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An Industry Perspective on Coalbed Natural Gas (Methane) Units

Gregory R. Danielson, Jamie Jost, Federal Onshore Oil and Gas Pooling and Unitization (2006)

Previous presentations at this conference have laid out the principles of pooling and unitization. With this paper, we will apply those principles to a drilling program focused on the development of coalbed natural gas (“CBNG”). This topic was previously addressed at a Rocky Mountain Mineral Law Foundation conference on Regulation and Development of Coalbed Methane where Fred MacDonald presented a paper titled “Coalbed Methane Units: Making the Square Peg Fit the Round Hole.”1 This paper provides an excellent summary of CBNG development issues and some of the problems faced by coalbed natural gas operators when trying to implement a CBNG development program under the terms of the traditional federal exploratory model form agreement. The paper also discussed the changes to model form agreements adopted by the Bureau of Land Management in Wyoming and Utah. Rather than summarizing that presentation, we have attached a copy of the paper for your review. Our goal is to supplement the discussion in that paper by discussing some of the issues that must be considered when determining whether to unitize a CBNG drilling program.

Each participant in a CBNG program must compare the numerous benefits to be derived from unitization with the cost of putting the unit together and the increased administrative burden and regulatory requirements that accompany a federally approved unit.