The Colorado state auditor on Tuesday released a new audit of the state's water-well inspection program that found the program overspent its budget and  must do a better job of prioritizing high-risk wells for inspection.

The program, under the Department of Natural Resources' Division of Water Resources, has three employees and a budget of about $300,000 annually, from cash funds derived from license, permit and application fees, as well as fines. 

Water wells are primarily tapped by those who live in rural Colorado, where access to municipal utilities isn't available. The wells commonly supply water for single-family domestic use, commercial businesses, crop irrigation and watering for livestock. Some wells are constructed to monitor groundwater quality.

State law requires every new well that diverts groundwater — that's the water that comes from aquifers and not from surface supplies like rivers — to have a permit issued by the state engineer. In 2003, the General Assembly established the Well Inspection Program, stating in the law's intent that "improperly constructed wells, improperly abandoned wells, and improperly installed pumping equipment can adversely affect groundwater resources and the public health, safety and welfare … [and] the periodic inspection of well construction and pump installation are essential for the protection of the public health and the preservation of groundwater resources.”

The law does not require every new well to be inspected, but the law does say that the program's inspectors will spent the majority of their time inspecting wells instead of writing reports.

That didn't happen in 2018, according to the audit. More than 4,460 new wells were constructed, but only about 310 were inspected. Of those 310, only 15 high-risk wells (out of 206 total high-risk wells) were inspected. The rest of the inspections (295) were of low-risk wells.

Part of the inspection process is to keep an eye on the construction of the well. The audit reported that once a well is completed, inspectors can't view key aspects such as the well's grout because it's then obscured by other parts of the well.

The audit found major problems in the well inspection program, chief among them the program's "underlying approach to protecting water resources and the public."

The audit said:

  • the Division lacks a strategy for "getting the maximum monitoring benefit from the program’s three inspectors and about $300,000 in annual funding";
  • the Division does not effectively use a risk-based approach to ensure the inspectors review high-risk well;
  • inspectors' time is not focused on observing "key phases of well construction"; and
  • the program does not ensure that its funds are used only for its operations.

With such limited resources, the program must do a better job of prioritizing wells for inspection, the audit reported. 

High-risk wells aren't only on the Eastern Plains or the Western Slope. One of the highest-risk areas is right in the Denver metro area, in the Laramie-Fox Hills aquifer, part of the Denver Basin, which stretches from Fort Collins to El Paso County. The risk? Well construction could accidentally tap into coal seams that run through the aquifer, and poorly constructed wells could contaminate the aquifer. 

According to the audit, 83 wells were drilled in 2018 in the Laramie-Fox Hills aquifer, but only six were inspected. Another set of high-risk wells, those drilled in "multiple confining layers," are wells that draw water from multiple sources. The risk is commingling from multiple aquifers. Of those 68 wells drilled in 2018, only seven were inspected. And of another 15 wells — those with potential for drawing water in areas with known water contamination — none were inspected. 

Part of the problem, according to the audit, is that the Division has no written policy for determining high-risk versus low-risk wells. Inspectors also told the auditors that they have another category of high risk: construction companies with a history of violating construction rules for wells. Those are the wells that got the highest priority for inspections, the audit reported.

"Even though management agrees that contractors with more frequent violations are a concern, they are reluctant to include this as a risk category because they believe it could have a negative impact on a contractor’s reputation and business," the audit reported.

Why some high-risk wells don't get inspected: According to the audit, the decision to inspect a well appears to be based largely on where inspectors choose to drive that day. Auditors spent a day in the field with the inspectors and noted that one inspector drove for six hours to inspect one well.

"This haphazard approach to conducting on-site inspection of wells does not appear to be an efficient use of the program’s limited resources," the audit reported.

The program also requires advance notice of well construction so that inspectors can visit before the well is completed. But the audit found 31 contractors didn't provide that notice, including five who failed to provide notice multiple times.

The program also overspent its budget, the audit reported. It spent $320,000 on inspecting low-risk wells, some of which were inspected multiple times. That money would have been better spent on a risk-based inspection process that targets the high-risk wells, the audit stated.

The Division, in its response to the audit, said it would implement such a process, complete with written policy, by next February.

The quality of the inspections was suspect, too, the audit indicated. Most of the inspections failed to review key phases of well construction; one well was inspected 23 times but missed every key phase of construction, the audit pointed out. There are six key phases in a well's construction, although not every well has all six. Those phases include location, casing, grout and depth of well, for example. 

The reason those key phases were missed, according to the audit: "The Division has not provided guidance to inspectors on what it considers to be key phases for each type of well or instruction to inspectors that they should focus their inspection efforts on key phases."

It's a matter of timing, the audit explained: If inspectors have better guidance, they could time visits for when a particular key phase was in process. 

Another problem: efforts by owners or construction personnel to block inspectors from well sites. At least 11 times, according to the audit, inspectors were locked out of well sites despite a state law that allows them to inspect. Inspectors told the auditors they considered being locked out a safety issue, but never complained to the board in charge of the program about those instances. 

Then there's the "sentinel effect" of the inspection program. That's when the potential exists for an inspector to show up at any time, with the hope that contractors would adhere to the program requirements for fear of fines or other penalties stemming from an unannounced inspection. Given how few wells get inspected every year, the Division's reliance on a sentinel effect doesn't work, the audit indicated.

The audit's recommendation, which the Division said would be in place by August 2020, is to have written policies to address the lack of information on key phases and how to file complaints against contractors or well owners who block access to sites.

Further, the audit recommended, the Division should refer contractors who don't comply with the law to the board, with penalties, such as suspension or revocation of their licenses.

Finally, the audit found that the program consistently overspent its budget during the past three fiscal years. Part of that is due to the program paying salary expenses for a dozen staff who aren't directly involved in well inspections, to the tune of more than $43,000. The payments were due to a coding error that was never fixed, the audit reported. That money would have covered another 100 well inspections, the audit claimed.

The Division agreed to clean up the coding problem and related concerns raised by auditors over its management of the cash fund.

Dan Gibbs, executive director of DNR, told Colorado Politics in a statement, "We value the work of the Office of the State Auditor that is shown in the performance audit. It's extremely helpful to the Department and the Division of Water Resources for the audit team to bring their external perspective to the process.

"The Department believes that the well inspection program is important to the protection of public health and our natural resources and we know our staff is passionate about the program. Because the performance audit was so comprehensive and presented recommendations we believe will improve the program, our perception is that the Legislative Audit Committee came away with a good understanding of the program and the actions that will be taken to improve its effectiveness."

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