Headwaters spring 2025: Liquid Assets

Liquid Assets

As water prices soar, farmers, cities and others navigate a shifting market — will speculation leave some high and dry?

SPRING 2025

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To stay informed on important SRF program updates, visit (https://cdphe.colorado.gov/glu) and subscribe to the SRF newsletter.

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photo courtesy of Ian Loffert

CONTENTS Spring 2025

FEATURES

INSIDE

The Wa ter M a rkets I s su e

Colorado’s thriving water market allows for the buying, selling and leasing of water rights — but as water becomes scarcer, investors are eyeing the resource as a commodity that can turn profits across the West. Some experts say that water markets could play a larger role in optimizing water use, but is Colorado protected against water speculation, monopolization, export and inflated pricing? Or could profiteering put critical water resources at risk?

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DIRECTOR’S NOTE

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WHAT WE'RE DOING WEco's upcoming events, reporting and more.

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FROM THE EDITOR

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PULSE Water news from across Colorado Water Works A $100 million deal funds river improvements and clears the way for new reservoirs.

COVER: AI IMAGE. CLOCKWISE FROM TOP: DANA SMITH; ISTOCK (2)

Grass Roots Change Colorado invests millions in turf replacement grants to save water — but is the return worth the cost?

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Liquid Assets Speculative water investment is difficult to define and prohibit.

Will profiteering lead to surge water pricing?

BY ZAK PODMORE

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The Price of Conserving Water Could speculators transform the state by taking water out of production?

BY ELIZABETH MILLER

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Tapping the Market Colorado has a robust water market, but some economists believe that more open markets can maximize water’s value, promote conservation, and more.

BY ANGELA UFHEIL

Care to Speculate?

Water experts share perspectives on investment water speculation.

BY ELISABETH KWAK-HEFFERAN

Around The State Quick updates from Colorado's major watersheds.

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MEMBER'S CORNER Celebrate the impact of WEco’s members.

ON THE COVER Image generated by AI

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INTRODUCTION A Note From The Director

The spring has arrived, and warmer temperatures remind us of the importance of water. The need for snow in Colorado highlights the interconnection of our water basins and our communities.

As we get ready for warmer dates, Water Education Colorado (WEco) is eagerly preparing for our signature programs.

Our Water Leaders Program will begin in late April. Since its inception, WEco’s Water Leaders Program has graduated 262 participants who are leading the water sector across disciplines. We are announcing this year’s Water Leaders class and are thrilled to see this new group of 20 leaders across Colorado come together and become the best version of themselves.

Similarly, our Water Fluency Program has been taking applications, and spots are quickly filling. This is a testament to the need for understanding the water space in Colorado, our challenges, and future management. Last year, 38 participants completed the program. Water Fluency enables participants to speak about Colorado water while also bringing meaningful positive changes to their communities and expanding their own professional network.

Our 2025 Basin Tour is also around the corner, coming up June 3-4. We are thrilled to be able to travel to southwestern Colorado for this annual bus tour. We plan these tours in partnership with local organizations and community leaders, in order to bring legislators, water managers, decision makers, interested individuals and others into different river basins to learn about water management, history, challenges and successes. Last year alone, 100% of the participants said that our Basin Tour provided a high or very high value, while 83% shared that the tour increased their understanding of perspectives, priorities, projects, and programs in the basin.

If you are curious about our programs and want to learn more, please sign up for our newsletter, and mark your calendars to participate in upcoming programs. Join us for the Basin Tour, June 3-4; our President’s Reception, September 10; and the Sustaining Colorado Watersheds Conference, October 7-9.

I wanted to thank all of our members, sponsors and supporters for making our work possible.

Water is a finite resource, and our work continues to ensure that all Coloradans are informed and equipped to make good decisions that ensure the sustainable water future of our home state.

I hope you enjoy this edition of Headwaters Magazine, as we tackle another complex issue that impacts us all. I hope you learn something new, and get inspired to continue to join us in our vision of stewarding our water for present and future generations.

Onwards,

STAFF

BOARD OF TRUSTEES

Lisa Darling President Dulcinea Hanuschak Sabrina Scherma Vice President Programs Director Brian Werner Secretary Saeda Aljazara Administrative and Alan Matlosz Programs Assistant Treasurer Cary Baird Sidney Barbier Perry Cabot Publications and Production Intern Nick Colglazier Nathan Fey John Carpenter David Graf Operations Manager Eric Hecox Tess Koskovich Matt Heimerich Marketing, Julie Kallenberger Communications and David LaFrance Outreach Manager Dan Luecke Jerd Smith Karen McCormick Fresh Water News Editor Leann Noga Lisa Strachan Peter Ortego Membership and Nate Pearson Development Manager Dylan Roberts Caitlin Coleman Monika Rock Publications and Digital Ana Ruiz Resources Managing Editor Elizabeth Schoder Don Shawcroft CREATIVE Chris Treese Dana Smith Katie Weeman Headwaters Art Director Juan Pérez Sáez Executive Director

THE MISSION of Water Education Colorado is to ensure Coloradans are informed on water issues and equipped to make decisions that guide our state to a sustainable water future. WEco is a non-advocacy organization committed to providing educational opportunities that consider diverse perspectives and facilitate dialogue in order to advance the conversation about water.

HEADWATERS magazine is published three times each year by Water Education Colorado. Its goals are to raise awareness of current water issues, and to provide opportunities for engagement and further learning.

THANK YOU to all who assisted in the development of this issue. Headwaters’ reputation for balance and accuracy in reporting is achieved through rigorous consultation with experts and an extensive peer review process, helping to make it Colorado’s leading publication on water. © Copyright 2025 by the Colorado Foundation for

Water Education DBA Water Education Colorado.

ISSN: 1546-0584 CSU Spur, Hydro/The Shop, 4777 National Western

Executive Director

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Drive, Denver, CO 80216 (303) 377-4433

COURTESY OF JUAN PEREZ SAEZ

Flowing Into Spring

WHAT WE'RE DOING ONLINE Want to Dive Deeper?

Get 20% off the fifth edition of Water Education Colorado’s Guide to Colorado Water Law— now through June 1, 2025! Plus, members can stack their exclusive discounts for even more savings.

CLOCKWISE FROM TOP: COURTESY OF WATER EDUCATION COLORADO; COURTESY OF LEANN NOGA; COURTESY OF SAEDA ALJAZARA

“ See How Rivers in Southwestern Colorado Shine – Join the Bus Tour This June 3-4!

A Conversation With LEANN NOGA

The whole purpose is to get to individuals that don’t have clean water.

It’s hard to believe that in our amazing state where all water flows out, that there’s anyone that doesn’t have clean drinking water.

”

We're excited to announce that WE'co's Annual River Basin Tour will feature rivers in the southwestern corner of the state in 2025. We'll spend two packed days in the field, seeing an exciting mix of natural features and infrastructure projects. Secure your seat on the bus for June 3-4, 2025. Members enjoy early registration access. Visit wateredco.org/tours to learn more.

WELCOME TO THE TEAM Water Education Colorado welcomed Saeda Aljazara to the team this January as our new Administrative and Programs Assistant. Saeda brings with her an impressive skillset in operations, process optimization, and project management. Previously, Saeda worked for The Table, a Muslim political nonprofit dedicated to increasing Muslim political representation in the United States. Saeda holds

a Master’s degree in History from the University of Missouri-Columbia. In her free time, she enjoys skiing in the Colorado mountains, spending time with her cat Salem, and diving into independent research projects. In this role, Saeda will support organizational operations and programming initiatives, contributing to our mission of advancing water education and engagement across the state.

For the Spring 2025 issue of Headwaters magazine, which focuses on water markets, we spoke with Leann Noga, a current Water Education Colorado board member and executive director of the Southeastern Colorado Water Conservancy District.

Read more on the blog at watereducationcolorado.org.

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BEHIND THE STORIES From The Editor

In recent years, there was news that investment firm Greenstone Management Partners bought — nearly a decade ago — almost 500 acres of farmland and water rights in Cibola, Arizona near the California border. Greenstone then sold that 2,033 acre-feet per year of Colorado River water in 2018 to a Phoenix suburb some 200 miles away for $27 million. The water started running to the suburb in 2023. CNN, in reporting on the transfer, quotes a Cibola resident who is worried about the impact of drying up the community and about the precedent that the transfer will set (read more about the idea of Colorado River water speculation and transfers in “The Price of Conserving Water,” page 22). The same story quotes Greenstone’s attorney reasoning that the company held water rights just like any other farmer in the region.

