COVER STORY: THIRST FOR BATTLE | Douglas County water project hits hiccups (2023)

Editor's note: This story has been updated with comments from Sterling Ranch, whose officials maintained that the development has no plans to get served with water from San Luis Valley, that it has no need for such water and that the community has all the water it needs.

Farmers, ranchers and water managers in the San Luis Valley are gearing up for the fourth legal fight in as many decades to keep their water in its aquifer, and, this time, away from thirsty Douglas County.

In recent weeks, they’ve gained a powerful ally: Attorney General Phil Weiser, who is threatening to go to court, if that becomes necessary.

Theproject by Renewable Water Resources, a water developer,proposes to tap 25 new groundwater wells in a “confined” aquifer in the valley. That would bring 22,000 acre feet of water to the South Platte River and eventually to a yet-to-be unidentified water provider in Douglas County.

COVER STORY: THIRST FOR BATTLE | Douglas County water project hits hiccups (1)

The RWR proposal, which has been underway since 2017, claims a billion acre-feet of water exists in the larger of two San Luis Valley aquifers, a figure disputed by San Luis Valley water experts. One acre-foot is equivalent to 326,000 gallons, or enough water to cover an acre of land, about the size of a football field one foot deep. Aconfined aquiferis an aquifer that is saturated with water. When drilled, water rises to the top. An unconfined aquifer is what is more commonly referred to as a water table — it rises and falls based on barometric pressure.

RWR's project wants to tap the confined aquifer, which is larger both by geographic footprint and by water volume. The company argued the project is needed to ensure water reliability for Douglas County, and maintained that the plan is sustainable—both for residents of the county and the valley.

Under the proposal, the wells would be situated on land either owned or controlled by RWR, which currently owns approximately 9,800 acres and has options to acquire approximately 8,000 additional acres.

The 22,000 acre-feet of water represents 2.5% of the aquifer’s annual recharge, defined as water pumped back into the aquifer through precipitation, and a volume that RWR claims would not affect diminish the base.

The proposal noted that Colorado's water law mandates that, in order to develop water,it must be "retired at the same rate," a doctrine informally known as the "one-for-one" lawin the water community. That means every drop of water removed must be replaced by the same amount.

As it turns out, Division 3 Water Court in in Alamosa, where RWR plans to submit its proposal, is the only water court that uses that law.

"Recognizing there is a shallow section of the aquifer, the RWR project aims to accomplish 'one-for-one plus," the proposal says, adding the Colorado Water Court also requires the provision known as "no harm, no injury" to the environment, people and property.

RWR claims its proposal will meet Water Court criteria and that it is prepared to enter it in Division 3.

Under the plan, Douglas County would kick in $20 million from American Rescue Plan federal money, which is already raising questions about whether that’s a legitimate use of the federal relief funds, and whether years of legal battles would run out the clock for using those dollars, which, under federal guidelines, must be spent by December 2024.

On Jan. 18, Douglas County commissioners heard very different perspectives on whether the water is actually there.

Bruce Lytle of Lytle Water Resources, who is working with RWR, told commissioners the aquifer has the water needed for the project. That's in stark contrast to what they heard from State Deputy Engineer Mike Sullivan, who told the commissioners the aquifer's water is over-appropriated, meaning there's nothing left for Douglas County.

On top of that, according to theAlamosa Citizen, the Rio Grande Water Conservation District was told Tuesday the aquifer reached its lowest point since 2013 and is not sufficiently recharging. That recharge is key to to RWR's proposal.

The Rio Grande River Basin, and the San Luis Valley, have for years been fighting the battle against drought, largely caused by declining rainfall and warmer temperatures, which makes the snowpack melt sooner.Water Education Coloradoreported in 2020 that growers of the valley's signature crop— potatoes—are trying to wean themselves off groundwater in order to restore stream flows in the Rio Grande, which is tied to a compact between Colorado, New Mexico and Texas.

