Durango’s title of Southwest Colorado’s “brewing capital” may have just gained more validity.

Telluride Brewing Co. announced last week that it will be relocating 83% of its production to Ska Brewing Co. in Durango.

Ska will produce about 7,000 barrels of Telluride’s beer annually, said Ska Co-Founder Dave Thibodeau.

The move will mean the loss of seven full-time jobs in Telluride and is largely the result of rising operational costs in the town – particularly the rise in wastewater expenses, according to a news release published in the Telluride Daily Planet last week.

“With everything that's been going on over the last couple of years, it's getting harder and harder with margins on beer,” said Telluride Brewing President and Co-Founder Tommy Thacher on Tuesday.

The company will continue producing 1,200 to 1,400 barrels annually in Telluride for local draft and research and development.

Operating in Telluride has been a struggle for the brewing company, the news release said.

“The brewery is devastated to have to now bid farewell to seven full-time, year-round employees,” he said. “It breaks our hearts to see our team impacted by this difficult decision.”

Telluride Brewing’s dilemma is related to its contribution of biological oxygen demand to Telluride’s wastewater treatment facility. The brewing company was the largest contributor to BODs in the town.

The BOD material was sediment created through the brewing of hops and yeast.

“Our wastewater treatment plant can't process that anymore because they're at capacity,” Thacher said.

Telluride’s wastewater treatment facility upgrades have been delayed for over a decade, and wastewater costs have increased dramatically the last six years, Thacher said.

He said there’s been a 100% increase in base fee and a 91.22% increase per 1,000 gallons, and there will be an annual increase of 18% going forward through 2027.

Similarly, the cost of water usage has risen by 45.3% since 2019 and is set to increase by 5% annually through 2028.

“The writing was on the wall,” Thacher said. “The town really started cracking down on our wastewater.”

In an effort to decrease the impact of BODs on the town’s treatment facility, the brewery and the Town of Telluride had set up side-streaming efforts in February.

But this process was unsustainable at the brewery's output levels, and the costs associated with transporting waste twice a week to Cortez caused issues financially. During the busy season, Thacher says it would likely be three times a week, which didn’t make sense from an environmental or financial standpoint.

Thibodeau said it's been a battle for microbreweries since 2020. Between the cost of shipping and increased labor costs, breweries had to get creative in order to make their business models sustainable.

For example, Dry Dock Brewing Company in Aurora moved brewing operations to Great Divide Brewing Company's Denver facility last November. Overwhelming competition led to significant sales declines and consolidation, according to The Denver Post.

In addition, Denver’s TRVE Brewing also abandoned its production facility and outsourced production to New Image Brewing Co. last year.

Thibodeau said the decision for Ska and Telluride to consolidate resources only made sense, considering thin profit margins Western Slope brewing companies work under.

A large portion of both Ska and Telluride’s business comes from wholesaling beer, Thibodeau said. However, because of rising costs, Ska has pulled out of selling beer in markets like Chicago and southern California.

There’s a lot that people can do with less in the brewing industry, Thibodeau said. But once a brewery’s demand reaches Ska’s production level, it has to invest in more expensive equipment in order to maintain efficiency. When there’s less beer to produce, breweries feel the impact of these purchases.

“We've pulled out of some markets and not selling as much beer as we used to sell. And now we're kind of at the bottom of the cycle,” Thibodeau said. “So adding approximately 7,000 barrels of Telluride beer to our production made great sense because it brings us back to our sweet spot.”

Telluride and Ska are no strangers to doing business with each other.

Ska has been Telluride’s distributor for most of its existence, and Ska has brewed batches of Telluride’s Facedown Brown before in 2019.

“(Telluride and Ska) have a great friendship and great respect for what they do in Durango, and we know we're in good hands,” Thacher said.

tbrown@durangoherald.com