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PRODUCED WATER FROM COALBED METHANE PRODUCTION: WATER LAW ISSUES AND DEVELOPMENTS

PRODUCED WATER FROM COALBED METHANE PRODUCTION: WATER LAW ISSUES AND DEVELOPMENTS. Zach C. Miller Davis Graham & Stubbs LLP Denver, Colorado December 14, 2007. TWO PENDING CBM WATER LAW CASES. COLORADO – VANCE v. SIMPSON Ruling Against State Engineer – July 2007

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PRODUCED WATER FROM COALBED METHANE PRODUCTION: WATER LAW ISSUES AND DEVELOPMENTS

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  1. PRODUCED WATER FROM COALBED METHANE PRODUCTION: WATER LAW ISSUES AND DEVELOPMENTS Zach C. MillerDavis Graham & Stubbs LLPDenver, ColoradoDecember 14, 2007

  2. TWO PENDING CBM WATER LAW CASES COLORADO – VANCE v. SIMPSON • Ruling Against State Engineer – July 2007 • Supreme Court Appeal Pending WYOMING – WEST v. TYRELL • Filed June 2007 • Early Stages

  3. SEO/DWR CBM STREAM DEPLETION STUDIES • San Juan Basin • Final Report – May 2006 • Est. Depletions: 56 AF O/P; 150 AF Total • Raton Basin • Draft Report – Nov. 2007 • Piceance Basin – Pending • On SEO Website

  4. STATE ENGINEER’S OFFICE/DWR REGULATES: • Permitting of Water Wells • Administration of Tributary Water Rights in Priority • Approval of Substitute Supply Plans • Prevention of Material Injury to Water Rights from Non-Water Right Water Diversions • Conferral in Water Court Matters

  5. ROLE OF WATER COURT • Designated District Court in River Basin • Exclusive Jurisdiction Over “Water Matters” • Decree New or Changed Water Rights • Approve Augmentation Plans • Prevent Material Injury to Water Rights

  6. COLORADO WATER LAW PRIMER • Prior Appropriation Doctrine: First in Time, First in Right • “Beneficial Use” = “Appropriation” = “Water Right” • Administered in Priority When Shortages • SEO Authority to Issue Well Permits • SEO Authority to Prevent Material Injury • Augmentation and Substitute Supply Plans • Water Court Approval of New or Changed Rights and Augmentation Plans

  7. SPECIAL STATUS OF “NONTRIBUTARY” GROUND WATER • Not Deplete Natural Stream At Annual Rate > 0.1% of Annual Rate of Withdrawal in 100 Years • Presumed Tributary Unless Rebutted • Governed Solely By Statute • Not Subject to Prior Appropriation Doctrine • Generally Allocated by Overlying Land Ownership • Generally Need SEO Well Permit • Special Mineral Extraction Statute: Not Need SEO Permit “Unless Water Will be Beneficially Used” (37-90-137(7)

  8. VANCE v. SIMPSON CASE • Dec. Jdmt. Action in Div. 7 Water Court • Filed December 2005 • Two Landowners vs. State Engineer • Intervenor: BP America Production Co.

  9. VANCE PLAINTIFFS’ CLAIMS • CBM Produced Water Withdrawal = “Beneficial Use” • Ergo, CBM Well = Water “Well” Requiring SEO Permit • Water Court Decree and Aug. Plans Required • SEO Must Curtail Pumping Until Permits Issued

  10. VANCE CASE COVERAGE AND EXCLUSIONS • Only CBM Wells in Water Division 7 (San Juan River Basin) • CBM Wells Within So. Ute Reservation With Any Tribal Interest Are Excluded/Not Covered

  11. WATER COURT SJ RULING – 7/07 • COGCC Not Have Exclusive Jurisdiction/Authority • CBM Produced Water Withdrawal = “Beneficial Use” • SEO Required to Issue Water Well Permits • Aug. or Supply Plans Required Where/When Out of Priority • Presume Produced Water Is Tributary Unless Proven Nontributary • No Deference to SEO Guidance Documents • Granted “Relief Requested In Complaint” • Silent Re Nontrib and Tribal Wells

  12. POST-DECISION STATUS • Direct Supreme Court Appeal by State & BP • Ruling Stayed by WC Pending Appeal • WC Declined to Clarify Ruling, Except Costs • Cost Claim Pending • Appeal Not Briefed • Designation of Record

  13. PRESENT EFFECT OF WC RULING • Ruling Stayed Pending Supreme Court Decision • Not Cover/Address: • CBM Wells with So. Ute Interests • CBM Wells Outside San Juan Basin • Non-CBM Oil and Gas Wells • Precedential Effect or Supreme Court Ruling? • Possible Legislative Fix? • Cf. Gravel Pit Case/Statute • To Be Continued!

  14. WEST v. TYRELL LAWSUIT - WYOMING • Dec. Jdmt Action Filed June 2007 • 2 Landowners v. State Engineer • Intervenors (Pending): Devon & Pennaco • Hearing on Disputed Intervention • “Flip-Side” of Vance Case

  15. WYOMING SEO POLICY/PRACTICE – 4/04 • Consider CBM Produced Water Withdrawal a “Beneficial Use” and Require Water Permit • Water Permits Generally Issued Without Aug. Plans and No Court Involvement • Simpler/Quicker Permit Processing Than Colorado

  16. WEST PLAINTIFFS’ CLAIMS • WY Constitution: No Appropriation Shall Be Denied, “Except When Such Denial Is Demanded By The Public Interest” • SEO Fails to Evaluate “Public Interest” • SEO Must Require No-Injury Proof • SEO Must Provide for Public Comment and Hearing • SEO Must Pass Rules for CBM Water Permits

  17. OTHER WATER-RELATED DEVELOPMENTS • Proposed New COGCC Rules • Water Monitoring and Protection • Wyoming CBM Task Force • Drainage Ditch Legislation • EPA CBM ELG-Setting Project • Voluntary/Mandatory “Surveys” • Critical to Provide Input • Colorado Water Legislation? • Keep a Close Watch On!

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