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Getting Into Hot Water: The Law of Geothermal Resources in Colorado

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Getting Into Hot Water: The Law of Geothermal Resources in Colorado ( getting-into-hot-water-the-law-geothermal-resources-colorado )

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NATURAL RESOURCE AND ENVIRONMENTAL LAW—WATER LAW state water laws.27 If demineralized water is a byproduct of the geo- thermal resource extraction process, such water is expressly suscep- tible to state water law and permitting.28 This purposeful lack of position, however, arguably has left open the question of whether the United States holds reserved water rights for geothermal de- velopment.29 Geothermal resources also are located on tribal lands, adding an additional layer of sovereignty to water and mineral de- velopment, which has been encountered in both the water rights and oil and gas contexts. There are three distinct phases in the development of a geother- mal power plant: (1) exploration; (2) confirmation; and (3) site de- velopment.30 In addition to the rights to the use of the resource, each phase of development of a geothermal power plant may im- plicate federal land use policies and National Environmental Policy Act or Endangered Species Act review, and be subject to local land use permitting and regulations under House Bill (H.B.) 1041. State Jurisdiction Over the Resource State law governs the process of geothermal resource develop- ment and leasing of geothermal resources that are not located in the federal mineral estate. Pursuant to the Colorado Constitution, the state of Colorado has jurisdiction over the waters of the state and state water rights issues.31 Colorado law also governs well drilling and operation.32 In regulating geothermal resources, the Colorado legislature rec- ognized that while the doctrine of prior appropriation is, and always has been, expressly recognized with respect to geothermal resources, such doctrine should be modified to permit the full economic devel- opment of the resource.33 However, that statement resulted in an unclear relationship be- tween the Colorado Geothermal Resources Act and the Colorado Water Rights Determination and Administration Act, which was partially resolved by passage of S.B. 10-174.34 Colorado water law allows, but does not require, developers of geothermal wells for energy production to establish their rights by adjudication of a decreed water right. In 2010, the general assembly clarified that nonconsumptive geothermal power production wells may receive authorization based on a Division of Water Resources permitting system.35 Geothermal resource development requires a finding by the State Engineer’s Office (SEO) that no material in- jury will occur to vested water rights.36 That injury finding can be made based on a “diminution or alteration in the temperature of water” only when the impacted water right is “adversely affected” and a “valid, prior” geothermal right.37 Permits for diversions of groundwater for geothermal resources can be appealed to the Col- orado Water Court.38 Thus, as a practical matter, the legal right to beneficial use of geothermal water diversions is best preserved through the traditional water court adjudicatory process. “Geothermal resources” are defined under Colorado law as the natural heat of the earth, including the energy that might be extracted from the natural heat, the material medium used to ex- tract the energy from a geothermal resource, and geothermal by- products.39 If geothermal fluid (described in the Geothermal Re- sources Act as “groundwater, brines, vapor and steam”) constitutes groundwater that is tributary to a stream, the usufructuary rights that flow from such an appropriation may be established only ac- cording to the procedures of the Act, as opposed to normal tribu- tary well diversions under Article 90 of Title 37.40 No correlative The Colorado Lawyer | September 2010 | Vol. 39, No. 9 67

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