Water Resources Review Committee (10/10/2013)

Final
STAFF SUMMARY OF MEETING

WATER RESOURCES REVIEW COMMITTEE

Date:	10/10/2013	ATTENDANCE

Time:	09:05 AM to 05:05 PM	Brophy	X
		Coram	X
Place:	SCR 356	Hodge	X
		Jones	*
This Meeting was called to order by		Mitsch Bush	X
	Senator Schwartz	Roberts	X
		Sonnenberg	X
This Report was prepared by		Vigil	X
	David Beaujon	Fischer	X
		Schwartz	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Call to order Electric Generation and Water Use Biomass and Watershed Protection Hydro and Pumped Hydro in Colorado COGCC Ground Water Rules Environmental Permitting for Oil and Gas Oil and Gas Development and Water Use Colorado River Basin Supply Study CPACE and Water Efficiency Improvements Public Testimony		- Briefing and proposed resolution Briefing and proposed resolution Briefing and proposed resolution Briefing only Briefing only Briefing only Briefing only Briefing only Testimony only

09:07 AM -- Call to order

Senator Schwartz, Chair, called the meeting to order and invited members to make announcements or provide other remarks. Representative Sonnenberg provided an update on flood impacts in the South Platte River Basin including damaged or destroyed water diversion structures. Committee discussion followed about the role of state in flood recovery efforts including repairs to diversions structures.

09:11 AM -- Electric Generation and Water Use

Ron Davis, Chief Advisor, Colorado Public Utilities Commission (PUC), described the commission's oversight of regulated electric utilities and discussed water use and electric generation (Attachment A). He described the commission's electric resource planning process and identified the issues that must be considered when utilities acquire electric resources. In 2010, the commission adopted a regulation to require utilities to report annually the water consumption for existing generation resources and the water intensity (in gallons per MWh) for these systems and for proposed energy resources.

1010AttachmentA.pdf

09:26 AM

Stacey Tellinghuisen, Western Resource Advocates, discussed water use and energy generation and the effect of water availability on the development of new electric generation. She compared water use for various energy sources including coal, nuclear, and natural gas, and renewable resources (Attachment B), and she responded to questions from the committee about the methodology she used to determine the water intensity of these generation systems.

1010AttachmentB.pdf

09:39 AM

Tom Plant, Advanced Energy Economy, discussed water use and electric generation. He also proposed legislation to require the PUC to give due consideration to the water intensity of different generating sources when ruling on integrated resource plans and energy acquisition (Attachment C).

1010AttachmentC.pdf

09:47 AM

Richard Belt, Xcel Energy, discussed water use and electric generation (Attachment D). He identified energy acquisition plans for Xcel and expected water demands for those resources. He responded to questions from the committee about proposed replacement of coal-fired power plants with natural gas and other energy sources and the cost of these changes to rate payers.

1010AttachmentD.pdf

09:58 AM

Mr. Davis responded to questions from the committee concerning issues considered by the PUC when it reviews new energy acquisition proposals from utilities.

10:02 AM

Mr. Plant responded to questions from the committee about his legislative proposal concerning electric generation during droughts. Mr. Belt also discussed electric generation during drought and the potential use of interruptible water supply agreements by agricultural irrigators and energy producers.

10:10 AM

Committee discussion followed about energy generation during droughts and how the doctrine of prior appropriation regulates such diversions.

10:13 AM -- Biomass and Watershed Protection

Kendric Wait, President and CEO, Evergreen Clean Energy Corporation, described the 11.5 MW biomass generation facility his company operates in Gypsum, Colorado (Attachment E). Energy from the plant is purchased by Holy Cross Energy. He explained how the biomass projects can create markets for Colorado's forests while creating jobs and helping to offset the cost of watershed protection. He also discussed water used by biomass facilities and identified opportunities to expand biomass in Colorado. He identified actions that are needed to increase biomass in Colorado including a reliable electric customer base, a stable, long term fuel supply, and low cost financing.

