Western Colorado water purchases stir up worries about the future of farming

By Heather Sackett, Aspen Journalism & Luke Runyon, KUNC

For five years, Zay Lopez tended vegetables, hayfields and cornfields, chickens, and a small flock of sheep here on the western edge of Colorado’s Grand Valley — farming made possible by water from the Colorado River. 

Lopez has a passion for agriculture, and for a while, he carved out a niche with his business, The Produce Peddler, trucking veggies seven hours away to a farmers market in Pinedale, Wyoming. 

Lopez also moonlights as a Realtor, with his finger on the pulse of the local real estate market. A few years ago, he noticed a strange new phenomenon. Much of the irrigated agricultural land sold in the valley — such as parcels just down the road from his farm — wasn’t being bought by another farmer. Instead, his new neighbor was Water Asset Management, a New York City-based hedge fund with deep pockets.

When Lopez and his wife Leah grew tired of trying to make ends meet, they decided to pack up and move to southern Colorado to grow hemp. They, too, sold their 26-acre farm to WAM. 

“It was hard to make the mortgage payment plus all of our other payments, and I didn’t see — with our current model of what we were doing — how we could get out of that hole,” he said. “Selling the farm wasn’t really a choice. We had to do it.”

Lopez’s recent sale is the continuation of a trend that has made some in the agricultural communities west of Grand Junction nervous; has created a buzz among water managers; and has led state lawmakers to pass a bill looking at strengthening Colorado’s anti-water-speculation law. 

WAM is buying irrigated land as an investment in the future potential value of the water. Although the company isn’t doing anything illegal, its actions have rekindled deep-seated and long-held fears about water in the West — that it could hasten the death of agricultural communities’ way of life and create an unregulated market for water that would drive up prices and drive out family farms.

Because of these sensitive issues, many people in the Grand Valley are reluctant to talk about WAM and what it is doing. Meetings have erupted in anger, some who have sold have become social pariahs, and top water officials from the valley’s canal companies refuse to talk to reporters on the record. For a while, a local rancher was actively updating a website “wall of shame” for people involved in Grand Valley water deals.

“They are the same concerns that have existed since the 1930s,” said Anne Castle, a senior fellow at the University of Colorado’s Getches-Wilkinson Center. “The east slope municipal diverters or an investment firm — it doesn’t matter who it is — are going to be able to offer more money for water than you could derive from farming or ranching. The concern is that if that becomes a trend, then the whole economy of the Western Slope changes and the agriculture economy will be very different and smaller than it is now.”

The Walton Family Foundation provides funding to KUNC and partial funding for Castle’s work. A member of the Walton family currently provides funding to Aspen Journalism via the Catena Foundation.

After struggling to make ends meet on his small market farm in western Colorado’s Grand Valley, Zay Lopez sold the land and its associated water rights to Water Asset Management, a New York-based investment firm that has been active in the valley since 2017. (Luke Runyon/KUNC)

Water Asset Management

Since 2017, WAM has spent $16.6 million buying up 2,222 acres of irrigated agricultural land in the communities of Fruita, Loma and Mack, west of Grand Junction. The company is now the largest landowner in the Grand Valley Water Users Association, the nonprofit canal company that delivers water to many Grand Valley irrigators. 

WAM now owns 1,659 acres in the GVWUA delivery area, which according to its website has 23,341 irrigated acres. That means the hedge fund owns about 7% of the land irrigated by the Government Highline Canal.

WAM, whose headquarters is on Madison Avenue in Manhattan, says it “seeks to be a leader in managing global water investments that solve water quality and availability issues,” according to its website. WAM is run by co-founder and principal Disque Deane Jr., while Matthew Ketellapper has been doing much of the “boots on the ground” work in the Grand Valley as the company’s Colorado asset manager.

Deane has been involved in water markets in the West for years, buying water and land tied to water rights. He doesn’t give many interviews, but according to a 2016 ProPublica article, “debt, death and divorce” has become his sort of motto, because those circumstances drive people to sell.

WAM are cash buyers — a rare offer in this rural area. In many cases, WAM makes improvements to irrigation infrastructure, such as adding center pivots and lining ditches, and leases the land back to farmers to keep it in agricultural production. 

Grand Valley’s farmland is expansive, with views stretching west to Utah, north to the Book Cliffs and south to Colorado National Monument. It is also exceedingly dry. The area where Lopez’s former farm is located was once a community of homesteaders known as New Liberty, who eked out a living by dryland farming before the construction of irrigation infrastructure, a notion at which Lopez marvels. 

