To place a value on water rights requires the ability to perform a number of analyses and to keep abreast with the market conditions, the latest water rights transactions, and new issues in the water rights market and administration.
HRS has performed water rights valuations for several thousand acre-feet of water. These valuations were for municipalities, water districts, State and Federal entities, ranches and ditch companies, and the private sector. They cover geographic areas including the Colorado River Basin, Arkansas River Basin, the Rio Grande, and South Platte drainage. Some of these valuations have been used in 1) sales transactions; 2) estate transactions and valuation; 3) valuation for conservation easements; 4) condemnation actions; and 5) other circumstances that require a value to be determined.
Water Value Methodologies
Traditional methods of water valuation have generally followed the standard methods for real estate appraisal. The commonly used methods are:
- Market transaction comparison
- Income-stream analysis
- Cost to replace
- Supply, tap/commodity fees
- In-lieu fees
Historic Use Analyses
The value of the water in Colorado and other western states is strongly tied to the prior appropriation system. Establishment of a property right to water requires demonstration that water has been used beneficially. Under this system, market value of water is directly proportional to its transferable consumptive use based on one or more traditionally-accepted uses.
HRS routinely performs these historic consumptive use analyses. They are conducted using many approaches, including aerial photograph interpretation, field investigations, analyses of records, and interviews with irrigators.