I. INTRODUCTION

Before Wolfe v. Sedalia, the standard for quantifying water rights, where the rights had been changed from one use to another in a prior change case, was not clear. In Wolfe v. Sedalia, the Colorado Supreme Court addressed for the first time the issue of quantification in a second change case. It held that issue preclusion bars re-quantification of historical consumptive use in most subsequent change cases, but a water court “should take any evidence and legal argument offered by the parties” where there is a change in circumstances since the first change decree, such as an extended period of unjustified nonuse. If a water court “finds there has been prolonged unjustified nonuse of the water right between entry of the prior change decree and the pending decree application, it may conclude that this constitutes a changed circumstance calling for the selection of a revised representative period of time for calculating the annual average consumptive use amount” available for the subsequent change.

Not more than three months later, the Colorado legislature passed a bill that essentially overturns the Court’s key finding in Wolfe v. Sedalia. Senate Bill 15-183 (“SB 15-183”) codifies existing case law by requiring quantification of a water rights’ historical consumptive use based on actual historical use of the water right during a representative period. Such period shall include wet years, dry years, and average years, but must not include undecreed use and need not include every year of the history of the subject water right. More importantly, the bill also prohibits reconsideration or re-quantification of historical consumptive use that has already been quantified in a previous change decree.

Thus, in subsequent change cases, the prevailing law is a bright-line rule. Water right holders with a previous change decree are entitled to rely on the quantification of the subject water right’s historical consumptive use. For waters right holders without a previous change decree, or the determination of historical beneficial consumptive use, the actual historical use of the water right during a representative period remains the standard. In Wolfe v. Sedalia, the Court correctly balanced the underlying policy objectives on water law when it decided the case. However, the legislature provided important predictability and stability for many water rights holders.

II. CHANGE DECREES IN WATER LAW

In Colorado, a water right is “a right to use waters of the natural stream … when water would be naturally available to it in order of priority,” at its decreed location of diversion, and in the amount of its decreed beneficial use. The value of a water right is primarily determined by its priority. Thus, water rights established for irrigation and mining purposes in the 1880’s are among the most senior and valuable rights in Colorado. Recently, municipal entities started acquiring these historical rights and converting them for municipal use, including use in augmentation plans.

A Colorado water right historically used for one purpose may be changed to another purpose, including a change “in the type, time, and place of use.” Upon the filing of an application, a change decree is adjudicated in water court and is typically approved so long as it will not injure the existing water rights of another. Importantly, the volume of water available for use or change from a senior water right is limited to the amount of historical beneficial consumptive use actually made of the water right over an historic period of time, “not the amount diverted or decreed.” Thus, when a water right is acquired for an alternative use, the law values it by both its priority date and volume of historical beneficial consumptive use.

Courts determine historical beneficial consumptive use by a number of factors, including the selection of a representative period of time in which to analyze the historic records of actual beneficial use. When water rights are historically used for irrigation purposes, the quantification includes the type of crops historically irrigated, the irrigated acreage, actual diversions of water made, and amount of water consumptively used. However, prior to Wolfe v. Sedalia, any water rights holders in Colorado who wished to submit or challenge a second change decree, especially where the water right had not been used to its full benefit, remained uncertain about the proper standard of quantification.

III. WOLFE V. SEDALIA

In 1883, a water right (the “Ball Ditch water right”) with an 1872 priority date obtained a decree for a diversion rate of 3 cubic feet per second (“cfs”) of water from West Plum Creek in the South Platte River system. In 1976, the District Court for Water Division No. 1 decreed Stephen Sump No. 1 as an alternative point of diversion, primarily for irrigation, for 0.4286 cfs of the 3 cfs originally decreed.

