DOUGLAS - When a reservoir containing coal-bed methane water leaked in Sheridan County, it caused contaminated water to resurface on a hillside below. The Wyoming Department of Environmental Quality issued a notice of violation to the company responsible because it was considered an illegal, or unpermitted discharge of water.

But when that same leak traveled down to another reservoir which in turn leaked and saturated an alfalfa field below it, the DEQ could do nothing about the damage. The water didn't resurface this time, but remained in the subsurface.

Technically, it was not an illegal surface discharge in the eyes of DEQ.

In another well-known case, rancher Kenny Claybaugh has watched the culmination of multiple upstream coal-bed methane water discharges transform a productive bottomland meadow on his property into a lake. This continues to happen year after year as DEQ and the state engineer continue to explain that neither is legally responsible for either preventing or rectifying the situation.

"We just permitted another discharge that is showing up on Claybaugh's property because we could only look at water quality. … But that's not the problem. It's the water quantity," DEQ water quality administrator John Wagner told members of a special legislative task force on Thursday.

Several members of the Coalbed Natural Gas Water Use Task Force agreed that it may take a change in the law to fill this apparent regulatory hole that exists between DEQ and the state engineer's office.

The basic premise is that DEQ is charged with permitting the surface discharge of waters produced in association with coal-bed methane. But it can only base its permitting considerations on water quality, not water quantity. Since the onset of commercial production in the Powder River Basin, the state has insisted that only the state engineer has authority over matters of water quantity.

Large volumes of groundwater are pumped to the surface during production of coal-bed methane.

In the case of the leaking reservoirs, State Engineer Patrick Tyrrell vehemently insisted that his office investigated the matter and would have issued an order to drain and seal the reservoirs, but the companies responsible had already taken those tasks on voluntarily.

Tyrrell, who serves on the 15-member task force, said his office is careful about getting involved in leaky reservoirs because nearly every reservoir in the state leaks.

But task force member Helen Jones, a rancher in the Powder River Basin, suggested that the state engineer's authority in water quantity is not used to prevent a problem from occurring in the first place when it comes to coal-bed methane water.

"This is part of my frustration. I can't figure out why it takes so long to get anything done," Jones said.

Task force member Sen. Kit Jennings, R-Casper, said he couldn't understand why the coal-bed methane operator in the case of the leaking ponds faces up to $19,000 in penalties. The company had acquired all the proper permits, after all, so the leak must have been "an act of God," Jennings said.

Wagner pointed out that DEQ's permit for the containment pond stipulated that the coal-bed methane water be contained. In fact, DEQ based its water quality parameters on the assumption that the water would be contained. If the company had opted for another type of permit to discharge water where it would flow across the surface, that would have tightened thresholds for various pollutants.

Task force member Joseph Olson, who represents the coal-bed methane industry on the task force, said he believes there may exist some regulatory gaps in the state's oversight of the industry. However, there's enough communication and cooperation among the state agencies to address a problem when one arises.

"It looks to me like the system is working," Olson said.

However, Olson said there will continue to remain the problem of having too much coal-bed methane water to put to a specific use in the Powder River Basin, particularly as the industry develops the watery Big George coal seam.

"If you get out in the middle of the Big George fairway and try to contain (coal-bed methane water), you're either going to build Hoover Dam or a million little dams," Olson said.

Energy reporter Dustin Bleizeffer can be reached at (307) 682-3388 or dustin.bleizeffer@casperstartribune.net.