The Water Law Review is proud to announce the elected Editorial Board for Volume 21!

Editor-in-Chief — Sarah Rice
Managing Editors — Vann Ellerbruch & Stephen Klein
Business Editor — Kole Kelley
Online Content Editor — Josh Boissevain
Production Editor — Josh Oden
Sources Editor — Connor Pace
Symposium Editor — Lindsey Ratcliff
Legislative Reports Editor — N. Rioux Jordan
Article Editors — Tucker Allen, Erica Montague, Dalton Kelley,
Trevor Lambirth, and Travis Parker
Court Report Editors — Maggie Casey & Tina Xu
Editorial Board Elect — Rebecca Spence


Order Concerning the Application for Water Rights of High Valley Farms, LLC (14CW3095)

Earlier this year, Colorado got its first taste of how the state sees marijuana cultivation within the framework of its water law regime.

In an order which may have far-reaching effects beyond Colorado’s flourishing cannabis industry, Division 5 Water Referee Susan Ryan held that it is proper to issue a new water right to a marijuana cultivator. Ryan issued this industry-favorable order despite the continuing prohibition of cannabis by the federal government. As the cannabis industry continues growing, states will be forced to confront an increasing number of conflicts between their internal water allocation and the supremacy of federal law.

As we have previously reported, the marijuana cultivation facility, High Valley Farms of Basalt, initially filed an application for an underground water right, surface water rights, storage water rights, and a plan for augmentation in 2014. High Valley amended its application twice in response to consultation reports and recommendations of the Division Engineer, which primarily focused on whether or not the company’s use of the new water rights were considered “lawful.” As part of the application process, the Division 5 Engineer requested that High Valley clarify how its application fit with the statutory concept of beneficial use in Colorado water law, specifically the phrase “lawfully.” High Valley responded to these inquiries by referencing the legalization of cannabis cultivation under Amendment 64 arguing that state legalization made High Valley’s proposed water use lawful and thus beneficial.

Perhaps the most important facet of High Valley’s application was that it was not claiming the use of any federal contract water or federal facilities. Using such water would almost certainly mean High Valley would have a harder time arguing federal law shouldn’t be a factor in the central beneficial use question.  In 2014, the Bureau of Reclamation announced a policy that federal water could not be used to grow marijuana.

The primary issue before Referee Ryan was whether the State of Colorado could lawfully appropriate High Valley water for cannabis cultivation despite federal prohibition of the plant within the Controlled Substances Act (“CSA”). This issue required Ryan to determine how the term “lawful” operates in the state water law statutes. In addition, Ryan examined whether there was a positive conflict between the Colorado statutes and the CSA.

At the beginning of her order, Referee Ryan began by discussing Colorado’s authority as a state to allocate its own internal water resources.  She reviewed the history of interaction between Colorado and the federal government regarding water rights, including the Mining and Reclamation Acts. Through this legislation, Congress established the federal policy of allowing states to construct and operate their own water regimes. Referee Ryan cited California Oregon Power Co. v. Beaver Portland Cement Co., which is United States Supreme Court precedent that supports the idea of “purposeful and continued deference to state water law by Congress.”

The concept of state deference is essential to the future of the marijuana industry in Colorado, which will require increasing amounts of water to operate, allocated primarily under Colorado water law. If Colorado is not allowed to allocate their own water for use in marijuana cultivation, the nascent marijuana industry may face some difficult questions down the road.

Next, Referee Ryan reviewed the doctrine of prior appropriation, which governs in Colorado, and the related concept of beneficial use under the Colorado Constitution. Under the prior appropriation doctrine, “a water right is a usufructuary right that is created when a specific quantity of water is applied to an actual beneficial use.” Regarding the interpretation of these doctrines, Referee Ryan noted that neither the Colorado Constitution nor state water statutes define the parameters of what constitutes beneficial use under state law, which leaves the question of whether growing marijuana constitutes a “beneficial use” open to interpretation by the state’s water referees and water judges.

