Traditional modeling of gas adsorption on wet coals does not include water as a separate adsorbed component and treats water as a "pacifier" of the coal matrix. Thus, the conventional modeling approach does not consider the competitive adsorption between the adsorbing gas and water in coals. In this work, we modeled the competitive adsorption of CO2 and water on wet coals by considering water as an active component in a binary mixture. A new data reduction method was implemented that accounts for the presence and effect of water in as many as three equilibrium phases (gas, liquid, adsorbed). Using the new data reduction method, we employed the simplified local-density (SLD) model to investigate the effects of water present in coals on gas adsorption under the conditions encountered in coalbed methane and CO2 sequestration applications. For this purpose, the SLD model was modified to account for the unique molecular interactions of water in the adsorbed phase and a new modeling approach was formulated for gas/water mixture adsorption on coals. The modified SLD model was then utilized to investigate CO2/water mixture adsorption on four well-characterized coals. Finally, a phase-check analysis was performed to investigate the possible formation of a third (aqueous) phase in these systems. Results indicate that the SLD model is capable of representing the adsorption of this highly asymmetric mixture within the experimental uncertainties, on average. The model parametrization used and the molecular interactions considered for describing water adsorption on coals illustrate a viable method to obtain precise representations of the adsorbed CO2/water mixtures. The phase-check analysis of the same mixtures indicated potential formation of a water-rich liquid phase in these systems for coals that contained large amounts of moisture.