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Colorado Finalizes New Water Usage Standards for Oil and Gas Operations By Jim Tartaglia, Steptoe & Johnson PLLC
The Colorado Energy and Carbon Management Commission (ECMC or Commission) recently adopted a set of new regulations aimed at limiting freshwater usage, and in turn promoting the use of recycled produced water, to support oil and gas operations across the state (collectively, Rules). This article provides a high-level summary of the Rules.
§ 34-60-135(2-3). The Consortium was tasked with developing a series of recommendations to guide the Commission in its development of the Rules. See id. at -135(4). In accordance with those recommendations and the statutory directives, and based on a six-month administrative record with substantial public and industry input, the Commission finalized its 2024-2025 Produced Water Rulemaking on March 15, 2025.
Background
Produced water is any water that is co-produced with hydrocarbons at the wellhead. Depending on several factors, a well operator will either dispose of produced water that it extracts (often by subsurface injection) or instead will recycle or reuse that produced water to support other drilling, completion, or enhanced recovery operations. A primary goal of the Rules is to incentivize the recycling and reuse of produced water by operators, and in turn, decrease the amount of fresh water used in oil and gas development processes. The impetus for the Rules dates back to House Bill (H.B.) 23-1242 (effective June 7, 2023), which enacted directives focused on the use of fresh water in oil and gas operations. That legislation imposed certain specific reporting requirements, and further mandated that the Commission adopt new regulations “to require a statewide reduction in freshwater usage, and a corresponding increase in usage of recycled or reused produced water, at oil and gas locations.” C.R.S. § 34-60-134(5) (c)(I). H.B. 23-1242 also created the Colorado Produced Water Usage Consortium (Consortium), comprised of 31 members representing an array of public and private stakeholder groups. See C.R.S.
New Produced Water Usage Standards
The Rules establish basin-wide targets that each operator must meet by ensuring that, for a given compliance period, a minimum percentage of its total water usage is recycled produced water or an acceptable alternative. Under the Rules, “Recycled Produced Water” includes any produced water that is reused in oil and gas operations, with or without reconditioning or other treatment. See 2 C.C.R. 404-1-100. Further, the reuse of any of the “Recycled Produced Water Alternatives” (Alternatives) enumerated in the Rules’ definition will be accounted for like Recycled Produced Water when measuring compliance. These Alternatives include brine and other chemical-rich liquids that are commonly disposed of and not returned to the hydrological cycle. See id. Basin-Wide Usage Measurements. As noted above, compliance with the Rules is a basin-wide assessment. When determining if an operator has met the minimum percentage required, the Rules focus on that operator’s aggregate water usage across all applicable wells within a designated geologic basin (as those geologic basins are identified in the 2002 version of the Colorado
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