Office of the State Engineer Rulemaking Hearing For

OFFICE OF THE STATE ENGINEER

RULEMAKING HEARING FOR PRODUCED NONTRIBUTARY GROUND WATER RULES, 2 CCR402-17

ALTERNATE RULE PROPOSED BY QUESTAR MARKET RESOURCES, INC. (QUESTAR EXPLORATION AND PRODUCTION COMPANY AND WEXPRO COMPANY)

1. Persons submitting the proposed alternate rule:

Questar Market Resources, Inc. (Questar Exploration and Production Company and Wexpro Company). Julander Energy Company joins in Questar’s proposal.

2. Alternate Proposed Rule:

2.1 Proposed Modification of SEO’s Proposed Rule The following modifications to the SEO’s Proposed Rules and the Proposed Alternate Rule are submitted for consideration by the Hearing Officer during the rulemaking proceeding: Current subparts B, C and D of subsection 17.7 of the Proposed Rules appear to be referenced as exceptions to current subpart 17.7.A. Questar suggests that, for clarification, existing subpart 17.7.A be retained simply as the introductory text of subsection 17.7, as modified below, and the following current subparts B, C and D then be redesignated as subparts 17.7.A, B and C. In addition, in order correctly to state the applicable legal principle reflected in this introductory paragraph, the text of the original Section 17.7.A of the Proposed Rule is proposed to be further modified as follows (added text is underlined): 17.7 Specific Locations of Nontributary Ground Water in Colorado

Ground water in the State of Colorado is legally presumed to be “tributary,” or hydraulically connected to surface water in such a fashion so as to require administration within the prior appropriation system in conjunction with surface rights, unless it is demonstrated to be nontributary ground water. See Simpson v. Bijou Irrigation Co., 69 P.3d 50, 57 n.7 (Colo. 2003). Accordingly, absent a determination made pursuant to Rule 17.5 of these rules, the State Engineer shall regard all Produced Water within the State of Colorado to be tributary, with the following exceptions:

2.2 Proposed Additional Nontributary Determination

17.7_ The Vermillion and Sand Wash Basins

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The State Engineer shall regard as nontributary all Produced Water diverted by means of oil and gas wells located within the boundary shown on Exhibit A from (1) the Fort Union Formation, Lance Formation, Lewis Shale, Mesaverde Group, Baxter Shale, Frontier Formation, Mowry Shale, Dakota Sandstone, and Nugget Sandstone and (2) those parts of the Hiawatha member of the Wasatch Formation identified as nontributary in Exhibit B.

3. State Engineer’s authority to promulgate the Alternate Proposed Rule:

The State Engineer is specifically authorized to adopt rules to assist in the administration of CRS §37-90-137(7) by CRS §37-90-137(7)(c), and has general rulemaking authority relating to all duties of his office under CRS §37-80-102(1)(g) and (k). See also, CRS §37-90-103(10.5).

4. Relation to subject matter and scope of rulemaking:

The alternate proposed rule would modify the rules as proposed by the State Engineer in the course of the rulemaking to identify an additional area within the state as nontributary, as expressly provided in the notice for this hearing.

5. Statement of basis and purpose:

A proposed Statement of Basis and Purpose is attached.

6. Map of areal limits of nontributary determination:

A map of the areal limits of the requested nontributary determination is attached. The area includes the portions of the following Townships and Ranges lying within the State of Colorado: T12N, R101W; T12N, T100W; T12N, R99W; T12N, R98W, T12N, R97W; T12N, R96W; and the entirety of the following Townships and Ranges: T11N, R101W; T11N, T100W; T11N, R99W; T11N, R98W, T11N, R97W; T11N, R96W; T10N, R98W; T10N, R99W.

