WINTHROP, Okanogan County – Follow the water to find the money.
This is how it often works in the dusty rural corners of Washington, where a Wall Street-backed firm is pursuing an ambitious commitment to state water.
Crown Columbia Water Resources since 2017 has been directing the water rights of the farms by the side rivers of the mighty Columbia River.
In March, the company sealed a $ 340,000 deal for Douglas County water.
On the same day, it paid $ 1.69 million for an agricultural partnership water in Columbia County.
Two months later, the company spent nearly $ 1.61 million near Walla Walla.
Piece by piece, the company's lawyer, Mark Peterson, constructed a portfolio to span the state, and builds a plan that he hopes will loosen the arcane world of water rights and push it into a 21
Worldwide, as temperatures rise and the aquifers dry, investors become increasingly reliant on water and bu ying vineyards, farms and ranches for what is below or flowing through.
In the state of Washington, there is little water left without requirements, according to the State Ecology Department. In the future, researchers expect less snowpack, more variable rainfall and more frequent lack of summer water.
In the midst of a changing climate, a population boom in Washington and demanding development, Peterson's client plans to buy, lease and sell water in a privately run water market of his own creation. Crown's activities here are unprecedented for a private company.
The company's aggressive search for water can put it in the vanguard.
Or it can all evaporate.
Ongoing negotiations between the United States and Canada over the Columbia River may shift flows and potentially drain demand.
Crown has met the regulatory control of the State Ecology Department. And in e-mails, some officials expressed private concern about Wall Street's influence on water markets.
Some critics fear that business models such as Crowns could lead to speculation or consolidation.
"We potentially allow a marketplace to develop here that can be quite devastating in the future," said Paul Jewell, a Washington State Association of Counties police director. "With an increasing population and increasing need for water, we will be monitoring private interests with a profit motive for what should be a public resource."
Meanwhile, the company's attempt to buy water from a local family-business partnership in the Methow Valley has ravaged nearby residents, farmers and farmers who were concerned that selling downstream water would permanently end community use. theirs, and that their lifestyle can dry up.
your water, you're going to lose agriculture, and I lose your character, I think, "said Craig Boesel, a Winthrop cattle family based in 1889.
Wall Street and Water
Peterson hails from Wenatchee, where the city's nameless river meets Columbia.
After attending college in Seattle and law school in Portland, Peterson returned to Wenatchee as a lawyer in a small town that took on "pretty much everything that went in the door."
The market led him to horizontal. He soon began to regard Washington's arcane system as ineffective and wasteful.
"Washington state is far behind" among western states, Peterson said.
For years he has seen the 1200 mile Columbia River, the irrigation highway in Central Washington, as an opportunity.
Valleys next to Columbia grow a cornucopia of high-quality crops every year: apples, vineyards, cherries and hops among them. When watered, Washington's land is among the most valuable in the country, according to the US Department of Agriculture.
Crown Columbia's parent company, the Spokane-based Crown West Realty, purchased two commercial farms in 2014 and 2016 for more than $ 46 million, hiring Peterson to consult on water.
Petrus Partners, a Manhattan-based investment firm, controls Crown West Realty. The company's founders have reported at least $ 298 million in investment deals under the name Petrus, according to the US Securities and Exchange Commission. The company's website says that about half of the capital comes from "retired partners of Goldman, Sachs & Co." and that the real estate arm was founded to "take advantage of distressed investment opportunities following the collapse of the housing bubble."
Petrus and Crown, Peterson saw the opportunity: The companies had the money, management experience and enough distance to see 10,000 feet.
"They invest in everything that will make a profit," he said.
And Peterson saw a win field along Columbia.
"Most of the ground in eastern Washington is cultivated, but much of it is dry farms. If you irrigate the ground, you can get six, seven times the return on the land, ”he said. "People complain about water along the main tribe of Columbia."
An arcane system dating from the late 1800s controls Washington's water.
In the earliest days, "you make a claim by sticking a piece of paper on a tree or in a public place that says you have the right to withdraw a certain amount of water," said Jonathan Yoder, director of the State of Washington Water Research Center and professor of economics at Washington State University.
Fast forward more than a century: Water rights, now administered by the Department of Ecology, are measured down to the molecule, Peterson joked.
In Washington, water is a public resource that cannot be owned, but the right to use water is exclusive and treated as a property right.
The state maintains a scattered online database of water permits, requirements and certificates, including some that rely on century-old cardboard photocopies Water rights that have not been used for five years can be lost, or give up for others to use.
During drought, the agency may restrict the use of some water rights to assist fish. Priority is given to older water rights.
Hammers, nails and paper are no longer sufficient to provide water. Now, a selection of expensive lawyers, consultants and engineers earn a living in the process.
Where there is a limit, a market can evolve, Yoder said.
"New water rights are hard to come by," Yoder said. “How else are you going to get water? You're going to buy it. ”
Water rights transactions are notoriously difficult to track. The state does not keep centralized data on water sales, said Harry Seely, of the WestWater Research consultancy. Sales are often linked to land or farm assets. Sales of water rights are subject to property tax, but they are not always registered and categorized in the same way. Market research is often dependent on word of mouth.