Cibola’s story isn’t unlike the story in southern Colorado’s Rio Grande Basin, where Renewable Water Resources bought up farmland and attempted to transfer water to Douglas County.

The water market is, by nature, a capitalist market, with water rights made more valuable in times of high demand. But does bigger capital investment have the potential to change that market and the water rights system? And if so, is that bad?

Douglas County hasn’t supported the deal and valley residents have opposed the transfer, perhaps halting that particular water export plan.

But the initial purchase of land and water by investment companies is hard to spot — investment water speculation is elusive. As Alex Funk says in “Tapping the Market,” (see page 26) in trying to catch water speculation, you’re trying to look into the mind of someone and determine what they plan to do with their water.

That’s one challenge, among many, that the Colorado AntiSpeculation Law Work Group ran up against when it met to make legislative recommendations to prevent investment speculation.

The group produced many ideas, recorded in its 2021 report, but no firm policy suggestions to limit speculation. State lawmakers are still working on such policy (see “Liquid Assets” page 12).

I understand why there wasn’t a clear solution. In “Care to

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Speculate,” (page 18) we hear four views on water markets that offer perspective into how different people view the resource.

They range from seeing water rights as an “investment-grade asset,” to highlighting the tension that happens when publicinterest values, like water for the environment, are underfunded when compared to moneyed investment speculation — they’re all reasonable. The water market is, by nature, a capitalist market, with water rights made more valuable in times of high demand.

But does bigger capital investment have the potential to change that market and the water rights system? And if so, is that bad?

If you didn’t know Justice Hobbs, he was a Colorado Supreme Court Justice and also vice president of the Water Education Colorado Board of Trustees and chair of our publications committee from WEco’s founding in 2002 until his passing in 2021. He often spoke and wrote about the prior appropriation doctrine, its flexibility and the foresight of setting aside water as a public resource. In a September 2015 talk that he delivered at the California Water Education Foundation’s Colorado River Symposium, he said: “A water right is not like 160 acres. It’s a much different resource. It’s fluid and it’s the public’s … And the use right we get under the prior appropriation doctrine is a right to use the public’s resource for an actual beneficial use without waste.

Really, if you look back at the doctrine, that’s what it was. It was anti-speculation, anti-monopoly.”

There are still a lot of questions and discussion to be had around water speculation, but I love how Justice Hobbs characterized water: “it’s fluid and it’s the public’s.” May we continue to respect that public resource well into the future.

Editor

COURTESY OF CAITLIN COLEMAN

The Price of a River

PULSE Water News From Across Colorado

The Poudre River flows in Poudre Canyon near Fort Collins.

Settlement Stream ISTOCK

Inside: A landmark deal funds river improvements, clearing the way for water development.

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PULSE Water News From Across Colorado

A $100 million deal funds river improvements and clears the way for new reservoirs.

BY SHANNON MULLANE

Fast-growing northern Colorado communities will pay $100 million into a Cache La Poudre River improvement trust to settle a lawsuit and clear the way for the construction of a complex water delivery system.

Save the Poudre sued in January 2024 to block the $2 billion Northern Integrated Supply Project (NISP), a two-reservoir development designed to serve tens of thousands of people in northern Colorado.

The lawsuit targeted a federal permit, alleging that the U.S. Army Corps of Engineers had not adequately weighed the environmental impacts and considered less ecologically harmful alternatives to the project. The Northern Water Board of Directors signed the new agreement on February 28, 2025.

“This is a milestone day for the communities participating in the project,” said Northern Water General Manager Brad Wind in a news release. “The settlement agreement will close the permitting process for the project, open the door to constructing a project that will deliver much-needed water supplies to vibrant communities, and allow for dozens of largescale riverine investments in and along the Poudre River.”

The settlement ends decades of opposition to the expansive water supply project, including concerns that the new reservoir northwest of Fort Collins would drain water from the Cache la Poudre River to satiate the needs of growing towns in Weld, Larimer, Morgan and Boulder counties. The project calls for a second reservoir, near Greeley, where water from the South Platte River will be stored and used or traded with Poudre River users.

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As a key win for environmental group Save the Poudre, the agreement outlines the creation of a new, long-term funding source to help a reach of the Poudre River, which extends from the mouth of Poudre Canyon to the river’s confluence with the South Platte River near Greeley.

Over the next two decades, the 15 project participants — who represent northern Colorado communities and water districts — will contribute $100 million to create the fund, housed at the Community Foundation of Northern Colorado, or NoCo Foundation.

The money will be made available for initiatives that improve the river’s ecosystems, wildlife habitat, recreational uses, water quality and more.

The participants’ share of the settlement will be assessed based on their share of the project, with the largest, Fort CollinsLoveland Water District, picking up about 20% of the cost, Northern Water spokesperson Jeff Stahla says.

The agreement also allows some of the fund to be used to buy water rights, which could help restore flows to severely depleted portions of the river near Fort Collins, as well as create recreational pools and flows for kayaking, fishing and more, according to Save the Poudre.

The $100 million is separate from, and in addition to, the money already committed

Part of the improvement plan will make money available to improve the river's recreational uses and more.

by NISP in its 2017 Mitigation and Enhancement Plan.

“For 20 years, we have brought attention to the plight of the Poudre River and the impacts on the river that would be caused by NISP,” Gary Wockner, Save the Poudre director, said in a news release. “We are pleased to have reached this agreement and we look forward to putting the improvement fund to work for the health of the river and all of the people who love and enjoy the river in northern Colorado.”

In return for the fund — and a win for the water providers — Save the Poudre will end its legal challenge to the federal Clean Water Act permit issued by the Army Corps of Engineers in 2023.

Colorado Sun journalists Michael Booth and Dana Coffield contributed reporting to this story.

An extended version of this story originally appeared in Fresh Water News, an initiative of Water Education Colorado published in collaboration with The Colorado Sun. Read Fresh Water News online at watereducationcolorado.org.

Shannon Mullane writes about the Colorado River Basin and Western water issues for The Colorado Sun.

ISTOCK

Water Works

Grass Roots Change Colorado invests millions in turf replacement grants to save water — but is the return worth the cost?

ISTOCK

BY JERD SMITH

Colorado’s top water agency has awarded nearly $1.2 million in new grants to communities across the state this year as its effort to boost conservation by replacing water-intensive lawns with droughtresistant grasses continues.

The money comes on top of $1.5 million the Colorado Water Conservation Board (CWCB) has awarded since 2023, when lawmakers OK’d the special grant fund to help communities test and expand turf replacement programs. The CWCB is the state’s primary water agency, helping set policy and disbursing money for waterrelated grants and loans.

Among the largest awards in this funding cycle is $462,234 to Colorado Springs and $498,087 to the Boulder-based Resource Central, a water conservation organization.

Aurora was awarded $100,000 to continue its GreatScapes initiative, which pays for turf replacement programs for homeowners who earn less than 60% of the city’s annual median income, according to the U.S. Census Bureau.

As Colorado and other Western states watch climate change reduce streamflows and shrink water supplies, efforts are underway to reduce water use.

Some in the state, including a few Colorado Water Conservation Board members, have questioned the effectiveness of the turf replacement programs. In this grant cycle, for instance, the top three grants total just over $1 million but will generate water savings of just 50 acre-feet per year. An acre-foot equals 326,000 gallons, enough water to serve approximately two to four urban homes for one year.

“We’re spending $1 million to save 50 acre-feet of water a year. It’s a huge investment for very little return.”

—John McClow, representative for the Gunnison River Basin on the CWCB Board

John McClow, who represents the Gunnison River Basin on the CWCB board, says that the price tag for saving such a small amount of water is high.

“We’re spending $1 million to save 50 acre-feet of water a year. It’s a huge investment for very little return,” McClow said at a recent board meeting.

The costs of those water grants pencil out to roughly $20,000 for one acre-foot per year, a price that is considered a good deal in some Front Range water markets, where water can sell for more than $60,000 an acre-foot per year. Variations in cost are common. Some water supplies go for as little as $400 an acre-foot.

But cost per acre-foot isn’t the only factor to consider as Colorado enters a water-short era and looks for ways to make every drop count. Jenna Battson, the CWCB’s outdoor water conservation coordinator, says the special turf program has other benefits that include public education. She cites a California study that showed homeowners in neighborhoods where turf replacement

programs were underway, often attracted new players to the effort.

