Ripple Effect 06: To Market, To Market

A discussion with Bret Bovee of WestWater Research about the mechanics of water markets and considerations for increasing water market activity. Extremely informative and timely!

Transcription:

Brian Lebrecht, President of Clyde Snow & Sessions 0:01
This podcast is brought to you by the law firm of Clyde Snow and Sessions based in Salt Lake City with offices in Oregon and California. For over 65 years Clyde Snow has represented clients throughout the West. Clyde Snow: Serious About Solutions.

Emily Lewis , Host 0:23
Hello, and welcome to Ripple Effect, a podcast putting water into context. I’m Emily Lewis, your host, and I’m a water attorney here in Salt Lake City, Utah, practicing creative solutions to today’s and tomorrow’s water problems. Welcome to the conversation. All right, and welcome to the sixth episode of Ripple Effect a podcast putting water into context. We are in the midst of COVID-19 and recording from our home studios, so please do excuse any technical errors or audio problems, we’ll do our best to fix them. But you may have one or two as you’re listening. Today, I am very excited to have with me, Brett Bovee from Westwater Research. Brett is a regional director and a reason I wanted to have Brett here is because he and his firm are kind of some of the regional experts and working practitioners in the field of water marketing. And I really wanted to talk to Brett about kind of what the nuts and bolts of that means on the ground. Water marketing is a term that is very popular these days in the water sector. Here in the state of Utah, we’ve had a lot of discussions about water banking. And so I want to make sure that we have some time to kind of dissect how all those different pieces fit together to make a market transaction and kind of what the considerations are that Brett and his firm look into. So all right, Brett, if you wouldn’t mind just kind of giving the listeners a brief bio about you and what you do, kind of what you’re excited about your practice and anything else you’d like them to know.

Brett Bovee, Guest 2:05
Yeah, sure. Well, thanks for having me on Emily, I, I’ve been working in the water sector for about 15 years, the first 10 of those years, I worked for an engineering company that specialized in Native American water rights. And really, we help provide technical information so that water right issues, whether they be court decrees or settlements, or just agreements could be completed and resolved. And so the technical work involved hydrology and water rights quantification, water use estimates, and a little bit of economics

Emily Lewis 2:42
And a lot of bureaucracy?

Brett Bovee 2:47
Exactly, you know, there’s all these little small worlds and water rights in the western US. And that is one of these small little worlds where it’s super fascinating, and highly bureaucratic and technical. And, yeah. So anyway, but I did I got a flavor of economics in doing that work, because some of the questions in doing that technical work is around the value of water, or your alternatives, you know, your alternatives to using water from this source or that source, which involves the value of that water. And so about five years ago, I was working on a project with Westwater and got basically offered or expressed interest in a job and got offered a job. And so last five years I’ve been working in the Colorado office, I basically manage the Colorado office for Westwater and have been learning and working in western water markets and water transactions. And it’s been really fascinating and interesting to, to sort of pick up this line of work.

Emily Lewis 3:53
Yeah, and I think exceptionally timely, I think that as we begin to understand the value, and I’m using quotes on quotes here, you know, of water. You know, there’s a lot of really intricate decisions and questions to be asked to get to that determination. And I think we’re at a cool stage in water law where we’re really starting to kind of unpack those questions. So then, Brett to give the listeners like a sampling of kind of like what the firm does, could you just kind of give us like, what would be two or three kind of sample projects you would work on for clients? Like what are the services they’re asking you to provide for them?

Brett Bovee 4:30
Sure, I’ll run through a couple example projects. These are all hypotheticals, but they’ll give you the flavor. So one example is just appraisal type work valuation work where a watershed owner or someone interested in water right, asks us to provide a fair market value of a water right and it’s typically not because you know, they they want to, they’re they don’t they need a good information. And it’s complicated. Usually it’s not a simple, share in a ditch company. Usually it’s a portfolio of water rights or a large block of water rights or something like that, it’s not easy to understand what the value of that is. But that’s our first line of work is doing valuation and appraisal type reports of water, right holdings.

Emily Lewis 5:14
Are these people who are looking to sell their water rights? Or are these purchasers? Or are they both?

