Colorado Supreme Court Victory: Water Courts Cannot Consider Speculative Water Transfers

By Stephen H. Leonhardt, Scott A. Clark and Alix L. Joseph

High Plains A&M LLC filed two almost identical applications for changes of water rights in late 2002 and early 2003. The Water Court consolidated the two cases. In its Applications, High Plains claimed to own or control of about 30% of the shares in one of the largest irrigation systems in Colorado. High Plains asked the Water Court to approve changes to its water rights from irrigation and other decreed uses in the lower Arkansas River Valley to any beneficial use, including over fifty identified potential uses, in any location within twenty-eight Colorado counties. High Plains’ applications did not identify any end users of the water besides the farmers who currently use the water. In High Plains A&M, LLC v. Southeastern Colorado Water Conservancy District, 120 P.3d 710 (Colo. 2005), Burns, Figa & Will, P.C., on behalf of our client, the Southeastern Colorado Water Conservancy District, successfully argued that High Plains’ application for a change of water right was properly dismissed because the application did not state with specificity the use or location of use of the changed water rights, thus violating Colorado’s anti-speculation doctrine.

After conducting limited discovery confirming that High Plains lacked any specific plan for use of the water, Southeastern and other objectors filed a motion for summary judgment asking the Water Court to dismiss High Plains’ applications. The Water Court granted Southeastern’s motion and dismissed High Plains’ applications because “Applicants’ plan was so expansive and nebulous that it was impossible for other holders of water rights to determine whether they will be injured,” and because the applications were speculative. On appeal, the Colorado Supreme Court upheld the dismissal, holding that:

the anti-speculation doctrine is rooted in the requirement that an appropriation of the public’s water resource must be for an actual beneficial use. To implement this requirement, adjudication of water right and change of water right applications includes identification of the structures through which the appropriated water will be diverted and delivered for identified beneficial uses at identified locations.
High Plains, 120 P.3d at 716.

The Court based its decision on statutory definitions of “change of water right,” “water right,” “appropriation” and “beneficial use,” the relationships linking those terms, and a review of how Court precedent on water rights and changes of water rights relates to the statutory definitions. These definitions work together to assure protection of the public’s resource by application of a specified amount of water to an actual beneficial use at a specified location. The essential elements of a water right are priority, location of diversion and amount of water applied to actual beneficial use. “Actual beneficial use is the basis, measure, and limit of an appropriation.” Water rights owners can change these essential elements of their decreed rights while preserving the original priority of the right. However, this right to change water rights is within, and subject to, the “Colorado Doctrine,” which specifies that water is a public resource dedicated to beneficial use by appropriators as prescribed by law.

The Court concluded that the primary function of a change of water rights proceeding is to assure that a valid appropriation continues in effect after the change. Thus, “the appropriator’s interest in the appropriation for an actual beneficial use is a prerequisite for maintaining the application and obtaining a decree.” The definition of “appropriation” found in C.R.S. § 37-92-103(3)(a), which implements the “appropriation and beneficial use requirements of Article XVI, sections 5 and 6 of the Colorado Constitution,” imposes on an applicant the obligation to demonstrate (1) an interest or reasonable expectation of procuring an interest in the lands or facilities to be served by the appropriation, and (2) a specific plan and intent to divert a specific quantity of water for specific beneficial uses. An application for change of a water right reopens the absolute decree to demonstrate terms of operation under changed conditions. Such changed conditions still must constitute an “appropriation.”

The Court found that High Plains failed to identify any specific parcel of land or consumer to be served by the changed water rights. In contrast, other change applications approved by the Court contemplated a plan for actual use by the applicant. (For this point, the Court cited Strickler v. Colorado Springs, 26 P. 313 (Colo. 1891); Farmers Highline Canal & Reservoir Co. v. Southworth, 21 P. 1028 (Colo. 1889); and City of Thronton v. Bijou Irrigation Co., 926 P.2d 1 (Colo. 1996).) The Court concluded that:

A guess that a transferred priority might eventually be put to beneficial use is not what the Colorado Constitution or the General Assembly envisioned as the triggering predicate for continuing an appropriation under a change of water right decree. The change application process is intended to prevent injury to other water rights. High Plains, 120 P.3d at 721.

High Plains’ applications were not sufficiently detailed to trigger a right to a continuing appropriation under a change of water right decree, and did not justify commanding the attention of the Water Court or the opposing parties.

Given the demand for Colorado’s limited supplies of water, the anti-speculation doctrine will be an increasingly important issue in changes of water rights. Without the protection of the anti-speculation doctrine, wealthy investors could potentially purchase agricultural water rights, obtain a broad change decree, holding changed rights until municipalities or other industries are so desperate for water that they will pay extraordinary prices. Colorado’s water rights system is rooted in continued beneficial use of water. Had the Court determined that the anti-speculation doctrine did not apply to changes of water rights, Colorado’s prior appropriation system would become an incomprehensible and unreliable jumble of ill-defined and unmanageable decrees authorizing ever-changing uses.

Stephen H. Leonhardt
For more information, please contact Stephen H. Leonhardt at (303)796-2626 or e-mail . Mr. Leonhardt concentrates his practice on water law, related governmental and environmental issues, and litigation. Mr. Leonhardt counsels clients on the establishment, protection, and modification of water rights throughout Colorado. He represents clients in judicial and administrative proceedings and transactions concerning rights to use both surface water and groundwater

Scott A. Clark
For more information, please contact Scott A. Clark at (303)796-2626 or e-mail . Mr. Clark represents clients on a wide range of environment and natural resources matters, including brownfields, remediation, real estate transactions, litigation, permitting, petroleum storage tank fund applications, regulatory compliance, water quality and water rights.

Alix L. Joseph
For more information, please contact Alix L. Joseph at (303)796-2626 or e-mail . Ms. Joseph is an associate with the firm. She focuses her practice on water law, environmental law, and civil litigation.