COVER STORY: THIRST FOR BATTLE | Douglas County water project hits hiccups (2)

It's a fight replicated across many communities in the American Southwest, which is grappling with drying rivers and dwindling water supplies amidst a decades-long drought that has forced states to aggressively adopt conservation measures.

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The commissioners

Whether the proposal goes forward with Douglas County money hinges on the county's commissioners, and they're not all on the same page.

Douglas County Commissioner George Tealwrote in aDouglas County News-Pressop-ed on Jan. 4 that he finds the RWR proposal “intriguing," and he appeared willing to listen to RWR's pitch.

"I am interested in a robust, fact-based conversation about our water future, to include innovation, conservation, and out-of-the-box thinking," he wrote. "I will listen to any idea that offers a path forward while protecting our Western way of life and fulfilling our commitment to our families and community, while also supporting our job-creating economy."

In 2020 and 2021, Teal took in thousands of dollars in campaign contributions from five of the eight RWR principals. Notably, on Aug. 13, his TRACER account showed nine new contributions totaling $16,000, and five came from RWR principals: Hugh Bernardi, the manager of RWR, gave the maximum $2,500. So did John Kim and Sean Tonner. Tonner's wife, Laura, donated $1,000, James Yates gave $500 and Bryan Wright contributed $1,000.

He also received contributions from the owners of Sterling Ranch, a housing developmentwest of Colorado Highway 85that Teal said could be one of several potential end-users.

Teal said he and Tonnerhave been been friends since 2004, and he called Tonner on Aug. 13, the same dayhe received contributions from the RWR principals.

He was trying to retire campaign debt, and RWR's principals came through, as did several other big-dollar donors, he said. Those contributions will also help him as he plans to run for reelection in 2024, when he faces a rematch with a Democratic opponent who, he said, receives a lot of out-of-state contributions.

Sean Duffy, a spokesman for RWR, confirmed the contributions but downplayed their significance.

"There was no significance to the date— just when the donations were received," he said. "For what it's worth, many of the RWR team, including the principals particularly, are Douglas County residents and most have been actively involved in county politics for 15 years or more, including Tonner hosting a 2020 event for [Commissioner] Lora Thomas at his home. So, political involvement isn't a new endeavor."

Thomas, whose district includes Sterling Ranch, is adamantly opposed, citing a host of reasons, including her ethical objections.

COVER STORY: THIRST FOR BATTLE | Douglas County water project hits hiccups (3)

In a Jan. 11 op-ed in theDouglas County News-Press, Thomas wrote that the$68 million in federal money awarded to Douglas County, if spent appropriately, can improve lives and change the face of the county.

“If misspent, we will squander a once-in-a-lifetime opportunity," she said, adding the proposal fails to identify how the water will get to the county.

She also noted the county already has received requests for water projects totaling $300 million.

“There is no available water to export to Douglas County or anywhere else,” Thomas said, citing current conditions in the valley. "All valley water is earmarked. Any new uses must shortchange irrigated agriculture to make that water available. The claim in RWR’s proposal that there is unused water in the valley are flatly contradicted by numerous court rulings and the very need for the state engineer to issue rules strictly governing water use.”

Taking water from the valley would dry up tens of thousands of acres of productive agriculture, she said.

She also claimed ARPA guidelines “preclude buying water rights and obtaining water for future population needs. Moreover, I believe it is morally and ethically wrong to take water from the valley under the circumstances.”

Thomas is now being targeted by robocalls, emails and a survey that asks Douglas County residents if they support her position. RWR denied it is responsible for those communications.

So, the project's fate mightcome down to Commissioner Abe Laydon, who said in a Jan. 3 commissioner work session that he has an open mind about the project. But Laydon, a Latino whose family goes back five generations in the valley,reportedly expressed hesitationabout doing anything that would hurt the San Luis Valley.

The county is expected to make its final decision on the project by the end of March.

Where is the water going?

Duffy told Colorado Politics last month that RWR has not yet determined a water provider who would buy the San Luis Valley-sourced water for customers. He said this week it's "premature" to identify an end user.

