Water Rights Sale: An Overview of Selling Your Water Rights

 

If you have water rights that you are not using or no longer desire to own, Colorado water law allows for a water rights sale. A water rights holder may sell a water right, which may involve changing the right to another type and place of use but retaining its priority date so the purchaser maintains the water right’s seniority.

 

Because water rights are considered real property in Colorado, they can be subject to a water rights sale and be bought and sold, or be leased to other legal entities. The actual ownership of the water belongs to the state, however a property right exists to use the water on a priority basis. When you purchase water rights from a water rights sale, you must file a change of water right application with the water court located in the district in which the water is diverted. Your application must prove that transferring the ownership of the rights involved in the water rights sale from the previous owner to you will not affect the water rights of the other appropriated users.

 

Conditions of a Water Rights Sale

 

But any change to a water right as the result of a water rights sale is subject to obtaining a water court decree, is measured by the decreed water right’s historic beneficial use and consumption in time and quantity, and must include conditions that prevent the water right from becoming larger or somehow injuring other water rights.

 

One of the most critical components of the change of a water right as the result of a water rights sale is the measurement of the amount of water historically put to beneficial consumptive use by the previous water rights holder. No more water may be consumed by the new water rights holder following a water rights sale. This ensures that no more water will be removed from the stream or river than was removed by the previous water rights holder. But the priority date of the water right will remain the same, meaning the water right retains its seniority.

 

Water Bank Program

 

In 2003, the Colorado state legislature created a water bank in each of Colorado’s water divisions. This system benefits farmers who aren’t using water rights as part of conservation efforts but don’t want to lose those rights to a water rights sale. Instead, the farmer can lease, load, or exchange water for payment without forfeiting water rights.

 

The Value of Water Rights

 

The asking price in a water rights sale per acre foot of water varies for a number of reasons. They include:


The availability of water in the river basin in which the water rights exist. The principle of supply and demand is evident here, since the more scarce the water or available water, the higher the water rights sale price per acre foot.


The source of the water, as in groundwater versus surface water or private water versus that available as part of a state or federal project. The latter is typically cheaper in a water rights sale since government water projects tend to be highly subsidized.


The kind of water being offered in a water rights sale; for example, raw surface water versus treated wastewater.

 

Who Makes the Purchase in a Water Rights Sale?

 

Water rights in Colorado may be held by any legal entity, which could include an individual, a group of individuals, an organization, a corporation, a government agency, etc. Any of these entities can participate in a water rights sale.

 

Buyers participating in a water rights sale can put the water to a multitude of beneficial uses. (A beneficial use must be proven in order to acquire water from a water rights sale.) They include:

  • Agricultural, used for irrigation and other farming activities

  • Municipal, used for city water systems and includes residential use and landscape irrigation

  • Industrial, used for industrial purposes including large-scale construction and mining

  • Commercial, used by private businesses or corporations

  • Private, used privately by residential homeowners

  • Environmental, used to benefit the environment by increasing streamflows, augmenting wells, managing fisheries, etc.

  • Governmental, used as part of a governmentally subsidized project for water resource management


For more information on selling your water rights through a water rights sale, please contact the water sale experts at Water Colorado.