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Emergency Flood Loan Completed for St. Vrain Creek and Left Hand Lake
More than seven years after the devastating floods of September 2013, the final project supported by a Colorado Water Conservation Board (CWCB) Emergency Flood Loan Program — the St. Vrain and Left Hand Lake No. 4 Repair — has been completed.
In the immediate aftermath of the flooding, CWCB awarded more than $23 million in interest-free and no-payment bridge loans to affected water suppliers for repairing damaged infrastructure. Lake No. 4, located along the St. Vrain Creek was filled with floodwater and debris, eventually causing its embankment dam to collapse. The St. Vrain and Left Hand Water Conservancy District received a loan of up to $4.5 million to repair the dam and construct a new emergency spillway to prevent damage in any similar flood event.
The 2013 Emergency Flood Loan Program served as a model for the current Wildfire Impact Emergency Loan Program created in response to the 2020 wildfire season. The Wildfire Impact Emergency Loan Program has already authorized more than $9 million in low interest loans.
Click here for all the inside skinny from Northern Water:
Spring Water Users Meeting
Tuesday, April 6, 2021, 8 a.m. to noon, virtual meeting via Zoom
Each spring Northern Water meets with Colorado-Big Thompson Project allottees and water users to preview the upcoming water delivery and irrigation season, learn about current water and snowpack conditions, runoff and streamflow predictions, progress on future water projects and more. After a discussion of the region’s water outlook, attendees will be able to offer input about the 2021 C-BT quota. This year, attendees also will be able to learn about project updates, as well as Northern Water’s response to the East Troublesome fire in Grand County.
A link to the Zoom meeting will be distributed in the days before the session to those who register.
According to the U.S. Department of Agriculture National Water and Climate Center’s snowpack report, the Wolf Creek summit, at 11,000 feet of elevation, had 31.6 inches of snow water equivalent as of 2 p.m. on March 31.
That amount is 101 percent of the March 31 median for this site.
The average snow water equivalent for this date at the Wolf Creek summit is 31.2 inches.
The Wolf Creek summit is the only location in the San Miguel, Dolores, Animas and San Juan River Basins that is over 100 percent of the March 31 median in terms of snowpack.
Almost half of the United States is currently experiencing some level of drought, and it is expected to worsen in upcoming months. Experts say the dry conditions could put a strain on water supplies and have important effects on the environment, such as increasing susceptibility to fire this summer.
The map above, built with data from the U.S. Drought Monitor, depicts areas of drought in the continental U.S. on March 23, 2021. It is based on measurements of climate, soil, and water conditions from more than 350 federal, state, and local observers around the country. NASA provides experimental measurements and models to this monitoring effort.
The hardest hit areas are in Arizona, Utah, Nevada, Colorado, and New Mexico, where severe to exceptional drought developed in 2020 and persisted through winter. A weak summer monsoon season and ongoing La Niña conditions have stifled precipitation. La Niña is characterized by cooler than normal sea-surface temperatures in the central and eastern tropical Pacific Ocean. The associated weather patterns can push the jet stream north and cause it to curve, diverting storms and precipitation away from the region.
The map below shows surface soil moisture as of March 29, 2021, as measured by the Gravity Recovery and Climate Experiment Follow-On (GRACE-FO) satellites. The colors depict the wetness percentile; that is, how the levels of soil moisture compare to long-term records for the month. Blue areas have more abundant water than usual, and orange and red areas have less. The darkest reds represent dry conditions that should occur only 2 percent of the time (about once every 50 years).
In California, many of the state’s reservoirs are currently below historical averages due to an absence of strong winter storms and below-average snowpack in the Sierra Nevada. As of March 2, the state closed out its fifth consecutive month with below-average rain and snow.
The current event fits the pattern of a long megadrought episode over the past two decades. A recent study showed 2000-2018 has been the driest period in the U.S. Southwest since the late 1500s.
“The larger megadrought and this event are certainly not independent of one another,” said Andrew Badger, an author of the study and researcher at NASA’s Goddard Space Flight Center. “While the megadrought period is primarily focused on the southwest U.S., the current drought outlook also has a larger spatial extent as it extends farther east towards the Great Plains.”