Switching gears from water law to marijuana law, Ryan’s order next outlined the laws governing the cultivation of marijuana. Specifically, Ryan analyzed the proposed uses outlined in High Valley’s application. Ryan explained that the Colorado Retail Marijuana Code, adopted by the state legislature after recreational marijuana legalization, explicitly contemplated the supply of water for cannabis grow operations within the state.

To support this, Ryan discussed an Order issued by the Office of the State Engineer after legalization, which stated that, “Division Engineers shall allow Irrigation Water Rights to be used to irrigate any type of plant that may be legally grown under Colorado law.” This Order was originally cited by High Valley in its briefings to Division 5.

Nevertheless, while the water used by High Valley would be from local Colorado sources and the ultimate product can only be sold in Colorado, there is Supreme Court precedent regarding how interstate marijuana growing can invoke Congress’s Commerce Clause powers to regulate that activity. Referee Ryan considered Gonzales v. Raich, in which the Supreme Court held that Congress has the power to regulate local cultivation of marijuana even when it does not enter interstate commerce. In this case, however, there is no federal law at issue, therefore the dispute should be settled under Colorado water law, according to Referee Ryan.

Next, Referee Ryan went on to examine potential preemption issues between Colorado law and the CSA. She discussed the 2015 Coats v. Dish Network case in which the Colorado Supreme Court construed the term “lawful” in a state employment statute in the context of a Dish Network employee being fired for using medical marijuana. The Coats court held that the employment statute’s term “lawful” referenced both federal and state law, and as federal law does not allow for any marijuana use, employer Dish was within its rights to fire the employee for federally-unlawful medical marijuana use.

In the Colorado v. Crouse case the Colorado Supreme Court examined whether a Colorado law that required the return of seized marijuana conflicted with the CSA. The court held that the CSA does not preempt state law unless there is a positive conflict – where it is impossible for federal and state law to coexist.

In her analysis, Referee Ryan explained that a lawful appropriation of water does not require an analysis of the legality of the subsequent use of that water. Distinguishing Coats and Crouse, she argued that the case at issue did not involve federal water, and therefore the presumption of a state’s right to allocate its own internal resources applied.

Ryan then determined that no positive conflict existed here between the CSA and Colorado water law, as “nothing in the CSA prevent(s) High Valley from seeking to divert unappropriated water for a specified beneficial use.” Ryan reasoned that complying with Colorado water law here would not make it impossible to comply with federal law, and therefore no positive conflict existed, unlike in Crouse and Coats.

Overall, the final order declared that the term “lawful” in C.R.S. §37-92-103(4) references solely Colorado water law and nothing more. As the application of Colorado law in High Valley’s water rights case does not conflict with any provisions of the CSA, there are no federal preemption grounds to rule against the cultivation facility.

In sum, Referee Ryan ruled that Colorado law does not preclude High Valley from continuing with its application for water rights. For now at least, the order provides some certainty to a growing industry and it gives a glimpse of how the state may proceed in reconciling some thorny and unsettled patches of water law.

                                                                                                                                    Brian Hinkle

Image: A medical marijuana growing operation. Flickr User Colleen Ellioit, Creative Commons.

Sources

Ord. Regarding Issues Raised in the Summary of Consultation, In Re: The Application of High Valley Farms, LLC, No. 14CW3095 (Colo. Water Ct. Div. No. 5 2015).

Kathleen Cunilio, Can the Beneficial Use Doctrine and Cannabis Coexist in Colorado? U. Denv. Water L. Rev. Blog (Dec. 20, 2016), http://duwaterlawreview.com/can-the-beneficial-use-doctrine-and-cannabis-coexist-in-colorado/.

Brent Gardner-Smith, Water court referee finds it lawful to issue a water right to grow pot,  Aspen Journalism (Feb. 21, 2017), http://aspenjournalism.org/2017/02/21/water-court-referee-finds-it-lawful-to-issue-a-water-right-to-grow-pot/.