Where there is scarcity in Washington, Seely said that water rights sales can fetch between $ 500 to $ 6,500 per year, which is about half the volume of an Olympic-size swimming pool. According to one seller, Crown used $ 3,000 a year for most of the water in Columbia County.
In other western states like Colorado, where the shortage is more acute, prices have gone higher, raising as much as $ 60,000 at auction for less than a square foot of water each year, according to the Northern Colorado Water Conservancy District.
In Washington, small water banks have operated locally for many years, often redistributing large water rights to new uses nearby.
Peterson's vision for Crown Columbia is greater. It would allow water to be distributed across much of the state, which he believes would be more economically efficient.
Agriculture has changed in the century since lawmakers began regulating water. Modern irrigation systems are more efficient, can send water longer and pump it upwards.
The farms have consolidated. The largest 4.4% of Washington farms, which are 2,000 acres and larger, run about 74% of the state's agricultural land, according to a Seattle Times analysis of the 2017 Census of Agriculture Statistics. These farms also own a growing percentage of the state's irrigated land.
“In tributaries the farms are small. It is difficult for them to be economically viable at scale, "Peterson said.
These farms have valuable water rights, which may be worth more downstream. Crown wants to buy and lease farming rights on the edge, let the water flow and let gravity deliver it to Columbia, where it can quench the thirst for vineyards, orchards or be used for ecological purposes.
"We I will sell to anyone," Peterson said.
Peterson's concept is linked to rights that are in the state's Trust Water Rights Program, which allows users to park inactive water rights with the state to avoid losing them.
The program is partially designed so that the Ecology Department can use parked rights to keep more water in streams, helping fish struggling with water too low or too hot.
For Crown, the program serves as a "vault" to protect its businesses, Sa Peterson said. Crown plans to eventually run a water clearinghouse – buy, lease and sell it. But before new water use can begin, the parked water must be validated and approved by the Ecology Department.
Over the past two years, Peterson and Crown purchased water rights for at least $ 4.7 million in several rural counties, according to real property tax records, putting some in temporary trust over 20 years. Crown has entered into agreements to market other entities' water, Peterson said.
The company controls about 7,000 acres it could rent or sell, Peterson said. This summer, it loaned its first 600-acre water loan to a farmer in the Walla Walla area, he said. Each acre foot was priced at $ 200 for one year.
But not all transactions have gone so well.
A Fight in Methow
In the Methow Valley, water nurtures the land and the colorful personalities that depend on it.
So when retired attorney Mary McCrea, from Twisp, in June last year discovered a small print in the Methow Valley News & # 39; legal section talking about a local ranching family's plans to sell water away from the valley, leaving she gobsmacked.
For many years she had worried that outsiders would come for the valley's water.
Crown's draft application, published online, sought to transfer the farm family horizontally to rely on and allow for future water use from the Chewuch River, near Winthrop, to the mouth of the Columbia River, more than 500 miles downstream.
The Lundgren Limited Family Partnerships claim dates back to 1907, according to the legal notice.
A 1910 agreement with Chewuch Canal Co. enables the Lundgren Partnership to transport water using the company's canal, which hoses across the landscape for more than 13 miles and delivers water to approximately 185 shareholders with farms, ranches and homes in the Winthrop area.
The draft application sought to trust the right to as much as 97 percent of the channel's power at any given time.
Following the local newspaper, Methow Valley News, published stories about the potential deal, "it was talk of the city, at least in my circles," said Channel shareholder Betsy Smith, of Winthrop.
These circles have changed for Smith, who is a veterinarian and matriarch of a sheep family.
The construction of Highway 20 in the late 1970s, which spills past granite spiers in the North Cascade mountain range, now connects the valley to Washington's urbanized west side. A migration of money and blast of second-home construction in the middle of Methow's dry Ponderosa pine followed, changing the color of the bucolic valley.
Methow has become a hub for climbers and skiers. In the summer, tourists swarm the streets of Winthrop and carry ice cream between the lounges and shops designed as a tribute to the American West.
"The economy is now not necessarily agriculture-based," said Casey Smith, 27, son and scion of BCS Livestock, the sheep operation. "It's based on recreation and tourism. But it's beautiful here because it's a green landscape."
Still, many livelihoods depend on irrigation.
A visit in early May found those working the country despite "Hectic Spring," as President Roger Rowatt of the canal company, called the beginning of the watering season.
Days before, Rowatt kicked a miller, farmer and carpenter sporting a white ponytail and an arrowhead goat pointing at his chin, then frenzied he opened a sluice gate on the Chewuch River, allowing water to run out into the canal and down to shareholders.
"It's a dry year," said Brian Larson, a local orchard manager who quarreled to fix a water pump before new trees arrived for planting. "Water is everything."
Some miles away, the blacksmith's sheep entered the neighbor's pasture.
"We graze on all the water pasture. Without it, we would not have food for the sheep, "said Casey Smith.