Colorado Politics asked most of the 47 water districts, including the dozen largest ones, whether they intend to participate in the project, either as the end user, or, in the case of Denver, allow the reservoirs the county manages to hold that water.

The answer was “no" from all but one potential end-user. Denver Water, which manages the reservoirs, also shot down the idea.

Jim Lochhead, manager of Denver Water, told Colorado Politics in an email that “Denver Water has not been contacted by Renewable Water Resources concerning any purchase of water or use of our facilities for the delivery of water. Moreover, Denver Water has no interest in purchasing or using water imported to the South Platte River Basin as proposed by RWR, nor any interest in any arrangement to use our reservoirs to facilitate the storage or delivery of this water to anyone else.”

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Denver Water manages three of the four reservoirs identified in the RWR proposal as potential storage sites: Antero and Elevenmile, both in Park County, and Strontia Springs in Douglas and Jefferson counties. The fourth reservoir identified in the RWR proposal, Chatfield, is managed by the U.S. Army Corps of Engineers, but it isn’t likely a storage destination, either, as it is solely used for the purpose of storing water belonging to Denver Water.

Greg Baker, a spokesman for Aurora water, answered similarly: RWR has not engaged in discussions with Aurora Water regarding storage or conveyance and does not plan to participate in the RWR acquisition. Aurora provides water to some of the northern county water districts.

Sterling Ranch is a 20-year housing project south of Titan Road and west of Colorado Highway 85. It began construction in 2016, with a proposed buildout for 33,000 residents and about 12,000 homes. So far, about 1,000 homes have been built.

That Dominion and Sterling Ranch could be the end users— both entities vigorously deny any interest in San Luis Valley water and maintain their supply is sufficient to meet needs— is bolstered by RWR’s proposal, which says theproject “will maximize use of existing infrastructures, ultimately supporting the county’s goals of enhancing solutions along the I-85 corridor.”

That's a reference to Colorado Highway 85, which comes into the county from the north and then merges with I-25 at Castle Rock.

On Jan. 17, showed 58 new-construction homes currently available for sale at Sterling Ranch.

Dominion, in an unsigned Jan. 3, 2022, email said it “had not been formally approached by RWR as a partner" on the San Luis Valley Water project.

"Our current water supply portfolio is sufficient to meet existing demands of our retail customers,” the water provider said.

In a Jan. 25 letter to Colorado Politics, Dominion said the projects it is advancing "do not include purchasing water from the San Luis Valley nor participating in the RWR proposal." The water provider also saidits existing water supply portfolio is "sufficient to meet and assure water is available at full build-out of Sterling Ranch as well as the existing residences included within the Chatfield Valley Framework."

The water provider added: "Dominion will meet the needs of our customers by using our existing water supply portfolio to the fullest extent – achieving our commitment to provide 70% renewable water supplies to our customers. We will do this in a responsible and thoughtful manner by leveraging the demand management techniques and water efficiency standards that have proven to reduce water usage by our existing customers. We will continue to champion collaborative solutions for Northwest Douglas County by continuing to provide our customers with a locally controlled, resilient water supply that is environmentally responsible and economically feasible."

The president of Sterling Ranch is Brock Smethills, whose father, Harold, was president when the project started. Collectively, the Smethills, including Harold’s wife, Diane, have poured more than $12,000 into Teal’s campaign account, mostly in 2020 and 2021. They’ve also been generous with Thomas, with $7,700 in contributions, although none came since 2020.

Both Brock and Harold Smethills are directors on the Dominion Water & Sanitation District board.

The Sterling Ranch website section onwater sustainabilitycontains this quote from Harold Smethills: “Water is such an important necessity of human life … There is plenty of water in the state, though it’s in the wrong places and we have to move it.”

Teal said it could be Sterling Ranch, Castle Rock or Parker Water. Regarding Castle Rock, Teal explained that the town provides water to customers outside of its boundaries, part of an I-85 partnership between Castle Rock and Dominion.

