2 CCR 402-17
DEPARTMENT OF NATURAL RESOURCES Division of Water Resources OFFICE OF THE STATE ENGINEER 2 CCR 402-17 [Editor’s Notes follow the text of the rules at the end of this CCR Document.] RULES AND REGULATIONS FOR THE DETERMINATION OF THE NONTRIBUTARY NATURE OF GROUND WATER PRODUCED THROUGH WELLS IN CONJUNCTION WITH THE MINING OF MINERALS “PRODUCED NONTRIBUTARY GROUND WATER RULES”
17.1 Title
The title of these rules and regulations is “Rules and Regulations for the Determination of the Nontributary Nature of Ground Water Produced through Wells in Conjunction with the Mining of Minerals." The short title of these rules and regulations is “Produced Nontributary Ground Water Rules” and in this document the rules and regulations may be referred to as “Rules.”
17.2 Authority
These Rules are promulgated pursuant to the authority granted the State Engineer in House Bill 09-1303, Section 3, as codified at section 37-90-137(7)(c), C.R.S.; and section 37-80-102(1)(g), C.R.S.
17.3 Scope and Purpose of Rules
A. The purpose of these Rules is to assist the State Engineer with administration in the case of dewatering of geologic formations by withdrawing nontributary ground water to facilitate or permit the mining of minerals.
B. These Rules establish procedures pursuant to which an operator may petition the State Engineer for a determination that water that is being or that may be withdrawn from geologic formations to facilitate or permit the mining of minerals is nontributary, as defined at section 37-90-103(10.5), C.R.S. These Rules further identify certain areas, locations and formations within the State of Colorado where the State Engineer shall regard ground water removed from geologic formations to facilitate or permit mining of minerals to be nontributary.
C. These Rules provide for the use of engineering and scientific methodologies, including the use and results of ground water modeling or other ground water characteristics, such as water chemistry, hydrogeology, or other scientifically based approaches, that an applicant may rely upon in support of a petition for a nontributary determination.
D. These Rules apply only to ground water removed from geologic formations to facilitate or permit mining of minerals. Consistent with section 37-90-137(7)(c), C.R.S., the State Engineer is adopting these Rules to assist with his administration of ground water withdrawn to facilitate or permit the mining of minerals. Consistent with the intent of House Bill 09-1303, such administration includes the State Engineer using nontributary determinations made pursuant to these Rules for purposes of issuing water well permits pursuant to section 37-90-137(7), C.R.S., and to obviate the need for administration of wells subject to permitting consideration, as allowed by sections 37-90-137(7) and 37-92-305(11), C.R.S.. The State Engineer shall not use these Rules for permitting of wells pursuant to section 37-90-137(4), C.R.S.
E. These Rules do not apply to any aquifer or portion thereof that contains designated ground water and is located within the boundaries of a designated ground water basin.
F. These Rules and regulations shall not be construed to establish the jurisdiction of either the State of Colorado or the Southern Ute Indian Tribe over nontributary ground water within the boundaries of the Southern Ute Indian Reservation as recognized in Pub. L. No. 98-290, § 3, 98 Stat. 201 (1984).
17.4 Definitions
A. Statutory Definitions. The terms listed below have the identical meaning as in the referenced statutes:
B. Specific Definitions. Unless expressly stated otherwise or the context otherwise requires:
C. Other Definitions. All other words used herein shall be given their usual, customary, and accepted meanings. All words of a technical nature specific to the well drilling industry shall be given the meaning that is generally accepted in that industry. All words of a technical or legal nature specific to the State of Colorado water rights administration shall be given the meaning that is generally accepted within that field.
17.5 Process for Obtaining a Determination of Nontributary Ground Water
Any person may seek to amend these Rules, through applicable rulemaking procedures, to identify areas within the State of Colorado where the State Engineer shall regard Produced Water to be nontributary, or to amend, based on factual information not presented at the time of adoption, the Rules to exclude areas previously determined to be nontributary pursuant to these Rules or any amendment thereof. An amendment excluding areas previously determined to be nontributary will not invalidate any existing permits issued pursuant to these Rules or otherwise cause the State Engineer to change his administration of wells in existence prior to such amendment. As an alternative to requesting a rulemaking proceeding, an Operator may obtain a determination regarding the nontributary nature of Produced Water through an adjudicatory proceeding before the State Engineer. Any such request for a nontributary determination must be submitted pursuant to the procedures set forth in this Rule 17.5. These Rules do not preclude any Operator from obtaining a determination regarding the nontributary nature of Produced Water, for the purpose of section 37-90-137(7), C.R.S., through an appropriate proceeding before the Water Court.
A. Submittal of Petition for a Determination of Nontributary Ground Water An Operator or group of Operators seeking a nontributary determination for Produced Water withdrawn from an existing well or group of wells, or for a well or wells to be constructed in one or more geologic formations within a geographically delineated area (“Applicant” ) shall file a petition in the form of a letter and accompanying professional report to the State Engineer. The petition shall at a minimum contain the following information:
B. Notice and Comment
C. Initial Determination
D. Hearing
E. Final Decision If no hearing is held, the Initial Determination shall become the Final Decision of the State Engineer (“Final Decision” ) with respect to the Applicant’s petition. If there has been a hearing on the petition, the decision of the State Engineer shall become the Final Decision of the State Engineer pursuant to procedures set forth in the Division of Water Resources Procedural Regulations, 2 CCR 402-5, and applicable provisions of the State Administrative Procedure Act.
F. Effect of Final Decision
17.6 Engineering and Scientific Methodologies and Standards
A. An Applicant shall comply with the engineering and scientific methodologies and standards described in Rule 17.6 of these Rules when submitting a petition for determination of nontributary groundwater made pursuant to Rule 17.5 of these Rules.
