May 30, 2009
The Colorado Supreme Court recently announced its decision that groundwater produced during coalbed methane (CBM) production constitutes an appropriation for a "beneficial use," and that State Engineers cannot allow out-of-priority diversions of CBM water without a well permit and a decree adjudicating an augmentation plan. This decision has significant ramifications for potentially all oil and gas exploration in Colorado.
Plaintiffs were ranchers seeking a judicial determination of the obligations of State water regulators regarding groundwater diverted for coalbed methane production. They argued that the water was diverted for a beneficial use, and thus, required well permits and augmentation plans. Defendants and interveners argued that water used during coalbed methane production was merely "produced water," and thus, subject only to regulation by the Colorado Oil and Gas Conservation Commission.
In affirming a judgment for the plaintiffs, the Court based its decision on the statutory definition of "beneficial use." It reasoned that coalbed methane production uses water from a well to accomplish a particular purpose and is therefore subject to Colorado's water laws. The fact that the water becomes a nuisance after its extraction does not affect the finding that it was first put to a beneficial use. See Vance v. Wolfe, 07SA293.
Exploration companies pumping groundwater in the process of extracting oil and gas in Colorado must now apply for well permits, and may need approval of augmentation plans if the water is tributary to a natural stream.
Should you have any questions about the application of this new decision, contact our experienced team of Environmental & Water Law, and Natural Resource Development Practice Groups.
Berg Hill Greenleaf & Ruscitti LLP E-Newsletters are used to inform our clients and friends of significant developments and current issues in a wide range of legal areas. This E-Newsletter is provided for general informational purposes only and does not constitute legal advice. Transmission of this E-Newsletter is not intended to create, and receipt does not constitute, an attorney-client relationship. The information in this E-Newsletter is accurate on the date published and sent. As laws change quickly, Berg Hill Greenleaf & Ruscitti LLP cannot guarantee that the information is consistent with all succeeding events. Recipients should not act upon this information without seeking the advice of an attorney. This E-Newsletter is not intended to be advertising or a solicitation of legal services. Berg Hill Greenleaf & Ruscitti LLP does not seek to represent anyone in a jurisdiction where this E-Newsletter may fail to comply with all laws and ethical rules of that state.