KERSEY — The desire to expand housing, commerce and other development around metro Denver and on arid high plains once deemed inhospitable has driven an innovative urban water broker to build a $22 million reservoir on a ranch 70 miles east of the city along the South Platte River.

Water siphoned from the river through a pipeline this summer has filled about a third of this 5,500-acre-foot — or 1.8-billion-gallon — 70 Ranch Reservoir. It’s the latest new storage in an expanding network of reservoirs that United Water and Sanitation District president and ranch owner Bob Lembke is installing to meet rising demands from Front Range suburbs hooked on dwindling groundwater.

For decades, federal and state governments drove massive water projects in the West. But large-scale dam and reservoir projects often are delayed amid environmental reviews and lawsuits due to disruption of natural flows.

The reservoir that Lembke built near his private 13,000-acre 70 Ranch, purchased in 2003, took three years to complete, the largest synthetically lined reservoir west of the Mississippi River. It reflects growing impatience with constraints that could limit development along Colorado’s booming Front Range.

Others in northeastern Colorado also are planning, and seeking funds, to build much larger reservoirs that, like this one, would capture South Platte water otherwise bound for Nebraska. Lembke has been able to avoid red tape — and has left critics asking questions — by working with wealthy water-poor suburbs, building on land he owns and using former gravel pits off the main channel of the river.

“We’d like to try to enhance the economic development. I’m a native. I grew up in Arapahoe County. As a native Coloradan, jobs for my kids, and eventually my grandkids, are important,” Lembke said in a recent interview in his headquarters suite at the Denver Tech Center.

“If you look at Denver, they’ve done a wonderful job planning for their water. But outside of the Denver service area? There’s a lot of challenges in how to get water and economic growth in these areas not served,” Lembke said.

Storing more water in new reservoirs — “utilizing a resource that currently is underutilized” — is the key to enabling population growth and economic expansion, he said.

“We have tens of thousands of acre-feet of water that, without storage, will leave the state — to no economic value here in Colorado. We can accommodate a great deal of quality growth. … I am a problem solver. I like to tackle difficult problems. Providing water increases the value of land that otherwise did not have water,” he said.

“We try to move more quickly” than federal and state government agencies “in a time frame that meets the needs of small communities that need water. These smaller communities cannot wait 30 or 40 years for a water solution.”

Putting water to “beneficial use”

Under Colorado’s constitution, water belongs to the public. However, rights to use water can be bought and sold. State natural resources officials are tasked with oversight, of administering water allocations based on a priority system.

To gain rights to use water, developers must demonstrate in water court that they would put the water to “beneficial use,” as opposed to “speculating” by holding water for profit. Beneficial use has been interpreted as supplying cities, industry and agriculture, though courts also have decided that leaving water in rivers to sustain natural ecosystems is legitimate.

Multiple stretches along the South Platte nevertheless are completely drained as urban, agricultural and industrial users siphon water.

The problem across south metro Denver has been suburbs relying too heavily on pumping underground water as a primary source because they lack sufficient renewable surface water. Water tables are falling in some areas, state data shows, and pumping to coax water from aquifers has become increasingly difficult and costly.

The East Cherry Creek Valley Water and Sanitation District and the Arapahoe County Water and Wastewater Authority years ago turned to Lembke and his United Water and Sanitation District to buy up agricultural land and gain rights to 11,000 acre-feet of river water previously used to irrigate crops. Lembke defends this practice, saying farmers willingly sold their water rights to be able to avoid bankruptcy and stay on their land.

But taking that water for urban use requires, under Colorado law, replenishment or “augmentation” of flows that otherwise could run low to the detriment of owners of senior water rights downriver. The primary purpose of Lembke’s 70 Ranch Reservoir is to provide augmentation water — back-filling the river to enable use of the 11,000 acre-feet that suburbs would withdraw 70 miles to the west near Barr Lake.

The 70 Ranch managers already have allowed fossil fuels companies to drill more than 500 oil and gas wells on the property. Producing oil and gas consumes millions of gallons of water per well, water that is injected deep underground with sand and chemicals to stimulate flows of hydrocarbons. Some water for these operations comes from a smaller reservoir on the 70 Ranch.

