Reclamation Funds ICS Water Optimization Study

Reclamation Funds ICS Water Optimization Study

An ICS-led water optimization study will explore opportunities for the City of Thornton and Larimer and Weld counties to strategically repurpose—and possibly reirrigate—farmland following a large municipal water transfer.

In 2019, the City of Thornton commissioned development of a Northern Properties Stewardship Plan (NPSP)—an effort to identify long-term management and dispossession strategies for 18,000 acres of farmland the city owns in Larimer and Weld counties. Thornton acquired the farms and their associated water rights in the 1980s to meet future demand for municipal water; it secured its Water Court decree changing the agricultural water rights to municipal use in 1998. The city intends to develop its water supplies over a 40-year period, between 2025 and 2065. It does not anticipate retaining land ownership after that time.

Repurposing 18,000 acres of farmland has significant social, economic, and environmental implications for Larimer and Weld counties. The United States Bureau of Reclamation and the Colorado Water Conservation Board are funding two initiatives designed to advance NPSP planning efforts, which could help Thornton and Larimer and Weld county communities repurpose land more strategically. The initiatives include a Regional Land Use Assessment and a Water Optimization Study. THK Associates is leading the Regional Land Use Assessment. ICS is spearheading the Water Optimization Study. CDR Associates is facilitating community engagement on both fronts.

The Regional Land Use Assessment will identify prospective future land uses on Thornton farms. It will engage community members in discussions regarding the needs of cities, towns, nature, and industry to determine what optimal future uses might be. The Water Optimization Study will explore how a “continued irrigation” provision in Thornton’s decree could help farmers, conservation groups, and other interested parties restore (with non-Thornton water) irrigation on Prime Thornton farmlands that will otherwise be dried. Specifically, it will examine whether a conceptual water market vehicle (a water optimization market) could support better, more integrated land use and water management outcomes by enabling Prime Thornton farmlands to stay in irrigated agriculture. The combined efforts aspire to holistically support new development, retain irrigation on Prime Farmland, and protect native ecosystems.

A simple illustration of how a water optimization market transaction might work under Thornton’s decree is as follows: Farmer X owns both land and water rights on 1,000 acres under the Water Supply and Storage Company (WSSC) system (all Thornton farms are irrigated with WSSC water). One of Farmer X’s 160-acre fields, which is irrigated by two WSSC shares, is designated as “Not Prime” by the Natural Resources Conservation Service (NRCS). It has shallow, Class 5 soils with poor water retention characteristics. It produces low yields, has steep slopes, and contributes to nonpoint-source impairments in an adjacent tributary drainage corridor. In a water optimization transaction, the City of Thornton sells Farmer X a 160-acre farm it owns—a unit with Class 1 soils and demonstrable yields, and which is proximate to Farmer X’s operation. The fee-title sale transfers the land only. Thornton does not include the two WSSC shares it owns that have, up until now, irrigated this ground and which are mandated (by the decree) to be developed for municipal use. Concurrent with the sale, the City of Thornton works with Farmer X to “move” the two WSSC shares from his/her 160-acre field unit to the Thornton farm s/he has just purchased, employing the alternative irrigation provision to do so. Following the sale, Thornton develops the two WSSC shares it owns for municipal use and helps the farmer reclaim the ground s/he moved shares from. Through the transaction, Thornton and Farmer X have executed a multi-benefit, strategic land repurposing effort that has: (1) restored water to an exceptional piece of Prime Farmland that would otherwise be dried; (2) increased the financial value of that ground by restoring permanent water to it; (3) enabled higher annual yields by Farmer X; and (4) improved water quality by ceasing irrigation in an area that was contributing to nonpoint source impairments.

Efforts are scheduled to begin in late 2021. A steering committee composed of Larimer and Weld county stakeholders will guide Land Use Assessment and Water Optimization Study undertakings to provide the City of Thornton with a clearer idea of how it can balance fiduciary obligations to its residents through property dispossession with the needs of Larimer and Weld County communities, where the impacts of removing water will be experienced.

