In what is starting out to be a very dry 2012 in Colorado—98% of Colorado is already in a drought—energy companies are outbidding farmers for portions of unallocated water in the state's water auctions.
The average price for an acre-foot of water provided by the Northern Colorado Water Conservancy District is up to $28 per acre-foot, $6 more per acre-foot than just two years ago. Northern Water, as it is also known, provides supplemental water for farm and ranch land and about 850,000 people in Northeastern Colorado via the Colorado-Big Thompson Project, a trans-basin water infrastructure that pumps water from the west side of the Continental Divide to Colorado's eastern cities on the other side of the Divide.
Oil and gas development has been going on in both the eastern and western parts of the state for many years but the recent discovery of commercially viable hydrocarbons in the Niobrara Formation in the Denver Basin has renewed energy firms' interest in Eastern Colorado as a hotspot for development.
But that sudden interest in oil and gas from the Niobrara Shale also means a sudden increase in competition for the water needed to frack wells. And the 28 percent price spike for unallocated water at the recent Northern Water auction is causing concern among farmers and environmentalists alike.
"How do we continue to sustain agriculture when there's just more and more demand on our water resources in this state?" said Bill Midcap, director of the Rocky Mountain Farmers Union, in an article in Sunday's Denver Post.
In a recent Huffington Post piece, Gary Wockner, director of the Save the Poudre Coalition, explained it this way:
many fast-growing Colorado cities predict they will have a shortage of water in the next decade and are already proposing new water supply projects that will further drain Colorado's already severely degraded rivers. And, the very same cities that are proposing new water projects are also selling increasing amounts of water for fracking.
Not only are cities selling water for fracking while demanding for the construction of new water projects, those cities are seeing major profits from selling water to energy companies for hydraulic fracturing.
In Greeley, Colo., the city made $1.6 million via 1,507 acre-feet of bulk water sales in 2011, most of which says city officials, went to the oil and gas industry. And up the road in Windsor, one of the cities supporting a controversial proposed reservoir, the city has already pocketed more than $22,000 selling water to oil and gas companies in 2012. In 2010, they didn't sell a drop.