Brett Bovee 5:19
They’re both people need to value water rights for all sorts of reasons. I mean, you think about like, an agricultural operator might need to take out a loan, and they want to put up their water rights as a piece of the collateral, or somebody is doing some estate planning, and they want to figure out whether to hold on to these assets, or donate them because they’re more of a problem than they’re worth. Or someone’s interested in buying, somoene’s interested in selling, they want to do some planning around either of those activities. So there’s a wide range of reasons people want to value water rights. But yeah, I mean, those are three example reasons that come up pretty often.

Emily Lewis 6:00
Okay, so you do valuations. And then what are the other offers>

Brett Bovee 6:03
Valuation is one, and then another area we do is help people, we provide assistance to buyers and sellers in actually identifying and executing a water transaction. So we get engaged to help buy and sell water rights.

Emily Lewis 6:18
So in that case, when you say that does someone come to you say, “Hey, I want 200 acre feet of water, will you help me find that?” or do you like how – unpack that a little bit more for me what you actually do when someone walks through the door- what are they asking? And kind of what are you looking at for them?

Brett Bovee 6:36
Sure. So the simplest example is either a municipal water provider or a developer with a project, who needs to dedicate water rights in order to get water service to that project. In either case, that entity usually has an idea of what they need. So it’s not just go find me a water right, it’s, “Hey, I know that I need one of these five types of water rights.” Or maybe the list is too long, you know, but they have specific needs, volume needs and, and type of water needs. And yeah, but that’s, that’s it – go find, we need this, here’s our timeline, help us find this water right. That’s on the buyer side, on the seller side, it could be you know, I have this water right, maybe I want to first understand the value potential value, or, and then if that looks good, maybe I want to take it to market and see what you know, what’s the best, most valuable offer I can get for it.

Emily Lewis 7:34
So then in the in the purpose, or in the circumstance with the buyer, if we go back to that one for a second, when they say like I need, you know, 400 acre feet needs to meet these certain conditions, then do you go out and be like, I know these people who have this water, right, that fits this bill? And then approach them about selling? Or like, how do you actually connect that person looking for water with the water that is potentially available or freed up to be available?

Brett Bovee 7:58
It’s a good question. It depends on the situation. So first, you have to understand, if you know the types of water right you’re going after, you have to understand the market for that, or the the market slash the inventory of it, right? So I want this type of water right, are there two of these water rights in existence? Or are there 200 of these water rights in existence? So understand kind of how, how big of an inventory is there of these types of specific water rates I need? And then depending on the answer to that, you know, sort of what your next step is. Are you really having to kind of approach to people with very good information? Or are you going to be approaching multiple, you know, potentially multiple people? But yeah, ultimately, you are identifying the seller for the buyer. I mean, specifically, you’re bringing an offer to the seller, you’re trying to engage them and you’re trying to create/craft a deal.

Emily Lewis 8:55
And so do you have like a list of ready sellers? Or do you have, do you essentially cold call people that have a water right that fits?

Brett Bovee 9:04
It depends on the place we work. So if we’ve done previous work in the area, potentially we have some good leads on who might have water rights. If it’s a place we’ve never really, you know, entered into, yeah, we will, we will just call people and say, “Are you interested?” And, you know, it’s usually a little more polished.

Emily Lewis 9:24
I believe you I believe it’s very well done.

Brett Bovee 9:27
No, I mean, and we’re not doing anything intrusive. We are just trying to feel out is there any interest in selling water rights?

Emily Lewis 9:34
Well, and there is typically I mean, I think that one of the things people are realizing is that, you know, that the value of their water or as we come up with more creative solutions and how we use our water, it’s making people think about their water rights and assets differently, you know what I mean? Where they’re like, oh, it might not fit exactly what you’re asking but this is gonna make me think about how I use my water a little bit differently. So it’s, you know, the conversation is occurring, and where you are in the conversation can be very different.

Brett Bovee 10:01
Yeah. Transactions are willing seller willing buyer. I mean, no one is forcing transactions to happen. So you’re correct there, you know, usually we find success in finding someone willing to sell.