For a summary of NPSP work, see ICS’s 2020 NPSP Work Summary and 2021 Work Projects Outline.

For more information, visit the City of Thornton’s NPSP website.

Mitigating the Economic Impacts of Dry-Up

Mitigating the Economic Impacts of Dry-Up

As water on Colorado’s Front Range moves from farms to cities, a pioneering ICS economic study charts a more promising course for agriculture.

The purchase of 5,540 Bessemer Ditch Company shares from Pueblo County farmers by the Board of Water Works of Pueblo (Pueblo Water) will provide the City of Pueblo, Colorado, with reliable water long into the future, but it will dry up one-third of all Bessemer irrigated farmland (approximately 5,000 of 15,000 acres) in the St. Charles Mesa, Vineland, and Avondale communities. The loss to Pueblo County agriculture following dry-up is expected to exceed the water purchase price ($56 million) in just 3-7 years. An ICS economic impact analysis (EIA) commissioned by Palmer Land Conservancy—with funding from the Colorado Water Conservation Board, the Gates Family Foundation, the Robert Hoag Rawlings Foundation, and the David and Lucille Packard Foundation—examines how Pueblo Water can support buy-and-dry alternatives that create a better future for farmers.

Agricultural-to-municipal water transfers at the scale occurring in Pueblo County almost always precipitate decline in the affected farm communities. Job loss, the failure of forward- and backward-linked industries, diminishing potential for new ag enterprises, hardships for the next generation of farmers, fiscal and land use challenges for local governments—these are the all-too-frequent results of dry-up. ICS’s EIA, which combines sophisticated analytics with exploratory scenario planning approaches, illuminates pathways to maintain—even improve—Pueblo County’s agricultural economy in the face of dry-up. The study links spatial analyses and economic models to assess alternative water development scenarios. The alternatives look at maintaining irrigation on high quality farmlands, providing remaining farmers with access to those lands, establishing innovative water-sharing agreements, and drying areas strategically to minimize agricultural impacts while maximizing environmental gains.

The alternatives are possible because of efforts undertaken by ICS and local advocates to establish key provisions in Pueblo Water’s decree to protect Pueblo County agriculture. One of these, a “substitution of dry-up” provision, allows remaining farmers to acquire highly productive farm ground that will otherwise be dried by Pueblo Water and move water to that ground from less productive areas, which are then dried instead. Earlier ICS studies, undertaken in partnership with Bessemer farmers, demonstrate the potential for substitutions to result in higher annual yields and increased real estate values—significantly improving a farmer’s bottom line.

As the EIA illustrates, in a “do-nothing” dry-up scenario, where Pueblo Water dries all the farms it purchased water from, the range of loss to Pueblo County would be substantial: between $8.4 million and $17 million annually. But the alternative dry-up scenarios create very different outcomes. Substitution of dry-up projects on 1,500 acres with optimized production practices would enhance total economic outputs over current Bessemer-derived production by $2 million/year (from $29.1 million to $31.1 million)—even with 5,000 acres of dry-up. A 1,000-acre continuing farming alternative, where Pueblo Water maintains irrigation on 1,000 acres—and installs drip systems to support farmers helping to expand production of high-value vegetable and specialty crops—would maintain current economic outputs and capitalize on growing retail markets for these products. A rotational fallowing program on 1,500 acres could produce similar outcomes. Substitution of dry-up projects offer permanent dry-up mitigation solutions that enable Pueblo Water to secure its full municipal yield. Continuing farming alternatives require some water sharing. Rotational fallow programs result in slightly greater loss of yield and, while feasible, pose other implementation challenges that would need to be surmounted.

The study examines ten alternative scenarios in total. The alternatives allow Pueblo County and Pueblo Water decision makers to compare mitigation strategies in light of Pueblo County’s 1041 permit requirements, which mandate that water supply projects not degrade any current or foreseeable future sector of the local economy, including agriculture. Pueblo Water will be required to secure a 1041 permit before it can develop its water supplies.

