What Is the Value of My Water Right?

Clients frequently ask us what their water rights are worth. Numerous factors go into making this determination. This article will only provide a very brief overview of some of the typical considerations that one must consider in answering this question.

First, the priority date of the water right is significant. Certainly, Kansas has a modified version of the “first in time, first in right” appropriation concept. Thus, if you live in Western Kansas or in an area facing water shortages, a low number on the water right is quite significant. In other areas, such as the Equus Beds where recharge occurs much faster, this may be less of a factor.

Second, a practitioner should consider the “guts” of the water right. At a very basic level, we consider the authorized quantity and the authorized rate of diversion. If not enough water can be pumped in a given amount of time, the water right may be worthless for the desired purpose. One must also consider the saturated thickness of the aquifer or the availability of the source water. If water is not readily available for pumping, the water right may be of little value.

Third, we consider the authorized place of use. Sometimes we have encountered situations where plenty of water is available but the water right was only authorized to be used on a small portion of land.

Fourth, we look at the nature of the designated use. A water right designated for industrial or municipal use may have inherently more value than another use in a given situation. It merits noting, however, that the attributes of the water right can be changed—as we discuss in another article. Also, in this vein, one must consider the “market” for the water right. Sometimes a valuable industry may make a water right tremendously valuable. Or, conversely, a water right near poor farming land, for instance, may have little value.

The above points constitute some of the many factors a practitioner must consider in assessing the value of a water right. We generally hire an experienced appraiser to help in analyzing the value and the appraiser will also look into comparable values of surrounding land. Keep in mind, however, that very few appraisers are properly trained in appraising water rights. At any rate, someone experienced in water rights can help with determining value.

Where Is My Water Right?

When a client purchases land we are oftentimes asked the basic, but very important question, of what, if any, water rights accompany the transfer. It is very common in a land transaction to include only very straightforward information in the purchase contract: a description of the land, the purchase price, details regarding closing, associated costs, and perhaps a reference to title insurance. Most deeds also only contain a description of the land as well. In the event water rights are associated with the land, those water rights may be ignored in the transaction and the contract will be silent on that important issue. Thus, clients ask us in this scenario what water rights are inherent in the transfer. This question also comes up frequently in a probate context.

There are a variety of ways to track down water rights. Surprisingly, there are actually several online tools that are quite useful in obtaining the basics on a water right. With these tools, you can actually see water rights associated with a given parcel of land and actually discover the number associated with a water right. Once an assigned number is determined, one can then learn basic attributes of the water right including the priority date, the location of the point of diversion, the authorized rate and quantity, and the associated place of use. This is a vital first step in learning about a water right.

However, these online tools are not foolproof and only provide basic information. The online information may not have been recently updated and only reveals a “surface level” picture of the water right. To obtain more information, the next step should be to complete an open records request to track down the complete water right files. Once this information is obtained, the practitioner can examine items such as the original certificate of appropriation and any important changes made to the water right. Oftentimes, there are details about a water right than can only be discovered after conducting a thorough review of the full water right files.

Additionally, there may be information that can be gleaned from an actual title search. It is possible that a previous owner of land sought to sever the water right from the land and only filed something with the office of the local register of deeds. In other words, proof that the water right is no longer intact may not have been properly submitted to the Kansas Division of Water Resources (DWR).

Finally, a diligent practitioner may want to visit with members of various agencies that govern the water rights. For example, if a local groundwater management district is involved, it is very useful to contact an employee of the district about a water right. We have also found the staff of DWR to be quite helpful and knowledgeable.

With these important steps, one can properly learn what water rights are actually associated with a land transfer. However, because this can become very technical in nature, it can be beneficial to contact a qualified professional to help with this analysis.

LEMAs: A Water Management Tool

Local Enhanced Management Areas (LEMAs) are a tool that allow for local management of water resources.  Usually a set period of time—i.e. 5 years—is specified over which reductions in water use must occur.

Local water users can come together to form a LEMA.  They must chart out a detailed plan of how reductions can be completed.  The plan is oftentimes based on expert analysis and data that demonstrate how to reduce declines in water levels. 

Once a plan is formulated, a series of public hearings occur.  The Chief Engineer of the Division of Water Resources will generally oversee those hearings.  The public is given a full opportunity to support or oppose the LEMA and proper process must be followed.

Once a plan is approved, the members of the LEMA must abide by its terms.  The Chief Engineer can enforce the LEMA terms and impose penalties for noncompliance.

LEMAs are becoming an increasingly popular tool to ensure water management in Western Kansas.  The formation of LEMAs has not been met without opposition, however.  At least one LEMA is now the subject of a court case due to objections lodged against the process utilized to form the LEMA and based on the terms of the LEMA itself.

Water Use Assessments in Groundwater Management Districts

A groundwater management district has the ability to assess a water use charge against landowners within a district or authorized users of a water right.  K.S.A. 82a-1030(a) allows the district to impose the charge based on “groundwater withdrawn within the district or allocated by the water right.”  The cap on the amount the district can assess is further defined in the statute.  Otherwise, a district is free to choose the assessment amount and this is often a very political decision.

A groundwater district can even assess a separate charge based simply on land owned within the district.  These special assessments are then treated in a manner similar to a property tax.  A landowner may seek a verified claim to try and seek abatement of the charges under certain circumstances.  These verified claims must be submitted by April 1 and each district may utilize a special form for this request.