The Owens Brothers Concrete Co. (“Owens Concrete”) later acquired an interest in 27.1% of the 0.4286 cfs of the Stephen Sump No. 1/Ball Ditch water right (“water right”). It filed an application to change the water right from irrigation use to augmentation plan use with a well that it had not yet drilled. The State and Division Engineers (“Engineers”) participated in the proceeding. This change proceeding required quantification, for the first time, of the historical consumptive beneficial use of the water right. In 1986, the water court entered a stipulated decree, concluding that Owens Concrete’s interest in the water right was historically used to irrigate 8.1 acres and the average historical consumptive use was 13 acre-feet of water per year. The water court determined that Owen’s Concrete was entitled to claim this amount as augmentation credit each year, and the water court changed the place of use from the irrigated farmland to the company’s well. However, Owens Concrete never used the well as intended. Pursuant to its augmentation plan, it left the 13 acre-feet of historical consumptive use water in the West Plum Creek for twenty-four years, but never claimed credit for anticipated depletions.

In 2009, Sedalia Water and Sanitation District (“Sedalia”) acquired the water right from Owens Concrete. It filed a change decree in 2010 and sought to change the purpose again from augmentation use to municipal use in its own augmentation plan. Its intention was to replace out-of-priority depletions from well pumping, which were located along a different part of the stream than the Owens Concrete’s intended well. In the change proceeding, Sedalia sought approval to use the same credit amount previously decreed in 1986, in Owens Concrete’s augmentation plan. However, the Engineers, also participating in this proceeding, insisted that the water court re-quantify the annual average historical consumptive use of the water right to include the period of nonuse between 1986 and Sedalia’s application. In a motion for partial summary judgment, Sedalia argued that issue preclusion bars the Engineers from relitigating the water right’s average annual historical consumptive use. The water court agreed with Sedalia and ruled that issue preclusion applies. The water court also found that abandonment, rather than the re-quantification of water rights, was the applicable standard for the facts in this case.

On appeal, the Colorado Supreme Court (“Court”) considered whether “in a third successive change of the Ball Ditch water right, its historical use should be quantified based on the average annual historical use last quantified by the second change decree and twenty-four years of subsequent nonuse.” The Court affirmed the water court’s holding in part and reversed in part. It affirmed that issue preclusion applies in water adjudications and prevents the Engineers from relitigating the historical beneficial consumptive use allocated to the water right for the 1872 to 1986 period. However, it reversed the water court’s finding that issue preclusion prevents inquiry into Owens Concrete’s twenty-four years of nonuse after the 1986 decree determination.

On appeal before the Court, Sedalia took the position that, once historical beneficial consumptive use is quantified under the original appropriation, “it is fixed and carries through to all future change cases.” The Engineers, on the other hand, argued that a water right under a change decree “must be re-quantified each and every time another change decree is sought.” The Court determined that this case could be resolved without adopting either position or a “cosmic pronouncement.” It analyzed both issue preclusion application in water cases, and quantification of beneficial consumptive use where there has been a change in circumstances since the previous decree.

In addressing these arguments, the Court first determined that the doctrine of issue preclusion serves an important role in water cases, and typically bars re-quantification of historical consumptive use in most subsequent change cases. However, in this case, the court found that Sedalia had not met two elements of the issue preclusion inquiry for the post-decree nonuse occurring between 1986 and Sedalia’s change application. First, the Court held that the present issue before the water court was not identical to the issue actually litigated and necessarily adjudicated in the prior action because the actual historical beneficial consumptive use that the court and parties examined in the 1986 change case did not include the twenty-four year period of nonuse. Second, the Court found that the party against who estoppel is sought, the Engineers, did not have a full and fair opportunity to litigate the issues, since it could not consider the effect, if any, that an “unjustified period of nonuse” has on the volume of consumptive use water available to Sedalia. Thus, the Engineers could not contest the amount allocated between 1872 and 1986 period, but it could contest the post-decree period from 1986 to Sedalia’s change application.

The Court then turned to the issue of when re-quantification of beneficial consumptive use may be justified in a subsequent change decree. It held that, “[p]rolonged unjustified nonuse of a water right between entry of a prior change decree and application for a successive change decree may constitute a changed circumstance,” because “it calls into question the appropriate representative period of time for calculating the annual average consumptive use.” The Court found that since the representative time period determines the amount of water available for the subsequent change decree, a change in circumstances that includes the twenty-four year period of nonuse may substantially reduce the volume of consumptive use water available to Sedalia.