B. Conceptual Model For any petition for determination of nontributary groundwater submitted pursuant to Rule 17.5 of these Rules, an Applicant shall include a conceptual model of the geologic and hydrogeologic characteristics of the relevant area, formation or basin under consideration. The conceptual model shall adequately represent the known geologic and hydrogeologic characteristics of the ground water system. At a minimum, the conceptual model shall define the hydrostratigraphic units along with any known characteristics and boundary conditions. The conceptual model will determine whether numerical or analytical modeling, or alternative methodologies are appropriate for evaluating the petition for a determination of nontributary ground water. For numerical modeling, the conceptual model shall establish the preliminary water budget of the system, which should include sources of water, flow directions, and discharge or exit points.
C. Ground Water Modeling
D. Alternative Methodology
E. Professional Report
17.7 Specific Locations of Nontributary Ground Water in Colorado
Ground water in the State of Colorado is legally presumed to be “tributary,” or hydraulically connected to surface water in such a fashion so as to require administration within the prior appropriation system in conjunction with surface rights, unless it is demonstrated to be nontributary ground water in accordance with the law. See Simpson v. Bijou Irrigation Co. , 69 P.3d 50, 57 n.7 (Colo. 2003). For purposes of administration under section 37-90-137(7), C.R.S. absent a determination made pursuant to Rule 17.5 of these Rules, or other Rulemaking, the State Engineer shall regard all Produced Water within the State of Colorado to be tributary, with the exception of the ground water described in Rule 17.7.A through D.
A. The Denver Basin The State Engineer shall regard the bedrock aquifers of the Denver Basin (the Dawson, Denver, Arapahoe, and Laramie-Fox Hills) to be nontributary only where shown to be nontributary by the Denver Basin Rules, 2 CCR 402-6. Pursuant to section 37-90-103(10.7), C.R.S., the State Engineer shall regard all remaining ground water in the bedrock aquifers of the Denver Basin subject to the Denver Basin Rules to be not nontributary.
B. Water Rights Found to be Nontributary by a Valid Court Decree The State Engineer shall regard all water rights that are decreed nontributary by a court to be nontributary only to the extent provided by the court decree and only insofar as such water is used in a manner wholly consistent with the terms and conditions of such decree.
C. Existing Ground Water Well Permits House Bill 09-1303, Section 3, codified at section 37-90-137(7)(c), C.R.S. provides “[a]ny rules promulgated pursuant to this subsection (7) shall not conflict with existing laws and shall not affect the validity of ground water well permits existing prior to the adoption of such rules.” Therefore, the State Engineer shall regard as nontributary all ground water permitted for withdrawal as nontributary ground water pursuant to well permits issued by the State Engineer prior to the adoption of these Rules.
D. For the purpose of meeting the objectives in the scope and purpose of these Rules, Rule 17.7.D. identifies geographically delineated areas under which the ground water in only certain formations is nontributary for the limited purposes of these Rules. Small-scale maps showing the extents of the delineated areas and identifying the geologic formations are included as a reference in an appendix to these Rules. Larger-scale maps are attached as attachments to these Rules. The small-scale and large-scale maps show identical areas and each are incorporated as part of the Rules. The maps are available with this rules document in hard copy form and are available on the Division of Water Resources’ website. The delineated areas may be viewed through Division of Water Resources’ public data viewing tools and the data files describing the areas are also available for downloading from the Division of Water Resources’ website.
17.8 Severability
If any portion of these Rules is found to be invalid, the remaining portion of the Rules shall remain in force and in effect.
17.9 Revisions
These Rules may be revised in accordance with section 24-4-103, C.R.S.
17.10 Other laws, rules, and decrees
These Rules shall be interpreted so as to not conflict with existing laws, rules, or decrees.
17.11 Effective Date
These Rules shall become effective 20 days after publication and shall remain in effect until amended or revoked as provided by law.
17.12 Statement of Basis and Purpose
The Statement of Basis and Purpose for these Rules is incorporated herein as part of the Rules. STATEMENT OF BASIS, PURPOSE, AND SPECIFIC STATUTORY AUTHORITY Department of Natural Resources Office of the State Engineer Produced Nontributary Ground Water Rules 2 CCR 402-17 This statement pertains to the adoption by the State Engineer of rules and regulations to assist his administration of wells that dewater geologic formations by withdrawing nontributary ground water to facilitate or permit the mining of minerals.
Background Pursuant to the Colorado Ground Water Management Act, § § 37-90-101 through -143, C.R.S. (the “Ground Water Act” ), the State Engineer must require all water users to obtain permits for any “well,” defined as “any structure or device used for the purpose or with the effect of obtaining ground water for beneficial use from an aquifer.” C.R.S. § 37-90-137(1); C.R.S. § 37-90-103(21)(a). Pursuant to the Water Right Determination and Administration Act of 1969, § § 37-92-101 through -602, C.R.S. (the “Water Rights Act” ), the State Engineer must protect existing water rights against injury by curtailing out- of-priority diversions of ground water that cause material injury to vested water rights. C.R.S. § 37-92- 502. Simpson v. Bijou , 69 P.3d 50, 67 (Colo. 2003).
Absent a showing to the contrary, ground water in Colorado is presumed to be “tributary,” or hydraulically connected to surface water so as to require administration within the prior appropriation system. Simpson v. Bijou Irrigation Co. , 69 P.3d 50, 57 n.7 (Colo. 2003). Pursuant to the Water Rights Act, the State Engineer must protect existing water rights against injury by curtailing injurious out-of-priority diversions of tributary ground water that are not replaced under an approved augmentation plan or substitute water supply plan or otherwise authorized under law. C.R.S. § 37-92-502. Simpson v. Bijou , 69 P.3d 50, 67 (Colo. 2003).
Ground water may instead be “nontributary,” defined as “that ground water, located outside the boundaries of any designated ground water basins in existence on January 1, 1985, the withdrawal of which will not, within one hundred years, deplete the flow of a natural stream, including a natural stream as defined at C.R.S. § § 37-82-101 (2) and 37-92-102 (1) (b) at an annual rate greater than one-tenth of one percent of the annual rate of withdrawal.” C.R.S. § 37-90-103(10.5). Under Colorado law, ground water that has been determined to be nontributary is not administered within the prior appropriation system. See C.R.S. § 37-92-305(11). Therefore, a party seeking to operate a well to withdraw nontributary ground water is not required to obtain an augmentation plan or substitute water supply plan. In addition, pursuant to C.R.S. § 37-90-137(7), a party who withdraws nontributary ground water in order to facilitate the mining of minerals is not required to obtain a water well permit, unless the ground water being removed will be beneficially used.
