Water prices reach historic highs

Rate increases come despite the Colorado-Big Thompson project’s abundant supply of H2O

BERTHOUD — Prices of Colorado-Big Thompson water have reached an all-time high, selling for nearly three times more than just two years ago.

Shares of the water went for more than $26,000 apiece at an auction Jan. 23, according to Berthoud-based Northern Colorado Water Conservancy District, the equivalent of $52,000 an acre foot. An acre foot equals 326,000 gallons, enough water to serve 2.5 households annually.

The water was bought for industrial and municipal uses, said Brian Werner, spokesman for the district. The identity of the buyer has not yet been disclosed.

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The high prices are likely to cause concern in the agricultural world, where farm water traditionally has been lower priced. Residential homebuilders also are likely to feel the squeeze, as fees for new water taps rise.

“It’s fairly expensive water these days, if you can find it,” Werner said. “Some people can’t even find it.”

The district, Northern Colorado’s largest water provider, is a federal water system overseen by a locally appointed board. The Colorado-Big Thompson Project, as Northern’s delivery system is known, brings water from the headwaters of the Colorado River high in Rocky Mountain National Park, and delivers it through the Adams Tunnel under the Continental Divide.

Unlike other major Colorado water providers, such as Denver Water, shares in Northern’s system can be bought and sold on the open market. When water is purchased, it can be used for a variety of purposes, such as energy development or home building. Those buying water outside Northern’s system are governed by state rather than federal laws and must go to a special water court to have water use legally changed, a costly process that can take years to complete.

Northern’s special status makes its water especially attractive, as a result.

Built originally in the 1930s to serve the region’s massive irrigated agriculture economy, shares in the C-BT gradually have been acquired by fast-growing cities and energy companies. Now the water is largely owned by cities, and leased back to farmers or others who seek to use it on a temporary annual basis.

How much water is associated with each share in the system changes each year and is based on how much water is derived from snowpacks and precipitation. This year, a share of water equals six-tenths of an acre foot since the Northern Water Board of Directors declared a 60 percent quota last April, meaning water-rights owners can use only 60 percent of the resource they own. 

The high prices for water come despite record levels of water storage in October in the district’s reservoirs, which span Northern Colorado and the Boulder Valley.

“Storage remained high throughout this year and through the winter,” Werner said.

As of Jan. 1, Colorado-Big Thompson had 665,000 acre feet of water in storage, 45 percent above normal, Werner said.

The higher levels stemmed from above-average snowpack, increased precipitation and less water delivered to water users. Flooding in September 2013 also replenished groundwater supplies in many areas.

Higher water storage may mean more water available to rent, but it may not affect water-rights prices, said Tom Cech, director of One World One Water at Metropolitan State University.

“The price of (Colorado-Big Thompson) water and other water rights in the region are directly tied to demand such as from energy development, water for fracking purposes, and then urban development,” Cech said. “Those are the two big drivers.”

Fracking involves pumping millions of gallons of water under high pressure deep underground to free oil and gas from dense shale formations. As energy companies benefit from the water, Cech said, agriculture has faced increasing challenges because of the high water prices.

“Irrigated agriculture is generally short of adequate water supplies,” he said. “In the wet years, there’s enough, but you always have the dry years around the corner.”

Slowing energy development because of lower oil prices could temper high water prices in the next year or so, he said. Oil and natural-gas drilling permits approved in Weld County remained flat during the third and fourth quarters amid falling oil prices, according to the Colorado Oil and Gas Conservation Commission.

Urban development, however, has shown no signs of abating. The population of Weld and Larimer counties is expected to grow from 580,000 to more than 1 million people by 2040.

“You have to have water supplies for the new residents, so developers and municipalities have to go out and acquire more water rights,” he said. “That should drive the price of water up.”

Developers in Northern Colorado cities such as Greeley already face higher tap fees when they have to rely on Colorado-Big Thompson water.

\If developers do not have water to supply their developments, they instead pay cash to use Greeley’s supply. Here also, rates have skyrocketed, with Greeley charging $25,000 per share in recent months, nearly triple the $9,000 per share it was charging in October 2012, according to Eric Reckentine, the city of Greeley’s deputy director of water resources.

Mike DiTullio, district manager for the Fort Collins-Loveland Water District, said the higher prices are making new homes increasingly expensive. He said he closed a deal in January for 200 units of Colorado-Big Thompson water – for about $5 million, at $25,000 per share.

The higher water prices will not affect rates of existing residential customers, DiTullio said. Instead, new homeowners and developers will foot the bill. The water district serves about 16,000 customers in Larimer County.

“That increase in raw water costs is paid for by new houses,” he said. “There’s no such thing as affordable housing in Larimer and Weld counties.”

Steve Lynn can be reached at 970-232-3147, 303-630-1968 or slynn@bizwestmedia.com. Follow him on Twitter at @SteveLynnBW.