People v. Crouse, 388 P.3d 39 (Colo. 2017).

Coats v. Dish Network LLC, 303 P.3d 147 (Colo. 2015).

Gonzales v. Raich,  545 U.S. 1, 29 (2005).

California Oregon Power Co. v. Beaver Portland Cement Co., 295 U.S. 142 (1935).


More than one thousand days have passed since the city of Flint, Michigan, had clean drinking water. One thousand days pales in comparison to the two centuries of research on the effects of lead contamination existing prior to April 2014, when disputes with the Detroit Water and Sewerage Department caused Flint to reopen its one-hundred-year-old lead pipeline connected to the Flint River. 

The Flint water crisis continues to make headlines into 2017, ranging from updates about the city’s drinking water lead levels, publication of a human rights commission report, initiation of more criminal lawsuits, and most importantly, contemplation of the future of Flint’s drinking water infrastructure.

Continued Water Advisories Despite Lower Lead Levels

First, the current lead contamination level in Flint’s water has subsided and is now below the federal limit. Nonetheless, the Michigan Department of Environmental Quality continues to advise Flint residents to use filtered drinking water while the city works to replace its lead-laced underground piping. The state continues to provide bottled water and filters to residents. However, the state of Michigan is trying to wean the City of Flint off of is its subsidization of water.

Discontinuation of Water Subsidies

This change occurred on the last day of February after the most recent water test demonstrated that Flint’s water complies with federal rules regarding copper and lead levels. Prior to this recent policy decision, the Michigan state government provided homeowners and businesses with water relief credits ranging between twenty and sixty-five percent.

Government officials estimate the cost of this these credits at $40.4 million. Considering that an initial remedy of adding phosphorous to water coming from the Flint River would cost, at most, $100,000 per year, the $40.4 million in water relief credits and the mounting legal costs associated with the crisis are exorbitant.

In a news release reacting to this announcement by Governor Snyder, Flint Mayor Karen Walker stated that, “We knew the state’s assistance with these water-related expenses would come to an end at some point, I just wish we were given more notice so we at City Hall, and the residents, had more time to prepare for the changes.”

Issues of Environmental Racism in Flint

In March 2017, an expert on Legionnaires Disease claimed the Flint water system is the likely source of a deadly outbreak killing twelve people in Flint in 2014 and 2015. In an affidavit filed with state health regulators, Dr. Janet Stout said that the city’s switch from Lake Huron back to the Flint River, as well the governmental inaction to treating the corrosive water, caused the outbreak, which also resulted in ninety-one illnesses. This Flint River water dissolved the lining in the city’s old pipes, causing iron to enter the water and boost Legionella bacteria reproduction. So not only were Flint residents left to worry about lead poisoning, they also had other harmful adulterants in their water.

The disease expert’s affidavit said the McLaren-Flint Hospital was the common source of exposure for over half of the Legionnaires confirmed cases during a seventeen-month period. This affidavit may have been included in the hospital’s response to inquiries from the Michigan Department of Health and Human Services to absolve itself from potential liability or sanctions for exposing hospital patients to the deadly disease.

A national study last year reported that Flint citizens of this predominantly African American city paid the highest water rates in the country. Even when the water was laced with lead, it is now apparent that some residents paid with their lives. The link between poor neighborhoods and the people of color who inhabit them has sparked the much-needed conversation of environmental racism.  Poor neighborhoods in the U.S. contain disparately greater amounts of lead.

The 2017 Michigan Civil Rights Report on Flint

Early this year, the government-appointed Michigan Civil Rights Commission released a lengthy 129-page report regarding the water crisis in Flint entitled, “Systemic Racism Through the Lens of Flint.”

The report acknowledges that “the people of Flint have been subjected to unprecedented harm and hardship, much of it caused by structural and systemic discrimination and racism that have corroded your city, your institutions, and your water pipes, for generations.” This report indicates “that the vestiges of segregation found in Flint made it a unique target” for its water crisis.

