Colorado Mining Summit: Got Water? In Western U.S., the Answer Increasingly is 'No'

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Written by John Egan for IIR News Intelligence (Sugar Land, Texas)

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Summary

The inability of seven Western states to decide how to allocate water from the Colorado River may cause the federal government to step in and allocate that precious resource, which could inject fresh uncertainties into project planning, imperiling hundreds of billions of dollars of planned industrial project activity as well as thousands of existing industrial plants, a Western water lawyer told attendees at the Colorado Mining Association's annual conference May 21.

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States Stalled Over Updating the Colorado River Compact

"Water is the growth constraint in the arid Western U.S.," James Eklund, a partner at Taft Stettinius & Hollister LLP, told about 300 attendees at the Western Mining Summit May 21. "It sustains life itself, governing residential development, industrial and advanced manufacturing, and data centers and artificial intelligence (AI) infrastructure."

The conference, held in Denver, Colorado, was sponsored by the Colorado Mining Association. According to Industrial Info Resources data, there are 36 mining-related projects currently under construction in the Rocky Mountains market region, valued at nearly US$15 billion.

For the last century, seven Western states--Arizona, California, Colorado, Nevada, New Mexico, Utah and Wyoming--have followed a set-in-stone formula to allocate water from the Colorado River, Eklund said.

But the so-called Colorado River Compact must be updated by the end of 2026 or the federal government will step in make those water-apportion decision itself. "Federalizing water allocations is a scenario almost no one wants to see," he added.

Without a guaranteed annual allocation of water from the Colorado River, he said, industrial project construction in seven Western states "can be stopped cold," Eklund pointed out.

Colorado River Compact Vital for Industries Across the West

When signed in 1922, the Colorado River Compact allocated 7.5 million acre-feet of water per year, or about 2.4 trillion gallons, of Colorado River water to Upper Basin states, which are Colorado, New Mexico, Utah and Wyoming. That pact allocated the same amount of water to be divided among the Lower Basin states of Arizona, California and Nevada. An additional 1.5 million-acre feet of water is allocated to Mexico.

An acre-foot is the amount of water that would cover an acre of land to a level of one foot, or about 326,000 gallons. One acre-foot of water is generally thought to be enough to support between two and four families for one year.

The compact was signed during a time when rainfall was plentiful in the states that feed into the Colorado River system. But now, as the West grapples with severe drought, legally required allocations totaling about 16.5 million acre-feet per year are far in excess of what flows into the river from rain and snowpack, creating friction among the seven states and Mexico.

"Right now, snowfall and rainfall in the seven compact states puts about 10 million acre-feet of water into the Colorado River per year, maybe less," Eklund said. Despite years of effort, the parties to the compact have not been able to agree on a new formula to allocate Colorado River water.

Years of overdrawing the river have sharply lowered water levels at the two large southwestern reservoirs that hold back Lake Powell and Lake Mead. Further declines could imperil hydropower production there, on which the 40-million residents of the seven states depend.

By the Numbers

• 16.5 million acre-feet of water: The amount of water allocated each year to seven Western states and Mexico under the terms of the Colorado River Compact, a foundational piece of Western water law.
• 10 million acre-feet of water: The amount of water entering the Colorado River each year through snowfall and rainfall.
• December 31, 2026: The deadline for states to update the Colorado River Compact, which governs how seven states and Mexico will divide up the water from the Colorado River

According to Industrial Info Resources data, 2,368 capital projects valued at about US$739 billion across 12 industry verticals in the seven affected states are scheduled to begin construction between January 2026 and December 2028. All 12 industries tracked by Industrial Info Resources have proposed projects that could be affected by the availability of water, but three stand out: Industrial Manufacturing, with 483 proposed capital projects worth about US$323.4 billion; Electric Power, which has 763 proposed projects valued at approximately US$303.5 billion; and Metals & Minerals, which has proposed starting construction on about 413 capital projects valued at about US$60 billion over that three-year timeframe. Subscribers to the Industrial Info Resources Global Market Intelligence (GMI) Project Database can view a list of detailed project reports.

In addition, there are about 15,434 existing industrial plants that are operating across those 12 industries in the seven Colorado River basin states that rely on water from the river to continue operations.

What Could Federalizing Water Allocations Mean?

The federal government making water apportion decisions for the seven states and Mexico could deeply politicize operational decision-making, with potentially disastrous results for some of the states in the compact, Eklund said in an interview with Industrial Info Resources at the conference.

"The fear is that the federal government will make decisions based on whether a state voted for President Trump or not," Eklund said.

Invoking a Christmas list metaphor, Eklund said, "Think about California and Colorado--deeply 'Blue' states that are definitely on the president's 'naughty' list because they are constantly opposing him. Wyoming and Utah, by contrast, are 'Red' states that are on Trump's 'nice' list. They are among the president's strongest supporters."

Eklund said that the concern among organizations trying to hammer out a new Colorado River Compact is that operational water-allocation decisions will be politicized, and states will never regain control over Colorado River water allocations.

Key Takeaways

• If the seven Western states and Mexico cannot come to an agreement on a new apportionment of water from the Colorado River by yearend 2026, the federal government will make those water-allocation decisions.
• Federalizing water-allocation decisions could inject politics into vital, non-political operational decisions, potentially affecting existing and proposed industrial plants as well as residents who live in those Western states and Mexico.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).