Colorado is examining water speculation, and finding it’s ‘all the problems’ in one


Conscience Bay Company President Eli Feldman stands at a headgate on the Alfalfa Ditch near Cedaredge. Feldman, whose company owns Harts Basin Ranch and irrigates with water from the ditch, has been accused of water speculation: buying the ranch just for the future value of the water.
Heather Sackett/Aspen Journalism

ECKERT — Melting snow and flowing irrigation ditches mean spring has finally arrived at the base of Grand Mesa in western Colorado.

Harts Basin Ranch, a 3,400-acre expanse of hayfields and pasture just south of Cedaredge, in Delta County, is coming back to life with the return of water.

Twelve hundred of the ranch’s acres are irrigated with water from Alfalfa Ditch, diverted from Surface Creek, which flows down the south slopes of the Grand Mesa. The ranch has the No. 1 priority water right — meaning the oldest, which comes with the ability to use the creek’s water first — dating to 1881.



What makes the ranch unique among its Grand Mesa-area neighbors is its owner. Conscience Bay Company, a Boulder-based private real estate investment firm, bought the property in 2017.

That fact alone has brought its owners scrutiny from neighbors and Western Slope water managers. Conscience Bay and its president, Eli Feldman, have been accused of water speculation — which means buying up the ranch just for its senior water rights and hoarding them for a future profit.



That is an accusation Feldman denies.

The Alfalfa Ditch, seen here in April, takes its water from Surface Creek. The owners of Harts Basin Ranch, which has a water right on Alfalfa Creek dating to 1881, have been accused of buying the ranch just for its old and valuable water rights.
Heather Sackett/Aspen Journalism

“Any time you come into a place that you’re not from, people are curious at best and skeptical and concerned at worst,” he said.

The ranch raises organic beef using regenerative techniques that operators say are better for soil health. Conscience Bay holds grazing permits on tracts of public land in western Colorado and Utah where the cattle feast on grass before being sent to California to be finished, slaughtered and sold under the brand name SunFed Ranch.

To the charges that he’s doing something untoward by investing in the ranch’s land and abundant water rights, Feldman said he’s just like any other major water user in the state putting it to beneficial use. The ranch is using the water to irrigate, he said.

“We’re growing grass and feeding it to cows and trying to improve the ground, improve the soil health and make a business out of it,” Feldman said.

Speculation work group

The conversation around water speculation has been heating up in Colorado in recent months. At the direction of state lawmakers, a work group has been meeting regularly to explore ways to strengthen the state’s anti-speculation law. The topic frequently comes up at meetings of Western Slope water managers: the Colorado River Water Conservation District, basin roundtables and boards of county commissioners.

Cowboys brand and vaccinate a calf at Harts Basin Ranch near Cedaredge in April. The ranch is owned by Boulder-based Conscience Bay Company.
Luke Runyon/KUNC

Investments such as Feldman’s have been of interest to the work group, which consists of water managers and users from around the state and is chaired by Kevin Rein, state engineer and head of the Division of Water Resources.

“I think it’s a valid concern because they do see unusual parties, large parties that, again, aren’t the typical parties, purchasing those water rights, and so that’s the concern,” Rein said. “Are they speculating or are they purchasing just so they can flip it, as people say, in a few years for more money?”

Under Colorado law, a water-rights holder must put their water to “beneficial use,” meaning continuing to use the water for what it was decreed in order to hang onto it. But Colorado also treats the right to use water as a private-property right. People can buy and sell water rights, change what the water is allowed to be used for and, if given a court’s blessing, move the water from agricultural use to growing cities.

This system, used widely in the western United States, creates an opening for investors who see water as an increasingly valuable commodity in a water-short future, driven by climate change. A private-equity fund, Water Asset Management, is now the largest landowner in the Grand Valley Water Users Association, which provides water for farmers in the intensely irrigated valley, a short drive from Harts Basin Ranch. The purchases of the New York City-based company have raised suspicions among water managers and prompted the formation of the speculation work group.