Emily Lewis 10:13
Well, well, then I guess that that’s my question is like, one of the things we’re talking a lot about here in the state of Utah is, you know, sounds like you have very good experience with the individual transactions you know, willing seller a and willing buyer a, you know, they’re they’re matched up. One of the things that we’re looking at here in this state, and I think that is happening across the West is like, how do we expand that discussion to create these kind of like, markets that are a little bit more available to have these willing sellers? And these willing buyers get together? And so does your firm also kind of look at like, bigger picture transactions, and just one or two people working independently? Or kind of looking at the more of the market creation side? Or are your your activities already kind of doing that innately?

Brett Bovee 11:10
Yeah. So that was the third piece of our work at Westwater

Emily Lewis 11:13
I got there!

Brett Bovee 11:17
Which is, is not specific valuations or specific transaction assistance. It’s thinking about water markets more broadly. And, and not just water markets, but the economics of water more broadly. And so I’ll get to your question, but let me just touch upon that real briefly is like, the third area we work in is like, it’s thinking about markets, it’s thinking about how things such as water banks, or alternative ways of transferring water or secondary impacts of water transfers, or even for like capital infrastructure projects, you know, what is what is the benefit of this project to these various what end water uses. So, for example, California projects we’ve been working on where they want to raise some some dams as a capital project, and the engineering firms we work with, can estimate the cost of those projects. But to get federal funding, you really got to prove that benefits are greater than costs. And so we’ve been brought in on those to value the benefits of these new water supplies, for municipal use for environmental use for recreational use, or whatever the uses may be that the project’s intended for. So it’s kind of the benefit side of capital projects.

Emily Lewis 12:33
Do you quantify that benefit went into an actual dollar value the? Like you say, –

Brett Bovee 12:38
Yes, it’s quantified for comparison to costs, you’ve quantified into $1 value.

Emily Lewis 12:43
Yeah. Okay. So then unpack that for me a little bit like how – What are you analyzing when you determine the benefit of something because you could have a benefit that’s like a recreational benefit, like you said, or environmental benefit, or a municipal benefit? What are the data points that you’re kind of reviewing to kind of come up with your sum total of your assessment of the project?

Brett Bovee 13:06
So yeah, that’s a good question. I mean, some of the best data points you can have, is transactions. Because a transaction represents a willingness to pay for a benefit. And that doesn’t need to be I mean, in the municipal sector, it’s acquisitions or leases. In the environmental sector, there’s entities who lease water supplies for environmental and stream flows. If outside of transactions, you can start looking at things such as surveys, or other data that indicates people’s desire to pay for a benefit, like, what would what do people pay to go kayak this river? You know, what is the economics around that? Or what do people pay to go fish? You know, and how many fishing visitor days are there on this river? So it really depends on the benefit you’re looking at. But economists have come up with varied ways to try to put $1 value on something that inherently has benefit. It’s just really hard to quantify.

Emily Lewis 14:07
Yeah. That beneficial use man.

Brett Bovee 14:10
Yeah, right. Right. Right. Totally. But your other question was just, you know, have we thought about brought by more than just two party transactions? About broader markets. And, you know, the reality is, I think is, you often see a lot of two party transactions because water rights are complicated, as you know. And unlike going to the grocery store, where you say, oh, there’s an apple, it costs this much, and you’re very sure of what you’re buying. water rights are a very different animal. And so, there are instances where these sort of more flexible, more easy, easy to grasp type markets are set up, but it in my mind, it usually requires is a fairly uniform type of water asset. Because then the seller knows what they’re selling, the buyer knows what they’re buying. And you can have these kind of mark, you know what people more think of as probably market structures, where it’s easy to transact in. So it’s things like storage, reservoir contracts, groundwater rights, where it doesn’t really matter where you are, as long as you’re in the same basin, groundwater basin, those things are pretty well suited to flexible and water bank type, frameworks, transaction structures, but you know, your average ditch share or surface water right – t’s really hard to just sort of say, Hey, this is for sale. And for the buyer to really have any idea what their what what’s being offered for sale?

