Leases & Exchanges
Leases, Temporary Water Use Approvals & Water Banks
To promote more flexible water transactions and minimize the impacts of permanent water transfers, the Colorado General Assembly has given the State Engineer authority to approve temporary changes of water use. These temporary administrative approvals include interruptible water supply agreements, temporary loans of water to the Colorado Water Conservation Board for instream flow use, lease-fallowing pilot projects, and loans from one agricultural water user to another. The General Assembly also allows water banks in each of Colorado’s seven water divisions. Upon request by a sponsoring entity in the water division, the State Engineer will create rules for operation of the bank. This legislation allows a farmer to lease, loan or exchange legally stored water for payment without losing the water right or permanently selling it. Direct flow water rights are not included in the bank, only storage rights.
The General Assembly has also authorized the water courts to decree crop rotational management plans for leasing water as an alternative to permanent water transfers.
A water exchange can occur within the prior appropriation system. An exchange allows an upstream diverter to take water that a downstream diverter would otherwise receive if the water is replaced at the time, place, quantity and suitable quality the downstream diverter enjoyed before the exchange.
The four critical requirements for a water exchange are: (1) the source of substitute water supply must be upstream of the senior diversion calling the water; (2) the substitute water supply must be equivalent in amount and of suitable quality for the downstream senior; (3) substitute water must be from legally available sources; and (4) the water rights of others cannot be injured when implementing the exchange.
Court approval of an exchange assigns it a priority in relation to other water rights and exchanges operating in the same stream reach. If water is available in priority and the exchange will not cause injury to other water rights, the State Engineer and division engineers may allow a water exchange without a court decree. A water exchange may decrease water flows in a particular stream segment in return for substituting water into another stream segment above the water right to which the exchange is made.