1010AttachmentE.pdf

10:31 AM

Mr. Kendric responded to questions from the committee about sources of fuel for the Gypsum biomass facility and the potential use of debris from the recent flood for fuel in the facility. He also discussed state and federal incentives to encourage the development of biomass and the need to change federal weight limits for timber hauling vehicles to allow them to carry larger loads.

10:43 AM

Michael Brod, Executive Director, Colorado Water Resources and Power Development Authority (CWRPDA), described the role of the authority in financing public wastewater and drinking water projects. He explained that in 2008, the legislature authorized the authority to issue bonds to pay for watershed protection and forest health projects sponsored by governmental entities. This authority was extended to 2023 by House Bill 13-1012. He explained that the board has yet to issue bonds for watershed protection and forest health projects because no governmental entities have applied for the loans. He also discussed provisions in current law that limit such loans to governmental entities and possible legislation to expand this authority to private entities. He responded to questions from the committee about CWRPDA loans and other financing to address impacts to public drinking water and wastewater projects caused by the recent floods.

10:52 AM

Mr. Kendric responded to questions from the committee about the challenge of obtaining financing for his biomass facility.

10:55 AM -- Hydro and Pumped Hydro in Colorado

Bruce Cotie, Excel Energy, described the Cabin Creek hydroelectric generating facility that uses pumped storage to generate electricity (Attachment F). He explained that the facility generates electricity during peak power periods and uses power during low demand periods to fill the associated reservoir. Mr. Cotie explained that the Cabin Creek facility provides"black start" capabilities to restart other electric generation facilities during major power disruptions. He also identified the water rights associated with the facility and discussed the Federal Energy Regulatory Commission (FERC) requirements that must be satisfied in order for the plant renew its license. He also identified planned improvements to the plant's generating facilities and reservoir that will increase its power output.

1010AttachmentF.pdf

11:13 AM

Richard Horn, President, Site Constructors, Inc., identified pumped hydro project his company has built and discussed the benefits of such facilities including grid stabilization, black start capabilities, and other benefits. He also described elements of pumped hydro facilities and how they constructed and operated.

11:22 AM

Chris Worely, Colorado Energy Office, described the benefits of pumped hydroelectric generation and described assistance provided by his office to applicants for FERC licenses for small hydro power projects. He also described the implementation of the 2010 memorandum of understanding between Governor Ritter and the FERC Chairman to streamline the regulatory review of small hydroelectric projects in Colorado.

11:27 AM

Kurt Johnson, Colorado Small Hydropower Association, discussed recent federal legislation to expedite permitting for small hydropower projects and identified the economic and environmental benefits of small hydropower projects (Attachment G). He identified several small hydropower projects being constructed in Colorado including the Tri County Water Project located on Ridgeway Dam in Ouray County and the Delta-Montrose South Canal Project, and he identified other hydropower projects in Colorado. He also proposed legislation to encourage small hydropower development in Colorado including a measure to designate a state agency to coordinate the FERC applications process; require fairness for avoided cost rates for power purchase agreements; authorize the use of electric motors as generators; raise net metering caps for municipalities; expand solar garden concept to small hydro; and create a financing mechanism for small hydropower.

1010AttachmentG.pdf

11:45 AM

Mr. Johnson responded to questions from the committee about his legislative proposals and opportunities for small hydropower development in Colorado. He also described a small hydropower development project that was completed on the Humphries Ranch near Creede, Colorado.

12:00 PM

Steve Conrad, Colorado Electrical and Plumbing Board, described the board's rule that limits the use of electrical motors to generate electricity and discussed the process for obtaining an exemption from this limit.

12:05 PM

Mark Brown, Colorado Electrical and Plumbing Board, described the National Electrical Code and availability of information about electrical equipment that complies with the Colorado Electrical and Plumbing Board's requirements. He also responded to questions about the authority of the board to allow the use of electrical motors as electrical generators and discussed proposed rules to to implement House Bill 13-1044 concerning use of greywater. He responded to questions about the authority of local jurisdictions to enforce the state electrical code.

