Jeff Scheid/The Nevada Independent
The Humbolt River flows near Elko on Tuesday, Feb. 6, 2018.

By Daniel Rothberg, The Nevada Independent

U.S. Water and Land, LLC is in the opportunity business. It knows that where there is scarcity and volatility, there is opportunity. And it knows that where there is water, there is often both.

It also knows that few places deal with scarcity and volatility as directly as the Humboldt River, a small river that Mark Twain once described as a “sickly rivulet” but the economic lifeblood for several Northern Nevada communities. Knowing this, the entity — an investment vehicle for a New York hedge fund — filed an application late last year with Nevada’s top water official to stake a large claim for the last available rights to one of the state’s most contested waterways.

In the months since its application, Nevada’s wildlife department and four rural counties — Elko, Lander, Humboldt and Pershing — have filed protests. If the rights are granted to the company, they argue, it could fuel speculation, harm existing water rights and damage the environment. All parties will present their cases in a public hearing, according to the state engineer, Nevada’s top water official who is charged with approving or denying applications for new water rights.

What is striking to many is not the ask itself but how much water the company is asking for. The entity, according to its application, wants the right to divert up to 300,000 acre-feet of flood waters from the Humboldt, the same amount as Nevada’s entire Colorado River allocation.

If it gets approval, the company’s plan would be to reinject the water into the ground, storing it in an aquifer. U.S. Water and Land is an owner of Winnemucca Farms, Nevada’s largest agricultural operation that has at times grown potatoes for Pringles and peas for dry snacks, and it has said that some of the stored water could be used for irrigation and to protect its existing rights. But the company has also said that it could sell the Humboldt River water to a buyer in the future, something that worries rural counties.

Dave Mendiola, who works for Humboldt County, said some commissioners worry the long-term plan is to ship Humboldt River water to cities.

“It’s a bad thing if you are a rural county like we are and your economy is based on agriculture and mining and things like that. Water is obviously precious to places like Las Vegas and Reno — at this point in time, they are growing rapidly,” Mendiola said. “They need water… But from our perspective, that’s water we could use when the drought comes and we go four or five years [with less water]. That’s water we want to use to keep our existing businesses in shape.”

U.S. Water and Land sees things differently. Sam Routson, a representative for the company, said in an interview that it’s true the water could end up being sold to a buyer, whether it be agriculture or a municipality such as Elko or Lovelock. But he said that if the rural counties are interested in using the water, they should partner with his company to store the water because right now, he said, the water that his company wants to acquire — 300,000 acre-feet of flood water — doesn’t benefit anyone. He said it goes to waste.

“The water we have filed on is available,” Routson said. “For the last hundred years, that flood water has flowed out of the system into a waste situation, which we think is a shame when it could be put to beneficial use for a multitude of other uses and that’s what we’re proposing.”

Where the water comes from

Compared to the Colorado River, the Humboldt is small, but the amount of water it carries to farmers, ranchers and towns downstream varies significantly from year to year.

“There’s a huge swing on the amount of water that’s available,” said Steve Del Soldato who works for the state engineer and is tasked with allocating Humboldt River water.

That “huge swing” hinges on snowpack in the mountains around Elko. In 2013, snowpack was so sparse that little water melted into the river during the irrigation season. Del Soldato, who keeps track of average daily flows, said the river hit a record low when about 34,000 acre-feet passed through Palisade, the ghost town that separates the upper and lower basins. In 1984, the best year on record, about 1.1 million acre-feet came to Palisade.

Del Soldato’s job is to allocate whatever Mother Nature hath brought among the users along the river who have existing rights to water. If there is any water leftover, it is allocated to the users that have rights to the river’s flood waters.

As it stands, Lovelock farmers, through the Pershing County Water Conservation District, have rights to some excess water. The Nevada Department of Wildlife also holds some of these rights to sustain wetlands habitat around the river. If there is still water left, it flows through the 290-mile long river and into the Humboldt Sink near Fallon.

When water ends up in the sink — a dry lake most of the time — Routson sees it as a waste. Instead, he believes the extra water in flood years should be captured and stored. And it’s what motivated him to file for water rights on 300,000 acre-feet of unappropriated flood waters at the end of last year.

The investor and the LLC

This is hardly U.S. Water and Land’s first venture in Nevada.

In fact, it is directly tied to its investment in Winnemucca Farms. And U.S. Water and Land is part of a larger firm that has experience across the West. It is listed online as an investment vehicle for Water Asset Management, a New York-based hedge fund that has water-related holdings across the West.

Many of its investments have stirred controversy in local communities. In March, it purchased ranches around Colorado’s West Slope, a move that caught the attention of local water officials long concerned of speculation that could lead to the sell-off of agricultural water to cities. The firm also has a stake in Cadiz Inc.’s project to sell Mojave Desert water to Southern California.

One of its primary goals is to market water, and this is not the first time it has looked at the Humboldt River. In a long profile of the company that ran in ProPublica and The Atlantic two years ago, Water Asset Management’s chief investor, Disque Deane Jr., was eyeing a ranch near Winnemucca that had surface rights to the Humboldt River, not just groundwater rights.

