Fallowing to support the Upper Colorado Basin

“Colorado farms going fallow? Not for the ‘stupid price’ of $150 an acre-foot” was the headline of a Denver Post editorial, referencing a recent offer by the Upper Colorado River Commission to lease water from irrigators to support flow in the Upper Colorado system and hopefully add volume to a very thirsty Lake Powell. The quote was attributed to a Colorado West Slope irrigator raising row crops, who went further to state that the price was likely set at a low level to sabotage the lease program.

The price is low, no doubt, but the reasons it’s starting there are neither stupid nor nefarious. It’s the logical starting point for the UCRC to conduct a grand experiment of how much irrigation water can be drawn from irrigation, at what price and for how long? It’s the same place we started when putting together a water lease program in central Nebraska but on a much grander scale.

The initial price is the result of previous leasing pilot programs in the Upper Colorado Basin that converged near a price of $150 per acre-foot for leasing water primarily from forage crops. Additionally, the leases were short term in duration with few strings attached. Moving forward, the UCRC does not have an unlimited budget. So, they had to start here.

My own experience in the Plains and others’ experience in Texas and California anecdotally indicates it takes a price of about 1.5 to 2 times irrigation’s expected net profit to get irrigators initially interested.

The applicant is free to ask for more than $150 per acre-foot if justification is provided. The leases would involve only the consumptive use portion of the irrigator’s water right, as per normal, and would be temporary. The Colorado River District has added resolutions encouraging that the Upper Basin states’ lease targets be proportional to their water obligations under the Law of the River. Also, within Colorado, the leases should be distributed in some proportion across the Western Slope to minimize third-party impacts. However, the short lead time afforded to enroll in the program, combined with little discussion of third-party impacts and inter-basin equity, have dampened the district’s enthusiasm about the program.

The enrollment period closed March 1 and participation numbers are anxiously anticipated. Due to a range of reasons, they are likely to be relatively low and if a chance to reenroll later is offered, the price will be higher. This range of reasons can be summarized in the perceived risk of dealing with a new program in a federal environment and insufficient return for this risk. My own experience in the Plains and others’ experience in Texas and California anecdotally indicates it takes a price of about 1.5 to 2 times irrigation’s expected net profit to get irrigators initially interested. As this process goes into a second and third year and as relationships between the UCRC and irrigators are established, discussion of multiyear leases, prices and price adjustment mechanisms, and long-term partnerships are then welcome additions to the relationships. But it’s all about human relationships, which can’t be hurried, but can provide the basis for a long-term insurance policy for the Upper Colorado River.

George Oamek, PhD, is an independent agricultural economist with Honey Creek Resources and is also on the staff of the Platte River Recovery Implementation Program’s executive director’s office.