#Colorado is examining #water speculation, and finding it’s ‘all the problems’ in one — @AspenJournalism

Conscience Bay Company President Eli Feldman stands at a headgate on the Alfalfa Ditch near Cedaredge. Feldman, whose company owns Harts Basin Ranch and irrigates with water from the ditch, has been accused of water speculation: buying the ranch just for the future value of the water.
CREDIT: LUKE RUNYON/KUNC via Aspen Journalism

From Aspen Journalism (Heather Sackett):

State work group trying to balance risks from investors, negative impacts to agriculture

Melting snow and flowing irrigation ditches mean spring has finally arrived at the base of Grand Mesa in western Colorado.

Harts Basin Ranch, a 3,400-acre expanse of hayfields and pasture just south of Cedaredge, in Delta County, is coming back to life with the return of water.

Twelve hundred of the ranch’s acres are irrigated with water from Alfalfa Ditch, diverted from Surface Creek, which flows down the south slopes of the Grand Mesa. The ranch has the No. 1 priority water right — meaning the oldest, which comes with the ability to use the creek’s water first — dating to 1881.

What makes the ranch unique among its Grand Mesa-area neighbors is its owner. Conscience Bay Company, a Boulder-based private real estate investment firm, bought the property in 2017.

That fact alone has brought its owners scrutiny from neighbors and Western Slope water managers. Conscience Bay and its president, Eli Feldman, have been accused of water speculation — which means buying up the ranch just for its senior water rights and hoarding them for a future profit.

That is an accusation Feldman denies.

“Any time you come into a place that you’re not from, people are curious at best and skeptical and concerned at worst,” he said.

The ranch raises organic beef using regenerative techniques that operators say are better for soil health. Conscience Bay holds grazing permits on tracts of public land in western Colorado and Utah where the cattle feast on grass before being sent to California to be finished, slaughtered and sold under the brand name SunFed Ranch.

To the charges that he’s doing something untoward by investing in the ranch’s land and abundant water rights, Feldman said he’s just like any other major water user in the state putting it to beneficial use. The ranch is using the water to irrigate, he said.

“We’re growing grass and feeding it to cows and trying to improve the ground, improve the soil health and make a business out of it,” Feldman said.

Cowgirls lasso calves so they can be branded and vaccinated at Harts Basin Ranch in April. The Delta County ranch, whose owners have been accused of water speculation, raises organic cattle.

Speculation work group

The conversation around water speculation has been heating up in Colorado in recent months. At the direction of state lawmakers, a work group has been meeting regularly to explore ways to strengthen the state’s anti-speculation law. The topic frequently comes up at meetings of Western Slope water managers: the Colorado River Water Conservation District, basin roundtables and boards of county commissioners.

Investments such as Feldman’s have been of interest to the work group, which consists of water managers and users from around the state and is chaired by Kevin Rein, state engineer and head of the Division of Water Resources.

“I think it’s a valid concern because they do see unusual parties, large parties that, again, aren’t the typical parties, purchasing those water rights, and so that’s the concern,” Rein said. “Are they speculating or are they purchasing just so they can flip it, as people say, in a few years for more money?”

Under Colorado law, a water-rights holder must put their water to “beneficial use,” meaning continuing to use the water for what it was decreed in order to hang onto it. But Colorado also treats the right to use water as a private-property right. People can buy and sell water rights, change what the water is allowed to be used for and, if given a court’s blessing, move the water from agricultural use to growing cities.

This system, used widely in the western United States, creates an opening for investors who see water as an increasingly valuable commodity in a water-short future, driven by climate change. A private-equity fund, Water Asset Management, is now the largest landowner in the Grand Valley Water Users Association, which provides water for farmers in the intensely irrigated valley, a short drive from Harts Basin Ranch. The purchases of the New York City-based company have raised suspicions among water managers and prompted the formation of the speculation work group.

Similar concerns have cropped up in agricultural communities throughout the West. A water transfer in Arizona from agricultural lands on the Colorado River to a rapidly expanding Phoenix exurb recently stirred up controversy. In Nevada, Water Asset Management is trying to market water held in an underground aquifer.