The map below shows shallow groundwater storage as of March 29, 2021, as measured by the GRACE-FO satellites. The colors depict how the amount of groundwater compares to long-term records (1948-2010). Groundwater in aquifers is an important resource for crop irrigation and drinking water, and it also can sustain streams during dry periods. Groundwater takes months to rebound from drought, though, as it has to be slowly and steadily replenished by surface moisture that seeps down through soil and rock to the water table.
The National Oceanic and Atmospheric Administration (NOAA) announced in its spring outlook that warmer-than-average temperatures this spring, below-average precipitation, and low soil moisture could lead drought conditions to expand in the Great Plains and southern Florida. Winter wheat crops already took a hit from a severe cold outbreak in February.
“As with any extreme event, pinning down the root causes can be challenging. The important thing to remember is the underlying conditions of the megadrought that are present now were present for the 2012-2013 drought,” said Badger. “These conditions can prime the surface for drought events to become more extreme when the right atmospheric conditions arise.”
NASA Earth Observatory images by Lauren Dauphin, using GRACE data from the National Drought Mitigation Center and data from the United States Drought Monitor at the University of Nebraska-Lincoln. Story by Kasha Patel.
Further west, an area of exceptional drought moved to extreme conditions across parts of Montezuma, La Plata and Archuleta counties.
Across much of western Colorado, exceptional and extreme conditions continue to dominate as it has for months. Exceptional drought remains in areas of Montezuma, La Plata, Archuleta, San Miguel, Montrose, Mesa, Delta, Garfield, Rio Blanco, Moffat, Routt, Grand and Eagle counties. Most of the remainder of those counties are in exceptional drought.
Extreme drought is also present across southern Las Animas, southwest Baca, and central Kiowa counties.
Recent heavy snowfall brought snow water content close to average as of mid-March across most of Colorado despite the ongoing areas of significant drought.
Overall, 15 percent of the state is in exceptional drought, unchanged from the prior week. Extreme drought is also unchanged at 17 percent, while severe conditions remain steady at 30 percent. Moderate drought increased from 30 to 31 percent, while abnormally dry conditions increased from seven to eight percent. None of Colorado is free from drought. Percentages do not total 100 due to rounding.
One year ago, 32 percent of the state was drought-free, with an additional 20 percent experiencing abnormally dry conditions. Moderate drought was impacting 44 percent of the state, with three percent in severe drought.
Just over 4.6 million people in Colorado are in drought-impacted areas, unchanged from last week.
High Plains Drought Monitor March 30, 2021.
West Drought Monitor March 30, 2021.
Colorado Drought Monitor March 30, 2021.
US Drought Monitor one week change map ending March 30, 2021.
Can technology save the Colorado River? A growing number of entrepreneurs and investors think so. To that end, the Denver-based Colorado River Basin Fund is raising $5 million to help promising new water technology companies bring their wares to market.
“We want to nurture startups that need access to money,” said Will Sarni, a general partner in the fund. “That’s where we think we can be part of the solution.”
Worldwide dozens of investment funds target water, through stocks in publicly traded utilities and direct investments in existing technology and infrastructure companies, among others. Just like some mutual funds focus on gold stocks or energy stocks, there are funds that focus on water stocks, such as the Invesco S&P Global Water Index.
But Sarni says that the newly formed Colorado River Basin Fund is the first private investment initiative focused on one place, the Colorado River.
The launch of the new investment fund comes as concern over the Colorado River intensifies. The river is mired in a 20-year drought which has caused its flows to decline by more than 16 percent since 2000, according to the U.S. Geological Survey. Those declines are expected to continue as the climate warms and mountain snow packs shrink.
Lon Johnson, a general partner in the new fund, said it is focused not on profiteering off the sale of water rights, but in finding technical solutions to keep the seven-state Colorado River system viable.
“Often when you think about investment into the West, your mind would go to the exploitive side. How do we profit off this crisis? That is not what this is about,” Johnson said. “What we’re seeking to do is identify the technologies that address scarcity and water quality within the basin. And then help them commercialize and scale.”
Researchers and entrepreneurs are pursuing dozens of technologies that could help the river become more sustainable even as population demands grow and climate change threatens to further reduce flows.