Read the ICS study: The Economic Impacts of Dry-Up on Colorado’s Bessemer Ditch

Read the Pueblo Chieftain article: How the future of Pueblo County farming may call for dry-up of less productive farmlands

ICS Maps Course for Spur Water Policy Institute

ICS Maps Course for Spur Water Policy Institute

Colorado State University selected CDR Associates, LRE Water, and ICS Consulting to initiate planning for a new water policy institute at the future Spur campus at the National Western Center in Denver.

“The Spur campus is a place made for the public, and a place to convene the greatest minds around the biggest issues of our time,” said CSU System Executive Vice Chancellor Amy Parsons. “Water is a critical issue that requires interdisciplinary expertise and collaboration, and the water policy institute is positioned to begin this work prior to the grand opening of the CSU Spur campus in 2022.”

Housed within the water building—one of three buildings on the Spur campus—this policy institute will be a CSU-led, non-partisan policy center that addresses core natural resources, regulatory and governance, and socioeconomic issues shaping sustainability of the West’s water future through research-based policy analysis, alternatives, and recommendations.

CDR Associates, which provides stakeholder engagement, will lead the strategic planning and decision-making process. “Developing a water policy institute is a meaningful and rare opportunity to shape how future water is managed, in a way that really meets the needs of these future policy implementers,” said Emily Zmak, a CDR Associates process expert on the project. Scott Campbell, owner of ICS Consulting, agreed: “We need a place like [Spur] to chart a viable future for the American West.”

At Spur, the water building will host programs focused on education, innovation, and research—advancing innovative practices in water; providing a venue for water-focused dialogue and conferences that highlight connections between water and urban and rural food systems; connecting water users with problem-solvers; showcasing water sustainability; and fostering cross-sector collaboration. The facility will be a venue for K-12 education and field trips. Denver Water’s water quality laboratory will also be part of the water center.

On April 30, 2020, at 1:30 p.m., CSU System will host a groundbreaking celebration with campus leaders, program partners, and community members at the future site of the Spur campus. The event is free and open to the public and will include site tours and a sampling of programs and activities that will be offered at the future campus—where researchers will tackle the world’s most pressing problems around water, food, and health.

 

Harvard Grant Supports ICS Water Fund Feasibility Study

Harvard Grant Supports ICS Water Fund Feasibility Study

Harvard University is helping ICS clients explore how social impact capital can be used to optimize limited irrigation water supplies in the American West. A grant from the university’s Loeb Fellowship Alumni Council is supporting an ICS-led collaboration among Colorado stakeholders and national conservation, finance, and water market experts. An October convening in Pueblo County, Colorado, kicked off the effort. The convening purpose was to explore the design of a water optimization fund, a conceptual impact investment vehicle, which could help farmers and conservation groups in Pueblo County optimize irrigation water supplies diminished by recent municipal acquisitions—creating better outcomes for cities, agriculture, and nature.

There are not many precedents for this type of effort. While experts across the American West are exploring alternatives to buy-and-dry practices (a term describing cities’ purchases of irrigated agricultural land interests to obtain new municipal water supplies—a practice that results in the permanent dry-up of land and, often, an ensuing array of land use, economic, social, and environmental challenges for agricultural communities), most of these alternatives are in pilot stage. In the meantime, cities with burgeoning populations, in river basins where demand exceeds supply, continue to appropriate water from farms because viable alternatives have yet to be brought to scale. These municipal acquisitions often target the most senior water rights (since the most senior rights are the most reliable) and the most productive lands (since the most productive lands demonstrate the greatest consumptive use history and therefore yield the most water).

Cities themselves are often obligated to undertake such actions because of intense competition in the marketplace and a lack of viable alternatives. That is the case in Pueblo County: a consortium of farmers initiated a sale of water interests, and the City of Pueblo’s municipal water provider, under threat of losing access to its Colorado River water supplies given the persistent drought and shortages the West faces, determined it was in city’s best interest to acquire the supply. It is essential that new water-sharing models be developed that obviate buy-and-dry practices and build equity between cities (which have substantial means to acquire water resources in the face of scarcity) and rural communities (which often lack the means to protect water resources for their own benefit); but it is equally critical to focus on guiding municipal water acquisitions so that they do not result in zero-sum games—where cities survive and rural agricultural communities do not.