Historically, the State Engineer has not administered ground water withdrawn in the course of oil and gas operations (“produced water” ) within the prior appropriation system. The State Engineer had concluded that administration of produced water was under the exclusive jurisdiction of the Colorado Oil and Gas Conservation Commission (“COGCC” ). Based on that conclusion, the State Engineer did not require oil and gas wells to obtain Ground Water Act well permits, or require oil and gas wells that withdraw tributary ground water to obtain substitute water supply plans or augmentation plans. Although these rules are not limited to oil and gas operations, they have been the primary focus of these rules. The State Engineer’s position was challenged by a group of water rights users in Vance v. Wolfe , 205 P.3d 1165, 1173 (Colo. 2009). In Vance , the Supreme Court specifically found that the extraction of ground water in the course of coalbed methane (“CBM” ) operations was a beneficial use of water, and that operators of CBM wells must obtain well permits under the Ground Water Act. Id. In addition, the Court in Vance more generally held that “while the production of oil and gas is subject to extensive regulation by COGCC, it is also subject to the [Water Rights Act] and the Ground Water Act.” Id . As a result, pursuant to Vance , the State Engineer must consider the need to permit, as well as determine whether augmentation or substitute water supply plans are required, for the more than 35,000 existing oil and gas wells.
In reaction to the Vance decision, the General Assembly passed House Bill 09-1303, as codified at C.R.S. § § 37-90-137, 37-90-138(2), and 37-92-308(11). House Bill 1303 had three primary purposes. First, House Bill 1303 established a reasonable period of delay, until April 1, 2010, before oil and gas wells would be required to obtain Ground Water Act well permits, if needed. C.R.S. § 37-90-138(2). Second, House Bill 1303 provided an additional transition period, until December 31, 2012, within which time period operators of CBM wells that withdraw tributary ground water could obtain approval of substitute water supply plans without having to file applications for plans for augmentation in water court. C.R.S. § 37-92-308(11). Third, House Bill 1303 authorizes the State Engineer to adopt rules to assist in the administration of C.R.S. § 37-90-137(7). The record shows that the legislature intended that the rulemaking be used specifically to assist the State Engineer in efficiently and expeditiously identifying those oil and gas wells that withdraw nontributary ground water. Description of Proposed Rules The State Engineer is adopting Produced Nontributary Ground Water Rules pursuant to the rulemaking authority granted to the State Engineer. The rules establish an adjudicatory procedure pursuant to which the State Engineer may make individual nontributary determinations for purposes of the State Engineer’s administration of produced water. Before Vance , requests for determinations of nontributary ground water required case-by-case analysis. However, the State Engineer had not established a formal procedure for the review of such nontributary determinations, other than in the context of challenges to the well permitting process. In addition, the State Engineer had not established a procedure for submission or review of requests for nontributary ground water determinations where well permits may not have been required; specifically, in the context of requests for withdrawal of nontributary produced water. These adjudicatory procedures provide interested parties with notice of such determinations and an opportunity for a hearing.
In addition, the rules delineate certain areas or formations of the State as nontributary for purposes of the State Engineer’s administration of produced water. Currently, there are no rules or statutes designating areas within the State where ground water is nontributary (with the exception of the Denver Basin Rules, which delineate areas of nontributary ground water in specific bedrock aquifers that rarely are used for the mining of minerals). The most efficient means by which the State Engineer can fulfill his statutory administration and potential permitting for the over 35,000 existing oil and gas wells and new wells that withdraw produced ground water is through rulemaking that designates produced water withdrawn from a certain geologic formation, within a certain geographic area, as nontributary. Basis for Rulemaking The State Engineer finds adoption of these rules necessary for the following reasons. First, adoption of such rules is necessary in light of the Colorado Supreme Court’s decision in Vance v. Wolfe , 205 P.3d 1165, 1173 (Colo. 2009). In holding that CBM operations place ground water to beneficial use, the Vance decision clarified that the State Engineer must permit CBM wells if they produce ground water. In addition, the State Engineer must evaluate all existing oil and gas wells for potential injury to vested water rights, and potentially require substitute water supply plans and eventually court approved augmentation plans for those oil and gas wells that withdraw tributary ground water. In order to most effectively comply with the Vance decision, the State Engineer must adopt rules delineating those areas of the State wherein he may regard ground water withdrawn to facilitate or permit the mining of minerals to be nontributary or in the alternative, conduct an adjudicatory process for such determinations after the rules are adopted.
Second, adoption of such rules provides the State Engineer, water users, and other interested parties with an adjudicatory process pursuant to which an operator withdrawing ground water to facilitate or permit the mining of minerals may obtain a nontributary determination. As noted, the State Engineer has historically processed requests for nontributary determinations in the context of well permitting applications. The State Engineer has not documented a formal procedure for review of requests of nontributary determinations where such a request is made outside of the context of a well permit application or where a well permit may not be required; for example, a request for a nontributary determination in the context of C.R.S. § 37-90-137(7). The State Engineer believes that adopting a formal procedure for processing requests for nontributary ground water determinations in the context of C.R.S. § 37-90-137(7) will clarify the process for submission and for obtaining adjudicatory review of such determinations. Authority for Rulemaking The State Engineer adopts the Produced Nontributary Groundwater Rules pursuant to House Bill 09- 1303, Section 3, codified at § 37-90-137(7)(c), C.R.S., which provides that “the State Engineer may, pursuant to the “State Administrative Procedure Act” , adopt rules to assist with the administration of this subsection (7).” These rules are adopted pursuant to the State Administrative Procedure Act, § § 24-4- 103 et seq. , C.R.S.
