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Leasing Coalbed Gas Prospects

John S. Lowe, Coalbed Gas Development (1992)

As planners and politicians contemplate problems of U.S. energy policy and security, they must give coalbed gas substantial attention. Simply stated, coalbed gas is natural gas found in and around coalbeds. Created by the physical and chemical processes that create coal,1 coalbed gas exists in large quantities within the United States, which contains one of the world's largest deposits of coal. The Bureau of Mines once estimated that there is 300 trillion cubic feet of coalbed gas in the United States, about half of which could be commercially developed. If that estimate is accurate, coalbed gas represents an energy source roughly equivalent to current proven reserves of natural gas.

While it is now clear that coalbed gas is an energy resource [11-2] of substantial potential importance in the United States, also substantial are the legal problems associated with its development. Some commentators are concerned that the legal uncertainties will chill the exploitation of U.S. coalbed gas resources.2

A variety of legal problems stand in the way of coalbed methane development. This paper will address only one group of issues directly — the issues that should be addressed in a coalbed gas lease.

I. The Coalbed Gas Lease

How one structures the terms of a coalbed gas lease depends upon the kind of production operations one envisions.3 For