Sarni said the Colorado River Basin Fund will focus largely on satellite and digital technologies that will help farmers use their water more efficiently and help smart homes do the same.
Sarni and Johnson join a growing group of investors and accelerators hoping to speed the creation of new solutions by backing promising startups. Among these is an international initiative called Imagine H20, which has raised more than $500 million to date, according to its website, to help fund new technologies tackling worldwide scarcity and water quality issues.
And several young water technology companies are already in the market, including Boss DeFrost, a Denver-based company whose device allows restaurants to dramatically slash the amount of water they use to thaw meat and other foods.
In Montrose there is the Delta Brick and Climate Company, which is dredging reservoirs and using the clay to make bricks. The brick ovens eventually will be fired with methane captured from leaking coal mines. The strategy frees up space in reservoirs, allowing them to store more water. And by removing methane from the atmosphere, the company plans to generate carbon credits that can be sold, generating revenue in addition to that generated from the sale of bricks. Chris Caskey is founder of the three-year-old startup and has won small government grants to fund operations thus far.
He said he’s been frustrated by the traditional investment community, which often requires entrepreneurs to come up with hundreds of thousands of dollars in seed capital before it will formally invest, and which can impose aggressive timelines on products to allow investors to cash out quickly.
But Johnson said he and Sarni have years of experience working in the water sector and that they are aware of the challenges.
“We believe traditional ‘tech’ investors aren’t always a natural fit for water entrepreneurs because those investors may have unrealistic expectations for growth and scale, and then ultimately on the investment return,” Johnson said. “The water sector is fragmented, and growth takes time and skill…our investment strategies and how we intend to work with companies after we invest will reflect this.”
Jerd Smith is editor of Fresh Water News. She can be reached at 720-398-6474, via email at firstname.lastname@example.org or @jerd_smith.
It’s important to note that a shortage means a reduction in the Colorado River supply available to Arizona. While we may have less water coming to Arizona from the Colorado River in 2022, the river will continue to be a vital source of water for generations to come.
In 2021, the river is currently operating in a “Tier Zero” status, requiring the state to contribute 192,000 acre-feet of Arizona’s 2.8 million acre-foot annual entitlement to Lake Mead. This contribution is coming entirely from the Central Arizona Project (CAP) system.
Based on the current hydrology, it is likely that the U.S. Bureau of Reclamation will elevate the shortage level to a “Tier 1” in 2022. This would require Arizona to reduce uses by a total of 512,000 acre-feet, again, borne almost entirely by the CAP system. While significant, the high priority CAP water supply for cities and tribes is not affected due to the implementation of agreements among Arizona water users.
We are prepared for Tier 1 reductions because Arizona water users have been working collaboratively for many years to protect our Colorado River water supply.
Specifically, the seven states in the Colorado River Basin and the U.S., and the Republic of Mexico, developed plans for managing the Colorado River, known in the U.S. as the Drought Contingency Plan (DCP), which lasts until 2026. Arizona prepared a unique and innovative way to implement the plan in Arizona through its DCP Steering Committee.
The DCP Steering Committee, which included more than 40 representatives of tribes, cities, agriculture, developers, environmental organizations, and elected officials, worked collectively to share the risks and benefits of the DCP. Arizona’s DCP implementation plan represents the best of Arizona water management: collaboration, cooperation, and innovation.
The plan shares resources and mitigates the impacts of shortage reductions. In the plan, some are committing to leaving extra water in Lake Mead to reduce future risks, while others are sharing water with the most severely impacted of the state’s water users, central Arizona agriculture Together these efforts reduce the pain of the near-term reductions while addressing risks of future shortages. The result is the Arizona water community is prepared, even in the midst of a decades-long drought.
The actions taken by Arizona’s water-community stakeholders, legislature and by Governor Ducey manage the immediate risk to supplies on the Colorado River, providing time while we develop new rules and programs to sustain the river after 2026.
As we face the prospect of a hotter and drier future, we are confident that with our long history of successful collaboration among our diverse stakeholders – agriculture, tribes, cities, environment, and industry, we will continue to find innovative and effective solutions to sustain Arizona’s Colorado River supply.
