I_WRRC_2021A 08/25/2021 02:29:21 PM Committee Summary

Kevin Rein, State Engineer, introduced the Senate Bill 20-048 Anti-Speculation Report. The full report can be found here: https://drive.google.com/file/d/1e3AgL3Ycvey3_qiObUWLX8r2RSakmhRk/view.

Mr. Rein spoke about the diverse group of stakeholders involved in compiling the report.  He told the committee about what is in the report and about how the work group was directed to explore the issue and the concepts that are presented.  

The committee asked about having the names and roles of the work group members given to them. Senator Donovan recognized and named the members that participated in the work group and in preparing the report.

Peggy Montano, attorney and work group member, told the committee that the report is not a compilation of recommendations. She discussed the group's decision to compile the report with the work product of the brainstorming of the individuals.  She went into detail about the definition of “traditional water speculation” and what constitutes the ownership of water.

Ms. Monanto spoke about the economic concern around the access to water and water capital. She discussed the varying concerns around water rights in Colorado that the work group heard about.

Joe Frank, Manager of Lower South Platte Water District and work group member, discussed how the report was an exploration of their ideas rather than official recommendations. He talked about the work groups lack of consensus during discussions that were held, and how they did a lot of exploration and analysis of the problem. He talked about the issues around the water market and the value of water.

Mr. Frank continued to speak about the costs and benefits of the private capital of water that are discussed in the report.  He pointed the committee to the section of the report that outlines the options for addressing anti-speculation.  He elaborated on the fact that they are not making any recommendations in the report.  

Mr. Frank answered questions about treating water like a commodity.  Ms. Montano told the committee that this is something that the legislature could look at possibly with the help of an economist.  

Ms. Montano spoke about the geographical diversity of the watersheds and how the local communities pay attention to what is going on with water resources in their area.  She spoke about her experience in water court and the costs of doing an anti-speculation trial.  Mr. Frank said there are individual rights that exist outside of ditch company water rights.  He spoke about the varying approaches to protecting water rights across the state within communities around water.

Mr. Frank answered a question about potential best practices provided in the report.  He told the committee that there are examples of what is being done and the opportunity to have a dialogue across the state.

Ms. Montano answered a question about what water speculation is currently happening.  She said people would disagree on the answer to this.  She thinks this is something that is happening, but it remains to be seen whether or not this is something that needs immediate intervention.

The committee asked if this was currently hurting Coloradans.  Mr. Frank said there is no direct answer to this problem, but he does not see a current legislative solution at this point.

The committee asked questions about any potential consensus within the report and if this is something that will grow.  Ms. Montano told the committee that she did not want to say there was any consensus.  Mr. Frank said that the demand will grow, which may open the door for investors. He noted that it is hard to interfere without impacts somewhere.  

Ms. Montano told the committee that when the work group started to try and define what the problem was, they needed to decide what they were talking about.  They created a definition and examples and then tried to ask what they could do about it, which is what the report expands on.  She noted that these are a lot of a local issues that may require more local solutions. The report opens the door for discussion on this topic.  Mr. Frank said the report did a lot of the exploring that Senate Bill 20-048 directed the work group to do, including the pros and cons of the solutions.

The committee asked about investors buying up farm land.  Ms. Montano said they talked about alternative transfer methods in their discussions.  The work group debated this as an option for farmers to allow for some flexibility.  Mr. Frank talked about property rights and looking to create benefits for farmers.

The committee asked about what has prevented anyone from pursuing investment antispeculation so far.  Ms. Montano said there are case laws developed that are focused on antispeculation.  The scope of this has become somewhat limited in the last couple of decades.  Mr. Frank said there are drawbacks in some of the options that would affect the price or value of water.  

The committee discussed the need for more stakeholdering on the issue.

Senator Donovan thanked the work group members for their efforts and contributions to the report.

Kevin Rein, State Engineer, introduced the topic of measurement rules on the Colorado River.  He discussed the physical devices that are used.  He noted that there are areas being over-appropriated and how important it is to have the measurement devices to track the appropriation across the basins.  The importance of measurement devices in the Colorado River Basin comes into play with the existing interstate compacts as a way to increase transparency and accountability in Colorado.

Mr. Rein talked about how measurement rules would help with efficient implementation of appropriation of water.

The committee made comments about the prior appropriation system, which is meant to help with this by having junior and senior rights.  

The committee discussed the challenges of water dispersion across the state and how some are facing more drought challenges than others.

Rebecca Mitchell, Director, Colorado Water Conservation Board, introduced her presentation on the implementation of the drought contingency plan.  She discussed the shortages in the Lower Basin which will affect the supply to other states from Colorado.  She discussed the structural deficit of the Lower Basin and its overuse.  She continued talking about the potential for a demand management storage agreement with Lake Powell and the Upper Basin.  She encouraged working to curtail overuse of the basins and working with other basin states to stabilize supply.