7. Description of hydrogeologic justification:

The alternate proposed rule is based on both modeling and alternate methods. Alternate methods were primarily used for the Nugget Sandstone, Dakota Sandstone, Mowry Shale, Frontier Formation, Baxter Shale, Mesaverde Group, Lewis Shale, Lance Formation, and the Fort Union Formation. Analytical modeling was used for the Hiawatha member of the Wasatch formation and to develop approximate tributary distances from outcrop for the other formations noted above. The model used in the analytical modeling is the Glover equation as incorporated in the IDS “AWAS” program and the Western Water Consulting, Inc. Well Pumping Depletion Model(WPDM) (© 2001, Western Water Consulting, Inc.). Formation parameters provided by Questar were utilized in the analyses and formation outcrops were identified from geologic maps and reports published by the USGS.

The Nugget Sandstone, Dakota Sandstone, Mowry Shale, Frontier Formation, Baxter Shale, Mesaverde Group, Lewis Shale, Lance Formation, and the Fort Union Formation have outcrops in the State of Colorado that range in distance from the study area from 41 to 77 miles,

000276 Questar APR Page 3 primarily to the southeast and east. Formation continuity with outcrop areas to the west and south is interrupted by significant fault bands that offset the formations and eliminate the potential for any hydraulic connection between pumping wells and surface waters of Colorado in any outcrop areas that may be present south and west of these fault bands. The stratigraphy of these formations also tends to be laterally discontinuous over larger areas, further limiting the potential for hydraulic continuity with the outcrops, regardless of the presence of faulting. The hydraulic conductivities of the formations, as per data provided from field and laboratory testing by Questar, range from 0.000274 feet per day (ft/day) to 2.74 ft/day, although the bulk of the values reported are typically less than 0.01 ft/day. The saturated thicknesses of these formations range from as little as 20 feet to as much as several hundred feet; however, the bulk of the thicknesses involved in the production intervals are less than 60 feet This results in a range of typical transmissivities of 0.04 gallons per day per foot (gpd/ft) up to 1.23 gpd/ft. Storage coefficients for these formations, utilizing a specific storage of 1 x 10-6, range from 2 x 10-5 to 6 x 10-5. With these aquifer properties and the measured distances to outcrop for the respective formations there will be no depletion to any surface waters in Colorado greater that 0.1 percent of the pumping rate after 100 years of continuous pumping. Therefore, withdrawal of Produced Water from these formations will not, within 100 years of continuous withdrawal, deplete the flow of a natural stream, including a natural stream as defined in sections 37-82-101(2) and 37- 92-102(1)(b), at an annual rate greater than one-tenth of one percent of the annual rate of withdrawal. Therefore, Produced Water from the above named formations within the study area is nontributary ground water.

Results of modeling carried out with the AWAS and WPDM programs utilizing conservative scenarios incorporating the infinite aquifer and infinite stream length options, and the ranges of transmissivities and storage coefficients developed from Questar data for the Nugget Sandstone, Dakota Sandstone, Mowry Shale, Frontier Formation, Baxter Shale, Mesaverde Group, Lewis Shale, Lance Formation, and the Fort Union Formation shows that wells located greater than four to five miles from a point of contact with a surface stream or its alluvial aquifer will not, within 100 years of continuous withdrawal, deplete the flow of a natural stream, including a natural stream as defined in sections 37-82-101(2) and 37-92-102(1)(b), at an annual rate greater than one-tenth of one percent of the annual rate of withdrawal. The nearest such point of contact to the study area for any of these formations is more than 25 miles away. This confirms that Produced Water from the Nugget Sandstone, Dakota Sandstone, Mowry Shale, Frontier Formation, Baxter Shale, Mesaverde group, Lewis Shale, Lance Formation, and the Fort Union Formation in the study area is nontributary ground water.

For the Hiawatha member of the Wasatch Formation, geologic maps indicate that the main body of the Wasatch, comprising the lower portions of the overall formation, and in which the Hiawatha member is found, does outcrop within the study zone. Specifically, in Township 12N, R100W, there is a small area of the Wasatch main body outcrop crossed by a stream alluvium associated with a tributary of Vermillion Creek. The analytical modeling has shown that there will be a zone of tributary water extending out approximately 7.5 miles from the stream as it crosses the main body of the Wasatch. The parameters used in carrying out these analyses include a permeability of 1 mD, equivalent to 0.00274 ft/day or 0.00205 gpd/ft, a zone thickness of 45 feet, representing the average of the production zone thicknesses as per Questar data, and a storage coefficient of 4.5 x 10-5, based on a specific storage of 1 x 10-6. Any water

000277 Questar APR Page 4 produced from wells in the remainder of the main body of the Wasatch formation within the subject property and lying beyond the 7.5 mile tributary zone are nontributary.

