For sale: Municipal water rights

Fort Collins Coloradoan (Colorado)

BYLINE: By, Bobby Magill

3/12/2012

 

For some cities selling water for fracking, the deal is a sensation to the bottom line.

For Windsor, it was a “phenomenon,” Town Manager Kelly Arnold said.

After years of selling small amounts of municipal water to construction firms, oil and gas well servicing companies started lining up in November at the town’s fire hydrants, earning the community nearly $17,000 in millions of gallons of water sales as of March. 1.

That’s what happens when the energy industry expands in Northern Colorado where Niobrara shale thousands of feet beneath the ground is suspected to hold a great store of oil.

To get that oil, the industry has to use a method called hydraulic fracturing, or fracking. Drilling companies inject sand and up to 5 million gallons of water and chemicals deep into the ground to fracture the rock below and stimulate the flow of oil and natural gas.

Fracking is a thirsty process, with each Niobrara frack job using an average of 4.3 million gallons of water, or about 13 acre-feet, according to the Colorado Oil and Gas Association.

Where that water comes from and where it goes is critical because many environmentalists are sounding alarms about the amount of water being used for drilling along the Front Range because they say it poses serious future water supply problems as the energy industry continues to boom here.

But the state begs to differ.

Colorado energy regulators project that roughly 16,000 acre feet of water will be used this year for fracking statewide, most of which will stay far underground without being returned to a local stream or river.

Compare that to the 13.9 million acre-feet of water used for farming in Colorado each year. Or the 1.2 million acre-feet of water all the state’s cities use each year.

Those figures show that fracking represents only a fraction of the state’s overall water demand, said Thom Kerr, acting director of the Colorado Oil and Gas Conservation Commission.

But state water and energy regulators, who predict fracking water consumption will rise to nearly 19,000 acre-feet by 2015, say they can’t accurately predict how much water oil and gas drilling will consume in the future because it’s “extremely difficult” to predict how fast new well drilling will occur, according to a COGCC and Colorado Water Conservation Board report issued in January projecting the water needs of fracking in the next three years.

Fracking, the report says, currently consumes 0.08 percent of the state’s entire water supply.

As questions fly about fracking’s water consumption, the Berthoud-based Northern Colorado Water Conservancy District, one of the region’s chief water suppliers, wants to ensure water for fracking doesn’t stray far from its source.

In February, Northern Water affirmed its policy that no water coming from the district’s Colorado-Big Thompson Project, or C-BT, can be used for energy development outside the district’s boundaries. Northern Water’s district includes Longmont, Greeley, Loveland and Fort Collins, and stretches along the South Platte River to Julesburg.

The C-BT Project siphons water from the Colorado River west of the Continental Divide and pipes it beneath Rocky Mountain National Park to provide Front Range cities with water from the Western Slope. Horsetooth Reservoir is part of the C-BT project, one of Fort Collins’ two sources of drinking water.

Making a killing

Water consumption for fracking may be small, but selling that water can be a big deal for Northern Colorado cities and towns.

Sometimes, the money starts rolling in nearly overnight.

The Coloradoan asked 32 municipalities in Larimer and Weld counties to report how much bulk municipal water they sold or rented to the energy industry in 2011, including oil and gas companies and their water haulers.

Of the 26 that responded, seven were able to report selling water specifically to oil and gas companies and water haulers. The rest either did not sell water to the energy industry last year or do not track what kind of companies buy their water.

In Larimer County, Fort Collins, Timnath, Wellington and Estes Park didn’t sell any water to the energy industry last year.

Windsor is the local “phenomenon,” however.

The town didn’t sell a drop to the oil and gas industry in 2010 and 2011, selling only to construction and excavating companies. The most the town earned in either year was about $12,900, selling 826,900 gallons, or roughly 2.5 acre feet.

But that changed as quickly as drilling rigs started rolling in.

Between Nov. 1, 2011 and March 1, 2012, Windsor made $16,876 selling more than 8.4 million gallons of water to six oil and gas well servicing companies. So far this year, Windsor’s total bulk water sales have totaled more than $22,000 and 8.4 million gallons.

The water needs of the industry have hit the town of Windsor so fast that town officials haven’t had the chance to process what it means for the town’s water supply and how to deal with selling water to the industry in the future, Arnold said.

“I think we now need to assess, does it make sense to centralize water sales?” he said. “It’s really kind of is a phenomenon. I think it’s kind of starting to make us look at, where are we on this curve, and are there any issues we need to address like centralized water (sales)? Do we want to limit sales of water to this industry? There’s been no policy discussion on this. I would define it as an emerging issue.”

Greeley, in the heart of Northern Colorado’s oil and gas patch, is another big benefactor of the industry’s thirst for water.

