High court rules in favor of ranchers

In a landmark decision rendered Monday, the Colorado Supreme Court ruled that, when utilizing groundwater to extract coalbed methane (CBM), energy producers must adhere to the same water regulations as other state water users.

Considered a “first of its kind decision in Colorado,” the high court ruling affirms a lower court finding that removing groundwater to release CBM is a “beneficial use” and is, therefore, subject to permitting, adjudication and administration pursuant to the 1969 Water Right Determination and Administration Act, and the 2008 Colorado Ground Water Management Act.

The judgment comes in response to an appeal brought forth by the defendants in a 2005 lawsuit levied by Archuleta County ranchers William and Elizabeth Vance, and La Plata County ranchers James and Mary Fitzgerald. Defendants include Colorado State Engineer Dick Wolfe, P.E., Water Division 7 Engineer Rege Leach, P.E. and BP America Production Company.

In the 2005 action entitled Vance v. Wolfe, District Court, Water Division 7 Judge Gregory Lyman (the Water Court) ruled that the state’s prior appropriation system exists to protect water rights holders, and the extraction, storage and reinjection of water during the CBM mining process renders water inaccessible to other water rights holders such as the ranchers. It also amounts to an appropriation, whereby state engineers must not allow “out-of-priority” diversions without a well permit and, where necessary, a decree adjudicating an augmentation plan.

Energy producers extract trapped CBM natural gas through more than 4,000 collection wells drilled 2,000 to 3,000 feet into coalbed formations throughout the San Juan Basin of southwestern Colorado. Pumping water from deep underground coal cleats relieves hydrostatic pressure and allows the gas to flow to the wellheads.

The water, meanwhile, is pumped to the surface and temporarily held in storage tanks. While some is lost to evaporation, most is eventually injected back into designated geologic formations that lie significantly deeper than the aquifer from which the gas was initially removed. “Injection control wells” are used to return the water underground, each of which is regulated by the Colorado Oil and Gas Conservation Commission (COGCC).

While state engineers agreed that the ranchers own water rights that lie in sources tributary to the Piedra and Pine rivers, they argued that CBM wells are not “wells” as defined by the Ground Water Act, because they don’t put water to a beneficial use. Instead, they claimed that water pumped from the ground is merely “nuisance water,” or an unwanted by product and is exempt from the appropriation doctrine, and should be regulated exclusively by the COGCC.

The Water Court disagreed, stating that, “ … the removal of water is not incidental,” but rather “occurs as the result of the active and intentional pumping of water to accomplish the intended purpose.” While the mining operation is to obtain gas, not water, the withdrawal of water is the inevitable result of the CBM process. Therefore, the court concluded that CBM production requires a water well permit and a decree adjudicating an augmentation plan.

Under the Ground Water Act, “no new wells shall be constructed outside the boundaries of a designated ground water basin … unless the user makes an application in writing to the state engineer for a permit to construct a well.” The act defines a “well” as, “any structure or device used for the purpose or with the effect of obtaining ground water for a beneficial use from an aquifer.”

On Monday, the Supreme Court agreed.

“This is a victory for both ranchers and our streams,” said Trout Unlimited attorney Mely Whiting in receiving the high court judgement. “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.”

According to Whiting, this decision goes a long way in protecting existing individual water rights.

Bart Miller of Western Resource Advocates concurred. “The court made a sound ruling based on a common-sense reading of Colorado law,” he said. “The decision implicitly recognizes the scarcity and value of water in Colorado. It’s an important decision.”

Whiting and Trout Unlimited participated in the appeal in support of the ranchers. Miller and Western Resource Advocates also participated by filing an amicus — “friend of the court” — brief in the appeal.

Both Whiting and Miller were among a host of participating attorneys who either represented the plaintiffs or other outside organizations affected by or interested in the case, while not actually having been parties to it.

Attempts to reach attorneys representing the defendants were unsuccessful.

chuck@pagosasun.com