My first thought on landing in China was that we’d come for the right reason.

We’ve flown here to finalize a content partnership with China Dealmaker magazine. After flying 6,000 miles, we’d descended to a thousand feet or so, and I still couldn’t make out terra firma in the thick soup of fog and smog out the airplane window.

The primary mission of our content partnership is to profile U.S. cleantech solutions and markets to China’s financial and M&A community. With China slated to invest many times the resources as the U.S. in the coming years to clean and green their economy, and my window view testament to their challenge, I’d say we’re on the right track.

The short drive from the airport also begins to confirm my suspicion that I’ve really no concept of how engaged, how awake China now is, and U.S. media headlines have proven inadequate in communicating the profound changes taking place here – good and bad. Driving into this bustling city, past a phalanx of modern office buildings topped with corporate logos from around the globe, is an immediate eye-opener.

One accurate characterization is that China has money – and markets – that potentially can benefit U.S. cleantech firms and startups. And as I read today from Beijing about the push in the U.S. to couple approval of the Keystone oil pipeline to a tax credit for business, I’m reminded that our political dialogue may be doing no favors for U.S. research and commercialization interests in cleantech and renewables.

Firms seeking capital and waiting for US capital markets to improve may be taking a risk. China’s moving fast. This from last week’s Planet-Profit Report and www.renewableenergyfocus.com:

China is creating 16 national energy research and development centres intended specifically to drive innovation in the clean energy sector, and by the end of 2011, national Chinese R&D expenditures are targeted to rise 11 percent over levels recorded just earlier in the year. Eight of 10 companies with the largest R&D budgets have established R&D facilities in China, India, or both. There has been a 600 percent increase in the number of college graduates in science fields in China between 1995 and 2005.

More later from China on Planet-Profit’s content plans with China Dealmaker, opportunities for U.S.-based firms that should develop as a result, and developments from meetings we have lined up with a cast of energy, water and policy officials in Beijing and Shanghai over the next several days.

(published 12/12/12)

In January, the Colorado Water Conservation Board (CWCB) will release the findings of its Flaming Gorge pipeline task force, convened early this year to study a project that’s divided the water community throughout the Colorado River Basin. Supported by users in Colorado with an acute need for water, the pipeline is opposed by motivated, well-funded interests who seemed to have the upper hand in a long-running debate over the project’s feasibility and wisdom.

But based on updates published by meeting facilitators, it’s a good bet the task force will recommend further study and deliberations, a result certain to anger its opponents. Even a neutral result that stops short of killing the idea outright would be a bitter disappointment for those hoping Flaming Gorge will be flushed by Colorado water officials.

The pipeline would tap Flaming Gorge reservoir in western Wyoming and move water east along the I-80 corridor, then south, for use and storage along Colorado’s thirsty Front Range. Flaming Gorge backs up Wyoming’s Green River, the Colorado River’s primary tributary. Opponents argue there’s no surplus water to divert, that the entire Colorado River system – including the Green – is tapped out, overdeveloped. The Bureau of Reclamation supply and demand study has demonstrated that demand in the seven-state river basin has indeed outstripped supply in most years.

Yet Colorado and the other Upper Basin states seem poised to tip over the current allocation regime along the river, and do so legally, pursuant to the Colorado River Compact. Colorado, Utah, Wyoming and New Mexico, the Upper Basin, haven’t developed their full river entitlement. For decades, California, Arizona and Nevada have used their share plus the Upper Basin’s unused portion. Given the economic value that flows downstream with every lost gallon of undeveloped water, this appears certain to change. Today, the headwater states need the water.

Can Flaming Gorge help Colorado develop its full entitlement? Certainly this question motivated CWCB to fund more research. Under the objective lens of the task force – with a timely assist from nature – the project’s attributes may be holding up.

As its proponents have argued, tapping the Green River in Wyoming provides a back up of sorts to the main stem of the Colorado River. The Green rises in north central Wyoming, near Jackson. If you’re a skier, you know a northerly storm track has dumped more than nine feet of snow at the Jackson Hole resort so far this winter.

When Colorado’s Rockies are dry, as they are now, Wyoming’s might hold more snow – essentially taking the pressure off the Colorado River headwaters, a scenario apparently not lost on the task force. In effect, Colorado would be able to tap a different source within the Colorado River system to realize its allocation. In years like those we’re currently experiencing, this could be significant.

