Q: So if you can show that it has been scientifically proven that you are not mining water . . .
A: If we are not mining water out of the basin then the State Engineer has been willing to basically allow us to increase our pumping cap on our groundwater resources from the basin but that's good for everyone because we don't want to be mining water out of the groundwater basin.
Q: What does it mean to be mining water?
A: Basically, you are taking water out faster than the natural recharge can replenish the water supply. You want to maintain a balance between what you are pumping and what can naturally be recharged.
Q: We are using a combination of groundwater and surface water from the Truckee River. What is the balance between current and ongoing development and the depletion of ground water?
A: Basically, on the groundwater side, it is really important that we maintain a natural balance of what the aquifer can naturally be recharged, whether it is through mountain run-off or whatever is recharging that aquifer. It is very important that we don't exceed [that balance] on a routine basis. Maybe during a drought period you can exceed the natural recharge of the groundwater basin, but it's really important not to exceed that during normal years so that you are allowing the water to replenish itself in the groundwater aquifers. That said, in many of the basins around this area, we are bumping up against the natural recharge capability and we are actually limited on our pumpage of groundwater rights from the Truckee Meadows basin because, although we hold 50,000 acre-foot rights, we are limited to about 16,000 acre-foot of pumping per year. We are monitoring that continually to make sure that we aren't over-pumping the basin. We are doing everything we can to replenish the basin, like recharging through our groundwater wells water back into the basin to make sure that we are keeping the basin whole. The other piece of the water picture is surface water rights off the Truckee River, and currently most of our supplies come out of the Truckee River. Probably anywhere from 75-95% of our supply on annual basis comes out of the Truckee River but there are still over 40,000 acre-feet of Truckee water rights that we look at as being convertible from agricultural uses, typically to municipal and industrial uses, and that's how the water rights in this community work. It basically requires a transfer of a water right from a previous usage or a previous project to a new project in order for any new project to get a commitment for water service from the resources available in the community.
Q: So, if you want to build a casino you have to find a rancher or somebody to give you the water rights and bring them in with you.
A: Absolutely. There is a misconception that if you save water that someone else will be able to build a new property based on that or a new development based on that and that is not the case. For every new development, there has to be water rights that are brought in to the water company and converted from a previous use, which is typically agricultural in this community. A property that used to be agricultural and somebody built a mall on it for example and now there is water rights still available from that previous usage that a developer can acquire either through the Water Authority or directly from the people who own the water rights. They bring those in for what we call a water will-serve letter from the Water Authority.
Q: So, what if they want to build 20,000 homes in south Reno? Before they ever get their development plans approved they have to find the water for the development.
A: Right, they have to get the water right. We play in the water rights market basically to keep the market stable and to keep water rights available for developers for just that purpose. We have folks who are continually looking for water rights to buy from people who want to sell water rights, not from people who want to hold on to their water rights. It's a free market; it's a willing buyer-willing seller type of market, and we just negotiate a price for purchasing water rights on a regular basis and then we basically are buying those to provide a service to customers who are looking to develop and need water rights. It could be anything from a single family home, a person who owns a lot and wants to develop a single family home to something larger, maybe a sub-division or a hotel casino that we will assist in that water rights market.
Q: You bank them, so if a developer comes in and says, I need to get 300 acre feet -- you can sell to him then?
A: Typically we don't have 300 on hand, but we may know people who have 300 and if we know that the developer wants to build a project and needs 300 acre-feet of water rights, we will do everything we can to make that transaction occur in that time frame. We're typically holding anywhere from a 100 to 200 acre-feet of water rights. We basically have an asset that's not doing anything for us if we have a huge bank of water rights, but we are continually rolling those over, selling them to new developments, to new customers, and then repurchasing to keep some in our bank so that we can meet the needs of the community.
Q: Where do you see this in the future? We are going to run out of water if they continue to build like we've built. There is a limit to how much water there is . . . it's a finite amount of water.
A: Clearly there are limits, realistically there are limits, and more importantly, there are limits to what the market can bear as far as projects that can produce wet water. You start looking at what we've done and we've bid off some of the cheapest alternatives already. Some of the projects that we are working on now, like storage in federal reservoirs, things like that, are really the cheapest alternatives versus if I need more storage and I have to go and build my own reservoir, that could be a very costly alternative. Not an undoable alternative but very costly. If you have to pipe it in . . .? Exactly, the prices of the facilities to get water here are going to be increasing in the future, and in the future -- we are looking to 20 to 30 years out -- we are going be needing more expensive options and those options as we go out in time will become more expensive, less cost effective. But that's the price you are going to pay if we want to continue development. You are going to have to bring new water resources into the area because you will have basically used the maximum that you can use off of the Truckee River. You'll have maximized your groundwater supplies and you will be looking for new alternatives and the alternatives definitely are going to be more expensive in the future.
Q: Are you concerned about that? Looking 20-30 years out, if we have 20,000 to 40,000 acre-feet, that's not a lot, is it?
