Aiming to rein in use of Colorado- Big Thompson

BERTHOUD – The Northern Water Conservancy District is proposing a rule that aims to make sure Colorado-Big Thompson water is not used outside of the district’s boundaries.

The rule, proposed by the district’s board of directors, is intended to keep cities and towns and others with C-BT water rights from selling the water for use outside the district.

In this case, that means selling it to oil-and-gas companies or water haulers who intend to use it on hydraulic fracturing – or fracking – operations in the region.

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Federal and state laws prohibit the use of C-BT water outside the district, but oil-and-gas companies and the water haulers who serve them have been eagerly buying water from any source available to them.

Brian Werner, Northern spokesman, said the rule was proposed because the district has been contacted by some of the 33 communities it serves about whether selling C-BT and Windy Gap Project water is allowed under their contracts.

“My guess is the vast majority of them have been approached by water haulers,” he said.

Werner said it’s alright to sell water to haulers and oil-and-gas companies as long as the C-BT and Windy Gap owners have enough other sources of water to cover those sales.

Some cities are making lots of money on water sales, including the city of Greeley, which estimates sales of surplus water this year will amount to 1,300 acre-feet and earn the city about $1.4 million.

An acre-foot equals 325,851 gallons.

Greeley is one of the biggest holders of C-BT water units, but Werner said the city has vast water reserves and can easily cover that level of surplus water sales beyond its allotment.

Northern’s proposed rules explicitly target the use of C-BT and Windy Gap water: “The use of C-BT Project water and the first use of Windy Gap Project water as well development water cannot and shall not be made for any oil or gas well located outside the boundaries of Northern Water or the Subdistrict.”

The proposed rule also calls for the water supplier – city, town or other possessor of C-BT or Windy Gap water – to keep strict accounting records to assure that the water is being beneficially used within district boundaries.

Penalties for violating the rules would include the water supplier being fined $500 per acre-foot of C-BT and Windy Gap water illegally delivered to a water hauler.

Other possible corrective actions include requiring water suppliers to provide a replacement water supply to Northern Water or the subdistrict.

“Most of them doing it (selling water) do have other supplies and can show they have at least X amount of other water supplies,” Werner said.

Werner said the board heard from a half-dozen representatives of Northern Colorado communities, oil-and-gas companies and water haulers at a meeting on Dec. 9. He said the comments were generally positive.

“I think everybody understands it’s an issue the board has to address, and generally they said they respect what we’re trying to do,” he said after the hour-long hearing. “They understand the corrective actions we’re proposing, but they want a little more time to think about it.”

Werner said Northern’s board will take the matter up again at its Jan. 13 meeting. He said written comments can be submitted through Jan. 3.

The Colorado Oil and Gas Conservation Commission estimates it can take up to 5 million gallons of water to frack just one horizontally-drilled well. And thousands of such wells are being drilled or planned in just Weld County alone.
Water keeps the fracking drills going, and drilling companies are scrambling to find sources for their operations. Water haulers for oil and gas companies are buying water wherever they can get it.

“We’re always looking for more water for different companies,´ said Gary Wright, president of A&W Water Services in Fort Lupton, one of the region’s biggest suppliers with about 200 water-hauling trucks.

Wright said his clients include Anadarko Petroleum, Noble Energy and Encana Corp., three of the biggest well operators in the region.

While the city of Greeley has become one of the region’s biggest suppliers of water to the oil and gas industry, Longmont, Loveland, Fort Lupton, Frederick and Firestone are also reportedly selling water.

Jon Monson, Greeley’s water and sewer director, said the city has been selling surplus water to the oil-and-gas industry for the last five years, an amount that held relatively steady through 2010 but which jumped by 50 percent this year.

“This extra revenue can lower the bond costs and the amount of bonds we need to issue,” he said. “This lowers the cost of the bonds to the ratepayers and will cut down future water bills.”

Monson said the water sold for delivery to oil and gas drillers this year was surplus water that would likely have not otherwise been used or stored.

“This is water that would have spilled down the river because we are full in our storage reservoirs,” he said.

Steve Porter covers agribusiness and natural resources for the Business Report. He can be reached at 970-232-3147 or at sporter@ncbr.com.