Origins of Produced Water Regulations in Colorado – A Brief History
By Dave Colvin, P.G., Leonard Rice Engineers
In the past, we have managed water and energy as separate resources. Our growing awareness of their critical inter-relationship has been described as the “water-energy nexus”. One of the current water-energy nexus issues being addressed is that of oil and gas produced water. Here in Colorado, this issue culminated in the recent development of new regulations for the administration oil and gas produced water.
The development of rules and regulations for the administration of produced water in Colorado have been in judicial and regulatory process since 2005. The technical and legal issues around produced water in Colorado are still being assessed and litigated. A recent seminar titled “Oil, Gas & Water – How They Do Mix in Colorado”, was held by the Colorado Groundwater Association on June 17th, 2011. An AWRA-Colorado summary of the seminar can be found at CGWA Seminar Summary Link.
“Produced water” is simply defined as any water produced during the extraction of oil and gas. Produced water has historically been exempt from Colorado’s prior appropriation doctrine (as put forth in the Water Right Determination and Administration Act of 1969 and the Ground Water Management Act) and was previously regulated solely by the Colorado Oil and Gas Conservation Commission (COGCC) as exploration and production waste. Produced water is typically discharged to surface water systems, evaporated in ponds, or most commonly, re-injected into deeper geologic formations.
Produced water issues were introduced into Colorado Water Court in a 2005 Division 7 (San Juan/ Dolores River Basin) case, Vance, et al., v. Simpson (Case No. 05CW63). This case was filed by a group of ranchers who claimed local produced water associated with coal bed methane (CBM) extraction was injuring springs with senior water rights. The Court ruled that the Colorado State Engineers Office (SEO) had the authority to regulate produced water, that CBM produced water is a beneficial use, and that CBM produced water shall be considered to be tributary unless proven otherwise.
The case was referred to Colorado State Supreme Court during an appeal process filed by BP America Production Company (“BP”). The Colorado Supreme Court tried Case No. 07SA293 (Vance, et al., v. Simpson) and upheld the lower court’s findings in an April 2009 ruling. The Supreme Court findings are summarized below and can be found at: Court Findings.
The function of water in the CBM extraction process played a central role in the Colorado Water Court and Colorado Supreme Court litigation. During the CBM process, water is pumped out of wells to reduce the hydraulic pressure in coal seams. As the pressure is reduced, methane gas desorbs and is extracted from the well.
During the Supreme Court trial, the SEO and BP legal counsels argued that CBM produced water is a nuisance and that there is no beneficial use to the oil and gas operations. The Supreme Court Justices disagreed, citing two 1988 gravel pit cases wherein courts ruled against gravel pit operators who made the same nuisance water claim.
Because the extraction of water is necessary to access CBM, the Justices ruled that the presence and extraction of CBM produced water are “integral components to the entire CBM process”. They elaborated that its extraction is thereby a beneficial use, that the SEO is required to permit oil and gas wells that produce water, and that produced water extraction is subject to Colorado Water Law.
CBM produced water was ruled to be subject to Colorado’s Prior Appropriation Doctrine because extracting the water makes it inaccessible to other water rights holders. Surface water discharge, evaporation ponds, and re-injection into deeper geologic formations all cause injury to senior water rights in a tributary ground water system.
Several other arguments were unsuccessfully presented by the SEO and BP. They claimed that COGCC has authority over oil and gas wells and SEO regulations would cause “overlapping, inconsistent, or conflicting regulatory requirements”. The SEO and BP also claimed that the Water Well Construction and Pump Installation Contractors Act exempts wells already covered under COGCC regulations. The court ruled that COGCC does not have jurisdiction over produced water and that it doesn’t have sole regulatory authority over oil and gas wells that also produce water.
Ultimately, the Supreme Court Justices upheld the lower court ruling and declared that CBM produced water is subject to Colorado water rights administration. The SEO has interpreted this ruling to apply to any well that produces water, thereby including all oil and gas produced water.
Although the court proceedings in Cases Nos. 05CW63 and 07SA293 referred specifically to CBM produced water, the principles argued apply to other types of produced water, and all produced water was covered under resultant legislation.
The Supreme Court ruling led to the Colorado State Legislature developing House Bill 09-1303 and Senate Bill 10-165. These bills gave the SEO the authority to initiate rule-making for Produced Water regulations. By the end of 2009 the SEO had adopted several geologic units as nontributary groundwater. The nontributary designations were determined by Glover analyses, MODFLOW models, and through geologic structure evaluation. (Supporting Documentation Link)
The many issues involved in administering produced water are yet to be resolved. For example, petitions for nontributary produced water status are ongoing in several areas. Future produced water management and administration will be subject to the technical and legal rigor common to other water well pumping in Colorado. The oil and gas industry is capitalizing on these new regulations and is finding ways to manage and/or treat the water so as to provide additional water resources to other users. The development of produced water regulation in Colorado is just one example of the issues around the water-energy nexus that our State will continue to address.