12:19 PM

Matt Rice, American Rivers, spoke in support of Mr. Johnson's legislative recommendations.

12:20 PM

The committee recessed.

01:43 PM -- COGCC Ground Water Rules

The committee returned from recess. Matt Lapore, Director, Colorado Oil and Gas Conservation Commission, discussed the commission's rule 805 b. concerning green completions and identified wells that are affected by this rule. Green completion is a practice that reduces emissions of salable gas and condensate vapors during cleanout and flowback operations prior to the well being placed on production. He also responded to questions from the committee about the effect of the green completion rule on the oil and gas industry and whether the commission expects to amend the rule.

01:53 PM

Mr. Lapore discussed the commission's groundwater sampling rules that are used to determine pre-drilling water quality and help identify potential impacts to groundwater resources related to oil and gas development (Attachment H). He also discussed other rules that protect groundwater resources including well casing and pressure treatment requirements. He identified the number of new wells that have been sampled since the rule took effect and industry's compliance with the new rule. Mr. Lapore responded to questions from the committee about issues considered during the rulemaking process for the groundwater sampling rule and discussed domestic water supplies that have been impacted by oil and gas development.

1010AttachmentH.pdf

02:20 PM

Mr. Lapore discussed impacts to oil and gas operations related to the recent floods and subsequent oil spills and releases. He explained that the commission is reviewing its current rules to determine whether amendments are needed to prevent spills and releases related to floods. He also responded to questions from the committee about current rules concerning oil and gas development in flood plains and the commission's duty to respond to flood related emergencies.

02:34 PM -- Environmental Permitting for Oil and Gas

Will Allison, Director, Air Pollution Control Division, explained that Senate Bill 13-284 would have established an expedited permit review process for air emissions produced by certain oil and gas operators subject to regulation by the Colorado Department of Public Health and Environment (CDPHE). The CDPHE also would have been authorized to establish an expedited review process for water discharges by oil and gas operators. An operator would not have been eligible for expedited permit review if the operation was out of compliance with state or federal pollution control standards. Mr. Allison discussed permits issued by his office for oil and gas development activities including general permits. He also identified efforts to address unnecessary permit delays for oil and gas development and proposed amendments to Air Pollution Control Commission regulations related to oil and gas activities. He also responded to questions from the committee about the role of stakeholders in the development of commission rules.

02:48 PM

Garin Vorthman, Colorado Oil and Gas Association, described the provisions of Senate Bill 13-284 and said that similar legislation is not necessary because current rules and procedures are sufficient.

02:50 PM

Stan Dempsey, President, Colorado Petroleum Association, discussed problems with Senate Bill 13-284 and said that similar legislation is not necessary because current rules and procedures are sufficient.

02:56 PM -- Oil and Gas Development and Water Use

Kevin Rein, Deputy State Engineer, Division of Water Resources, discussed water needs for oil and gas development (Attachment I). He explained that approximately 12,000 - 14,000 acre-feet per year are used to complete oil and gas wells in Colorado. Most of this water is used primarily for enhanced recovery, also called fracking. He compared water used for oil and gas development with water used for agricultural and other purposes and identified sources of the water used for oil and gas development including municipal supplies, new diversions, nontributary groundwater, and produced water.

1010AttachmentI.pdf

03:08 PM

Mr. Rein responded to questions from the committee about the regulation concerning the use of water obtained from the dewatering of oil and gas bearing formations, called produced water, and the effect of demand for water for oil and gas development on the price of water.

03:14 PM

Stan Dempsey, President Colorado Petroleum Association, identified information resources available for the legislature and the public to understand how water is used for oil and gas development. He also discussed the effect of natural gas and oil prices on demand for water for oil and gas development. He also described efforts by oil and gas operators to conserve water.

