Excessive water production (more than 7000 bbl/month per well) from many coalbed methane (CBM) wells in the Powder River Basin of Wyoming is also associated with significant delays in the time it takes for gas production to begin. Analysis of about 550 water-enhancement activities carried out during well completion demonstrates that such activities result in hydraulic fracturing of the coal. Water-enhancement activities, as the operators in the basin call this procedure, consists of pumping 60 bbl of water/min into the coal seam during approximately 15 min. This is done to clean the wellbore and to enhance CBM production. Hydraulic fracturing is of concern because vertical hydraulic fracture growth could extend into adjacent formations and potentially result in excess CBM water production and inefficient depressurization of coals. Analysis of the pressure-time records of the water-enhancement tests enabled us to determine the magnitude of the least principal stress (S₃) in the coal seams of 372 wells. These data reveal that because S₃ switches between the minimum horizontal stress and the overburden at different locations, both vertical and horizontal hydraulic fracture growth is inferred to occur in the basin, depending on the exact location and coal layer. Relatively low water production is observed for wells with inferred horizontal fractures, whereas all of the wells associated with excessive water production are characterized by inferred vertical hydraulic fractures. The reason wells with exceptionally high water production show delays in gas production appears to be inefficient depressurization of the coal caused by water production from the formations outside the coal. To minimize CBM water production, we recommend that in areas of known vertical fracture propagation, the injection rate during the water-enhancement tests should be reduced to prevent the propagation of induced fractures into adjacent water-bearing formations. In areas where S₃ is unknown, a minifrac should be done to determine the magnitude of S₃ (to know whether fracture propagation will be vertical or horizontal), so the water-enhancement activities at the time of well completion are done to minimize water production and optimize gas production.