BILLINGS, Mont. (AP) - An energy development firm and conservation group said Wednesday they have reached an agreement that will head off a threatened lawsuit over coal-bed methane water.

Fidelity Exploration & Production Co. and Northern Plain Resource Council, which had threatened to sue over concerns with the company's discharging of coal-bed methane water in southern Montana, said the plan will, among other things, lead to improved water quality monitoring on the Tongue River.

Northern Plains said a judge still must sign off on the agreement, which also addresses a partial reimbursement by Fidelity of legal fees that Northern Plains incurred in a previous court challenge.

Mark Fix, a rancher and Northern Plains member, said he's pleased with the agreement, particularly a pledge by the company to fund a five-year water quality monitoring effort on the river upstream of an irrigation ditch.

"It seems like we're making some steps forward and hopefully we can build on that," he said.

Some ranchers and conservationists are among those who have raised concerns about the quality of water released in the drilling for coal-bed methane, contending that it's often salty or of poor quality and can harm crops or other vegetation.

In addition to the monitoring project, the two sides said Fidelity agreed to stop discharging coal-bed methane water into several holding ponds, and Northern Plains said the company agreed to remove some others. In exchange, Northern Plains said it would withdraw its recent notice of intent to sue over concerns and resolve lingering issues related to two previous lawsuits, the sides said in a statement Wednesday.

Mike Caskey, Fidelity executive vice president and chief operating officer, said the monitoring data should be helpful to both industry and the farming community.

"We have long believed that cooperation is better than confrontation," he said in the statement, "and through reasonable discussions, we were able to settle some issues with Northern Plains." ---

On the Net:

Fidelity Exploration & Production Co.: http://www.fidelityepco.com/

Northern Plains Resource Council: http://www.northernplains.org/

AP-WS-08-25-04 1640EDT