Moreover, the report argues that the racial discrimination in employment practices, education, housing, and even lending practices demonstrate a pattern of race-related issues in Flint. This pattern of historic racism “was built into the foundation and growth of Flint, its industry and the suburban area surrounding it.”

One of the report’s recommendations includes bias training for state officials. Additionally, this report is the third report to target current state laws related to emergency manager positions. A state-appointed emergency manager made the key recommendation to use the Flint River as a water source, albeit for just an interim period.

More Criminal Charges Filed in Addition to On-Going Civil Suits

Michigan Attorney General Bull Schuette charged two emergency managers, among two others, late last year. With these added officials, the total number of state employees criminally embroiled in the Flint water crisis sits at thirteen. Criminal charges among this group hovers at forty-three. In Schuette’s ongoing criminal investigation, the fact that a state-appointed emergency manager controlled Flint when it switched to the untreated water is crucial to these new charges.

In addition to these criminal-focused investigations, Schuette’s office also filed civil claims against two private companies: the Texas-based corporation LAN and multi-national corporation Veolia in mid-2016. These two for-profit water-engineering firms both allegedly played a role in the decision to switch to Flint River water.

The alleged civil law violations between these two companies include professional negligence, fraud, and public nuisance. Moreover, the lawsuits allege that these two companies overlooked crucial warning signs leading up to and during the water crisis. To back its civil claims, the Attorney General’s website also publicly displays a dearth of complaint exhibits for these two civil suits.

While some Flint residents are focused on these lawsuits and holding government official accountable for the lead in their water, others, including Flint’s mayor Karen Weaver, are looking towards the future.

Other Cities May Need To Take a Closer Look at Flint’s Water Infrastructure Rebuilding

Mayor Weaver recently announced that the city is still at least two full years away from achieving lead-free water service lines. These ongoing infrastructure development issues remain important because Flint’s agreement with the entity that provides its residents with its current water source is set to expire this summer.

In terms of the infrastructure efforts, Flint’s Mayor cautioned that a completion date of August 2019 is the goal. By then, the city will be able to replace its thousands of lead and otherwise unsafe service line pipes for its roughly 98,000 residents. As of March 2017, Flint has only replaced 8,000 of those pipes. Very recently, the EPA announced that Flint will receive a $100 million emergency grant to help fund these updates.

Other cities may also be looking at Flint’s infrastructure plans. For example, Pittsburgh is currently struggling with elevated levels of lead in its tap water. The lead issue in Pittsburgh is so widespread that the city’s mayor recently announced that the city will offer the free filters to all City of Pittsburgh homeowners.  A Virginia Tech professor who has researched the Flint water crisis also commented on what’s going on in Pittsburgh.  “The levels in Pittsburgh are comparable to those reported in Flint,” Dr. Mark Edwards said. “I don’t think you have a Flint on your hand, but those levels are worrisome.”

An interesting twist is that Pittsburgh also contracted with Veolia, the same corporation that the State of Michigan is currently suing. Veolia consulted with Pittsburgh to help the city cut costs. One of the more drastic measures included having the city switch from using soda ash to treat pipe corrosion to caustic soda, a less expensive chemical additive.

Closing

In response to the media frenzy about the lead contamination, Governor Rick Snyder responded by releasing his emails back in January 2016.  In one email, he stated, “It’s just a few IQ points… It’s not the end of the world.”  However, local Flint pediatrician, Dr. Hanna-Attisha, disagreed: “If you were going to put something in a population to keep them down for generations to come, it would be lead.”

In part of the Michigan Civil Rights Commission’s report it noted, “When the last of the civil lawsuits and attorney general criminal investigations are completed, and relief dollars from state and federal sources are exhausted, what will remain is a city and its people who will continue to fight against built-in barriers but whose voices – as a matter of public right – must never be stifled or quelled again.”