Drought may also be accelerating supply shortfalls that were initially forecast to develop in Colorado in 2030 and beyond. Gary Barber, Chairman of the Arkansas Basin Roundtable and a task force participant, issued a stark warning in mid-November to John Stulp, Colorado’s Director of Interbasin Compact Negotiations and Gov. John Hickenlooper’s water ‘czar’.

“The very real potential exists for a water supply gap in agriculture next year, 2013, if the snow pack along the Continental Divide is average or less,” he said. “A municipal supply gap could exist as early as the year 2020.”

Flaming Gorge proponents have long held that this was the right project to take the pressure off Colorado’s agriculture sector. It would be ‘new’ water into the system – a new source. Currently most ‘new’ supplies sustaining Colorado’s economic growth, from energy to urban development, are coming from the state’s ag sector. Ag transfers are watering Colorado’s boom. But for how long? Much is being written today about the future of agriculture here and throughout the West. How long can state planners here lean on ag?

As Barber notes, “The alternative to moving forward on new supplies will be the loss of irrigated agriculture in the Arkansas Basin.”

Of course, few if any of the arguments for Flaming Gorge will convince opponents of its viability. After all, it’s an infrastructure option in a time of diminishing support for large water infrastructure projects. It’s expensive.

Wyoming isn’t a fan, although water law may obviate their objection in the end. And there’s the current state of the basin. We know with certainty that demand now exceeds supply. Flaming Gorge opponents argue there is no more water to develop.

Finally, there’s the possibility that if Colorado develops more water from the river, drought, over-use and Lower Basin obligations will dry up new users that have grown accustomed to it. Curtailment, as it’s called, would present very large headaches for water officials here.

It’s a good possibility we might get an even closer look at Flaming Gorge in the near future if task force deliberations are an indication of how they’ll report on the year-long process. We should know in early January. The blowback from opponents will certainly not go unnoticed.

(originally published 2012)

Ninety years old this year, the Colorado River Compact is more relevant and consequential than any time in its history. That says a lot. Sharing water within its collaborative, progressive framework, the Southwest blossomed, and its sustained influence on our current water dialogue is immeasurable.

Indeed it’s more than an interstate agreement. It’s a way of life, not to be trifled with carelessly. Arizona Senator John McCain was reminded of this in 2008 when he was roundly thrashed on the campaign trail for suggesting the Compact be renegotiated. (Though Arizona has never been thrilled with the Compact).

It’s also an agreement that’s largely ignored in a surprising way.

Turns out the Colorado River has never really been divided as the Compact authors envisioned. At least as much as we can tell. The legendary treatise, constructed to apportion the prodigious fruits of the Colorado River equitably between the Upper and Lower River Basin, really hasn’t.

In 1922 legislators divided the Colorado River roughly in-half, in theory, requiring the Upper Basin, the headwater states, to send 7.5 million acre-feet of water downstream on average every year past Lee Ferry’s, Arizona, to users in the Lower Basin. It was assumed based on information available at the time that about the same amount would remain for use by Colorado, Wyoming, Utah, and New Mexico.

But Eric Kuhn of the Colorado River Water Conservation District cites Bureau of Reclamation data that indicates usage has been far different. Over the past fifteen years, for example, “Lower Basin Consumptive Uses” has been around 11,000 million acre-feet per year; uses by the Upper Basin, roughly 4 million acre-feet. It’s a big discrepancy from the Compact parameters. The River tilts to the southwest – in more ways than one.

This imbalance may have been agreeable in the past. Not anymore, for two reasons.

One is demand. There used to be plenty of water to go around. However much water rose in the headwaters of the River was enough. A precise accounting wasn’t really necessary. The other is information – data. Usage throughout the River system is far better understood, and more data is coming. This will enable states, in this new era of scarcity, to track supply and call on the resources of the River more accurately. As a result, any notion of a River-wide surplus is disappearing. And with it any casual, generous interpretation of the terms of the Compact.

Of course states, not the Basins, will press the case to revisit apportionment of the River given the imbalance, and Colorado may stand to gain as the River is more accurately measured. The Compact allocated 51% of the Upper Basin share to Colorado, or 3.6 million acre-feet annually. Kuhn estimates that last year, in 2010, the state tapped the River to the tune of about 2 million acre-feet.