Cowgirls lasso calves so they can be branded and vaccinated at Harts Basin Ranch in April. The Delta County ranch, whose owners have been accused of water speculation, raises organic cattle.
Heather Sackett/Aspen Journalism

Similar concerns have cropped up in agricultural communities throughout the West. A water transfer in Arizona from agricultural lands on the Colorado River to a rapidly expanding Phoenix exurb recently stirred up controversy. In Nevada, Water Asset Management is trying to market water held in an underground aquifer.

Colorado’s current anti-speculation doctrine is based on case law that says those seeking a water right must have a vested interest in the lands to be served by the water and must have a specific plan to put the water to beneficial use.

The work group has identified the following risks from speculators: investors’ obtaining a monopoly over a local water market; large-scale, permanent dry-up of agricultural lands; less water availability for other water users; and violation of Colorado’s values to see a vital public resource traded as a commodity.

The potential solutions to these risks are many, according to a draft document. The work group is exploring several of these, including creating a process to determine the intent of the purchaser; taxing profits from the sale of water rights at varying rates to encourage beneficial use and to discourage profiteering; imposing time limits on turnover of ownership to discourage short-term “flipping”; encouraging local governments to police investments through their 1041 powers; and creating a public-review process for water transfers that exceed some threshold.

The group has not coalesced around any of these potential solutions, but state officials said they are zeroing in on using the water court process to evaluate transfers as a way of spotting speculation.

The work group is supposed to submit a report, along with any recommendations from members, to state officials by August. But so far, the group has had a difficult time making sense of the thorny questions raised by these issues. Even trying to define what speculation is (and isn’t) and who is considered a speculator has been a struggle.

“It’s one thing to point at something and say, ‘Oh, that’s probably speculative.’ Another to actually put the legal definition on it,” said Alex Funk, agricultural water-resources specialist with the Colorado Water Conservation Board. Funk is also a member of the work group.

Discussions so far about reining in speculation have focused on the intent of the buyer. Can the state determine whether someone who is purchasing water rights intends to grow hay or build a residential subdivision? Or are they solely focused on the water rights’ future value? And how do you tell the difference?

“Do we want to protect against certain types of intent?” Rein said. “And then how do we determine that?”

Predetermining a water-right purchaser’s intent could prove to be a difficult task, akin to stopping a crime before it’s actually committed. Funk invoked the 2002 film “Minority Report,” in which a police detective (played by Tom Cruise), with the help of three psychics, tracks down would-be murderers and arrests them before any gun goes off.

“There aren’t speculation police running the state and breaking up these investments, right?” Funk said.

Financial water speculation

A draft report by the work group attempts to define two different types of speculation.

The first is traditional water speculation, which involves obtaining a water right without any plan or intent to put that water to beneficial use. The intent is to obtain a desirable priority date and then sell the water right to others who have a beneficial use.

This type of speculation has been addressed before in Colorado water law in what is known as the High Plains case. In 2005, the Colorado Supreme Court determined that a water-investment company was speculating because its plan for using the water was too expansive and nebulous, and the plan did not identify either the structures through which the water would be diverted or the specific locations where the water would be used.

The second type of speculation — and, because of WAM’s dealings in the Grand Valley, the one on which the work group is more focused — is financial water speculation. The work group defines this as the purchase and use of water rights with the primary purpose of profiting from increased value of the water in a short period of time. Financial water speculation may run counter to Colorado’s prior-appropriation doctrine because the primary intent is profit rather than beneficial use.

Mike Higuera, of Conscience Bay Company, walks by a parshall flume measuring device in the Alfalfa Ditch near Cedaredge. The company owns nearby Harts Basin Ranch and uses water from the ditch for irrigation.
Heather Sackett/Aspen Journalism

The concerns over speculation tap into a deep-seated anxiety that is…



Read More:Colorado is examining water speculation, and finding it’s ‘all the problems’ in one

Leave a Reply

Your email address will not be published. Required fields are marked *