How the Colorado Water Trust Uses Market-Based Agreements to Benefit Rivers and Irrigators

The Colorado Water Trust makes agreements with water rights holders to buy or lease water to keep in the state’s rivers and streams. It negotiates deals with water rights holders—usually farmers and ranchers, who own 85 percent of the water in Colorado—to obtain rights for instream flow. The approach benefits farmers, fish, and everyone who depends on healthy rivers. Andy Schultheiss, the executive director of the Colorado Water Trust, tells us more.

Irrigation Leader: Please tell us about your background and how you came to be in your current position.

Andy Schultheiss: I come from the political side of the environmental movement and have more than 20 years of experience in the private, public, and nonprofit sectors. I have worked across the American West for organizations including the League of Conservation Voters and the National Parks Conservation Association, usually on projects involving local communities and natural resources. I was chief of staff and district director for our current governor, Jared Polis, when he was a member of the U.S. House of Representatives. I left to become a local government consultant. When the executive director job at the Colorado Water Trust was posted in 2017, I applied, and over the past 4 years, I’ve slowly learned about water in the West. Water rights are a complicated and highly political issue in the West, and I think that people are gradually realizing how much they don’t know about the water issues in their state. I am interested in trying to find solutions that will allow agriculture to thrive while also preserving some water for rivers and for growing cities.

Irrigation Leader: Please introduce the Colorado Water Trust.

Andy Schultheiss: The Colorado Water Trust is a small private nonprofit founded to restore flow to Colorado’s rivers by buying or leasing rights from current water users. We were founded in 2001 and finalized our first deal in 2008. Today, we have roughly 25 permanent projects, with more coming on all the time. Convincing people that it’s possible to share the water while still holding themselves harmless financially and maintaining their full rights to the water in the future takes a great deal of time and trust.

We work closely with the Colorado Water Conservation Board, which is uniquely empowered to hold water rights for environmental benefit. The board acquires those rights in one of two ways. The first way is by creating new rights, which is called appropriating rights. Those new rights tend to be junior rights, so they aren’t satisfied in years when there’s a water shortage. The second way to acquire rights is by buying or leasing older rights from willing current users. For the first 30 years after instream flow rights became established in law, those acquisitions were extremely rare, and the state agency had no time to go out and try to find water rights owners willing to cut deals with them. That’s why the Water Trust was founded.

Irrigation Leader: Does that mean you acquire these rights and then deliver them to the Colorado Water Conservation Board?

Andy Schultheiss: While that was the original intention, we don’t always deliver the rights to the board. Sometimes, we just cut deals with water users to allow more water to stay in rivers. However, we usually go through the board, because it is the only entity that is legally allowed to hold the water for environmental use.

The Colorado Water Trust has worked to increase flow in the Yampa River through reservoir releases.

Andy Schultheiss: The money comes from a variety of sources, including corporations, private donors, and the Water Conservation Board itself. Our staffing and various other operational costs are covered by funds from private donors and foundations.

Irrigation Leader: How do instream flow rights differ from other water rights?

The Colorado Water Trust has worked to increase flow in the Crystal River through a diversion coordination project.

Andy Schultheiss: Instream flow rights keep water in rivers and streams rather than taking it out for some consumptive use. They typically apply to a few miles of a river and are designated for sections of rivers where Colorado Parks and Wildlife determines that extra flow will be valuable for the fish and other wildlife that rely on it. The beauty of these rights is that they don’t differ from other water rights: They are regular water rights that were created by an act of the Colorado legislature in the early 1970s. Water rights for consumptive uses have existed since the 19th century, so instream flow rates came late to the scene. That means they’re junior rights, and when there isn’t enough water, which is often the case, they don’t get satisfied. That’s where the acquisition and repurposing of older rights comes in.

Irrigation Leader: Do similar instream flow rights exist in other states?

Andy Schultheiss: Colorado’s water rights system is more advanced and legally developed than those of other mountain West states. One other western state that has a highly developed system like Colorado’s is California. Irrigation Leader: Is the mechanism you use to acquire these rights as simple as going out to the market, finding a right, and buying it?

Andy Schultheiss: We almost never buy a right in fee simple. For example, there was recently a ranch for sale for around $8 million near Rocky Mountain National Park, and more than half the property’s value was water. Buying that water outright, especially a senior right like that one, is beyond most people’s capacity. For a nonprofit like ours, a purchase like that is usually not in the cards, so we often lease a water right instead. Essentially, we buy the use of that senior right to use for one season or perhaps for half a season, or we cut deals with irrigators and ask them to not irrigate for a month or two during the year and compensate them for that. There’s often a framework and agreement that lasts more than 1 year, but the decision to run a project in any given year is always up to the water right owner.

Irrigation Leader: How do you determine the compensation offered?

Andy Schultheiss: The prices of water rights in Colorado vary dramatically. An acre-foot of water that has come over from the west slope and is now on the Front Range of Colorado might cost $20,000 or more, while an acre-foot in a certain area of the west slope might cost $60. It depends on factors such as who owns it, where it’s located, and how high the demand is. The Water Trust pays market rate whenever we can. It’s an important part of our model.

