Pair charged with selling Boulder agricultural water to frackers, Johnstown pair alleged to see profits of about $800,000 by Mitchell Byars, March 22, 2016, Bolder County News
Two Johnstown men have been arrested on suspicion of theft after prosecutors said they bought water from the city of Boulder designated for agricultural use but then turned around and sold that water for use in fracking operations, for about $800,000 in profits.
Norman William Armstead, 65, and his nephew, Donald Benjamin Armstead, 44, were both arrested last week on suspicion of theft between $100,000 and $1 million, forgery and conspiracy to commit theft. In addition, Donald Armstead is facing an additional charge of theft between $100,000 and $1 million.
According to an arrest affidavit, “the theft was committed by deceptively purchasing water leases explicitly designated for agricultural purposes at a low price and selling/subleasing those water leases for fracking at a higher price.”
According to the affidavit, Donald Armstead was a ditch rider for Boulder and White Rock Ditch and Reservoir Company while Norman Armstead was a superintendent for Rural Ditch Company.
It was not clear from the arrest affidavit how the two men were related.
Both men have been released on $2,500 personal recognizance bonds. Donald Armstead is scheduled for a first appearance on March 31, while Norman Armstead is set for a first appearance on April 1.
Neither could be reached for comment Tuesday.
‘Poor decisions’
According to the affidavit, both men would purchase leftover water from the city of Boulder at agricultural rates with personal checks, telling the city they were purchasing the water on behalf of the ditch companies.
But instead, they sold the water to A&W Water, which the affidavit identifies as a Fort Lupton-based hydraulic fracturing company. A&W’s website describes the company as providing services such as “water hauling” and “frac tank hauling and rentals.”
The city of Boulder does not allow the resale of water for industrial purposes such as hydraulic fracking and also does not allow the subleasing of water.
“The city of Boulder takes its water rights and obligations very seriously and is working in full cooperation with prosecutors on this matter,” Boulder city spokeswoman Sarah Huntley said.
A & W did not return calls for comment on the story.
According to the affidavit, at the time of the investigation water sold for agricultural purposes at $30 per acre/foot but water sold for hydraulic fracturing was potentially worth about $3,000 per acre/foot.
According to the affidavit, Boulder and White Rock Ditch and Reservoir Company on April 2014 noticed an unusual form from Donald Armstead requesting payment for 648.9 acre/feet water. But company officials said when they tracked down the original invoice, it was for 1,433.7 acre/feet of water and that Donald Armstead’s company bought the remaining water.
When confronted, Armstead reportedly told the board he had forged the invoice and “admitted to making poor decisions.”
‘Who wouldn’t?’
A Boulder District Attorney investigator found that from 2010 through 2014, Donald and Norman Armstead bought $101,200 in water from the city of Boulder.
During that same time, they received 12 payments from A & W to an account for Donald Armstead’s father, Benjamin Armstead, between March 2013 and August 2014 totaling $907,561.22. Records show the deposits into those accounts were followed by payouts to Norman and Donald Armstead.
In addition, bank records also show a payment in October 2014 of $847,561 to Donald Armstead from Water Resources and Equipment, which sells water for industrial use. According to the affidavit, the company prepaid Donald Armstead $847,500 for water but said he never delivered because he had since been fired at Boulder and White Rock Ditch and Reservoir Company.
In an interview with police in January 2016, Norman Armstead admitted to buying water from the city of Boulder and then routing it through a ditch company in Longmont and then to a ditch company in Loveland where it was pumped into A & W trucks.
When told he was buying the water for $30 per acre/foot but then selling the water for $2,700, Norman Armstead reportedly told the investigator, “Who wouldn’t?”
When Donald Armstead was interviewed by police, he claimed that the city of Boulder told him to get rid of the water and said he did not know the water was designated for agricultural use only.
But city of Boulder officials said they were under the impression the men were making the purchases on behalf of the ditch companies they worked for.
While he was named several times as also having participated in the buying and selling of the water, Benjamin Armstead was not charged. According to the affidavit, he suffered from a stroke in May of 2014 and was significantly impaired, with Norman Armstead acting as his caregiver and wielding power of attorney on his accounts. [Emphasis added]
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With no government assistance, some Albertans struggle with water contamination or loss of their water, while others try to make a buck by selling it. Water for sale sign as seen in a field from Hwy 22 North of Cochrane, Alberta – *We have blocked out last digits of phone number and plate number, as sign has now been removed or moved.