TECHNICAL MEMORANDUM

This Technical Memorandum discusses the existing industrial and mining use in the basin. The document fulfills the reporting requirements of Task 2, industrial water use.

This memorandum contains the following sections:

Section 1 - Introduction
Section 2 - Industry in the WBHB

2.1 Manufacturing

2.2 Power Production

2.3 Mining: oil & gas, coal, uranium, bentonite and gypsum

3.1 Current Water Rights/Usage

3.2 Steam Power Plant Water Usage.

Section 1 - Introduction

The counties considered herein are Big Horn, Fremont, Hot Springs, Park, and Washakie. It should be noted that a small area in northwest Natrona County lies within the WBHB watershed, while a portion of the southeast corner of Fremont County lies outside it, in the Green River drainage. Both these areas are very thinly populated. The people in the Fremont County are outside the basin are included in the demography of the Wind/Big Horn Basin Plan, though water use/demand is not. In the case of the Natrona County section, its population is not incorporated in the WBHB demographic analysis. Two or three small, generally intermittent streams that head in Natrona County flow into Washakie and Fremont counties.

There are also portions of Teton County within the watershed, but they are virtually uninhabited mountain areas. Much of Yellowstone Park lies physically within the Basin (mostly in Park County) but since its management is almost entirely a federal prerogative, an analysis of Yellowstone's water demand differs somewhat, of necessity, from that of the rest of the Basin. Although water is certainly consumed within the Park, and is accounted for in the WBHB Plan, consumption is limited to domestic use (approximately 1 acre foot per year) and evaporative losses. Agricultural or industrial development is precluded in the Park, and therefore is not considered in this memorandum.

Projections of industrial water needs at low, medium, and high growth rates over the planning period are discussed in Chapter 4. Most industrial water users in the Wind/Big Horn Basin (WBHB) are comparatively small companies, with relatively low water needs. In most cases, these companies draw their water from municipal systems, or from their own wells. In many cases the water used from wells for industrial purposes is not suited for other uses due to poor water quality. For those industries utilizing water from municipal sources, that consumptive use is included in the basin as municipal use.

Section 2 - Industry in the WBHB

The Basin's economy, like Wyoming's as a whole, has long depended on a triad of industries: mining (especially coal, bentonite, oil and gas), tourism, and agriculture. Mining's annual payroll in Wyoming nearly doubles that of retail trade, the nearest competing sector. In terms of numbers of jobs it trails only retail trade and accommodation, and food services (U.S. Census Bureau, 1997 Economic Census). Other economic sectors, such as manufacturing, are, of course, significantly impacted by events in the minerals industries. Another energy-producing industry, hydroelectric power production, needs to be considered. Virtually all such power is currently produced by the U.S. Bureau of Reclamation at its reservoirs. Although there may be more potential in the power generation industry. Wyoming's electricity costs are well below the national average, and this might prove useful in attracting new manufacturing plants.

Note: Power generation potential is discussed in a separate report "Power Generation Potential in the Wind River, Clarks Fork, and Big Horn Basins of Wyoming", BRS, MWH, et al, 2003.

Discussions of manufacturing, power production, and mining, and oil and gas follow.

2.1 Manufacturing

Large manufacturing companies are rare in the WBHB, as they are in the state as a whole. In the WBHB there are about two-dozen manufacturing companies that consistently maintain a workforce of twenty-five or more [Phillip Christopherson, Andy Rose, MAMTEC, Riverton and Powell]. Most of the larger companies' products are related to Wyoming's overall character . products derived from minerals, products for agriculture, products for camping, hunting and fishing. Machinery, electronic goods, and fabricated metal products are also manufactured in the Basin. Manufacturing companies include:

Industry	Location
Sugar Beet Refinery	Worland, Powell
Bottling, Water and Beverages	Worland
Aluminum Can Manufacturing	Worland
Light Manufacturing (Brunton Factory)	Riverton
Bentonite Plants	Greybull, Lovell, Worland, Lucerne
Sulphur Plants	Rural Fremont County

