Montana v. Wyoming: An Opportunity to Right the Course for Coalbed Methane Development and Prior Appropriation

Across vast swathes of western lands, coalbed methane (CBM) wells dot the landscape, pumping out billions of gallons of groundwater to release natural gases trapped within subterranean coal seams. These coal seams interlace complex networks of underground aquifers, many of which share a relationship with overlying surface waters. In Wyoming, Montana, and other western states, these CBM wells are developed largely outside of the traditional prior appropriation system, with little or no review of how water rights may be affected. These CBM wells are also developed under state laws that give little consideration to the interstate nature of the affected waters. Commentators have called for a more cohesive CBM regulatory regime that protects water rights users, and the law has experienced incremental changes. But change has been slow, and the present reality is that western states are enabling CBM development without a true understanding of how CBM groundwater withdrawals impact both underground and surface water supplies. With tremendous pressures to develop CBM as a principal fuel source, and technical complexities that obscure our understanding of the CBM-water relationship, the problem appears intractable, yet deeply in need of reform. Herein lies the significance of the current United States Supreme Court litigation between Montana and Wyoming. The case centers upon the interstate waters of the Powder River Basin (the Basin), home to one of the largest and fastest developing CBM reserves in the nation. The Basin, nestled within the Yellowstone River system, contains an estimated 18,000 CBM wells collectively pumping somewhere between 30 and 110 billion gallons of water each year, predominantly on the Wyoming side. Among its several allegations in Montana v. Wyoming, Montana alleges that Wyoming’s substantial CBM withdrawals are depleting surface waters that belong to Montana under the 1950 Yellowstone River Compact (the Compact). Some sixty years ago, when the Compact’s negotiators were dividing the interstate waters of the Yellowstone River system, they had little inkling that CBM development would later transform the landscape of the Powder River Basin. Their focus was instead on the paramount importance of irrigated agriculture to the survival of the arid region. Arriving at what they believed to be an equitable division of waters, the States of Wyoming, Montana, and North Dakota expressly adopted the doctrine of prior appropriation to govern the uses of water under the Compact. The Montana v. Wyoming litigation thus confronts the same issue with which the western states are grappling: Can CBM development regulations be made consistent with traditional prior appropriation principles? The U.S. Supreme Court recently issued its first ruling in Montana v. Wyoming, addressing the separate question of whether the prior appropriation doctrine accommodates Wyoming irrigators who upgrade their irrigation efficiencies and reduce historic return flows to Montana. While the Supreme Court has not yet ruled on Montana’s CBM claim, its appointed Special Master Barton H. Thompson has issued some threshold legal conclusions. Importantly, he has concluded that groundwater withdrawals are within the scope of the Compact and that Wyoming would be in violation of the Compact if it is allowing CBM groundwater withdrawals to deplete surface waters belonging to Montana. The Special Master’s conclusions, which Wyoming chose not to appeal, create significant repercussions for Wyoming CBM development, and arguably Montana CBM development as well. The Special Master will next consider whether Wyoming’s CBM groundwater pumping is indeed depleting surface water supplies, and if so, what remedies are appropriate to address the Compact violations. These remaining questions create an important opportunity to usher in regulatory changes that ensure CBM development does not undermine the Compact’s division of waters - regulatory changes that may serve as a signpost for the other western states as well. Part I of this Article provides a brief background on the Yellowstone River Compact and the Montana v. Wyoming litigation. This part further explains the Special Master’s analysis of the CBM issue, as well as the Supreme Court’s recent ruling on improved irrigation efficiency. When viewed together, these decisions provide an important framework for determining how the parties’ regulation of CBM development should proceed. Part II then describes the magnitude of the CBM groundwater pumping issue and asserts that the posture of the Montana v. Wyoming case provides a unique opportunity not only to set Powder River Basin CBM development on the right course for Compact compliance, but also to more broadly right the course for how prior appropriation and CBM development work together in the western states. If this opportunity is not seized, there is great potential for harm to water users throughout the West, some of which may be irreversible and may not be redressed under current state laws. Focusing on the remedy aspect of the litigation, Part III then discusses the steps that the Special Master - or the parties in a settlement process - can take to design a comprehensive CBM regulatory process that upholds the principles of prior appropriation. These steps include invalidating those aspects of the States’ current CBM regulations that fail to comply with the Compact and requiring new, science-based regulatory features that prospectively protect water rights users. The Article concludes that the Yellowstone River Compact dispute, and like disputes throughout the West, cannot be fully resolved without a new regulatory process for CBM development that prospectively addresses harms to water rights. Ultimately, this interstate dispute provides a rare and critical lens for all prior appropriation states grappling with how to adapt traditional appropriative rights principles to the emerging use of CBM development.