Colorado’s current anti-speculation doctrine is based on case law that says those seeking a water right must have a vested interest in the lands to be served by the water and must have a specific plan to put the water to beneficial use.

The work group has identified the following risks from speculators: investors’ obtaining a monopoly over a local water market; large-scale, permanent dry-up of agricultural lands; less water availability for other water users; and violation of Colorado’s values to see a vital public resource traded as a commodity.

Part of Harts Basin Ranch’s hayfields are irrigated with sprinklers. The ranch is owned by Boulder-based Conscience Bay Company and has the oldest water right on the Alfalfa Ditch.

Potential risks and solutions

The potential solutions to these risks are many, according to a draft document. The work group is exploring several of these, including creating a process to determine the intent of the purchaser; taxing profits from the sale of water rights at varying rates to encourage beneficial use and to discourage profiteering; imposing time limits on turnover of ownership to discourage short-term “flipping”; encouraging local governments to police investments through their 1041 powers; and creating a public-review process for water transfers that exceed some threshold.

The group has not coalesced around any of these potential solutions, but state officials said they are zeroing in on using the water court process to evaluate transfers as a way of spotting speculation.

The work group is supposed to submit a report, along with any recommendations from members, to state officials by August. But so far, the group has had a difficult time making sense of the thorny questions raised by these issues. Even trying to define what speculation is (and isn’t) and who is considered a speculator has been a struggle.

“It’s one thing to point at something and say, ‘Oh, that’s probably speculative.’ Another to actually put the legal definition on it,” said Alex Funk, agricultural water-resources specialist with the Colorado Water Conservation Board. Funk is also a member of the work group.

Discussions so far about reining in speculation have focused on the intent of the buyer. Can the state determine whether someone who is purchasing water rights intends to grow hay or build a residential subdivision? Or are they solely focused on the water rights’ future value? And how do you tell the difference?

“Do we want to protect against certain types of intent?” Rein said. “And then how do we determine that?”

Predetermining a water-right purchaser’s intent could prove to be a difficult task, akin to stopping a crime before it’s actually committed. Funk invoked the 2002 film “Minority Report,” in which a police detective (played by Tom Cruise), with the help of three psychics, tracks down would-be murderers and arrests them before any gun goes off.

“There aren’t speculation police running the state and breaking up these investments, right?” Funk said.

A parshall flume measures the water in the Alfalfa Ditch, which diverts water from Surface Creek, near Cedaredge. The water is used to irrigate hayfields at nearby Harts Basin Ranch.
CREDIT: LUKE RUNYON/KUNC via Aspen Journalism

Financial water speculation

A draft report by the work group attempts to define two different types of speculation.

The first is traditional water speculation, which involves obtaining a water right without any plan or intent to put that water to beneficial use. The intent is to obtain a desirable priority date and then sell the water right to others who have a beneficial use.

This type of speculation has been addressed before in Colorado water law in what is known as the High Plains case. In 2005, the Colorado Supreme Court determined that a water-investment company was speculating because its plan for using the water was too expansive and nebulous, and the plan did not identify either the structures through which the water would be diverted or the specific locations where the water would be used.

The second type of speculation — and, because of WAM’s dealings in the Grand Valley, the one on which the work group is more focused — is financial water speculation. The work group defines this as the purchase and use of water rights with the primary purpose of profiting from increased value of the water in a short period of time. Financial water speculation may run counter to Colorado’s prior-appropriation doctrine because the primary intent is profit rather than beneficial use.

The concerns over speculation tap into a deep-seated anxiety that is prevalent in Western farm towns: the transfer of water from agriculture to cities. There are real examples of agricultural water being sold to cities, sometimes derisively described as “buy and dry,” and some rural communities have suffered economically as a result.

In some ways, the work group’s discussion of how to prevent speculation is really a broader discussion of how to prevent water transfers away from agriculture. The group has identified the large-scale, permanent dry-up of agricultural lands as the No. 1 risk from speculators. Part of Funk’s job is to head up a program of “alternative transfer methods,” which allow cities to temporarily buy or lease water from agriculture, but without the severe economic impacts.