The data sources, reports and maps relied upon to formulate the rule include:

1. Tweto, Ogden; 1976; Geologic Map of the Craig 1 x 2 Quadrangle, Northwestern Colorado; United States Geologic Survey Miscellaneous Investigations Series Map I-972

2. Rowley, Peter D., Hansen, Wallace R., Tweto, Ogden, and Carrara, Paul; Geologic map of The Vernal 1 x 2 Quadrangle, Colorado, Utah, and Wyoming; United States Geologic Survey Miscellaneous Investigations Series Map I-1526

3. United States Geological Survey Digital Data Series 069–D

4. URL:

5. National Assessment of Oil and Gas Project:

Petroleum Systems and Geologic Assessment of Oil and Gas in the Southwestern Wyoming Province, Wyoming, Colorado, and Utah

By USGS Southwestern Wyoming Province Assessment Team

Chapter 7 The Hilliard-Baxter-Mancos Total Petroleum System, Southwestern Wyoming Province By Thomas M. Finn and Ronald C. Johnson

Chapter 8 The Mesaverde Total Petroleum System, Southwestern Wyoming Province By Ronald C. Johnson, Thomas M. Finn, and Laura N.R. Roberts

Chapter 9 Lewis Total Petroleum System of the Southwestern Wyoming Province, Wyoming, Colorado, and Utah By Robert D. Hettinger and Laura N.R. Roberts

Chapter 10 The Mesaverde–Lance–Fort Union Composite Total Petroleum System, Southwestern Wyoming Province By Thomas M. Finn, Ronald C. Johnson, and Stephen B. Roberts

Chapter 11 Geologic Assessment of Undiscovered Petroleum Resources in the Lance–Fort Union Composite Total Petroleum System, Southwestern Wyoming

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Province By Stephen B. Roberts

Chapter 12 Geologic Assessment of Undiscovered Petroleum Resources in The Wasatch–Green River Composite Total Petroleum System, Southwestern Wyoming Province By Stephen B. Roberts

Chapter 13 U.S. Geological Survey Assessment Concepts for Continuous Petroleum Accumulations By James W. Schmoker

Chapter 14 Subsurface Stratigraphic Cross Sections of Cretaceous and Lower Tertiary Rocks in the Southwestern Wyoming Province, Wyoming, Colorado, and Utah By Thomas M. Finn and Ronald C. Johnson

Chapter 15 Stratigraphic Framework of the Cretaceous Mowry Shale, Frontier Formation and Adjacent Units, Southwestern Wyoming Province, Wyoming, Colorado, and Utah By Mark A. Kirschbaum and Laura N.R. Roberts

6. Data provided by Questar Exploration and Production in spreadsheet format including a list of active wells with API number, lease name and number, location, field name, production zone name, cumulative gas, oil and water production, year to date oil, gas and water production, first production date, last production date, total depth, upper and lower perforated zones, and latest month oil, gas and water production.

7. Data provided by Questar Exploration and Production in map format presenting the structural contours on the top of the Almond formation.

8. Data provided by Questar Exploration and Production in map format presenting the structural contours on the top of the Frontier formation.

9. Data provided by Questar Exploration and Production in map format presenting the structural contours on the top of the Fort Union formation.

10. United State Geological Survey Topographic maps

11. United State Geological Survey 1:500,000 scale state map series Map of Colorado. Raven Maps and Images, 1989

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12. Data provided by Questar Exploration and Production on water quality in certain of the basin formations; Water analysis Reports; Champion Technologies, Inc., Multi-Chem group, LLC., and Wyoming Analytical Laboratories, Inc.

