BLM considers geothermal leasing in Colorado

QUICKREAD

The state water agency’s view

Kevin Rein, assistant state engineer for the Colorado Division of Water Resources, said state law looks at geothermal resources as a public resource. If people want to drill a well and divert water for geothermal use, they need a well permit, and they must show they won’t injure other water rights, in terms of quantity, quality or temperature.

In the case of nonconsumptive diversions, the state may be able to waive permitting, he said.Colorado Geological Survey and U.S. Bureau of Land Management maps suggest much of central and western Colorado holds at least some potential for geothermal development. In 2005, the Idaho National Laboratory ranked Colorado fourth among 10 western states in terms of potential geothermal power site potential. The lab pointed to nine possible sites in the central part of the state.

A 2007 Colorado Geothermal Strategic Development Plan by a diverse working group including the Governor’s Energy Office suggested further investigation of several areas to prove their resource value.

“These locations include the Mount Princeton area near Buena Vista, the Waunita Hot Springs area in southeastern Gunnison County, the San Luis Basin, especially along its margins, the San Juan Mountains near Ouray and Rico, Pagosa Springs, the Raton Basin west of Trinidad, the Steamboat Springs area, and possibly an area near Somerset,” the plan said.



Rico town council member Matt Downer remembers his excitement when he saw a map showing that his town might sit on top of some of the state’s hottest geothermal resources.

“This could really be awesome for the town and for the region,” he said, thinking of the potential for taking advantage of that resource in his community southwest of Telluride.

“It looked like just a really fantastic use of a natural resource that’s nonextractive, totally renewable. It just seemed like the direction we should be going in,” Downer said.

He and other town officials envision tapping geothermal energy for everything from electricity generation to heating sidewalks and buildings.

But like so many others looking into geothermal, Rico officials feel as if they’re venturing into uncharted territory dotted with more questions than answers.

“To be honest, we’re still trying to figure out what the rules are,” Downer said.

So is the U.S. Bureau of Land Management, at least in Colorado. For the first time in the state, the BLM was scheduled this month to offer to sell lease rights to develop geothermal energy. However, the agency has decided to postpone the action until its next quarterly oil and gas lease sale in February. BLM spokesman Jim Sample said the agency put off the geothermal sale “to give us time to work on our agreement on how to handle geothermal with the state.”

Many questions

The proposed lease sale, involving about 800 acres near Mount Princeton west of Buena Vista, is being monitored closely by everyone from state officials to hot spring resort owners. It raises water-law considerations and also split-estate issues like those surrounding oil and gas development, as well as the promise of a clean, renewable, around-the-clock energy source.

“There’s lots of really tough, unanswered questions out there about this whole field,” said Scott Balcomb, a water attorney who over the years has worked to protect the water rights of the Hot Springs Lodge & Pool in Glenwood Springs.

The BLM hopes the lease sale will provide some answers by giving the agency its first chance to study geothermal lease sales in the state.

“We’re all watching this very carefully,” Sample said. “This will be a learning experience for everybody on all sides of the question on this particular lease.”

Mount Princeton could be first

Count among those people Hank Held, owner of Mt. Princeton Geothermal LLC. Held has been pursuing the possibility of geothermal development in the Mount Princeton area. He even received Governor’s Energy Office funding to help pay for test wells.

Held hopes to be the first commercial geothermal electricity producer in Colorado. But he says it wasn’t his company that nominated the 800 acres for geothermal leasing.

“We have no idea who did,” he said.

Sample said the BLM can’t release the nominator’s identity until the lease sale.

Held said whoever proposed the parcel is “trying to piggyback on our efforts,” and his company is discussing bidding for the lease.

Held believes property owners in the Mount Princeton area would be better off with his company owning the lease rather than some big, out-of-state energy company.

“I grew up in Salida. We want to develop this in an orderly manner if we can continue to control it,” Held said.

Great, if done right

Held said he wants to protect the interests of area homeowners and entities including the Mount Princeton Hot Springs Resort, which is adjacent to the land to be leased. Thomas Warren, the resort’s general manager, said the resort supports alternative energy and thinks geothermal development near the resort could be “a great thing” if properly done.

But the resort wants to make sure the leasing doesn’t affect the local water table and the hot springs’ temperature, and that any surface development isn’t an eyesore.

The BLM lease language specifies the geothermal project’s daily water production rate can’t exceed that of the resort’s.

Said the BLM’s Sample, “The big thing there is we are definitely going to stipulate that we can’t usurp the water rights of existing landowners to serve a new geothermal well.”

The state Division of Water Resources also has something to say about that. Kevin Rein, assistant state engineer for the division, said the agency acknowledges the BLM’s claim of a right to lease the geothermal resource.

