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FEATURED: As Drought Hits Farms, Investors Lay Claim to Colorado Water

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#GlobalWarming & #ClimateChange – Michael Jones ducked under an idle sprinkler and strode across the sandy soil where he planned to plant drought-resistant crops, hoping to save water amid the driest period in more than 1,200 years according to Civil Eats by Published: August 10, 2022

For the fourth-generation grower, sowing fewer, higher-value plants on this tiny organic farm was borne out of necessity: In 2018, his irrigation ditches ran dry. Farmers in Colorado’s San Luis Valley rely on such ditches, which are fed by snowmelt and rain that run into cottonwood lined creeks that flow out of two towering mountain ranges, the Sangre de Cristos and the San Juans. But that snowmelt dropped by 40 percent over the last four decades. The six-county region is now among the harshest places to farm in the West. Federal officials designated it a disaster area in April due to its extremely arid conditions.

“We have a saying in the West that ‘water flows uphill toward money.’”

“The water table on my well is at 42 feet,” Jones said recently as he sat at the kitchen table in his family’s renovated adobe home. “When we were kids, we could dig to water before lunch pretty easily and wells that pumped 1,000 gallons a minute to start the season now only produce half that.”

After five years of scraping by, Jones and his wife, Sarah, are looking forward to a season shaped by greater demand for their potatoes, rye, canola, peas, and other crops that will allow them to make enough money to meet their needs. Yet this tenuous success may be in peril. A company known as Renewable Water Resources (RWR) aims to drill a series of deep wells on a nearby ranch it owns and pipe the water more than 200 miles north to a Denver suburb, where sprinklers rotate on manicured lawns.

A map of the Sangre de Christo Wilderness, illustrating the proposed water diversion project that RWR is proposing.
A map of the Sangre de Cristo Wilderness, illustrating the water diversion project that RWR is proposing. (Click for a larger version)

The firm recently sought $10 million from Douglas County to kickstart its project. Now, trucks across the Massachusetts-sized valley sport bumper-stickers in opposition; there’s even a hostile marquee. Urban leaders anxious about their own dwindling water supply to the north, some of whom have accepted campaign contributions from the company’s principals—a group of well-to-do businessmen that includes a former governor—have expressed ongoing interest in working with RWR on its plan.

If the state engineer’s office, its water court, and federal regulators were to approve RWR’s plan, it would mark the first time that private investors could ship water from an aquifer in one part of the state to a community in another. Yet the potential to profit from piping the scant resource to the rapidly expanding cities east of the Rocky Mountains is increasingly attractive to investors as drought and shortages drive up the price of water and Colorado’s population is expected to double by 2040.

It’s a scenario that will test Colorado’s ability to balance water use between its agriculture industry—whose 38,900 farms and ranches generate about $47 billion a year in economic impact—and rapid population growth.

To proceed, RWR must purchase water rights from farmers and ranchers, many descendants of families who settled Colorado’s oldest agricultural region in the mid-1800s.

Meanwhile, farmers and ranchers who share the 8,000-square-mile valley with RWR have already been tilling less ground, fallowing land, and using less water-intensive crops in a race to meet a state-mandated 2030 deadline to restore water to shrinking aquifers or face well shutdowns.

Selling their water to RWR, a practice known as “buy and dry,” would force farmers to grow even less and could have cascading effects on a region that reaps the nation’s second-largest potato crop. Such transactions have previously been politically unpopular and discouraged in the state’s water plan, in part because they can devastate local economies and ecosystems. Wildlife is also suffering as water supplies shrink: Biologists move threatened fish in buckets from creek to creek. Nesting birds on one of three national wildlife refuges in the valley almost ran out of water recently until state and local officials scrambled to find alternative sources.

However, the valley’s climate crisis hasn’t stopped RWR—which is backed by private investors, attorneys, and lobbyists and has ties to an investment firm with purportedly more than $100 million in assets, Zeppelin Partners, LLC—from asking commissioners in Douglas County to buy the water RWR says it has already started to acquire. (By law, the firm must make an agreement with an end user before it can present a plan in water court, a critical step along its path to becoming a water-dispensing intermediary.)

The proposal pits some of the state’s poorest residents against some of its most well off, raising equity issues emblematic of those faced by communities across the West as they determine how to best share water in a new age of scarcity. And it’s one of a number of efforts to treat the system of water distribution as a new kind of marketplace.

