Colorado Supremes rule that coalbed methane wells must be monitored

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From the Associated Press (Judith Kohler) via Forbes:

Groundwater pumped out during coal-bed methane drilling is not just a waste product, the court said, ruling on a lawsuit by landowners who say their water supplies are threatened by companies using groundwater to free natural gas in coal seams….

The state engineer’s office and BP America Production Co. argued that water is a byproduct of drilling and should be regulated by state oil and gas rules. BP America re-injects the water it uses into the ground.

But the Supreme Court upheld a state water court ruling that the water is put to beneficial use and, therefore, is subject to state water laws. The justices rejected the argument that water pumped out while drilling gas was “merely a nuisance.”

Here’s a release from Colorado Trout Unlimited and Western Resource Advocates:

April 20, 2009
For Immediate Release
Contact: Mely Whiting, 720-470-4758
Bart Miller, 303-444-1188 x.219

Colorado Supreme Court rules in favor of ranchers, Colorado streams

In a first of its kind decision in Colorado, the Colorado Supreme Court today ruled in Vance v. Wolfe that coal bed methane producers have to adhere to the same water rules and regulations as other state water users.

For years, CBM producers were allowed to pump large amounts of tributary groundwater (groundwater connected to nearby streams) as part of their extraction operations without a water right or approvals from the State Engineer and the water courts. Water keeps the CBM in place in underground formations. When groundwater is pumped, the gas is released from the formation and can be captured by producers. CBM producers often re-inject most of the water underground, but in different, deeper formations, so the water is not available to other water users or the nearby streams as it was before the CBM operation.

A State Engineer permit and water court approval are usually required before tributary groundwater can be pumped. These approvals are designed to ensure that the water rights of others, including instream flow rights held by the Colorado Water Conservation Board, are not injured. CBM producers have for years argued that they are not “using” the water but are simply disposing of it, therefore they are not subject to these requirements.

In 2005, two ranchers and water rights owners in Archuleta and La Plata county sued the State Engineer, arguing that his failure to require British Petroleum (BP) to get permits and water court approvals to pump tributary groundwater as part of the company’s CBM production was illegal. Judge Gregory G. Lyman, the water judge in Durango, agreed and the State Engineer and BP appealed to the Colorado Supreme Court. Today’s decision affirms Judge Lyman’s decision, finding that the extraction of tributary groundwater for CBM production is a beneficial use of water subject to water rights administration and approvals by the water courts.

“This is a victory for both ranchers and our streams,” said Mely Whiting, an attorney with the conservation group Trout Unlimited, which participated in the appeal in support of the ranchers. “The decision sends a strong message that just because you are part of the oil and gas industry, you are not above and beyond Colorado water laws.”

“The court made a sound ruling based on a common-sense reading of Colorado law,” said Bart Miller, with Western Resource Advocates, also participating in the appeal by filing an amicus—“friend of the court”—brief on the appeal. “The decision implicitly recognizes the scarcity and value of water in Colorado. It’s an important decision.”

Whiting gave credit for the ruling to the Vance and Fitzgerald families, the ranchers who brought the suit, as well as to Sarah Klahn of the Denver law firm of White & Jankowski. “They did the lion’s share of work, and they deserve congratulations for this important achievement,” she said.

Trout Unlimited is the nation’s largest coldwater conservation organization, with 140,000 members dedicated to conserving, protecting, and restoring North America’s trout and salmon fisheries and their watersheds.

Western Resource Advocates protects the West’s land, air, and water. We work in collaboration with other conservation groups, hunters and fishermen, ranchers, American Indians, and others to ensure a sustainable future for the West.

More coverage from the Denver Post (Mark Jaffe):

The ruling means energy companies must prove to the state engineer that their drilling is not impinging upon senior water rights. If the methane wells do affect neighboring water supplies, companies must provide a plan for increasing those supplies. “In Colorado, water is just as important as gas, and this ruling protects water from drilling,” said Bill Vance, an Archuleta County rancher who was a plaintiff in the lawsuit…

The Colorado Oil and Gas Association said the ruling will “just add more fuel to the fire of uncertainty affecting the oil and gas business in Colorado.” About 5,000 coal-bed methane wells operate in the state, primarily in Las Animas, Archuleta and San Juan counties, according to the state. The San Juan Basin wells alone remove nearly a billion gallons of water a year, according to state data.

Vance and a neighbor, Jim Fitzgerald, filed a lawsuit in 2005 claiming that the state engineer was failing to regulate the wells under state water law. The ranches, at the foot of the HD Mountains in the San Juan Basin, depend on seeps and springs to water hay and alfalfa fields, Vance said. The plaintiffs said that energy companies benefit by removing the water to release the methane. Under Colorado law, any “beneficial use” of water needs a permit.

In oral arguments before the Supreme Court, the state Attorney General’s Office said the water removed from coal seams to get the methane is only an incidental byproduct. BP American Production Co., which operates 695 wells in the San Juan Basin affected by the lawsuit, intervened in the case to support the state.

The Supreme Court agreed with the ranchers and a lower court ruling. Five justices supported the decision, one dissented in part and one did not participate.

In a statement, BP said it was “disappointed” in the ruling but will comply with state water laws and ensure that “senior water rights are protected.” State Engineer Dick Wolfe said only wells that affect tributary streams will need a permit and only those affecting senior water rights will need augmentation plans. He said he does not expect all 5,000 methane wells to need a permit. The energy companies should not have a problem meeting their augmentation plans, Wolfe said. “These are companies with resources to develop a plan, and these operations are not in a highly urban part of the state,” he said. A bill working its way through the legislature, supported by Wolfe and water advocates, would give energy companies a year to file for the permits and until 2012 to file augmentation plans.

More Coyote Gulch coverage here and here.

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