Irrigation Leader: Please tell us about how you build relationships with irrigating farmers, irrigation districts, and other water users across the state.

Andy Schultheiss: It’s taken 20 years to build our relationships with clients, and we’re still working at it. Farmers or ranchers are never gullible; they’re always rightly suspicious of folks trying to acquire their water rights. Irrigators own the right to use most of the water, about 85 percent in Colorado, because their rights are the oldest and get satisfied before most of the cities’ rights. But farming and ranching in the high country of Colorado do not have large margins, and the farms and ranches are typically small. Their owners sometimes feel they’re targeted because of the large volumes of this precious resource they control. Because of that, we have spent years building up trust by ensuring that we design our projects to be financially viable for farmers and ranchers. Our contracts also give our clients the right to decide every year whether they want us to do the project or not. If we didn’t give them that kind of flexibility, I don’t think we would be where we are now.

Irrigation Leader: It sounds like you work entirely within the framework of existing water rights law rather than seeking to change the law.

Andy Schultheiss: Yes, we’re on the vanguard of what’s called market-based environmental work. Instead of spending all our efforts on politics and trying to change the law, we work within the system. We don’t get into politics. We make a point of being a water rights user like any other user. It has taken 20 years, but as a result, we’re now viewed differently from other environmental groups, even though our goals are often the same.

Irrigation Leader: How do you identify areas of rivers that would benefit from the extra water?

Andy Schultheiss: All of them would. There may be some high up in the Rocky Mountains that are still fine, but for the most part, anywhere we look, we see rivers in need. That being the case, our outreach is widespread, and we are for the most part opportunistic about where we work. We don’t preselect streams to work on, because that makes rightsholders in the area feel like they have targets on their backs. We get tips from people associated with water users, such as water lawyers or water engineers, regarding a water user who might be interested in a creative solution. We also do generalized outreach, which people sometimes respond to by contacting us. When we investigate further, we usually find a river that would benefit from our work.

Irrigation Leader: Do you work statewide, or mostly just in the Colorado River watershed?

Andy Schultheiss: We are statewide, although we only have two projects outside the Colorado River watershed: one on the Cache la Poudre River, which heads east toward the Mississippi, and one on the Alamosa, which heads south to the Rio Grande.

Irrigation Leader: How has the drought in the Colorado River basin affected your work?

Andy Schultheiss: As water gets scarcer, people feel more water threatened. Growers start thinking much more seriously about their futures and whether they and their children have one in agriculture. Particularly on the west slope of the Continental Divide, the average age of an agricultural water user is quite high. In a lot of cases, they shouldn’t be farming anymore, but they continue anyway. In that sense, there’s been more interest in what we do, because we don’t take their water permanently and we maintain the ecological integrity of their land.

However, we are in competition with hedge funds and other entities all over the world that see water as a financial opportunity. There are people out there who can afford to buy large senior water rights outright and just hold them. We can’t pay ranchers and farmers millions of dollars for their water. It’s a huge controversy right now, but farmers and ranchers are slowly selling out. To do so is their right, but it would be a disaster for the state’s rural economy if it continues. If enough people sell their water rights in a certain area, the whole economy falls apart. That’s something we’ve seen in the eastern plains of Colorado. A couple of decades ago in Crowley County, some Front Range cities basically bought out all the farms and their water rights. Now, most of the economy is gone, and weeds and dust rule. All the agricultural businesses, the diners, and so on closed. We’re trying to prevent that from happening again.

Irrigation Leader: Looking back over the last 20 years, what are the Water Trust’s main accomplishments?

Andy Schultheiss: Last year was our biggest year ever. There were more than 10,000 acre-feet that would not have run in rivers if not for us. In fact, there were times when more than half the Yampa River through Steamboat Springs was water that we had bought and released from a reservoir. Sadly, despite these achievements, the amount of water in the rivers is constantly decreasing.

Irrigation Leader: What are the best ways to balance irrigated agriculture with environmental preservation?

Andy Schultheiss: Of course, there’s a third factor we haven’t talked about: residential and industrial use, which is growing along with the population. I think that the paradigm needs to shift toward people sharing water in smart, efficient ways with compensation, because nobody wants a western Colorado with no ranches. That would be a catastrophe for the communities in that part of the state. There are ways to share water smoothly, particularly late in years when rivers are low. Much of the productive growth in agriculture is early in the year anyway, which allows us to create promising agreements called splitseason contracts. It’s also important to implement creative methods of using water from reservoirs, such as projects that retime flows so that there is always a minimum in the river. Another tactic is to use municipal and industrial water multiple times, which is something cities are doing all over the Front Range. All these different strategies need to greatly expand. There is enough water in Colorado for Colorado, but we need to use it more wisely. IL

Andy Schultheiss is the executive director of the Colorado Water Trust. He can be contacted at aschultheiss@coloradowatertrust.org.