Not much would grow here without the region’s two main irrigation canals, which draw water from the Colorado River: Government Highline Canal and Grand Valley Irrigation Canal. The bigger of the two, the 55-mile-long Government Highline, snakes through the northern part of the valley and is managed by GVWUA. One hundred and fifty miles of ditches known as laterals bring water from the main canal to individual farms. 

In mid-March, before the water began flowing in the canals and bringing the annual green return of irrigated agriculture to this valley, the air was thick with smoke as farmers burned their ditches and the earth was dusty, brown and parched.

What leaves people scratching their heads is this: How does a New York City investment firm plan to make money from marginal desert land in western Colorado? 

“Everyone is very cautious about what these guys from New York are doing out here buying up our ground,” Lopez said. “I mean, honestly, it’s still kind of a mystery what their overall vision is.”

The Colorado River, the source of the Grand Valley’s irrigation water, flows through Debeque Canyon. (Luke Runyon/KUNC)

“Temporary, Voluntary, Compensated”

The key to WAM’s overall vision may lie in demand management, a state program still in the investigation and feasibility stage. 

At the heart of such a program envisioned by state officials — and designed to be “temporary, voluntary and compensated” — is the concept of paying irrigators to use less water by fallowing fields. By doing so, there will be more water in the Colorado River flowing downstream to be stored in Lake Powell in an effort to bolster reservoir levels and help Colorado meet its Colorado River Compact obligations. 

The future of the demand management feasibility investigation is unclear because the state on May 1 cut its budget by $750,000 due to the COVID-19-caused state financial crisis.

The thing many water managers and users in Colorado fear most is what’s known as a compact call. Under the terms of the 1922 Colorado River Compact, the Upper Basin states (Colorado, Utah, Wyoming and New Mexico) are required to deliver 75 million acre-feet of water over 10 years to the Lower Basin states (California, Nevada and Arizona). If the Upper Basin can’t deliver because of drought, climate change or any other reason, it could lead to a compact call, triggering involuntary cutbacks and an interstate legal quagmire that could drag on for decades. 

A new demand management program would allow Colorado to send water to a 500,000-acre-foot pool in Lake Powell that would act as a modest insurance policy to help protect the Upper Basin against a compact call. 

The Grand Valley, which takes its name from the “Grand River,” the historical name for the Colorado River, is well-positioned for a demand management program. Water left in the river at this location is almost certain to reach Lake Powell because there are few major diversions between here and the giant reservoir.

And entities in the Grand Valley have rights to a lot of water. With 1912 adjudication dates, Grand Valley irrigation districts are some of the most-senior water rights on the Colorado River and can call about 2,200 cubic feet per second down through the river system. 

There is some precedent that a demand management program would work in the Grand Valley, as some irrigators here have participated in two different experimental pay-to-fallow programs undertaken by the Upper Colorado River Commission and the GVWUA. These types of programs have intense interest from many sectors, including municipalities, which often see transferring water from agriculture as a viable way to increase their supplies, as well as from environmental organizations that would like to see more water stay in the river. 

Mark Harris, general manager of the Grand Valley Water Users Association, stands inside the Grand River Diversion Dam, also known as the “roller dam.” The water diverted by the dam runs through tunnels in the canyon cliffs until it flows out into the farmlands of the Grand Valley. (Bethany Blitz/Aspen Journalism)

Returns On Water

Since 2017, WAM has made investments in Grand Valley agriculture, choosing to make purchases of parcels in batches every few months. But in the past six months, the hedge fund has taken one step that signals what could be a renewed effort to sway Western water rules in its favor. 

WAM recently brought onto its team a heavy hitter in the world of Colorado River politicking: Denver-based attorney James Eklund. 

Eklund is the former director of the state’s top water policy agency, the Colorado Water Conservation Board, and served as the state’s representative to the Upper Colorado River Commission, another powerful policymaking agency on the river. He was one of the architects of the Drought Contingency Plan, the document that made the case for a demand management program throughout the Upper Basin. Soon after he left these public posts, he began representing WAM as counsel.

Eklund, who comes from a Western Slope ranching family, says WAM’s strategy is to buy irrigated land and then pump money into cutting-edge technology and practices, thereby increasing irrigation efficiency and crop yield. The leftover water could be, in exchange for payment, sent downstream under a demand management program.

“I definitely think that if there’s a program that pays farmers, (WAM is) interested in it — and for good reason,” Eklund said. “They want to make sure their investment is generating the types of returns that their investors expect.” 

