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Coalbed Methane Primer

Randy Allen, Regulation and Development of Coalbed Methane (2002)

Coalbed methane has always been at the epicenter of controversy. For coal miners the issue was safety. For mineral owners, the controversy has been over who owns it. In the late 1980's, the controversy was an expiring tax credit leading to rapid drilling of wells and the anticipated demise of the industry thereafter. More recently, controversy has arisen through several issues, including what to do with water produced from the wells,1 whether it is safe for certain end users to burn the “new” fuel,2 hydraulic fracturing of coalbeds,3 and the usual land use issues raised by bringing development to previously undeveloped areas. Why all the controversy?

It is not a dirty industry. Millions and millions of dollars are invested to develop a field, bringing in decent-paying jobs and creating a tax base that will last 30 years or so. In Alabama, the government rolls out the red carpet to welcome new manufacturing operations to the state. In some situations, manufacturing companies can receive sales and use tax abatement, property tax abatement and an income tax incentive that essentially amounts to an income tax exemption lasting 20 years. But in some areas, operators proposing new coalbed methane development are greeted by outraged citizens groups. Because coalbed methane can be developed in a safe, environmental friendly and neighborly manner, the root of this level of publ