While the slew of lawsuits implicating both criminal and civil blame for the Flint water crisis are far from settled, the town’s lower lead levels and long-term goal of replacing water service lines are small steps in the right direction. Nonetheless, Flint may simply be the tip of a lead-laden iceberg as other cities like Pittsburgh are realizing their lead-based water pipelines pos a significant health risk.

                                                                                                                        Kelsey Holder

Image: Flickr User darkday, Creative Commons.

  

Sources:

Public Sector Consultants, Saginaw Bay Watershed and Area of Concern, Michigan State University: Land Policy Institute (2012), http://www.pscinc.com/LinkClick.aspx?fileticket=Hi_PFZU-xOI%3D&tabid=65.

Siddhartha Roy, Why is it possible that Flint River water cannot be treated to meet Federal Standards?, Flint Water Study (Aug. 24, 2015), http://flintwaterstudy.org/2015/08/why-is-it-possible-that-flint-river-water-cannot-be-treated-to-meet-federal-standards/.

Judy Stone, What you need to know about lead poisoning – Flint edition, Forbes (Jan. 9, 2016), http://www.forbes.com/sites/judystone/2016/01/09/what-you-need-to-know-about-lead-poisoning-flint-edition/#29640bfc212f.

M.B. Pell and Joshua Schneyer, The thousands of U.S. locales where lead poisoning is worse than in Flint, Reuters (Dec. 19, 2016), http://www.reuters.com/investigates/special-report/usa-lead-testing/.

Wes Janz, This is Flint, Michigan, in all its pain and all its glory, Grist (Feb. 17, 2011), http://grist.org/urbanism/2011-02-15-this-is-flint-michigan/.

John Wisely, Was Flint River water good enough to drink?, Detroit Free Press (Jan. 30, 2016), http://www.freep.com/story/news/local/michigan/flint-water-crisis/2016/01/30/flint-river-water/79396268/.

Elisha Anderson, Legionnaires’-associated deaths grow to 12 in Flint area, Detroit Free Press (Apr. 11, 2016), http://www.freep.com/story/news/local/michigan/flint-water-crisis/2016/04/11/legionnaires-deaths-flint-water/82897722/.

Janey Pelley, Legionnaires’ outbreaks in Flint linked to corrosive tap water: Corrosion in drinking water pipes allows deadly bacteria to flourish, Chemical & Engineering News (Jul. 25, 2016), http://cen.acs.org/articles/94/web/2016/07/Legionnairesoutbreaks-Flint-linked-corrosive-tap.html.

Justin A. Hinkley, Former Ingham County officials charged in Flint water crisis, Lansing State Journal (Dec. 20, 2016), http://www.lansingstatejournal.com/story/news/local/capitol/2016/12/20/2-charged-flint-water-crisis-have-ingham-county-ties/95647920/.

Ron Fonger, General Motors shutting off Flint River water at engine plant over corrosion worries, M Live (Oct. 13, 2014), http://www.mlive.com/news/flint/index.ssf/2014/10/general_motors_wont_use_flint.html.

Molly Young, Flint falls off FBI’s semi-annual crime report due to dropping population, M Live (Jan. 26, 2015), http://www.mlive.com/news/flint/index.ssf/2015/01/flint_falls_off_fbis_semi-annu.html.

Jiquanda Johnson, Flint, Detroit among nation’s poorest cities, new Census data show, M Live (Sept. 17, 2015), http://www.mlive.com/news/flint/index.ssf/2015/09/flint_detroit_among_nations_po.html.

Gus Burns, Report explores impact of racism on Flint water crisis, M Live (Dec. 5, 2016), http://www.mlive.com/news/detroit/index.ssf/2016/12/report_explores_impact_of_raci.html.

Ron Fonger, Two former Flint emergency managers charged with water crisis crimes, M Live (Dec. 20, 2016), http://www.mlive.com/news/flint/index.ssf/2016/12/former_state_emergency_manager.html.

Jennifer Chambers, Federal judge dismisses class action lawsuit over Flint, Detroit News (Apr. 19, 2016),

http://www.detroitnews.com/story/news/michigan/flint-water-crisis/2016/04/19/flint-class-action-lawsuit/83229426/.

