Some feel like it’s something straight out of a dystopian movie. Others say it’s already happening: out-of-state companies purchasing Colorado water rights as an investment for when water gets so scarce that the price skyrockets.
Sen. Kerry Donovan represents the 5th District in the state Senate.
“Water speculators aren’t in the business of using the water, they’re in the business of owning the water for future times when they can sell it,” said state Senator Donovan, a Vail Democrat. “And that’s why you see hedge funds coming into the state and buying water in a portfolio. That is what is concerning me…”
That’s how Colorado Newsline reporter Moe Clark began her September 12 article about a new 18-member work group convened by the the Colorado Department of Natural Resources (DNR). The new group’s mission: to come up with ways to strengthen Colorado water law to prevent for-profit water rights speculation.
I Googled Ms. Clark’s story after coming across a related article on the Coyote Gulch website, written by reporter John Orr, who runs that website. Mr. Orr’s article quotes a press release from DNR that states, in part:
The Department of Natural Resources released the names of a 18-member Anti-Speculation Law Work Group (Work Group) whose objective is to explore ways to strengthen current Colorado water anti-speculation law. The Work Group arose out of passage of Senate Bill 20-048 sponsored by Senators Donovan and Coram and Representatives Roberts and Catlin and signed by Governor Polis on March 11, 2020.
“I’m encouraged by the participation in the Work Group, which represents diverse stakeholders from all across the state,” said Dan Gibbs, Executive Director, Colorado Department of Natural Resources, who appointed the Work Group members. “Our goal is to have a transparent and thoughtful process over the next year.”
Senate Bill 20-048 requires the Executive Director of the Colorado Department of Natural Resources to convene a work group to explore ways to strengthen current anti-speculation law and to report to the water resources review committee by August 15, 2021, regarding any recommended changes. Colorado water law prohibits speculation by requiring water to be used for a beneficial purpose.
Colorado water law does not effectively prohibit speculation, as far as I can tell. As with so many laws created to protect and benefit the people of Colorado, the state’s water law has been distorted and corrupted by clever attorneys working on behalf of corporations, agricultural groups, oil and gas associations, and government entities. “Speculation” has in fact been built into the system by water court decisions from judges who no doubt believe they’ve been making wise decisions.
Apparently, water rights speculation is threatening to become so common now in Colorado that we need a special work group to try and design some legal control over the worst cases.
Disclosure: I currently serve on the San Juan Water Conservancy District board, but this essay does not necessarily reflect the opinions of the SJWCD board as a whole or of any other SJWCD board members.
Some of the basic ideas behind Colorado water law seem reasonable. First of all, water is a public resource and (theoretically) cannot be privately owned. But parties — corporations, farmers, ranchers, ditch associations, oil companies, municipal water districts — can request from the state government the right to use specified amounts of our public water for specific ‘beneficial’ purposes. These rights to water utilization have a ‘temporal’ ranking — based on the date of adjudication — that becomes important when there’s not enough water to go around. If your water rights were adjudicated in 1905, for example, and my water rights were adjudicated in 1965 — and Colorado is experiencing a drought and a water shortage — you get to take your full allocation, before I can take a single drop.
This is a fascinating idea. The spirit of brotherhood, if it existed among water users, would dictate that — if there were a shortage of water — everyone would cut back. We would share the pain.
But that’s not how Colorado water law works. Instead, the law functions on a “winner takes all” basis — a perfect setup for water rights speculation to become a tool for generating windfall profits for investors.
DNR is responsible for regulating water uses in Colorado, but the actual water rights are adjudicated by water court judges — meaning that we have both the Executive Branch and the Judicial Branch involved. Senate Bill 20-048, meanwhile, is the work of the Legislative Branch, as would be any new laws controlling water rights speculation.
SB20-048 includes this legislative language:
THE EXECUTIVE DIRECTOR OF THE DEPARTMENT OF NATURAL RESOURCES SHALL CONVENE A WORK GROUP DURING THE 2020 INTERIM TO EXPLORE WAYS TO STRENGTHEN CURRENT WATER ANTI-SPECULATION LAW. THE DEPARTMENT AND THE ATTORNEY GENERAL SHALL SUPPORT THE EFFORTS OF THE WORK GROUP…
…THE WORK GROUP SHALL SUBMIT A WRITTEN REPORT TO THE COMMITTEE BY AUGUST 15, 2021, REGARDING ANY RECOMMENDED CHANGES.
From the September 12 article by reporter Moe Clark on Colorado Newsline:
Since 2017, a New York-based hedge fund called Water Asset Management has spent $16.6 million buying up 2,222 acres of irrigated agricultural land in the communities of Fruita, Loma and Mack, in western Colorado, according to reporting by KUNC and Aspen Journalism in June…
Joseph “Joe” Bernal, owner of Bernal Farms in Loma and a member of the new working group, said he’s looking forward to learning more about Colorado’s anti-speculation law and if there is a need to strengthen it.
“We must protect our water rights for our land and our community. That’s why it’s important,” Bernal said. “If there’s a law that the Colorado Senate thinks needs to be looked at, well then, I’m all for discovering what the needs are…”
Senator Donovan explained that the work group was meant to be stacked with legal expertise.
“This is a technical detailed legal group to examine current law and practice, not a stakeholder group trying to determine policy,” Donovan said. “We need to send a message that if a hedge fund is looking towards Colorado, that we’re working on water speculation preventative measures, and hopefully that gives them pause before they just waltz into Colorado thinking that they’re going to make a buck off of buying our limited resource.”
We should probably recognize that, historically, many people have waltzed into Colorado thinking that they were going to make a buck off our limited resource. The first folks to use Colorado rivers and streams to generate income streams were miners and farmers — back in the days when mining and farming were the only games in town. But those folks were using the water to actually produce something. To actually contribute to society.
Some recent water speculators seem more interested in… what?