New impact investment structures, such as those explored in the design of a Pueblo County water optimization fund, could help both the City of Pueblo and Pueblo County agriculture thrive in a water-constrained future. They would support efforts to preserve irrigation on and permanently protect critical production areas on the Bessemer Ditch through the use of a “substitution of dry-up” provision established in Colorado Water Court.  This provision—which was developed through a collaborative effort between ICS, Lyons Gaddis Attorneys & Counselors, Palmer Land Trust, the Pueblo Board of Water Works, Rocky Mountain Farmers Union, and parties to the Colorado Water Court change case—affords anyone who owns land and water on the Bessemer Ditch the opportunity to preserve water on the best farmland by substituting other areas for dry-up (for example: poor production ground where contaminants make their way into watersheds through surface irrigation practices). The result would be better farmland retained in agriculture, restored ecological systems, and improved environmental conditions.

Why would any farmer or impact investor want to do this?  Financial modeling indicates that purchasing land and water interests at fair market value to support substitutions can be profitable.  It can improve real estate values by linking limited water supplies to the best farmland, and it can also increase annual, per-acre production yields.  With this in mind, experts at the Pueblo convening kicked off the Harvard-funded effort by exploring the following questions:

  • What types of capital structures could support exchanges of land and water interests that result in substitutions?
  • What sorts of conservation transactions would they support?
  • What sources of capital would they draw from?
  • What financial returns could they produce?
  • Who would invest in this effort?
  • Who would manage it?

Both public and private entities have been supporting different forms of water optimization for some time, and the notion of a water optimization fund builds on numerous precedents. For example, investments in irrigation efficiency (e.g., converting from flood to drip irrigation) support a type of water optimization. Purchases of instream flow rights (e.g., by water trusts) represent another type of water optimization. However, these “investments” don’t usually create a monetary return for the investors themselves, which a Pueblo-based water optimization fund would seek to do. Furthermore, because the approach focuses on improving water use across complex urban, agricultural, and ecological systems while producing a return on investment, such a model, if deployed successfully, could have far-reaching implications for how water funds are developed in other arid contexts around the globe.

To learn more about the Pueblo County effort, see ICS Navigates the Wake of Municipal Water Sales, or read the Harvard grant report: Investing in Water Optimization: New Markets for Conservation on Colorado’s Bessemer Ditch.  To learn more about using private capital to support working lands conservation, see the Conservation Finance Networks’ publication, Private Capital for Working Lands Conservation: A Market Development Framework.

A Western River with too Much Water? ICS Explores

A Western River with too Much Water? ICS Explores

Can it be, in the midst of drought, with intense competition for limited water supplies, that a major tributary flowing through one of the Intermountain West’s largest, fastest growing cities, has too much water?

Descending an incredible 9,475 vertical feet in just 74.5 miles from tributary headwaters on Pikes Peak to its confluence with the Arkansas River in the City of Pueblo, Fountain Creek bisects the City of Colorado Springs. Observed from the heart of downtown, it looks like a major water course, and at flood stage it is. But Fountain Creek used to be ephemeral: dry in different places at different times of the year. Today, it’s perennial, with three times more water flowing in it than flowed there historically. And that’s not a good thing.

The history

Unlike Denver, Fort Collins, or Pueblo, which developed around major river systems—the Platte, the Cache la Poudre, and the Arkansas—the City of Colorado Springs, which is projected to become Colorado’s largest city within two decades, did not develop proximate to a robust array of local surface water supplies. The growing city derives the majority of its supply from rivers on Colorado’s Western Slope, importing water through a series of transbasin diversion, storage, and conveyance projects. Other communities in the Fountain Creek Watershed—the 927-sqare-mile hydrological basin that surrounds Colorado Springs—share a heavy reliance on imported water, and groundwater as well. But where does all that imported water end up? Not just in people’s taps, but in Fountain Creek.

