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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

KRC Analyzes Coalbed Methane Bill  Posted: February 23, 2004

Kentucky Resources Council, Inc.

Post Office Box 1070

Frankfort, Kentucky 40602

(502) 875-2428 phone (502) 875-2845 fax

e-mail: fitzKRC@aol.com

www.kyrc.org

February 23, 2004

Hon. Jim Gooch

Hon. Keith Hall

Hon. John Arnold

Hon. Eddie Ballard

Hon. Buddy Buckingham

Hon. Brent Yonts

Kentucky House of Representatives

Frankfort, Kentucky 40601

Re: House Bill 556: Coalbed Methane

Dear Representatives Gooch, Hall, Arnold, Ballard, Buckingham, and Yonts:

I have reviewed the text of proposed HB 556, creating a new chapter of the Kentucky Revised Statutes governing coalbed methane (CBM) extraction. I am writing to request your consideration of several amendments that are needed in order to assure that coalbed methane resource development occurs in a manner that respects the rights of surface landowners and is protective of the environment, as intended by HCR 99 (2003).

Background on Coalbed Methane Generation & Environmental Problems

As with the extraction, collection, and transportation of any fossil fuel, and indeed as is the case with any energy source, there are environmental benefits and costs associated with the recovery and use of coalbed methane. The United States Geological Survey fact sheet on coalbed methane properly describes the situation as one of "an untapped energy resource and an environmental concern." In reviewing the proposed bill, the potential environmental concerns do not appear to have been given more than passing attention.

Methane is a greenhouse gas, and a principal component of natural gas created through the decomposition of organic matter. Coalbed methane (CBM) is the name given to methane, formed during the coalification of organic material, contained in coal seams and in formations associated with coal seams. Methane is 21 times more potent a greenhouse gas than carbon dioxide, and though emitted at much lower quantities than carbon dioxide, is considered the greenhouse gas of second concern behind CO2.

Methane is liberated from many sources, from landfills, natural gas production and transportation, livestock operations, and from natural processes such as wetlands and forest matter decay. Methane concentrations have more than doubled in the last 200 years, and are considered a significant contributor to global warming. Nearly 10 percent of atmospheric methane resulting from human activity is derived from coal mining, and is released as so-called "coal mine methane (CMM), a subset of coalbed methane (CBM). Globally, coal mines account for 8% of all methane emissions. In the US, approximately 72% of total CMM emissions are from underground mines, with the balance from surface mines, abandoned mines and post-mining processing and storage of the coal. Degasification may occur in advance of the mining, or as part of the mining process through mine ventilation.

The potential environmental problems associated with CBM development include both the surface disturbances typically associated with any drilling operation – erosion and sedimentation from surface roads, powerlines, pipelines, drillpads, drilling and production fluid pits, and releases of produced waters, and impacts of surface disturbances on the use of land by surface landowners and on wildlife, and also impacts that are of particular concern due to the nature of CBM development. Among these are:

* The longer duration of CBM-producing wells relative to conventional oil and gas wells and the heightened potential for adverse impact on agricultural land uses;

* Contamination of aquifers due to coalbed methane development. Cross-contamination has been a problem in areas such as the San Juan basin where development of coalbed methane began in the 1980's. USGS studies have identified multiple pathways of contamination – some from natural release along fractures; some from older deteriorating gas wells completed into oil and gas reservoirs, some from recently completed CBM wells. There is a need for baseline groundwater information prior to development of CBM, regarding the hydrogeology of the area, and current and potential uses of those groundwater resources.

* Surface releases of produced water. Production of CBM may require extraction of significant quantities of water from coal aquifers in order to lower pressure at the well bottom and release trapped gas. Surface release of produced water, and the potential for dewatering aquifers that are underground sources of drinking water is a concern.

* Surface contamination and spills, and underground contamination of aquifers associated with use of sand and chemical fluids to fracture the coal in order to release methane gas.

* Closer spacing of wells and associated gas and water lines, location and number of compressor stations and roads, electricity feed lines.

* Air quality impacts of flaring of CBM that is produced during de-watering.

HCR 99, a Kentucky General Assembly concurrent resolution enacted in 2003, directed a study by the Special Subcommittee on Energy off coal bed methane, including such areas as:

-ownership, including forced pooling and escrow arrangements;

- spacing between wells, buildings, and property lines

- protection of coal seams

- mine safety

- environmental protection, as it relates especially to water quality,

quantity and availability; and

- any other policy areas deemed to be in the interest of reducing

barriers to CBM recovery while safeguarding the environment.

Unfortunately, HB 556 falls short of adequately responding to HCR 99 in several key areas, notably failing to provide:

* Adequate notice to surface landowners of proposals for drilling coalbed methane wells and pooling requests. No notice is provided to surface landowners under the bill, despite the fact that in many cases, the question of whether the CBM rights were severed and who owns the resource may involve the surface landowners.

* Coordination of issuance of permits to drill or convert coalbed methane wells with environmental permitting. Despite the potential for air quality, surface water quality, and groundwater impacts, no coordination is provided with the Clean Air Act, Underground Injection Control Program, or KPDES surface discharge permit program.

* Collection of baseline environmental data necessary to protect surface and groundwater resources from damage associated with coalbed methane well development and stimulation. While the bill includes the requirement that water supplies damaged by CBM wells be replaced, there is no provision for identification of groundwater resources or users, or collection of baseline data necessary to allow a determination of causation when a claim is made that the quality or quantity of the groundwater resource has been diminished.

* Provision of a reclamation plan for management of drilling fluids and reclamation of areas disturbed in conjunction with coalbed methane operations. Despite enactment of KRS 353.500(2) requiring development of a comprehensive regulatory program for oil and gas operations, no such program has been developed. The bill provides for development of reclamation plans in cases of complete severance, but in other cases fails to require development and approval of a drilling and reclamation plan to meet the goal of HCR 99 of “safeguarding the environment.”

I look forward to working with you, the Environmental and Public Protection Cabinet, and interested parties in development of amendments to address these important areas and to satisfy the mandates of both HCR 99 and KRS 353.500(2).

Cordially,

Tom FitzGerald

Director

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