“At the same time, we believe that we need to administer this resource according to Colorado water law,” he said.

He said the division has been cooperating with the BLM to try to eliminate any water-related conflicts in the case of that lease and geothermal development more generally.

Glenwood Springs concerns

Balcomb, attorney for Glenwood’s Hot Springs Pool, said the pool has assumed there wouldn’t be much, if any, geothermal leasing around Glenwood Springs because companies would be more interested in other, hotter water sources more capable of generating electricity.

Held said a company such as his most likely would try to develop areas of the state with the hottest heat flows first. But he said technological advances are making it possible to produce electricity from geothermal sources as cool as 165 degrees Fahrenheit.

Besides creating electricity via turbines, geothermal can be used to directly heat buildings, as occurs at the Glenwood pool structures. The pool participated in a city committee that has explored opportunities to develop geothermal resources in the area.

“We might even agree to sustain some effect on our operations,” Balcomb said. “We’re not trying to hold back progress. We’re just trying to make sure that the progress that does take place doesn’t really screw us up. These aquifers can be very fragile.”

Ouray dealt with issue before

Such concerns arose a few decades ago in Ouray when the city began doing some drilling in hopes of further developing geothermal resources, and some motels in town sued, contending their hot spring sources were being damaged. The city ended up having to ensure the continuation of adequate and hot enough flows to the motels, Mayor Bob Risch said.

Still, that drilling helped the city hit a spring that let it extend the season of the municipally owned pool, Risch said.

He thinks it’s important to explore geothermal’s potential as a green energy source in Colorado, and the city continues to look into ways of putting it to more use for purposes such as heating buildings in town.

Ouray’s springs peak at about 155 degrees, a bit too cool for electricity generation, Risch said. He said it’s possible hotter water could be found by drilling deeper, but it’s important not to damage shallow aquifers in the process.

“We want to make sure we know who’s drilling where, how deep, and that they’re aware of the history and the potential to do some very serious damage to other springs. We learned our lesson,” Risch said.

Worried about drinking water

Warren said he’s concerned about geothermal development’s possible impacts on area drinking water wells, not just on Mount Princeton Hot Springs Resort.

“There’s really no argument on whether we want (geothermal) power production. We just want to make sure it’s done correctly and doesn’t affect us or our neighbors,” he said.

Split-estate issues

Warren believes the question of split estates could become a big issue, in the Mount Princeton area and elsewhere. The resort owns its mineral and geothermal rights, but a lot of nearby property owners don’t, he said. The acreage the BLM is leasing is generally privately owned, with federally owned mineral rights beneath it.

“There hasn’t been a lot of vocal outpouring yet. I think a lot of that is a lot of people don’t fully understand what’s going on,” Warren said.

The very idea of viewing geothermal water resources as a mineral surprises Mary Ellen Denomy, president of the Rocky Mountain Chapter of the National Association of Royalty Owners, made up of people with oil and gas rights. In Oklahoma, she said, courts decided geothermal rights aren’t a part of mineral rights, unless documents conveying mineral rights specifically include geothermal. Otherwise, geothermal rights belong to the landowner, she said.

The BLM’s Sample said people think of water like they think of air, “but it’s a mineral with mineral properties. That’s where geothermal comes into play.”

Dave Neslin, director of the Colorado Oil and Gas Conservation Commission, said he hasn’t heard any discussion of geothermal development coming up in his agency.

Rein, of the Division of Water Resources, said while the division has oversight over water aspects of geothermal development, he couldn’t speak to the legal questions surrounding accessing someone else’s land to tap the resource.

In split-estate cases involving federally owned geothermal rights, at least, Held of Mt. Princeton Geothermal worries about the possibility of an irresponsible company putting geothermal drilling rigs where landowners don’t want them.

As a rule, federal mineral rights take precedence over surface rights. Where an energy developer and landowner can’t reach a surface-use agreement, the matter goes through a BLM process to determine a bond amount for damages, and either party ultimately can appeal over the size of the bond to the Interior Board of Land Appeals. In the case of federal geothermal leasing in Colorado, split-estate issues are among those still being worked out with the state, said BLM spokesman Steven Hall.

Todd Hartman, spokesman for the Governor’s Energy Office, said the office is “very supportive” of geothermal development, in general and on BLM land. But it also would defer to other state agencies that may have concerns, and would want to make sure any concerns are addressed, he said.

He said the office also wants to review some BLM policies that could inhibit some development.

Luke Schafer, northwest organizer with the Colorado Environmental Coalition, said questions such as groundwater impacts and split-estate issues need to be addressed, but he’s not sure what stance his group should take on the lease sale or geothermal leasing in general.

“It’s completely new to everyone. We don’t know how to approach it; at least I don’t,” he said.


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