By Vernon Robison
Moapa Valley Progress
Submitted April 23, 2008
The Southern Nevada Water Authority (SNWA) Board voted on Thursday, April 17 to approve an item which set aside $40 million for the acquisition of additional water rights on the Muddy and Virgin River systems. These rights are intended to provide additional culinary water to Las Vegas valley residents. The action paved the way for the SNWA to purchase and acquire up to a total of 50,000 acre feet from the Virgin/Muddy River systems. An acre foot is equal to 325,851 gallons and is enough to provide water to roughly two Las Vegas households for a year.
The proposal was the result of over 18 months of negotiations with the Muddy Valley Irrigation Company (MVIC) and Virgin Valley water shareholders. The proposal set a new SNWA bid price for MVIC water at $50,000 per preferred share. For the first time, it also offered options to shareholders to lease their water shares to the SNWA.
MVIC General Manager, Scott Millington, saw the proposal as a benefit to all MVIC shareholders. “We have worked long and hard to put this package together,” Millington told the SNWA Board. “We feel that we have come to something that will benefit every shareholder, both large and small.”
Muddy River water rights are of significant value to the SNWA. This is because the Muddy River water rights fall under a decree dating back to the 1920s and predating nearly all other legal water agreements in the state. The use of Muddy River water rights are not affected or limited by seasonal water shortages on the Colorado River system. Furthermore, Muddy River water is relatively easy to get, flowing through a natural conduit, The Muddy River, from its source at Warm Springs into Lake Mead.
Because of this water’s inherent value, the SNWA has been acquiring MVIC and Virgin River water shares since the 1990s. The SNWA currently owns about 30% of the total MVIC shares and about 40% of Virgin River shares at Bunkerville.
In 1996 and 1997, the SNWA entered into agreements with the MVIC and the Moapa Valley Water District (MVWD) regarding what was viewed at the time as aggressive SNWA water acquisitions in the community. Among other things, these agreements limited the amount of water that could be transferred by the SNWA out of the Moapa Valley community to 5,000 afy. In return the local water entities, agreed to assist the SNWA in gaining access to the 5,000 afy it was allowed to transfer.
Access to the water presented a problem, however. SNWA hoped that arrangements could be made to allow the river water to flow through Moapa Valley into Lake Mead and then be taken out at existing facilities on the other end of Lake Mead for use in the Las Vegas valley. Until recently however, this was not allowed under the so-called “Law of the Colorado River”. This law dictated that once water entered the Colorado River system it fell under the “Law of the River”, a complex set of interstate agreements dating back to 1929. These agreements regulate the use of Colorado River waters among the seven states which benefit from the river’s water.
But in May, 2007 an historic agreement was reached and signed among these seven states. This agreement, among other things, allowed SNWA to take tributary water from the Muddy and Virgin Rivers after it had flowed into the Lake and not have to count it against Nevada’s 1920s Colorado River allocation. In short, this would provide the SNWA with a solid block of water as a cushion to shore up SNWA supply if its Colorado River allocation was ever cut back due to drought shortage.
The proposal before the SNWA on Thursday also assumed the success of ongoing negotiations with the Moapa Valley Water District (MVWD) seeking to eliminate a 5,000 afy restriction put in place several years ago by the MVWD on transferring Muddy River water out of the community. The SNWA proposal would also allow the MVWD the option to acquire 1/3 of all SNWA Muddy River water for use in the MVWD service area, up to 6,000 afy. It would also allow the MVWD to exchange that non-potable Muddy River water for potable groundwater from Coyote Springs to which SNWA currently holds permits. This would eliminate the need for the MVWD to build an expensive water treatment facility to bring Muddy River water up to household use standards.
This agreement with the MVWD is yet to be finalized.
“We still don’t have anything down on paper with them,” said MVWD General Manager Brad Huza. “I’m a little surprised that they went forward with all of this without our agreement in place.”
But SNWA officials were confident that an agreement with MVWD could be worked out. “We are probably 80-90% of the way to an agreement with the MVWD,” said SNWA attorney John Entsminger. “[Thursday’s SNWA Board action] just sets the parameters for our negotiations and, hopefully, it gives us enough that we won’t have to come back to the board to finalize that agreement.”