Scope of Rulemaking Section 37-90-137(7)(c), C.R.S. authorizes the State Engineer to adopt rules to assist with the administration of this subsection (7). Section 37-90-137(7) concerns the administration of wells that withdraw ground water to facilitate or permit the mining of minerals. Therefore, these rules apply only to ground water withdrawn from geologic formations to facilitate or permit the mining of minerals. Consistent with C.R.S. § 37-90-137(7)(c), the State Engineer is adopting these Rules to assist with his administration of ground water withdrawn to facilitate or permit the mining of minerals. Consistent with the intent of House Bill 09-1303, such administration includes the State Engineer using nontributary determinations made pursuant to these rules for purposes of issuing water well permits pursuant to C.R.S. § 37-90-137(7), and to obviate the need for administration of wells subject to permitting consideration as allowed by C.R.S. § § 37-90-137(7) and 37-92-305(11). The State Engineer shall not use these rules for permitting of wells pursuant to C.R.S. § 37-90-137(4). The State Engineer recognizes that administration of water removed in the course of geothermal energy development raises complex issues that were not the subject of this rulemaking proceeding. The State Engineer did not address such issues in developing these rules. Therefore, whether or not water withdrawn in the course of geothermal energy development is considered to be water withdrawn to facilitate or permit the mining of minerals, these rules shall not apply to water removed in the course of geothermal energy development.
These rules focus on distinguishing tributary and nontributary ground water. There is a third legal category of ground water known as designated ground water. Exclusive authority over designated ground water is vested in the Colorado Ground Water Commission. The State Engineer has included a provision clarifying that these rules do not apply to any aquifer or portion thereof that contains designated ground water and is located within the boundaries of a designated ground water basin, thus recognizing the jurisdiction of the Colorado Ground Water Commission over designated ground water. These rules were developed in order to make hydrogeologic determinations for the purposes of the State Engineer’s ground water administration, not for purposes of making political or jurisdictional determinations or decisions. Therefore, although the rules delineating nontributary and tributary areas extend into the Southern Ute Indian Reservation, the rules shall not be construed to establish the jurisdiction of either the State of Colorado or the Southern Ute Indian Tribe over nontributary groundwater within the boundaries of the Reservation as recognized in Pub. L. No. 98-290, § 3, 98 Stat. 201 (1984). Discussion of Specific Concerns Raised in the Rulemaking Proceedings During the course of the rulemaking proceedings, issues and concerns with certain aspects of this proceeding were raised by parties in various motions and prehearing or responsive statements, and by nonparties through comments submitted to the State Engineer. The State Engineer’s responses to the relevant issues and concerns are as follows.
Adoption of Basin-Specific Rules. Certain parties questioned whether the State Engineer has authority to adopt through these rulemaking proceedings rules that designate certain areas of the state to be nontributary. These parties acknowledged that the House Bill 09-1303 granted the State Engineer authority to adopt rules to assist the State Engineer in making nontributary determinations for his permitting and administrative decisions related to wells that withdraw ground water to facilitate or permit the mining of minerals. However, these parties argued that this authority extended only to establishing adjudicatory procedures for making such nontributary determinations, and not to establishing rules that make such determinations.
The State Engineer has considered these arguments but disagrees. The General Assembly has previously granted the State Engineer authority to identify areas of the State as nontributary through his rulemaking authority. See C.R.S. § 37-90-137(9). The legislative history for House Bill 09-1303 demonstrates that the General Assembly granted the State Engineer similar authority in House Bill 09- 1303. The legislative history for House Bill 09-1303 clearly establishes the General Assembly intended that, in order to comply with the administration deadlines set forth in House Bill 09-1303, the State Engineer rely upon the authority granted pursuant to House Bill 09-1303 to adopt rules delineating areas of the State as tributary or nontributary for the purposes of his administration of C.R.S. § 37-90-137(7). Testimony by various persons before House and Senate Committees indicated that the intent of the Bill was to provide a means by which the State Engineer could identify nontributary wells, thus enabling the State Engineer to more effectively and properly permit and administer oil and gas wells by the deadlines established under House Bill 09-1303. Therefore, the State Engineer finds that he has authority to adopt through these rulemaking proceedings rules that determine ground water in certain areas of the State to be nontributary.
Due Process. Certain parties argued that these rulemaking proceedings did not provide the parties with due process. The State Engineer disagrees with this assertion. The essence of due process is basic fairness in procedure. Jafay v. Bd. of County Comm’rs of Boulder County , 848 P.2d 892, 899 (Colo. 1993). The procedural protections that the Colorado and federal due process clauses require are not fixed, but are contingent upon the demands of the particular situation. Id. (citing People v. Kibel , 701 P.2d 37, 43 (Colo.1985)). Whether particular procedures satisfy due process standards depends upon the circumstances of the particular case. Jafay , 848 P.2d at 899; see also Anderson v. Colorado State Dep't of Personnel , 756 P.2d 969, 976-77 (Colo. 1988). Here, the Colorado General Assembly in House Bill 09-1303 specifically identified the process that should be provided with respect to the circumstances presented by this rulemaking proceeding. Specifically, the General Assembly directed the State Engineer to comply with the requirements of the Colorado Administrative Procedure Act. In addition, the General Assembly directed the State Engineer to provide parties the opportunity to cross-examine witnesses.
The State Engineer complied with the requirements imposed by the Colorado General Assembly. All parties were provided notice and opportunity to be heard, as provided for in statute. The State Engineer provided formal notice of the rulemaking proceedings consistent with the Colorado Administrative Procedure Act. All parties were provided the opportunity to present evidence and cross-examine witnesses. The State Engineer complied with the timelines set forth in the Colorado Administrative Procedure Act.
