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Farming, water and Wall Street on Colorado’s Western Slope

Agriculture producers in Grand Valley face difficult questions over the future of water in the West
Joe Bernal works on his family's farm on Sept. 1 in Fruita. (Hugh Carey/The Colorado Sun)

LOMA – Just as Joe Bernal starts to back a shiny-green John Deere tractor out of a massive garage on his family farm a few miles north of downtown Fruita, his son Bryan appears in his line of sight and starts waving his hands around, pointing at his head.

“Oops,” Bernal says, removing the ball cap he’s wearing.

Bernal had mistakenly grabbed the wrong hat a few minutes earlier. He hops out of the tractor’s cab and flicks the hat toward Bryan, who tosses him one in return.

“See you later, Bryan,” Bernal says, climbing back into the cockpit. “We’re gonna go cut ends from west to east.”

Under the blazing afternoon sun, Bernal navigates around a row of older farm equipment. “That particular tractor my dad bought in 1975,” he says. “It’s gonna stay around here.” Bernal continues down an expansive gravel driveway, passing the gray, single-story home he grew up in. A barking dog darts around a fenced yard adjacent to the house.

On the far side of the building, Bernal hangs a right onto Q Road. He begins pointing out the land his family has acquired over the years. His grandparents had 150 acres over there. His parents bought this land here. His great grandparents, who showed up in 1925, lived in a house right there.

Surrounding Bernal’s land are the vistas of the Grand Valley, a strip of high desert situated on Colorado’s Western Slope marked by dusty mesas and cliffs and the winding, ever-present Colorado River, which plunges down from the mountains to the east. Grand Valley farmers and ranchers use the water to irrigate tens of thousands of acres, growing everything from peaches and corn to wheat and alfalfa.

But since 2000 flows on the river have declined 20% and water levels at Lake Powell and Lake Mead have dropped to less than 30% of their combined storage. With the river overtaxed, Grand Valley farmers now face difficult questions regarding the future of water in Colorado and the West. Questions about how irrigation, which accounts for about 70% of the state’s Colorado River water use, can be more efficient, whether water can be conserved and banked in Lake Powell and what, if anything, to do about someone looking to make a buck on the state’s most precious resource, so-called water speculators.

In the Grand Valley, much of the concern around private, profit-driven investment in the river has focused on a New York investment firm called Water Asset Management, or WAM. Run by co-founder Disque Dean Jr., son of a New York real estate developer, WAM has spent millions buying farmland with valuable senior water rights in this part of Colorado. The company is the largest landowner in the influential Grand Valley Water Users Association, which operates the 55-mile Government Highline Canal. Western Slope farmers rely on the canal to irrigate about 24,000 acres of farmland.

When the New York Times declared in a January 2021 headline that “Wall Street eyes billions in the Colorado’s water,” Colorado water users voiced significant concern about the company’s motives.

“The worry was that a New York hedge fund’s outside investors would not have the same economic and sociological calculus in deciding to lease or sell their water as a longtime resident would,” Anne Castle, a senior fellow at the Getches-Wilkinson Center for Natural Resources, Energy, and the Environment at the University of Colorado, said. “Generational farmers and ranchers are going to be thinking about the impact on their neighbors, the local communities and what their kids do if the water leaves the ranch.”

State politicians looked at addressing private water speculation during the most recent legislative session. Colorado law already requires water be put to a “beneficial use,” say, to irrigate a farm, supply taps in cities or be left in the river for environmental or recreational purposes. You can’t just buy water rights and sit on them. A draft state bill, however, tried to examine whether it might be viable to curb the sale of water in Colorado purchased specifically to turn a profit later on. But telling people what they can and can’t do with their private property rights is a tricky proposition. The bill did not make it beyond the Agriculture and Natural Resources Committee.

Three years ago, Water Asset Management purchased a farm from a landowner who was leasing the land to Bernal, who farms alfalfa, corn and other crops. A member of the water users association board, Bernal has since leased a few other WAM-owned fields. The way he puts it, he’s neither WAM’s advocate nor their adversary. “I keep saying, ‘So far so good,’” Bernal said. “Am I glad they’re here? Not really. Would I have invited them in? No. How are they now? They’re as good as any landlord I’ve had.”

Water savings programs
The Bernal family from left: Joe, holding his grandson, Trevor, standing with his son, Bryan. (Hugh Carey/The Colorado Sun)
Joe Bernal holds an ear of corn grown at the family’s farm in Fruita. (Hugh Carey/The Colorado Sun)

A few years ago, through the Grand Valley Water Users, Bernal enrolled some land in a water conservation project known as the System Conservation Pilot Program, sometimes referred to as a “buy and dry” or lease-fallowing program. The project, which ran from 2015 to 2018, was designed partly as a test of how paying farmers to voluntarily and temporarily fallow land might actually look in practice.