“Many things can be true at the same time,” Battson says. “And there are behavioral shifts and status quo shifts that are harder to quantify. A study out of California found that for every 100 people who participated, another 132 neighbors converted as well. It’s called the neighbor effect.”

After the latest application round closed in February, CWCB expects the Turf Replacement Grant Program funding to be exhausted, Battson says. However, CWCB has two annual application deadlines for Water Plan Grants that can help support collaborative, multibeneficial conservation projects.

An extended version of this story originally appeared in Fresh Water News, an initiative of Water Education Colorado published in collaboration with The Colorado Sun. Read Fresh Water News online at watereducationcolorado.org.

Jerd Smith is editor of Fresh Water News.

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PULSE Around The State: Quick Updates From Colorado's Major Watersheds

Enhancements coming soon to the Lobato Bridge area of the Rio Grande will improve outdoor access and river recreational opportunities.

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ARKANSAS RIVER BASIN Fresh Water News reports on a new wave of activism by Lower Arkansas Valley farmers as they protest agricultural water transfers and growth plans in Colorado Springs. In February, the Lower Arkansas Valley Water Conservancy District passed a resolution outlining the threats its communities face when Colorado Springs expands.

The district cites concerns about annexations in general as well as the Karman Line project — a recently approved annexation near Colorado Springs. Farmers have been organizing protests and speeches targeting the City of Colorado Springs with the hope of stopping large annexations that require taking water from farms to fuel the growth. Farmers say policies to combat the dry-up of farmland aren’t working.

COLORADO RIVER BASIN According to the Denver Post, more than a quarter of all Colorado River water is used to grow alfalfa. However, recently a team of researchers at Colorado State University’s Western Colorado Research Center are looking into the potential of crops that could be used as alfalfa alternatives. The study, taking place near Fruita, is testing to see if these replacement plants — kernza, sainfoin and silflower — can better resist drought and grow in Colorado using less water.

The studies will span multiple seasons.

Even if the alternatives use less water, it would require a shift of industry and culture to transfer to new crops.

FACING PAGE: ISTOCK

GUNNISON RIVER BASIN According to the Gunnison Times, the City of Gunnison is beginning an in-depth investigation of its municipal irrigation ditch system. The goal is to keep the ditches operational for the communities that rely on their water supplies by creating a long-term plan

for how the city will manage the ditches into the future. Gunnison’s Public Works Department in collaboration with the engineering firm SGM will assess the condition of Gunnison’s ditches and prioritize big-budget repairs. Currently, the estimated cost to fix them exceeds $2 million, but a draft ditch master plan will be released in October once all the data are collected.

NORTH PLATTE RIVER BASIN Fresh Water News reports that Colorado is looking to solar panels that float on reservoirs and lakes as a way to save water. The Colorado Water Conservation Board published a feasibility study on floating solar in December, finding that Colorado could use the arrays to keep a maximum of 429,000 acre-feet of water from evaporating into the atmosphere.

The town of Walden has some 200 solar panels floating on top of a pond at its drinking water treatment facility. This array, installed in 2018, was the first floating solar project in Colorado. The system has been a low-maintenance way to provide certainty around the plant’s power supply and has reduced the growth of algae. “If we had the opportunity to do another one, we probably would,” said Mark Russell, Walden’s public works director.

SAN JUAN/DOLORES RIVER BASIN The Durango Herald reports that In January 2025, the Southwestern Water Conservation District (SWCD) received notice that it would be awarded $25.6M as part of the U.S. Bureau of Reclamation’s Upper Colorado River Basin Environmental Drought Mitigation Program. As of February, that funding was paused and under review by the Trump administration. If awarded, the funding will support 17 projects across the Dolores and San Juan River Basins in Southwest Colorado. This could include bank stabilization, invasive plant species removal, riparian restoration, fish passage and habitat connectivity, erosion control, and wetland restoration.

SOUTH PLATTE RIVER BASIN Fresh Water News reports that Colorado's Attorney General Phil Weiser sent a letter to county commissioners in northeastern Colorado pledging to defend their rights if Nebraska tries to condemn land for the proposed Perkins County Canal Project. The canal would divert water from the South Platte River in Colorado to a storage facility on the Nebraska side of the state line. The 1923 South Platte River Compact authorizes Nebraska to build a canal.

RIO GRANDE BASIN

YAMPA RIVER BASIN

According to the Mineral County Miner, the Great Outdoor Fund recently secured funding from Great Outdoors Colorado and the Colorado Water Conservation Board to begin construction of educational and recreational enhancements to the Lobatos Bridge area in Costilla and Conejos counties. The goal of this $697,693 project is to create a nature-based classroom to interpret the rich cultural, historical and natural heritage of the Rio Grande Natural Area.

The project will also create opportunities for river recreation.

According to the Steamboat Pilot, a large-scale restoration project at the confluence of the Yampa River and Walton Creek in Steamboat Springs got a boost in Januaury 2025 with a $5 million U.S. Bureau of Reclamation grant. The restoration work aims to clean up the river and provide ecological resilience to future wildfires and droughts. According to the city, the design and permitting process is expected to be complete by 2026 with construction expected to be completed by 2028.

— Sidney Barbier

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Liquid Assets Colorado has long sought to protect its water from profiteering and hoarding — but it's difficult to spot and prohibit investors from buying farmland and water, speculating that they'll profit off of water scarcity. Could Colorado's liquid assets wind up in the hands of profit-driven out-of-state interests? Or are critics concerns overblown?

BY ZAK PODMORE

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ILLUSTRATIONS BY DANA SMITH

Poke around in the annals of Colorado water history for long enough and you’ll find the name “Vidler” recurring with some frequency. It refers to a man, Rees Vidler, who purchased a silver mine southwest of Georgetown, Colorado, in 1902. The mine eventually became the Vidler Tunnel, which diverts water from the Colorado River watershed and moves it beneath the Continental Divide to the South Platte River Basin. It’s also shorthand for an important 1979 Colorado Supreme Court ruling, the Vidler decision, that sought to limit water speculation in the state.

And finally, there’s the Vidler Water Company. Its modern incarnation formed in 1995, when the Wall Street-connected company bought the tunnel that was named after the man and set about attempting to do what the Vidler decision explicitly tried to limit: investing in water rights with the hopes of returning substantial profits.

Kerry Donovan first heard about a hedge fund with ties to the Vidler Water Company, Water Asset Management (WAM), when she was purchasing hay from a farmer in Mack, Colorado, in 2019.

Donovan runs a ranch near Edwards with water rights that date back to the 1800s, and at the time she was a state senator representing a district on Colorado’s West Slope. She was surprised to later learn that between 2017 and 2020 WAM had bought up $16.6 million worth of farmland in the Grand Valley near Grand Junction.

WAM’s spending spree was happening at the same time Donovan had been hearing more discussion about the creation of water markets, which “set the warning bells off” for her. “It really seemed like we were careening toward a place where water wasn’t going to be held for beneficial use except for a benefit to the investors,” she says.

Donovan was not alone. Farmers and environmentalists alike have spoken out against Wall Street plays in rural agriculture. Top water negotiators in deep red states like Utah and blue states like Colorado have raised concerns about such investment.

Efforts of private investors to sell groundwater beneath productive agricultural lands in the San Luis Valley to Front Range cities have met backlash. The investors, a real estate development firm called Renewable Water Resources, purchased farmland in the valley and proposed exporting underlying groundwater to Douglas County, south of Denver — but RWR doesn’t have buyers for that water. In 2022 Douglas County rejected the idea of RWR’s export proposal.

And in the water-short San Luis Valley, where irrigators are fallowing farmland to combat shrinking aquifers, a coalition — including water districts, conservation districts, towns, cities and counties — argues that taking water from the valley would threaten agriculture, the economy and the environment.

An Alamosa Citizen poll found that only 1% of valley residents supported the plan to export water. “This valley was so heavily split in both the 2016 and 2020 elections,” says Teal Letho, an activist and water policy-focused social media influencer from Durango who posts under the name Western Water Girl. “For them to have such a unifying voice on this issue is a very resounding: ‘No, you’re not taking our water.’” Opposing water speculation, Letho says, can transcend “the Republican-Democrat dynamic.”

Despite the complexities of water law, often little context or

explanation is needed to raise eyebrows about water investment.

When CBS Mornings ran a 2023 investigative report on Wall Street’s interest in Western water, the host felt compelled to editorialize. Treating water as “the new oil,” he said, reminded him of “that scene in The Lorax when they start selling fresh air … very troubling stuff.”