The State Engineer recognizes that the procedures provided by this rulemaking proceeding differ than those that might have been provided in a formal judicial setting. However, the State Engineer does not find there was a need or requirement to impose formal judicial-type procedures upon these rulemaking proceedings in order to ensure fairness to the parties. Courts have rejected this argument, noting that the demands and objectives of a governmental agency proceeding differ from that of a judicial proceeding. See, e.g. Mathews v. Eldridge , 424 U.S. 319, 348 (1975) (noting that the judicial model is neither a required, nor necessarily the most effective method of decision making in all circumstances). Rather than strictly imposing judicial requirements upon agency proceedings, Courts have required agencies provide process that is reasonable when weighed against the individual interest at stake, the governmental interest in retaining challenged procedures, and the degree to which proposed alternative procedures will lessen risk of erroneous deprivation of individual property. Matthews v. Eldridge , 424 U.S. at 334-35; see also Watso v. Colorado Dept. of Social Services , 841 P.2d 299, 307-08 (Colo. 1992). The State Engineer believes the process provided complied with this requirement. First, the process provided was reasonable. As noted, the State Engineer provided all process required by the General Assembly in House Bill 09-1303. In addition, although not specifically required by House Bill 09-1303 or the Colorado Administrative Procedure Act, the State Engineer in this matter implemented additional procedural safeguards in the interest of ensuring due process. The State Engineer provided all parties the opportunity for informal discovery by establishing processes for the exchange of information regarding and demonstration of the technical models considered as part of these proceedings. Testimony throughout this proceeding affirmed the usefulness of these informal discovery processes. In addition, the proceedings were bifurcated and continued in order to provide the parties with additional time to gather evidence, prepare for the proceedings, present evidence, and question and cross examine witnesses. The proceedings followed with respect to the adoption of these rules provided the parties substantially more procedural protection than the General Assembly has required, or the State Engineer has historically provided with respect to nontributary decisions. The State Engineer’s nontributary determinations have historically been made in the context of the State Engineer’s permitting decisions, without notice or hearing, and based solely on State Engineer review of information submitted by the permitting parties. See, e.g. C.R.S. § 37-90-137(2) (requiring notice and hearing only where there are well owners within six hundred feet of the proposed well). These proceedings, by comparison, provided parties not only with ample opportunity to be heard, but with many of the procedural protections, such as the opportunity to cross-examine witnesses, that are typically available only in judicial-type forums. The State Engineer also provided extensive process prior to the formal initiation of this rulemaking proceeding. The State Engineer provided public notice through publication on the State Engineer’s Substitute Water Supply Notification List of the State Engineer’s intent to initiate these rulemaking proceedings well prior to the formal initiation of the proceedings. In order to solicit input into the rulemaking process, the State Engineer noticed and held several public meetings regarding the proposed rulemaking prior to the initiation of these rulemaking proceeding. The State Engineer formed a Produced Nontributary Ground Water Advisory Group, including legal and technical subcommittees, which included representatives from many of the parties to this rulemaking proceeding. The State Engineer notes that there were other opportunities for parties to become aware of and involved in the issues relevant to these proceedings. The CBM produced water issue has been a topic of active investigation and discussion for many years. The State Engineer’s Office has previously briefed the General Assembly regarding this issue. There have been active legal and technical discussions regarding this issue. Numerous studies of the issue have been conducted. The issue was the subject of a Water Court proceeding and a Supreme Court appeal. Parties involved in this proceeding participated in the drafting of House Bill 09-1303. There was extensive testimony throughout these proceedings regarding the Technical Advisory Group established to provide peer review of the model developed for purposes of evaluating CBM well operations in the San Juan Basin – Fruitland Formation. With respect to the Alternate Proposed Rules proposed by the CBM operators, some of the technical information has been available well before the initiation of this rulemaking. This information was requested and provided to party representatives through Colorado Open Record Act requests made on March 21, 2008, August 14, 2008, and June 14, 2009.
The State Engineer acknowledges that notwithstanding all of the facts in the preceding paragraph, this rulemaking presented a challenging schedule for all parties. The State Engineer also acknowledges, however, that the ambitious schedule was set by the General Assembly for the purpose of solving a problem without imposing unnecessary regulation. The State Engineer believes that the parties to the rulemaking have responded such that the outcome of the rulemaking would not have been significantly different given more time.
Second, the process provided was sufficient to protect the individual property interests at stake. Although the State Engineer agrees that tributary water rights are significant property interests, the State Engineer believes these proceedings as conduced present minimal risk of a significant deprivation of these rights. The State Engineer applied a conservative “clear and convincing” standard in deciding whether to delineate an area or formation within the State as nontributary. Conservative assumptions were made in the models used to delineate nontributary areas. In addition, the CBM wells that result in the majority of the produced water at issue in these proceedings operate for only a limited period of time. Accordingly, to the extent that there may be errors in these assumptions, the State Engineer is convinced any such errors would be outweighed by the other conservative assumptions and attributes of the models. The limited purpose of these proceedings also weighs against the likelihood of a significant deprivation of a property right. Consistent with C.R.S. § 37-90-137(7)(c), the State Engineer is adopting these Rules to assist with his administration of ground water withdrawn to facilitate or permit mining of minerals. Consistent with the intent of House Bill 09-1303, such administration includes the State Engineer using nontributary determinations made pursuant to these rules for purposes of issuing water well permits pursuant to C.R.S. § 37-90-137(7), and to obviate the need for administration of wells subject to permitting consideration as allowed by C.R.S. § § 37-90-137(7) and 37-92-305(11). The State Engineer shall not use these rules for permitting of wells pursuant to C.R.S. § 37-90-137(4). Indeed, to this point, there have been no specific allegations of deprivation, only general allegations that the proceedings present a