A: We are really looking at right now a very doable, in my mind, 20-year supply for current growth rates, if growth rates level off a little bit, back off a little bit. In the last 10 years we've seen what would really be an unprecedented growth rate, in this community particularly, and so if that went back to 15-year-ago level that would certainly be more than a 20-year supply or growth capability. Conversely, if the growth rate accelerates, then we will use up those water supplies in a much quicker time frame. That's why we do planning. We are continually looking at what are the next alternatives, what's the next cheapest alternative. Is it bringing water in from another location through a pipeline or are there options we can do to increase the yield of our existing resources on the Truckee River? Things like storage make a big difference in drought year planning, and really one of the criteria that we are planning for right now is a 10-year drought. That's a very conservative drought standard, and it really assumes that you are going to have the worst drought on history plus the worst two years of that drought. So there are even some opportunities in looking at whether the community would be willing to withstand a drought without that conservative of a standard and maybe have a few more bumps during those drought years, in the out years, but for cheaper water supply alternatives. There are a lot of things that can be done to make that picture look a lot different.
Q: But, water is the life blood of all of the development of this area, all of the growth, whether it's for a casino, for tourism, or for houses . . .
A: It's definitely one of the pieces of the life blood. Between water issues and sewer issues, those are two constraining requirements in the community. On the sewer side, you have to make sure that you are keeping the river and the environment whole. And so those kind of issues are very challenging issues and as you go out into future years and development takes place, they become more complex and they become more expensive.
Q: So if you pipe water in from, say, out of California . . . we will all be seeing an increase in the price of water rights -- for the development of the tube to bring that water in and to pay for the development of the plant.
A: In my mind, it's the development that basically needs to bring in that next incremental resource, whether it be an importation project or whether it be conservation programs that can help us ride through that drought period better, or whether it is storage. I really think that right now, for example, development is bringing in the water resources, they are bringing in the water rights off of the Truckee River and new developers pay for those water rights and they pay for the conversion of those water rights to the use of their building in their development. So I think that in the future, it's going to be expected that new development will continue to fund the needs of the community for new facilities, new storage, whatever it may be to basically bring that development in. I think my expectation is that existing customers are not going to tolerate paying for development, and that's really not a fair way in my mind for it to happen anyway.
Q: It's obviously very political already . . . how political is water?
A: Water is very political. I would say in all of the western states, it's a critical natural resource. It's critical for development; it's critical for life. Water quality issues are getting more stringent through EPA regulations that are changing on an annual basis. Water has all of these facets. Everybody wants it. People go to war over it. Water is a very critical issue. It's very political.
Q: And it's going to get worse . . .
A: Probably as it gets scarcer or the availability of resources become narrower and prices become higher, I would anticipate yes, that the politics around it will become even more enhanced than they currently are.
Q: So right now, it may not be as competitive to hang on to water rights, but they are going to become very valuable as water becomes more scarce.
A: Yes, water rights are very valuable. Clearly, out in the future, if you are in a futures market. Or take the scenario where growth and development stops for some reason, it could be for any number of reasons, then they basically have no value. I don't know what the future is going to bring but you can think of either scenario. One way, they become highly valuable and the other way, they become almost worthless.
Q: You don't see us in the next 20 or 30 years running out of water? Instead you see us finding other resources for water?
A: Absolutely, I think it's going to get more challenging out in the future but I really don't see that development is going to come to a screeching halt in the next 20 or 30 years because of water issues. I think that the technologies are out there and available to us to solve a lot of these problems, and certainly not without cost, but I think that there are a lot of options out there and we'll just be taking the least costly ones as they come along.
Q: Explain how each development has to bring in its own water -- there is not a connection between water rationing and new developments.
A: I think that the public does believe that, but that's simply not the case. For a new developer to come in, they basically have to go into the water rights market or come to the Water Authority, which has water rights it has purchased on the market, and buy those water rights and dedicate them to that project. Conversely, water rights that have been dedicated to the development, like a sub-division that you might live in, those water rights are dedicated to serve that usage, that development that you live in. I can't take those water rights and move them to something else. That isn't allowed by state water law. If I bulldoze your development, then I could possibly move them for something else. But as long as there are customers there who are requiring water, those water rights are dedicated to that usage.
Q: So when you buy your home, you have the right to have water.
A: You have the right to have water delivered to your home. Basically, the Water Authority holds those water rights in lieu of delivering water products to your home. The Truckee River has a set number of water rights allocated on it. If you think of it, it's a pie with several hundreds of thousands of slices, but there are no more slices of the pie. So basically all you are doing is converting who owns a slice of the pie, from typically agricultural interests to municipal and industrial interests, for a casino, for a housing development, a commercial property of some sort, for whatever purpose. Basically you are converting ownership of the pie; you are not changing how many pieces of the pie on the Truckee River there are. There is a finite number, and as we've talked about, there are about 40,000 acre-feet right now, we estimate, that are available to convert from agricultural to municipal and industrial use. That looks like about a 20-year supply for the current growth rates in this community. Not then, but currently, we are looking at other options. We are looking at water importation options, we are looking at storage options that can take the water rights that we currently hold and make the drought yield of those water rights greater. We are looking at those options continually and that is what the planning process is all about in this community.
Q: Tell us about the Orr ditch decree.