“I think the issue with speculation is that what on paper might seem a very sort of small, isolated issue, as soon as you start sort of unpacking it a little bit, it’s essentially all the problems that Western water and rural communities are facing in, like, one issue,” Funk said. “So, as soon as you start unraveling it, you start running into other forces at play that are really beyond the state’s control or any one individual producer’s control.”

Harts Basin Ranch is a 3,400-acre expanse of hayfields and pasture just south of Cedaredge in Delta County. The ranch is owned by Boulder-based Conscience Bay Company and has the oldest water right on the Alfalfa Ditch.

Impacts to ag

The work group is walking a fine line to come up with ways to deter speculation while not harming traditional agriculture producers in the process. In a big-picture sense, irrigators may worry about the impact to their community and way of life if all their neighbors sell to hedge funds. But when it’s their turn to receive a check for their water rights, they don’t want regulators doing anything that would make the process harder or devalue the ranch they have put their lives into, including restricting whom they can sell to.

It’s an oft-repeated adage that a rancher’s land and water rights are their 401(k) or their child’s college fund, and some say any new rules aimed at speculators should not make it more difficult for traditional ag producers to cash out if and when they want.

So far, the investment firms active in western Colorado have continued to lease their land back to farmers, or farm it themselves.

Carlyle Currier, a rancher in Molina and president of the Colorado Farm Bureau, has a seat on the Colorado River Basin Roundtable and his family has ranched in the Grand Mesa area for more than a century. Currier said until the investors attempt to sell it off, they’re not doing anything illegal.

“If the government can tell (someone) they can’t buy a farm and farm it, well, then they could tell me that, too. And I don’t want them telling me that,” Currier said.

The speculation discussion is also set against the backdrop of a potential demand-management program, the feasibility of which the state is currently studying. A demand-management program would pay irrigators on a temporary, voluntary basis to fallow fields and leave more water in the river. This water would be sent to Lake Powell to fill a 500,000-acre-foot pool that could be used to help the upper-basin states avoid a protracted legal battle with states downstream on the Colorado River.

Some say the exploration of demand management — including pay-to-fallow pilot projects in the Grand Valley — could have opened the door for investors who want to take advantage of the program to make easy money. Where there are opportunities, there are opportunists.

“Here in Mesa County, we’ve been watching a Wall Street investment firm buying up agricultural properties all with pre-compact water rights,” Steve Aquafresca, Mesa County’s Colorado River District representative, said at a board meeting last month. “I think it could be safely said that these actions probably would not have occurred if the state were not discussing the possibility of a demand-management program and if one particular major irrigation-water provider was not showing some willingness to entertain a demand-management program.”

The Alfalfa Ditch, seen here in April, takes its water from Surface Creek. The owners of Harts Basin Ranch, which has a water right on Alfalfa Creek dating to 1881, have been accused of buying the ranch just for its old and valuable water rights.

Suspicion of outsiders

For all the concern about water speculation, there’s scant proof that it’s happening on a large scale on the Western Slope. Even WAM is not speculating, according to the current definition, as long as they keep the land in agricultural production.

“It does seem like there’s a lot of speculation about speculation,” Feldman of investment firm Conscience Bay said.

Instead, he said, old-fashioned suspicion of outsiders is at the heart of the issue.

“There’s people that view us as outsiders and we are not from here,” he said. “We know that. We know that damn well. And that’s not news to us.”

And there’s some evidence that he’s right. The Colorado River District, which protects Western Slope water interests, is developing a policy statement about water speculation. A draft of the policy says the district “recognizes the importance of locally owned agricultural lands and waters” and will work “to protect our state’s water resources from out-of-state special interests.”

And although these ideas didn’t get much traction, the work group has also floated two more potential solutions targeting outsiders: restricting the ability of out-of-state entities to participate in Colorado water court proceedings and prohibiting out-of-state entities from holding water rights.

“Is speculation just another word for investment (but it has) a negative connotation to it because it’s somebody that’s not from here?” Feldman said. “OK, well, do you not want to have investment in rural Colorado? Is that what we’re after? That’s where it would go if you put up enough barriers and hoops.”