risk of deprivation. Other factors provide additional protection against such deprivation. Because the rules result in many CBM wells being found to be tributary, operators of such wells will be required to obtain approval of substitute water supply plans and eventually augmentation plans. Such plans provide protection against deprivation of water rights. Should any such deprivations be revealed, the deprivations may be adequately addressed through these plans, proposed modifications to the rules or other appropriate agency or water court proceedings. See, e.g. Sundheim v. Board of County Commissioners of Douglas County , 904 P.2d 1337, 1346 (Colo. App. 1995) (no due process violation where state affords reasonable remedies to rectify errors). Third, it is not clear that any proposed procedural modification would prove useful in preventing any deprivation. The State Engineer authorized informal discovery that included model demonstrations and the opportunities for the parties to request and provide additional technical information. The State Engineer provided parties additional time to review corrections made to the models. With respect to the Alternate Proposed Rules proposed by non-CBM operators, the hearing date has been delayed until January 11, 2010, thus providing the objecting parties additional time to review the technical information. Fourth, there is substantial governmental interest in proceeding with the rulemaking pursuant to the procedures established under House Bill 09-1303. The State Engineer is statutorily obligated to evaluate the need to administer over 35,000 wells by April 1, 2010. This rulemaking proceeding was based upon a schedule that was necessary for the State Engineer to effectively fulfill this statutory obligation. The legislative history for House Bill 09-1303 indicates that the General Assembly specifically contemplated that the State Engineer would rely upon this rulemaking to designate nontributary areas prior to April 1, 2010. Absent the challenged procedures that allow for timely implementation of the rules, the State Engineer may be forced to curtail thousands of wells with severe economic consequences, contrary to the General Assembly’s intent in granting the State Engineer rulemaking authority in House Bill 09-1303. In summary, the State Engineer has complied with the clear direction provided by the General Assembly. The State Engineer has conducted these proceedings in a fashion that provides all parties ample opportunity to be heard, and that minimizes the risk of a deprivation of rights. Therefore, based upon a review of the circumstances relevant to this rulemaking proceeding, it is the State Engineer’s conclusion that these proceedings provided the parties with due process. Limiting Basin-Specific Rules to Existing Wells. Certain parties questioned whether the State Engineer has authority through these rules to adopt basin-specific rules that apply to areas where there currently are not existing oil and gas wells. These parties argued that the State Engineer’s authority is limited to adopting rules for administration of existing wells. However, nothing in the plain language of or legislative history for House Bill 09-1303 indicates that the General Assembly intended to so limit the State Engineer’s authority. Indeed, House Bill 09-1303 more broadly grants the State Engineer authority to promulgate rules to assist with his administration of C.R.S. § 37-90-137. The State Engineer therefore concludes that he has authority to adopt basin-specific rules that apply to areas that he reasonably determines to be areas of likely future oil and gas development. Standard of Review. Certain parties requested that the State Engineer include within these rules a statement indicating the effect that aWater Court should grant to State Engineer determinations made pursuant to the rules. With respect to judicial challenges to the rules themselves, the State Engineer agrees with the position expressed by all of the parties that, pursuant to C.R.S. § 37-90-137(7)(c), the proper standard for Water Court review of the rules themselves is that set forth in the Colorado Administrative Procedures Act. With respect to the effect upon Water Court proceedings of the State Engineer’s determinations made pursuant to the rules, the State Engineer believes that such effect is a matter for determination by the Water Court. The State Engineer does not presume the authority to dictate through these rules their effect upon a water court proceeding. Extension of Notice Period for Adjudicatory Proceedings. Certain parties requested that the State Engineer extend from 30 to 60 days the time period for allowed for persons to respond to a petition for a determination of nontributary ground water. The State Engineer declines this request. In other comparable circumstances, including, for example, submission of comments on the State Engineer’s review of an application for a substitute water supply plan pursuant to C.R.S. § § 37-92-308(4) and -308(5), and submission of comments on a ground water well permit application pursuant to C.R.S. § 37-90-137(2)(b) (II)(E), the General Assembly has specifically provided for a 30 day comment period. Accordingly, the State Engineer believes that 30 days is a reasonable time period for responding to a petition for a determination of nontributary ground water.
Dedication of State Engineer Staff. Certain parties requested that the State Engineer include in the rules a provision stating that the State Engineer would be required to dedicate staff to evaluation of any submittal of a petition seeking a nontributary determination through an adjudicatory or rulemaking proceeding prior to committing staff to curtailing any wells that are the subject to such a petition. The State Engineer does not believe it appropriate to include such a provision in these rules. Decisions about appropriate allocation of staff shall be made on a case-by-case basis, based upon the circumstances presented.
Evidentiary Standard for Adoption of Basin-Specific Rules. As part of this rulemaking proceeding, the State Engineer considered whether to adopt alternate rules that identify areas and formations within specific basins of the State as nontributary for purposes of the State Engineer’s administration of wells pursuant to C.R.S. § 37-90-137(7). The parties disagreed with respect to the evidentiary standard the State Engineer should apply in considering whether to indentify an area within the State as nontributary. In a recent case indirectly addressing this issue, the Supreme Court indicated that the standard of review is “clear and convincing.” Colorado Ground Water Comm’n v. North Kiowa-Bijou Groundwater Management Dist. , 77 P.3d 62, 70 (Colo. 2003). Several parties have argued that the Court’s statements in North-Kiowa are dicta, and that the correct standard is “clear and satisfactory,” as applied in Safranek v. Town of Limon , 123 Colo. 330, 334, 228 P.2d 975, 977 (Colo. 1951). The State Engineer has applied a “clear and convincing” evidentiary standard. To whatever extent applicable, the North Kiowa-Bijou decision does indicate that the “clear and convincing” evidentiary standard is the correct standard for determining whether water is nontributary. Applying a “clear and convincing” standard thus creates the most regulatory certainty in the event of challenges to State Engineer nontributary determinations. In addition, applying a “clear and convincing” standard minimizes the risk of any deprivation of property rights.
