State Engineer Todd Sando told the interim Water Topics Overview Committee Thursday that the penalties in place are working at reining in those who sell water in excess of that permitted to the oil and gas industry for fracking.

House Bill 1061 increased the daily fine for misappropriation of water to $25,000 per day, up from $5,000 per day. The issue has come about with the sharp increase of water sales to the oil and gas industry in the oil patch in the past few years.

“I think the message is getting out there (that) their water permits are in jeopardy,” Sando said.

The state Water Commission has authority to modify or revoke a permit, he said. The first step in dealing with water permit holders who are in violation is to issue a cease and desist order, then write a consent agreement.

Sando said the consent agreements reduce permit holders’ appropriations for the following year to offset the level they went over in the current year.

For example, if a permit is for 100 acre-feet for a year and the permit holder uses or sells 120 acre-feet, the permit-holder will be fined the amount of profit made for that additional 20 acre-feet.

An acre-foot is the amount of water that would cover an acre, one foot deep.

“We’re going to ask for all of it back,” Sando said, referring to the profit from the amount that exceeded the permit. It goes into the state general fund, he said.

The 20 acre-feet used in Sando’s example also would be taken from the next year’s permit.

He said there have been two major violations in recent years. The largest involved a fine of more than $800,000 and the other more than $600,000. The rest have been small violations, he said.

“Everyone’s watching each other closely because there’s a lot at stake,” Sando said.

Project updates

Sando also gave the committee a rundown of other major ongoing water projects across the state.

For the Red River Valley Water Supply project, $11 million was allocated for 2013-15 for planning. The project would supply the Red River Valley with Missouri River water.

A study of possible routes for the project is ongoing. Sando said no firm decision has been made on how to proceed.

The Southwest Pipeline project is one water system in the oil patch facing challenges due to population growth, Sando said.

“We’re in a whole new realm in western North Dakota,” he said.

The project is providing service to about 50,000 people in 31 communities. Sando said the most recent estimate puts the service population of the project at 78,000 in the coming years.

Another is the Western Area Water Supply project in the northwest corner of the state. Sando said the project has a service population of about 58,000 this year, but is now estimated to service around 99,000 people by 2035.

Committees to meet

Three interim legislative committees are set to meet at the Capitol next week.

The Commission on Alternatives to Incarceration meets at 9 a.m. Tuesday in the Roughrider Room. Included on its agenda are discussions on treatment programs and sentencing.

The Education Funding Committee meets at 9 a.m. Wednesday, in the Roughrider Room. In the morning, the committee will hear a report from a University of Wisconsin-Madison professor on North Dakota education funding. In the afternoon, legislators will hear from a representative from the West Fargo School District on district budgeting.

The Administrative Rules Committee will meet at 10 a.m. Thursday, also in the Roughrider Room. It will hear presentations by several state departments and boards on rule changes.

Reach Nick Smith at 250-8255 or 223-8482 or at