The city made $1.6 million in 1,507 acre-feet of bulk water sales in 2011, up from $951,000 in 2010, mostly to the oil and gas industry, said Jon Monson, director of Greeley Water and Sewer.

Much of the water Greeley sells to the oil industry comes from the Poudre River.

Northern Water requires each municipality obtaining C-BT water to sign an affidavit affirming that it will not allow the water they sell to stray outside Northern Water’s boundaries.

But Greeley, by far Northern Colorado’s biggest seller of municipal water to the oil and gas industry, doesn’t track where its water goes because the city has access to enough water from the Poudre River and other sources to prevent C-BT water from leaving the area, Monson said.

Also reaping big benefits from selling water to the energy industry is the city of Fort Lupton in southern Weld County, where officials are using the windfall of cash to pay down $20 million in debt the city racked up from replacing its water treatment plants in the 1990s, Fort Lupton city administrator Claud Hanes said.

Fort Lupton, a Northern Water customer which gets its water from Carter Lake near Loveland and has interests in the controversial Windy Gap Firming Project, earned $677,808 selling about 474 acre-feet of municipal water to the oil and gas industry in 2011 – 99 percent of the city’s total bulk water sales last year.

A decade ago, the city was making less than $10,000 annually on water sales to drillers. That changed nearly overnight in 2008, when water sales to the energy industry reaped the city nearly $249,000, up from about $9,000 the previous year.

“It’s been a benefit to us, a great benefit,” Hanes said.

Supply and demand

Though state oil and gas regulators say fracking doesn’t amount to much when considering future water supplies, environmentalists are worried the state and the oil and gas industry have their calculations wrong.

“They don’t understand what the cumulative impact is going to be if we put in another 100,000 wells,” said environmentalist Phillip Doe of Littleton, a former environmental compliance officer for the U.S. Bureau of Reclamation. If all the wells that exist today were fracked multiple times, “it’s not hard to come up with calculations that come up with Denver’s annual water use. This stuff goes underground and never comes back.”

In other words, the water is “used to extinction,” he said.

Though the state doesn’t have much data on the exact amount of water used to extinction in a fracking operation, some of the water does return to the surface, but it takes time, Kerr said.

“A fairly substantial amount of that water does not come back as flowback,” he said. But, “over the life of the well, that water will continue to come back.”

Regardless, he said, the amount of water disappearing forever down a well bore is negligible.

Doe accused the industry of forcing state regulators to accept energy companies’ projections for the amount of water they use without verifying that independently.

“We don’t know what we can afford in terms of fresh water supply,” he said. “We should know how much water we’re using. If it were a rational process, we would be asking the question, How much water is (drilling) going to require? How many wells are they going to drill? How many times are they going to be re-fracked, and at what intervals, and what is the overall water demand and can we afford that?”

There’s a problem with cities and towns selling water for fracking, too, said Gary Wockner, executive director of Save the Poudre and Clean Water Action in Fort Collins.

Loveland, Longmont and Greeley – all cities selling millions of gallons of bulk water to anyone who wants it – are part of Northern Water’s Windy Gap Firming Project, which involves building the proposed Chimney Hollow Reservoir southwest of Loveland as a way to firm-up future water supplies for Front Range cities.

The Windy Gap environmental impact statement says nothing about using water from Windy Gap for fracking, Wockner said.

“The more water we use for drilling and fracking, the less water that’s available for cities, farms and rivers,” he said. “This is a new industrial use of water. This also uses water to extinction.”

He said the overall environmental impact of using Windy Gap water for fracking needs to be analyzed as part of the environmental assessment for the project.

“We would need to know how much (water for fracking cities are) selling today, and a projection of how much they would be selling in 10 or 20 years,” he said.

But what environmentalists believe could be a large amount of water being used for oil and gas, Northern Water says is just a drop in the bucket.

Most cities that obtain C-BT water are allotted more water than they use each year, and they have the right to rent or sell it as they please, Northern Water spokesman Brian Werner said.

“It’s getting a lot of attention for the water that’s being used, but in the grand scheme of things, it’s not that much of the total water supply,” he said.

WHO’S SELLING WATER FOR DRILLING

Cities and towns sell or rent excess municipal water to a variety of industries, including agriculture, construction and energy. The Coloradoan asked 32 municipalities in Larimer and Weld counties to report how much water they sold to water haulers and oil and gas companies for use in oil and gas well drilling in 2010 and 2011. Of the 26 that responded, seven were able to report selling water specifically to oil and gas companies and water haulers. Because many cities do not track which industry their bulk water customers are part of, many reported only the total amount of bulk water they sold and how much revenue they generated from the sales. State law prevents cities and towns from revealing the names of their water customers, however, many cities reported that oil and gas-related water haulers are some of their biggest water customers.

 

PUBLICATION-TYPE: Newspaper

Copyright 2012 Fort Collins Coloradoan
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