Water Asset Valuation

WWR was retained by The Nature Conservancy (TNC) to complete an appraisal of a pre-1914 surface water right to Mill Creek, a tributary to the Sacramento River. The water right was being used to irrigate orchard property and was being delivered through an inefficient delivery system. The owner was converting the orchard to be served through groundwater wells and was marketing the surface water right. TNC was pursuing the water right to assist in streamflow restoration for anadromous fish passage and rearing habitat in Mill Creek. WWR completed an analysis of the transferable volume of water and developed a range of value through review of comparable water right sales in the region. There is no central location for water right sales in the region. As a result, development of the comparable sales information required extensive research at the state and county levels as well as direct communication with water agencies, attorneys, and water right holders. In addition to the development of a comparable sales database, WWR assessed the marketable region for the water right by considering its possible use south of the Sacramento-San Joaquin Delta. Water rights that can be moved south of the Delta generally have a higher value as there is significant demand for reliable water sources for municipal, industrial, and agricultural uses. This marketability assessment involved review of previous transfers through the Delta as well as research into regulatory and physical constraints on the use of state and federally operated conveyance systems. The water right appraisal underwent extensive external review and supported TNC’s application for state funding to support the transaction.

WWR completed a valuation analysis of water supplies and associated water rights used in support of irrigation within the Pondera County Canal and Reservoir Company in Pondera County, Montana. The analysis was used by Farm Credit Services to support a loan decision to finance improvements to a dam operated by the canal company. The dam had been identified by the state of Montana as in need of repair to satisfy dam safety requirements. WWR worked with Farm Credit Services and local irrigators to develop a statistical model that estimated the contribution of irrigation water supplies to land values within the canal company’s service area. The statistical model considered soil quality, location, and water source among other factors to isolate the market value of the water supply provided by the canal company’s water rights. The model relied upon GIS analysis to develop key data inputs. In addition, WWR reviewed canal company and state water right transfer records to identify and report previous sales of water rights in the region. Additional factors such as regional water supply and demand conditions and water reliability were incorporated into the analysis to arrive at a value estimate. In addition, WestWater developed an estimate of the likely market absorption period and the liquidation value associated with the water rights.