Jennifer Chambers, Lawsuit filed for kids in Flint water crisis, Detroit News (Oct. 18, 2016), http://www.detroitnews.com/story/news/michigan/flint-water-crisis/2016/10/18/aclu-flint-lawsuit/92351692/.

Michigan A.G. announces lawsuits against two companies in Flint water crisis, Fox Detroit (Jun. 22, 2016), http://www.fox2detroit.com/news/flint-water-crisis/164273723-story.

Ron Meader, Expert insights on what went wrong in Flint – and why it could happen here, MinnPost (Oct. 19, 2016), https://www.minnpost.com/earth-journal/2016/10/expert-insights-what-went-wrong-flint-and-why-it-could-happen-here.

Steve Almasy, Flint water lead amounts improve, below federal limits, CNN (Jan. 20, 2017 5:50 PM), http://www.cnn.com/2017/01/24/health/flint-water-crisis/index.html.

Jonathan Oosting, Flint: ‘All clear’ for drinking water years away, DETRIOT NEWS (Mar. 7, 2017), http://www.detroitnews.com/story/news/michigan/flint-water-crisis/2017/03/07/flint-water-conference/98862674/.

Ron Fonger, Experts’ affidavits point to Flint water as source of Legionnaires’ outbreak, MLIVE (Mar. 10, 2017),

http://www.mlive.com/news/flint/index.ssf/2017/03/experts_affidavits_point_to_fl.html.

Professor on Flint water crisis research team calls lead levels in Pittsburgh ‘worrisome’, COX MEDIA GROUP  (Aug. 4, 2016), http://www.wpxi.com/news/investigates/professor-on-flint-water-crisis-research-team-calls-lead-levels-in-pittsburgh-worrisome/417483321.

Donald Cohen, Flint And Pittsburgh Have More In Common Than Lead In Their Water,

HUFF POST (Mar. 10, 2017), http://www.huffingtonpost.com/entry/flint-and-pittsburgh-have-more-in-common-than-lead_us_58c2f195e4b0a797c1d39c25.

Peduto administration raises $1 million for safe water plan, PITTSBURGH COURIER (Mar. 8, 2017), https://newpittsburghcourieronline.com/2017/03/08/peduto-administration-raises-1-million-for-safe-water-plan/.

Julia Lurie, This Major City’s Drinking Water Was Fine. Then Came the Private Water Company, MOTHER JONES (Oct. 26, 2016 6:00 AM), http://www.motherjones.com/environment/2016/10/private-water-pittsburgh-veolia.

Melissa Nann Burke, EPA gives Flint $100M to help repair pipes, DETRIOT NEWS (Mar. 17, 2017 11:20 AM),  http://www.detroitnews.com/story/news/michigan/flint-water-crisis/2017/03/17/flint/99301466/.


INTRODUCTION

Small-scale hydropower projects are on the rise in Colorado.  Both federal and state legislation paved the road for the rise by easing the permit process for hydropower as an energy source, and the recent Colorado Supreme Court decision in Frees v. Tidd created the no-stoplight speedway to make hydropower an up-and-coming energy source in the state.  However, stakeholders don’t yet fully know what this development might mean for water and water rights holders.

HYDROPOWER ISSUES IN COLORADO

Historically, Colorado has been a proponent of hydropower development.  In 1891, Southwest Colorado became home to the first hydropower generating station in the world, and the state was already attempting to demolish the road blocks standing in the hydropower industry’s way prior to any of the recent federal congressional acts.  Between 2005 and 2013, Colorado developed sixty-two hydropower facilities.  In 2010, the Colorado Energy Office and the Federal Energy Regulatory Commission (“FERC”) signed a memorandum of understanding to streamline the processing of low-impact hydropower projects in Colorado.