That strategy doesn’t sit well with Andy Mueller, general manager of the Colorado River Water Conservation District. His organization’s mission is to protect water interests on the Western Slope, which often means protecting agricultural interests. He worries that WAM’s land buys are being done with the intent to separate the water from the land and that the private equity fund does not have the community’s best interest at heart. 

“I think a charitable view would be that they are engaging in the acquisition of private property in a capitalistic society, and they have the right to do that,” Mueller said. “And that might be as charitable as I could get with them.” 

So far, WAM has been keeping the land in agricultural production, much the same as it had been with previous owners. According to Colorado water law, to retain its agricultural water rights, the company must continue to put the water to “beneficial use,” or, in other words, utilize the water to keep growing crops. 

And Mueller’s fear of separating water from land isn’t currently possible under the rules of GVWUA, where three-quarters of the land purchased by WAM sits. Under that organization’s rules, the water cannot be sold separately from the land; you must own the land to get the associated water. 

Without access to GVWUA records, it is difficult, if not impossible, to figure out exactly how much water WAM has the rights to. Class 1 land irrigated by GVWUA comes with 4 acre-feet of water per acre each irrigation season. 

There is not a way to tell from publicly available property records how much of the land WAM has purchased is irrigated Class 1 land. But if all the land WAM has purchased is Class 1, then it would have at least 6,636 acre-feet of water. 

Eklund said the amount of water held by WAM is akin to financial information, which the hedge fund, per its policy, won’t disclose. GVWUA director Mark Harris and the organization’s counsel, Kirsten Kurath have both repeatedly declined to be interviewed on the record for this story. However, Kurath, said in an email that GVWUA is aware of and monitoring activities within its district.

Another lingering, hard-to-answer question is how much WAM’s water is worth. Under the System Conservation Pilot Program, run by the Upper Colorado River Commission, Grand Valley farmers were paid $200 for every acre-foot of water they left in the river. Using this number as a benchmark, WAM’s 6,636 acre-feet of water could currently be worth more than $1.3 million. How much it could be worth in a hotter, drier future is unknown. 

“A lot of the crops we grow are not very profitable, so I think they are projecting, hey, this water is going to be more valuable than even the crops they are growing with it,” Lopez said.

The Government Highline Canal flows past Highline State Park. Water Asset Management, a New York City-based hedge fund, has been buying up parcels of land irrigated with water from the canal. (Bethany Blitz/Aspen Journalism)

Preventing Speculation

WAM’s land buys have not escaped the attention of Colorado lawmakers, who say what the company is doing is legally dubious. State Sen. Kerry Donovan is a rancher who represents District 5, a stretch of rural mountains, agricultural valleys and ski towns on the Western Slope. 

In the 2020 legislative session, before the coronavirus pandemic slowed legislative activity, she sponsored Senate Bill 48, which Gov. Jared Polis recently signed into law. The new legislation directs Colorado’s Department of Natural Resources to convene a workgroup to explore ways to strengthen the state’s anti-speculation law. 

“I also hope (this bill) sends a message to people that might be looking to Colorado to make a quick buck that we’re not interested in that type of behavior in our state,” Donovan said. “If you’re just coming up here to buy up water to turn into a profit in the years to come for your clients, like, ‘No, thank you.’” 

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. 

“(WAM’s) goal is to buy assets, to make money — and as much money as they can,” Donovan said. “I don’t want that type of player in the prior appropriation system, just full stop.” 

WAM attorney Eklund says the investment firm’s directors are not speculators; they are farmers. 

“The characterization of any farming or ranching operation that is putting water to a beneficial use as a speculator, that’s just plain-and-simple wrong,” he said. “In light of Colorado water law, this is not accurate as a description that they’re speculating here.”

Eklund sees a bigger role for WAM and other similar players in a potential future water market. He would like to see Colorado fill up that insurance pool in Lake Powell as quickly as possible and said WAM can help the state do that. 

“(WAM is) looking at how they can move water down to Lake Powell to avert a crisis,” Eklund said. “And they’re trying to make sure that we’re becoming more resilient in the agricultural economy in the Grand Valley by strategically planning for how that water gets into the account in Lake Powell.” 

The Grand Valley Irrigation Company Canal flows past a property that WAM bought in Fruita. Until recently, the hedge fund from New York had only bought property serviced by the Government Highline Canal. (Bethany Blitz/Aspen Journalism)

A Shift?

The type of land purchase that WAM usually pursues has recently shifted. All of the Grand Valley land that the company bought up until this year had been irrigated with water from the Government Highline Canal, where the right to water depends on how much irrigated acreage someone has and where water is tied to the land. 

