Water ‘investment’ tough to define, may involve property rights — The #Sterling Journal-Advocate

A lateral brings water from the Grand Valley Irrigation Company canal to this parcel of land, which is owned by private equity firm Water Asset Management, a company that has been accused of water speculation. A state work group has released its report on investment water speculation, but failed to come to a consensus and did not make recommendations to lawmakers.
CREDIT: BETHANY BLITZ/ASPEN JOURNALISM

From The Sterling Journal-Advocate (Jeff Rice):

Trying to recommend ways to improve on Colorado’s anti-water speculation law is a tough job, primarily because the state’s constitution, statutes and legal precedence already do a good job of it.

It doesn’t take much to set off alarms in Colorado’s water community, and in 2019 there were purchases of irrigated land by entities not normally associated with water use. According to water journalist Allen Best, “large, water-rich ranches in the Grand Valley on the West Slope by investment banks” tripped all kinds of alarms across the state. Of all the nightmares that keep Colorado water interests awake at night, water speculation is among the spookiest.

During the 2020 legislative session, the General Assembly passed Senate Bill 20-048, which directed the director of the Colorado Department of Natural Resources to convene a working group to recommend ways to shore up the state’s protections against water speculation.

Joe Frank, manager of the Lower South Platte Water Conservancy District, was named to the 22-member working group, which submitted its final report, titled “Report of the Work Group to Explore Ways to Strengthen Current Water Anti-Speculation Law,” last month on Aug. 13, just two days short of the deadline.

Critics immediately denounced the report, saying it has little value because it doesn’t actually make any recommendations to the Legislature. In an interview with Best, Frank said there’s still work to be done before any new laws can be written.

Talking last week with the Journal-Advocate, Frank said it’s going to be difficult to figure out ways to strengthen something that’s already quite strong.

“We took it upon ourselves to define two types of water speculation,” Frank said. “There’s traditional speculation, which is already pretty well addressed. And then we defined what we call ‘investment water speculation,’ and that’s harder to get your hands around.”

Under Colorado water law the water in Colorado is a public resource for beneficial use by public agencies, private persons and entities. A water right, which is owned, is created to use a portion of the public’s water resources, and is subject to water availability and under the terms specified by a water court. Those specifications — date of priority, physical location, and the amount that can be used by the water right – appear in what is called a decree.

Cities own water rights and the infrastructure to deliver such rights, so people are purchasing water from the city even though water in Colorado is a public resource. Water rights are real property rights and can be sold and traded as long as it is continued to be put to beneficial use…

According to Frank, about the only way to prevent “investment water speculation” is to define actions that prove intent, and that raises the specter of yet another agrarian nightmare; trampling on a property owner’s right to sell his property.

“Is it the intent to come in and profit from the increased value of water?” Frank asked. “It has to do with point of sale and real property. But can you pass a law that says you can interfere with the market?”

In other words, in order to prove intent, it would be necessary to examine and have some legal control over the sale of land and water rights. In theory, an investor from Manhattan could buy several irrigated farms, allow the water to be used for crops for a period of time while the dollar value of those shares increases, and then sell those shares to, say, a growing Denver suburb and pocket the profit.

State Sen. Don Coram, who wrote SB 20-048, has gone on record saying he doesn’t want the state to get involved in curtailing property rights.

Frank said there may be no easy way to write anti-speculation legislation, but rather it may take a series of smaller actions.

“The over-arching issue that we have to solve is supply and demand,” Frank said. “When there’s more demand than supply, that drives up the price of water. Conservation and efficiency only go so far, and nobody is creating any more water.”

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