State water plan celebrates one year anniversary

In the year since Gov. John Hickenlooper and the Colorado Water Conservation Board released a much-ballyhooed plan to grapple with a looming water shortage, a critical question remains: How to come up with the estimated $20 billion to pay for it?

“Money is a key part of making this work,” said Bart Miller, Healthy Rivers Program Director for the conservation group Western Resource Advocates. 

The state’s share is expected to be about $3 billion, or about $100 million per year, beginning in 2020. The rest will come from local and regional water providers, who will pass on the costs to you through higher rates.

The water plan, adopted last November, seeks to head off the looming water shortage created by Colorado’s population boom. In 2050, the state’s population is expected to hit roughly 11 million, double what it is now. The water conservation board projects that demand will outstrip supply by about one million acre-feet of water per year, or enough water to satisfy four million families in Denver.

When Hickenlooper ordered the plan in 2013, he said “every conversation about water needs to start with conservation.” That’s among the two biggest goals of the plan: to ask Coloradans to conserve about 400,000 acre-feet of water per year. The second lofty goal is about storage – either above-ground reservoirs or refilling aquifers, especially in the Front Range – and that goal is also 400,000 acre-feet of water per year. An acre-foot is the amount of water it would take to cover Mile High Stadium from endzone to endzone with one foot of water.

The plan also aims to align water conservation with land-use planning, and calls for sharing of agricultural water and greater protection of watersheds.

The $20-billion cost of the plan is its biggest hurdle. In the plan’s first year, the state was able to invest about one-tenth of one percent of that, about $18 million, in various projects. The state also loaned $90 million to help a water storage project get off the ground near Loveland.

But, it’s not at all clear whether the state will be able to continue to raise even that much money in the short-term future. The General Assembly is tapping severance taxes to cover costs of projects related to the water plan, and that money stream, too, has gone from a stream to a trickle due to the slump in oil and gas, coal and mineral industries.

With the oil and gas industry struggling, it’s difficult for the water conservation board to figure out how to keep the water plan going “at high gear,” former Speaker of the House Russ George of Rifle and water conservation board chair told The Colorado Independent. What’s needed most is a predictable forecast of revenues in order to plan the projects that will solve the problems, he said. That’s just not something that’s possible right now with severance tax revenues and that makes paying for the water plan “risky these days,” he said.

The magnitude of the shortage predicted for Colorado has repercussions across the state, from cities to farms and ranches. The Colorado River, the state’s signature waterway, is already over-tapped. More water is needed from it than it produces annually.

In the year since the plan was adopted, the General Assembly passed an $8 million grant program that will, among other things, pay for a water supply study of the Bear Creek Reservoir, dredge state reservoirs to provide more water storage; and improve watersheds, the swaths of lands that drain all streams and rainfall to a common outlet. One million of the $8 million was earmarked for an update to a water conservation board study that projected the gap between supply and demand would hit one million acre-feet shortage a year by 2050. Water experts now say the shortage is likely to be greater.

The state Legislature also kicked in another $5 million as part of an annual water projects bill. The projects include watershed-level flood and drought planning; funding for water forecasting and measuring, money to update re-use regulations and a training program on water loss.

And nine statewide groups, known as roundtables, spent another $7.1 million in state funds for dozens of projects including a study of storage along the South Platte River, repairs to ditch infrastructure in the Arkansas Basin, community forums and education plans in several communities, creek restoration. The state water plan, which took two years to draw up, relied on the work of the roundtables, which are tied to eight of the state’s major rivers, plus another group for the Denver metro area. The nine groups include representatives of municipal water providers, environmental groups, recreational water users, industry and agriculture.

One of the major collaborations in the first year has been among the four western roundtables (Yampa/White River, Colorado, North Platte and the Southwest) and the Colorado Water Conservation Board on the first phase of a $52,000 study to examine the possibility of a “call” on the Colorado River. Seven states downstream of Colorado would exercise their rights under contracts made with the state to draw more water out of the river that originates here. Such a “call,” has become increasingly probable because both Lake Powell on the Utah-Arizona border and Lake Mead on the Nevada-Arizona border are reaching levels so low the lack of supply could jeopardize the generation of hydroelectricity that supplies the Western power grid.

The chance that the states will issue a call, a situation that could create havoc among them — as well as in Mexico, which also relies on Colorado River water —  is on the horizon, but not imminent, said Chris Treese of the Colorado River District.

Colorado agriculture also faces a supply-and-demand gap, and the conservation board teamed up with the Department of Agriculture to devise ways to save water and preserve rural Colorado’s farming and ranching communities and their cultures. The hope is to avoid “buy and dry,” the practice employed by municipal water providers to buy farm and ranch land for its water rights, leaving the land unsuitable for farming. Alternative transfer methods, or ATMs for short, allow farmers and ranchers to lease water rights, rather than sell off their land and the water rights that go with it. ATMs also encourage farmers and ranchers to plant crops with shorter growing seasons.

Farming and ranching use 89 percent of the state’s “consumed” water –meaning water that is used and doesn’t return to a waterway or ditch. Most of that agricultural water comes from the Western Slope and is funneled to the ag-rich eastern part of the state through tunnels built through the mountains during the 20th century. 

The water plan’s goal is to use ATMs to conserve 50,000 acre-feet of water a year. The two ATMs currently in place are saving only a fraction of that – 2,500 acre-feet annually, said water conservation board Director James Eklund. “We’ve got a long way to go,” he told the board last week.

