When Colorado convened a working group on water speculation, its members shared stories of times in which they’d seen or thought they might have seen investment water speculation occurring — when water rights are purchased with a primary purpose of profiting from the future sale or lease of that water as demand drives up its price. On the list was the notion that buyers with no real interest in agriculture would buy agricultural land and water rights with the primary intention of enrolling in a program that pays water rights holders not to use that water.
The concern, essentially, was that programs that compensate farmers for fallowing fields like the Upper Colorado River Basin’s System Conservation Pilot Program, and nonprofits that fundraise to keep water in streams weren’t sufficiently guarded against abuse, particularly when it comes to an increasingly constrained Colorado River system.
“The impacts of drought and the risks that drought causes in the Colorado River Basin, just by way of example, attract money to the concept that money can be made from taking water out of production — conservation,” says Peter Fleming, general counsel for the Colorado River District.
“Where do you draw the line in that?” Fleming asks. “Which one is a good, socially recognized benefit that the state as a whole should support versus which one is bad because it encourages speculation in water resources, and it makes things more difficult for others, and it has adverse secondary impacts in the local economies when you take water out of production?”
A few guardrails exist to make real conservation efforts — those that serve the common good — clear. But questions remain on whether those protections can really stop investment water speculation before speculation occurs.
Little Cimarron Ranch, where a first-of-its-kind agreement allows water rights to go to irrigation in the spring and summer, and to instream flows to support river health in the summer and fall. Photo courtesy of Mirr Ranch Group
Streamflows for the Public Good
In 1973, Colorado lawmakers legally recognized instream flows, in which water is allocated to the river to maintain flows and habitat as a “beneficial use” in parallel with industries, cities and agriculture. That 1973
legislation tried to prevent speculators from prospectively appropriating instream flows and locking up the state’s water by taking measures like limiting who can operate instream flows to a single state agency, the
Colorado Water Conservation Board.
“There is government oversight for specifically this reason — to prevent speculation,” says Josh Boissevain, staff attorney with the Colorado Water Trust, a nonprofit that works to secure water for streams. “Instream flow is a decreed use, so using that water for instream flow is not speculation at all, even though it’s left in the river.”
When water rights owners work with the water trust to use their water to restore flows, it takes a lot of paperwork and a close look at the web of other users affected. The process can be tedious and time-consuming, and the profits marginal.
“Nobody is doing that for the money,” Boissevain says. “They do it because they care.”
Some loopholes have been closed. For example, a 1994 change to Colorado’s water law prevents conditional water rights holders, who hold onto water rights for unbuilt projects or potential future uses, from transferring those rights to instream flows. That law blocks speculators from selling conditional water rights to the CWCB for a profit.
Having a perfected water right — one that is fully established and has been put to beneficial use — converted to instream flows is fine, Fleming says. The Colorado River District participates in those programs and is working to buy a water right currently used to generate 15 megawatts at Xcel Energy’s aging Shoshone hydroelectric power plant. The River District aims to convert that hydropower right to an instream flow right to ensure that this water continues to flow from the headwaters down through boating hotspots in Glenwood Canyon, regardless of the 115-year-old power plant’s future.
But Fleming, who worked on a 2021 report that reviewed Colorado’s legal sideboards on speculation, remains concerned that the lines are not clearly enough drawn between those recognizable benefits to the state and local economies, and the place where speculators could start counting on those efforts and “conserving” to make a profit. At a certain scale, the effects of taking water off farm fields could ripple out beyond bare fields to farm supply stores and gas stations, as well as the local job market in rural communities.
Perhaps the most frightening possibility that could result from profiteering is that water rights bought and steered from use in Colorado will somehow be sold to thirsty fields or towns in Arizona or Nevada. But even
if both buyer and seller are willing, specific language in interstate compacts and existing law complicates the likelihood of selling water from one state to a buyer in a different state.
Meanwhile, conservation groups are also concerned about speculators cornering them out of the increasingly expensive water rights market, Boissevain says. To adapt to the current water market, the Colorado Water Trust is exploring a new acquisition model with Qualified Ventures, a consulting company based in Washington, D.C. Through this new approach, the water trust would buy land with water rights through financing from lenders. A conservation easement would protect the land as agricultural, and the tax
rebate from that status would partially repay the loan. The water trust would reassess how to profitably farm that land while sharing the water rights between agriculture and environmental flows. Then the land could be sold, potentially at a reduced price, perhaps to a first-generation farmer.
