Why Colorado towns and farms are spending a hundred million for a power station : The Indicator from Planet Money In Western Colorado, towns and farms are banding together to pay a hundred million dollars for water they don't intend to use. Today on the show, how scarcity, climate change and a first-dibs system of water management is forcing towns, farms and rural residents to get spendy.

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How Colorado towns are trying to get some water certainty

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SYLVIE DOUGLIS, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

ALEX HAGER, BYLINE: Hey, Darian, I've got a question for you. How much do you pay for water?

DARIAN WOODS, HOST:

Well, hi there, Alex Hager, Colorado River reporter for KUNC in Colorado. Well, the answer to that question is I don't really know. It's all built into my rent. But, let's say - I don't know - $200 a year.

HAGER: All right. Well, how much would you pay for millions of glasses of water, like, a whole river full of water?

WOODS: A river full of water? I mean, it sounds like a management consultant interview question, but I don't know - let's multiply my bill by a million. A couple hundred million.

HAGER: Yeah, it would get expensive, and we have proof of how it is getting expensive. What if I told you that right now, there is a group in Colorado spending $100 million on access to water from the Colorado River, and their plan is to leave it in the river totally untouched?

WOODS: It's a deal. This is THE INDICATOR FROM PLANET MONEY. I'm Darian Woods.

HAGER: And I'm Alex Hager.

WOODS: The Western U.S. has less water to go around every year thanks to climate change, but it also has more people turning on their sinks, showers, and sprinklers.

HAGER: That is forcing cities, farms and even states to get anxious and spendy to make sure those taps keep flowing in the future. And for one community, that means paying for the status quo. We'll explain after the break.

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WOODS: There's something unusual going on in Colorado right now. People from a rural part of the state are about to pay $100 million to buy water and then do nothing with it. And to understand why, we have to look at how water in the Western U.S. is managed. As we've covered on THE INDICATOR before, the Colorado River is super unique.

HAGER: Yeah. Right now, it supplies 40 million people across seven states. It's also used by 30 Native tribes and parts of Mexico. Without it, the West would not look the way it does today. It's been a big part of why cities out here have been able to grow, like Denver, LA, and Phoenix.

WOODS: And not to mention agriculture. Water from the river flows to tons of farms and ranches around the region. Parts of Southern California and Arizona use it to grow about 90% of the nation's wintertime vegetables.

HAGER: The Colorado River is crucial to life and the economy in the Southwest and, because of the food that's grown with its water, to the rest of the country, too. But the way the water is managed here leads to some big tensions. We're talking fights that go back over a century.

WOODS: And we have an excellent episode on that, which we'll link to in the show notes.

HAGER: I recently stopped by one place where those fights are playing out right now. It's smack-dab in the middle of Colorado in Glenwood Canyon.

WOODS: OK, I'm picturing snowy mountains and a beautiful rocky canyon.

HAGER: That's right. Exactly. Craggy rock walls covered in snow and a big rushing river next to a highway. And pinched in the middle of it all is this little building. It's really not much bigger than a house, but inside is the Shoshone Power Plant. I visited with Amy Moyer.

AMY MOYER: It is a nondescript brown building off of I-70 that most people don't notice when they're driving. But if you are in the water world, it holds the key for one of the most interesting and important water rights on the Colorado River.

HAGER: Amy is with the agency paying 100 million on behalf of the communities in Colorado's rural Western Slope. She says the power plant itself doesn't actually produce that much energy. The really valuable thing is the water it uses to turn hydroelectric turbines inside. That water flows through the plant and downstream to a bunch of different people and industries in western Colorado. And it's belonged to the power plant for more than a century.

MOYER: When we stand on the banks and see rafters flowing through Glenwood Canyon, when people are drinking water on the west slope, it really all ties back to this building and these historic water rights.

WOODS: The fact that it's been around for so long is pivotal when it comes to water in the West. There is a very particular system managing water there. And it's founded on an idea called prior appropriation. And that basically means if you were the first to use water, you'll be the last to lose it when there is a shortage. We talked about that system with water economist Chris Goemans from Colorado State University.