2.2 Power Production

Hydroelectric power is produced by water-driven turbines at thirteen Bureau of Reclamation sites in Wyoming, six of which are in the WBHB. Collectively the six WBHB plants have a production capacity of 47,100 kW. Clearly the Wind/Big Horn system is capable of producing considerably more power. A 1993 study for the U.S. Department of Energy listed sites with potential for hydropower production on the Big Horn River at Kane and Thermopolis, as well as on the Clarks Fork, Popo Agie and Shoshone Rivers. Other listed sites were on Shell, Sunlight, Sunshine, and Tensleep Creeks [James E. Francfort, Idaho National Engineering Laboratory, "U.S. Hydropower Resource Assessment for Wyoming," U. S. Department of Energy, December, 1993.]

The questions are whether or not there is a ready market for increased amounts of electric power, and whether or not the power can be transmitted to market. The possibility of the deregulation of the electric power industry exists, creating many uncertainties in the industry. Historically the industry has been vertically integrated, with power generation, transmission, and distribution linked within corporations. Legislation mandating separation of these functions has been enacted in Oregon, Arizona, and Texas, and suspended in California after having been enacted. In Wyoming, restructure has been studied, but there are currently no active efforts to legislate deregulatory action [Energy Information Administration, U.S. Department of Energy, http://www.eia.doe.gov/, September, 2002.] Although the potential to produce more power in the WBHB exists, at this timethe transmission capacity necessary to export that power is lacking. The future of the State's electric power industry remains uncertain, since "transmission issues cloud investment in generation" [Wyoming Energy Commission Progress Report, Section VI., Electric Transmission Working Group, www.wyomingenergy.org/minerals/energy_commission/index.cfm] [new link 10/2009 HERE]. Development of additional generation capacity, for export outside the state, appears to hinge on further development of markets and transmission capacity. Power production for local consumption and/or peak demand is more promising.

Currently there are no commercial fossil fuel power generation facilities in the basin. Small gas- fire, gas-cooled, turbine generating stations are utilized in the oil and gas industry for internal use such as powering gas pumping stations. Historically there has been both coal mining and coal fired power production in the basin, however, reported coal production ceased in the Wing River and Big Horn basins in 1966 and 1994, respectively (Bob Lyman, WGS, May, 2002). However, as discussed in the report "Power Generation Potential in the Wind River, Clarks Fork, and Big Horn Basins of Wyoming", BRS, MWH, et al, 2003, there are sufficient coal and natural gas reserves in the Wind River and Big Horn Basins to support at least modest power production.

Promising new developments in combined-cycle gas turbines, using gas-fired, gas-cooled, turbines in combination with waste heat/gas-fired, conventional steam turbines may make natural gas electric power production more competitive. William Liggett of the Energy Information Agency, points out that "Technological improvements in gas turbines have changed the economics of power production. No longer is it necessary to build a 1,000- megawatt generating plant to exploit economies of scale. Combined-cycle gas turbines reach maximum efficiency at 400 megawatts, while aero-derivative gas turbines can be efficient at scales as small as 10 megawatts" [ http://www.eia.doe.gov/cneaf/electricity/chg_stru_update/update2000.html].

2.3 Mining: oil & gas, coal, uranium, bentonite and gypsum

Over the years the WBHB, as well as the state generally, benefitted from repeated mining booms: there has been oil and gas, bentonite and industrial minerals, and coal production in the Basin for many decades. However, several of Wyoming's currently healthy mineral products, coal, coalbed methane, uranium and trona, are not produced in the WBHB. In fact, the availability of jobs in the Powder River Basin, and in southwest Wyoming, where some of these minerals are being produced, certainly draws some working-age people from the WBHB, further limiting its labor force and hurting its economy.

In Wyoming the peak years for oil production were 1959 to 1976, while gas production began a steep upward climb about 1976, and is still rising. Coal experienced three major production booms . from the late 1880s until the early 1920s, during World War II, and an ongoing boom that began about 1969 [University of Wyoming, "Economic Trends in Wyoming's Mineral Sector"].