03:19 PM

Kent Holsinger, Colorado Oil and Gas Association, identified sources of the water for oil and gas development and compared this use with diversions for other purposes. He also discussed the regulation of produced water and explained how the law protects other water users from impacts related to oil and gas development.

03:23 PM

Mr. Rein responded to questions from the committee about the use of nontributary groundwater for oil and gas development and potential impacts on other water users.

03:32 PM

Mr. Holsinger responded to questions from the committee about the quality of produced water and the ability to use this water for irrigation or other purposes. He also described the disposal of produced water that is not of sufficient quality to be used for irrigation or other purposes.

03:36 PM

Mr. Rein discussed the depth of wells in the Denver Basin for municipal supplies and the depth of oil and gas producing formations.

03:37 PM -- Colorado River Basin Supply Study

Erin Wilson, Wilson Associates, described the provisions of the Colorado River Basin Supply and Demand Study and what it determined about Colorado's water future (Attachment J). She explained how the mean flow of the Colorado River Basin has changed over recorded history and described the importance of water storage to address the variability of the natural water supply and provide a more stable water supply. She discussed the imbalance between the natural water supply and future demand for water from the Colorado River Basin and identified alternatives to mitigate this imbalance including water conservation, desalination, weather modification, water imports, and other measures. She also discussed next steps in the development of basin supply plan.

1010AttachmentJ.pdf

03:54 PM

Ms. Wilson responded to questions from the committee about Colorado's water delivery obligations under the Colorado River Compact.

03:58 PM

John Currier, Chief Engineer, Colorado River Water Conservation District, discussed water supply challenges in the San Luis Valley and how the Colorado River Basin may experience similar problems if it is overdeveloped (Attachment K). He also noted similar declines in ground water levels in the Closed Basin in the San Luis Valley with declines in reservoirs in the Colorado River Basin. He also discussed declines in water stored in Lake Powell and Lake Mead in recent years due to drought and water diversions. He expressed concern about water storage levels if upper basin states increase their consumption from the Colorado River Basin and discussed the water that may be developed by Colorado in the Colorado River Basin under the Colorado River Compact.

1010AttachmentK.pdf

04:26 PM

Mr. Currier and Ms. Wilson responded to questions from the committee about the uncertainty of future water supplies in the Colorado River Basin and the risk associated with new water developments that use water from the basin.

04:32 PM

Senator Schwartz announced that the Water Resources Review Committee will hear a briefing on October 30 concerning the use of water banks to address water demands in Colorado and distributed a presentation from Professor Bonnie Colby who will be making the October 30 presentation (Attachment L).

1010AttachmentL.pdf

04:41 PM

Mr. Currier responded to questions from the committee about Colorado River Basin depletions associated with proposed water diversion projects including the Windy Gap Firming Project, the Moffat Expansion Project, and the Northern Integrated Supply Project.

04:46 PM -- CPACE and Water Efficiency Improvements

Paul Scharfenberger, Colorado Energy Office, discussed the Commercial Property Assessed Clean Energy District (C-PACE) program that was authorized by Senate Bill 13-212 (Attachment M). This program uses the existing public-sector structures of improvement and assessment districts to create a voluntary statewide district for funding energy projects. If counties choose to opt-in to the district, commercial property owners will be able to place a property assessment on a property in order to finance energy improvements. The debt issued to finance the energy improvements is secured by a property lien that is senior to all commercial liens on the property, including mortgages. The existing property tax collection system is used to collect debt payments from the property owner and repay the project costs, increasing investor security and improving financial terms. Mr. Scharfenberger responded to questions from the committee how the C-PACE program may be expanded to finance water efficiency improvements and whether this expansion would require a statutory change.

1010AttachmentM.pdf

04:59 PM -- Public Testimony

Susan Nedell, Environmental Entrepreneurs, described the growing water demand for municipal and industrial supplies in Colorado and identified measures to address this demand through water conservation and other measures (Attachment N).

1010AttachmentN.pdf

05:05 PM

The committee adjourned.