CHRIS GOEMANS: It would be if we had a car out on the street, and you showed up, and you drove it today. And that meant every day moving forward that you would have the first right to drive that car.

WOODS: And it doesn't really matter what you're using it for, if you're using it efficiently or where you're using it. It kind of just matters that you are using it first.

HAGER: And the Shoshone Power Plant - it got to the proverbial car first. It's been using water since 1902, and it's legally allowed to use a lot of water. So whoever owns it wields a ton of power.

WOODS: And this gets at the core of what's going on here, a century-long power struggle over water in Colorado.

HAGER: Right. The state is split in two by the Rocky Mountains. On the west side, where the hydropower plant is, it's pretty rural. You've got famous ski towns like Vail and Aspen but also a bunch of agriculture, big cattle ranchers and peach farms, that kind of thing.

WOODS: And on the other side of the mountain, in the east, you've got big, fast-growing cities that make up more than 80% of Colorado's population. Denver and all its suburbs - they might need to find more water to sustain all that growth.

HAGER: And that's got the rural side worried that all the growth will change the status quo. It'll push cities and suburbs to seek out more water and pipe it across the mountains away from the farms and towns in the rural part of the state and the plants and animals that live in and around the river. Now, it's worth mentioning that some of those fast-growing cities have said, we're not going to take that water. You do not need to worry.

WOODS: But at the end of the day, water users on Colorado's rural Western Slope are still anxious, and now they're putting a price tag on getting rid of that anxiety, a $100 million price tag. Chris says they're placing dibs and buying some peace of mind.

GOEMANS: And so if I'm a user on the West Slope, I'm really concerned about what might happen to my livelihood, to the ecosystems that exist around where I live. Uncertainty is so prevalent in everything having to do with water that I'm just trying to buy certainty.

HAGER: And there's something else at play here, a concept that comes from econ 101 - externalities. The classic example is air pollution.

WOODS: And it basically goes like this. Say you have a factory making a product. It puts smoke and chemicals into the air as part of its process, and all the people downwind of that factory have to deal with the impacts of that pollution.

HAGER: But those people are not involved in the buying or selling of the stuff that gets made at the factory. So the pain they feel from the pollution isn't considered part of the cost. The air pollution is a consequence of the factory, but it doesn't influence the price of what's being made there. When it comes to river water, Chris says, there's one externality that comes up pretty often, especially when it comes to hydropower.

GOEMANS: One of the really unique aspects of water is that when I divert an amount of water, a portion of that can return back to the stream.

HAGER: The Shoshone power plant pulls water out of the river and uses it. But once the water passes through electric generators, every last drop goes right back into the river. So by the time the river reaches the cities and farms downstream, the amount of water they get has a lot to do with how it was being used upstream.

WOODS: For a long time, water left in the Colorado River has been an externality, a positive one, albeit unintended, a consequence of a water user like a hydropower plant who uses the river but doesn't actually consume it. It was a consequence that didn't necessarily matter to the person buying or selling the water, just one that impacted a third party.

HAGER: But in this case, that third party, the towns and farms of Western Colorado - they're trying to control their own fate. Water users in those rural communities are banding together and intervening. Chris says they're scared the cities could beat them to it and use the water in a way that doesn't leave as much in the river for them.

GOEMANS: They're stepping in, and they're kind of guaranteeing that their voice in this is being reflected in the market.

WOODS: Stepping in with that $100 million price tag because right now, the Colorado River is defined by an uncertain future. It's shrinking due to climate change. And the people who make the rules about how it should be shared going forward - well, they're caught in a standoff, and they can't agree on how to keep divvying up a water supply that's projected to keep getting smaller.

HAGER: And for the players caught in the middle of that standoff, unsure about how policymakers' big decisions will impact them, it can be worth it to put up big bucks and buy some control.

WOODS: This episode was produced by Julia Ritchey, with engineering by Neal Rauch. It was fact-checked by Sierra Juarez. Kate Concannon is our editor, and THE INDICATOR is a production of NPR.

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