13. Data provided by Questar Exploration and Production in spreadsheet format presenting information on formation properties including formation depths, porosities and permeabilities.

14. Freethy, Geoffrey W., and Cordy, Gail w., “Geohydrology of Mesozoic Rocks in the Upper Colorado River Basin in Arizona, Colorado, New Mexico, Utah and Wyoming, Excluding the San Juan Basin”; USGS Professional Paper 1411-C

Submitted October 2, 2009.

PETROCK & FENDEL, P.C.

/s/ Signed original submitted to SEO ______Frederick A. Fendel, III

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CERTIFICATE OF SERVICE

I certify that I served a copy of the foregoing Alternate Rule Proposed by Questar Market Resources, Inc. (Questar Exploration and Production Company and Wexpro Company) on October 2, 2009, by email on the following persons:

NAME REPRESENTED E-MAIL BY/ADDRESS

PARTIES

Party Status 1. Altela Inc. Matthew Bruff Email: [email protected] Altela Inc. 5350 S. Roslyn St., Suite 430 Englewood, CO 80111 2. Anadarko Petroleum Zach C. Miller Email: [email protected] Company Davis, Graham & Stubbs LLP 3. BP America Production 1550 Seventeenth Street, Suite 500 Company Denver, CO 80202 4. EnCana Oil and Gas (U.S.A.) Inc. 5. McElvain Oil & Gas Properties, Inc. 6. Rosetta Resources Operating LP 7. Rosewood Resources, Inc. 8. Centennial W&S District Timothy R. Buchanan Email: [email protected] 9. City of Boulder Buchanan and Sperling, P.C. [email protected] 10. Harmony Ditch Company 7703 Ralston Road 11. Natural Soda, Inc. Arvada, CO 80002 12. North Sterling Irrigation District 13. Pawnee Well Users, Inc. 14. Chevron U.S.A. Inc. Mark A. Hermundstad & Email: [email protected] Kristen M. Kurath [email protected] Williams, Turner & Holmes, P.C. P.O. Box 338 200 N. 6th St. Grand Junction, CO 81502 15. City of Trinidad Jeffrey J. Kahn Email: [email protected] Lyons, Gaddis, Kahn & Hall P.O. Box 978 Longmont, CO 80502 16. Climax Molybdenum Brian Nazarenus Email: [email protected] Company Ryley, Carolock & Applewhite 1999 Broadway, Suite 1800

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Denver, CO 80202 17. Colorado Environmental Beck Long Email: [email protected] Coalition Colorado Environmental Coalition 1536 Wynkoop St., #5C Denver, CO 80202 18. Colorado Interstate Gas Daniel J. Schnee Email: [email protected] Company 2 N Nevada 19. El Paso E&P Company, L.P. Colorado Springs, CO 80903

20. Colorado Oil & Gas Ken Wonstolen Email: [email protected] Association Andrew Bremner [email protected] 21. Energen Resources Susan L. Aldridge [email protected] Corporation Beatty & Wozniak, P.C. 23. Petro-Canada Resources 216 16th Street, Ste. 1100 (USA) Inc. Denver, CO 80202 24. Petroglyph Energy, Inc. 25. Samson Resources Co. 26. SG Interests, Inc. 27. Colorado Petroleum John Paul Seman, Jr. Email: [email protected] Association 1660 Lincoln Street, Suite 1460 Denver, CO 80264 28. Colorado River Water Jason Turner Email: [email protected] Conservation District CRWCD P.O. Box 1120 Glenwood Springs, CO 81602 29. Conejos Water Conservancy Patricia M. DeChristopher Email: [email protected] District Moses, Wittemyer, Harrison & 30. South Adams County Water Woodruff, P.C. & Sanitation District 1002 Walnut St., Suite 300 31. Town of Aguilar, Colorado Boulder, CO 80306 32. Conoco Phillips Company Gregg Wurtz Email: 3401 E. 30th Street [email protected] Farmington, NM 87401 33. Conquest Disposal Services Steven J. Bushong Email: [email protected] 34. Exxon Mobil Kristin Howse Moseley [email protected] Corporation/Exxon Mobil Oil Glenn E. Porzak Corporation Porzak, Browning & Bushong, LLP 35. Produced Water 929 Pearl Street, Suite 300 Development Corporation Boulder, CO 80302 36. Wellington Water Works, LLC 37. Cripple Creek & Victor Michael D. Shimmin Email: [email protected] Gold Mining Company Vranesh and Raisch, LLP 38. Cucharas Sanitation & 1720 14th Street, Ste. 200 Water District Boulder, CO 80306 39. GW Management Districts 40. Delta Petroleum Lila Harvey Email: [email protected] Corporation Delta Petroleum