Emily Lewis 15:47
Yeah, no, I think about this a lot, because it is so true. I mean, I like to tell clients that water rights are kind of like old houses – you don’t really know until you get in there, and I’m like, you could be fine, or there could be some thorny thing. And it’s such a, you know, it’s a field you’ll never, ever really fully mastered. Because there’s always something new going on, there’s always some interesting aspect of it, and especially in today’s day and age, you know, doctrine that we created back in the, you know, mid 19th century is being applied to 21st century needs, you know, it’s such a, it’s such an interesting field. But I do want to kind of get back to, I really, realistically, I probably very much agree with you that, you know, one party to one party transaction is so easy, and we have the transactions that are easiest, are in these kind of areas where we have units of conformity, you know, groundwater acre foot, groundwater acre foot, those are definitely the easiest. But the reality that we’re running into is that those are the low hanging fruit for these kind of deals, you know what I mean? And like, unless we like, really rethink our storage infrastructure, and, you know, what our federal storage contracts can do with private water users, I think we’re probably going to have to start thinking about, like, how do we create these markets in these more fluid and dynamic surface streams and surface structures in between companies? Because in the West, a lot of that water is still, you know, in canal companies and ditches and are these surface water sources. And so I think that’s kind of a challenge that we all have as a water user community. But in your mind, you know, moving into a more complex issue, one, should we but two how do we kind of make those more complex decisions easier? What are the things we can look at to like, bring some uniformity to these kind of complex water rights? I have some ideas. It was kind of wondering, you know,

Brett Bovee 17:35
yeah. It’s a good question. think there’s no black and white answer to either your questions like, should we do that? And is there a way to make it easier? I don’t think it’s definitely yes, or definitely no, but more in my head is that is, you know, is there a need? Is there a need to develop those structures? Is there a shortage that’s not being met? Is there a new regulatory policy, which is changing the dynamics, which sort of is forcing the issue? So when I’ve seen these types of water market, type frameworks get set up beyond those two party transactions, it’s usually driven by something. And those things are those those drivers are usually shortage in high value sectors that actually can’t get the water they need. Or it’s something regulatory, like, “Hey, we used to think we had this much groundwater now we have this lower amount and we’ve all got to reallocate our, our holdings, because we have less to play with.” And I’ve often found that they’re successful when you have those drivers, which are going to motivate transactions. There’s other examples around the west of these market frameworks getting set up, and there’s just no activity. Because there’s no driver of people wanting to partake in it. Basically, they’re, they’re happy enough doing the two party transactions, and they’re fulfilling every need they have doing that. And there’s a lot of certainty in doing that. And so –

Emily Lewis 19:02
“Keep it simple, stupid”?

Brett Bovee 19:03
Well, you know, what you said before, water rights are inherently complex.

Emily Lewis 19:08
Yes.

Brett Bovee 19:09
You know, and, and before you spend money, you’re gonna want to know, you know, be comfortable with what you’re buying. So that was the first part. Should we do it? I think if there’s a driver, yes, because that’ll, that motivates people to want to participate in that market. The second question of how you do it easier. I don’t have very many good answers on. I mean, there’s people I’ve done. There’s things they’ve done. They’ve, you know, in Colorado, we had this experience where we’ve loosened. We tried over many years to loosen the regulatory burden. So we have this water court system in Colorado that handles all transfers, and it’s pointed to as both super cumbersome and super certain. But it’s expensive. It’s expensive, and it’s time consuming. And so there was an effort over like a decade to bring in state engineer approval of transfers under certain conditions. And I think what we’ve largely found is they haven’t really been exercised. These easier to use administrative tools haven’t really been exercised as much as I you know, would be hoped, because I think the reality is Colorado water rights, much like Utah water rights in certain areas, they’re just complex, and it doesn’t matter if it’s an administrative process, or a water court legal process, you’re going to have to stick to some basic legal principles like don’t impact anyone and can expand the water and you can’t speculate, you know, these kind of basic doctrine or tenants, you’ve got to hit those, it doesn’t matter what route you take, it’s gonna take a while to to make sure everyone’s on board with it.

