The Colorado Supreme Court’s ruling on May 2nd that struck down bans and moratoriums on fracking re-opens the door to oil and gas development in Boulder, Broomfield, Fort Collins, Lafayette, and Longmont. But don’t expect these communities to suddenly have a change of heart and usher in industry. The legal victory has assured two things: one, a fight about fracking at the ballot box, and two, industry should be on the lookout for other creative production-halting threats.
The day after the Supreme Court’s ruling, the Longmont City Council discussed a proposed ordinance that is intended to prohibit the city from leasing water to companies involved in oil and gas, or to communities on Longmont’s eastern border.
As cities and counties scrapple with a patchwork of regulations and local control jurisdictional debates over who controls what (and where), agenda-driven local elected officials may see a way to prevent some oil and gas development via water-related policies. Colorado’s cities and local water providers have the unique ability to hold multi-use water rights in amounts beyond their current immediate needs, a practice that is disallowed for private entities under the anti-speculation doctrine of Colorado water law. As a result, municipal and quasi-governmental local water entities can provide a reliable and legal water source for the oil and gas industry from their water rights reserves approved for industrial uses. Alternatives to municipal leasing exist, but oftentimes are more expensive and require additional regulatory and legal hurdles.
Fracking is the game changer on oil and gas production, and water is the driving force behind fracking; if municipalities stop the flow of water to oil and gas then they’ll force operators to expend additional resources looking far and wide for water supply, despite the fact that it could be legally obtained from the city. This will add to the economic disadvantages already felt by producers in Colorado. The cessation of municipal water leasing to operators could also have other unintended consequences, including increased trucking and pipelines, the removal of water from ecologically sensitive areas, or permanent buy up and removal of water from agriculture (aka “buy and dry.”) While Colorado has been a leader in creating a model for regulations, those water standards are geared towards health and safety, not sourcing.
If you’re an oil and gas operator, where does your water come from? Is it from a secured, legal and reliable source you know won’t be changing?
There are times when properties, circumstances or unique contract arrangements require above-and-beyond aid to ensure your project or purchase goes smoothly. And there can be a lot of data, historical documents, decrees and variables to trail in just one water right.
At Ponderosa Advisors, we’ve dedicated our practice to understanding energy, agriculture, water and how they intersect. Markets, analytics, data research – you name it, we’ve done it.
While our online water rights mapping platform Water Sage supports water sourcing and management in numerous sectors, sometimes needs extend beyond what computers can predict and maps will show you on the surface. As the debate about fracking continues, we expect water sourcing will remain a key issue. We operate with a fundamental belief that access to information and transparency in markets facilitates better decision making, which benefits everyone. If you need clarity on your water or help finding a new water sourcing solution, drop us a line – we’re here to help you navigate Colorado’s water ways.