The Smethills, in a Jan. 24 letter to Colorado Politics, disputed the story, saying any depiction of Sterling Ranch as a recipient of water from the RWR project or that it is short on water is factually inaccurate.

In particular, the Smethills said, "Sterling Ranch has no plans to be served by the San Luis water. That water is not required or needed [for] the buildout of Sterling Ranch."

"When our family planned Sterling Ranch we committed to create a reliable renewable conjunctive use water system and that has been accomplished," the Smethills said. "Tens of millions of dollars was invested to create that system and it is now serving Sterling Ranch and has all the water it needs to provide water at build out. It is now building the infrastructure as it is needed."

Castle Rock Water spokeswoman Mary Jo Woodrick said in an email to Colorado Politics that "at this time, we do not intend to acquire water from RWR’s San Luis Valley project."

Woodrick added:"Our financial resources are already committed to a number of big projects that are part of our long term renewable water plan, a plan that has been in progress since at least 2013."

She said that includes completing the construction of a new reservoir; tapping into the Aurora WISE project, which supplies water to a number of Douglas County water districts; and, constructing a new pipeline to the county's Rueter-Hess reservoir, which is on the county's east side.

The town'sstrategic plan, which was updated in 2019, however, also calls for the purchase of 700 acre-feet of water through "renewable water rights."

Teal said he found it "amusing" that Castle Rock said it had no plans to participate.

"I'm sure that's the answer right now," he said. "Is Douglas County secure in its water today? Yes. I don't know if anybody is laying awake today, wondering if the taps will turn on ... Our water is secure, today. [But] it's like filling up your car with gas and driving around, thinking you'll never have to fill it up again."

The American Rescue Plan Act

The American Rescue Plan allocated tens of millions of dollars to county and state governments, and Douglas County's share is $68 million. Interim guidelines from the Treasury Department allow for investments in water, sewer, and broadband infrastructure.

But does that include paying a private company to build a pipeline? Thomas says no.

TheNational League of Citiespublished guidance on the types of water projects that would fit under ARPA. Citing an interim final rule from the Treasury, eligible uses include “a broad range of projects that improve access to clean drinking water, improve wastewater and stormwater infrastructure systems.”

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The interim final rule, the national group said, is intended to align “types of eligible projects with the wide range of projects that can be supported by the U.S. Environmental Protection Agency’sClean Water State Revolving FundandDrinking Water State Revolving Fund.” The latter can be used for building or upgrading facilities and transmission, distribution, and storage systems; supporting the consolidation or establishment of drinking water systems; and, replacing lead service lines.

A review of the Drinking Water State Revolving Fundguidebook, however, declares ineligible forfunding “for-profit non-community water systems.”

Much is to be decided.

Teal told Colorado Politics the county is seeking an opinion on the legality of using ARPA funds. He noted the guidance does not appear to allow for the acquisition of new water rights, which is at the heart of the RWR project. But there could be some wiggle room for consideration of well infrastructure, for example, he said.

Another issue isownership, he explained. That question pertains to just how much Douglas County would have to invest in the project, and whether $20 million would be a large enough stake to allow for using ARPA dollars.

Should it be determined that the county cannot use ARPA money, and the county is unwilling or unable to use its own funds, another one option is to forego the county's share of the cost, Teal said. That's assuming RWR agrees to it, ponies up all of the money, but is willing to share ownership rights to Douglas County, which Teal called something akin to profit-sharing.

The state engineer

Among RWR’s claims in its proposal is that State Engineer Kevin Rein “recently urged Denver Metro water providers, including those located in Douglas County, to seek renewable sources of water other than the Denver Aquifer."

"This new guidance," RWR said, "will limit the use of the Denver Aquifer and essentially maintain the aquifer as a ‘preserve.’ In other words, the aquifer will serve as a back-up option for when Douglas County needs water at times of extreme drought but NOT the main source. For Douglas County, this ruling is an imminent and practical challenge and catalyst for necessary change.”

That comes as news to Rein. He told Colorado Politics there have been no new rulings that apply to what RWR describes.