But WAM’s most recent purchase in January was a $6 million deal on 541 acres in Fruita and irrigated by the Grand Valley Irrigation Company Canal, the other big player in Grand Valley agriculture. In its delivery system, shares of water can be bought and sold, and the amount of water is not tied to the land. It marks a departure from the company’s previous purchases, even as Eklund maintains it’s not a change in WAM’s strategy.

“I would say it’s very significant,” Mueller said. “Land that is irrigated under a private water right like the GVIC, that becomes more challenging and more threatening from a permanent-dry-up perspective.”

But even as suspicion and skepticism run high, some Grand Valley farmers, including Lopez, say WAM has been a good neighbor so far.

“Absolutely, they are committed to the future of agriculture in the Grand Valley. They are fronting a lot of money to do these irrigation projects and leasing the ground back to the farmers who had farmed it already,” Lopez said. “Now, is that just to look good to the community and their investors? I have no idea.” 

This story is part of a series on water investment in the West, produced by KUNC in Colorado, Aspen Journalism, KJZZ in Arizona and the Nevada Independent.

Aspen Journalism is a local, nonprofit and investigative news organization that covers water and river issues.

KUNC’s Colorado River reporting project is supported by a grant from the Walton Family Foundation. KUNC is solely responsible for its editorial content. 

Arizona housing growth tees up opportunity for water investors

By Bret Jaspers, KJZZ

Central Arizona has been booming -- more people, more houses, more need for water. There’s also a long-term drought, and less water to buy from the Central Arizona Project canal system. It’s leading Phoenix exurbs to cast about, looking for new buckets.

Other regions of the state say: don’t come here.

“They want to come and take from the rural counties, which is completely wrong, in my opinion,” said Holly Irwin, a county supervisor in La Paz County, in far-west Arizona. Her district is where the Colorado River runs along lush irrigated farmland and small towns. 

La Paz county Supervisor Holly Irwin is against the transfer of water from the county’s agriculture to Queen Creek. (Bret Jaspers for KJZZ)

Rural communities clash with metro exurbs

Irwin is pushing back against a plan to transfer water rights from some privately-owned farms there to the Town of Queen Creek, likely never to return. 

To her, it’s a slippery slope.

“There’s already people in line waiting to see if this is going to go through - entities,” she said. “And the minute the first one goes through, it’s like opening up flood gates and you’re never going to be able to close them.”

The buyer here, the Town of Queen Creek, says this purchase will help it grow sustainably.

“What we’re trying to do is get that groundwater pumping down to as close to zero as possible,” said Paul Gardner, Queen Creek’s utilities director. “We’re not gonna quite get there, but we want to get as self-sufficient as possible on renewable supplies.”

Like other cities and towns on the outskirts of the Phoenix metro, Queen Creek’s population has increased significantly, over 60 percent since 2010 (although some of that was through annexing existing homes). 

The town is paying $10,000 an acre-foot for water rights tied to the farmland. The quantity is 2,083.1 acre-feet of Colorado River water, making the total price about $20.8 million. (An acre-foot is roughly what a family of four uses in a year.) 

Asked if it’s fair that water should go to the highest bidder, Gardner said, “I think water's a market. And we don’t set the market. And the market is what the market is.”

The price is not exorbitant, experts say, considering that the sum pays for a right to water in perpetuity.

Investors aim to cash in

There’s a major player at the heart of this deal. The Phoenix-based water investment company Greenstone owns the farmland, through its subsidiary GSC Farm. If successful, they’ll receive about $20.8 million for the water, about double what they spent on the land.

Greenstone is one of a handful of private investing firms looking at water scarcity in the West as a money making opportunity. Principals at Greenstone declined an interview for this story.

The firm has hired well-known Phoenix real estate attorney Grady Gammage. After a hearing on the deal in November, he rejected the notion that transferring these specific water rights will hurt development in rural Arizona.

“The amount of water that is there is vast, frankly,” he said. “The existing river communities only use about 40% of their existing municipal supply.”

Gammage said this particular situation is unique, and won’t create the slippery slope rural  boosters are so worried about.

“To the knowledge of GSC Farm, LLC and the Town of Queen Creek, there are no other transfers of water to Central Arizona currently contemplated, nor do the commenters identify any such possible transfers,” wrote attorneys for GSC Farm, LLC in its response to public comments

This land, however, is likely not the only property Greenstone owns in Western Arizona. According to county records, LLCs with the same Phoenix address as Greenstone own over a thousand acres in Yuma County, just south of La Paz.

Many Yuma County residents are, like Irwin, staunchly against the transfer.

