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EMD99-05 (Issued December 15, 1999) Superseded by TITLES-03-03 SUBJECT: COALBED METHANE POLICY (Revised December 15, 1999; replaces Information Letter E91-18; 1991)
This information letter describes the Ministry of Energy and Mines' approach to the
management of coalbed methane resources in British Columbia. It is based on a study
conducted by the Canadian Institute of Resources Law, on behalf of the Ministry.
Coalbed methane is natural gas and where the rights to the resource are held by the
Crown, such rights are conveyed through provincial petroleum and natural gas tenures under
the Petroleum and Natural Gas Act. These tenures are issued by the Titles
Divsion, Ministry of Energy and Mines. All regulation of drilling, geophysical operations, and other field activities is
carried out by the Oil and Gas Commission.
Persons wishing to obtain rights to coalbed methane resources may nominate parcels for inclusion in a competition for petroleum and natural gas rights (see Information Letter EMD99-02). The proponent must clearly indicate that the posting request is to obtain
rights for coalbed methane development. In addition, the Ministry may, if requested by the
proponent, configure sale parcels to include only the coal-bearing formations, to avoid
competition with parties wishing to exploit conventional petroleum and natural gas
resources. Posting requests will be scrutinized for potential overlaps with existing coal rights
and the rights to coalbed methane resources will be made available for public tender in
accordance with the case situations identified in the attached Memorandum of Record. The
Crown is not in any way liable if the persons acquiring the petroleum and natural gas
rights cannot produce the coalbed methane resource because of conflicts with the holders
of coal rights. Processing of requests by the Ministry, for rights in areas other than northeast
British Columbia, may require more time than that indicated in the schedule in Information
Letter EMD99-02, to consult with government agencies and First Nations who may be
unfamiliar with oil and gas activities. Nominations for postings for rights to coalbed methane resources in the areas known as
the Dominion Coal Block will not be accepted, pending a Provincial/Federal agreement on
rights administration.
The Oil and Gas Commission is responsible for authorizations and approvals related to
the drilling of test holes. A test hole may be drilled without the operator first
obtaining the rights to the natural gas resource. The depth of a test hole must not exceed
600 metres and a test hole may not be used for production purposes; flowing from a test
hole is permitted for evaluation purposes only.
Normal oil and gas well authorization application procedures apply to coalbed methane
wells. However, additional information and time may be required to process applications to
examine circumstances unique to a coalbed methane development or to address environmental
or public and First Nations consultation issues, particularly in regions where the
population may be unfamiliar with oil and gas operations. Where possible, applications for
the licensing of coalbed methane wells or test holes should include information regarding
subsequent potential developments.
Normal gas spacing and target areas, as defined in the Petroleum and Natural Gas Act
and the Drilling and Production Regulation, apply to coalbed methane wells; however, these
provisions may be altered if sound reasons can be demonstrated. The Oil and Gas Commission
should be consulted if other than normal gas spacing is required for a proposed coalbed
methane project.
a) Test Holes The Drilling and Production Regulation governs the submission and release of test hole
data. All information obtained from a test hole must be submitted to the Oil and Gas
Commission, and is released after three years. b) Wells Data submission requirements for coalbed methane wells is the same as for natural gas
wells. Information release is defined in the Drilling and Production Regulation.
Designation of coalbed methane wells as experimental schemes, with three-year
confidentiality periods, may be possible upon the approval of an application to the Oil
and Gas Commission.
The provisions for conventional natural gas resources apply for coalbed methane.
The development of coalbed methane resources may raise a number of environmental, land
use and other issues that are of concern to the public. The applicant is responsible for
undertaking consultation to identify and respond to these public concerns. The applicant
should consult with the Oil and Gas Commission as to the extent and form of such public
consultation, prior to finalizing its plans for the development.
The Ministry has published a study that delineates and quantifies the coalbed methane
resource in the Elk Valley, Crowsnest and Flathead coalfields. This report, Coalbed
Methane in Southeast British Columbia, is available at a price of $50.00 from Crown
Publications Inc., 521 Fort Street, Victoria, British Columbia, V8W 1E7, telephone (250)
386-4636. In addition, the Ministry can provide non-confidential geological and geophysical
reports and subsurface geological data that has been submitted by industry. Existing test
hole and well information is maintained by the Oil and Gas Commission and is available for
public viewing at the Victoria offices of the Commission. For further information, contact
Steven Glover, Data Centre Supervisor, telephone (250) 952-0293.
For further information contact: Gerald German Telephone: (250) 952-0334
Endorsed by
MEMORANDUM OF RECORD (Updated December 15, 1999) The Administration of Methane Production from Coal Seams for Commercial Purposes
The purpose of this Memorandum is to confirm and record the basis on which the Ministry
of Energy and Mines (Ministry) will make available the rights to methane gas contained in,
and associated with, coal seams (coalbed methane) and to provide guidance to the Oil and
Gas Commission (Commission) when authorizing development of the resource.