“Because of the reservoirs, we have lands that can get water. Those lands have more value,” Lembke said, adding that developers now could build new housing around south metro Denver. “I have some land that has benefited. Some of my land would not have had water but for this reservoir.”

70 Ranch Reservoir “brings up questions”

Historically, plains tribes treated the grasslands here in this area near Kersey — the 70 Ranch is located 70 miles from Denver, Cheyenne and Sterling — as hunting grounds. Early settlers determined the land was practically a desert, too dry for farming. Ranchers brought cattle.

The push for intensified development on Colorado’s Front Range, and beyond, has led to demands for increased water supplies, though conservation in cities has decreased water use per person. Private corporations have sensed opportunity — as farmers’ irrigation ditch cooperatives did in the past.

A New York hedge fund called Water Assets Management, for example, has bought more than 1,500 acres of agricultural land in western Colorado with water rights. The idea was that water will gain value if anticipated shortages in the Colorado River Basin compel California and other lower-basin states to issue a formal “call” on water from the upper basin states (Colorado, New Mexico, Utah and Wyoming).

Across Colorado, government officials and others point to a trend over the past decade of outside investors buying up irrigated land with water rights without any intention of playing an active role in agricultural operations. These buy-ups are raising concerns about the survival of food production and open landscapes.

“Whether on the South Platte River, the Colorado River or the Yampa River, we’re not in favor of converting agricultural water use to municipal use,” said Andy Mueller, manager of the Colorado River District, which represents western Colorado communities.

The new 70 Ranch Reservoir northeast of Denver “brings up questions,” Mueller said. “Is it water to support new growth? Or is it water to support the existing population that is dependent on groundwater?”

The hedge fund investors purchasing land and water rights in western Colorado typically seek double-digit returns, Mueller said. “They believe there’s monetary value there for their investors. We’d say that’s speculation. How do we make sure there is not emerging speculation by outside investors who may not have community values? How do we help farmers and ranchers stay in business?”

Colorado leaders for decades have declined to regulate population growth and development. But the growing private interests in water, perhaps reviving the role private financiers played developing water systems in the 19th and early 20th centuries, has piqued concerns.

“Because traditionally in the West we have the mind-set that water is the property of the people, we are concerned when water is being controlled and distributed by a private corporation that may have very different interests from the collective group of people who are affected by the use of that water,” said Anne Castle, formerly the top federal water official in the Obama administration, now a senior fellow at the University of Colorado Law School’s Getches-Wilkinson Center for Natural Resources, Energy and the Environment.

For an urban water broker to buy agricultural land and install a reservoir “is all perfectly legal and allowable,” Castle said. “But it does make us nervous because we tend to think governmental entities will have some accountability to the people to recognize the different kinds of values people put on water. We just don’t have that assurance with a private corporation.”

Lembke in his role as president of United Water and Sanitation also serves as president of the Weld Adams Water Development Authority, which owns and operates the 70 Ranch Reservoir. He pointed out that these so-called special-use districts are governmental groups.

Using water intelligently

Denver-based water attorney David Robbins called Lembke “a very smart man. He is an entrepreneur. He is filling a niche.”

The 70 Ranch site also is used for experiments in drip irrigation, aimed at using water more efficiently to grow plants where otherwise vegetation might not survive.

Lembke now is installing other reservoirs — including two that he would own privately — as part of a network that when completed would store about 30,000 acre-feet for supplying water to suburbs, agriculture, industry and other development along Colorado’s Front Range.

He has built, or is in the process of building, four reservoirs upriver from the 70 Ranch at high-growth locations along the South Platte: in Milliken (12,000 acre-feet), between Commerce City and Brighton (3,500 acre-feet), east of Lochbuie (4,000 acre-feet) and in Fort Lupton (5,000 acre-feet).

These will supply businesses and housing developers in each booming area “to help them achieve their goals for economic growth and development” using surface water from the river rather than by pumping from over-tapped underground aquifers, Lembke said.

“Everything has got a finite limit,” he said. “But if we use water intelligently, we have the potential for long-term growth in this region.”