Discussion of Specific Concerns Regarding Basin-Specific Rules As part of this rulemaking proceeding, several parties proposed alternate rules that identify portions of formations within specific basins of the State as nontributary for purposes of the State Engineer’s administration of wells pursuant to C.R.S. § 37-90-137(7). The State Engineer is adopting the following basin-specific rules. The bases for the State Engineer’s adoption of these rules, and responses to some of these issues and concerns raised by various parties regarding the rules, are set forth below. Rule for Piceance Basin – Mesaverde Formation (see Rule 17.7.D.1). The State Engineer finds there is clear and convincing evidence supporting his adoption of a rule identifying water withdrawn from the Cameo and South Canyon Coal Groups of the Mesaverde Formation by wells located within a delineated area of the geologic formation known as the Piceance Basin, in the Muddy Creek Drainage north of Paonia Reservoir in Delta and Gunnison Counties, Colorado to be nontributary for purposes of his administration and permitting of wells pursuant to C.R.S. § 37-90-137(7). The State Engineer’s finding is based primarily upon testimony and evidence provided regarding an analysis performed by Gary Witt, P.G. using the Glover-Balmer method for purposes of determining the timing of depletions to stream flow resulting from withdrawal of ground water from the Cameo and South Canyon Coal Groups. The State Engineer finds there is clear and convincing evidence that this analysis identifies nontributary areas in manner that is consistent with C.R.S. § 37-90-103(10.5) and, therefore, provides a useful tool for the State Engineer’s administration and permitting of ground water wells pursuant to C.R.S. § 37-90-137(7) within this delineated area. First, the State Engineer finds that the Glover method is an appropriate method for determining the timing of depletions to stream flow for purposes of C.R.S. § § 37-90-103(10.5) and 37-90-137(7). Although less sophisticated than numerical flow models such as the U.S.G.S. MODFLOW modeling code (“MODFLOW” ), the Glover method is nonetheless a well-established method for analyzing ground water flow, with an extensive history of use in Colorado for determining impacts of ground water pumping upon stream flow. This history has demonstrated the Glover method to be generally a “conservative” method for determining whether water removed in the course of ground water pumping is nontributary, in that the method is generally regarded as overestimating the impact of such pumping on such surface streams. Dave McElhaney, P.G., Chief of the Hydrogeological Services Branch for the Office of the State Engineer, testified that in his experience he had never observed water determined to be nontributary through the Glover method to later be found tributary through use of a MODFLOW model. Second, the State Engineer finds the inputs to the Glover-Balmer method to be appropriate in the case of Mr. Witt’s analysis of the Cameo and South Canyon Coal Groups. The basic values needed to operate the Glover-Balmer method are transmissivity, storativity, and a distance from the pumping well to the nearest potential point at which depletions could occur. The State Engineer finds the storativity values relied upon by Mr. Witt are reasonable. The transmissivity values relied upon by Mr. Witt were on the lower end of the range of values for coal deposits as commonly presented in the literature. However, the values were within the acceptable range. In addition, the values provided were supported by research of coal fractures and permeability in nearby coal mines conducted by other investigators. The State Engineer finds this independent, site-specific data to be convincing evidence that values used were correct and that these values are further supported by supplemental evidence provided by Mr. Witt regarding the dry condition of adjacent coal mines.
Certain parties commented with respect to whether Mr. Witt considered all appropriate potential points of depletion. Specifically, these parties questioned whether Mr. Witt should have included depletions to ephemeral streams located within the study area as a point of depletion to a “natural stream” for purposes of the definition of nontributary water at C.R.S. § 37-90-103(10.5). The State Engineer believes it is unclear at this time whether and when modeling to an intermittent or ephemeral stream is appropriate. As noted by Mr. McElhaney, for bedrock aquifer applications, it has been the general practice of the State Engineer’s Office to model depletions to the nearest perennial stream and its saturated alluvium, rather than to intermittent or ephemeral streams, in order to avoid classifying as natural streams channels where stream flow is often only associated with extreme or prolonged precipitation events and the alluvial saturation is unknown, or where the condition of the channel or alluvium otherwise does not justify modeling depletions to that location. However, the State Engineer has in certain circumstances modeled stream depletions to ephemeral or intermittent streams with saturated alluvium. In this case, the State Engineer does not need to reach a decision on this issue with respect to the rule for the Piceance Basin – Mesaverde formation, because the evidence was clear, and all parties agreed, that in this instance modeling to any additional intermittent or ephemeral streams would not have altered the location of the line demarcating the tributary and nontributary areas.
In summary, the inputs to the analysis are appropriate and based upon site specific data. All inputs to the data are within the expected range. No aspects of the analysis are indicative of errors that would cause meaningful error in the proposed line derived from the model demarking the division between tributary and nontributary ground water. The State Engineer finds the Glover analysis performed by Mr. Witt to provide clear and convincing evidence in support of the State Engineer’s adoption of a rule identifying water withdrawn from the Cameo and South Canyon Coal Groups of the Mesaverde Formation by wells located within a delineated area of the Piceance Basin in Delta and Gunnison Counties, Colorado to be nontributary for purposes of his administration and permitting of wells pursuant to C.R.S. § 37-90-137(7). Rule for Northern San Juan Basin – Fruitland Formation (see Rule 17.7.D.2). The State Engineer finds there is clear and convincing evidence supporting his adoption of a rule identifying water withdrawn from the Fruitland Formation by wells located within delineated areas within the geologic formation known as the Northern San Juan Basin (“NSJB” ) in southwestern Colorado to be nontributary for purposes of his administration and permitting of wells pursuant to C.R.S. § 37-90-137(7). The Northern San Juan Basin is defined as that portion of the San Juan structural basin located within Colorado. The State Engineer’s finding is based primarily upon the testimony and evidence regarding the development, operation and calibration of a numerical ground water model of the Northern San Juan Basin (the “NSJB Model” ) utilizing MODFLOW. The State Engineer thus finds that there is clear and convincing evidence that the NJSB Model is capable of conservatively demarcating areas within the Fruitland Formation in the NSJB as nontributary in manner that is consistent with C.R.S. § 37-90- 103(10.5) and, therefore, provides a useful tool for the State Engineer’s administration and permitting of ground water wells pursuant to C.R.S. § 37-90-137(7).
First, the State Engineer finds there is clear and convincing evidence that the detailed conceptual model of ground water flow in the Fruitland Formation within the San Juan Basin more than adequately represents the geologic and hydrogeologic characteristics of the pertinent formations for purposes of developing a ground water flow model meeting the objective of this rulemaking. The NSJB has been the subject of numerous studies by independent parties over an extended period of time. As a result, there is an extensive site specific robust geologic and hydrogeologic data for the NSJB. These robust data include permeability, basin geology, formation thickness and location, recharge amounts and location, location of outcrops, climatology, surface water hydrology, and ground water/surface water interaction. The testimony and evidence provided by the witnesses throughout this proceeding demonstrated that there was appropriate reliance upon these datain development of the NSJB conceptual model. Where there was doubt with respect to a certain data, the conceptual model generally relied on conservative data. Dr. James McCord, Ph.D, P.E., an expert representing parties generally opposed to adoption of the NSJB conceptual and numerical models, did concede that many aspects of the NSJB models are well founded on site specific data.