The position of the Ministry of Energy and Mines is that methane found in coal seams is
natural gas, and that the holder of petroleum and natural gas rights secures, with these
rights, the entitlement to commercial production of the methane. This interpretation is
supported by the scientific, common and statutory meaning of natural gas as including
methane contained in coalbeds. Coalbed methane is recovered by techniques that resemble
those which pertain to natural gas extraction, including the drilling of wells, and an
operator who explores for and develops methane is indeed interested in a natural gas
resource. On this basis, the Ministry administers title, and the Oil and Gas Commission regulates
drilling and production operations. However, operations to extract coalbed methane must
take into account coal rights, to the degree that they could be injuriously affected by
operations to produce methane. The Ministry and the Commission will manage projects to
extract coalbed methane on a case-by-case basis, with recognition of these conflicting
interests.
In view of the fact that the ownership of the coal must be taken into account,
management of the coalbed methane resource will be based on the following six distinct
situations or conditions in which methane is encountered in coalbeds: Case 1 No Prospect for Coal Extraction In those situations where coalbeds have been identified, but which have no present value for coal extraction, and no coal tenure has been issued, the coalbed methane will be administered under the Petroleum and Natural Gas Act without regard for the presence of the coal. The methane resource will be managed to the benefit of the province, with due regard for conservation and good engineering practice.
Case 2 Prospect for Coal Extraction In those situations where there is the prospect of coal production, but no coal tenure
has been issued, petroleum and natural gas rights will be granted, but the regulation of
drilling and the operation of wells to produce coalbed methane will take into account the
need to protect the coal resource. Case 3 Coal Tenure - Agreement Where prior coal tenure exists, petroleum and natural gas rights may be granted, but
methane production from coalbeds will not be approved unless there is an agreement with
the holder of the coal tenure. Where petroleum and natural gas rights are granted, the
onus will be on the holder to obtain an agreement from the holder of the coal tenure, with
regard to acceptable terms and conditions on operations to extract methane. The receipt of petroleum and natural gas rights to coalbed methane will not assure that
it can be produced. The Crown is not in any way liable in the event of a failure by the
coalbed methane tenure holder to negotiate an agreement with the coal tenure holder. Where such agreement exists between the holders of the coal and petroleum and natural
gas tenures, wells may be drilled and produced under the requirements of the Petroleum
and Natural Gas Act. Case 4 Coal Tenure - No Agreement Where prior coal tenure exists, and petroleum and natural gas tenure has been granted,
but no agreement can be reached between the holders of the coal and petroleum and natural
gas tenures, then conditions on the production of methane from the coalbeds will be
considered by the Ministry and recommended to the Minister for resolution on a
case-by-case basis. However, there is no assurance of approval to develop the coalbed
methane resource in this situation. Case 5 Freehold Coal Rights Where freehold coal rights exist, the position of the Ministry is that methane
contained in such freehold coal seams belongs to the holder of the petroleum and natural
gas rights. Such rights may be granted by the Ministry without regard for the freehold
coal rights. If petroleum and natural gas rights are granted, the onus will be on the
holder to obtain an agreement from the holder of the freehold coal rights, with regard to
acceptable terms and conditions on operations to extract methane. The receipt of petroleum and natural gas rights to coalbed methane will not assure that
it can be produced. The Crown is not in any way liable if, for any reason, the holder of
the petroleum and natural gas rights is not able to develop the methane resource. In
addition, failing an agreement between the holders of the freehold coal rights and the
petroleum and natural gas rights, the holder of the petroleum and natural gas tenure must
give, prior to any approval to develop the coalbed methane resource, written agreement to
hold the Crown blameless, should legal suit follow. Case 6 Freehold Coal and Petroleum and Natural Gas Rights Petroleum and natural gas rights cannot be granted over areas where all subsurface
rights are freehold. However, any drilling for, or extraction of, methane from such coal
seams will still be regulated by the Oil and Gas Commission in accordance with regulations
under the Petroleum and Natural Gas Act.
Petroleum and natural gas rights, where coal seams exist or are likely to be
encountered, may be made available with recognition of the above situations. A disposition
of rights will only be approved with the caution that the opportunity to exploit coalbed
methane may be limited by coal rights.
Exploration for and development of coalbed methane resources will be regulated in
accordance with the Petroleum and Natural Gas Act and associated regulations. NOTE This Memorandum of Record, updated December 15, 1999, defines the policy of the
Ministry of Energy and Mines with respect to the exploitation of natural gas in coal
seams. It is intended for general information only and is not intended to fetter any
statutory decision maker. All such decisions will be made in accordance with all
applicable legislation, regulations, and policies, and with all due consideration of the
specific circumstances. Endorsed by December 15, 1999
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