• 61st Legislature HB0575 - 1 - Authorized Print Version - HB 575

61st Legislature HB0575
AN ACT PROVIDING THAT WATER PRODUCED IN ASSOCIATION WITH COAL BED METHANE
PRODUCTION MAY BE USED FOR CERTAIN PURPOSES; ALLOWING A TEMPORARY PERMIT FOR THE
BENEFICIAL USE OF WATER FROM COAL BED METHANE PRODUCTION; INCREASING COMPENSATION
FROM THE COAL BED METHANE PROTECTION PROGRAM; ASSESSING A FEE; REQUIRING A STUDY
OF ISSUES RELATED TO WATER IN ASSOCIATION WITH OIL AND GAS PRODUCTION; AMENDING
SECTIONS 15-36-331, 76-15-904, 76-15-905, AND 82-11-175, MCA; REPEALING SECTION 10, CHAPTER
531, LAWS OF 2001; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE AND AN APPLICABILITY DATE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Temporary permit. (1) As provided in this section and in accordance with this part, the
department shall issue a temporary permit for the beneficial use of water produced in association with coal bed
methane production.
(2) In addition to the requirements of this part, an application for a temporary permit under this section
must:
(a) provide that the source of the appropriation is surface water in the pipeline, pond, pit, or other means
of containing or conveying the water approved by the board of oil and gas conservation pursuant to 85-2-510;
(b) provide that the point of diversion is a specified place diverting the water from the pipeline, pond, pit,
or other means of containing or conveying the water approved by the board of oil and gas conservation pursuant
to 85-2-510; and
(c) limit the use of the water to:
(i) stock water;
(ii) managed irrigation with no return flow to surface water;
(iii) dust suppression and other industrial uses;
(iv) domestic use; or
(v) distribution for the purposes of subsections (2)(c)(i) through (2)(c)(iv).
-1- Authorized Print Version - HB 575
 HB0575
(3) A temporary permit issued under this section expires when the beneficial use ceases or coal bed
methane production ceases.
(4) An applicant for a temporary permit under this section shall pay an $800 fee to the department.
(5) (a) The holder of the temporary permit shall notify the department when the beneficial use ceases
or coal bed methane production ceases.
(b) The owner of the coal bed methane well or the holder of the temporary permit shall give the owner
of the land where the well is located reasonable notice that the temporary permit is about to expire.
(6) Water right holders who may be affected by the use of water under a temporary permit issued
pursuant to this part are eligible for compensation pursuant to 76-15-905.
(7) Permits may not be issued under this section after June 30, 2011.
(8) Appropriations approved under this section must not exceed a combined total volume of 2,000
acre-feet annually.
(9) (a) The department and the board of oil and gas conservation shall study the:
(i) effect on ground water of water produced in association with oil and gas production by using
information gathered prior to [the effective date of this act] and any information collected pursuant to this section;
and
(ii) appropriate uses of water produced in association with oil and gas production.
(b) The department and the board of oil and gas conservation shall report findings and any
recommended legislation from the study to the appropriate interim committee in accordance with 5-11-210 before
September 1, 2010.
(10) Nothing in this section alters or amends in any way a water compact that has been entered into and
approved by the state of Montana and a tribe, the United States, or another state under Title 85, chapter 20.
Section 2. Section 15-36-331, MCA, is amended to read:
"15-36-331. Distribution of taxes. (1) (a) For each calendar quarter, the department shall determine
the amount of tax, late payment interest, and penalties collected under this part.
(b) For the purposes of distribution of oil and natural gas production taxes to county and school district
taxing units under 15-36-332 and to the state, the department shall determine the amount of oil and natural gas
production taxes paid on production in the taxing unit.
-2- Authorized Print Version - HB 575
 HB0575
(2) (a) The amount of oil and natural gas production taxes collected for the privilege and license tax
pursuant to 82-11-131 must be deposited, in accordance with the provisions of 17-2-124, in the state special
revenue fund for the purpose of paying expenses of the board, as provided in 82-11-135.
(b) The amount of the tax for the oil, gas, and coal natural resource account established in 90-6-1001
must be deposited in the account.
