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I I I I I I I I I I I I I I I I I I I 0214 CHAPTER 2 ISSUE IDENTIFICATION AND HISTORICAL WATER TRANSFERS 2.1 Introduction This Chapter includes a description of the water transfer process in Colorado by which agricultural water is moved to urban areas. The specifics of the Colorado Water Supply Company offer to purchase shares of stock in the Ft. Lyon Canal Company in December, 1991, are described as well as the response by shareholders to the offer. Issues arising from large ruraVagricultural to urban/non-agricultural water transfers are summarized. Details of all significant historical Arkansas River water transfers from agricultural use to other uses in or adjacent to the study area are presented. The thirteen transfers illustrate a great variety of impacts and issues connected with water transfers. Factors which may affect the likelihood of sale of water by rural, agricultural owners in southeastern Colorado are presented. The factors are not dissimilar from factors affecting farming elsewhere in Colorado. 2.2 Water Transfer Process in Colorado The water transfer process is basically a free market process constrained by the need to obtain governmental permits and a transfer decree from the water court. The permit and decree processes mayor may not consider the impacts on third parties. Third parties are defined for this study as any individuals, organizations or elements of the physical natural environment which are not represented as a party to the transaction in a water transfer(s). Such third parties may accrue costs or benefits from the transaction which go unrecognized in the transfer process, including objectors to the transfer in water court. Water rights may be sold with or separate from land. A buyer obtains water rights (and often associated irrigated land) by purchase from individual water rights owners, who are typically individual farmers. Unlike some other western states, water rights are seldom owned by districts or canal companies. A real estate agent or water broker often facilitates the transaction. The purchase and sale contract entered into by the buyer and seller typically states a price per share or per acre foot of transferable consumptive yield. Often, but not always, the transaction does not close until a water court transfer decree is obtained. The seller usually must agree to "dryup. lands associated with water sold as stated in the water court decree provisions. The contract may specify other obligations of the buyer and seller, and may anticipate conditions in a water court decree. The sales contract may include allocation of liability for compliance with the decree conditions, and related transaction costs, to the buyer or seller. Typically the buyer desires to obtain a firm water supply for municipal uses. The seller has a fluctuating water supply historically used for farmland irrigation and delivered through a mutual 2-1