Is Colorado therefore entitled to more water per the Compact? In theory, yes. In practical terms, maybe. In the estimation of some, including voices in the environmental community, no.

Kuhn’s District is one influential voice advocating very deliberate action relating to a possible Colorado surplus. CRWDC makes their case for caution in a thorough, authoritative report released early this year. (Read it here.) The CRWCD simply doesn’t believe water’s available in the long run, guessing that any additional supply Colorado might be entitled to is illusory. The CRWCD sites a diminished River as evidence.

Data indicates that in the early 1900’s, when volume was measured for purposes of dividing the River, conditions throughout the Basin were unusually wet. Recently, drought has been the norm. Like others, they’re also concerned that climate change will lessen the amount of future precipitation in the region. It adds up to a total volume of water less than the 15-18 million acre-feet Compact authors divided in the first place. As the first obligation of Colorado and other Upper Basin states is to send 7.5 million acre-feet of water downstream every year, plus a little more for Mexico, Colorado’s 51 percent share would be calculated from a smaller total. In this new calculation, its surplus evaporates. Literally.

It’s the potential of developing more water only to have the supply curtailed, reversed after users come to rely on it that leaves the CRWCD uneasy (if I read their report correctly). Imagine cities that come to rely on a new supply only to have it cut-off.

Nevertheless others here and throughout the Upper Basin would move aggressively to grab more water and let policy-makers catch-up to new information that for now seems to indicate there’s room for a revised apportionment upward. As risky as some think this strategy may be, if it’s shown that more can be done to capture and use water allocated under the terms of the Compact, officials in water-challenged communities or states may choose to pick-up where Senator McCain left-off.

And the Compact, in its 91st year, will yet again prove its relevance.

More from the pro-development camp next time.

Business leaders attending the ColoradoBiz/UMB Financial Top Company awards retreat in Napa, Calif., lamented a lack of qualified workers to fill openings but expressed “cautious optimism” in discussing Colorado’s economic prospects in 2013. Executives from 11 Top Company winners attended the annual event.

Against a backdrop of improving national economic news including gains in home prices and starts, slowing increases in health-care costs, unemployment rates trending down and consumer confidence rising, executives pointed to labor-related issues as a potential barrier to growth.

Tom Tolkacz, longtime CEO of Swingle Lawn, Tree & Landscape Care and winner in the services category summed up the “good news, bad news” scenario facing Colorado companies. “We’re currently seeing our best year since the recession. But we feel like we could have grown our business significantly more than we did if we were fully staffed. We don’t know where the people are going to come from to fill our positions.

“From entry level unskilled labor all the up to skilled positions like engineers, it seems like those companies who are hiring are struggling,” he said.

Melissa Grandchamp, director of human resources at Ping Identity, a Top Company software-category winner, echoed Tolkacz’s sentiment. “We grew 67 percent last year just in head count … we can’t hire fast enough and find talent fast enough. We’re finding the universities in Denver don’t graduate a lot of talent in technology – so we’re trying to do a lot of visibility at the high school level and track it through to college. But we’re doing great.”

Brett Huston, executive vice president at SpectraLogic, a robotics and automated storage libraries manufacturer and winner in the technology category, agreed. “We’re doing fine – Europe is slow, but in the U.S. it continues to be a great ride but we can’t hire fast enough,” Huston said, also citing a lack of technical talent, including engineers.

Labor issues aside, executives were optimistic about national news and bullish on Colorado’s current standing. “We just haven’t seen the downtick we probably thought we would,” said Sandy Rothe, managing director of Deloitte’s Denver office and event co-sponsor. “Part of that is Denver’s doing better than much of the rest of the country, though even nationwide we continue to grow. Most of our clients are profitable, skeptical if profitable, as many aren’t making the investments we’d otherwise see them do; but they’re fundamentally pretty healthy.”

Robin Wise, Junior Achievement-Rocky Mountain president and CEO of and co-winner in nonprofit category, also suggested companies are still cautious. “Our supporters … have not really dialed back their giving … but we have seen organizations look hard at where they give and what they give to. Companies are also looking to give more to fewer and looking at making their charitable contributions go further in terms of branding and return on investment.”