“It’s another way to keep ag in production and keep water on the land,” Boissevain says. “It’s another step up in the competition against people that might try and buy [irrigated farms] for speculation or maybe even development.”
The results might resemble a project on the Little Cimmaron River near Gunnison, where the Colorado Water Trust purchased 5.8 cubic feet per second of flow in the McKinley Ditch to return water to a river that was nearly dry in late summer months. The water trust partnered with a land trust to buy the water rights and land, put a conservation easement on the land, then sell the land and water rights to a private landowner. In a
first-of-its-kind agreement, the water rights can go to irrigation in the spring and summer, and to the CWCB for instream flow in the late summer and fall when the river needs it most. In a very dry year, all of the water can be left in the stream protected, and in a wet year, all of it can be diverted for agriculture.
On the Colorado River, the Colorado Water Trust leases water that bolsters flows and protects endangered fish species as it flows through this stretch, known as the 15-Mile Reach, in the Grand Valley. Photo by i-Stock
Environmental groups contend that for the environment to thrive, the entire river system needs this kind of adaptability, particularly as Colorado River Basin states renegotiate operations for Lake Powell and Lake Mead ahead of the current guidelines’ expiration in 2026.
“We want to see better, more realistic management of the Colorado River that accounts for climate change and … drastic shifts in hydrology,” says Matt Rice, Southwest regional director with American Rivers. “It’s all about creating, from our perspective, more flexibility in the system to avoid emergency action after emergency
action because we’re collectively afraid to make hard decisions when we need to.”
With an eye on the prospect of a compact call or other crisis, WaterCard, a Colorado-based company, aims to leverage private market dynamics to promote water conservation in the Colorado River system. It also provides an avenue for companies and individuals to offset their water footprint.
It works like this: A person can buy a WaterCard, which gives them conservation credits linked to a quantifiable amount of water conserved on a Colorado farm or ranch. It’s like an offset. The WaterCard buyer also
receives an NFT digital token as proof of purchase.
In the field, WaterCard funds are used to compensate farmers and ranchers who sign up for the program and voluntarily reduce water usage by fallowing fields for a season, decreasing irrigation, or transitioning to drought-resistant crops.
To demonstrate the concept, WaterCard founder James Eklund, who is also a working water attorney and rancher, is fallowing 66 acres of grass-alfalfa hay at his family ranch in western Colorado’s Plateau Valley. Introducing a market-based mechanism for water conservation in a headwaters state does not equate to speculation, Eklund says, because buyers are only purchasing credits tied to conserved water, not the underlying water rights themselves.
“This approach aligns fully with the anti-speculation doctrine, which I strongly support. That doctrine prohibits buying a water right, leaving it unused, and flipping it for profit — that’s speculation,” he says.
WaterCard’s model is designed to work within the Upper Colorado River Commission’s System Conservation Pilot Program (SCPP) and, Eklund hopes, eventually within a demand management framework. SCPP was
designed to explore solutions to low flows in the Upper Colorado River Basin by granting funding to irrigators who voluntarily apply to conserve water for the season. If a demand management program is developed, conserved water could serve as a “savings account” in Lake Powell, helping Colorado meet future
obligations to send water to downstream states under the Colorado River Compact.
By piggybacking off of the SCPP, WaterCard benefits from the SCPP’s efforts to verify conservation efforts. Therefore, producers enrolled in WaterCard must also have a project enrolled in the SCPP. WaterCard will simply boost the amount of funding those irrigators receive for conservation efforts, making SCPP participation more appealing. As of early 2025, however, it’s unclear whether the SCPP will continue. Eklund argues that this model allows private entities and individuals to play a meaningful role in preventing water crises, one $3.50 WaterCard — representing 500 gallons of water saved — at a time.
Farmers and ranchers who participate can diversify revenue sources while continuing to farm and ranch. Eklund contends that current SCPP payments are insufficient and rejects the notion that fair compensation would cause agricultural producers to abandon their livelihoods.
“That idea is insulting,” he says. However, if farmers and ranchers can derive a higher dollar value for conserved water through a market-based system, he says, that’s not speculation, that’s “market-based capitalism.”
Independent journalist Elizabeth Miller has written about environmental issues around the American West for publications including The Washington Post, Scientific American, Outside, Backpacker and The Drake.
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