According to Water Asset Management’s website, Winnemucca Farms has about 36,000 acre-feet in groundwater rights from the state. The firm’s website, under a description of U.S. Water and Land, said that the LLC “will seek to develop water resource activities including the sale/lease of water for: industrial, power generation and municipal and regional water users.”

The application pending before the state engineer, if approved, would allow it to do that. On good hydrological years, the LLC would be able to take up to 300,000 acres of flood waters out of the Humboldt River, pump it near Winnemucca Farms, reinject it underground and store it.

“The goal of the proposed project is to provide water to recharge the Paradise Valley aquifer that supplies groundwater to Winnemucca Farms to ensure the long-term sustainability of pumping in the area,” water attorney Paul Taggart wrote in a response to the protests. “If excess stored water is available for recovery above that needed to protect the Applicant’s existing rights, that water may be applied for other beneficial uses under future applications.”

Dry years are the real opportunity

Even as the application bets on years where excess water flows through the Humboldt River, several water managers believe the real opportunity for U.S. Water and Land is in dry years.

The ongoing drought hit the Humboldt River especially hard. In 2013, the river hit a record low, and several users did not get their full allocations. The greatest impact was on downstream users — Pershing County farmers and ranchers. In the aftermath, those farmers took the issue to court, suing the state engineer in 2015. They had asked the state engineer to curtail users that pump groundwater in connected basins, a request that sparked outcry among businesses, cities and farmers across Northern Nevada.

Western water law is governed by a tenet known as “first in time, first in use.” It’s a system in which the water users with earlier rights get a priority to water first during times of scarcity. That meant that many of the Pershing County farmers had a priority right to water that they weren’t getting even though the upstream groundwater pumpers, with junior rights, were getting water.

To avoid the lawsuit, the state has been working on a plan to conjunctively manage the river and has been working on regulations. Under the proposed rules, some groundwater users would financially compensate surface water users harmed by drought. And curtailment still looms. In all of this, there could be a demand for the water that U.S. Water and Land wants to store.

“It could be used to supplement water demands in Pershing County,” Routson said. “Or it could be available to others that would need water to meet their needs, whether its in farming, ranching or municipal use — Elko, Winnemucca, even Lovelock, Battle Mountain.”

Keep rural water rural, protesters argue

Eight entities have filed protests objecting to the project.

The applications provide a litany of arguments against the project. It is speculative in nature, some of the protesters say. Another protest from Lander County argues that no decision on the application should not be made until the litigation and conjunctive management regulations are settled. The Nevada Department of Wildlife wrote of several environmental concerns.

“The approval of this application would negatively impact a currently functioning flood plain and its vegetative plant communities, Ryepatch Reservoir and associated fish and wildlife species,” wrote the Nevada Division of State Lands, which filed on behalf of the wildlife department.

The Humboldt River Basin Water Authority said the “application is for a substantial amount of water which, if approved, could have a significant impact on the future management of water in the Humboldt River Basin as well as the economy, environment and way of life.”

Pershing County Water Conservation District was one of the entities to call the application “an unlawful attempt to tie up waters of the Humboldt River System that are not currently available.”

“We protested it to be a participant in the game,” said Bennie Hodges, the manager of the conservation district. “They have to prove that they are going to put it to beneficial use. They have to prove that the project is economically justifiable. They have to show that if presented the application, that it will not interfere or harm any existing rights on the Humboldt River System.”

Taggart, the water lawyer representing U.S. Water and Land, addressed these concerns one by one in a 30-page reply that argues the proposed project could benefit the system and is legal. It is better to to develop the water, Routson argued, then let it evaporate off the Humboldt Sink. He said that the company has offered for the rural counties to join as partners on the project.

“This water that is being applied for is already going out of the system,” Routson said. “This water leaves the system and goes out of Pershing County and goes into Churchill County. It goes out into the sink and in certain years and flows, it will go around into the Carson Sink. This water is already leaving the system. So their objections ring just a little bit hollow.”

Tony Lesperance, a columnist and a former head of Nevada’s Department of Agriculture, lives on a ranch in Paradise Valley, the same area as Winnemucca Farms. He has been writing about the project and similar ideas for years. Lesperance is strongly opposed to giving the company a right to that much flood water, arguing that it should stay in the area to support rural economies.

“They are interested in getting their hands on as much water as they can. And once they’ve got enough of it there, they’ll put together a project to get water to Reno and Sparks and Fernley. I guarantee you. Most people don’t understand that. Most people don’t believe it. But I’ve lived a long time. I’m 80-some years old. I’ve seen quite a few things happen that weren’t supposed to happen. I have no trust whatsoever,” he said. “Water is going to flow to money every time.”

“It takes someone that has a pretty wild imagination,” he added. “I’ll give him that.”

This article reprinted with permission from The Nevada Independent. Those interested can email contact@thenvindy.com