GILLETTE, Wyo. - A watchdog group says a proposed tax break for the coal-bed methane industry would cost governments nationwide nearly $2.5 billion, but industry officials say the break is needed to spur drilling in nonproductive areas.

Several large energy corporations and Wyoming's congressional delegation are striving to renew a tax credit known as Section 29 that expired last year.

The previous tax break was for wells drilled between 1979 and 1993 and expired in 2002. The national energy bill, not yet finalized, includes proposals to extend the tax credit to new wells until 2007.

"No matter what the ultimate cost of the credit, it amounts to a needless gift to an already booming industry," said the Public Citizen in a news release.

The Washington, D.C.-based group offered a chart illustrating that coal-bed methane in the Powder River Basin of northeastern Wyoming has skyrocketed for 10 straight years without the incentive of the Section 29 break.

The number of wells increased from 113 in 1993 to 10,718 in 2002.

Ron Wirth, spokesman for Western Gas Resources, said Friday that coal-bed methane "continues to be a very low-risk, high-return type of asset."

Western Gas and its partner plan to drill between 600 and 650 new coal-bed methane wells in the basin this year, and the company plans to increase its capital budget by 15 percent to $210 million, according to company documents.

However, until the Senate and House finish their work on the energy bill, it is not known if Section 29 will be renewed or how it would be structured.

"In all likelihood, it would kick in at a lower price level," Wirth said.

A tax credit incentive might not make or break producers in the Powder River Basin, he said, but it could be a factor whether coal-bed methane is produced in other areas of the Rocky Mountains and the United States.

"I'm sure there's other plays in other areas where that might make a difference between someone developing a play or not developing a play," he said.

As a member of the Senate Finance Committee, Sen. Craig Thomas, R-Wyo., is pushing for extension of the credit to help boost domestic energy production.

"A stable, reliable, and affordable energy supply is the key to our economic and national security," he wrote in a recent news release. "The immediate solution to our growing energy needs begin at home."

Sarah Gorin of the Equality State Policy Center, a Wyoming watchdog group, said Section 29 was meant to spur exploitation of "non-conventional" fuels.

In Wyoming, coal-bed methane no longer fits that definition because of its growth.