Feldman says he is not the enemy. His operation isn’t the mom-and-pop homestead ranch of the Old West. It’s the investor-owned, employee-operated, risk-taking ranch of the New West. Harts Basin Ranch is looking for innovative ways to adapt to water scarcity and is participating in a program with environmental group Trout Unlimited to study consumptive use and how agriculture can stay productive while using less water. The group receives funding from the Walton Family Foundation, which also funds KUNC’s Colorado River reporting.

Feldman sees the heated discussion about speculation as a symptom of how Western communities are choosing to grapple with increasing water scarcity under climate change. There are those who explore new ways of running an old business and there are those who want to protect the status quo.

“At its core you see a real friction or conflict between a group of people that’s trying to make water policy more flexible to adapt to a changing climate,” Feldman said, “and those that are trying to impose more rigidity and prevent any change from occurring.”

This story was part of a collaboration between KUNC in Colorado and Aspen Journalism. Aspen Journalism is a local, nonprofit and investigative news organization that covers water and river issues. KUNC’s Colorado River reporting project is supported by a grant from the Walton Family Foundation. KUNC is solely responsible for its editorial content.

Surface Creek Valley Water Meetings — January 29 and 31 #COriver


Here’s the announcement from the organizers — the Grand Mesa Water Conservancy District and the Water Center at Colorado Mesa University. The public is invited to come and learn about water issues facing Colorado, the
Gunnison River Basin and the Surface Creek Valley.

More Surface Creek Watershed coverage here.

Cedaredge: The town council’s consultants are recommending a new $3.4 million wastewater treatment facility on Surface Creek


Here’s the release from the Town of Cedaredge via The Delta County Indpendent:

Last March Cedaredge public works director David Smith told the trustees that the wastewater treatment plant exceeded the planning threshold for organic capacity levels three times in the past year, and that now was the time to start planning for a solution.

To that end, the trustees approved JVA Consulting‘s proposal to create planning documents based on the evaluation of the existing wastewater treatment facility and anticipated effluent limits.

McGibbon provided the trustees with an overview regarding the current wastewater needs for the town; an evaluation of the existing treatment facility; organic loading capacities; recommended design alternatives; and future operations of the wastewater treatment plant, including the most cost effective alternatives.

JVA’s recommendation is for the town to build a new mechanical wastewater treatment facility near Surface Creek, with total capital costs projected to be nearly $3.4 million, plus $1.3 million in operational and maintenance costs. McGibbon provided the trustees with a four-year implementation schedule to begin in October, with a startup date for the new facility of December 2015.

More wastewater coverage here.

Orchard City: Town officials tour highlights improvements to water system

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From the Delta County Independent (Hank Lohmeyer):

Town officials conducted a tour last week to view a new water diversion project, take a look at the water treatment plant, and follow the route of the soon-to-begin and already-paid-for Phase I West Side main transmission line replacement project.

This year’s completion of the relatively inexpensive and modest looking Ward Creek diversion belies the project’s incalculable importance to the town. For a comparatively paltry $49,000 price of construction, permits, and engineering, the town now has an alternative to drawing reserve water supplies from the difficult-to-process irrigation flows of Big Ditch.

In addition to that, the project, as explained by officials, creates the ability to draw town water reserves from the much cleaner water stored in Ward Creek Reservoir and to divert that water directly into a pipeline to the treatment plant.

There is a third benefit to the town from the project. It is by far the biggest and most valuable advantage, while at the same time being completely invisible to unknowing eyes. That is access to Ward Creek reservoir itself. To explain — the most glaring weak link in the town’s water utility system has long been the lack of a raw water reservoir that could supply needs of the town’s water customers when springs dry up during severe drought. Orchard City has never had a raw water storage reservoir for its domestic supply. When the town’s extensive system of springs is producing water normally, there is ample water for town needs. But, in the frightful drought year of 2002, the flow of clean mountain water from Orchard City’s springs dwindled to a trickle. Trustees and staff scrambled trying to beg or borrow any water at all off the Grand Mesa that they could somehow manage to get into their collection system, or the Big Ditch…

Also during the town trustees’ victory tour last week, water utility superintendent Keith Peterson explained the workings of the town’s water treatment plant. The plant’s two filtration cells are sufficient to supply water users’ needs in normal, day-to-day operations. But, the plant was constructed in 1999 and 2000 with an eye to the future and was built to house two additional filtration cells, doubling the plant’s capacity, if ever needed.

