AURORA | Anadarko Petroleum is looking to modify a $9.5-million water contract with Aurora for its oil and gas drilling operations across the state because of the oil and gas industry slump.
In 2012, Anadarko entered into an agreement with Aurora to purchase “used” water from the city for five years at a rate of 1,500 acre feet per year. The company is in the final year of its agreement with the city, and still owes $2,025,915, according to city documents.
At an Aurora City Council Water Policy Committee meeting Oct. 13, council members agreed to move forward with renegotiating the final year of Anadarko’s agreement to spread that 1,500 acre-feet payment over three years, with Anadarko purchasing 500 acre feet of water per year.
“Anadarko has recently undergone significant economic set-backs, due to the steeply declining price of oil. As a result, drill rigs have been laid down and oil production in Weld County has virtually ceased,” city documents said, as to why Anadarko is proposing the change.
Anadarko is also offering the city an incentive for the contract change that will include 150 Lupton Meadows Ditch Company shares to pay for some of the full $2 million-plus still owed. City officials say those shares are worth $1,410,000 in water rights and would provide Aurora with a better deal than what was proposed under the initial contract because Aurora will have ownership of the Lupton Meadows Ditch.
“Anadarko has been a really positive partner, and we’ve developed a relationship that’s been beneficial to both parties,” said Lisa Darling, a program manager with Aurora Water, at the meeting.
Aurora At-large Councilman Bob LeGare, a member of the committee, agreed, and said after the meeting the new contract would be a fantastic deal for the city because of the gained water rights.
“The reason it’s such a sweet deal is they (Anadarko) have an asset, the water rights they own, and it’s not as valuable to them as it is to us,” LeGare said. “Rather than cash, we get water shares that produce water in perpetuity.”
LeGare said the value of those water shares are likely to increase in coming years, with water becoming an increasingly scarce resource for the state’s booming Front Range.
Aurora’s water system consists of 12 reservoirs that span the Front Range and Continental Divide, providing the city with more than 156,000 acre feet of storage located in three water basins. But even though they can supply the city with years of emergency supply in case of a drought, city officials say demands for water are increasing, and that they will need more storage to provide services to potentially 600,000 residents in the coming decade.
The contract change still needs to be heard by the full Aurora City Council before it is approved.
In 2012, the company paid Aurora four times the market rate for the city’s effluent water, or water that has already been used and treated and would otherwise flow downstream and out of the state. The water is sanitary, but not potable or made available for public use.
Last year, the Texas-based company reported a $2.2 billion loss as the company delayed production on about 200 wells nationwide, most of them in Weld County’s Wattenberg Gas Field.
The Associated Press contributed to this story.