Some of the farmland in the Cibola Valley is owned by the water investment firm Greenstone. They are looking to sell a large chunk of their water rights to the town of Queen Creek, a Phoenix exurb. (Bret Jaspers for KJZZ)

Development pressure continues in Phoenix metro 

Water transfers like this, with some important differences, have been tried before. The main reason is that water for new development in Central Arizona is increasingly pricey and scarce, especially in communities on the outer edges of Phoenix. And yet, people are moving there in high numbers. 

“The development of housing in those areas tends to be less expensive than in the older cities,” said Sarah Porter of Arizona State University. “And those developers are required to find a water supply before they can develop.”

New development in Central Arizona must show a hundred years of supply, and have a plan to replenish any groundwater it pumps. One way to do that is enroll houses in an agency called the Central Arizona Groundwater Replenishment District (CAGRD). That agency, tasked with replenishing pumped groundwater, has consistently raised its prices. It’s also on the hunt for more water.

For a town such as Queen Creek, securing its own renewable supply would keep it less reliant on the CAGRD.

Rural lawmakers, like Regina Cobb of Kingman, say Central Arizona towns need to live within their means.

“Queen Creek has a budget right now. And they’re not working within their budget. They’re saying ‘I need more, I need more, and this is how I’m gonna get more,’” she said. “And they’re using a heavy hand trying to do it.” 

Farmers’ Bridge crosses over the Colorado River and gives farmers access to their land in Arizona’s Cibola Valley. (Bret Jaspers for KJZZ)

Is Compromise Possible?

Robert Glennon at the University of Arizona has written extensively about water markets and thinks transfers like this can work, if designed in a particular way. He thinks a water buyer could put money towards something the rural community wants, like infrastructure to help farmers there use water more efficiently.

“I’m a huge fan of markets,” Glennon said. “And there’s a way to do this and a way not to do it.”

This proposal doesn’t have that extra local investment, and GSC Farm’s response to public comments did not include any such plan. It’s also unclear it would make a difference to people in Western Arizona anyway. Cobb said she would fight the deal all the way to the federal Department of Interior, which has to approve the transfer of the water right.

Most observers believe Interior will put a lot of weight on whether or not the Arizona Department of Water Resources recommends the deal. The department has until July 9 to make a decision. 

An emailed statement from the department said “the Director intends to utilize all the allotted time to review and consider all the collected data and public comments regarding the proposed transfer before issuing a recommendation.”

It’s a pivotal moment for those who have water, those who need water, and those in the middle who want their investment in water to ripen. 

This story is part of a series on water investment in the West, produced by KUNC in Colorado, Aspen Journalism, KJZZ in Arizona and the Nevada Independent.

Stars and Struggles - About this Project

Why we did these stories

There’s a lot of noise in the Southern Nevada education bubble. Go to practically any sanctioned meeting, and you’ll hear a steady drumbeat of phrases such as “student achievement,” “budget cuts,” “teacher pay,” “chronic underfunding,” “school district reorganization” and “labor relations.” They’re all important topics that, when weaved together, form a tapestry under which Clark County educates its children. But those words alone don’t really tell the stories that play out 180 days per year in classrooms across the Las Vegas Valley. We wanted to go under the hood, so to speak, and tell that story — the everyday triumphs and challenges of students and staff. After all, they’re the ones on the front lines.

Why we chose this school

The key to telling this story, of course, would be access. You can’t describe what goes on in a learning environment without actually being in that learning environment. So we made a pitch to Clark County School District officials: Let us embed in an elementary school for the academic year and be the proverbial fly on the wall. They accepted, which led to step two: identifying a school. We didn’t want the highest-performing school or the worst-performing school. We wanted something relatively in the middle — a school showing promise but also vexed by struggles common to other Clark County schools. That’s how we landed on Sunrise Acres Elementary School, nestled between Eastern Avenue and Mojave Road in the city’s urban corridor. The school receives extra federal and state money because it serves a large population of students who come from low-income households or who are still learning English.

How we reported these stories

Starting in early October, a reporter and photographer endeavored to make weekly school visits — or more if possible. They spent time in classrooms, on the playground, in the front office, at lunch, in staff meetings and at after-school events. They also interviewed staff members and analyzed school data to better understand the dynamics at Sunrise Acres. The goal: Paint a portrait of daily life at this urban school by sharing scenes and stories from various staff members and students. We intentionally did not focus on any one person. A school, perhaps more than any other organization, is an ecosystem that builds off the collective work of all people inhabiting it. Above all, we didn’t want to harm the children through the course of this reporting. Some of the material is sensitive in nature. For that reason, we changed all students’ names to protect their identities. We did the same for their parents — only to further keep students’ identities concealed.