Executives also heard from UMB Executive Vice President and Chief Investment Officer KC Mathews, who asserted that a “fiscal-cliff” would likely be avoided given the significant blow-back politicians might experience, but agreed with others who forecast very modest GDP growth over the next decade – in the 1.8 percent to 2.2 percent range.

Mathews also commented on the dampening effects of the current labor situation, suggesting that extended unemployment benefits may be working to keep otherwise qualified – and much-needed – workers out of the labor pool. “An extended unemployment benefit is not stimulative. The labor participation rate, the percent of individuals active in the job market is … is 63.6 percent, the lowest rate in 30 years. It’s 66 percent on average since 1980. Six million workers have basically said ‘I’m done.’”

Yet Mathews also pointed to housing as a bright national and regional segment, citing the housing ecosystem as a potential high-growth opportunity in markets like Colorado.

Go here for more information on the ColoradoBiz/UMB Financial Top Company awards.

One measure of the high anxiety around water in the West is the hyper-interest in the Nov. 30 release of the final phase of Bureau of Reclamation’s Colorado River study. This phase promises to be the most interesting, approachable part of the study, focusing on a long list of proposals submitted by the public to restore the Colorado River to a healthy balance, where supply can meet growing demand.

But those looking for a silver bullet from the Bureau’s research might be disappointed. It’s a good possibility this final report won’t live up to the hype. For one, researchers have warned that policy recommendations will be avoided. The study won’t propose a plan to fix the imbalance in the river. We’re instead promised more information that will facilitate good policy-making. The question is whether the report will lead to answers to the big, intractable challenges that Western water planners face.

That said, the Bureau study has already broken new ground. It has quantified use throughout the seven-state Colorado River Basin and forecast it decades into the future, a first. Modeled against the study’s supply data, it’s how we know with certainty there’s an imbalance – that the demand for Colorado River water exceeds supply.

I’m told the final report will analyze the dozens of proposals to fix the imbalance against the study data. It’s a fascinating list of proposals ranging from suggestions to increase supply, reduce demand, modify operations and conceive of ways to govern or regulate water differently. At minimum, if the report provides meaningful feedback on the feasibility of the more promising suggestions, planners will have the makings of a new and helpful tool kit of options to consider when dealing with river issues.

It remains to be seen, however, whether the final report will help resolve huge policy issues that loom.Two issues top my list:

1. Will the Upper Basin be ‘made whole’?

In the 90-plus years the Colorado River Compact and related agreements (the ‘law of the river’) have managed its allocation, the river has tilted downstream, decidedly in favor of the Lower Basin states of Arizona, Nevada and California. For decades, the Lower Basin has used its share plus the unused portion earmarked for the Upper Basin by the Compact. But now, the Upper Basin needs the water and likely will pursue its entitlement, as every gallon of ‘surplus’ water that flows downstream equates to economic loss.
Colorado is required to protect its allocation by statute, and the study has already determined it uses less than the Compact entitles by a wide margin, as much as a million-acre feet. Will the study contemplate a future where the Upper Basin uses more water, not less? It’s a near certainty Colorado will develop its remaining allocation, much as New Mexico and Utah are. What impact will this have Basin-wide?

2. Can Basin-wide planning co-exist with prior appropriation?

Of the suggestions relating to ‘governance and implementation’ received by the Bureau, none dealt with the long-term efficacy of ‘prior appropriation’ (first in time, first in right). Western water law has developed with prior appropriation at its core, but as a 19th-century concept, some view it as barrier to effective planning.

Natural resources law specialist Michael Blumm, writing in the informative book The Public’s Water Resource by Colorado Justice Greg Hobbs, sums up a growing opinion in water circles: “The current system of water allocation (prior appropriation)suffers from poor enforcement, little citizen involvement, and virtually eschews comprehensive planning entirely.”

But a higher level of Basin-wide planning seems inevitable. If Blumm is right, prior appropriation may have to modified. That’s a tall order. Will the study offer a way forward?

Other questions may elude the study. Drought and climate change can be measured fairly easily. Can inaction by policy-makers be “modeled?” It’s difficult to see how. I’m guessing the study will take a close look at the viability of widespread desalination – an expensive and resource intensive process. Again, is their political will to follow-through, today, before a crisis unfolds?

But if the study doesn’t offer a management “silver-bullet” that some hope for, the Bureau will still have done a service. It’s already added much to the discussion. Possible short term disappointment aside.

I’ll review the results next time.