In the Fountain Creek Basin, there is a correlation between water demand and increased creek flows. It takes 1.0 acre-foot (AF) of imported water, on average, to serve two single-family homes for one year. 0.6 AF of the water used in those homes goes down the drainpipe and, after treatment by sewage plants, is discharged into Fountain Creek as “new water.” The impervious surfaces created by those homes and the infrastructure that serves them creates 0.25 AF of additional flows into Fountain Creek in the form of stormwater runoff. So today, for every 1.0 AF of imported water, 0.85 AF is added to the Fountain Creek system. Accordingly, an average of 110,000 acre-feet per year (AFY) flows down Fountain Creek today compared to 38,000 AFY prior to 1970, and even small rain events produce much greater flooding than they did historically due to expanding impervious surfaces.

It takes 1.0 acre-foot (AF) of imported water to serve two single family homes for one year. For every acre-foot imported, 0.85 AF is added to Fountain Creek. 0.6 AF of water used by those homes becomes treated sewage, which is discharged into Fountain Creek. And every two new homes (and the infrastructure that serves them) create impervious surfaces that add 0.25 AF of new stormwater runoff into Fountain Creek as well.

Why is more water in the creek a bad thing?

A New Norm for Floods? Expanding impervious surfaces have altered the rainfall-runoff response in Fountain Creek. Contemporary rain events produce greater floods than their historic equivalents. The graph illustrates a significant shift beginning around 1980. Analysis compiled by Brian Tavernia, Spatial Ecologist, TNC.

The simple answer is that the geology of the area cannot handle the increased flows. Loose, sandy soils define the region. Erosion has cut hundreds of banks. Cut banks disconnect the creek from floodplains. Floods become much more devastating. Sediments from erosion and flooding release dangerous contaminants such as selenium and arsenic. The cost to repair the damage in Fountain Creek is already well over $1 billion—and this does not count the costs to human life, health, and property that continue to accrue or the costs to address the causes of the problem.

So what’s to be done?

The key, as difficult as it sounds, is to address the root causes. This means uncoupling the relationship between water demand, which is driven by growth, and increased creek flows. To do this, Colorado Springs and surrounding communities—whose populations are some of the fastest growing in the state—will have to embrace three principles: reduce overall water use, increase water reuse, and capitalize on green infrastructure and low impact development opportunities. Reducing water use and increasing water reuse (recycling water as many times as possible, at a variety of scales—from the household to the utility scale) means less water is sent “down the system.” And green infrastructure and low impact development means stormwater is treated onsite and absorbed into the ground rather than running across impervious surfaces as sheet flows going straight into a river system that nature didn’t design to handle those flows.

Erosion on Fountain Creek

This fifty foot bank exists where a county road between Colorado Springs and Pueblo used to lie. The bank began eroding in the late 1970s, when water imports started producing higher base flows and expanding impervious surfaces contributed to higher peak flows. Banks like this disconnect Fountain Creek from its natural floodplains, which absorb water and mitigate flood damages. Accordingly, each subsequent flood becomes all the more devastating. Repairing this bank will cost $5.6 million. It is one of 215 identified bank stabilization projects south of Colorado Springs. Photo © Denise Dethlefsen.

Can it be done?

Yes, but not overnight. In the Fountain Creek Basin, it will mean course-correcting 100 years of water management history while addressing complexities in state and federal water law. An ICS-led team of scientists, policy analysts, and program managers from The Nature Conservancy (TNC) spent a year studying restoration needs in the 927-square-mile basin and determining how to navigate these issues. One key action to guide future endeavors will be the development of a stream management plan that helps basin stakeholders determine (and agree to) the combination of demand management, water reuse, hard infrastructure, green infrastructure, and floodplain restoration activities required to stabilized this highly unbalanced system. Colorado’s Water Plan calls for developing stream management plans on 80% of rivers and streams identified as basin priorities by 2030. Fountain Creek is an Arkansas River Basin priority. The  Colorado Water Conservation Board (CWCB) provides funds to develop stream management plans. It allocated $5 million for stream management planning efforts in 2017, and TNC is helping Colorado communities tap into these funds and launch planning efforts.