Restarting the program was a key part of a plan the Upper Basin states of Colorado, Utah, New Mexico and Wyoming released in June in response to Bureau of Reclamation Commissioner Camille Touton’s call to cut between 2 million and 4 million acre-feet of Colorado River water use by next year. The original, four-year Upper Basin program, funded by major water utilities and money from the Walton Family Foundation, spent more than $8 million and reduced consumptive use by roughly 50,000 acre-feet, according to reports compiled by the Upper Colorado River Commission. In the Grand Valley specifically, the program ran for two years, enrolled about 2,300 acres and saved about 6,000 acre-feet of water.

Colorado’s U.S. Sen. John Hickenlooper introduced legislation in late July that would effectively reauthorize the program. If the bill, which has yet to make it out of the Senate, eventually passes, there appears to be money on the other side. The $4 billion in drought funding included in the Inflation Reduction Act, spearheaded in part by U.S. Sen. Michael Bennet, will be available through the Bureau of Reclamation to pay water users to voluntarily reduce use.

“As we drafted that language, we spent hours on the phone to make sure it worked for our state and for the Upper Basin,” Bennet told the audience at Colorado Water Congress in late August. “That would be true of any agreement we make going forward for the Colorado River.”

Any water saved under the original version of the conservation pilot program was considered “system” water, meaning it wasn’t specifically tracked and no one got credit for whatever extra amount eventually flowed into Lake Powell. It’s one of the reasons the Upper Colorado River Commission eventually decided to stop the pilot.

“The commission believes that any viable demand management program requires the ability to accumulate and store conserved water over multiple years. However, no means for accounting, measuring, conveying or storing water have currently been established,” a 2018 commission memo halting the program reads. “As such, any water that is currently conserved is subject to downstream water users or release from existing system storage prior to being needed by any emergency drought conditions, thereby defeating the purpose of any demand management.”

Joe Bernal drives a tractor on his family’s farm on Aug. 31, in Fruita. (Hugh Carey/The Colorado Sun)

Since then, the commission and the other Upper Basin states have investigated the viability of a demand management program that would give the Upper Basin states credit for banking conserved water in Lake Powell in a 500,000-acre-foot “account” created under the 2019 Drought Contingency Plan. All four states would have to agree on the implementation of that kind of program. Earlier this year, Colorado paused its investigation to let other states catch up with their studies. The Upper Colorado River Commission is slated to release a demand management feasibility report sometime this year.

The difficulty of moving and tracking water from somewhere in the Upper Basin to Lake Powell, a technical process known as shepherding, is one of the reasons the Grand Valley is a popular target for any kind of agricultural water savings program. The valley’s proximity to Utah makes it easier logistically to get any conserved water to Powell, more than 150 miles to the southwest on the Utah-Arizona border. As the water flows to the edge of Colorado and through the rest of Utah, the river doesn’t pass that many other users.

When Bernal first heard about the pilot program concept, he thought it could open up some useful possibilities for him, a way to optimize his operation. Maybe he could get some guaranteed income. Or maybe this would give him a chance to do some land leveling on a field he wouldn’t be able to do otherwise. Heck, maybe he could even just work a little less.

Grand Valley Water Users Association board member Troy Waters, a fifth-generation farmer north of Fruita, said he was at first resistant to this type of program, but did eventually participate in the initial pilot project and learned a lot by doing so.

“With all the issues that are going on on the Colorado River, I think programs like this might become a necessary evil,” Waters said. “I think Colorado is going to have to do their part; even though I still feel this whole mess is the Lower Basin’s fault – they created it. The Lower Basin states have just been willy-nilly drainin’ them reservoirs.”

When Waters decided to enroll some of his land in the initial system conservation program, he purposefully selected a variety of fields, some more productive ground and some less. He said he noticed that it took his land with more fertile soil a couple years to get back to producing the same yield as it did before it was fallowed. “When you fallow ground without irrigating it for a year it hurts your soil,” Waters said.

Any compensation for a program like this, Waters said, should pay farmers not just for the fallowed year but also for the time that it takes to get that land back up to full production.

Two basins, one river
The Colorado River flows along Interstate 70 in Glenwood Canyon in August 2021, near Glenwood Springs. (Hugh Carey/The Colorado Sun)

Since Commissioner Touton told the seven basin states to find a way to cut as much as 30% of the usage on the river, the position among top Colorado water officials has been fairly consistent: Yes, Colorado and the Upper Basin can help, but the majority of water cuts need to come from the place that uses the majority of the water in the Colorado River, the Lower Basin states of Arizona, California and Nevada.

The same day the commissioner made her announcement before a Senate committee, Chuck Cullom, the executive director of the Upper Colorado River Commission, presented provisional numbers showing that Upper Basin water use had declined by about 1 million acre-feet from 2020 to 2021, dropping to 3.5 million acre-feet. At the same time, water use in the Lower Basin increased to roughly 10.5 million acre-feet after accounting for evaporation losses, Collum said. The figure includes Mexico’s allotment.

Sen. Bennet also highlighted this discrepancy during his Water Congress visit. “We know temporary Band-Aids won’t cut it,” Bennet said. “Any long-term solution requires permanent reduction in use by the Lower Basin. All parties have to live with what the river can provide.”

Bernal thinks about that discrepancy, too. “The Lower Basin uses 10.5, we use 3.5 and we’re each supposed to get 7.5 – whose problem is this? It’s theirs,” Bernal said. “Are we going to get away with not helping? I doubt it.”