The idea of private equity firms hoarding water during a drought and selling an essential resource to thirsty residents at a substantial markup is, for many observers, a vision of dystopia. And for the agricultural community, there are worries about private investors playing a role in aggressive “buy and dry” schemes that have shut down farms across the West. Traditional buy and dry has already occurred without Wall Street involvement, when municipalities have purchased farmland and transferred agricultural water to city taps, hollowing out rural economies in places like Crowley and Bent counties in southeastern Colorado.

Wall Street, Donovan says, approaches water with its own set of priorities that could make the issue even worse. “If you’re a family-run ranch or farm, you’re not doing it because the hours are good,” she says. “You’re not doing it to get rich.” She contrasts that ethic with the goals of investment speculators. “That’s a really scary proposition for someone to hold water rights where their primary goal is to make money — not to raise food, not to fill up your bathtub, but to make money.”

Anti-speculation restrictions are at the heart of water law in many arid states, including Colorado, but new forms of speculative water investment are difficult to define and prohibit. Recent efforts in Washington, D.C., and in the Colorado legislature to strengthen anti-speculation laws, including several led by Donovan, have been

The idea of private equity firms hoarding water during a drought and selling an essential resource to thirsty residents at a substantial markup is, for many observers, a vision of dystopia. unsuccessful. Water investors themselves argue that unleashing market forces on water management will modernize an inefficient and outdated system, assisting with water distribution in times of drought. They say this can be done while raking in returns. WAM president Matthew Diserio told Fast Company in 2023 that water is “the biggest emerging market on Earth,” calling it “a trillion-dollar market opportunity.”

Are critics’ concerns over the issue overblown? Or could average homeowners someday be subjected to surge pricing for tap water during droughts as farmlands dry up?

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FROM THE COLORADO DOCTRINE TO THE VIDLER DECISION When gold prospectors began flocking to the Colorado Territory in the mid-1800s, settlers from the East Coast quickly recognized that water was scarce in the region and that water diversion would be a key component of mining and farming operations.

The gold seekers — first in the codes of Colorado mining districts and later in the Colorado Constitution of 1876 — set up a legal system that was intended to speed settlement through the broad distribution of water rights. This set of laws, which was later adapted by other Western states, is known as the “Colorado Doctrine.” Legal scholar David Schorr argues that the doctrine was anti-speculative in its intent, and was based on the idea of “distributive justice” — Colorado water law intended for this vital public resource to be distributed to as many people as possible.

Since agriculture uses around 89% of all water consumed in Colorado, and producers hold many senior water rights, farmers and ranchers are often seen as an obvious target for programs that conserve water, either for environmental streamflow purposes or for downstream users and interstate compact compliance.

A driving question on settlers’ minds, Schorr writes, was: “Would the lands of the public domain be disposed of to absentee speculators and corporations controlled by Eastern and European investors, or to the archetypal ‘actual settler’?” The Colorado Doctrine was developed in favor of the latter. The doctrine differentiates water from typical property rights, establishing that ownership of water belongs to the people of Colorado, but water rights allow the use of that water. It included two fundamental pieces of Western water law: the prior appropriation system (those with the oldest water rights have priority over junior water users) and beneficial use (water rights are obtained, not through buying stream-front property, but by diverting and using water for a specific purpose). The “use it or lose it” principle of water law further prevented speculation, hoarding and monopolization since it threatened the loss of water rights if beneficial use stopped.

By dissuading wealthy water rights owners from sitting on water for years while waiting for its value to rise, the Colorado Doctrine encouraged Western development by European-Americans and the forced removal of Indigenous peoples. Boosters promoted the idea that anyone could strike it rich in Colorado with a lucky mining claim or the right amount of hardscrabble effort poured into a ranch carved from the public domain.

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By the time mining executive Rees Vidler bought his tunnel in the early 1900s, the Colorado Doctrine was thoroughly enshrined in state water law and development was proceeding apace. He didn’t own the Vidler Tunnel for long, and subsequent owners’ plans for the tunnel failed to materialize. It wasn’t until the 1960s that the tunnel found new life as a small transmountain diversion project owned by the Vidler Tunnel Water Company. In 1973, the company proposed building Sheephorn Reservoir on the upper mainstem of the Colorado River that would have been capable of storing over 150,000 acre-feet of water.

The Vidler Tunnel Water Company was a private company seeking to profit from a public resource, and its plan for Sheephorn Reservoir ran up against the anti-speculation intent of the Colorado Doctrine. The City of Golden was considering leasing a fraction of that water, but Vidler did not have buyers in place for the majority of the water that would be captured by the proposed project. The Colorado Supreme Court eventually ruled against Vidler’s proposal. “Our constitution,” the justices wrote in the 1979 decision, “guarantees a right to appropriate, not a right to speculate.

The right to appropriate is for use, not merely for profit.”

Since the company had proposed the reservoir without specific plans to put the water to beneficial use, Sheephorn Reservoir was stymied. It would take several decades for Vidler to once again emerge on the water scene.

A NEW ERA The Vidler Tunnel saw new ownership in 1995 when it was purchased

by Disque Deane Jr. and Al Parker, two investors who believed betting on water was the future in the fast-growing Southwest. They started a new company with a familiar name, the Vidler Water Company, and began acquiring water rights primarily with the hopes of marketing them to Front Range cities.

Vidler merged with a real-estate firm in 2022. Its most notable (and controversial) projects are in Nevada, the driest state in the country. Early Vidler partners moved on to other water investment firms and companies that have been purchasing water rights and assets across the West like Greenstone and Cadiz Inc. Many of these private investors wanted to do something that the Colorado Doctrine had intentionally avoided: open water pricing to market forces, generating returns for investors as the value of water rights increases. Water investment reports have concluded that doing so could reduce waste and inefficiencies that plague Western water, especially in agriculture.

Some reports claim that prior appropriation and use-it-or-lose-it laws encourage water rights holders to take their full allotment of water, even when there are users elsewhere who are willing to pay more per gallon than the returns available from an alfalfa farm, for example.

Since agriculture uses around 89% of all water consumed in Colorado, and producers hold many senior water rights, farmers and ranchers are often seen as an obvious target for programs that conserve water, either for environmental streamflow purposes or for downstream users and interstate compact compliance.

Colorado’s population has more than doubled since the 1979 Vidler ruling. And the effects of climate change, that have been felt in the Colorado River Basin since the onset of the Millennium Drought in 2000, have reduced the river’s average flows by around

HEADCASE DESIGN

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20% compared to the 20th century. Lake Powell and Lake Mead dropped to record-low levels in 2022, prompting federal officials to call for the biggest cuts to water use in the basin’s history.

Deane left Vidler in the early 2000s and co-founded the hedge fund Water Asset Management in 2005. Despite widespread media coverage of their activities, WAM executives rarely speak to the press. Headwaters invited WAM’s principal owners to comment for this article, but those requests were declined or went unanswered.

An investor brochure published with the Securities and Exchange Commission says WAM caters to “high-net-worth individuals and institutional investors” willing to spend at least $1 million, and WAM’s website has limited information about the hedge fund’s activities.

Marc Robert, chief operation officer at WAM, outlined the fund’s investment model in a 2020 webinar, where he said WAM had already invested over $300 million in Western agriculture. Given water availability issues in the West, he said, WAM believes it’s necessary to “compel” landowners to operate more efficiently. In a slide titled “value creation,” Robert showed WAM’s efforts to buy and consolidate farmland, rent that land back to local operators, and work toward a long-term goal of leasing water to municipalities, industry, environmental users or others.

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One concern is that, due to the shortage on the Colorado River, investors may be looking to profit from demand management programs that pay farmers not to irrigate during a drought, says author and water policy expert Eric Kuhn. “The fear today is … somebody is going to be out there in the market,” he says, “looking for existing agricultural rights that consume water and saying, ‘I’m going to invest in those because somebody is going to pay me a lot of money not to farm in the future.’” This is a different profit model from the water speculation that was prohibited under the Vidler Decision, and it is difficult to regulate because it involves buying water rights that are already associated with agricultural land.

WAM’s investments in Colorado appear to have slowed in recent years, but its purchase of $100 million worth of farmland in Arizona in 2024 prompted criticism from Arizona Attorney General Kris Mayes, who told the Parker Pioneer it could be the largest single water deal in Arizona history.