Emily Lewis 20:47
Yeah, I’ve thought about that a lot. I think that the water user community, at least I’m I’m understanding my evolution in my practice, which still many ways is very young, is I kind of think of the change application process is like the bread and butter of a water practice, I need to go from point A to point B, and you like help people do this. It kind of is the oil, the grease that makes things happen. But you know, one of the things I’m just realizing more and more and more, at least how the Utah system is set up, and I’m assuming it’s similar in other states, I know in Idaho they also have kind of a similar process. But like, that administrative process of changing water is really where the rubber hits the road for a lot of things, like, if you’re going to get into depletion analysis, it’s going to happen in a change application process. And if we’re going to change our depletion laws, you know, we need to address that at the change application process. You know, if we go for enhanced in stream flows, which here in Utah, we have a very, very limited in stream flow, statue, you know, that’s going to be taken care of, and protected at the change application process. And so for me, when I think about this kind of a different way to think about the question I posed to you, is like, how do we make things easier? Instead of looking at the substance, you know, where I look at is the process, you know, are there ways that we can kind of like streamline some of the review in this process so that did the willing buyer willing seller have some certainty in that process about kind of like what they’re going to get? I don’t know, that’s kind of where I’ve been, my head’s been about little.

Brett Bovee 22:20
Yeah. And I think, you know, in terms of streamlining market activity, I mean, it’s where I’ve, where I’ve seen it really successful is, is kind of those two things is that I talked one I talked about before, which is having a uniform type of water asset, where every unit is the same. So either having that or setting something like that up, can really help. Right? And then the second piece of the regulatory review, kind of goes hand in hand with that, that if things are sort of uniform, in terms of the water assets, so the regulatory process is simple, because you’re only transferring what’s already been agreed to as what you own, then I mean, the some of the markets that have the most activity in the West are that situation, the regulatory process is very limited, very quick and inexpensive, because of the uniformity of what’s being transferred, and everyone around them is very comfortable that they can transfer that to a new use. Because it’s, it’s sort of that, you know, it’s based on that uniform type asset, like the Colorado Big Thompson project in Colorado, are uniform assets. And some of the places we see a lot of groundwater trading are because they’re, they’re uniform acre foot units, you know, that are fully transferable. So, I think that the difficulty with streamlining things outside of that box is that people inherently hold very valuable water right assets. And they are resistant to cases where they don’t, that they aren’t comfortable with what someone else is doing in a transfer that may impact their water rights. You know what I mean? So, I think a challenge is how do you make things more streamlined, but make sure everyone is comfortable that no one’s been injured, or impacted? Or there’s no expansion of reuse, you know, things like that. How do you do that? That’s the challenge is providing that comfort, but also making it quicker and less expensive.

Emily Lewis 24:22
Yeah, because to me it’s like getting you know, you have uniform units that are based on basically the practicality of a situation like an aquifer like you mentioned earlier. But I can also see the process as a means to getting to more uniform units. Like for example, we have this thing called full supply equivalent here in Utah where basically like we cut water rights back on kind of like what class they were from a decrease if it’s a higher class, you know, that’s like a, you’re only going to get that water very, very high water, you know what I mean? That’s not a water that’s that water, right? It’s not going to supply you water for the full season. It’s just going to supply you water for very peak period of time, when flows are, you know, high. And so like one of the ways that I accounted for the change application is they say, Well, this is this is full supply equivalent calculation. And so I think we can kind of, because here’s what I think about happening in the future, is everyone’s kind of playing at the margins and all these cool ideas like depletion analysis, like you know, secondary metering, kind of like all these kind of strategies, or actual applications that are going to change how we view water use occurs. And so if we can figure out ways to account for that, and then put it in an analysis that people feel comfortable with, like, that’s how you get to like a more you agree to unit kind of like a, you know, there’s conversions between like, equivalent residential units or so you know, what I mean, like, you can kind of -.

Brett Bovee 25:39
I agree, I if, you know, if more transaction activities, the goal, I think that is a good way to get there is making these very understandable, uniform type water assets. And, you know, then, you know, you have that sort of basic dynamic of I know what I’m buying, you know what you’re selling, we’re good. Everyone else around us is comfortable, you know, that that’s it would make market activity greater and it, you know, potentially greater.

Emily Lewis 26:08
Yeah, we’re just more confusing.

Unknown Speaker 26:11
Like that driver. It’s like, it’s, you know, the West is a very diverse place, right? Water markets and transactions. They happen in localized areas, because there’s a reason people need to buy water rights. There’s a lot of places in the West, where there is very little water right transfer activity right? Because there’s just no driver that’s moving water use from one water use from one use to another use.

Emily Lewis 26:37
Yeah, I think that’s a really good point to come back to, like, continually.

Brett Bovee 26:41
Yeah.

