The Denver office of the Environmental Protection Agency never released a report it produced in 2003, which said cleanup costs were relatively inexpensive, the Washington Post reported.
A Montana consulting firm obtained a copy of the EPA report, however, and gave it to Gov. Brian Schweitzer.
Citing the EPA paper, Montana's Board of Environmental Review voted to force coal bed methane companies to leave the state's streams as clean as they were before drilling.
"We want to develop energy in Montana, but we want to do it right," Schweitzer said in an interview.
Mark Fix, a Montana rancher who chairs a community group that pushed for regulation, said the alfalfa crop on his 9,700-acre cattle ranch has suffered since gas companies started dumping water from drilling 100 miles upstream.
The Energy Department and the Wyoming congressional delegation are trying to block Montana's new rules on the grounds they could hamper energy development.