As part of Thursday’s agreement, the SNWA also pledged to help fund maintenance and upkeep of the aging Muddy Valley Irrigation Company distribution system of ditches and pipes. This adds up to nearly $250,000 in infrastructure improvements. “We are making the MVIC, in effect, our water manager for this block of water,” said Entsminger. “So we will work cooperatively with them to make sure that the water is efficiently delivered to Lake Mead.” This provides a tremendous benefit to MVIC shareholders, said Irrigation Company Manager Scott Millington. “Our infrastructure is old and in bad repair,” he said. “This has always hurt the small shareholder the most, because he can’t afford to fund repairs to the decrepid ditches to get the water to him. This will make sure that the last guy on the last ditch will be able to still get his water far into the future.”
To determine a fair bid price for water shares, the SNWA compared current market value of water in other areas. Bid prices for MVIC water shares were set at $50,000 per preferred share and $4500 per common (seasonal winter water) share. Bids for Mesquite and Bunkerville shares were set at $73,000 and $80,056 per share respectively. Differences in the quantities of water included in each share of Virgin River, as compared to Muddy River shares, account for the difference in share prices.
“Those prices might seem pretty high to some people, but when you take a closer look, the fact is, they probably should be even higher,” said MVIC Board Chairman Todd Robison. “But having this bid out there doesn’t prevent shareholders from seeking a higher price elsewhere. What it really ends up doing is setting a new floor on the market.”
Robison said that he has already seen water shares trade for amounts in excess of $50,000 in recent weeks.
For the first time ever, the SNWA is also offering to lease water from shareholders for terms from as little as a year to as much as ten years. The lease price for MVIC shareholders is set at $1700 per year for each preferred share and $155 per year for common shares. Lease prices offered on Virgin River shares are between $2353 and $2637 per year per share.
Millington explained that the benefit to MVIC shareholders was that it opened up a market for water where the market was scarce before. “This agreement is really about creating options for shareholders,” he said. “For the first time, they have the ability to benefit from an asset that has had a limited market before.”
Millington said that the ability to sell and lease water shares had a direct affect on people’s lives. “Most people who are selling their water are doing it because they have to,” Millington said. “They have scratched out a hard living farming in the community and now they have a financial need to fall back on that resource. They are usually sad to do it, but they are glad that it is an option. So this set of agreements is really about providing choice to them.”
Before the SNWA Board took its vote, it opened the meeting to hear concerns regarding the agreement. County Commissioner Tom Collins expressed concern that the agreement would hurt small farmers in the community.
Collins owns and resides on an 18.5 acre ranch in Logandale. While Collins said that he owns a “few shares” in the MVIC, he rents most of the water that is needed to maintain his acreage. It is a customary practice, in these cases, for the one leasing the water to do so for the price of the annual MVIC assessment, which is $40 per year. Collins worry was that the proposed SNWA lease option would price him out of the market. “My concern is the shock waves that go through the community when people go from renting water for $40 per year, to jumping up to $1700,” Collins said. “This puts the shareholders value versus the issue of folks who are doing hobby farming or horse ranching.” Mainly because of Collins’ concern, a third option was added to the proposed agreement just before the Board Meeting commenced that morning. This option allowed the SNWA to offer a “callable lease” at a discount. For a lease price of 1/10 the regular lease price (or $170/share), the shareholder could continue using the leased water on local fields or yards. But if a shortage on the Colorado River was declared by the Secretary of Interior, the SNWA could “call” that water away and use it to fill the need in Las Vegas. When this option was presented to Millington he said he had no fear of it, but that he, frankly, didn’t see its necessity. “What allows a person to farm is the lease option that is already in place,” he said. “There are very few cases; maybe only a couple of instances, that would benefit with this option. Most of those are very small shareholders watering their yards, not farming.” “Even so”, Millington said, “if it gives more choices to shareholders, it would most likely be okay with the MVIC board.” SNWA Board Member, Andrea Andersen asked Millington if the decline of farming had become a major issue in the Moapa Valley community. “Farming has been declining for years,” Millington responded. “It just isn’t economically feasible. The fact is, it is tough to farm in the desert, everyone knows that. All that is left really is hobby farming and that is subsidized by full-time jobs. The natural trend has, for decades now, been away from farming. It will continue to fade away just by natural attrition.”