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370 17th Street, Suite 1300 Denver, CO 80202 41. Denver Water Mary B. Rastall Email: [email protected] Denver Water Legal Division 1600 W. 12th Ave. Denver, CO 80204 42. Diamond Operating, Inc. David C. Peterson Email: [email protected] Diamond Operating, Inc. 6680 Gunpark Drive, Suite 100 Boulder, CO 80301 El Paso E&P Company, L.P. Christopher L. Thorne Email: [email protected] 43. K.P. Kauffman Company, William H. Caile [email protected] Inc. Holland & Hart, LLP 44. Pioneer Natural Resources P.O. Box 8749 USA, Inc. Denver, CO 80201 45. Williams Production RMT Company/Williams Production Company, LLC 46. XTO Energy, Inc.

47. Gunnison Energy Wayne F. Forman Email: [email protected] Corporation Brownstein, Hyatt, Farber, Schreck, LLP 1720 14th Street, Suite 2200 Denver, CO 80202 48. Hill Ranch, Ltd./Kozad Alan E. Curtis Email: [email protected] Properties, Ltd./GLENHILLS White & Jankowski, LLP Ranch, Ltd. 511 16th Street, Suite 500 49. Senior Water Right Owners Denver, CO 80202 (Alan Bielski, Ben and Melanie Bounds, Corsentino Dairy Farms, Inc., James and Mary Fitzgerald) 50. Senior Water Right Owners continued (City of Raton, City of Sterling, Alan & Janice Tucker, William & Elizabeth Vance 51. Noble Energy, Inc. Robert G. Leo, Senior Counsel Email: [email protected] Noble Energy, Inc. 1625 Broadway, Suite 2200 Denver, CO 80202 52. North Fork Landowner’s Tracy Dahl Email: [email protected] Association 14218 Switchback Road Weston, CO 81091 53. OXY USA Nick A. Swartzendruber Email: [email protected] Poulson, Odell & Peterson, LLC [email protected] 1775 Sherman Street, Suite 1400

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Denver, CO 80203 54. Petroleum Development Randall Ferguson Email: [email protected] Corporation Petroleum Development Corporation 1775 Sherman Street, Suite 3000 Denver, CO 80203 55. Purgatoire River Water Julianne M. Woldridge Email: [email protected] Conservancy District MacDougall, Woldridge & Worley, P.C. 530 Communication Circle, Suite 204 Colorado Springs, CO 80905

56. Red River Ranch Holdings, James J. Killean Email: [email protected] LLC 1675 Broadway, Suite 2600 Denver, CO 80202 57. Rocky Mountain Farmers Charles Holum Email: [email protected] Union 4633 Montview Blvd Denver, CO 80207 58. Sierra Club Rocky Kirby Hughes Email: [email protected] Mountain Chapter Sierra Club 2725 Black Canyon Road Colorado Springs, CO 80904 59. Southern Ute Indian Tribe Adam T. Reeves Email: [email protected] Maynes, Bradford, Shipps & Sheftel, LLP 835 E. Second Ave., Ste., 123 Durango, CO 81301 And

M. Catherine Condon Email: [email protected] McElroy, Meyer, Walker & Condon, P.C. 1007 Pearl Street, Suite 220 Boulder, CO 80302

______Frederick A. Fendel, III

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