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E&P Role Disputed in Northern Colorado Water Price Spike
Persistent drought in recent years is said to have played a role, but exploration and production (E&P) activity is being cited as another reason water prices in Northern Colorado have skyrocketed in the past three years. However, state water officials caution that the numbers can be overstated.
A recent analysis in regional business publication Northern Colorado Business Report indicated that prices were four times higher for water from the Northern Colorado Water Conservancy District’s (NCWCD) Colorado-Big Thompson Project (C-BT) from a combination of drought and E&P demand. Water supplies that were selling for $7,000/acre-foot three years ago now are exceeding $28,000/acre-foot.
However, NCWCD spokesperson Brian Werner told NGI Wednesday he would not place cause of the price spikes solely on oil and natural gas operators. “The fact of the matter is that we’re growing again, and builders and cities need more water to satisfy the expanding population. In the overall scheme of things, oil/gas drilling operations are still a very small portion [less than 0.5%] of our water use.”
A spokesperson for the Colorado Oil & Gas Association (COGA) pointed out that E&Ps don’t buy water normally; they rent it for a year at a time, so it is hard to say the E&P activity is having an impact on prices.
“Oil and gas does very little buying of water, and C-BT doesn’t sell to oil and gas companies,” said COGA’s Doug Flanders. “It is really hard to say that oil and gas is moving that price up when they are not a player in the market to buy water. And in most cases the sellers of the water are either a farmer or a municipality.”
Last year a report by a trio of state agencies, including the Colorado Oil and Gas Conservation Commission (COGCC), concluded that water use for hydraulic fracturing (fracking) in Colorado was expected to grow by 35% by 2015 but would remain a minute portion of the state’s overall water use (see Shale Daily, Jan. 30, 2012).
COGCC and the state’s Division of Water Resources and Water Conservation Board took on the task of answering policymakers’ questions about how much water would be required by the increased use of fracking for unconventional drilling and found that it was no more than 0.1% of the state’s consumption. Agriculture is the big water user.
Indicative of the pinch between supply and demand, the NCWCD set a quota on purchases at 60% of a acre-foot, and the water district has 40 organizations and individuals trying to rent water supplies, but only one entity selling. Fort Collins, CO, which ordinarily rents water to farmers, has none available.
Among the 40 seeking supplies are Anadarko Petroleum Corp., one of the largest gas producers in Northern Colorado (Weld County) and A&W Water Service Inc., which transports water to E&P sites.
The water experts are convinced that the producers’ demand has led to both higher rental and sales prices for water, according to the Business Report analysis, but the NCWCD isn’t supporting that conclusion.
In 2012, water usage growth was estimated to be about 1,200 acre-feet, moving up to a total of 16,100 acre-feet for fracking, compared with 14,900 acre-feet in 2011. The COGCC report last year stated that Colorado uses about 16.35 million acre-feet annually, with agriculture accounting for 13.9 million acre-feet, or 85.5% of the state’s water use.
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