The Court did not make an ultimate determination as to the appropriate representative period in this case, because, the lower could, among other things, did not make a factual finding as to whether Owens Concrete’s nonuse was justified. It only held that the lower court erred by applying issue preclusion to the alleged period of nonuse after entry of the 1986 change decree. Thus, on remand, the Court instructed the water court to determine whether it is appropriate to use a different representative period to calculate the amount of historical consumptive use in addition to taking “any evidence and legal argument offered by the parties” on the issue of the alleged period of post-1986 nonuse. In making this determination, the Court suggested that the water court consider the General Assembly’s intent to not consider every year of actual use “in order to promote other objectives of the water law.” Additionally, the Court pointed to case law that excuses periods of nonuse, such as the results beyond a user’s control. Since water law does not require a rigid examination of every year that a water owner does not use a right, the Court reminded, “under appropriate circumstances, the water court has discretion to select a representative period of time of the water right’s exercise in calculating the amount of consumptive use water available for inclusion to the changed water right.”

IV. COLORADO SENATE BILL 15-183

Not more than ten days after the Court decided Wolfe v. Sedalia, several legislators introduced SB 15-183 in the Colorado Senate. The bill addressed two key aspects of water law: (1) the test for quantification of historical consumptive use; and (2) the finality of a decision regarding historical consumptive use that had previously been quantified.

More specifically, the bill requires that quantification of historical consumptive use be based on actual historical use of a water right, during a representative period. The representative period will include wet years, dry years, and average years, but must not include undecreed use and need not include every year of the history of the subject water right. The bill also prohibits reconsideration or re-quantification of historical consumptive use that had already been quantified in a previous change decree; although, it does permit a water judge to impose terms and conditions on an applicant’s future consumptive use to keep it from exceeding the previously quantified historical consumptive use.

Most of the proposed language codifies existing case law, but the latter part directly conflicts with the Court’s holding Wolfe v. Sedalia. The bill’s supporters contend that it would reduce litigation and provide much needed certainty in water change cases. Municipal entities especially supported the bill because it would provide certainty in the water rights they own and allow them to determine how much water they can count on having available in the future.

Colorado Governor John W. Hickenloooper signed SB 15-183 into law on May 4, 2015. The changes appear in Colorado Revised Statutes section 37-92-305(3)(d)–(e), “[S]tandards with respect to rulings of the referee and decisions of the water judge.” The changes apply to future change applications, and applications currently pending before a water judge or referee.

V. JUSTIFICATIONS FOR THE PREVAILING LAW

The Court correctly balanced water law’s underlying policy objectives when it decided Wolfe v. Sedalia, but the legislature provided important predictability for water rights holders in passing SB 15-183. The underlying policy objectives of water law, as identified by the Court, are to provide security, assure reliability, and cultivate flexibility. In its holding the Court adhered to these objectives in two ways. First, it maintained that “issue preclusion will prevent relitigation of the historical beneficial use of previously changed water rights in many cases,” which prevents needless relitigation and “promote[s] the integrity of the judicial system” by allowing parties to rely on judicial decrees. Second, the Court allowed flexibility in the law by finding that a prolonged period of unjustified nonuse may be a legal basis for a water court to determine that the circumstances have changed. The Court’s holding merely “calls into question” the appropriate representative period of time, but it does not require a water court to re-quantify historical consumptive use.

Flexibility is necessary in a water system that experiences periods of drought and has historically been over-allocated. In finding that issue preclusion applies, the Court pointed to Farmers High Line as a controlling case in applying preclusion doctrines in water cases. Reiterating its analysis in Farmers High Line, the Court stated that due to the unique nature of water law, water courts must tailor the traditional preclusion analysis to the specific context of water decrees, and not close the door to “petitioners who allege new injury as a result of another’s enlarged use.” Essentially, the rule works to prevent possible injury to junior water rights holders who have come to rely on available water. In its decision, the Court also pointed out that control should not be ridged over such a scarce and valuable resource. However, this flexibility left ambiguity in the law as to what facts might constitute “prolonged unjustified nonuse.”