Even though water is growing increasingly scarce, Wall Street still only plays a minor role in Colorado’s vast and complicated water rights system. Joe Frank, general manager of the Lower South Platte Water Conservancy District in rural northeastern Colorado, says investment water speculation — where water rights are purchased

with the primary intent of profiting from a future sale or lease, rather than a need to use that water — has not yet become a big issue in his district. Frank says traditional buy and dry remains a more pressing concern for farmers as cities grow and droughts deepen.

“You have a limited, finite supply of water and you have an increasing demand for water, primarily driven by the growth of the Front Range,” Frank says. “There’s only so many places to go after that water, one of them being senior irrigation rights. That really drives up the price and probably lends itself to the ability for a hedge fund to come in and speculate because they know the water is going to continue to go up in value.” Balancing supply and demand and reducing municipal pursuit of senior irrigation water, Frank says, should be a primary focus when combating both water speculation and buy and dry.

In some cases, additional water storage projects, cooperative agreements, and other solutions can help bolster supply. The Lower South Platte Water Conservancy District entered into a $1.2 billion deal with the Parker Water and Sanitation District and the City of Castle Rock in Douglas County over the past few years — the same region that Renewable Water Resources targeted in its scheme to export water from the San Luis Valley. The plan, known as the Platte Valley Water Partnership, will pay for the construction of new reservoirs and pipelines to allow for more spring runoff water in the South Platte River to be captured and shared by farmers on the northeastern plains and municipalities south of Denver. Frank says this plan is a win-win and is preferable to buy and dry, new legislation, or the valley export scheme.

IDENTIFYING AND REGULATING WATER SPECULATION Donovan, the rancher and former Colorado legislator, doesn’t see why hedge funds should play any role in making water use more efficient.

In 2021, Donovan helped pass a bill that created a working group to study ways to strengthen anti-speculation water law in the state.

The group — which consisted of stakeholders from a wide range of backgrounds, including the agricultural, environmental and legal communities — produced a 66-page report. It outlined the history of anti-speculation efforts in Colorado and attempted to define investment water speculation, but the group failed to reach consensus on any firm recommendations. “Some voices were louder than others,” she says, “and it left the legislature with few ideas to pursue.”

The working group did explore 19 “anti-speculation concepts,” listing the pros and cons for each. A low-hanging fruit explored by the group, Donovan says, would be to make water rights more transparent so that the public can see who is buying and selling water.

Colorado Sen. Dylan Roberts (D-Eagle) has proposed draft bills in recent legislative sessions that would have treated water rights transfers like real estate, making transactions searchable in a publicly accessible database. “Transparency is where a lot of this could start or should start if we’re going to add anything to our anti-speculation laws,” Roberts says, “making sure that people in Colorado understand who’s selling, who’s buying, and maybe put some light on what the prices are. I think that price gouging is more possible without transparency because people are coming up with sale prices completely

One concern is that, due to the shortage on the Colorado River, investors may

be looking to profit from demand management programs that pay farmers not to irrigate during a drought. on their own without doing comparison to other rights, which is the opposite of real estate.”

Multiple anti-speculation and transparency bills drafted by Donovan and Roberts died in the state senate. Related efforts on the federal level, including bills introduced by Sen. Elizabeth Warren (D-Mass.) and Rep. Ro Khanna (D-Calif.), also went nowhere. Rep. Ruben Gallego (D-Ariz.) sponsored a 2023 bill that would have tasked the Federal Trade Commission to “create regulations prohibiting the sale or lease of water rights at an excessive price in drought-stricken areas.”

The effort, Gallego says, would ensure “shadowy Wall Street firms” can’t “price gouge our farmers and communities in desperate need of water.” The bill never saw a vote.

Frank, the water conservancy district manager, served on the anti-speculation working group formed by the Colorado legislature, and he says sweeping proposals to change state water law give him pause. “We get scared a lot of times when we talk about changes to state law because we come from a rural, agrarian area where the prior appropriation system is bedrock to us,” he says. Frank added that he supports voluntary temporary leasing options for farmers and incentive programs for municipal water conservation over broad regulations and mandates.

Roberts and Donovan understand that perspective, but both said new legislation is needed to protect farmers and municipal users.

Roberts believes his water rights transparency bill failed to gain bipartisan support in 2024 because it was misunderstood. In 2025, he plans to make transparency a formal topic of the Water Resources and Agriculture Review Committee, which he chairs, so experts can testify to lawmakers. “When you want to try to do something in water policy, it usually takes a couple years,” Roberts says. “You’ve got to have a lot of meetings, and you’ve got to make sure everybody gets their questions answered.”

The efforts could go much further, Donovan says. Other proposals include outlawing investment groups from holding water rights altogether or heavily taxing certain water rights transfers.

“The water world at large only responds when there’s a crisis,” she says, “not when we can see a crisis coming.”

Zak Podmore is an award-winning author and journalist who writes about water and conservation in the West. He is the author of two books: "Confluence: Navigating the Personal and Political on Rivers of the New West" (2019) and "Life After Dead Pool: Lake Powell's Last Days and the Rebirth of the Colorado River" (2024).

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CARE TO

SPECULATE?

The best way to handle water transactions in Colorado looks different depending on where you sit. We asked four people from a variety of walks of life about their thoughts, values and wishes regarding investment water speculation.

BY E LISABE TH KWAK- HE F F ERAN

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THE WATE R ATTOR NEY

JAMES EKLUND Headquarters: Denver

James Eklund knows both the public and private sides of water policy. As a water attorney at Taft/Sherman & Howard, he advises clients across the spectrum — from private sector stakeholders with assets in water and agriculture, including Water Asset Management, to public agencies navigating complex regulatory landscapes.

He recently launched WaterCard, a tool designed to crowdsource private funding to compensate farmers and ranchers for water conservation efforts. Prior to this, Eklund served as director of the Colorado Water Conservation Board. A fifth-generation cattle rancher, his family has been ranching near the Grand Mesa since 1888. “On a working cattle ranch, water is always part of the conversation around the dinner table,” Eklund says. “Those discussions primed the pump, so to speak, for my career in water law.”

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ON WHY VILLAINIZING SPECULATION MISSES THE MARK “When you buy an asset, no matter what that is — whether it’s a house, land or water rights — you generally hope that it appreciates in value. If I buy a house, I hope it’s worth more when I sell it. Does that make me a speculator? Of course not.

That’s not illegal conduct, nor should it be discouraged. Yet, that’s what people are doing in the water context — similar intent is often framed as problematic, which oversimplifies the issue.”

ON WATER AND PROPERTY RIGHTS “If you have the ability to put water to a legally recognized beneficial use, that use should be protected from unnecessary government interference. If I’m uncertain about planting a crop this year, I should at least have the option to lease that water to someone who needs it. If I decide to take land out of production or shift to more water-efficient crops, I may have a chunk of my water right that I no longer need and I should be able to sell it. That requires access to a market that extends beyond just my immediate neighbors.”

“If you have the ability to put water to a legally recognized beneficial use, that use should be protected from unnecessary government interference.”

BETTING ON FARMERS “When you invest in stock, you’re placing a bet — that your investment will grow in value. The vast majority of consumptive water use in the West is tied to agriculture. I want people to bet on us. I want people to recognize that water rights in Colorado are investment-grade assets.

What I don’t want is for those assets to be so heavily manipulated by government policies that investors take their capital to other states or industries. Supporting agriculture and water rights as sound investments strengthens our communities and our economy.”

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THE CON SE RVATION IST

KATE RYAN Headquarters: Boulder

As executive director of the nonprofit Colorado Water Trust, “It’s almost like I get to represent the interests of rivers,” says Kate Ryan. The group works to restore water to the state’s rivers through Colorado’s Instream Flow Program, non-diversion agreements, and strategic reservoir releases. Ryan started her career as a scientist, then became a water rights attorney in 2006, joining Colorado Water Trust in 2018 as staff attorney. By 2020, she had risen to the top job. “I’ve been very passionate about working toward solutions to address climate change and to protect natural resources more generally,” she says.

A PART OF THE SYSTEM “Investment speculation has been part of our system of water rights in the state since the outset. We’ve always had, as a state, a prior appropriation system. That system relies on transfers of water from one place to another in order to make it possible for cities and industries to grow.

I also recognize that private interests have built a lot of the ditches that transfer water from streams and rivers to their place of use. Without that private investment, we wouldn’t have the communities built around water for agriculture and other beneficial uses that we have today.”