Peter Fleming, Colorado River Water Conservation District, discussed demand management.  He described demand management as reducing consumptive uses with the hope that those reductions make their way into a reservoir for storage. He spoke about the stakeholder group and their input on how to implement demand management.  The stakeholder group came up with a report with five main themes, which is soon to be published.  He recommended that Colorado needs increased water storage away from regular use.

Mr. Fleming continued to discuss the themes of the report and how important compact compliance and maintaining existing water rights are across basins.

The committee asked about pressures built into the compact on the lower basin states to also address demand management and be more equitable in sharing this burden.  Ms. Mitchell said this is not explicitly built into the compact, but the framework is not an incentive system right now.

Jim Lochhead, Denver Water, discussed the differences between being in the Upper and Lower River Basins.  He told the committee about major disagreements that exist with the Colorado River Compact between the two basins.  He discussed the varying challenges located above or below the reservoirs within the basins and how the reservoirs are experiencing shortages every year whether it is a dry year or not.

The committee asked for clarification about what it means to incur shortages in the lower basin versus the upper basin.  Mr. Lochhead described how the lower basin states take their water compared to how the upper basin users take their water.   He said that the lower basin use is done by contract.



The committee asked if someone in the lower basin has seen water cuts this year.  Mr. Lochhead said they have not, and they are working to try and get lower basin users to voluntarily cut their water.

The committee asked what the lower basin states have done to reduce the out of the reservoirs that they share with the upper basin states and if there were impacts on those downstream from decreased levels Lake Mead or Lake Powell.  Mr. Lochhead said the lower basin has not experienced cuts and shortages to their water usage, and there has been no affect on those downstream from the decreased reservior levels.

The committee asked if California farmers are illegally using their water and drawing down their groundwater.  Mr. Lochhead said this occurs throughout the western United States, and that there is a significant groundwater overdraft problem in the entire western United States.

Mr. Lochhead answered a question about municipal water use in places outside of Colorado. He said municipalities have done well in curtailing their usage, and that Las Vegas in particular has made a lot of effort to conserve water.

The commmittee asked if lower basins have used water from the Colorado River to create aquifers.  Mr. Lochhead said Arizona has been aggressive to do groundwater storage, which is legal within the state.  He discussed the difficulties associated with doing this as it pertains to groundwater sustainability.  He told the committee that in Colorado, when there are shortages, farmers and municipalities traditionally work together to figure out how to work through it.  

The committee discussed the drought status of the counties and asked if lower basin states were willing to invest in the upper basin watersheds.  Mr. Lochhead said there is a lot they can work together on as an entire basin.

Mr. Lochhead discussed the challenges in meeting the compact requirements and the obligations of the upper basin serving the lower basin. He told the committee that there is a national obligation to Mexico as well, so there is an international piece of the issue.

Amy Ostdiek, Colorado Water Conservation Board, discussed the voluntary nature of demand management. She spoke about how there are other tools that they are looking into to address sustainable water supply. She talked about the questions that their board has and how to create programs that answer the questions and address a wide variety of considerations. She told the committee about the outreach and education that the board has been engaging in to communicate with individuals and communities.

The committee discussed the concept of voluntary being critical because it implies the concept of the ability to participate and asked if there are discussions around the ability of hedge fund farms versus family farms to voluntarily participate in demand management.  Ms. Ostdiek said there are a lot of open questions about the types of activities that could be incentivised that they do not want to see incentivised.  

The committee discussed the challenges that districts face with compact compliance on a daily basis.  

Ms. Ostdiek said there is a significant amount of funding for demand management programs.

The committee asked about Utah, New Mexico, and Wyoming and what they are doing when it comes to demand management.  Members discussed the potential of climate change being a permanent thing and only addressing temporary fixes to the issues it brings.  Ms. Mitchell said she will bring the comments back to the board in terms of climate change challenges.  She said that when it comes to other states, they are working on looking at demand management with each individual state.  They are looking at it through an interstate lens, and their work will address the standards and guidelines implemented in other states.

The committee asked why it should be everybody’s responsibility to contribute in an equitable way.  Ms. Mitchell said equity has been a heavy part of the discussions they have been having.

The committee asked if they can take back the message to their partner states that they need to work together.  Ms. Mitchell said they are hearing this message, and it has been a big push for them in discussions.

The committee asked about the measurment of water levels of Lake Powell or Lake Mead.  Ms. Mitchell said the purpose of the reservoir is to meet compact compliance.  She said in terms of the measurement component, there is going to be further discussions about it with their partners, including the federal government.

The committee asked what we are going to do to make sure that Colorado is ready to receive the water and money that is coming in.  Ms. Mitchell said with the Water Plan, the money may be going in different directions, and that there are existing programs set up in the state that can receive the money.  

Ken Brenner, Upper Yampa Water Conservation District, testified to the committee.

Angie Gamble, representing herself, testified in front of the committee.