In response to some of these concerns, the legislature passed SB 15-183. The policy objectives of security and reliability in judicial decrees are especially important in Colorado where the population is growing, and streamflows can fluctuate from extreme highs to extreme lows resulting from periods of drought. Municipalities using augmentation plans need to be able to rely on these judicial decrees, as they acquire rights but do not always use the full amount. Such municipal entities include water districts, parks and recreation departments, and fire departments. Under the rule in Wolfe v. Sedalia, water rights holders run the risk of having a significant reduction in their water rights if they filed a subsequent change decree after a period of nonuse. Additionally, by allowing an objector to challenge any change in circumstances in a change application, the Court increases both court time and costs in change decree cases. Understanding these important concerns, interested parties filed multiple amici briefs with the Court in favor of Sedalia’s position.

In sum, Wolfe v. Sedalia answered an important question in water law, but the legislature quickly overturned it in favor of a bright-line rule. The prevailing law is that water right holders with a previous change decree are entitled to rely on previous quantification of that water right’s historical consumptive use. However, for water rights holders without a previous change decree, or the determination of historical beneficial consumptive use, actual historical use of the water right during a representative period remains the standard, as now codified by the legislature.

Featured image is of Dillon Reservoir in Colorado and is part of the public domain.


Sources:

Wolfe v. Sedalia, 343 P.3d 16, 29 (Colo. 2015).

S.B. 15-183, 17th Gen. Assemb., 1st Reg. Sess. (Colo. 2015).

Gregory Hobbs, The Public’s Water Resource: Articles on Water Law, History, and Culture 202 (2d ed. 2010).

COLO. REV. STAT. § 37-92-103(5) (2015).

Leonard Rice, Engineering and Hydrologic Issues in Changing Water Uses, in TRADITION, INNOVATION AND CONFLICT: PERSPECTIVE ON COLORADO WATER LAW 163 (Lawrence J. MacDonnell ed., 1985).

Daniel S. Young & Duance D. Helton, Developing a Water Supply in Colorado: The Role of an Engineer, 3 U. DENV. WATER L. REV. 373, 377 (2000).

Oral Arguments, Wolfe v. Sedalia, 343 P.3d 16 (Colo. 2015) (No. 2014SA12), https://www.courts.state.co.us/Courts/Supreme_Court/Oral_Arguments/Index.cfm?year=2014&month=&Submit.

Order Re: Sedalia’s Motion for Summary Judgment and the State and Division Engineers’ Cross Motion for Summary Judgment, Case No. 2010CW261 (Water Div. 1 Nov. 24, 2013).

Senators: Hodge, Sonnenberg, Crowder, Guzman, Ulibarri, & Woods; Representatives: Arndt, Becker J., Lebsock, & Pettersen; see Colo. S.B. 15-183.

Senate Bill 15-183 – Official City Position, Westminster City Council, approved on March 5, 2015, http://www.ci.westminster.co.us/Portals/0/Repository/Documents/CityGovernment/SB%2015-183%20Official%20City%20Position.pdf.

Water Rights–Historical Consumptive Use-Quantification, 2015 Colo. Legis. Serv. Ch. 157 (S.B. 15-183) (May 4, 2015).

COLO. REV. STAT. § 37-92-305(3)(e) (2015).

Farmers High Line Canal & Reservoir Co. v. City of Golden, 975 P.2d 189 (Colo. 1999).


This December, the United States Supreme Court will consider simultaneously Decker v. Northwest Environmental Defense Center and Georgia-Pacific West, Inc. v. Northwest Environmental Defense Center, two appeals resulting from the Ninth Circuit case of Northwest Environmental Defense Center v. Brown, 630 F.3d 1063 (9th Cir. 2011).  The case centers on stormwater runoff resulting from logging operations in state forests in Oregon and whether it falls within certain permitting requirements under the Clean Water Act (“CWA”).  In the past, the Environmental Protection Agency (“EPA”) has determined that runoff resulting from logging operations does not fall within these requirements.  However, the Ninth Circuit below in Brown held that the stormwater runoff collected and discharged by a system of ditches, culverts, and channels alongside the roads used by the logging companies is a point source discharge that requires a National Pollutant Discharge Elimination System (“NPDES”) permit.  Both state forestry officials (“Decker”) and private companies (“Georgia-Pacific”) filed petitions for writ of certiorari with the Supreme Court, which will hear oral arguments on December 3, 2012.