Numerous basin stakeholders—including state and federal water experts, water engineering firms, and NGOs—believe a CWCB-funded stream management plan, and the scientific studies that support it, can drive consensus for collective actions to restore the watershed. And there is more to do than just fix the altered hydrology. The Colorado Water Plan calls for stream management plans not only to assess existing hydrological and geomorphological conditions and prioritize management actions to achieve measurable progress toward improving flow regimes; it also calls for developing recreation opportunities, restoring habitat, and improving other physical conditions around the creek. These are critical needs in Fountain Creek, which is, today, a heavily degraded urban waterway throughout much of its course.

To learn more about the altered hydrology of Fountain Creek and TNC’s efforts to restore river flow and function, see ICS—Nature Conservancy Issue Urban Watershed Plan, or read the ICS report: Natural Solutions for a Communally Vibrant, Ecologically Resilient Fountain Creek.

ICS Enterprise Launch: Frost Ranch Sportsmen Club

ICS Enterprise Launch: Frost Ranch Sportsmen Club

ICS helped Frost Livestock Company launch a private sportsmen club for fowl, small game, and big game hunters on its 24,000-acre, Frost Ranch property. Frost Ranch Sportsmen Club, LLC, a subsidiary enterprise of the livestock company, is an important component of two succession-planning endeavors designed to help the company facilitate a shareholder buyout and consolidate company interests: (1) the pursuit of venture capital, and (2) the launch of new ranch-based enterprises.

The overarching goal is to facilitate the transfer of shareholder interests without having to subdivide portions of the ranch—thereby keeping the historic agricultural operations whole. Frost Livestock Company retained ICS to develop capital acquisition strategies and assess green energy, water, tourism, agricultural, and educational enterprise development opportunities that could help it achieve this goal. The sportsmen club is the first of several planned subsidiary enterprise businesses. New enterprise development is key to increasing company revenues, creating loan leverage opportunity, supporting capital development strategies, and bringing the next generation of ranchers home.

Frost Ranch lies less than thirty minutes from downtown Colorado Springs, Colorado, and twenty minutes from downtown Pueblo. Five residential structures exist on the ranch, the largest of which, the “Big House,” a historically and architecturally significant home, serves as the clubhouse for the new enterprise. The 6,500-square-foot adobe home with 5 bedrooms, 5 baths, and 5 fireplaces was designed and built by Wallace Frost, the architect who, among many notable achievements, designed actress Ellen DeGeneres’s 1930’s era home, which is the subject of her 2015 book: Home. Cattle and sheep are raised on the ranch, which also grows organic produce and is a member of the Arkansas Valley Organic Growers Cooperative and the Colorado Farm and Art Market.

The Big House on Frost Ranch.

The ranch contains a mix of wetland and upland prairie habitat spanning the Fountain and Chico drainage basins. Two miles of Williams Creek and three miles of Fountain Creek course through the main section of the property, and exceptional waterfowl hunting exists on wetlands spanning the 1,000-acre area near the confluence of these two streams. Portions of Chico Creek also cross the property. In addition to duck, geese, and other migratory waterfowl, there is an abundance of turkey, quail, whitetail deer, mule deer, pronghorn, and small game hunting on the ranch.

The Frost family, nationally recognized as conservation pioneers, worked with ICS to design a club that provides an exceptional, intimate experience for a limited number of hunters, their families, and their guests. They wanted a club that advances a conservation ethos on the ranch; informs and shapes native-habitat- and ranch-improvement projects; works in concert with existing farm and ranch operations; and builds meaningful, long-term relationships based on shared values. The club, which launched in 2017, has already offset all business development, operations, legal, and consulting expenses with substantive first year revenues.  ICS continues to work with the company on new enterprise development, business and succession plans, and profitable ecosystem service payment opportunities.

Meet the next generation of Frost ranchers.  Watch the video.