Archives for category: consumptive use

colorado water marketing conference – highlights

December 13, 10 //
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If you follow me on twitter, you most likely picked up on my  #COwatermarketing tweets delivered live from the 2nd Annual Colorado Water Marketing Conference. If you don’t follow me on twitter, you should.  Since I was already in the neighbor and have completed a couple projects in Colorado, I couldn’t miss the opportunity to hear what the water wizards of Colorado had to allow. Rather than keeping this knowledge to myself, I felt inclined to share my highlights.

Water Rights Valuation. The foundation of all water values are clearly defined underlying water rights.  Historic consumptive use remains the basis of most valuations in Colorado. Appraisals can be orders of magnitude off, if the volume is not accurately quantified. For example,  are you appraising a one story house or a two story house?

Water’s New Paradigm. We are facing a shift in paradigms. The old paradigm of resource extraction is shifting to a  new paradigm focused on sustainability.

Instream Flows. Colorado is making strides in its recognition and execution of instream flows. This work is being advanced through the tenacity and execution of  the Colorado Water Trust.  Although strategic legislation, such as tax credits, bring additional value  to instream flows, Colorado still suffers from a lack of private ownership that are driving the most active instream flow markets.

Ag to Urban Transfers. “Property rights held by farmers are valuable assets.” Exactly! – a resonating theme in almost all of my material. One obvious change is the transition from buying and drying to interruptible leases and efficiency projects.  Also of interest was water transfers involving NPDES programs. This could result in an interesting alignment of water quantity and quality markets.

Augmentation. Referred to as mitigation in  many Western states, I consider Colorado the leader in Augmentation/Mitigation plans. The basic premise is in an over appropriated basins, you must mitigate or augment new water use or changes in water use to prevent injury to senior water users. These augmentation plans vary from umbrella storage release plans in the Upper Gunnison to small augmentation recharge basins in the South Platte.

Changes and Transfers. Although Colorado’s water market is one of the most advanced, it still struggles with exceptionally high transaction costs. One figure estimated transferring 25 ac-ft at up to $500,000 in engineering and attorney fees – excluding water costs.  In my opinion, this is not a good thing and transaction costs are one of the biggest challenges water markets face.

Super Ditch.  I didn’t place Super Ditch under Ag – Urban transfers because I feel strongly it deserves its own section – probably its own blog post.  Nevertheless, the Super Ditch is a collaboration of 7 ditch companies in the Arkansas River Basin to lease water back to various municipal institutions at $500 an ac-ft.  The beauty of this structure is the joint-effort allows for rotational cropping and a leasing structure where  Ag maintains control of their water rights assets. Rather than the municipalities walking in the back door and striking 1 – off water deals, they now have a store front (Hi, welcome to the Super Ditch) they can visit. In my mind, this is a win for agriculture and a win for the water market.

montana water right transfer question?

January 17, 10 //
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I just received the following email:

Hi Chris,

What is Montana’s policy or law regarding irrigation water that can be sold? Leased? Is it the calculated amount of consumptive use, amount diverted, amount specified in the water right or?

This represents a great question and one frequently asked. Rather than reply to the email, I’ve decided to answer the question below. If you are not in the mood to read, and just want to know the short answer, I’d recommend scrolling down to the very bottom for the Cliff Notes Version.

First, I’ve touched on this topic in three previous post:


Although, I’ve yet to provide a direct answer focused on Montana. The most recent answer to this question was provided in the notice of adoption for amendments of ARM 36.12.1901, Filing a Change Application and 36.12.1902, Change Application -Historic Use. These rule adoptions became effective on 11/26/09. Nevertheless, this notice provides the following information regarding the question at hand:

“Elements of a water right include the priority date; flow rate; volume; point of diversion and place of use. A water right that has been preliminarily decreed may not show a figure for the volume (acre-foot) limit of the right, but the right is decreed with the statement that the volume is limited to the historic use. In a change proceeding, previous case law and department orders limit the change to the historic diverted flow rate, historic diverted volume, and the historic consumptive use cannot be increased. An increase in historic consumptive use would generally reduce return flows. While the limit of a water right for the purposes of changing the right has is historic consumptive use, this figure has not typically been recorded on the water right. The DNRC is not reducing the right through a change process. It is identifying those figures so that the record contains that information for future changes to the water right. The identification of the consumed volume by a change applicant is critical to both junior and senior water right owners. That water not consumed generally creates return flows upon which seniors and juniors are entitled to rely. If the historic consumptive use is unknown, it would be difficult in a change proceeding for applicants to prove that it will not be increasing the amount of water consumed from the source.”

“A water right owner who wishes to change the point of diversion of a water right still has the right to the flow rate of water historically diverted and may divert under the same diversion practices as has been done previously; however, at present the water right will show a figure that identifies the amount of water currently consumed. A water right owner who wants to change the purpose from irrigation to municipal use, can only change the amount of water diverted from the source, less the amount of water returned to a source. If the change were not limited to the historic consumptive use, the operation of the right could reduce the return flow of water to which others have a right (see “Thompson v. Harvey” (1974), 164 Mont. 133, 519 P.2d 963; “McIntosh v. Graveley” (1972), 159 Mont. 72, 495 P.2d 186; “Head v. Hale” (1909), 38 Mont. 302, 100 P. 222 [cannot so change water use as to deprive lower appropriators of their rights, already acquired]; “Gassert v. Noyes” (1896), 18 Mont. 216, 44 P. 959 [change unlawful, downstream water users entitled to return flow]). The portion of a water right not changed due to lack of proof of historic use remains as stated under the applicable Statement of Claim. Water rights are not forfeited through a change process (see Beck, Robert E., Water and Water Rights at § 14.04(c)(1)(b), pp. 14-50, 51 (1991 edition); Wells A. Hutchins, “Water Rights and Laws in the Nineteen Western States”, at 624 (1971)).”

Furthermore, existing ARM 36.12.1902(2) states:

“The amount of water being changed for each water right cannot exceed or increase the flow rate historically diverted under the historic use, nor exceed or increase the historic volume consumptively used under the existing use.”



Cliff Notes Version
Water sold or leased will most likely require a change application. This change is limited to the historic diverted flow rate, historic diverted volume, and the historic consumptive use. A water right changed from irrigation to another use, can only protect – downstream of the historic point of diversion- the amount of water diverted from the source, less the amount of water returned to a source. AKA the consumptive use.

With that said, there is always exceptions to the rule and the transferable volume will remain dependent on the specific transaction.