Certain parties expressed concern that the recharge amount for the Fruitland Formation, which was estimated based upon a chloride mass balance method, may be inaccurate because of the possible contribution of chloride from the formation itself. However, the recharge estimate is consistent with independent recharge estimates by Kernoddle (1996). Certain parties also note that the Kirtland Shale Formation thins out in the eastern portion of the NSJB, and questioned whether the formation should be considered a confining layer for that portion of the model. However, the evidence demonstrated that even to the east the Kirtland Shale Formation remains at a thickness which is much more than sufficient to act as a confining layer. Finally, certain parties questioned whether certain “dikes” formed by vertical to near- vertical intrusive igneous features in the eastern portion of the NSJB might act as pathways for hydraulic communication between the Fruitland Formations and overlying surface water features such as streams and springs. However, the State Engineer finds this concern to be unsupported based on rebuttal testimony.
Second, the State Engineer finds there is clear and convincing evidence that the NSJB Model more than adequately integrates the conceptual model and data underlying that model into a numerical model utilizing MODFLOW. MODFLOW is a well-established tool for modeling ground water flow. All of the parties to this proceeding conceded that an appropriately-developed MODFLOW model is a useful tool for the State Engineer’s administration and permitting of wells pursuant to C.R.S. § 37-90-137(7). Here there was substantial evidence that the NSJB Model was properly developed. The testimony of Adam Bedard, P.E. provided a thorough description of how the NSJB conceptual model was translated into a numerical model. The numerical model appropriately reflects the geologic and hydrogeologic data developed for the NSJB conceptual model. The staff of the State Engineer questioned whether the NSJB Model should have relied upon a general head or drain boundary to define the boundary of the model. The State Engineer finds the testimony of Mr. Bedard to provide a convincing justification for the use of a drain boundary. The staff of the State Engineer also raised other questions regarding implementation of the NSJB Model, including how the river length was calculated, and how the model sums and lumps the net coal and carbonaceous shale intervals into individual model layers. The testimony of Mr. Bedard adequately responded to these concerns. The staff of the State Engineer testified that their concerns with respect to these issues had been adequately addressed. Certain parties also questioned the appropriateness of the vertical conductivity values used in the NSJB Model. There was no evidence, however, that this concern of anisotropy bias caused any inaccuracy in calibrating the model. Also, the model conservatively assumed continuous layers with a constant horizontal permeabilities, which is an idealized representation of the lenticular and discontinuous nature of this stratigraphy. Indeed, the evidence indicated that the model likely over estimated the horizontal permeability of the coal layers (the predominant flow path), thus conservatively reducing the area found nontributary by the model despite the anisotropy ratios used in the NSJB Model.
Third, the State Engineer finds the calibration results for the NSJB Model provide additional clear and convincing evidence that the NSJB Model accurately delineates areas within the Fruitland Formation in the Northern San Juan Basin as nontributary. Mr. Bedard noted that calibration of the NSJB Model was able to rely upon a large dataset, including transient heads. The availability of these data resulted in a model with very good calibration results. Dr. McCord agreed that one of the strengths of the NSJB Model was the robust calibration approach employed to refine model parameters to improve the fit to observational data. Dr. McCord found it especially notable that this calibration approach included a transient calibration.
Certain parties objected to the manner in which calibration of the NSJB Model addressed certain issues. Specifically, certain parties noted that the recharge value for the model was decreased from 160 acre-feet per year to approximately 130 acre-feet per year as part of the model calibration process. The State Engineer finds that Mr. Bedard and James Thomson, P. G., provided persuasive explanations for adjusting the recharge value as part of the calibration process. The State Engineer, therefore, finds the final recharge value used in the model to be reasonable. Certain parties also objected to the manner in which the NSJB Model was calibrated to springs. The State Engineer finds, based upon the testimony of Mr. Bedard and Mr. Thomson, that the model was appropriately calibrated to springs. Fourth, the State Engineer finds that there is clear and convincing evidence that the NSJB Model was appropriately adjusted based upon corrections to the storativity values for cells located at the outcrop. The State Engineer finds that these corrections were necessary to correctly model unconfined conditions at the outcrop.
Fifth, the State Engineer finds the peer review of the NSJB Model, in the form of the participation of experienced engineers and hydrogeologists in a Technical Advisory Group, to be additional clear and convincing evidence that the NSJB Model is capable of accurately delineating areas within the Fruitland Formation in the NSJB. In particular, the State Engineer finds convincing the testimony of Phillippe Martin, P.G., C.P.G., a hydrogeologist with many years of experience working directly with ground water models, Colorado water issues and Colorado water law. The State Engineer finds the participation of these individuals is additional evidence that the NSJB Model was developed in a conservative manner using accepted and supported values and methodologies. Participation by these individuals also addressed any concerns raised regarding the experience of Mr. Bedard with respect to Colorado water law issues as it may relate to developing the conceptual and numerical models. In summary, the State Engineer finds the NSJB Model to be well-conceived and consistent with the known geologic/hydrogeologic framework of the Northern San Juan Basin. The inputs to the NSJB Model are based upon particularly complete and robust data. All data were within the expected range. The NSJB Model was thoroughly calibrated and had undergone appropriate peer review. No aspects of the conceptual and numerical models are indicative of errors that would cause significant error in the proposed line derived from the NSJB Model demarcating the division between tributary and nontributary ground water. The State Engineer thus finds there to be clear and convincing evidence supporting his adoption of a rule identifying water withdrawn from the Fruitland Formation by wells located within areas delineated through use of the NSJB Model to be nontributary for purposes of his administration and permitting of wells pursuant to C.R.S. § 37-90-137(7).
APPENDIX A _____________________________________________________ Editor’s Notes History Entire Rule eff. 01/30/2010.