Coalbed Methane: How It Is Produced and What It Means for Royalty Owners

How coalbed methane is held and released

In a conventional gas reservoir the gas sits in pore space under pressure. In a coal seam most of the gas is adsorbed — held on the enormous internal surface area of the coal — and kept there by the pressure of water in the seam's natural fractures (called cleats). Coal can hold several times more gas per unit volume this way than a sandstone of the same size.

To produce it, an operator drills into the coal (vertically, or with horizontal laterals in the thicker seams), completes the well, and pumps water out. Lowering the water level lowers the pressure, the gas desorbs from the coal, and it flows through the cleats to the well. The water is the key: without dewatering, there is no gas.

The production profile is the inverse of a shale well

A shale well produces its highest volumes in the first months and declines steeply. A coalbed-methane well does the opposite. It produces mostly water first, gas production ramps up over months to a few years as the seam depressures, and it then declines slowly — often over decades. Peak gas can arrive one to three years after first production, and early royalty checks can understate what the well will eventually pay.

The flip side is that a CBM well's economics depend on the cost of handling water. Produced water must be treated and discharged under permit, reinjected, or hauled, and in a mature field the operator's dewatering cost per unit of gas rises as volumes fall. Which wells stay on line is therefore as much a water-handling decision as a gas-price decision.

Where coalbed methane is produced in the United States

Commercial CBM production began in the 1970s and early 1980s in the Black Warrior Basin of Alabama, where the Pottsville coal groups (Pratt, Mary Lee, and Black Creek) around the Oak Grove, Blue Creek, and Brookwood fields became the first large-scale coalbed-methane development in the country. The San Juan Basin of New Mexico and Colorado (Fruitland Coal) became the largest CBM field in the world, and the Powder River Basin of Wyoming added thousands of shallow CBM wells in the 2000s. Smaller plays include the Raton Basin, the Cherokee Basin of Kansas and Oklahoma, the Uinta Basin, and the central Appalachian coalfields of Virginia and West Virginia.

The U.S. Geological Survey's 2002 assessment of the Black Warrior Basin estimated a mean of about 8.5 trillion cubic feet of undiscovered technically recoverable gas across the basin's conventional and continuous plays, with the Pottsville coalbed-methane play a large part of it (USGS Fact Sheet 038-03; the Pottsville coalbed play alone was assessed at about 7.1 Tcf in Fact Sheet 2004-3092). Most U.S. CBM production peaked in the mid-to-late 2000s and has declined since as gas prices fell and fields matured.

What coalbed methane means for a royalty owner

• Who owns the gas can be a title question. Coal and gas are often severed into different estates. Whether coalbed methane belongs to the coal owner, the gas owner, or both depends on the deed language and on state case law. See who owns coalbed methane.
• Early checks understate, late checks overstate. Because the profile ramps and then declines slowly, a royalty stream's first year says little about its life, and a twenty-year-old well may still be paying a small, steady amount.
• Water and permitting drive shut-ins. In a mature field, wells are shut in when water-handling cost exceeds gas revenue, not only when gas prices fall. A shut-in well can be returned to production if economics improve, but it may also be plugged.
• Mining can interrupt or end production. Where the coal is also mined, a mine advancing through a gas-producing seam removes the reservoir. Gas that is captured ahead of mining or from mined-out areas (gob gas) can be produced, but the timing follows the mine plan.
• Records are older and thinner. Many CBM wells predate modern digital reporting; production histories, division orders, and well status often need to be assembled from state regulator records rather than an operator portal.

What a buyer looks at in a coalbed-methane royalty

Any buyer evaluating a coalbed-methane interest will check which wells on the tract are still on line at the state regulator, what they currently produce and how that has trended, who operates them and how that operator handles water, whether mining is planned through the seam, and how the coal and gas estates were severed in the chain of title. Owners in the Black Warrior Basin can read how those factors play out locally on the basin page or go straight to the Black Warrior Basin sell page.

Related reading

Who Owns Coalbed Methane?

Black Warrior Basin Mineral Rights (Alabama & Mississippi)

Sell Black Warrior Basin Mineral Rights

Powder River Basin Mineral Rights

Split Estates: Surface and Minerals Owned Separately

Oil & Gas Encyclopedia — all terms