Trustees also got a look at the two one-million-gallon storage tanks at the treatment plant site that will be the beginning of the soon-to-begin, seven-mile-long, $2-plus million West Side Main transmission line project. With an expectation that work will be able to begin in September, the 12-inch-diameter pressurized water line will follow a course across country and along road rights-of-way directly south to connect with the town’s storage tank at Eckert on Happy Hollow Road.

More Gunnison River Basin coverage here.

Surface Creek sourcewater protection meeting recap

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From the Delta County Independent (Hank Lohmeyer):

The project is conceived as an effort on the part of local water providers, including the U.S. Forest Service which administers lands where water supplies originate, to identify threats to source water quality and cooperate on a plan to protect those sources from contamination threats. The water providers involved in the initiative are the Towns of Orchard City and Cedaredge, Coalby Domestic Water Company, and Upper Surface Creek Domestic Water Association.

According to Colleen Williams of the Colorado Rural Water Association, a government-funded 501(c)3 that is leading the planning effort, the communities of Collbran, Rangely, and Paonia are all at various stages of developing their own source water protection plans. Williams is the “facilitator” of the effort to develop a localized plan which hopefully in the initial stages will attract grant money for things like fencing and signage to help protect local water sheds.

The committee is at the stage of developing management strategies for dealing with a range of source water quality issues including the following ones: Oil and gas development, roads and dust, livestock grazing, wildland fires and forest health decline, noxious weeds, septic systems, and a half-dozen or more other factors.

More Surface Creek watershed coverage here.

Orchard City: New raw water source running into regulatory snafus

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From the Delta County Independent (Hank Lohmeyer):

With regulatory hang ups and delays frustrating the Ward Creek Diversion project at almost every turn, [Orchard City Town administrator David Varley] told the trustees at their October regular meeting, “I think it’s pretty much impossible that we’re going to get that project constructed this year.” The seemingly simple and relatively inexpensive idea was proposed last year. It was seen as a way to increase the efficiency of the town’s water system by diverting an existing raw water supply directly into a pipeline to the treatment plant. The project entailed about $38,000 in construction costs, and the town board had good hopes at the outset that the work could be completed in 2009. But contingency planning for the project failed to foresee the entangling involvement of the Army Corps of Engineers and the state Water Quality Control Commission. Varley gave those two agencies most of the responsibility for regulatory delays that will push the project’s completion date into next year.

More Surface Creek watershed coverage here.

North Fork River Improvement Association watershed action plan meeting October 14

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From the Delta County Independent:

NFRIA is beginning its update to the original 2000 Watershed Action Plan for the North Fork of the Gunnison. This is a chance for citizens to take action in addressing the foremost issues concerning the river. A public meeting is scheduled for Wednesday, Oct. 14, at Memorial Hall in Hotchkiss from 4-6 p.m.

NFRIA would like to assess how the public perception of the watershed has changed during the last nine years. Participation in this meeting will prove valuable for NFRIA in pursuing the goals of all stakeholders in the watershed. They hope to come away with an inclusive list of public concerns allowing them to optimize their efforts. In order to better serve all stakeholders, NFRIA welcomes critique of previous projects and how well they have addressed the initial action plan.

This meeting is the first of two public meetings as the first task in updating the watershed plan. The update process will review the science, the state of the watershed, sources of water quality impairment, public concerns, and will set the goals for the next 10 years.

Colorado Water Conservation Board is funding this project. The original 2000 Watershed Action Plan can be found at http://www.nfria.org. Contact the NFRIA office with any questions at 872-4614.

More Gunnison Basin coverage here.

Surface Creek Valley: Orchard City scores 5 shares of Leon Lake water

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From the Delta County Indpendent (Hank Lohmeyer):

Town Trustee Jimmie Boyd presented the board with the offer he had received for the Leon Lake shares. Boyd explained, “This last week I had a lady approach me with five shares of Leon Lake water for sale. She is asking $5,000 for the five shares, which figures out to a little bit less than $2,500 per acre-foot. That’s about the going rate. “This water,” Boyd continued, “has already been converted to domestic use or as augmentation water, as well as irrigation. The town has 85 shares of Leon Lake at this point, so this purchase would bring us up to 90 shares.” Boyd went on to explain that there are about 3,600 shares total in the Leon Lake water company. “The largest owner has about 225 shares,” Boyd said. “There about 160 owners in the company, so no one individual or owner interest would be hit real hard if some kind of work had to be done on the reservoir.” Leon Lake is located on the north side of Grand Mesa in the Plateau Creek drainage. Water is transported to Surface Creek Valley by a tunnel that was constructed decades ago.