“We have a saying in the West that ‘water flows uphill toward money,’” said Peter Gleick, a senior fellow at the global water think tank The Pacific Institute. “That is true if our laws and water rights rules permit farmers to sell water. Then these kinds of transfers, which were very common in the 20th century, are going to continue. And they are not going to solve our water problems, they’re going to change where they are most severe.”

Is Water a Commodity?

Water has always been in short supply in much of the arid West. Now, the worst drought in more than a millennium, combined with a boom in new subdivisions, mini malls, and big box stores, is stretching the precious resource to the breaking point.

The West was built by moving water around. Historically, utilities or municipalities have purchased water from farmers and ranchers to serve residential and business customers. Those farmers and ranchers hold some of the most senior water rights and, in most states, consume up to 80 percent of the available water.

In Colorado, more than two dozen trans-basin diversions send surface water from one region to another, mostly from the Western Slope of the Rocky Mountains to the eastern side, where nine out of 10 of the state’s residents live. This system is increasingly under strain as the snowmelt that feeds rivers shrinks and more people move to the Denver region. If solutions aren’t found to better conserve and share this water, researchers warn, the state risks losing “700,000 acres of currently irrigated farmland” supporting commodity crops like alfalfa, corn, wheat, sorghum, and millet.

An illustration of a flock of sandhill cranes flying over the San Luis Valley and its farms. Illustration by Sarah Gilman.
Illustration by Sarah Gilman.

Also being squeezed are the state’s overtapped aquifers. The groundwater Douglas County relies on is not renewable, something the state engineer’s office frequently reminds well users about. RWR seeks to capitalize on this message with its own: “Douglas County’s current ‘patchwork’ system of compiling water in small amounts is not working,” reads one proposal to the three-member county commission.

The company’s principals, who said in a public meeting that their proposal is “not speculative,” did not respond to requests for comment by phone and text, or answer detailed questions sent by e-mail. A visit to offices listed on business filings turned up dusty desks in an industrial park and a vacant glass-walled office in a shared workspace near downtown Denver.

RWR’s plan is one of several controversial plays by investors in the West who view water as a money-making opportunity and are eager to act as middlemen between farmers and water providers.

The debate over how to treat water—as a commodity that can be bought or sold on the market like gold, corn, or oil, or a public resource that should not be available to investment markets—is escalating as climate change accelerates the water crisis in the West.

“Speculators buy water rights and they just hold them and there’s no record of it…The neighbors don’t like it, but people keep their mouth shut about it, and it’s not highly publicized and there’s not any way to track these deals.”

Water now trades on the Chicago Mercantile Exchange, with proponents saying that treating water as a commodity could help mitigate future water crises. Private investors are also buying up water rights in a bet on escalating prices.

In one scenario, the New York-based hedge fund Water Asset Management (WAM) spent more than $16 million to acquire 2,000 acres of farmland on the Western Slope of Colorado’s Rockies. It’s now positioned to harvest water by fallowing ground on properties it owns. Its executives say it could store the water saved in Lake Mead and Lake Powell. Though Lake Powell fell to its lowest level on record in May, forcing federal regulators to hold back water releases to Arizona, California, and Nevada, WAM has invested more than $300 million in water-rich farms in these states.

These types of acquisitions drew the attention of California state legislators, who asked Attorney General Merrick Garland “to investigate anti-competitive practices in water rights purchasing and potential drought profiteering in western states.”

The United Nations has also warned that futures markets elsewhere could exacerbate inequity while speculators drive up the value of water. The opaque system of ownership also makes many nervous about unknown impacts for ratepayers and the environment.

“Speculators buy water rights and they just hold them and there’s no record of it,” said Peter Nichols, a partner at Berg Hill Greenleaf Ruscitti, LLP, who specializes in water law. “The neighbors don’t like it, but people keep their mouth shut about it, and it’s not highly publicized and there’s not any way to track these deals.”

With more headwaters than any other state, Colorado is on the leading edge of experiments to develop such water markets. The emerging practice is in direct conflict with the historic means by which water rights have been distributed in the West. These rules gave away water to settlers on a first-come, first-served basis known as “first in time, first in right.” But ultimately over the last 150 years, regulators distributed far more water than exists.

#AceNewsDesk report ………..Published: Aug.11: 2022:

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