Staff-Compiled

DENVER - The Colorado Supreme Court ruled this week that water produced during coal-bed methane drilling is subject to state water law and the extracting companies must get water well permits or replace the water.

The decision stems from a lawsuit filed by landowners in the southwest part of the state who say their water supplies are threatened by companies pumping groundwater to free the natural gas in coal seams. The landowners want the energy developers to defer to water users with older water rights and replace water they use when it belongs to others.

Defendants in the case are the state engineer’s office and BP America Production Company. They argued the water is a waste product of the drilling and should be regulated under state oil and gas rules. Siding with the landowners, the Court said, in essence, that water is not just a byproduct but a benefit.

Attorneys for both sides said yesterday it is unclear what effect the ruling will have on the state’s energy industry. At first glance it would appear the Court decision will it more cumbersome for energy companies to get at natural gas reserves because it requires them to go through the water court system to obtain permission to pump water from the coal seams where the natural gas is located.

However, Kathleen Curry, D-Gunnison, and Sen. Jim Isgar, D-Hesperus, are sponsoring House Bill 1303 that would give the state engineer’s office added authority to determine which oil and gas wells are “tributary” or “non-tributary.” The former designation means a well is connected to nearby rivers and streams and, would therefore, be subject to Colorado’s water laws.

Energy law experts say the bill is needed so companies don’t have to go into water court to get a ruling on whether or not it is a tributary well or not - a more complicated and time-consuming process. The bill has been endorsed by the Colorado Water Congress and other water attorneys. Supporters of HB 1303 are meeting with groups today to review it in light of the court ruling.

The bill would delay requirements for energy companies to get rulings and permits from the state engineer’s office until March 31, 2010. In addition, it would require the engineer’s office to develop rules criteria for deciding which wells are tributary or non-tributary. If a well is deemed “tributary,” companies would have until 2013 to file a long-term plan explaining how they’ll replace the water pumped from the wells.

According to the state, Colorado has more than 38,000 oil and gas wells, and roughly 5,000 are the coal-bed methane type. BP America says it has about 1,300 wells in the state, with slightly more than half probably tributary. The energy company says it supports HB 1303.