justifies treating them as a single system for monitoring purposes. Any modified monitoring shall be conducted pursuant to a schedule specified by the State and concurred in by the Administrator of the U.S. Environmental Protection Agency.

Unfortunately, similar provisions do not exist in any other sections of the regulations, including those pertaining to maximum contaminant levels. Therefore, it is not clear how this provision might affect the SDWA’s water quality provisions, if at all, or how it might alter potential liabilities.

Should a public water system not comply with any of the statutory or regulatory requirements, the SDWA provides the Administrator with two enforcement options. For non-primacy states, such as Wyoming, the regulations provide:

If on the basis of information available to the Administrator, the Administrator finds, with respect to a period in which a State does not have primary enforcement responsibility for public water systems, that a public water system in the State—(i) for which a variance under section 300g-4 of this title or an exemption under section 300g-5 of this title is not in effect, does not comply with any applicable requirement; or (ii) for which a variance under section 300g-4 or this title or an exemption under section 300g-5 of this title is in effect, does not comply with any schedule or other requirement imposed pursuant to the variance or exemption; the administrator shall issue an order under subsection (g) of this section requiring the public water system to comply with the requirement, or commence a civil action under subsection (b) of this section.

If a public water system fails to comply with the SDWA’s drinking water regulations or with an Administrator’s order pursuant to this section, the SDWA provides for substantial penalties: “[a]ny person who violates, or fails or refuses to comply with, an order under this subsection shall be liable to the United States for a civil penalty of not more that $25,000 per day of violation.” This penalty provision applies to municipalities as well as private entities. Similar penalties apply should the Administrator commence a civil action to enforce the Act:

The court may enter, in an action brought under this subsection, such judgment as protection of the public health may require, taking into consideration the time necessary to comply and the availability of alternative water supplies; and, if the court determines that there has been a violation of the regulation or schedule or other requirement with respect to which the action was brought, the court may, taking into account the seriousness of the violation, the population at risk, and other appropriate factors, impose on the violator a civil penalty of not to exceed $25,000 for each day in which such violation occurs.

Further, the Administrator may issue emergency orders whenever he or she finds that an “imminent and substantial endangerment to the health of persons” exists. 42 U.S.C. § 300i(a). Failure to comply with any such order also subjects the violator to substantial liability:

Any person who violates or fails or refuses to comply with any order issued by the Administrator under subsection (a)(1) of this section may, in an action brought in the appropriate United States district court to enforce such order, be subject to a civil penalty of not to exceed $15,000 for each day in which such violation occurs or failure to comply occurs.

The SDWA contains a citizen’s suit provision allowing “any person” to commence the following civil actions:

(i) against any person (including (A) the United States, and (B) any other governmental instrumentality or agency to the extent permitted by the eleventh amendment to the Constitution) who is alleged to be in violation of any requirement prescribed by or under this subchapter;

(ii) against the Administrator where there is alleged a failure of the Administrator to perform any act or duty under this subchapter which is not discretionary with the Administrator; or

(iii) for the collection of a penalty by the United States Government (and associated costs and interest) against any Federal agency that fails, by the date that is 18 months after the effective date of a final order to pay a penalty assessed by the Administrator under section 300h-8(b) of this title, to pay the penalty.

These provisions are not exclusive. As will be discussed in more detail below, the SDWA specifically preserves all rights that a citizen may possess to seek any remedies provided under state or common law.

Conclusion
Any attempt to apply water produced by coal bed methane development to a beneficial will face substantial difficulties. Obtaining rights to the water, treating it to a usable level, and creating an infrastructure capable of adequately distributing the water will all require significant monetary commitments and patience. However, given the substantial quantities of water being produced, and the even more substantial quantities yet to be produced, establishing a system wherein this water can be beneficially used might be the best option for assisting continued development while protecting Wyoming’s residents and environment.