Key figure behind major Colorado Springs water deal has his share of critics

Author: Marianne Goodland - August 29, 2018 - Updated: September 13, 2018

The Arkansas River near La Junta (National Weather Service)

Colorado Springs Utilities is celebrating what it believes will be a historic water-sharing agreement that would benefit agriculture in the Lower Arkansas River region as well as boost the city’s own water supplies. But there are others who point to the record of Karl Nyquist, a key figure behind the deal, as a reason to be skeptical.

RELATED: Colorado Springs Utilities reaches novel water-sharing agreement

The Colorado Springs deal is being touted as preserving farmland while helping to meet demand in a growing city. But Nyquist over the years has made similar promises that haven’t always come to pass, sometimes leaving behind dried-up farmland.

The Pueblo Chieftain newspaper, which has followed Nyquist closely for years, wrote in a 2016 editorial that he “has a notorious history of diverting agricultural water from the Arkansas River Valley to the Northern Colorado cities surrounding Denver.”

The complex Colorado Springs water deal boils down to this:

  • The city water utility would be getting 2,500 shares of water through the Lower Arkansas Water Management Association (LAWMA). That’s about 2,100 acre-feet of water per year for five out of 10 years, in perpetuity. (An acre-foot of water is 326,000 gallons, enough to supply two typical families of four per year.)
  • The utility has agreed to pay $8.75 million for the shares, at about $3,500 per share. That represents about 13 percent of LAWMA’s total shares, according to LAWMA General Manager Don Higbee.
  • LAWMA would get the water in the other five years for the benefit of its roughly 210 shareholders, about 90 percent of whom are farmers, Higbee said. That’s more water per share in those five years and that could mean better crop yields.
  • LAWMA also would get a place to store the water: A gravel pit near Lamar and $1.75 million from Colorado Springs Utilities to make that storage a reality.

The Colorado Springs Utilities deal must still be approved by the state’s Water Court, a process that could take several years.

The shares of water that Colorado Springs Utilities has agreed to buy aren’t owned by LAWMA; they’re held by C&A Company of Littleton, which owns two properties in the Lower Ark Valley, known as Arkansas River Farms (ARF). C&A also owns the gravel pit in Lamar.

Nyquist is C&A’s principal and co-founder.

The press release from the Colorado Springs Utilities about its deal for LAWMA water didn’t mention Arkansas River Farms or Nyquist. It also didn’t say that the utility’s $10.5 million payment — $8.75 million for the LAWMA shares plus $1.75 million toward water storage — would go to a single shareholder — Arkansas River Farms.

Nyquist isn’t a farmer. He’s a real estate developer with a portfolio of multimillion-dollar development deals all along the Front Range. He’s also been generous with political contributions over the last half-dozen years.

For years he has been active on water projects in Colorado’s Lower Arkansas Valley, the section from Pueblo east, and has ruffled some feathers along the way. A 2011 Pueblo Chieftain editorial accused him of “peddling snake oil” — one of numerous editorials in the Pueblo paper that have been critical of Nyquist in recent years.

In 2011, according to the Chieftain, Nyquist proposed a deal to sell LAWMA water to Elbert County southwest of Denver through a 150-mile pipeline at a cost of $350 million. He said the pipeline would bring jobs and tax revenues to Bent County. That deal never came to fruition.

Last year, according to former Bent County Commissioner Bill Long, C&A went to Bent County officials and promised to build a dairy on an Arkansas River Farms property that would employ 35 to 40 people. But it would also mean drying up the land and selling off the water rights.

County commissioners issued what’s known as a 1041 permit for about a third of the property. A 1041 — named for the law that created it — is a permit under state law that allows local governments to maintain controls in development for areas and activities of “state interest.”

But that Bent County dairy deal has since fallen apart, said Long, who worked with the county on the 1041 permit. “All of the water they’re selling is a result of drying up irrigated agriculture.”

The largest Arkansas River Farms property, some 18,000 acres, has its own controversial history in water. The property was owned years ago by a company called High Plains A&M LLC, which tried back in 2002 and 2003 to obtain water court approval for a change in water use.

According to a write-up on the case by attorneys at Greenwood Village-based law firm Burns Figa & Will, “High Plains asked the water court to approve changes to its water rights from irrigation and other decreed uses in the lower Arkansas River Valley to any beneficial use, including over 50 identified potential uses, in any location within 28 Colorado counties. High Plains’ applications did not identify any end users of the water beside the farmers who currently use the water.” The case went all the way to the state Supreme Court.