Emily Lewis 26:43
Yeah, I’m kind of interested to see in terms of drivers, you guys have offices in California, correct?

Brett Bovee 26:48
Yeah.

Emily Lewis 26:49
Yeah. So like, has sigma, the groundwater man- Because you mentioned earlier, like, what causes a driver? And maybe this is a good time to kind of talk about, like, when we say driver, what does that mean? And what what are some of the things that could occur? And you like mentioned earlier, like, you know, new regulation could be a driver. You know, my question is kind of extensively about California, because they have a new groundwater regulation rule, but like, also kind of like, what are some other drivers that we should be thinking about, or potentially be forecasting? Because I do think that like, steel tariffs, or something I think a lot about, you know, I think about, you know, disruptions from COVID-19 to the agricultural sector. You know, are there things that you guys also think about? What are the big shifts that are gonna happen in water use that could potentially be a driver?

Brett Bovee 27:37
Sure, yeah. So a big one across the West is actually a regulatory actions. And Sigma is a great example. So Sigma is going to drive market activity, because by and large, sigma is managing groundwater more sustainably, resulting in a lot of different water use sectors having less water available than they thought. And so they may acquire groundwater rights from a different user, they may acquire surface water rights to backfill some of that lost groundwater. But whatever form that takes Sigma is driving market activity. I mean, one of the things, one of the cool things we’re doing is for a groundwater district in California, we help them actually establish a water bank very much kind of cutting off from our previous conversation. And the whole idea of the bank is all right, to sustainably manage this groundwater aquifer, we need to only have X acre feet of depletion. And so those will be credits given out to the users. And those credits are transferable. So now you have these credits, which everyone knows what they are, and they’re pretty flexible and transferable. Now you can have a lot of market activity to allow those credits to be transferred. So stuff like that regulation is the big driver of market activity, particularly groundwater in many states, because we haven’t managed groundwater sustainably in a lot of places and now we are moving towards that and it’s creating market activity because there’s reduced supply and the same demand. And then another regulatory driver is the environmental sector. Pacific Northwest is a good example of this where you know, you basically have environmental laws saying that there’s not enough water in the stream we need to put more water in stream and there are actions to either cut back existing uses or restrict new uses, or market basically lease water for the for the stream. And any one of those three is a market driver creates marketing activity. So yeah, environmental regulation and groundwater management regulation is is a big driver in many Western states. other drivers, a big one is municipal growth. So you know the West is growing, and in a lot of places that means municipal water providers, particularly the small and fast growing ones. So in your neck of the woods, I don’t know. But my guess is Salt Lake City has plenty of water rights in their portfolio. But the suburbs to the north and to the south don’t. And so the entities that are actually acquiring water rights aren’t the big cities typically as much as the small suburban towns or cities or just outskirts managed by a water district. Those are the ones like often the most active in the water market, because they don’t have this decades long build up of a water portfolio.

Emily Lewis 30:31
Yeah, Salt Lake City’s got a pretty impressive water rights portfolio. It’s a whole other podcast and a whole other story that I hope one day to do because the Salt Lake City water rights portfolio and the canyon water is fascinating. But yes, it is true, though. I mean, like, where we see these are new areas of growth, but it not only stimulates those people looking for water rights, but like, you know, for eaxmple, so we represent Central Utah Water Conservancy District, those big municipal suppliers are also looking at the market activities happening for them as well. And so it’s not just, you know, someone has to feed that demand.

Brett Bovee 31:09
Exactly,

Emily Lewis 31:10
So we’re kind of thinking about that.

Brett Bovee 31:12
So that’s, that’s another driver. And then, so the third one I’ll mention is like just changes in industry. So you know, I think, looking to the future, you’ve got, we will have more regulation, because we’ve got environmental laws, and we’ve got a better view on how to manage groundwater than we did decades ago. So that will be a continued driver, municipal growth, I would expect it will continue to be a driver. And the third one is more location dependent and maybe more to the point of what you were talking about with the steel tariffs is like his industry drivers where changes of industries, growth of industries, or decline in industries creates market activity. So an example is, for instance, coal plants, right? Coal plants turn out use a lot of water and the coal industry is sort of there’s a lot of shutdowns happening and a lot of shutdowns projected over the next decade, across the western US and the water rights associated with those coal plants. You know, it’s a curiosity, where will those water rights end up? Will the owners look to sell those water rights and to what uses? Yeah, I mean, so that that creates market activity, because there’s been change in industry.