ON SPECULATION VS. THE ENVIRONMENT “It is hard, in theory, for the environment to compete with high-moneyed interests.

There is a tension between investment-based speculation today and what the drafters of Colorado’s constitution saw in the early days, that water could be transferred from one use to another. It’s hard for that flow to happen freely when public-interest values like environmental flows are underfunded in comparison with investment-based speculation.”

ON LEVELING THE PLAYING FIELD “I would not want to see changes that place constraints on the prior appropriation system, because it does function pretty well in Colorado. I would like to see incentives in place, whether policy-based or otherwise, that make transactions for public-interest purposes easier. Whether that’s more funding for in-stream acquisitions by the state, or incentives for water users to engage in water-sharing projects with the environment or other public-interest purposes. I think that would help to level the playing field.”

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THE CIT Y UTILIT Y

ALEX DAVIS Headquarters: Aurora

In her role as the assistant general manager of water supply and demand at public utility Aurora Water, Alex Davis oversees a spectrum of city water-related activities.

Her teams handle everything from water rights acquisition to conservation to helping protect the ecological health of the area’s watershed and wetlands. Before joining the utility, she spent most of her career working for several state agencies with a minor stint in private practice. “I came to Aurora Water in part because I realized that water utilities in Colorado were and are in the forefront of finding and implementing solutions for really difficult issues,” she says. “Being part of that motivates me every day.”

ON THE SPECIAL NATURE OF WATER “You can’t do anything without water. Every single thing, every computer, every chair, every car, everything we use, do and eat, has water in it. You can’t substitute it. So the idea that a small group of people or an individual could control access through pricing, or make huge amounts of profit off of this vital resource, is concerning to me. Which is not to say that the tenets of capitalism shouldn’t apply to resource allocation. But it is to say that there’s a point at which this resource should be treated as a public resource and preserved.”

IS TAXATION THE SOLUTION? “Thinking about how to change this system is extraordinarily difficult. We have invested so much into it. How would you allocate water in a way that does not open the door for firms from New York and Chicago coming in and flipping water? That’s basically what they’re doing. That money doesn’t stay in the state, it doesn’t contribute to economic growth in this state. I would explore a tax. Let’s say Aurora pays someone $20 million for water rights, and that someone is a New York hedge fund. How would you fashion a tax to ensure that the state sees the benefit of transactions involving this critical resource? You could create a tax that could go to fund water projects in Colorado.”

“You can’t do anything without water. Every single thing, every computer, every chair, every car, everything we use, do and eat, has water in it.”

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THE FARM ER

MATT HEIMERICH Headquarters: Crowley

Matt Heimerich married into the agricultural life. Originally from New York, he was working as a civil engineer when he met his wife, Karen, who came from a line of Colorado farmers. Fate soon brought them back to her home region, where they bought a 100-acre farm in 1988. Ever since, they’ve been growing crops like corn, oats, alfalfa and forage sorghum. Heimerich has also represented Crowley County on the Southeastern Colorado Water Conservancy District board since 2021. (Editor’s note: Heimerich also serves on the Water Education Colorado Board of Trustees.)

ON THE VALUE OF WATER “Let’s say your house is worth a quarter-million dollars. But down the block, somebody sold a house for $350,000. Are you happy?

Yes, because your asset grew. What if you wanted to move into a bigger house? But instead of the house you want being worth $275,000, now it’s worth $490,000. And you can’t get that out of your house. How do you feel now?

“The ease with which we change water from agriculture to municipality has completely disrupted the agriculture water market. How can somebody farming in Berthoud or Johnstown or Rocky Ford expand their farm or buy a farm for their children, when all of a sudden the farms are trading for tens of thousands of dollars above [what they would if they were] purely agriculture?”

farm. I know them. I know their kids. If this is important to us as Coloradans, I think we should and we must do a better job of sitting down with our agricultural community and finding out what they want.

“Things are changing. What does that mean for us as farmers and ranchers? We’re pretty adaptable, but I have yet to figure out how to grow a crop in a place that only gets 10 inches of rain without irrigating.”

If this is important to us as Coloradans, I think we should and we must do a better job of sitting down with our agricultural community and finding out what they want.

ON SUPPORTING FARMERS “Can we, should we come up with ways to identify the most essential and critical agricultural areas so that we can remove them out of this aura of speculation, selling, drying up and transferring? People are always saying to me, ‘Everybody’s selling because nobody wants to farm.’ I don’t believe that.

There are plenty of people who want to

Elisabeth Kwak-Hefferan is a freelance writer and editor who specializes in climate and the environment. Her work appears in The New York Times, Sierra, National Geographic and more.

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THE PRICE OF

CONSERVING When does conserving water help the environment, and when does it cross into financial gamesmanship?

Programs to address low water levels in Lake Powell, pictured here, and throughout the Colorado River Basin compensate farmers for fallowing fields. Some worry that speculators could take advantage of these programs and get paid to take water out of production.

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ILLUSTRATIONS BY DANA SMITH

BY ELIZABETH MILLER

WATER

When Colorado convened a working group on water speculation, its members shared stories of times in which they’d seen or thought they might have seen investment water speculation occurring — when water rights are purchased with a primary purpose of profiting from the future sale or lease of that water as demand drives up its price. On the list was the notion that buyers with no real interest in agriculture would buy agricultural land and water rights with the primary intention of enrolling in a program that pays water rights holders not to use that water.

The concern, essentially, was that programs that compensate farmers for fallowing fields like the Upper Colorado River Basin’s System Conservation Pilot Program, and nonprofits that fundraise to keep water in streams weren’t sufficiently guarded against abuse, particularly when it comes to an increasingly constrained Colorado River system.

“The impacts of drought and the risks that drought causes in the Colorado River Basin, just by way of example, attract money to the concept that money can be made from taking water out of production — conservation,” says Peter Fleming, general counsel for the Colorado River District.

“Where do you draw the line in that?” Fleming asks. “Which one is a good, socially recognized benefit that the state as a whole should support versus which one is bad because it encourages speculation in water resources, and it makes things more difficult for others, and it has adverse secondary impacts in the local economies when you take water out of production?”

A few guardrails exist to make real conservation efforts — those that serve the common good — clear. But questions remain on whether those protections can really stop investment water speculation before speculation occurs.

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STREAMFLOWS FOR THE PUBLIC GOOD

In 1973, Colorado lawmakers legally recognized instream flows, in which water is allocated to the river to maintain flows and habitat as a “beneficial use” in parallel with industries, cities and agriculture. That 1973 legislation tried to prevent speculators from prospectively appropriating instream flows and locking up the state’s water by taking measures like limiting who can operate instream flows to a single state agency, the Colorado Water Conservation Board.

“There is government oversight for specifically this reason — to prevent speculation,” says Josh Boissevain, staff attorney with the Colorado Water Trust, a nonprofit that works to secure water for streams. “Instream flow is a decreed use, so using that water for instream flow is not speculation at all, even though it’s left in the river.”

When water rights owners work with the water trust to use their water to restore flows, it takes a lot of paperwork and a close look at the web of other users affected. The

AT A CERTAIN SCALE, THE EFFECTS OF TAKING WATER OFF FARM FIELDS COULD RIPPLE OUT BEYOND BARE FIELDS TO FARM SUPPLY STORES AND GAS STATIONS, AS WELL AS THE LOCAL JOB MARKET IN RURAL COMMUNITIES. process can be tedious and time-consuming, and the profits marginal.

“Nobody is doing that for the money,” Boissevain says. “They do it because they care.”

Some loopholes have been closed. For example, a 1994 change to Colorado’s water law prevents conditional water rights holders, who hold onto water rights for unbuilt projects or potential future uses, from transferring those rights to instream flows. That law blocks speculators from selling conditional water rights to the CWCB for a profit.

Having a perfected water right — one that is fully established and has been put to beneficial use — converted to instream flows is fine, Fleming says. The Colorado River District participates in those programs and is

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working to buy a water right currently used to generate 15 megawatts at Xcel Energy’s aging Shoshone hydroelectric power plant.

The River District aims to convert that hydropower right to an instream flow right to ensure that this water continues to flow from the headwaters down through boating hotspots in Glenwood Canyon, regardless of the 115-year-old power plant’s future.

But Fleming, who worked on a 2021 report that reviewed Colorado’s legal sideboards on speculation, remains concerned that the lines are not clearly enough drawn between those recognizable benefits to the state and local economies, and the place where speculators could start counting on those efforts and “conserving” to make a profit. At a certain scale, the effects of taking water off farm fields could ripple out beyond bare fields to farm supply stores and gas stations, as well as the local job market in rural communities.

