GILLETTE -- Montana dealt a potential blow to Wyoming industry on Thursday in an ongoing turf battle about how to manage water produced from coal-bed methane wells in the Powder River Basin.

The Montana Board of Environmental Review accepted a proposed rule change to block any degradation of water quality in Montana streams. The rule is aimed at cleaning up water discharges from coal-bed methane wells.

Although the board rejected a mandate to re-inject the produced water, the bottom-line impact in Wyoming could be that producers here would have to spend more money to treat and regulate the water produced from coal-bed methane wells on this side of the state line.

"I would say it's not unexpected -- at least their decisions regarding non-degradation and going against re-injection," said Rob Hurless, energy and telecommunications adviser to Gov. Dave Freudenthal.

Any rule changes made in Montana must be submitted to the Environmental Protection Agency for final approval. Wyoming Department of Environmental Quality Director John Corra said the state will review what's submitted to the EPA, then make its own case to the federal agency.

"We plan to contact the EPA and continue to make our case that we should maintain control how we regulate coal-bed methane," Corra said.

By placing a non-degradation standard on the rivers, the rule essentially extends upstream into Wyoming, where the industry is already struggling to keep millions of barrels of production water out of the rivers.

The industry is feeling pressure within Wyoming's borders, too. To keep the water out of the Montana-bound rivers, producers here are carving hundreds of new holding reservoirs and washing the water through upland ephemeral drainages. That has caused headaches for many ranchers here because the large number of reservoirs are cutting into their pastures, and the discharges are washing out their low-lying grazing lands.

To fight those disposal methods, the Powder River Basin Resource Council and several ranchers launched a petition asking the state to require a measurable beneficial use for all volumes of coal-bed methane water disposed on the surface. The Wyoming Environmental Quality Council agreed to go through with a rulemaking process that could ultimately make those changes.