The South Adams County Water and Sanitation District’s position on Hydraulic Fracturing

Based upon information that we have received from the Colorado Oil and Gas Association, “Hydraulic Fracturing” is a process that uses fluids to create a crack in oil or gas bearing formations by utilizing hydraulic pressure. The operators continue to inject fluids into the crack fracture to make it grow larger, and finally they place small granular solids into the crack to ensure that it will remain open after the hydraulic pressure is no longer applied. The purpose of this process is to increase the rate at which the well is capable of producing oil or gas.

Concerns that have been voiced about these operations are potential impacts to air, groundwater and structural damage to adjacent properties. The District is not involved in the permitting process for fracturing operations and does not review or approve permit applications. The District is aware of all of these concerns, especially possible cross-contamination of groundwater aquifers, because this could impact the District’s groundwater supplies, as well as the supplies of private well users. It has been represented that cross-contamination of groundwater aquifers is unlikely to occur if wells are properly constructed. The District strongly encourages the permitting agencies to require all fracturing operators to utilize proper construction and operating procedures to ensure that none of these fears become reality.

To the extent that these operations are permitted by the State Oil and Gas Commission (and thus are going to occur regardless of who supplies water to the fracturing operator), the issue before the District is whether it will consider requests to lease water for these purposes. Historically, the District’s stated purpose is to provide water and wastewater services within its service area to residential, commercial, industrial and other uses. The District’s Board of Directors has asked the District staff and legal counsel to prepare a policy for these types of short-term water leases for its consideration. It is anticipated that this policy will be drafted and brought to the Board within the next few months. When the Board is asked to consider this policy, it will be included on the meeting agenda for that Board meeting and the public will be welcome to attend the meeting and comment on the proposed policy.

Specific items to be considered for inclusion in the policy will be:

• An application process for the review and consideration of District staff.

-Timing and duration of use
-Amount of water to be used
-Location of use
-Verification that this use will not negatively affect the District’s ability to provide water to our residential, commercial and industrial users.
-Method for taking the water (hydrant, physical connection)
-Proper metering and backflow prevention
-Cost – ensure that all short term leases pay an appropriate amount for the water that they are using.
-Ensure that all governmental permits have been issued for the anticipated use
-Ensure that the lessee has provided the local governmental agencies (Commerce City or Adams County) with proper notification and has properly coordinated any public notification processes and/or meetings necessary for the intended use.
-Ensure that the lessee is utilizing proper waste handling procedures for all chemicals used in their processes as well as wastewater treatment, recycling and disposal.

• An agreement form that can be utilized in these instances to explain all of the requirements and understandings between the District and the leasing party.
• A stated policy for short-term leases within the District’s service area, as well as consideration of whether there should be a policy for requests to use District water resources outside of the District’s service area. The District’s Rules and Regulations state that no future service is available outside the District’s service area except as specifically authorized by the Board of Directors.

To date, the District has issued only one hydrant permit to a party that is associated with fracturing operations. That permit was issued to Select Energy Services (“SES”) on November 7, 2011, and expires in May 2012. For the month of November, SES reported 453,700 gallons of water usage. SES has reported that it will not be using any water in December. SES has paid the construction hydrant charge of $4.87 per thousand gallons for its water supplies. A typical District residential customer pays an average of $3.77 per thousand gallons for their water needs. SES will be informed that for any future uses of District water, SES will have to go through an approval process similar to the process that will be included in the final policy for short term water leases.

Again, it is very important to remember that the District is not involved in the permitting of these fracturing operations.