Water district aims to shut down speculators

BERTHOUD – The Northern Colorado Water Conservancy District is moving to head off possible attempts by water speculators to obtain Colorado-Big Thompson water rights and hold onto them for future profit.

Eric Wilkinson, the district’s general manager, said rules are being drafted for action by the district’s board of directors in June to shut down efforts to profit on C-BT water units as the region’s available water supplies for development diminish.

“We have suspected (this activity) for the last three to four years but it was in December that it really came to light,” Wilkinson said. “Documents were forwarded to us that showed a potential organized effort to invest in Colorado-Big Thompson water in a way that could possibly influence markets.”

Wilkinson said he could not reveal any information on who or what group or groups may be involved in such a scheme.

With an estimated 3,000 to 4,500 acre-feet of C-BT water each year moving from agricultural ownership to municipal and industrial use, Wilkinson noted that there is “an appreciable demand” for the water that could be viewed as an investment opportunity.

In the past – when agricultural land was sold – the water rights attached to the property were also purchased. But in recent years land has been sold without the water rights, leaving those rights unattached to a particular property.

‘Parking agreements’

Wilkinson said land sellers with unattached water rights have been creating “parking agreements” with other land owners who only appear to own the water, leaving the true ownership of the water murky.

“Our records show the second landowner being the owner but the behind-the-scenes agreement shows the original (water) allottee still retains ownership to it,” he said. “The second allottee can then file to transfer back to the original allottee when he or she is ready to sell.”

Wilkinson said such confusion caused by shadowy ownership of the water “kind of circumvents the regulations and policies of the water district.”

The water district was formed in 1937 to administer the Colorado-Big Thompson Project, which brings water from the state’s West Slope to supply agriculture and development to a seven-county service area along the northern Front Range.

Wilkinson said when such parking agreements are created, the district cannot effectively track its true ownership. “When we grant a Class D allotment contract, (the water is) supposed to be attached to that land and the landowner and the allotment owner are supposed to be the same,” he said.

Increasingly, Wilkinson said, agricultural land buyers are people who don’t need the water to irrigate crops or can obtain cheaper water than C-BT for their needs. And the fluidity of the water in terms of where it can be used makes it attractive for speculators, he said.

Marketable commodity

“C-BT water can be moved anywhere within the district boundaries and you don’t have to go through water court to get a decree, so it’s pretty marketable,” he said.

Wilkinson said the district has already begun tightening up its procedures for transferring C-BT water. Since January, buyers and sellers water have had to sign an affidavit describing any third-party agreements on that water, he said.

Wilkinson said he expects the district’s board of directors will take a non-punitive approach to any existing third-party agreements when it adopts new “anti-speculation” rules at its June 13 meeting.

He also expects the board to offer an amnesty period – probably up to one year – to dissolve any such agreements.

“I think the board wants to put programs in place that just reinforce what the district has been doing over all these years,” he said. “The board’s not trying to be punitive but it’s trying to correct something.”

But only up to a point, Wilkinson noted. Those who do not dissolve their parking agreements will face as-yet-undefined “ramifications” for not adhering to district policies, he said.

Steve Porter covers agribusiness for the Northern Colorado Business Report. He can be contacted at 970-221-5400, ext. 225, or by e-mail at sporter@ncbr.com.

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