Logging companies contracted with the state use a system of roads to remove harvested trees from the state forests.  The sloped roads used by the companies’ trucks and equipment utilize a system of ditches, culverts, and channels to handle stormwater runoff and extend the duration of the roads.  This system collects not only water but a substantial amount of sediment as well, which is considered a pollutant.  The water and sediment eventually finds its way to the rivers, leading to the argument by the Northwest Environmental Defense Center (“NEDC”) that this system is point source discharge and is subject to NPDES permits.  Decker and Georgia-Pacific both argued in their respective writs for certiorari that a permit was not required because the drainage system was a non-point source discharge, fell under the silvicultural exemption, or at the very least an amendment to the CWA in 1987 excused the requirement.  These arguments stem from 33 U.S.C. § 1342(p), which requires NPDES permits for stormwater discharges resulting from industrial activities.  However, it was left to the EPA to decide what exactly constituted “industrial activity.”  The EPA passed its own regulation, 40 C.F.R. § 122.26(b)(14), which determined that stormwater runoff from logging activities and other silvicultural activities is non-industrial and does not require an NPDES permit. Additionally, both Decker and Georgia-Pacific argued that with the two-step process required by the 1987 Amendment to the CWA, the EPA intentionally refused to list logging operations as “industrial activity” that would require a NPDES permit for stormwater runoff.

The Supreme Court granted certiorari and will be considering two distinct issues.  The first is whether the Ninth Circuit improperly determined that the stormwater runoff resulting from logging operations is industrial runoff, subject to NPDES.  This holding, argues Decker and Georgia-Pacific, goes against the longstanding determination of the EPA and its regulations, the apparent intention of Congress in the 1987 amendment to the CWA, as well as decisions made by several other circuits that deferred to EPA decisions.  The second issue is the manner in how NEDC originally brought the suit.  Decker argues the Ninth Circuit allowed NEDC to bypass judicial review of the NPDES permitting rule and challenge the validity of the rule directly in a citizen suit to enforce the CWA.  This argument stems from countering statutes, 33 U.S.C. § 1365 and 33 U.S.C. § 1369.  The Supreme Court must decide whether or not the decision to allow the citizen suit under § 1365 was proper and not precluded by § 1369, which says EPA rulings cannot be challenged in any civil or criminal enforcement proceeding, as the Ninth Circuit apparently allowed.

Should the Supreme Court uphold the Ninth Circuit’s decision (stormwater runoff from logging operations is industrial runoff), logging companies would be required to apply for and receive a NPDES permit for all the roads they use during operations, rather than utilizing best management practices.  This would result in time consuming litigation and reallocation of resources for the companies.  State governments may even be required to alter their well-established road drainage system requirements in order to reduce NPDES permitting.  Most importantly, however, is if the Court were to uphold it would approve the Ninth Circuit’s decision to break thirty-five years of precedent and overrule the EPA and its interpretation of its own regulations.  This may very likely require a revisit to Chevron.


Sources:

  • Nw. Envtl. Def. Ctr. v. Brown, 640 F.3d 1063 (9th Cir.)Petition for Writ of Certiorari, Decker v. Nw. Envtl. Def. Ctr., No. 11-338 (U.S. Sept. 13, 2011), 2011 WL 4352279.
  • Petition for a Writ of Certiorari, Georgia-Pacific W., Inc. v. Nw. Envtl. Def. Ctr., No. 11-347 (U.S. Sept. 13, 2011), 2011 WL 4352287.
  • Respondent’s Brief in Opposition, Decker v. Nw. Envtl. Def. Ctr., Nos. 11-338, 11-347 (U.S. Nov. 10, 2011), 2011 WL 55487721.