Oil and gas remain important to the WBHB economy, with gas plants in all counties except Hot Springs, but it seems unlikely that the future will offer many more jobs in the industry. There appears to be more potential in the Wind River Basin Province than in the Big Horn Basin Province [Fox, James E., and Dolton, Gordon L., 1995, Wind River Basin Province and Bighorn Basin Province,USGS National Oil and Gas Assessment].

Uranium mining began in Wyoming in the 1950s, primarily in the Wind River Basin. The industry peaked, producing uranium for the Atomic Energy Commission (AEC), around 1960. As AEC stockpiling slowed to a halt about 1964, the industry "crashed." From 1964 to 1972 a transition occurred as private sector demand, mostly for power plants, developed. Increasing oil prices, spurred by the embargo of 1974, helped uranium markets rise to another peak around 1978-80. Oversupply, compounded by the aftermath of the Three-Mile Island event, brought on another crash in uranium markets from 1982 to 1984.

The future for uranium mining appears to be in-situ development, in which wells, rather than open-pit mines, produce the ores. Non-potable ground water is re-injected into ore seams as part of a reverse osmosis process, resulting in a net consumptive loss of only 5% or so. Uranium production via in-situ methods is active in the Powder River Basin, making Wyoming one of the largest uranium producing localities in the United States. One potential future in-situ uranium mine (Power Resource Inc.) is permitted but not in production in the Gas Hills Uranium District, Fremont County. Additional uranium reserves in the District, held by other interests, could support a second in-situ operation or enhance the longevity of the currently planned development.

Wyoming leads the nation in bentonite production, and it is mined at several locations in the WBHB. The outlook for bentonite production seems to be a continuance of the status quo. No large increases or decreases in productions seem likely. [Larry Madsen, Black Hills Bentonite, 9 September, 2002; Rick Magstaff, WyoBen Corporation, 10 September, 2002, personal communications].

Bentonite processing plants are located in Big Horn (Greybull and Lovell) and Washakie (Worland) Counties. The Black Hills Bentonite plant in Worland uses about 500,000 gallons per month, purchasing it from the City of Worland. Near Greybull, WyoBen's water is pumped from the Big Horn River, and used mainly for dust control on haul roads. Lovell's American Colloid plant uses Bentonite to produce drilling mud, and uses very little water. The future of that operation is closely tied to that of oil and gas drilling [Jay Bischoff, American Colloid Corporation, personal communication, 10 September, 2002.]

There are gypsum plants in Park and Big Horn Counties, producing wallboard. Well water is used in the process, and recycling is practiced in all plants.

Despite the vicissitudes of minerals production, mining in the WBHB has generally offered better-paid jobs than most other industries. It remains fundamental to the Basin's economic foundation. Absent the development in the WBHB of major new industries, such as light manufacturing or agriculturally related industry, the size and makeup of both the economy and population will continue to be strongly related to the economics of mineral production.

Section 3 - Summary of Consumptive Use

3.1 Current Water Rights/Usage

Appendix A contains a listing of all industrial and mining water rights, surface and ground water, in the Wind River/Big Horn River Basins, from Division III, State Engineer's Office, tabulation, 1999. In summary, the permitted water rights for mining and industrial uses in the basin are:

Oil & Gas, including pipelines	73,792 acre-ft/year
Mining, dust control and mine pit waters	2,741 acre-ft/year
Manufacturing and Miscellaneous Industrial	15,708 acre-ft/year
Total Permitted Water Use - Industrial and Mining	92,241 acre-ft/year

3.2 Steam Power Plant Water Usage

Although there are currently no fossil fuels power plants in the Basin, there is a potential reserve base for either coal or natural gas fired electric power production. It is estimated that a nominal 200 MW coal-fired steam turbine facility would require approximately 4,000 acre-ft/year of water and a 500 MW gas-fired combination turbine facility would require approximately 5,000 acre- ft/year of water.

APPENDIX A

Industrial and Mining Water Rights
Surface and Ground Water
Wind River/Big Horn River Basins
Division III, State Engineer's Office, 1999