Perhaps the most frightening possibility that could result from profiteering is that water rights bought and steered from use in Colorado will somehow be sold to thirsty fields or towns in Arizona or Nevada. But even if both buyer and seller are willing, specific language in interstate compacts and existing law complicates the likelihood of selling water from one state to a buyer in a different state.

Meanwhile, conservation groups are also concerned about speculators cornering them out of the increasingly expensive water rights market, Boissevain says. To adapt to the current water market, the Colorado Water Trust is exploring a new acquisition model with Qualified Ventures, a consulting company

based in Washington, D.C. Through this new approach, the water trust would buy land with water rights through financing from lenders. A conservation easement would protect the land as agricultural, and the tax rebate from that status would partially repay the loan. The water trust would reassess how to profitably farm that land while sharing the water rights between agriculture and environmental flows. Then the land could be sold, potentially at a reduced price, perhaps to a first-generation farmer.

“It’s another way to keep ag in production and keep water on the land,” Boissevain says. “It’s another step up in the competition against people that might try and buy [irrigated farms] for speculation or maybe even development.”

The results might resemble a project on the Little Cimmaron River near Gunnison, where the Colorado Water Trust purchased 5.8 cubic feet per second of flow in the McKinley Ditch to return water to a river that was nearly dry in late summer months. The water trust partnered with a land trust to buy the water rights and land, put a conservation easement on the land, then sell the land and water rights to a private landowner. In a first-of-its-kind agreement, the water rights can go to irrigation in the spring and summer, and to the CWCB for instream flow in the late summer and fall when the river needs it most.

In a very dry year, all of the water can be left in the stream protected, and in a wet year, all of it can be diverted for agriculture.

Environmental groups contend that for the environment to thrive, the entire river system

Little Cimarron Ranch, where a first-of-its-kind agreement allows water rights to go to irrigation in the spring and summer, and to instream flows to support river health in the summer and fall.

FROM TOP: COURTESY OF MIRR RANCH GROUP; ISTOCK. PREVIOUS SPREAD: ISTOCK.

On the Colorado River, the Colorado Water Trust leases water that bolsters flows and protects endangered fish species as it flows through this stretch, known as the 15-Mile Reach, in the Grand Valley.

needs this kind of adaptability, particularly as Colorado River Basin states renegotiate operations for Lake Powell and Lake Mead ahead of the current guidelines’ expiration in 2026.

“We want to see better, more realistic management of the Colorado River that accounts for climate change and ... drastic shifts in hydrology,” says Matt Rice, Southwest regional director with American Rivers. “It’s all about creating, from our perspective, more flexibility in the system to avoid emergency action after emergency action because we’re collectively afraid to make hard decisions when we need to.”

With an eye on the prospect of a compact call or other crisis, WaterCard, a Colorado-based company, aims to leverage private market dynamics to promote water conservation in the Colorado River system.

It also provides an avenue for companies and

individuals to offset their water footprint.

It works like this: A person can buy a WaterCard, which gives them conservation credits linked to a quantifiable amount of water conserved on a Colorado farm or ranch.

It’s like an offset. The WaterCard buyer also receives an NFT digital token as proof of purchase.

In the field, WaterCard funds are used to compensate farmers and ranchers who sign up for the program and voluntarily reduce water usage by fallowing fields for a season, decreasing irrigation, or transitioning to drought-resistant crops.

To demonstrate the concept, WaterCard founder James Eklund, who is also a working water attorney and rancher, is fallowing 66 acres of grass-alfalfa hay at his family ranch in western Colorado’s Plateau Valley. Introducing a market-based mechanism for water conser-

vation in a headwaters state does not equate to speculation, Eklund says, because buyers are only purchasing credits tied to conserved water, not the underlying water rights themselves.

“This approach aligns fully with the anti-speculation doctrine, which I strongly support. That doctrine prohibits buying a water right, leaving it unused, and flipping it for profit — that’s speculation,” he says.

WaterCard’s model is designed to work within the Upper Colorado River Commission’s System Conservation Pilot Program (SCPP) and, Eklund hopes, eventually within a demand management framework. SCPP was designed to explore solutions to low flows in the Upper Colorado River Basin by granting funding to irrigators who voluntarily apply to conserve water for the season. If a demand management program is developed, conserved water could serve as a “savings account” in Lake Powell, helping Colorado meet future obligations to send water to downstream states under the Colorado River Compact.

By piggybacking off of the SCPP, WaterCard benefits from the SCPP’s efforts to verify conservation efforts. Therefore, producers enrolled in WaterCard must also have a project enrolled in the SCPP. WaterCard will simply boost the amount of funding those irrigators receive for conservation efforts, making SCPP participation more appealing. As of early 2025, however, it’s unclear whether the SCPP will continue. Eklund argues that this model allows private entities and individuals to play a meaningful role in preventing water crises, one $3.50 WaterCard — representing 500 gallons of water saved — at a time.

Farmers and ranchers who participate can diversify revenue sources while continuing to farm and ranch. Eklund contends that current SCPP payments are insufficient and rejects the notion that fair compensation would cause agricultural producers to abandon their livelihoods.

“That idea is insulting,” he says. However, if farmers and ranchers can derive a higher dollar value for conserved water through a marketbased system, he says, that’s not speculation, that’s “market-based capitalism.”

Independent journalist Elizabeth Miller has written about environmental issues around the American West for publications including The Washington Post, Scientific American, Outside, Backpacker and The Drake.

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$$$ TAPPING THE MARKET Soaring water prices and investor interest are reshaping Colorado’s water market — who’s really in control?

BY ANGELA UFHEIL 26 • W A T E R E D U C A T I O N C O L O R A D O

ILLUSTRATION BY DANA SMITH

The price tags on Colorado water rights deals aren’t getting any lower.

In April 2024, the City of Aurora dropped $76.8 million on real estate in Otero County that included about 7,500 acre-feet of water rights per year, about $10,240 per acre-foot.

In northeastern Colorado, the price per acre-foot was even higher: In a February 2024 auction, the sellers of 90 shares of Colorado-Big Thompson (C-BT) Project water snagged about $52,000 per acre-foot per year. One acre-foot roughly equals the annual water use of two to four households.

For Chris Goemans, the high prices suggest something strange happening in the market. As a professor of agricultural and resource economics at Colorado State University, Goemans compares the productive value of water in an agricultural operation with what the resource is worth to a city. He says water prices are higher than what normal supply-and-demand economics can explain.

He sees several reasons for the disparity. One is the limited amount of available water rights, a pool growing even smaller as municipalities buy rights to meet the needs of growing populations amid the unpredictable nature of climate change. This makes senior water rights — the ones allocated water first during times of scarcity — more reliable and, therefore, more valuable.

Another possible factor, Goemans says, is the presence of speculation in the market.

"One thing we worry about with speculation is that small groups of private entities could go in and purchase up lots of farms, lots of water rights, and they could kind of gain power in the water rights market," Goemans says.

In other words, a single player would have the power to decide the cost of water rights. Municipalities in particular could find themselves forking over more and more money to support the water needs of their residents, Goemans says.

At the same time, economists have proposed — and in some cases installed —

regulated water markets that encourage more trading and invite speculators to participate.

Could the same thing happen in Colorado?

THE SYSTEM GOVERNING WATER MARKETS

In 1876, the state constitution put the doctrine of prior appropriation into law. It established that water in Colorado is public property, but that people can appropriate rights to use it. The doctrine also says that these rights can be transferred among water users in a variety of ways, including via sale, inheritance and more.

“ ONE THING WE WORRY ABOUT WITH SPECULATION IS THAT SMALL GROUPS OF PRIVATE ENTITIES COULD GO IN AND PURCHASE UP LOTS OF FARMS, LOTS OF WATER RIGHTS, AND THEY COULD KIND OF GAIN POWER IN THE WATER RIGHTS MARKET. ” —Chris Goemans, professor of agricultural and resource economics at Colorado State University

Another portion of the doctrine of prior appropriation creates rules around how the owner of a water right must use the resource. Water must be put to a beneficial use approved by a Colorado court. In Colorado’s early years, that beneficial use was often agricultural or industrial, but as the state approaches its 150th birthday, the beneficial uses have evolved. This essentially prohibits water speculation because a water right holder must use their water instead of sitting on it to resell for profit.

