From The Grand Junction Daily Sentinel (Dennis Webb):
Tax disincentives, requiring water rights to remain tied to irrigated agricultural land, and penalizing or prohibiting owners of water rights from being paid to not divert and use water are among concepts a water anti-speculation task force has forwarded for consideration by the state Legislature.
The task force’s report focuses on eight conceptual changes in law that the group says could reduce investment water speculation on a large scale, but the 22-member group was unable to come to a consensus on any recommendation.
A state law, Senate Bill 20-048, directed the state Department of Natural Resources to form the work group to explore ways to strengthen current water anti-speculation law…
The task force delivered its 66-page report to the state Water Resources Review Committee [August 13, 2021]. The task force included representation from the legal, nonprofit, municipal and agricultural communities and from a variety of water basins, along with several state-level officials.
Ultimately, group members couldn’t all see eye- to-eye on how to address the challenge.
“The Work Group wants to stress to the Committee the complexity and nuance of the problem identified in SB 20-048 and the fact that any concept that would be effective in reducing or preventing Investment Water Speculation also comes with significant drawbacks,” the report says.
It said the group is diverse, with varied and sometimes conflicting interests, and some of its members found that any concept, “even if further developed to minimize drawbacks, is unacceptable.”
Common drawbacks of the concepts included the high cost of implementation, the time and cost impacts of water transactions for all water users, and the potential reduction in the sale price of water rights and thus their value as property, which presents “a risk to the current owners of irrigation water rights,” the report says.
According to the report, investment water speculation “violates the intent of Colorado’s anti-speculation doctrine because the investor’s primary goal is profit from the water value rather than beneficial use of the water (and the profit that comes from the use).”
PROFITING OFF WATER RIGHTS
Speculation concerns center around things such as water brokers buying water rights and quickly flipping them to a third party for profit, or investors continuing to use water rights for their historical use with the primary goal of later profiting from the increased value of water through a sale, lease or payment for nondiversion of water for the benefit of a downstream user. Another concern is investors cornering a water market, driving up the price for others in need of water…
Other concepts include:
eliminating or reducing the agricultural tax benefit for lands from which water is removed, to reduce the benefit for lands converted from irrigated uses; requiring water to be tied to the land unless irrigated land is going to be changed to a new land use; funding and/or creating a right of first refusal before water rights are sold, which would allow for the purchase of the rights by the state or another public entity for long-term irrigation use for public benefit; creating a statewide process, such as through water courts or a state agency, to identify and prohibit investment water speculation; encouraging local governments to police investment water speculation through their “1041” powers, which get their name from a law that already lets counties require permits for things like reservoirs; taxing the profit from sale or lease of water previously bought for investment water speculation purposes; establishing a maximum rate of water right price increase and imposing higher taxes when exceeded.
One concept [Peter Fleming] was interested in but wasn’t seen as ultimately likely to have a large-scale impact on speculation would be modifying the state’s land conservation easement statute as incentive to tying water rights to their place of historical use.
Fleming said it’s unfortunate there are no recommendations, but even if there were, it would have been a long road to any change in law.