“We are a regulatory agency but we have made no ruling relevant to what the report describes,” Rein said in an email.

The advice to limit the use of the Denver aquifer, he pointed out, came out in 1996, although a memo in 2020 provided guidance to the staff of the engineer’s office that is “a recitation” of the 1996 memo.

“I can’t explain why the report refers to it as new guidance,” Rein said. “Nothing that the state engineer has done has made the challenge any more ‘imminent.'”

Show me the money

The project’s total cost is estimated at $600 million. RWR has, so far, raised just $5.7 million of the total $28.5 million through sales of unregistered securities,according to filings with the Security and Exchange Commission. That’s based on filings from 2019 that have not been updated since then.

Tonner toldWater Education Coloradoin 2019 that the rest of the money will come once the company has signed a deal with an end user in Douglas County.

Tonner said the end user would need to sell enough bonds to pay the farmers, RWR, and the cost of the massive well fields, pipeline and delivery system that will be needed to bring the water up Highway 285 and across to the Front Range.

RWR has promised valley residents $50 million for economic development, which the company claims is far more than farmers and ranchers would ever get from agriculture. That “community fund" would assist local communities with schools, broadband or food banks, senior services or job training, the company said, adding a separate pool of money, about $68 million, would pay farmers and ranchers who agree to sell their water rights, known in agriculture circles as "buy and dry."

The attorney general

In the valley, the RWR project is opposed by water conservation districts, city and county leaders, as well as various non-profit organizations.

However, RWR claims in its proposal that it is acquiring water rights through willing buyers, and that once someone learns about the project's benefits for the valley, support grows to 42%. The proposal didn't say where the floor for that support started.

Last week Attorney General Phil Weiser joined in the chorus of opposition to the project, and, along, with state Sen. Cleave Simpson, R-Alamosa, who manages the Rio Grande Water Conservation District,penned an op-ed for the Alamosa Valley Courier.

“There is a right way, and a wrong way, to manage our water,” the two wrote in the op-ed, which was published Jan. 7. “Piping water from the San Luis Valley to the Front Range is the wrong way.”

They wrote that the RWR plan buys up water rights intended for irrigation, and comes at a time when the valley is “desperately working to manage a depleted aquifer and protect this community’s future.”

A2019 Water Education Colorado articlesaid the aquifer is so depleted “that the state has ordered the valley to bring water levels back up to where they were prior to 2000, or face a massive shut down of farm wells in 2030.”

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Simpson, in that same article, said the basin is over-appropriated.

COVER STORY: THIRST FOR BATTLE | Douglas County water project hits hiccups (5)

“There are way more decrees for water rights than can be delivered in any one year. We have water rights that haven’t been able to draw from the river in 20 years. Likewise the groundwater system is also over-appropriated,” saidthefourth-generation San Luis Valley rancher and farmer.

In addition, Weiser and Simpson wrote, the proposal will not comply with rules from the State Engineer or the state Supreme Court. The RWR proposal seeks to change the rules, which would undermine Colorado's compliance with the Rio Grande compact, they said.

“No solution to solve these needs should be done at the expense of our agricultural communities,” they wrote.

Weiser, in an interview last week with Colorado Politics, is prepared to put his money, or rather the state’s, where his mouth is, and that includes going to court, if necessary.

Weiser explained his office is statutorily mandated to represent a number of agencies relevant to the water issue, including the state engineer. But he has a second hat, as the people’s lawyer, which means he is in a position to be an advocate, adding that, from that perspective, “we need to protect the water of the San Luis Valley.”

He hasn’t landed on any particular legal strategy yet, but noted that previous attorneys general have been willing to be active litigants or amici (friend of the court) in cases where the public interest is at stake.

“I won’t be merely reacting on behalf” of whatever agencies his office works with, Weiser said. “I’m going to take a lead role in how we in Colorado can stop this from happening because the idea of removing water from the valley at a time of a depleted aquifer is something I can’t understand.”

