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Colorado Springs Utilities reaches novel water-sharing agreement

Author: Marianne Goodland - August 16, 2018 - Updated: August 30, 2018

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Colorado Springs Utilities has entered into a water-sharing agreement that would bring in new supplies for a city that’s projected to grow by some 200,000 residents in the next 30 years.

The agreement — which still faces hurdles — was struck between Colorado Springs Utilities, which manages water for 480,000 customers, and the Lower Arkansas Water Management Association (LAWMA). It makes the utility a shareholder in LAWMA, with 2,500 shares purchased from Arkansas River Farms, a Littleton-based agricultural-land company that’s one of LAWMA’s shareholders.

The utility will pay the company that owns Arkansas River Farms $8.75 million, at about $3,500 per share. That represents about 13 percent of LAWMA’s total shares, according to LAWMA general manager Don Higbee.

Abby Ortega, manager of water resources for Colorado Springs Utilities, said the utility has no intention of becoming a majority shareholder in LAWMA.

Arkansas River Farms owns several agricultural properties in the Lower Arkansas Valley.

This agreement and water it yields for the city will come in addition to the 50 million gallons of water pumped through the Southern Delivery System each day from the Arkansas River. That $825 million project, which began in the 1990s, was widely considered as a necessity for Colorado Springs, Fountain, Security and Pueblo West to expand in the coming decades.

Coming soon to Arkansas River Farms and its owner have a colorful history in the Lower Ark.

The first-of-its-kind agreement is related to what’s known as an alternative transfer method, also referred to by the somewhat confusing acronym ATM in water jargon, in which agricultural water rights are not sold but water can be shared.

An ATM is viewed as a substitute for “buy and dry,” when agricultural water rights are sold outright, usually to a municipality, and the land permanently goes out of agricultural production.

Buy and dry has sucked out of production a third of the agricultural land in the Lower Arkansas region (basically from Pueblo east to the Kansas state line), said Pete Nichols, an attorney for the Lower Arkansas Water Conservancy District.

Crowley County represents a substantial portion of that buy-and-dry area after its water rights owners sold off the water to about 45,000 acres in the 1970s, sometimes leaving the county looking like the dust bowl of the 1930s. That left Crowley with about 5,000 acres of agricultural production — and that’s in a good year.

The Crowley water went to Pueblo, Colorado Springs and Aurora. And it’s Colorado Springs that continues to look for water as its population grows.

Ortega said the agency usually has enough storage to get through drought years, like this one. The newest ATM agreement, she said, would provide additional water in drought recovery years to refill depleted water supplies.

“Knowing that the supply will be available for our use in five out of 10 years helps mitigate the risk and impacts of that drought to our customers,” she told Colorado Politics.

What Colorado Springs gets out of the deal  

The deal between Arkansas River Farms and Colorado Springs Utilities will allow the utility to gain about 2,100 acre-feet of water per year for five out of the next 10 years and in perpetuity after that, again for five out of every 10 years.

The other five years, the water stays with LAWMA, which serves Bent and Prowers counties and the Lower Arkansas River valley from John Martin Reservoir to the Kansas state line.

An acre-foot of water is about 326,000 gallons, enough water on average to supply two families of four for a year.

The deal is a win-win for everyone, Ortega said. The LAWMA shareholders will get more water per share in those five years when the utility isn’t taking the water. That water will be stored in a gravel pit near Lamar (which is owned by C&A Companies of Littleton, owner of Arkansas River Farms), where it will be available even when the utility is taking its share of the water. The utility is paying $1.75 million to set up that storage arrangement.

“We’ve had water-sharing agreements with (Colorado Springs Utilities) for the past 10 years,” said Higbee, the LAWMA general manager.

“We hope to gain more water” out of the agreement than what LAWMA had originally planned for, he said, adding: “It won’t hurt our members in any way.”

ATMs are nothing new in Colorado. In the state water plan, they’re referred to as a preferred way to share water between agriculture and municipal or industrial users instead of relying on buy and dry.

The water plan has set a target of 50,000 acre-feet of water through ATM sharing by 2030. Colorado has had programs in place to encourage voluntary ATMs since 2008, mostly through pilot programs that so far have produced more research than participation by the agriculture industry.

