27 May 2009

The Super Ditch

TM sent me this interesting article on the Lower Arkansas Valley Super Ditch Company (SDC), which -- despite its name -- is located in southeastern Colorado. The SDC is a project that allows agricultural irrigators to join together as a cartel in making deals to lease water to cities. The SDC has taken inspiration from PVID, an irrigation district that has been successful in negotiating high prices ($340/af for a one-year lease) to cities.

TM provides this background:
This is a water market that I think you should follow. It hasn't started yet, because of legal stuff, but is moving very fast. Basically they are consolidating almost all of the irrigation ditches in the Arkansas Valley to pool their water, do rotational fallowing, and then auction the water.
Sounds good to me:
  • Short-term transfers? Check.
  • Limited transfers? Check.
  • Rotating costs and benefits? Check.
  • Maximum price? Check.
Bottom Line: Farmers should make as much as possible when selling/leasing their water. If they do not, everyone gets upset, and transfers stop (cf. Owens Valley)

3 comments:

  1. WaterSource/WaterBank27 May, 2009 04:51

    Did you notice that at a prevailing interest rate of 1%, the present worth of the water equates to $34,000 / acre foot ? ( Interest rates are probably closer to 0.5%, so the value would be $68,000/AF).

    And you thought $25,000/AF was high !

    For domestic in-house use only, it is still a super good price if it were actual ownership. Remember that they get to multiply by 50 with municipal sewage systems.

    There are too many problems with the "Super Ditch" to go into here without writing a book. I was administering water rights on that section of the Arkansas River in 1972.

    Without a permanent firm supply of acceptable augmentation water (consumptive use credits in acre feet), it will be nearly impossible for planners to approve domestic use which has to be available for long term mortgages. If memory serves me correctly, the CO state engineer requires a reliable 300 year source in order to approve augmentation plans for subdivisions in county jurisdictions.

    Too bad the Super Ditch does not have a Super Source of a million acre feet a year like the one that is available for NV & CA. NV & CA are not interested in the investigation of any such solution for their water shortage dilemmas...

    WaterSource/WaterBank waterrdw@yahoo.com

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  2. Ray – Sure there are a significant amount of problems with the ‘Super Ditch’ – the Arkansas River Basin is one of the most complicated river basins in Colorado. It was one of the first fully-appropriated basins in Colorado. Kansas successfully sued Colorado for violating the river compact. The 1969 Groundwater Adjudication Act. The fact that because of Kansas, return flows are so heavily scrutinized that every drip irrigation system has to be monitored for violating the historical flows of the river. Then there is the Fry-Ark project and all of the legal complications that are still associated with moving water using its facilities. Or maybe the drought risk on a fully-appropriated river, with many ‘junior’ ditches that receive much lower average yearly flows being included in the ‘Super Ditch’ concept. This would significantly reduce the amount of water available for leasing. Then there is the participation factor – if nobody participates, no water is available.

    But then again in the 21st century, no water supply is without its challenges. Which is why if you read the article, look at other Pueblo Chieftain articles on the topic, you will see that the Lower Arkansas Valley Water Conservancy District is actually doing the legwork required to get this approved. A complicated engineering and economic study taking ALL of the aforementioned factors (and many more) into account, has already been completed. They have signed on many of the ditches to at least agree and discuss the options. They did all of this without a buyer, without legal approval, and now because of it already have interested buyers, nearly every stakeholder willing to take at least a further look, and are moving much faster than expected.

    Given that agricultural rights still are the majority on the river, even during a drought there would be plenty available for leasing – many times for the benefit of the farmer because farming during a drought isn’t easy. Take a look at the Aurora, CO - Rocky Ford-Highline canal, two-year lease agreement – many farmers that participated said that it saved them, allowed them to pay back debt – gave them a second crop. Aurora and the Highline canal are working on a longer-term agreement between the two to continue leasing water. Some farmers on the canal are also looking into the ‘super-ditch’. Consolidating the rights of all of the canals, along with legal agreements on rotating leases, could provide nearly a guaranteed amount of water which would go to the highest bidder. The rest of the water that will vary year-by-year can be used for reservoir augmentation after drought – an equally important water management tool (drought firming). In the worst case, water could be available every year, depending on how many farmers participate each year, to the highest bidder – there is always a demand for water in Colorado, especially given the high reliance on the fossil Denver Basin aquifer. If it were “virtually impossible” for planners to approve the water from the ‘super ditch’ then why are the water managers from Colorado Springs, Aurora, and Northern El Paso County (desperately looking for a source to mitigate their Denver Basin overdraft) sitting at the table, rather positively, for the ‘Super Ditch’?

    Seems to me, that despite it laundry list of problems, the ‘Super Ditch’ has made many think that water markets might be part of the solution to the water crisis, without harming the farmers. It may not be the silver bullet, and it may not even get off the ground, but it is a start that is moving along rather well. (Post Continued)

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  3. As for the ‘million acre-feet’ of free, new, non-tributary water – this sounds good. Many people said the ‘super ditch’ was impossible, yet it is moving along. Maybe the key information holders for this new source could inspire a quality engineering company and a couple of water lawyers to push the new source into the mainstream. Seems like the logical next step to me. If the water is really close to free, then I’m sure that it can be sold at a price that would handsomely compensate the experts to do the necessary legal and engineering studies (the latter only if necessary) to convince stubborn California and Nevada (Pat Mulroy has never been known to propose something that may require legal wrangling….)

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