The decision by C. Stephen Allred, assistant secretary for land and minerals management at the Department of Interior, would allow companies to proceed with plans to drill on more than 1.5 million acres of federal land in Montana's remote Powder River Basin.
Drilling in the basin has boomed over the past decade across the border in neighboring Wyoming. The heady pace of development pumped tens of millions of dollars into local communities - but also depleted water supplies and battered populations of game animals including sage grouse.
Tuesday's approval of the Montana development plan followed a three year delay caused by drilling opponents. Conservation groups and the Northern Cheyenne tribe won a court order temporarily blocking drilling in 2005, over worries it could foul water supplies and harm wildlife.
The Powder River Basin holds a type of natural gas known as coal-bed methane, which companies can extract only after pumping vast quantities of water from underground aquifers that trap the gas. That's the same water ranchers in the arid region depend on to irrigate fields and fill stock ponds.
Bureau of Land Management officials say their latest plan would phase in drilling, meaning it could be halted if environmental problems arose. Agency spokesman Greg Albright said an industry shutdown could come long before all 18,000 predicted wells were drilled.
"If our monitoring shows we're getting into impacts that aren't acceptable, we're going to start making changes right now," he said. "We're not going to wait until we reach some number of wells."
Beth Kaeding with the Northern Plains Resource Council - a plaintiff in the 2005 lawsuit - said her group wants "to see that coal-bed methane development is done right" under the new plan.
She said the group had not yet seen Allred's decision and could not comment on it directly. And she declined to say if another lawsuit would be filed seeking to block the latest BLM plan.
"We'll just have to consider our next move," she said. "We want to make sure that our water is considered."
More than 20,000 coal-bed methane wells have been drilled on the Wyoming side of the basin over the last decade. Through 2005, groundwater discharged as a result of that drilling totaled more than 147 billion gallons. That's enough to cover almost 700 square miles with water one foot deep.
The water is high in salt, making it generally unsuitable for agriculture. Only about 500 wells have been drilled to date on the Montana side of the basin.