A: The water rights were allocated in a federal decree called the Orr Ditch decree, which allocated the water rights on the Truckee River. Typically those were allocated based on the irrigated acreage that a farmer had and that he was actually irrigating, so there are patches of property that have so many acre-foot per acre of land and that's how the water rights were originally allocated. When you go to transfer a Truckee River water right, you basically are stripping it off of that land that it was originally allocated for under the Orr Ditch decree. Many of those pieces of land have been fractionated, parceled, parts of them sold off, so it can become very complex to basically follow the chain of title and the deeds for those water rights as they have transferred and transitioned through time. We have water right technicians who basically do that. They look for water rights that are available from those old allocations that were done back in the 1930's with the Orr Ditch decree in case there is a drop of water out there that we missed. That's basically the water rights we are looking to transfer for future growth and development in the community. Now, how does that relate to the groundwater aquifer. Basically, we think of surface water and groundwater here pretty much as separate commodities. They don't seem to have a lot of impact that you might think, for example, the river doesn't seem to have a lot of communication with the groundwater aquifers. We have developed a pretty substantial groundwater modeling system where we've looked at water constituents in our different wells and certain wells, as odd as it may seem, there may be several groundwater aquifers just within the Truckee Meadows basin because we will see different patterns in some of our wells and even wells that appear to be in close proximity to one another have very differing water qualities which suggests that they are pumping actually from a different groundwater aquifer. It's really hard to map the aquifers underground. What we do have set up are hydrographic basins. We basically look at the Truckee Meadows as an entire hydrographic basin. We are really looking at what the natural recharge of that whole hydrographic basin is. There are [also] several basins to the north of us.
Q: So you would look at Cold Springs as one basin and the South Truckee Meadows as another basin?
A: Basically, the South Truckee Meadows is included in what I would call the Truckee Meadows hydrographic basin. The basin boundary goes a little bit further south than what we call the South Truckee Meadow area.
Q: And out there, the issue is not that we have no water; it's that we are running out of what we can pump as groundwater. Therefore, we have to figure out where the water would come from if we are to have a diversion.
A: Right, and really when you talk about water resources and you talk about this whole region, there are a group of water resources that are available to us including importation projects, the Truckee River resources, and the groundwater resources. At the regional water planning level, we are really looking at how to best integrate all of the use of all those resources to maximize the usage of all of those resources to the best means of the community. So you can't rule out that you are going to supply Truckee River water or creek water to the south Truckee Meadows area, or that you might even take that water as far north as Cold Springs and deliver it out there if that made sense for the best resource option available out there.
Q: How much is the demand for water rights in this community?
A: A couple thousand a year is the demand on water rights in this community or has been over the past 10 years. In the past 10 years, you can see the growth in will-serve's from '72 to '87 and from 1987 to last year. So you can see in the last 10 years, it's been a much steeper [demand] trend for the water rights.
Q: So, you have somebody looking for water rights, what happens?
A: Typically, if someone calls and they are looking to buy some water rights, we direct them to Jack Robb or one of our water rights technicians, Trudy Sallie or Debbie Setero. If they want to buy something that we have in stock, then Debbie and Trudy usually handle that. Typically, if they need a large block of water rights, we'll call Jack or whoever finds out will and say, Hey, I have a developer who needs a block of water rights this big, can you get us a deal put together to do this? He needs them in two weeks, and in the next two weeks, Jack will be calling his contacts in town, folks he knows who have water rights and seeing if they want to sell. It's basically a negotiating game. He right now is offering people $3000 to $3200 an acre-foot. By the time we do the water rights work to perfect the water rights, there is some staff time and some labor and some paperwork time that goes into that. Typically we'll mark them up a couple hundred dollars an acre-foot to cover our staff time.
Q: Who is your competition to get those same water rights?
A: We would not like to have a competition, but there are other water rights brokers in town who also are buying and selling water rights into the market. If, for example, we know that one of the brokers has just made a purchase of some water rights and [we find that] right now we can't meet the developer's needs, we'll send the developer over to that broker to buy them there. A lot of times the developers come with their own water rights, for example, if they bought a piece of farmland that had water rights associated with it.
Q: What's a water right worth? How much does an industrial property versus a large hotel take in water rights?
A: Right now about $3200 an acre-foot is the going market rate. Two average homes [get] about an acre-foot of water [allocated to them]. Basically, with an industrial property or a commercial property like the Reno Hilton, we look at the number of rooms, the number of fixtures they have, what kind of restaurants they have. You do fixture counts and then you do your best estimate on what they will need. I really have no idea of how many water rights it took to commit for the Reno Hilton property, but several hundred acre-feet would not be out of all reason. So basically, you are just doing fixture counts on what kind of water using fixtures they have and you are doing estimates from there, or you look at other properties that are similar. If somebody wanted to come in and build another Reno Hilton, for example, you would look at the Reno Hilton's usage and compare how many rooms the new hotel was going to have with what the Reno Hilton has. So we use a lot of different comparisons for commercial properties like that. We're trying to bring in enough water rights to support the project, but we don't want folks to over-dedicate water rights because that puts the water rights out of play for future developments. We want to make sure that we are close in balance there.