As the state tries to reform its relationship to drilling, an expensive task awaits.
When an oil or gas well reaches the end of its lifespan, it must be plugged. If it isn’t, the well might leak toxic chemicals into groundwater and spew methane, carbon dioxide and other pollutants into the atmosphere for years on end.
But plugging a well is no simple task: Cement must be pumped down into it to block the opening, and the tubes connecting it to tanks or pipelines must be removed, along with all the other onsite equipment. Then the top of the well has to be chopped off near the surface and plugged again, and the area around the rig must be cleaned up.
There are nearly 60,000 unplugged wells in Colorado in need of this treatment — each costing $140,000 on average, according to the Carbon Tracker, a climate think tank, in a new report that analyzes oil and gas permitting data. Plugging this many wells will cost a lot —more than $8 billion, the report found.
Companies that drill wells in Colorado are legally required to pay for plugging them. They must also put forward financial assurances in the form of bonds, which the state can call on to pay for the plugging. These bonds are meant to incentivize cleanup and to protect the state, in case a company is unable to pay. But as it stands today, Colorado has only about $185 million in bonds from industry — just 2% of the estimated cleanup bill, according to the new study. The Colorado Oil and Gas Conservation Commission (COGCC) assumes an average cost of $82,500 per well — lower than the Carbon Tracker’s figure, which factors in issues like well depth. But even using the state’s more conservative number, the overall cleanup would cost nearly $5 billion, of which the money currently available from energy companies would cover less than 5%.
This situation is the product of more than 150 years of energy extraction. Now, with the oil and gas industry looking less robust every year and reeling in the wake of the pandemic, the state of Colorado and its people could be on the hook for billions in cleanup costs. Meanwhile, unplugged wells persist as environmental hazards. This spring, Colorado will try to tackle the problem; state energy regulators have been tasked with reforming the policies governing well cleanup and financial commitments from industry.
“The system has put the state at risk, and it needs to change,” said Josh Joswick, an organizer with the environmental group Earthworks. “Now we have a government that wants to do something about it.”
THE FIRST WESTERN OIL WELL broke ground in Colorado in 1860. Drilling has been an important part of the state’s economy ever since; as of 2019, Colorado ranked in the sixth and seventh in the nation for oil and natural gas production, respectively.
When it comes to cleanup, Colorado uses a tiered system known as blanket bonding. Small operators can pay ahead with bonds on single wells. Drillers with more than 100 wells statewide pay a fixed reclamation fee of $100,000, regardless of the number of wells. A similar system also applies to wells on federal public land in the state. Large companies pay a single $150,000 bond, which covers unlimited federal public land wells throughout the country. There are about 7,400 public-land wells capable of producing oil or gas in Colorado, according to the Bureau of Land Management.
When a driller walks away or cannot pay for cleanup, the well enters the state’s Orphan Well Program, which works to identify and plug these wells. There are about 200 wells in the program right now, according to the state. But a closer look at state data reveals a large number of wells at risk. Nearly half of the state’s unplugged wells are stripper wells — low-producing operations with small profit margins often at the end of their lifespans. These wells are particularly vulnerable to shifts in oil prices. That means they change hands often. “This is a common tactic in the oil and gas industry: Spinning off liabilities to progressively weaker companies, until the final owner goes bankrupt and none of the previous owners are on the hook for cleanup,” said Clark Williams-Derry, a finance analyst with the Institute for Energy Economics and Financial Analysis.
There are also inactive wells: Nearly 10% of the state’s wells have not produced oil or gas in at least two years, according to a Carbon Tracker analysis of state permitting data. Unlike some of the neighboring oil states, Colorado requires that companies pay a single bond on each inactive well of this sort. This costs either $10,000 or $20,000, depending on the depth of the well. In theory, these payments protect the state, in case the well owner goes bankrupt. But in Colorado, it’s still far cheaper for energy companies to pay the cost of that single, unused well — and the small annual premium payments on the bond — than to actually plug it. “Colorado clearly makes it cheaper to idle a well than to clean it up,” Williams-Derry said.