Emily Lewis 32:31
So can I ask you about another one, though? I mean, and this is one of the questions. I think this is the big question. Do you think that technological innovation in itself is a driver in the sense that like, if we all of a sudden move to, you know, more efficient sprinklers and our water laws adjust to allow for a right to the conserved water from, you know, implementing a conservation program, You know, like, this gets back to your question of, do we need the market in the first place? But like, if suddenly we, quote, unquote, make more water available through technological advances, do you think that in itself is to create market activity? I guess, it depends on where you are. And it depends on how overly appropriated you are and what the need is. Because I think one of the questions we think about is like, where do we spend our time, money and resources? Like in Utah, we have this huge push to do kind of like statewide secondary metering, which I think in itself is like a very good goal. But the question is like, that really is like the most impactful when you look at it like at the local level, you know what I mean? So as a statewide policy, there’s a question of whether or not we should be putting our money and our political energy behind that. And so for me, I feel like there’s like a very large, like I just had a great discussion with Representative Tim Hawkes and Jeff DenBlykker, from Jacob Engineering about the Utah Agriculture Optimization Task Force. And so we’re putting all this time energy and resources into looking at ways to more efficiently use our water. Like, do you think that in itself is just making more water available for use is a market driver?

Brett Bovee 34:04
It could be. You know, I’ll think about one piece of this, which is just sort of how municipalities acquire water rights. And what some people don’t realize, at least in most places, is that the water rights are acquired one time when the house is built, in most places you don’t get you don’t get a certificate of occupancy to live in that house until water rights have been dedicated to the municipal provider or money has been dedicated to municipal provider to service that house. And so once those water rights have been either acquired, or money’s been dedicated for them, it’s a one time kind of transaction, if you will, and then how that house uses water from then on out, really has no, it doesn’t really influence the municipal water entity unless the municipal water entity changes its management. Let me explain a little bit more. So say you have a house, and that house dedicated half an acre foot of water rights to get water service from the municipal provider. Now that municipal provider went out and either own that half acre foot now or they went out and bought a half acre foot, at some point to to serve that house. Let’s say that house uses three tenths of an acre foot forever, you know, so there was two tenths of an acre foot of savings, because there were sprinkler efficiencies, because there were new toilets, whatever. But unless that municipal provider says, Okay, the next house that comes to me, you don’t have to provide as much water, because I have some leftovers from the other house that’s using less that dedicated the half an acre foot. Unless that management takes place, you know, there’s not really a reduction in water acquisition by the municipality. Does that make sense?

Emily Lewis 35:56
It does.

Brett Bovee 35:57
It really boils down to that, that one time transaction when a house is built, and a municipal provider says, “Yes, I’ll provide service.” That’s the point where water rights often change hands. But once that transfer has happened, that house using less water really doesn’t affect the water rights that have been acquired by the Muni, they stay with the Muni.

Emily Lewis 36:18
Right. But I think that question is that is is the management like, you know, we’ve been talking a lot about like, another bill that came up this year in the Utah legislature was whether or not public water suppliers should be required to do an American Water Resources Association. WWRA? Maybe it’s AWWA?

Brett Bovee 36:37
Yeah, AWWA.

Emily Lewis 36:37
Yes, so many acronyms. But the, you know, there was a promotion of doing a water audit. And the purpose was to find that point two acre feet, so they could reallocate it, you know, and so, as water gets tighter, and the low hanging fruit gets higher, you know, I think that management will go that direction.

Brett Bovee 37:00
Yeah, I think it in some ways it needs to, because if you think about it like in the municipal sector, we’ve been very successful in conservation over the years. I mean, this is, you know, almost every state, if not every state in the West, there’s been success in municipal water conservation. And so you would think that the municipalities, you know, because of that, that dedication process that I just talk through, you would think that they have some amount to be able to accommodate new growth, without continually acquiring new supplies and water rights. But it really, you know, the interesting thing is, while I say that municipal water providers are, are very risk averse, for good reason, like shutting off taps, or heavily constraining people’s household water use is, you know, a non starter. And so, when you start to play with these, oh, you should have this water to serve new growth, doing so just creates risk. Right? And so, there’s not an appetite often to do that.