Given that, Bernal said he’d rather have a say in any role Colorado and the Grand Valley will play in efforts to better balance the amount of water used each year with the amount actually flowing through the river. He doesn’t want to find out what a federal threat of “unilateral action” could mean. “I don’t want to know what that might hold,” he said.

Designed correctly, Bernal thinks some kind of water banking program could work in this part of Colorado. “I think a widely distributed water banking program can have a low impact on a community and I think it can still be beneficial to what we’re doing.”

But he also worries that efforts to decrease water use could alter the character of the place he grew up, a region that includes the deep canyons and red rock formations of Grand Junction’s Colorado National Monument. If too much land is fallowed, Bernal is concerned it could negatively impact the local co-op or the seed producer or the trucker who lives down the road or the part-time mechanic he employs or his son Bryan or nephew Mario Baleztena who do this work with him full time.

“Imagine if we didn’t have this irrigation system,” Bernal said. “There wouldn’t be anything to look at but the Monument.”

But it’s a delicate balance, he said. For instance, he knows the land he leases from Water Asset Management could be enrolled in a restarted system conservation project, bringing new revenue for the owners. “WAM would sure like to see a program,” he said.

“It could hurt the entire system if they try to put too much in,” Waters said of WAM potentially enrolling land in any future water savings program. Waters said he would want a program that didn’t allow any one individual to enroll too much land or for there to be too much ground fallowed in the valley as a whole.

“If you take out a quarter of the farm ground,” Waters said, “if it ain’t managed right, this whole valley will turn into a dust bowl.”

So far, Waters said, he feels like WAM has been relatively open about what its doing. “All the ground is being leased and farmed,” he said. “I can’t say anything bad about them right now. Are they somebody we need to keep our eye on? Yeah.”

Public entities

Denver attorney James Eklund, who advises Water Asset Management as a client, last month drafted a letter on Sherman & Howard letterhead titled “a letter of intent to conserve and lease water.”

The letter, dated Aug. 10, does not mention WAM, but rather appears to offer to start a sort of water conservation program, to sign up farmers via a “lease conservation agreement” to conserve water. The letter identifies a 5% cost of due diligence to be “borne by the Bureau of Reclamation, other governmental agency, or as provided in the LCA.”

Eklund said that in discussions he’s had with agricultural water users they wanted to know how they could demonstrate interest in a demand management program, and that he put together what he described as a nonbinding letter of intent as a way for farmers to demonstrate that interest. He said that the 5% was his attempt to “cover the cost of running a program.”

“I’ve been very vocal and supportive of a demand management program,” said Eklund, who grew up on a Grand Valley ranch his folks still own and previously served as the state’s Colorado River Commissioner. “I didn’t find it acceptable that we were just going to say, ‘nope, we’re blaming other states,’ so I put something together on my own letterhead and I went out and started talking to my own family and friends and people we ranch and farm with.”

Andy Mueller, general manager of the Colorado River District, said he has significant concerns about the letter Eklund drafted.

“It’s unacceptable that a former government official for the state of Colorado would be acting in this way,” Mueller said. “If you read all his statements about caring about ag and caring about our community, really what he’s doing and what he’s showing with this document is that his law firm intends to take a 5% profit off the private market of water. He saw an opportunity to try to set up that private market.”

Mueller said the larger concern is that while the River District and the state examine these kinds of water savings programs from a public interest perspective, other entities might not, and that a program could attract “unscrupulous outside investment which doesn’t share the same values about protecting ag.”

“It’s a real threat,” Mueller said, “and anyone who says differently is trying to line their pockets.”

The final language in the Inflation Reduction Act, signed by President Joe Biden on Aug. 16, put specific parameters on the drought money. A spokesperson for Bennet said the senator pushed for the language that makes the funding available “to and with public entities or Indian Tribes.” The spokesperson said the language was necessary to “protect against speculation of private entities seeking to buy water to make a profit.” The specifics of how the funds will be distributed from the Bureau of Reclamation to public entities will be up to the bureau, the spokesperson said.

As for whether Water Asset Management would take part in any kind of water conservation program, Eklund said he hoped they would participate – though he joked that they’d likely be criticized for doing so. “Just as we feared, these terrible New Yorkers are now going to get paid for conserving water,” Eklund said in jest. “No, that’s exactly what we should hope they would do. We should want to incentivize them as we are incentivizing anyone else in this area to conserve water.” Eklund said WAM owns less than 10% of the shares in the Grand Valley Water Users.

Waters, the Fruita farmer, wanted to make it clear that the Sherman & Howard letter has “nothing to do with us.” He said the Grand Valley Water Users Association would only work with the state or some other public entity if approached to go in that direction.

As far as next year goes, Bernal said he’s proceeding with caution about whether any kind of system conservation program might be up and running through the Grand Valley Water Users. “My hope,” he said, “is that we don’t screw up what we have going here.”

The Colorado Sun is a reader-supported, nonpartisan news organization dedicated to covering Colorado issues. To learn more, go to coloradosun.com.