More Surface Creek coverage here.

Surface Creek Watershed: Source water protection plan

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From the Delta County Independent (Hank Lohmeyer):

The Orchard City Town Board gave the go-ahead for its administration to apply for up to $5,000 in grant money to cover the costs of its participation in developing a “source water protection plan” for the town’s drinking water supplies. The town will be cooperating with other drinking water suppliers and interested groups in the Surface Creek Valley on the area-wide plan…

Trustee Jimmie Boyd who attended the first organization meeting of the group earlier this month explained that Forest Service facilities like gravel pits and septic systems pose the biggest concern as point source contaminants of drinking water supplies on the Grand Mesa. “This is essentially going to be a plan, or an inventory resource of what is up on the side of Grand Mesa that could involve our water sources,” Boyd explained. “There are no teeth in it that force us to do anything, but it could provide some possible advantages for grants or loans for the town.”[…]

The second planning meeting of the entities participating in the project is scheduled to take place in Cedaredge on Monday, Sept. 21, at 6 p.m. at the Community Center.

More Surface Creek watershed coverage here.

Surface Creek Watershed: Source Water Protection Plan

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Folks are organizing to protect the Surface Creek Watershed. Here’s a report from the Delta County Independent (Hank Lohmeyer):

The Colorado Rural Water Association (CRWA), a non-profit group located in Pueblo West, has signed on with drinking water interests in the Surface Creek Valley area to advance the government-funded Source Water Protection Plan (SWPP) project.
Thirty people responded to 60 written invitations that went out for the meeting held at the Cedaredge Community Center. Colleen Williams, a facilitator with the non-profit group, said $5,000 grants are available to groups participating in the program. “We might be able to get $10,000 easy with this (size) group,” she told those at the meeting.

The SWPP project is funded by the U.S. Department of Agriculture, by the Environmental Protection Agency, and by the Colorado Health Department, Williams said. The grants require a 50 percent local match which can be provided by local attendance at meetings credited toward the match at the rate of $30 per hour. “Specialists” who attend meetings qualify for a $100-per-hour grant match credit…

The Source Water Protection Plan is aimed at “keeping contaminants off the land and out of water treatment plants,” Williams said. Williams said that other communities, including the Plateau Valley area and Rangely, are participating in the SWPP project. Groundwork for the SWPP effort was laid in 1996 with passage of the federal Safe Drinking Water Act. The initiative was advanced in 2004 with the compiling of local “Source Water Assessments” (SWA)…

The Colorado Department of Public Health and Environment website explains the statewide Source Water program as follows: Colorado Source Water Assessment and Protection (SWAP) is a program designed to provide information about your drinking water, as well as provide you and your community a way to get involved in protecting the quality of your drinking water. The program encourages community-based protection and preventive management strategies to ensure that all public drinking water resources are kept safe from future contamination.”

More Surface Creek watershed coverage here.

Irrigating the Surface Creek Valley

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Here’s an article about John Spurgeon’s new book Irrigating the Surface Creek Valley, from Bob Borchardt writing for the Delta County Independent. From the article:

With help from the Black Canyon Chapter of the Audubon Society, the Surface Creek Valley Historical Society and the Surface Creek Winery and Gallery, local author John Spurgeon is receiving much deserved recognition for his book “Irrigating the Surface Creek Valley.”
According to Spurgeon, every community “has its own water story, even if it has been forgotten with the passage of time.”[…]Spurgeon said the irrigation ditches fascinated him, and he wanted to know why, how, and for what purpose these ditches came to be. “What’s this buying and selling of water all about?” he asked. His research and inquiries led to his writing of this easy-to-read and extremely fascinating book.

I’ve emailed the Independent for information on purchasing the book.