AURORA | The city’s reservoir levels are currently high — about as high as the city’s confidence that there will be enough water for its residents even as the city continues negotiating water leasing deals.
In the wake of the water lease between Anadarko Petroleum Corp. and Aurora, the city’s water officials say leasing deals are a common way to pay down debt and stabilize water rates.
Joe Stibrich, Aurora Water’s deputy director and manager for water resources, said the city has been leasing water for years.
“We’ve always looked at where our supplies are, where our projected demand is going to be, and where we have windows of opportunity. Where we think we have additional supply, we’ll go ahead and lease it,” Stibrich said.
The Anadarko leasing deal was especially high profile because the city agreed to lease water to the company for hydraulic fracturing purposes — a contentious issue that some Aurora residents have vehemently opposed.
But leasing deals have existed long before then, Stibrich said.
Those include a 7,000 acre-foot lease to the Central Colorado Water Conservancy District, a 4,340 acre-foot lease to Rocky Mountain Energy Company, now owned by Xcel Energy, and leases that are currently being negotiated for the WISE project that will eventually grant water to 11 water providers in Douglas and Arapahoe counties in times when Aurora has additional water.
The agreements are called water “leases” because under Colorado law, the entities are obtaining the ability to use the water over the 5-year term of the lease, but ownership of the water rights remain with Aurora, said Aurora Water Spokesman Greg Baker. The city regularly leases water when they do not have the ability to utilize it at any particular time, but by city charter, cannot sell their water rights, Baker said.
Stibrich said the leases are typical, since Aurora’s water supply is abundant. But the city is only leasing water that’s going downstream of the city, and water they wouldn’t be able to otherwise store.
“We currently have no capability for bringing that up to the city,” he said.
As of now, Aurora’s water supply is in good shape.
The city stores water in 16 reservoirs — of which they own five: Quincy, Aurora, Rampart, Spinney Mountain and Jefferson Lake. The rest of the reservoirs are shared with other cities, for example, Homestake Reservoir stores water for Aurora and Colorado Springs.
The reservoirs have a total water storage capacity of 156,000 acre feet of water. An acre foot is 326,000 gallons, or enough water to serve two typical households per year. The amount of storage capacity the city has is three times more than the city’s actual need.
The city uses about 50,000 acre feet annually, and the reservoirs were about 85 percent full in May.
The city is continually looking at more opportunities for water storage. Between 2012 and 2014 the city will be working on land easements and begin pre-permitting activities for the development of the Box Creek Reservoir, which they hope will be online and storing water by 2030.
Stibrich said water management is all about striking a balance between acquiring water, storing it, leasing it, and still having enough for residents in times of drought.
“We’re in much better shape than we were years ago, in the prior (2002) drought, but it’s probably still never enough because you don’t know what’s coming down the road,” he said.
The city has found ways to safeguard against droughts. After the severe 2002-03 drought, the city decided to create the $660 million drought-hardening Prairie Waters project, that will ensure the city has enough water during droughts for decades. But with that investment came millions of dollars worth of debt, and leasing some water that’s either not usable or can’t be stored, is a way to help offset the debt and stabilize water rates, Stibrich said.
“We’re not going to say (leases) solve the problem and make it so we don’t ever have to raise rates,” he said. “The leases just provide a small portion of our revenue. But anything can help.”
About 80 percent of Aurora Water’s total revenue comes from rate payers, of which the city has between 75,000 to 80,000, said Gabrielle Johnston, a spokeswoman for Aurora Water. About 20 percent of the budget is made up of development fees, water leases and miscellaneous revenue, she said.
Just because the city generates revenue from a leasing deal doesn’t mean that water rates will ever decrease, though. But Stibrich said he expects rates to be stable or only increase by about 2 percent within the next five to seven years.
That’s a small percentage increase compared to previous years. For example, in 2010 water rates increased by 7.5 percent over 2009, in 2009 they increased by 8 percent, and in 2008, 2007, and 2006 there was a 12-percent increase.
In 2003 and 2004 water rates increased by 15 percent over the previous years to pay for the Prairie Waters project.
In 2011 and 2012, there was no rate increase, and Aurora City Council members are expected to set water rates for 2013 in the fall.
“We are not anticipating any rate increases at this time,” Johnston said.
Under the Anadarko water lease, Anadarko is planning to pay Aurora Water to use 1,500 acre feet of “effluent” water per year over five years. The company will be paying four times the market rate for the city’s effluent water, or water that has already been used and treated that would otherwise flow downstream and out of the state.
That equals to about $1,200 per acre foot, whereas the market rate is about $350 per acre foot.
Anadarko will pay Aurora about $9.5 million over five years for the water.
According to a newsletter sent to Aurora users in August, the city would have to raise rates by 1.8 percent to generate the same amount of money.
The water Anadarko is leasing from the city is sanitary but not “potable,” or drinkable, and is not made available for public use. Aurora is already getting requests from other companies to lease potable water, but Aurora water officials suggested at a committee meeting on Aug. 15 that Aurora City Council members deny those requests.
While water lease deals may be common for Aurora, the third largest city in Colorado, they aren’t as typical in Colorado Springs, the second largest city in the state.
Steve Berry, a spokesman for Colorado Springs Utilities, said the city has never leased water to an oil and gas drilling company before.
“We have occasionally leased water to other water providers in El Paso County, but it is not common,” he said.
Colorado Springs’ total storage capacity is about 260,000 acre feet; the city stores water in 25 reservoirs, and has about 135,690 metered water accounts.
The city of Fort Collins often leases surplus raw water to offset costs, but it hasn’t leased water to an oil and gas drilling company either, said Susan Smolnik, the city’s water resources engineer.
“In most years, the city has at least some surplus water available for rent,” she said in an email. The majority of raw water is leased to area farmers or gravel pit operators.
Some Aurora residents say they are concerned with the city’s long-term water lease agreements, and that they should be more conscientious of potential drought situations before striking leasing deals.
“I think they should do some worst-case scenario risk assessments,” said Duane Senn, a longtime Aurora resident and former chief surveyor for the city. “I’m not sure they’re doing sufficient risk analysis. They’re looking at best-case scenarios instead of worst-case scenarios.”
Aurora residents should know that they are always taking water customers into account in negotiating lease deals, Stibrich said.
“Our customers are always our first priority and we’re always managing and operating our system in order to meet their demands,” he said.
Reach reporter Sara Castellanos at 720-449-9036 or [email protected]