Potential Changes Looming for Recharge Credits in Equus Beds

The City of Wichita has filed applications with the Division of Water Resources to change the manner in which the city is granted “recharge credits” arising from the aquifer recharge project in the Equus Beds aquifer. The recharge project takes water from the Little Arkansas river during the times when the river is flowing at a specified rate above normal.  The water is treated to normal drinking water standards and is caused to be either injected or settled into the aquifer. The city’s stated purpose is to provide increased access to Equus Beds water during times of draught. The city already has the most extensive water rights in the Equus Beds aquifer.  The Division will hold public hearings to consider the applications.

A Water Right for Recreational Use

One type of use of a water right is for recreational use.  K.A.R. 5-1-1 defines
“recreational use” as “use of water in accordance with a water right that provides entertainment, enjoyment, relaxation, and fish and wildlife benefits.”

A recreational water right is commonly pursued for hunting and fishing purposes.  For example, one may wish to pump groundwater from a specified diversion point for the purpose of flooding a pond for duck hunting.  The pond would thus be the place of use.

A recreational water right must be developed like any water right.  An applicant must seek a permit.  A separate and distinct face sheet must be completed for a recreational water right.  For someone coming from a perspective of loving the outdoors, a recreational water right is a vital tool.

Bill to Change Assessment Caps Being Debated

An important bill is being debated regarding assessment caps for groundwater management districts.  That bill is SB 194.  Groundwater management districts can impose assessments on landowners in the respective district, along with charges on appropriators of water.  Right now those assessments are capped.

The problem is that several groundwater districts simply cannot meet operating expenses given the current assessment caps.  Thus, the groundwater districts, along with support from other entities, are lobbying to change the caps. 

SB 194 will increase the capped rates from $1 to $1.50 for water used within the respective groundwater management district.  It will also increase the rate from $1.50 to $2 if more than 50 percent of the water is used outside the district.

The bill also doubles the assessments on land owned within the district.  The bill has already passed the Senate and is now before the House for consideration.


What Happens If a Farm Tenant Overpumps a Water Right?

We frequently have landowners that come to us with the concern of what happens if their farm tenant overpumps a water right.  We acknowledge that this is a very valid fear that we have encountered numerous times. 

A “black mark” can go on a water right when it is overpumped.  For first time instances the Division of Water Resources (“the DWR”) usually just issues a letter and a fine.  However, for repeated and serious violations, a water right can potentially be forfeited.  Thus, it is a very big deal if a water right is consistently overpumped.

We commonly see the problem happen when the landowner lives out-of-state and has less ability to “police” the tenant’s stewardship of the property.  In situations where the landowner is completely innocent and unaware of the tenant’s actions, the DWR has still taken the position that a landowner is responsible for the actions of the landowner’s agent.  Thus, the moral of the story is to pick your tenant very carefully.

Additional precautions can be taken to help guard against the above scenario.  We have drafted language that can be put into a robust farm lease to help ensure that the tenant takes every precaution not to fall out of compliance with the water right.  A good, independent farm manager can also help to monitor the tenant’s actions.  There are several companies that offer this service.  Indeed, the overpumping of a water right is a significant concern that must be properly addressed by the landowner. 

Who Owns Your Water Right?

Owners of water rights are frequently surprised to find that their water rights are partially owned by others. The awareness of this problem most often arises when the obvious owner applies for a change in the right—such as permission from the Division of Water Resources to drill a new well.

It is at this time that they learn the unexpected news: that many years ago the place of use was set up to include land also owned by someone else. Such a situation causes the current owner of the previously unknown “place of use” to have an interest in the right.

To avoid such unpleasant surprises we recommend some of the following steps. If land, including a water right, is being purchased have the right examined for title and ownership purposes. It is preferable to have the examination completed by a competent water law attorney. Title insurance does not include any detailed analysis of a water right. It is not insured under the normal policy.

As to land under common ownership which has been irrigated for many years, the same examination by a competent water law attorney is warranted.

When such extraneous ownership is discovered, or is known, there is great merit in working to clear the records so that such ownership is eliminated. The Division of Water Resources responds affirmatively to (1) agreements among owners and (2) court orders. Agreements are usually much less expensive.  Court orders can be arduous processes to obtain.

Planning up front is thus critical to avoid unexpected expenses and surprises. In this case, an ounce of prevention is worth many acre feet of cure.

What Are the Basic Steps of Acquiring a Water Right

A number of steps go into obtaining a water right.  First, an individual or entity seeking a water right must file an application with the Division of Water Resources (DWR).  The correct application form must be submitted.  DWR will make a variety of determinations regarding whether to approve the application including, but not limited to, a safe yield analysis and whether the water use will interfere with other area water rights, minimum desirable streamflow, or the public interest.

If DWR approves the application, it will issue a permit.  After the permit is issued, the applicant must complete the diversion works.  An example of a diversion works is the drilling of a well.  After the point of diversion is completed, the applicant then has 4 to 5 years to perfect the water right.  An extension of time may be sought during the perfection period.  Perfection essentially means proper diversion of the water and utilization of the water right.

After the perfection period is completed, a field inspection is conducted by DWR.  The field inspector will assess such things as where the water is being used and the rate of diversion, among many other factors.  If the field inspection passes muster, a draft certificate of appropriation is issued.  The applicant then has 30 days to comment on the draft certificate.

After the above process is completed, a certificate of appropriation is issued.  The certificate must then be filed in the Register of Deeds office in the appropriate county to become effective.  The applicant must then file annual reports with DWR to keep the water right active.