(3) (a) For each tax year, the amount of oil and natural gas production taxes determined under
subsection (1)(b) is allocated to each county according to the following schedule:
Big Horn 45.05%
Blaine 58.39%
Carbon 48.27%
Chouteau 58.14%
Custer 69.53%
Daniels 50.81%
Dawson 47.79%
Fallon 41.78%
Fergus 69.18%
Garfield 45.96%
Glacier 58.83%
Golden Valley 58.37%
Hill 64.51%
Liberty 57.94%
McCone 49.92%
Musselshell 48.64%
Petroleum 48.04%
Phillips 54.02%
Pondera 54.26%
Powder River 60.9%
Prairie 40.38%
Richland 47.47%
-3- Authorized Print Version - HB 575
 HB0575
Roosevelt 45.71%
Rosebud 39.33%
Sheridan 47.99%
Stillwater 53.51%
Sweet Grass 61.24%
Teton 46.1%
Toole 57.61%
Valley 51.43%
Wibaux 49.16%
Yellowstone 46.74%
All other counties 50.15%
(b) The oil and natural gas production taxes allocated to each county must be deposited in the state
special revenue fund and transferred to each county for distribution, as provided in 15-36-332.
(4) The department shall, in accordance with the provisions of 17-2-124, distribute the state portion of
oil and natural gas production taxes remaining after the distributions pursuant to subsections (2) and (3) as
follows:
(a) for each fiscal year through the fiscal year ending June 30, 2011, to be distributed as follows:
(i) 1.23% to the coal bed methane protection account established in 76-15-904;
(ii) 1.45% to the natural resources projects state special revenue account established in 15-38-302;
(iii) 1.45% to the natural resources operations state special revenue account established in 15-38-301;
(iv) 2.99% to the orphan share account established in 75-10-743;
(v) 2.65% to the state special revenue fund to be appropriated to the Montana university system for the
purposes of the state tax levy as provided in 20-25-423; and
(vi) all remaining proceeds to the state general fund;
(b) for fiscal years beginning after June 30, 2011, to be distributed as follows:
(i) 2.16% to the natural resources projects state special revenue account established in 15-38-302;
(ii) 2.02% to the natural resources operations state special revenue account established in 15-38-301;
(iii) 2.95% to the orphan share account established in 75-10-743;
(iv) 2.65% to the state special revenue fund to be appropriated to the Montana university system for the
-4- Authorized Print Version - HB 575
 HB0575
purposes of the state tax levy as provided in 20-25-423; and
(v) 1.23% to the coal bed methane protection account established in 76-15-904; and
(v)(vi) all remaining proceeds to the state general fund."
Section 3. Section 76-15-904, MCA, is amended to read:
"76-15-904. Coal bed methane protection account -- use. (1) There is a coal bed methane protection
account in the state special revenue fund.
(2) There must be deposited in the account the proceeds from the distribution of oil and natural gas
production taxes, as provided in 15-36-331.
(3) All money paid into the account must be invested by the board of investments. Earnings from
investments must be deposited in the account.
(4) Subject to the conditions of subsection (5), money Money deposited in the account must be used to
compensate landowners and water right holders for damages attributable to coal bed methane development as
provided in this part.
(5) Money deposited in the fund and earnings of the fund may not be expended until after June 30, 2005.
For fiscal years beginning after June 30, 2005, principal and earnings may be expended only in the case of an
emergency. For fiscal years beginning after June 30, 2011, principal and earnings in the account may be
expended for any purpose authorized pursuant to this part.
(6)(5) Money in the account must be appropriated to the department for use by conservation districts that
have private landowners or water right holders who qualify for compensation as provided in 76-15-905.
(Subsection (2) terminates June 30, 2011--sec. 10, Ch. 531, L. 2001.)"
Section 4. Section 76-15-905, MCA, is amended to read:
"76-15-905. Coal bed methane protection program -- restrictions. (1) There is a coal bed methane
protection program administered by conservation districts that have coal beds within the exterior boundary of the
district or whose water sources may be adversely affected by the extraction of coal bed methane. The purpose
of the coal bed methane protection program is to compensate private landowners or water right holders for
damage caused by coal bed methane development.
(2) A conservation district shall establish procedures, approved by the department, for evaluating claims
-5- Authorized Print Version - HB 575
 HB0575
for compensation submitted by a landowner or water right holder. The procedures must include:
(a) a method for submitting an application for compensation for damages caused by coal bed methane
development;
(b) a process for determining the cost of the damage to land, surface water, or ground water, if any,
caused by coal bed methane development;
(c) the development of eligibility requirements for receiving compensation that include an applicant's
access to existing sources of state funding, including state-mandated payments, that compensate for damages;
and
(d) criteria for ranking applications related to available resources.
(3) An eligible recipient for compensation includes private landowners and water right holders who can
demonstrate as the result of damage caused by coal bed methane development:
(a) a loss of agricultural production or a loss in the value of land;
(b) a reduction in the quantity or quality of water available from a surface water or ground water source
that affects the beneficial use of water; or
(c) the contamination of surface water or ground water that prevents its beneficial use.
(4) (a) Subject to the conditions of subsections (5) through (8) (7), an eligible landowner may be
compensated for the damages incurred by the landowner for loss of agricultural production and income, lost land
value, and lost value of improvements caused by coal bed methane development. A payment made under this
subsection (4)(a) may only cover land directly affected by coal bed methane development.