One critical issue, however, is that water is a private property right and anyone can sell their water rights independent of the land itself. Weiser said his office will work on how to honor water as a property right, as well as recognize the broader public consequences of potential decisions that, to him, can have harmful effects on other water users.

“My advice to everybody in the Colorado water community is if we can find ways to work together and reach mutually agreeable sound solutions, we're all going to be better off,” Weiser said. “Once you start an injury into long-term testing your rights and litigation, it is a lengthy, expensive and uncertain proposition.”

According to the Water Education story, backers of the RWR project would have to prove it wouldn’t harm other water users or the aquifer, and demonstrate it would not affect the groundwater that maintains the Great Sand Dunes National Park.

Simpson told Colorado Politics last month that the Rio Grande Water Conservation District hasbeen stockpiling funds from previous settlements, in preparation for the day when they’re back in court.

Previous attempts

RWR isn't the first entity to try and ferry water out of San Luis Valley.

On the last day of 1987, American Water Development Inc. filed a proposal in Division 3 Water Court to pump 200,000 acre-feet of water per year out of the valley, with Denver as a potential end user. AWDI based its proposal on a claim that the water isn’t non-tributary —meaning it isn’t groundwater connected to a surface stream. The court, believing otherwise, shot the proposal down in 1991.

That led to another attempt a few years later that involved Yale University; Gary Boyce, a rancher near Crestone, and Farallon Capital, which at the time was owned by California billionaire Tom Steyer, who unsuccessfully ran for president in 2020. Boyce, according to theNature Conservancy,bought the land from AWDI and turned it into Baca Ranch, with ideas of his own on water exports.

According to a 2013Washington Free Beaconstory, “Farallon’s Vaca Partners, a joint venture between Yale and the hedge fund, bought Boyce’s Baca Ranch for about $16 million in the mid-1990s,” with plans to sell the water to Denver. The proponents tried to put two ballot measures on the state ballot in 1998 that would clear the way for their plan, but the public rejected those measures with 96% and 97% voting against.

After the failure of the ballot measures, in 1999, Farallon sold the 97,000-acre ranch to Congress in a deal brokered by The Nature Conservancy for $32 million. That acquisition quadrupled the size of the Great Sand Dunes, which became a national park in 2004.

Other solutions

There is at least one other alternative to the Douglas County's efforts to secure more water, which comes from the Platte Valley Water Partnership. It’s a collaboration between the Lower South Platte Water Conservancy District, based in Sterling, and the Parker Water and Sanitation District.

The partnership’swebsitesays Parker’s current water resources are sufficient to meet current demands, but "with a population that’s projected to double and with the Denver Basin groundwater supplies diminishing over time, Parker’s ultimate goal is to diversify its water resources portfolio to be comprised of at least 75% renewable water." (Renewable water is water that can be used, with the remainder returned to its source and then reused over and over again, to extinction.)

The plan is to build more storage along the South Platte to capture some of the water heading out of the state— and into Nebraska— that exceeds the requirements of the compact between Colorado and Nebraska.

The partnership plans to build a 4,000 acre-foot reservoir near partnership-owned land in Logan County, as well as store water in Prewitt Reservoir in Merino northeast of Fort Morgan. Future plans include a 72,000 acre-foot reservoir, in Fremont Buttes, in-between Brush and Akron. The total cost? About $800 million.

According to anop-ed by Sarah Parmer, director of conservation for Colorado Open Lands, the partnership “would utilize high water events on the South Platte River and divert that excess water into reservoirs that can then be used by both cities and farmers and ranchers,” with an additional agreement to avoid “buy and dry” on agricultural land.

“The citizens of Douglas County can choose to invest in a water future that cripples a rural community, or they can join Parker in leading the Front Range in a new direction — one that reflects the spirit of the Water Plan, Parmer wrote. "The best investment for Douglas County and for Colorado is in a cooperative water-sharing partnership that respects the economy, culture, and wildlife of two basins while getting Douglas County the water it needs to support its growth,” Parmer wrote.

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