With depletion of coalbed-methane (CBM) wells in the San Juan basin, permeability rises by 10-100 times. Similar permeability increases are found in other CBM basins around the world. Models previously advanced to explain this behavior combine a compaction mechanism (which closes cleats) with matrix shrinkage (which opens cleats). In this paper, the original model-Palmer and Mansoori (1996, 1998)-is extended to include the transversely isotropic elastic response found in vertically cleated coals. This new version of the model has been calibrated by laboratory measurements on San Juan basin coal loaded under uniaxial-strain conditions to simulate reservoir depletion. The main goal/result is a predictive model characterized by two measured Young's moduli and three measured Poisson's ratios. Although there exist many models that seek to explain the huge permeability increases in CBM wells, the significance of this logical extension to the Palmer-Mansoori model (Palmer and Mansoori 1996, 1998) (i.e., the addition of coal anisotropy) is that it has the ability to predict permeability increases in wells in the field by use of measurable rock moduli and other quantities, thus reducing the need for empirically derived field matching parameters. Note that this new model also confirms an empirical constant that was invoked in a previous version of the Palmer-Mansoori model (Palmer and Mansoori 1996, 1998) to account for cleat anisotropy. To illustrate the model results, permeability increases with depletion from a few wells in one area of the San Juan basin have been matched by the new model. The new model should allow better forecasting of gas rates by reservoir simulators, as well as improved predictions of gas production in fields yet to be developed.