Confluence: Water prices to rise, but not only from demand

LOVELAND — If there was consensus among water experts in Northern Colorado represented on a water price panel at Confluence: the Northern Colorado Water Conference, it was that they’re rapidly rising and will continue.

The discussion occurred Thursday at the Ranch event complex in Loveland.

Demand, of course, as the region grows and develops is the primary cause of water price increases, but there are other factors as well. 

Marie Livingston, professor emeritus at the University of Northern Colorado in Greeley, said, “You must consider the transaction costs of moving water.”

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“Water is used and reused many times over as it travels down the river. Consumptive use varies, but a rule of thumb is that in agriculture, 50 percent is consumptive, and 50 percent return flow. For cities, it’s 20 percent consumptive and 80 percent return flow,” she said.

Downstream users depend on those return flows, and they have the legal right to those return flows, so when water rights transfer from one owner or user to another, consideration — and cost — goes into determining that downstream water rights are protected.

“When water is reallocated, only the consumptive fraction may be transferred. Consumptive rights are the true measure of Colorado water rights,” she said.

The cost of determining impacts of a water sale, in addition to the basic demand for the water, contributes to the final cost of the water share.

She said the burden of proof when someone wants to buy water is on the person initiating the change. That person has to prove that someone else will not be injured by the change.

Those determinations may take years to prove.

Kevin McCarty, owner of McCarty Land & Water Valuation Inc., said the current price for Colorado Big Thompson shares, the gold standard in Northern Colorado water, is in excess of $48,000. In June a year ago, the price was $30,000 per unit. Part of the problem, he said, is that there’s a scarcity of shares.

There are 310,000 units of Big T water, and less than 10 percent of those are in farmers’ hands, with some of that 10 percent in what he called “pre-developed land,” which the farmer hopes to develop and therefore is unlikely to sell.

With the scarcity of Big T shares, water available in other water districts becomes more valuable, and development moves to communities, such as Johnstown, that have access to those other sources of water.

Chris Matkins, general manager of the Fort Collins-Loveland Water District, and Mike Scheid, general manager of the East Larimer County Water District, both said that water districts like theirs face challenges determining water prices because they don’t control land-use planning. Formulas used in years past to set tap fees need to change as land-use planning changes. Smaller lots, for example, are typical in urban land planning and require less water, yet increased density may increase water demand overall.

Matkins said infrastructure within a water district also increase costs. New design standards required of districts to expand water-treatment capacity result in increased tap fees, he said.

“We have a commitment to serve whoever needs the water, but growth needs to pay to extend those resources to the new developments,” Matkins said.

“We know the population of the Front Range will double, and I’m pretty sure the rivers won’t,” he said.