As more and more of Colorado’s water was appropriated, senior water rights became more valuable — creating a market for them.

In the most basic version of the water market, the owner of a water right can sell it to any buyer for as much as that buyer is willing to pay. Owners can change how the water is used, as long as that change doesn’t impact other water rights and is approved

by Colorado's water courts.

THE GRAY AREA OF SPECULATION

Despite Colorado’s strict anti-speculation laws, the water market has evolved to allow certain behaviors that some observers say seem speculative.

Water courts sometimes grant conditional water rights, allowing someone to hold a water right without immediately putting it to beneficial use as long as they have a demonstrated plan to eventually use the water.

Zachary Gray, a shareholder with Frascona Joiner Goodman & Greenstein who practices law in Colorado, points out that "the very nature of conditional water rights are speculative," though he says there are valid reasons to have them.

One of those reasons is exemplified by the C-BT Project, which moves water from the headwaters of the Colorado River to the South Platte River Basin for use in northeastern Colorado. The C-BT developer, Northern Water, secured conditional water rights so it could build the project without fearing water would be unavailable once the project was constructed, says Jeff Stahla, a Northern Water spokesperson.

At times, conditional water rights have been abused. Trout Unlimited argued in a 2009 Colorado Supreme Court case against a conditional water rights claim made by the Pagosa Area Water & Sanitation District. The utility claimed the ability to use far more

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water from Dry Gulch Reservoir than Trout Unlimited believed its residents would need in the future.

The Supreme Court ruled in Trout Unlimited’s favor, affirming that a municipality’s predicted growth must be substantiated in order to secure conditional water rights.

Companies purchasing farms and the water rights attached to them also spark speculation fears. For example, a Littleton-based real estate firm, C&A Investors, has been purchasing land in Colorado’s Arkansas River Valley since the 1990s, according to Bill Grasmick, a C&A investor and farm manager overseeing some of the company’s properties in Otero County.

C&A’s 2024 deal with Aurora Water led to accusations of “buy and dry” behavior, with some arguing C&A had only purchased the farms to sell the water rights for profit.

But Grasmick, whose family has long farmed in the valley, says C&A helps the area’s economy. On the farms it purchased, C&A installed pivot irrigation systems, and ceased irrigating the corners of fields.

That decision allowed for the sale and transfer of some of what was conserved.

Even though the firm has sold water rights, Grasmick says it’s not C&A’s main business — farming is. The company operates a greenhouse in Bent County and is also partnering with a dairy company to bring an operation to the area.

C&A hopes the shape of its deal with Aurora shows its commitment to keeping agriculture viable in Otero County. Aurora owns the water rights, but can lease that water back to C&A seven of the next 10 years.

“We think that's a much more viable plan to work in a partnership with these people, like these municipalities and so forth, when they need the water, rather than to have them have to come in, buy it and dry it up and move the water out of the valley,” Grasmick says.

Everything C&A has done is legal under the rules of the market set forth by the prior appropriation doctrine, even if it raises eyebrows, says Goemans.

Alex Funk, director of water resources and senior counsel at the Theodore Roosevelt Conservation Partnership, was part of Colorado’s Anti-Speculation Law Work Group. The group was formed by the legislature in 2020 to

examine ways to strengthen anti-speculation laws. The work group's final report, in 2021, did not ultimately recommend new policy because it couldn’t find a good way to decipher the intent of buyers.

“You go down so many rabbit holes trying to … basically looking into the mind of someone in terms of what they plan to do with the water,” Funk says.

CITY IMPACTS

Colorado's water market is private, so the price tag on many transactions is unknown.

But the price of C-BT Project water provides an example of how much the right to use water has increased over the years.

Price per unit huddled well under $3,000 for decades. Then, until the mid-2010s, share prices fluctuated between $7,000 and $15,000, according to Northern Water.

Between 2013 and 2024, a single C-BT unit spiked from $15,065 to $67,000 — an increase of almost 345% — before settling in the $60,000 range.

A sample of water right prices for the Northern Colorado Front Range region over the period 2002-2024. Graph presented by WestWater Research at the August 2024 Water Resources and Agricultural Review Committee Meeting.

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DITCH COMPANIES

COLORADO-BIG THOMPSON

DENVER BASIN GROUNDWATER

CHART: WESTWATER RESEARCH

As demand surges and supply shrinks, water prices fluctuate — driven by market forces, municipal growth, and the unique value of every drop.

UNIT PRICE ($2024/AF)

WHAT'S THE COST OF WATER?

Population growth along the Interstate-25 corridor is one of the main factors driving the cost of water up. Alexandra Davis, assistant general manager of water supply and demand with Aurora Water, says that municipalities, including Aurora, rarely sell water rights once they've purchased them because cities are usually preparing for more people to arrive and for dry years.

That behavior makes water rights scarcer, increasing their price.

The team at Aurora Water has seen private investors enter Colorado's water market, including C&A, the company that sold the municipality land and water rights for $76.8 million. When Aurora has worked with those investors, water prices have tended to be a little higher than when the city works directly with farmers, says Davis, though she declined to say by how much.

Those higher prices increase the cost of development in growing cities like Aurora, said Shonnie Cline, a spokesperson with Aurora Water.

O N TA P

COLORADO’S WATER MARKET DOES APPEAR TO BE ON PAR WITH OTHER WESTERN STATES. ACCORDING TO A 2020 PAPER “WATER MARKETS IN THE WESTERN UNITED STATES,” FROM 20092018, COLORADO TRADED AN ANNUAL AVERAGE OF $89 MILLION IN PERMANENT WATER RIGHTS SALES AND $8 MILLION IN LEASES. COMPARE THAT TO CALIFORNIA — HOME TO THE MOST SALES AND LEASES OF ANY WESTERN STATE — WHICH SAW $100 MILLION IN PERMANENT WATER SALES, AND A WHOPPING $295 MILLION IN LEASES.

ISTOCK

OTHER MARKETS Colorado’s anti-speculation laws are considered among the toughest in the West, which, Goemans says, can slow down the rate of water rights transactions. Implementing the priority system in a water rights transaction isn't something that a layperson can tackle on their own, he says.

“You have to hire engineers, attorneys, etc. to make sure, under our implementation of prior appropriation, that no other parties are injured by that transaction,” Goemans says.

While some may be squeamish about buying and selling a life-giving resource, a busy water market can have advantages.

Markets are an efficient tool that move resources from one place to another, says Billy Ferguson, an environmental economist and PhD student at Stanford University.

They come with other advantages too.

In his book “Liquid Asset,” Stanford Law professor Barton Thompson says that markets help ensure that water is put to its highest

economic use. They can minimize economic losses during drought, he says — allowing junior water users to buy or lease water from senior users. Thompson argues that markets also encourage conservation (if an irrigator knows they can lease the water that they save, they are more likely to conserve).

Simplifying the rules around water rights could make buying and selling, or leasing, easier, and limit transaction costs, Ferguson says. He proposes a model where water rights would become more homogenous, indicating just source and quantity.

In his model, users could sell or lease any unconsumed portion of their water right, encouraging conservation and trading.

If Ferguson’s proposal was pursued, modeling water consumption would likely result in the barriers to entry that exist in the current system, Goemans says.

Creating a market that operates outside of prior appropriation, even if it does speed up water sales, would remove the positives

of the current system, Goemans says. “[Prior appropriation] really provides security for existing water rights holders in terms of the water supply they can expect under different types of climate conditions,” Goemans says.

Plus, Goemans says, market efficiency is not the only factor to consider in economics.

Equity and fairness are important, too. “[Water] is a resource that many people think, from a fairness or equity standpoint, that everyone should have access to,” he says. “As economists, we can comment on the efficiency of certain outcomes, and we can comment on who is impacted, who is made better or worse off by different policies or allocation institutions … But then society has to figure out what is fair and what is not fair.”

Angela Ufheil is a freelance journalist and senior projects editor at the Denver Business Journal.

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MEMBER'S CORNER A Community Of People Who Care About Water

Thank You

Water Education Colorado members make our work possible!

The WEco community is connected by a deep appreciation for water and a love for our state. Together we’re committed to ensuring Coloradans are informed on water issues and equipped to make decisions that guide our state to a sustainable water future.

We are continually inspired by members like you who share our vision for a well-informed and water-aware Colorado. We would like to recognize our current members (as of March 1, 2025) at the “Stream” level and above. For a full listing of all our members and supporters, including all levels of our generous members in our 2024 Annual Report, found at wateredco.org/reports.

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