Emily Lewis 37:58
Well, I think the other thing is that, while these are very good gains, and very, very important place to fit, you know, focus or emphasis, especially in the face of additional growth, you know, it’s still in the state of Utah, I don’t know what the percentage is, and other states, but like agriculture, still 80% of the water use anyway. And so like, I do think like, this kind of comes back to this, you know, we can see technological innovations and conservation in the municipal supply, or, you know, ultimately helpful, but not effectual until there’s management changes. I think on the agricultural side, though, like, that’s, there’s so much emphasis over there. And if we can find ways to manipulate the data know what we have, to me, it seems like it would increase market activity.

Brett Bovee 38:43
Yeah, and it really gets to what I find interesting is, it really depends on where the agricultural activity is. And does that provide any benefit to other uses? That would that have a demand? Right,

Emily Lewis 38:58
That driver?

Brett Bovee 38:59
Well, yeah, like, you know, I’m just only think about Utah. So say you were like, if you’re in, you know, Southern Utah somewhere, and you had a pivot that put a new drops in so they have high efficiency, low elevation, sprinkler nozzles, and they’re more efficient, they’re using less water. Like that doesn’t really help the Salt Lake City situation, right? Yeah, I think the challenge is, it is true that agriculture uses large percentage of the water on a statewide basis. But but water is heavy and expensive to move. And so what you really have here, these little localized decisions, which I think actually you mentioned earlier, you have these localized decisions happening, and it involves some agriculture, but not like that big 80% just because savings here don’t mean fulfilling that need or demand over here.

Emily Lewis 39:50
Yeah, I always try and tell people water’s like the stock market, but not. Because I feel like we do a lot of these and you know, not to knock stock market, but you know, so half of water is paper and half of water is practical, you know, and the point being is the practical doesn’t work, the paper will never work. And so like in getting those to the lineup, I think is like half of our job right now.

Brett Bovee 40:15
Yeah, but I think that a lot of our decisions right now are, as you know, I mean you have several clients, a lot of water decisions, they’re very localized, unless you’re a big entity like maybe Central Utah Water Conservancy District, you know, stuff happening thirty miles away or forty miles away, it doesn’t really effect your decisions you have to be making top meet the objectives you need to meet.

Emily Lewis, 40:38
Yeah, unless you start talking in a big scale, you know? Like through this water banking effort in the state of Utah we always talk about the Arkansas Valley super ditch where you have some kind of large scale association that decides to do a project of lots of acreage.

Bret Bovee, 40:56
Right but the, I mean, I have a little bit of reading on that, but the interesting thing about that is, that is true, it’s a lot of acreage across a river valley but the point of diversion is really all back up in Pueblo Reservoir so again it’s like the users are whoever can pull water out of Pueblo reservoir. It’s like a fairly local point of use but a big area of acreage that kind of feeds back up into that, Yeah. So the entities who are interested in the Super Ditch water are entities that have a pipeline out of Pueblo Reservoir and if you don’t it really changes the dynamic of if you can even use that supply.

Emily Lewis, 41:34
Fascinating. Okay, well Brett this has been awesome! I think we probably talked for a really long time about all kind of things

Brett Bovee, 41:43
I think we did! I think we did.

Emily Lewis, 41:45
Well I want to thank you for your time today and really, your expertise and hopefully we will get to work with you in the state of Utah in the next little bit, but, very exciting activities you guys have going on over there. It’s a great time to be in the field and I am glad to call you a colleague.

Bret Bovee, 42:03
Yeah, likewise! And yeah, bring me on again in a few years, that’d be fun.

Emily Lewis, 42:09
Years?! I mean there’s a lot of people out there but I am going to try and milk all my contacts. Alright, thanks, talk to you later.

Bret Bovee, 42:18
Bye.

Brian Lebrecht,
Nothing said in this podcast should be taken as providing legal advice or as establishing an attorney client relationship with you or anyone else. Thank you for listening

Transcribed by https://otter.ai

One thought on “Ripple Effect 06: To Market, To Market

Comments are closed.