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