A recent water auction in northeast Colorado has raised concerns among agriculture interests and environmentalists that development of the Niobrara Shale formation along the Front Range could squeeze farmers and growing municipalities out of badly needed water.

The concern stems from a state auction last month that involved more than 8 billion gallons of unallocated water in northeast Colorado, where the Niobrara play is booming.

While the agricultural sector successfully bid for the majority of water at the March 16 auction, a growing volume was purchased by companies that supply water to the oil and natural gas industry for use in hydraulic fracturing, or fracking -- the technique of injecting water, sand and chemicals underground at high pressure to create fissures in tight rock formations and allow gas and oil to flow freely to the surface.

Nearly 750 million gallons of water was allocated at the auction for this use, said Brian Werner, a spokesman for the Northern Colorado Water Conservancy District, which oversaw the auction.

"The Niobrara play is in a very dry area of the state, so the water that's up there is pretty sacred because it's scarce," said Bill Midcap, director of the Rocky Mountain Farmers Union's Energy Center in Denver. The union represents about 22,000 farmers in Colorado, Wyoming and New Mexico.

But Werner disputes concerns about water supply or the oil and gas industry driving up prices so high that farmers and even municipalities are squeezed out of the bidding.

The Northern Colorado Water Conservancy District still has another 2.9 billion gallons it could auction off later this year if needed, he said.

"The idea is that the water benefits the region, and it's available to whoever wants it," he said. "Yes, some additional water is going to people who are hauling water to oil and gas developments, but that's good news. The knee-jerk reaction is it's a bad thing. But oil and gas development is a big economic driver in northeast Colorado, and we don't need to apologize for that."

Big potential, growing concern

Still, worries grow as drilling near municipalities along the Front Range continues to increase as companies race to tap into massive petroleum and natural gas reserves in the Niobrara.

Though it's less fully understood than other shale oil plays, companies see the Niobrara as having strong potential, and the state's governor expects a coming boom in new onshore crude oil production from the area that stretches just outside Denver north into Wyoming (EnergyWire, March 27).

While the state estimates that the oil and gas industry used about 4.5 billion gallons of water for fracking statewide in 2010, that number is projected to increase to 6 billion gallons by 2015, according to a nine-page report released in January by the Colorado Oil and Gas Conservation Commission.

That would still be far less than agricultural, municipal or large industrial uses, according to the state report, but already more than ski resorts use for snow making, as well as what's used statewide each year for coal, natural gas, uranium or solar development.

The increased numbers are a source of growing concern, said Midcap, the Rocky Mountain Farmers Union official, and a lot more research is needed.

"As we think about the oil and gas play in the Niobrara, and what they've done in other areas, I guess I have a lot of concerns about are they going to get it right this time," Midcap said. "Hopefully, they get it right on this fracking business. The quality of the water concerns me a lot, and so does the quantity they're talking about removing."

Boulder, Colo.-based Western Resource Advocates (WRA) is putting the finishing touches on a months-long study of water use and fracking in Colorado that it plans to release later this month, said spokesman Jason Bane.

The study used industry and state water use estimates to predict that by 2015, the volume of water used by the industry for fracturing and drilling statewide will be equivalent to the total annual volume used by the residents of Lakewood, Colorado's fifth-largest city, said Laura Belanger, a WRA water resources engineer.

Belanger said the state needs to do a better job of collecting per-well water use data and sharing that information with water resource planners and the public. "When you start looking at where the [water] demand is, we need to do a better job of planning," she said.

Drought conditions, less water

The latest auction and concerns about water quantity are playing out against the backdrop of unusually dry conditions and low snowpack levels across most of Colorado.

The latest drought forecast compiled each week by the Agriculture Department, the National Oceanic and Atmospheric Administration, and other federal and state agencies recently estimated that 98 percent of the state is suffering from droughtlike conditions.

Wendy Ryan, a research associate at the Colorado Climate Center at Colorado State University in Fort Collins, said it's only going to get worse.

Ryan said an updated forecast expected to be issued today will show 100 percent of Colorado is in drought, with March grading out as one of the warmest and driest on record.

And while Ryan said climatologists are hopeful for a wetter, cooler April and May, there are no guarantees.

Snowpacks across the state are at "unprecedented" low levels, Ryan said. And the warm and dry conditions in March have started melting what snow there is weeks ahead of schedule.

"We had a record snowpack last year, and reservoir storage is good, so we've got that going for us," Ryan said. "We're still hopeful. There's a lot of April left. We're just hoping for the best."

But the droughtlike conditions illustrate why water use for oil and gas development must be considered in concert with agriculture, municipal and other already stressed uses in the state, said Gary Wockner, director of the Save the Poudre Coalition in Fort Collins, which works to preserve the Cache la Poudre River.

"We're talking about an additional use of water beyond what's already being taken out of rivers. And a lot of the rivers are already in severely bad shape," he said. "Now there's a new big dog in the game, and it's the drillers and frackers, and they can outbid everybody. They're buying water from cities; they're outbidding farmers for water at auctions. It's a game changer in the water wars in Colorado."

Streater writes from Colorado Springs, Colo.