Colorado Springs Utilities could be the vehicle for as much as half of that goal; it needs 25,000 acre-feet of water to cover its municipal water needs through about the next 40 years, according to Ortega.

ATMs already in place in the Lower Arkansas and South Platte have provided much-needed cash to farmers in exchange for temporary leasing of their water to municipalities. In exchange, farmers may fallow their land for a season or a year, plant crops that use less water, or irrigate crops in their growth stage only during drought and hope for rain to cover the rest.

What makes the deal between LAWMA and Colorado Springs Utilities the first of its kind is that it’s a permanent arrangement to share water, rather than sharing through leases, which is what ATMs have done in the past.

Scott Lorenz, senior project manager for the utility, said that past water deals involved ownership and the control that comes with it and that is put in the hands of a single party. For buy and dry, ownership and control was in the hands of the city rather than the farmer. In traditional ATMs where the water is leased, the farmer holds the control.

“In this model, the ownership, control, and risk will be shared by LAWMA and (Colorado Springs Utilities). I believe it will incentivize both sides to work together to ensure mutual success,” Lorenz said.

There’s something else unusual about this agreement, and that’s because LAWMA is what’s known as a well augmentation company. That’s different from a ditch company or canal, which owns shares of the water in the ditch or canal that gets its water from the Lower Arkansas River. While LAWMA does own some surface water rights, its primary purpose is to buy water to replace water that’s being pumped out of the ground by its shareholders.

That’s required by a 1995 U.S. Supreme Court decision that scolded Colorado for taking too much water out of the Arkansas River, water that Kansas claimed was theirs. So anyone using wells to obtain groundwater — which courts have said eventually tap into the river — had to replace that well water with water from somewhere else.

The agreement is not without its detractors — most notably, the Lower Arkansas Water Conservancy District, which Higbee says views the arrangement as competition for the Super Ditch, which is a company, not a ditch, and which leases agricultural water to municipalities.

Water court approval a hurdle

The agreement with Colorado Springs Utilities has a few hurdles to cross before it becomes final. One is approval from the Fort Lyon Canal Company. That’s needed because LAWMA buys some of its water from the canal company (most of Arkansas River Farms’ water comes from Fort Lyon) and their current agreement doesn’t allow their water to be routed to municipalities.

The second hurdle — and the toughest one — will be in getting approval from the state water court, although Higbee believes that also will be OK’d.

Bill Long, a former Bent County commissioner who worked with the county on a special permit for the project, is less certain. He believes the court application will draw a lot of objections, which could even include the state of Kansas, which has sued Colorado several times over Arkansas River water issues.

“People are skeptical” about this deal, Long said, in part because of Arkansas River Farms. “The jury is still out on their intentions,” he said.

Part of that court application will likely require Colorado Springs Utilities to set up an exchange, Long explained, which asks the question on how the water gets from the Fort Lyon Canal Company to Colorado Springs. That’s often done by exchanging water in one place for water that’s closer to where you want it.  That will draw objectors, too, Long said. Water rights holders want to make sure their rights will be protected.

The second part of the water court application will seek permission to change the water’s use from agriculture to municipal.

The water court part of the deal is likely to take at least several years, Long said.

In the grand scheme of things, the amount of water being shared in this newest kind of ATM isn’t a lot. Ortega said the utility is “trying this out,” to see how it works both for the utility and for LAWMA.

And that may be one of the biggest benefits of all, given the concerns over buy and dry that continue to haunt southeastern Colorado.

“We recognize those concerns,” said Lorenz, the Colorado Springs Utilities official. The way to overcome those fears, he said, is through a deal like this, and to look at how Bent or Prowers counties benefit from the arrangement in about 10 years.

“If that happens, it will move past the argument on whether it’s buy and dry,” Lorenz said.

Marianne Goodland

Marianne Goodland

Marianne Goodland is the chief legislative reporter for Colorado Politics. She's covered the Colorado General Assembly for 20 years, starting off in 1998 with the Silver & Gold Record, the editorially-independent newspaper at CU that was shuttered in 2009. She also writes for six rural newspapers in northeastern Colorado. Marianne specializes in rural issues, agriculture, water and, during election season, campaign finance. In her free time (ha!) she lives in Lakewood with her husband, Jeff; a cantankerous Shih-Tzu named Sophie; and Gunther the cat. She is also an award-winning professional harpist.