by Larry MacDonnell


Two New Laws of Interest from the 2001 Regular Session
The Colorado General Assembly enacted House Bill 1354, authorizing a pilot water banking program for the Arkansas River Basin. Under rules to be established by the State Engineer no later than July 1, 2002, storage water within or from the Arkansas River Basin may be leased, exchanged, or loaned to other users without requiring water court approval. Transactions must not result in material injury to existing water rights.
Uses of banked water both within and outside the Arkansas River Basin are authorized. In-stream uses by the Colorado Water Conservation Board are made possible. One likely use of banked water is to replace depletions attributed to newly regulated well pumping within the basin.
The State Engineer is to provide a report evaluating operation of the bank by November, 2005. Authorization for the bank sunsets as of July 1, 2007.
The intent of water banking is to provide a specially-designed process for facilitating voluntary transfers of water without adversely affecting other existing water uses. Banks offer water rights holders the option of earning income through another’s use of the rights. By simplifying transfer procedures banks reduce the substantial transaction costs that inhibit such beneficial transfers.
Another new law of interest is House Bill 1090, increasing the state income tax credit for donation of a perpetual conservation easement. Conservation easements voluntarily restrict the kinds of activities that can occur on privately owned lands for the purpose of preserving agricultural uses or protecting wildlife or scenic values. Property owners who donate such easements to qualified organizations such as land trusts receive significant federal income tax benefits — generally the ability to deduct from gross income the value of the easement.
HB 1090 significantly enhances state tax incentives for landowners to donate conservation easements by allowing an income tax credit of 100% of the first $100,000 of the value of the easement and 40% of any additional amount up to $260,000. The value of the easement generally represents the value of the potential property development foregone through the easement.

Colorado Riparian Association