In Colorado, just two companies are responsible for nearly 70% of the bonds for currently inactive wells. One is Noble Energy Inc., which was purchased by the global oil giant Chevron in October 2020. The other is Kerr-McGee, a subsidiary of Occidental Petroleum. Kerr-McGee was responsible for the 2017 home explosion in Firestone, Colorado, that killed two people. Last year, the COGCC fined the company more than $18 million for the accident, by far the largest fine in state history. Both companies still own large numbers of wells in the Denver-Julesburg Basin, the prolific oil and gas formation beneath central and eastern Colorado. And the mass desertion of wells is not hypothetical: In fall of 2019, a small company called Petroshare Corporation went bankrupt and left about 90 wells for the state to cleanup. That alone will cost Colorado millions of dollars. Last summer, when California’s largest oil driller filed for Chapter 11 bankruptcy protection, it left billions in debt and more than 17,000 unplugged wells.
The oil and gas industry is already mired in a years-long decline that raises doubts about its ability to meet cleanup costs. In six out of the past seven years, energy has been either the worst- or second-worst-performing sector on the S&P 500. And the economic fallout from COVID-19 has only accelerated the decline. Oil prices hit record lows in 2020. The industry’s debt approached record levels, and thousands of oilfield workers lost their jobs, Colorado Public Radio reported. Many companies went bankrupt, including 12 drilling companies and six oilfield service companies in Colorado, according to Haynes and Boone LLP, a law firm that tracks industry trends.
IN 2019, A NEW LAW completely overhauled the state’s relationship to oil and gas. This spring, Colorado oil and gas regulators are tasked with reforming the financial requirements for well plugging. It’s a big deal, especially in an oil state like Colorado: The law gives local governments more control over oil and gas development, and it rewrote the mission of the COGCC, the state’s energy regulator. The COGCC has subsequently banned the burning off or releasing of natural gas, a routine drilling practice, and instituted a broad range of wildlife and public health protection policies. Recently, it voted for the nation’s largest setback rule, which requires oil and gas operations to stay at least 2,000 feet from homes and schools.
The deep divide between the true cost of cleanup and what industry has so far ponied up is not news to Colorado regulators. In a 2017 letter to lawmakers, the COGCC estimated that the average costs of plugging wells and cleaning up the drilling site “exceed available financial assurance by a factor of fourteen.” With this new rulemaking process, Colorado has a chance to make up this gap.
How to handle this looming liability remains an open question, said John Messner, a COGCC Commissioner. The rulemaking process is still in its early stages and will take months. The commission is asking stakeholders of all kinds — industry, local governments, environmental groups and more — to submit suggestions and opinions to the commission. There are several different methods for how best to reform the process, Messner said. That might involve leaving the current structure in place, while increasing the bond amounts, including on individual well bonds. It might mean a revamped tiered system, where more prolific producers pay more, or a different fee structure based on the number of drilled wells. Messner mentioned the option of a bond pool, where companies pay into a communal cleanup fund and, at least in theory, provide industry-wide insurance to guard against companies defaulting on cleanup obligations. Messner stressed that no formal decisions have been made and that the final rule could involve some combination of these and other tools.
I asked Messner about balancing the pressing need to increase cleanup requirements with the possibility of companies walking away from their wells if the cost to operate in Colorado spikes. “It’s a real risk,” Messner said. The Colorado Oil and Gas Association expressed a similar concern in an email to HCN.
“When it comes to financial assurance for current or future wells, we need to ensure that the potential solution doesn’t create an even bigger problem by raising the cost of doing business in Colorado for small businesses,” said COGA President Dan Haley in a statement. “Regulatory changes in the past two years alone are costing oil and gas businesses an extra $200 million a year. For our state to stay competitive, regulators and lawmakers need to be cognizant of that growing tally and the rising cost of doing business.”
But as it stands today, oil and gas companies aren’t realistically paying anywhere near the true cost of cleaning up their drilling sites. And with the industry’s murky financial future, experts predict more and more sales of risky wells to less-wealthy operators, until the state could end stuck with the final cost.
“It’s like a game of hot potato,” Williams-Derry said, “except that when the potato goes off, it’s the public who loses.”
Nick Bowlin is a contributing editor at High Country News. Email him at email@example.com