Court rules for ranchers in water suit

State justices' decision will affect 4,600 coal-bed methane wells

by Joe Hanel
Herald Denver Bureau

Article Last Updated; Tuesday, April 21, 2009 9:08AM

DENVER - The state Supreme Court has ruled for two Southwest Colorado ranching families who say coal-bed methane drilling has depleted their water supplies.

The ruling means that all 4,600 coal-bed methane wells across the state have two months to get a water well permit from the state Division of Water Resources.

The confusion brought about by this decision will just add more fuel to the fire of uncertainty affecting the oil and gas business in Colorado.

- Nate Strauch, spokesman, Colorado Oil and Gas Association

However, both sides in the case are backing a bill in the Legislature that would avert the chaos the ruling could cause. House Bill 1303 calls for a timeout on the need for water permits until March 31, 2010.

The case dates to 2005, when William and Elizabeth Vance and James and Mary Fitzgerald sued the Division of Water Resources, also known as the state engineer's office. BP joined the state government as a defendant. The plaintiffs won in a Durango water court decision in 2007, which the Supreme Court upheld Monday.

The Supreme Court ruled that water produced during coal-bed methane drilling is a "beneficial use" that requires the wells to be regulated under Colorado's water law system.

The decision means the ranchers can go to court and the state engineer's office to safeguard their water, said Sarah Klahn, attorney for the plaintiffs.

"They'll be able to protect their vested senior water rights," Klahn said.

The opinion, written by Justice Allison Eid, appears to affect only coal-bed methane wells, Klahn said. But it could open the door for challenges to other types of wells.

Colorado has about 34,000 active gas and oil wells, including coal-bed methane wells. If the state engineer had to issue water permits for each one, it could cost more than $7 million and require many new employees, according to an analysis by the Legislature's staff.

Even if only coal-bed methane wells were affected, the applications could swamp the state engineer's office. In anticipation of the ruling, lawmakers introduced HB 1303. The sponsors are Rep. Kathleen Curry, D-Gunnison, and Sen. Jim Isgar, D-Hesperus.

Isgar and State Engineer Dick Wolfe met Monday afternoon to see if the bill needs to be changed in the wake of the court ruling. But most people think the bill will work, Isgar said.

"Right now, it looks like the bill's in good shape, and it is needed because of this Supreme Court decision," Isgar said.

HB 1303 passed the House 60-0 on April 7. It's on the calendar for a vote in the Senate today, but Isgar said it's more likely to be heard Friday.

The Colorado Oil and Gas Association still is figuring out what the decision means, but the industry group isn't happy about it.

"Colorado oil and gas producers understand the requirement to protect senior water rights, but no actual injury to such water rights has been demonstrated with respect to coal-bed methane production. The confusion brought about by this decision will just add more fuel to the fire of uncertainty affecting the oil and gas business in Colorado," association spokesman Nate Strauch said in an e-mail.

Coal-bed methane wells differ from traditional gas and oil wells. They tap gas found in coal formations about 2,000 to 3,000 feet deep - closer than many other gas wells to the water formations tapped by domestic water wells.

Water on top of the coal seams holds the gas in place, and drillers pump out water to start the flow of gas to the surface.

The Supreme Court's ruling says this pumping of water constitutes a beneficial use of water. For years, gas companies and the state government had argued that any water pumped through coal-bed methane drilling was a waste product and not beneficial, because it's often injected deep into the ground.

The Vances and Fitzgeralds, however, claimed that nearby gas wells might draw down the water table and injure their water rights.

Five justices joined the majority opinion. Justice Alex Martinez did not participate, and Justice Nathan Coats dissented. Coats agreed with one part of the majority's opinion - that the Colorado Oil and Gas Conservation Commission does not have exclusive jurisdiction over all gas and oil activities in the state.

jhanel@durangoherald.com