The Balancing of Coal and Coalbed Methane Interests Within the Coalbed Methane Statutory Schemes of Virginia, West Virginia, and Kentucky

Article by: Sharon O. Flanery and Leslie R. Miller-Stover; originally appearing in JNREL Vol. 19, No. 2

Abstract by: Kyle Hermanson, Staff Member

Virginia, West Virginia, and Kentucky each have coal seams that lay within the Appalachian Basin and each of the states have adopted statutory schemes designed to maximize the utilization of those natural resources. Their statutes are intended to both ensure the safe production of coalbed methane (CBM) and coal within the same coal seam and balance the rights of the CBM and coal interest holders when they conflict. In 1990, Virginia became the first of the three states to specifically regulate the production of CBM, doing so within its existing scheme of oil and gas regulations. Virginia's statute states that its provisions should be construed to encourage the exploration for and production of the Commonwealth's oil and gas reserves. The statute goes on to provide that the production of coal should be maximized so long as it does not substantially affect the rights of a gas or oil owner. West Virginia and Kentucky's statutes differ in that they emphasize the recovery of coal and that the recovery of CBM should be promoted, provided it does adversely affect the safety or mining of coal seams.

CBM is natural gas that lies trapped in coal seams. CBM is unique in that it is both generated and stored within coalbeds, with the coal acting like a sponge and storing six times the volume of natural gas found in conventional reservoirs. CBM is often produced as a safety measure in advance of underground mining. However, CBM can also be produced for commercial reasons from unmined coalbeds as well as from the fractured rock wastes generated by longwall mining. In order to produce CBM, "stimulation" of the coal seam is usually required. Fluids are injected into the seam at high pressures in order to stimulate the coal and release the gas. There is some concern that this process may affect both the safety and productivity of coal mining.

Despite Virginia's stated emphasis on gas production over coal, the Commonwealth has the toughest standard for the production of CBM, requiring coal owner consent before a permit for stimulation can be granted and providing no venue for appeal should consent not be obtained. West Virginia and Kentucky, like Virginia, also require a permit for stimulation. However, where consent cannot be obtained, both states allow the stimulation applicant to request a hearing before a state agency review board. At the hearing, the applicant must prove that the stimulation will not render the coal seam unmineable or unsafe for mining in order to obtain a permit. In West Virginia, even if a CBM producer obtains a stimulation permit, absent coal owner consent, the producer is subject to tort liability for any damage caused to coal or mining equipment by the stimulation.

In addition to stimulation, the location and spacing of CBM wells provide ample grounds for conflict between CBM producers and coal operators due to potential safety hazards and significantly increased costs to coal operators related to well placement. Through the enactment of statutes, Virginia, West Virginia, and Kentucky have addressed these and several other issues involved in balancing the interests of the producers of two valuable resources, however each state's statutes differ in their specifics and goals.