Without a specifically identified use, the water court rejected the application, calling it speculation. It’s illegal to buy up water rights for speculative purposes in Colorado.

Failing to win the case, High Plains sold the property to Pure Cycle Corp., a Watkins-based publicly traded water company.

Pure Cycle didn’t hang onto the property for long. Three years ago, they sold it to Arkansas River Farms.

Nyquist, through a spokesperson, told Colorado Politics that some of his projects have “ended up keeping water in the (Lower Arkansas River) valley and bringing much-needed jobs to the area.”

But he also acknowledged that in some cases, his projects have and will dry up farmland with the water headed elsewhere.

In the 2011 deal, another Nyquist company, GP Irrigated Farms, originally acquired 12,000 acres, of which 8,000 were irrigated, and developed plans to supply water to cities on the Front Range, Nyquist said.

“After challenges with a municipal contract and listening to negative input from a variety of stakeholders, I made the decision to take GP Farms in a different direction,” he said. That led to the gravel pit in Lamar, which employs 20 people, and a dairy in Prowers County, which he believes will become “one of the largest agribusinesses in the region.”

With regard to the proposed dairy in Bent County, Nyquist said the commissioners’ resolution associated with the 1041 permit gives him three years to attract agribusiness to the county “to offset any potential economic impacts caused by the drying up of (Arkansas River Farms’) farm acreage.”

If those efforts fail, he said, Arkansas River Farms has agreed to provide Bent County with a $1.7 million letter of credit “to ensure no economic harm can come to Bent County as a result of the drying up of these farms.”

Despite noting that some of his projects will dry up farmland in the valley, Nyquist said Arkansas River Farms “has made no plans to ‘dry-up’ farms for water to be sold to the Front Range. Instead, ARF has been and continues to be focused on consolidating farm operations to its best parcels in the Arkansas River basin. The company has opted to use a combined approach of divesting unproductive farmland, consolidating water rights for ongoing farm operation, or selling water rights and then dryland farming or restoring the remaining parcels to natural vegetation.”

The total acreage to be dried up for the Colorado Springs Utilities deal is 4,434 acres, with another 843 acres already dried up “by other parties unrelated” to Arkansas River Farms, Nyquist said.

The company’s focus is to consolidate and “improve farming operations on the most productive parcels it owns in the Arkansas River basin,” Nyquist said. The projects have created both economic and job growth in the valley, with more than $100 million invested. “Our focus is supporting these investments and then by extension the local economy.”

Matt Heimerich, a farmer in Crowley County and former county commissioner who has experience in water issues, said that if the proposition is to move water from lower-producing acreage to higher-producing acreage, it makes sense, both economically and environmentally.

But Heimerich told Colorado Politics that his experience over 31 years is that when water is about to be removed permanently from the land, the only successful revegetation is done under conditions when surface or irrigation water is applied to that land to grow a permanent cover. It can be a combination of native and non-native species, Heimerich said, but that may not have a high value for grazing.

Neighboring Crowley County’s experience in the 1970s is telling on the issue of revegetation. When the water rights were sold — to Aurora, Colorado Springs and Pueblo — the land, more than 45,000 acres of it, was supposed to be restored through revegetation. There was an effort to do that, but the effort lacked a long-term commitment to ensure that the revegetation took hold. It didn’t.

“There was a significant breakdown of responsibilities for when those water rights were changed” to municipal use, Heimerich said. “In all fairness, the city of Aurora, when they bought 14,000 acres, they did do a relatively good job, rigorous in their revegetation efforts.” But that also relied on another crop on the ground with grasses and then applying water over one or more seasons. What broke down, he said, was a lack of follow-through in how those lands were managed and whose responsibility it was to steward the revegetated land into perpetuity.

Today, large swaths of the county, especially in dry years, look more like the dust bowl of the 1930s. Crowley went from 50,000 irrigated acres to 5,000 and even less in drought years.

The other proposal for dried-up farmland — dryland farming — hasn’t exactly had a successful history in the Arkansas River Valley, either. Heimerich said he’s never seen a dryland crop in Crowley County in 31 years nor has his family, which dates in the county back to the 1950s.

Dryland farming “is a terrible challenge,” Heimerich said. That’s because the soils have changed after decades of farming. “It’s not that healthy, native soil that you would see on the prairie. It’s very silty, and when the ground has been used for crop rotation, its ability to sustain dryland seeding or farming is diminished.”

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.