In addition to state funding, the success of the water plan relies upon local water providers and municipalities to continue to pay for much of the infrastructure needed to stave off a water shortage.

The Northern Colorado Water Conservancy District, based in Berthoud, is into the 12th year of a project to add 40,000 acre-feet of water (enough water to supply 160,000 families in 15 northern Front Range communities) to two reservoirs near Fort Collins and Greeley. A third project, to build the Chimney Hollow reservoir west of Carter Lake in Loveland, will add another 30,000 acre-feet of water. Total cost for the three projects: around $1.2 billion. Chimney Hollow is expected to break ground in about two to three years. The U.S. Army Corps of Engineers must give final approval for the Glade and Galeton reservoirs. That is not expected until 2018.

Denver Water also is working on a storage solution: the expansion of Gross Reservoir, west of Boulder. That expansion will add 77,000 acre-feet of water, almost all of it for Denver Water customers along the Front Range  at a cost of $380 million. That, too, counts toward the $20 billion cost of the water plan.

As implementation of the water plan began last year, some conservationists complained of a slow start. But, a year in, groups including Conservation Colorado, Western Resource Advocates and American Rivers collectively deemed this year’s efforts to be “a good first lap,” according to a statement issued by the groups last week.

As the 2017 legislative session approaches, Hickenlooper’s administration is preparing to ask lawmakers to approve a three-to-five-year $55 million funding plan that would provide grants and loans for water projects. The money would come from a reserve fund controlled by the Department of Natural Resources. Of that $55 million, $10 million would go directly to fund projects tied to the water plan. Those projects are currently in the application process and have not yet been identified.

The $55 million also includes a $30 million loan guarantee fund for water providers that they can then use to obtain large loans in the financial markets. The CWCB estimates project participants could obtain up to $300 to $400 million in the finance market through this loan fund. 

Board director Eklund echoed water conservation board chair George’s concern that severance tax and federal mineral lease revenues aren’t consistent and reliable forms of funding. So, too, did Miller of Western Resource Advocates, who also said it’s critical that the $55 million plan be adopted and the projects launched.  The water conservation board is looking for other revenue sources that would provide more stable funding, although George and Eklund declined to identify what those sources might be.

However, The Nature Conservancy recently commissioned a study on various ways the state could generate the money needed to cover that $3 billion state obligation on the water plan. The study came up with nine ideas that could bring in between $10 million and $86 million per year. Those ideas included peak water use fees, a tourism fee; and fees on marijuana grow operations, paid for by consumers or the industry. Summit Economics, which conducted the study, said they would not make a specific recommendation, citing the need for more analysis based on water plan criteria. As a next step, the economists suggested the state gauge public opinion on the top two or three options.

Aaron Citron of the Nature Conservancy said the organization is primarily interested in the environmental goals of the plan, but acknowledged that the funds will support other goals as well.

The water plan wasn’t a high priority in the 2016 session; lawmakers were much more concerned about finding a way to fund transportation infrastructure and K-12 education.

Whether the $55 million ask in the coming session gets approved may depend on the selling job by the water conservation board and supporters of the water plan, including the governor. In the past several sessions, rural lawmakers have been loathe to touch severance tax revenue for anything other than its major intended purpose: to mitigate impacts of oil and gas or other mining activities in local communities. Many of those communities have have been hard hit by declines in oil and gas production and mining, but still have to deal with the impacts of those activities.

Republican Sen. Jerry Sonnenberg of Sterling says he doesn’t have much confidence in the way the water conservation board is proceeding with the water plan. Sonnenberg is most interested in seeing progress on building or expanding water storage, particularly along the South Platte River.

Sonnenberg, who chairs the Senate Agriculture, Natural Resources and Energy Committee, also is not wild about the water conservation board tapping a reserve to cover the $55 million request in 2017. The state, he said, should pay back the severance tax money it has been “stealing” for the last several years, which has often used to balance the budget or pay for other priorities. The water conservation board also ought to do a better job of prioritizing its projects, he said. It may result in a slower pace for the water plan, but the state has to figure out how to allocate the severance tax dollars it has, Sonnenberg said.

Democratic Sen. Pat Steadman of Denver, who sits on the Joint Budget Committee, said the administration’s $55 million request is reasonable and believes that severance tax revenues should cover it. But he also said this might not be the best time to make that request, given a recent court case involving oil giant BP.

Last spring, the Colorado Supreme Court ruled in favor of BP and against the Colorado Department of Revenue in a lawsuit over tax refunds. Energy companies are allowed to deduct transportation, manufacturing and processing costs from revenue when they value oil and gas for severance tax purposes. The Court ruled the energy companies could also include the cost of capital for transportation, manufacturing and processing, and the Court made the ruling retroactive to 2012.

The legislature, concerned that lots of other companies and individuals would seek similar refunds, put the state’s main revenue source, the general fund, on the hook to cover those refunds, estimated in August at about $51.4 million.

Hickenlooper has proposed clearing out several severance tax accounts to reimburse the general fund for those refunds, Steadman noted. And that’s going to cut back on what’s available to the water conservation board for its projects.

The public needs to be weighing in on this, George said, because the infrastructure that people want government to provide has to be paid for somehow. “Growth and demand are outpacing revenue available to modernize our infrastructure,” he said, adding,“that’s a political conversation that persists without solution. The state water plan will be held back if we can’t get over that hump of political decision-making.”

Photo credit: Raquel Baranow, Creative Commons license, Flickr