(b) Subject to the conditions of subsections (5) through (8) (7), an eligible water right holder may be
compensated for damages caused by the contamination, diminution, or interruption of surface water or ground
water.
(5) In order to qualify for a payment of damages under this section, the landowner or water right holder
shall demonstrate that it is unlikely that compensation will be made by the coal bed methane developer or
operator who is liable for the damage to land or the reduction in or contamination of surface water or ground water
as the result of coal bed methane development.
(6) Compensation made to a landowner or a water right holder under this section may not exceed 75%
of the cost of the damages. The maximum amount paid to a landowner or water right holder may not exceed
$50,000 $150,000.
-6- Authorized Print Version - HB 575
 HB0575
(7) Conservation district administrative expenses for services provided under this section are eligible
costs for reimbursement from the coal bed methane protection account.
(8) (a) Except as provided in subsection (8)(b), compensation for damages allowed under this section
may be made only after June 30, 2011.
(b) Compensation for an emergency may be made after June 30, 2005."
Section 5. Section 82-11-175, MCA, is amended to read:
"82-11-175. Coal bed methane wells -- requirements. (1) Coal bed methane production wells that
involve the production of ground water must comply with this section.
(2) Ground water Water produced in association with a coal bed methane well production must be
managed in any of the following ways:
(a) used as irrigation or stock water or for other beneficial uses in compliance with Title 85, chapter 2,
part 3;
(b) reinjected to an acceptable subsurface strata or aquifer pursuant to applicable law;
(c) discharged to the surface or surface waters subject to the permit requirements of Title 75, chapter
5; or
(d) managed through other methods allowed by law.
(3) (a) Prior to the development of a coal bed methane well that involves the production of ground water
from an aquifer that is a source of supply for appropriation rights or permits to appropriate under Title 85, chapter
2, the developer of the coal bed methane well shall notify and offer a reasonable mitigation agreement to each
appropriator of water who holds an appropriation right or a permit to appropriate under Title 85, chapter 2, that
is for ground water and for which the point of diversion is within:
(i) 1 mile of the coal bed methane well; or
(ii) one-half mile of a well that is adversely affected by the coal bed methane well.
(b) The mitigation agreement must address the reduction or loss of water resources and must provide
for prompt supplementation or replacement of water from any natural spring or water well adversely affected by
the coal bed methane well. The mitigation agreement is not required to address a loss of water well productivity
that does not result from a reduction in the amount of available water because of production of ground water from
the coal bed methane well."
-7- Authorized Print Version - HB 575
 HB0575
Section 6. Repealer. Section 10, Chapter 531, Laws of 2001, is repealed.
Section 7. Codification instruction. [Section 1] is intended to be codified as an integral part of Title
85, chapter 2, part 3, and the provisions of Title 85, chapter 2, part 3, apply to [section 1].
Section 8. Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid
part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in
all valid applications that are severable from the invalid applications.
Section 9. Effective date. [This act] is effective on passage and approval.
Section 10. Applicability. [This act] applies to pending beneficial use applications for water produced
in association with coal bed methane production submitted before [the effective date of this act] and to beneficial
use applications for water produced in association with coal bed methane production submitted on or after [the
effective date of this act].
- END -
-8- Authorized Print Version - HB 575
 HB0575
I hereby certify that the within bill,
HB 0575, originated in the House.
Chief Clerk of the House
Speaker of the House
Signed this day
of , 2009.
President of the Senate
Signed this day
of , 2009.
-9- Authorized Print Version - HB 575
 HOUSE BILL NO. 575
INTRODUCED BY MCCHESNEY, ANKNEY, AUGARE, MACLAREN, MCNUTT, SESSO, BALES, KEANE,
LEWIS, J. PETERSON, STAHL
AN ACT PROVIDING THAT WATER PRODUCED IN ASSOCIATION WITH COAL BED METHANE
PRODUCTION MAY BE USED FOR CERTAIN PURPOSES; ALLOWING A TEMPORARY PERMIT FOR THE
BENEFICIAL USE OF WATER FROM COAL BED METHANE PRODUCTION; INCREASING COMPENSATION
FROM THE COAL BED METHANE PROTECTION PROGRAM; ASSESSING A FEE; REQUIRING A STUDY
OF ISSUES RELATED TO WATER IN ASSOCIATION WITH OIL AND GAS PRODUCTION; AMENDING
SECTIONS 15-36-331, 76-15-904, 76-15-905, AND 82-11-175, MCA; REPEALING SECTION 10, CHAPTER
531, LAWS OF 2001; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE AND AN APPLICABILITY DATE.