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, an 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 Navigates the Wake of Municipal Water Sales

ICS Navigates the Wake of Municipal Water Sales

Irrigated agriculture is an economic pillar in Pueblo County, Colorado. Pueblo Chiles at Whole Foods Market: they’re grown here—along with other specialty, food, and forage crops. Until recently, Pueblo County was relatively unaffected by municipal “buy-and-dry” practices (agricultural water appropriations by municipalities that result in permanent fallowing and the loss of farmland); but in 2009, the Pueblo Board of Water Works (Pueblo Water) purchased 5,540 shares of water on the Bessemer Ditch to repurpose for municipal and industrial use.

The Bessemer Ditch irrigates approximately 18,000 acres of designated nationally significant farmland. The 2009 acquisition will fallow enough farms under anticipated dry-up scenarios to create significant economic, environmental, and land use challenges—making it difficult for farms that did not sell water to remain viable. Pueblo Water leased water back to farmers through 2029 and, although dry-up could happen sooner, fallowing will likely occur after that date. A Pueblo Chieftain article termed the purchase-lease option a “slow death for agriculture.”

Rocky Mountain Farmers Union (RMFU) commissioned ICS to highlight pathways to retain a resilient agricultural base while guaranteeing the City of Pueblo its full yield of municipal water. ICS, leading a project team of diverse practitioners—GeoAdaptive; Sourav K. Biswas; Lyons Gaddis Attorneys & Counselors; McCarty Land & Water Valuation; and Palmer Land Trust—employed a collective impact approach to address the issue. The collective impact approach enabled joint fact-finding among disparate interest groups and the development of a common agenda to mitigate the anticipated impacts of the municipal acquisition. The findings of the group, published in ICS’s Navigating the Wake of Municipal Water Sales report, show how a new, post-transfer management strategy can improve land use patterns, promote economic opportunity, improve environmental conditions, foster intraregional cooperation, and advance innovative water management practices that benefit farms and cities.

Approximately one third of Bessemer irrigated farmland will be permanently fallowed through the Pueblo Water purchase. The study found that the problem is compounded by the fact that Pueblo Water’s purchase occurred on some of the best production lands in Pueblo County. When analyzing Bessemer irrigated farmlands, nearly half the parcels where water was purchased rank 90% or higher for protection priority (meaning they possess prime soils, exceptional production capability, demonstrated historic productivity, and are both sizable and contained within important farm production “clusters”). Under almost any agricultural economic objective, these are the lands that should be retained in irrigated agriculture.

The project team estimated that at least 3,000 acres could be fallowed in lieu of lands that rank high for protection priority. Fallowing these lands instead of the best production land would minimize negative agricultural, economic, and land use impacts and maximize environmental gains—for example, significantly improving water quality. The team further discovered that voluntary, market-based solutions can be employed to fallow alternative grounds and restore water to quality farmland where Pueblo Water purchased water; and three separate case studies demonstrate the potential for these “water exchange” frameworks to help farmers expand holdings, increase the value of those holdings, enhance production potential, improve environmental conditions, and permanently retain the best production ground in agriculture for future generations.

Click here to read the full Navigating report.

Super Ditch: ICS Examines a Buy-and-Dry Alternative

Super Ditch: ICS Examines a Buy-and-Dry Alternative

ICS Principal Scott Campbell penned, “Super Ditch,” the fall cover story in Lincoln Institute of Land Policy’s quarterly publication, Land Lines. In it, he explores the launch of the Super Ditch, a corporation designed to become a lease agent for farmers looking to protect agricultural water supplies from municipal acquisitions by leveraging water’s value as an annual cash crop—temporarily leasing it to cities in a rotational fallowing program rather than selling it outright.

In river basins across the American West, where every drop of water is owned and accounted for and no water is available for new uses, cities are buying agricultural water rights in order to supply water to growing populations. These are voluntary economic transactions, frequently negotiated with retiring farmers hundreds of miles from city centers. But when farm communities lose a critical mass of water to municipal sales, economic collapse can ensue; and remaining farms and businesses are sometimes no longer viable. The Super Ditch, a corporation serving eight mutual irrigation ditches across Colorado’s Lower Arkansas River Valley, in an effort to eliminate this zero-sum game, is conducting an experiment that allows farmers to pool supplies from rotationally fallowed fields, rest those fields every one-in-ten years (a good soil management practice), and lease the pooled supplies to cities. This brings cash to the farmer and water to the city, while creating a “buy-and-dry” alternative. (Buy-and-dry refers to municipal water appropriations practices where cities buy interests in farm properties, then fallow those farms to divert the water for municipal use.)

The Colorado project, which is in pilot phase, is fraught with hurdles and complexities. Nevertheless, Campbell argues, the Super Ditch is creating important new paradigms: First, by opening up new market channels, it helps farmers recognize the value of this important natural resource in ways other than outright sales or crop production. (Outright sales don’t enable a farmer to realize gains from water’s increasing value. Crop production profits are subject to the ebbs and flows of markets and commodity prices, which don’t often correlate with water’s value). That not only saves farms, it maintains a field of diversified water ownership. Diversified ownership creates market competition that will more effectively price water in the long run. Even though the price of water out West is increasing, municipal acquisitions tend to keep prices artificially low considering the scarcity of this precious resource.

Click here to read the article.

Click here to view the complete Fall 2015 Land Lines publication.