Did Middle Park sell $1 billion of water for 10 bucks?

Since Dwight Eisenhower was president, tiny Middle Park Water Conservancy District has hoarded a precious gem: 20,000 acre-feet of water rights on Troublesome Creek, near Kremmling, and the authority to build a dam for it. 

In October, Middle Park gave its treasure to a private rancher. For $10.  

The Middle Park district, which primarily serves ranchers and hay growers in Grand and Summit counties, has only a few hundred thousand dollars of revenue each year, and no ability to raise potentially tens of millions of dollars for environmental permitting and hundreds of millions for construction, the district’s attorney said. 

The private buyer, Circle C Ranch Kremmling LLC, owns the property on Colorado River tributary fork East Troublesome Creek northeast of Kremmling, where Middle Park had been planning a dam for decades. 

If Circle C ever does build the reservoir, the water would be used by local ranchers and the new owners would be barred from selling it to Front Range water users or anywhere outside Middle Park, attorney Kent Whitmer said. 

“They’re interested in preserving agricultural values in Colorado,” said Circle C’s attorney, David Jones, of LCWater LLP. 

But Colorado River advocates who oppose new dams and diversions on the lifeline waterway call the deal unprecedented. They say Middle Park never put the billion-dollar water rights up for wider bidding, and that dam permitting and construction on Troublesome Creek could never be financed just by local farm water sales. 

“We have serious concerns that the water may be developed for purposes of selling to the Front Range,” said Gary Wockner of the nonprofit Save the Colorado/Save the World’s Rivers, which frequently objects to and sues over dam and diversion projects throughout the state. 

Save the Colorado has filed as an objector in state water court over the Troublesome Creek rights transfer. Those holding conditional water rights must periodically seek water court reaffirmation of the right if a dam has not been built, and prove they have made some effort to develop storage even if a project is years away. 

Wockner noted the proposed dam on Troublesome Creek, long dubbed the Haypark Reservoir, would be just a few pipeline miles from the Windy Gap Reservoir project at Granby that helps agencies transfer Colorado River water into Front Range reservoirs. 

“If this project were built and available to the Front Range, 20,000 acre-feet would be worth probably around a billion dollars, because Colorado-Big Thompson shares right now are going for about $50,000 to $60,000 per acre-foot. So that raises a lot of very serious questions,” Wockner said. “We want the people of the district to know.” 

Save the Colorado has also asked the Colorado Water Conservation Board, which has no direct authority over a project like Middle Park’s, to become another objector in water court, Wockner said, “in order to protect statewide interests.” 

“I’ve never seen anything like this before, where a public entity gave away a water right to a private corporation,” he said. 

The water district said calling the deal a $10 transfer is misleading, and an artifact of boilerplate deed language. 

“The real consideration being given for this deal is the trade of the water rights by Middle Park for the commitment of Circle C to pay for and develop those water rights, with the ultimate goal being that Middle Park receive some portion of the developed water rights at no cost in perpetuity and that the remainder of the water rights be developed and utilized by Circle C and the constituents of the district in Grand and Summit Counties,” Whitmer said. 

Building the reservoir would also be beneficial to the Colorado River environment on the Western Slope, Whitmer said, counter to what Save the Colorado is arguing.

“It is likely that this reservoir will be filled during spring run-off,” Whitmer said, “with releases then being made at times when the Colorado River typically has low flows and high temperatures.”

Save the Colorado’s objections have been assisted by the University of Denver’s Sturm College of Law Environmental Law Clinic. The filed objection includes protests that the Middle Park water right is untenable because the 1959 appropriation is quite junior for the area, and is often out of priority for storing runoff. That problem will only get worse with climate change taking more moisture out of Grand County headwaters areas, the objection states. 

Attorneys for Middle Park and Circle C said the Haypark rights transfer has been discussed openly in public meetings of the water district for a long time. They said Circle C’s owners could try to make a profit from local water sales if the dam is ever built, but added that there are more restrictions on speculation by private entities than there are for public water agencies. 

“It really won’t look a lot different than if a government entity owns the water rights, or if a private party owns the water rights, because either party is going to look to sell that water to the people within the district boundaries at market rate,” Whitmer said. “How the directors looked at it was, we’re at a decision point where it’s either abandon these water rights or try something to salvage it so that there’s the potential to have this resource available for people in our district in the future.” 

Whitmer said Middle Park’s water right on Troublesome Creek, dating originally to the 1950s and renewed periodically since, would not benefit from an open bidding process. 

“We’ve got a board of directors. They discussed it. People had an opportunity to weigh in if they thought that there was a better approach,” Whitmer said. “In general, water rights have a pretty limited market, but especially when you’re considering a major improvement on private land that would not be something that would be very marketable to other people beyond the folks that own that land.”

The agreement between Middle Park and Circle C, conveying the water right for $10, was signed Oct. 9. Middle Park’s district would get 2% of the water stored in Haypark if Circle C completes the project. 

Circle C’s owner, David Phelps, owns other ranch properties with water rights in northwestern Colorado, and wants to support local ranching and agriculture, Whitmer said. Phelps is also listed in state dam inspection records as the owner of the Little King Ranch Dam near Hot Sulphur Springs.

Jones confirmed that Phelps is the chairman and CEO of Merlin Cyber, a Virginia-based cybersecurity firm with a host of government and private contracts. 

Save the Colorado recently led the successful effort to declare Denver Water’s expansion of Gross Reservoir in Boulder County to be in violation of permitting laws. A U.S. district judge ordered Denver Water into negotiations this month with Save the Colorado over how to mitigate damage from the ongoing dam expansion. The judge ruled the U.S. Army Corps of Engineers broke federal environmental laws when it issued the expansion permits without considering alternatives.