CHEYENNE - The state of Wyoming joined Penneco Energy and others arguing in federal court on Thursday that the Bureau of Land Management acted properly in issuing federal leases for coalbed methane development in the Powder River Basin.

The plaintiffs asked Judge Clarence Brimmer to overturn the Interior Board of Land Appeals' 2002 decision to require the BLM to consider environmental impacts of coalbed methane in more detail before it issued three specific oil and gas leases on federal minerals. Lawyers for Penneco and the Petroleum Association of Wyoming said the IBLA arbitrarily based its decision on poor evidence, including several newspaper articles.

The hearing for Penneco Energy et al vs. The Department of the Interior et al lasted nearly five hours. Brimmer will review evidence presented in the case and is expected to make a ruling sometime in the next few months.

Brimmer asked for counterpoints from defendants - the Department of Interior and several intervening environmental groups including the Powder River Basin Resource Council and the Wyoming Outdoor Council - that had argued the leasing case before the IBLA.

WOC staff attorney Tom Darin said the IBLA was given ample evidence on which to base its decision - evidence that suggested the BLM did not consider the unique impacts of coalbed methane development before it issued the leases.

That way, the BLM could have decided not to issue leases in certain areas sensitive to water and air quality impacts, or it could have attached stipulations to the leases to ensure the company comply with mitigation measures.

"We wish prior to making the lease commitment that the BLM attach stipulations to provide for water mitigation measures and protection of property rights," Darin said.

After about 45 minutes of discussing evidence that was presented to the IBLA on behalf of the enviromental groups, Darin noted he still hadn't mentioned any evidence that was submitted in the form of a newspaper article.

"It's not so much about whether the IBLA, in its decision, weighed this evidence back and forth. It is whether the record before it supports a reasoned decision," Darin said.

Darin Scheer, an attorney representing the Petroleum Association of Wyoming, said the defendants based much of their arguments on the wide impacts of coalbed methane development throughout the Powder River Basin, but the leasing decision is limited to three parcels.

Scheer also said that when the BLM is considering whether or not to allow oil or gas development on a particular lease is not the best time to do detailed analysis as mandated by the National Environmental Policy Act (NEPA).

"We can require more NEPA analysis at the pre-leasing stage, but that does not equal more effective NEPA analysis," Scheer said.

Much more effective water and air quality impact analysis usually takes place later when the BLM - and several state agencies - cooperate on a company's application for permit to drill (APD), Scheer added.

"You're requiring speculative analysis too early," he said.

On several occasions during testimoney from both sides, Brimmer asked for clarification on how coalbed methane gas production differs from the traditional oil and gas development. He also questioned what the DOI and the environmental groups had to gain in the case, given that coalbed methane development appears to be a certainty in the region.

"The ranchers with the cause, I think, are concerned because the splitting of surface and mineral estates, and they are having consequences they never anticipated," Brimmer said from the bench.

Brimmer then asked the plaintiffs, "To what extent does the industry see this voracious opposition here as an effort to just kind of delay what seems to be sure and certain development of these mineral estates?" Lawyers for the plaintiffs said their challengers seem to be asking for more government analysis in an area alread rife with cumbersome regulatory processes.

During a break in the hearing, Susan Daggett, an attorney representing the alliance of conservation groups in suport of the DOI, said the groups' wish to uphold the IBLA case "is not about invalidating existing leases."

Federal leases are issued with expiration dates, and as they are nominated for re-issuance, the BLM should consider whether it is appropriate for coalbed methane development to occur in a particular area and, if so, under what stipulations.

Daggett also said that the pending completion of the Powder River Basin Oil and Gas Environmental Impact Statement still may not resolve the pre-leasing issue.

"Even when the ROD (Record of Decision) comes out, it won't be the end of the story," Daggett said.

The BLM administers nearly 60 percent of the coalbed methane estate in the Powder River Basin, and most of those parcels have already been leased. BLM officials estimate that some 295 other leases were issued in a similar manner as the three leases called into question in the federal case.

The BLM stopped issuing leases for coalbed methane development in the Powder River Basin after the IBLA ruled against the agency last April. BLM officials said the suspension will last until the agency receives some clear direction on the leasing question.

Charles Kaiser, an attorney representing Penneco Energy, cited a case in Park County in which the state Supreme Court decided that the U.S. Forest Service is not required to complete a full Environmental Impact Statement before it decides whether or not to lease a federal parcel for mineral development.

Kaiser said the BLM in part based its decision to issue the Powder River Basin leases on a Regional Management Plan completed in the 1985. And although that RMP did not mention coalbed methane development in particular, it did consider "all methods" of oil and gas development and "all types" of potential impacts.

Eric Barlow's family owns a ranch which overlies one of the federal mineral parcels named in the lawsuit. During a break in the testimony, Barlow said many ranching families like his are simply asking the BLM to consider environmental mitigation measures before it issues a federal lease and conveys the right to drill.

"The initial mitigation takes place in the leasing," Barlow said. "That's what is missing from this process."