While streamlining provided a clearing of roadblocks on the way toward a hydropower processing system that would benefit developers, Congress also enacted legislation to ease the process further.  In 2013, Congress passed both the Hydropower Regulatory Efficiency Act and the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act (“Acts”).  These Acts incentivize hydropower development by eliminating the requirement of environmental impact statements while streamlining the federal regulatory approval process.  Colorado responded by publishing The Small Hydropower Handbook in 2013 and followed up with its 2014 state legislative law that synchronized state and federal permit processing.  This new process allows a noncontroversial project to obtain both state and federal approval in as short as sixty days.

Colorado courts joined the legislature’s pursuit for a streamlined hydropower permitting process with the landmark Colorado Supreme Court decision of Frees v. Tidd (“Frees”).  The Frees case, decided in June 2015, established that an applicant can obtain a junior conditional water right to use the same water as a senior water right holder so long as the applicant can show the water is available and will be for a non-consumptive use.

David, George, and Shirley Frees (the “Frees”) own an irrigation water right with an 1890 priority.  This right diverts water from Garner Creek to Garner Creek Ditch, where the Frees own an easement across a small portion of Charles and Barbara Tidd’s (the “Tidds”) property.  When the Tidds applied for a conditional water right to use .41 cfs for a non-consumptive hydropower use, the district court granted the declaratory judgment in favor of the Tidds, and the Colorado Supreme Court affirmed in a divided decision.

Colorado’s high court affirmed the judgment in part because the Tidds could demonstrate that their non-consumptive hydropower use would not cause injury to the senior, the Frees, while also putting the water a beneficial use.  Moreover, because the Frees’ senior water right is usufructuary and limited to irrigation purposes, the Court reasoned that the Tidds can use that .41 cfs for hydropower purposes and not disrupt the Frees’ use of the water.

The Court’s decision comports with the goal of maximizing beneficial use of Colorado’s water, while also aligning with recent pro-hydropower legislation.  The Court found that hydropower is a legitimate beneficial use under state law because its environmental impacts are minimal and do not require building dams or reservoirs.  Hydropower also diverts less water and is less vulnerable to blackouts and damage caused by storms.  Given these advantages,  small hydropower is attract both developers and policymakers alike.

Now, by issuing the Frees decision that allows a junior conditional water right to utilize preexisting senior water rights for hydropower purposes, the Colorado Supreme Court essentially gave a green light to small hydropower development.  Developers can now easily acquire junior conditional water rights of flows over developers’ property, so long as they can show no injury to the senior water right holder and that the water will be used for hydropower and then returned for the senior water right holder’s use.

Legislative streamlining and the Frees decision could potentially affect 315 individual water rights in Colorado. Ditches are the largest potential source of flows (at about 4,000 cfs) to support hydropower projects, and Montrose and Mesa counties could potentially hold the largest sources for hydropower flows.

However, as the dissent in Frees discussed, some unfortunate ramifications could result from this otherwise less environmentally invasive and strategically streamlined plan.  The dissent proposed the hypothetical of the Frees desiring to change their point of diversion.  This would potentially injure the junior water rights holders, the Tidds.  If this were to happen, a court would have to balance the interests of the Frees and the Tidds so that both parties can reasonably enjoy their water rights conjunctively.  In essence, the dissent argued, the Frees might not be able to unilaterally move their point of diversion, despite an 1890 priority date.

Although these junior, nonconsumptive rights are small (less than five megawatts), the amount of junior water rights available under this new rule in Colorado could lead to unforeseen consequences.  For example, as laid out in University of Denver School of Law student Christopher Ainscough’s recent law review article, the situation is much more complex if, instead of one senior water right holder, multiple seniors are involved.  Aincough’s article also considered the potentially damaging environmental and legal consequences of setting up multiple small-scale hydropower plants every half-mile along the Colorado River.

Further, the Frees dissent argued that the majority intruded into legislative policy and decision-making and did not consider the consequences of the decision. This is exactly what Ainscough warns of: the potentially chaotic results of the influential decision.

CONCLUSION

While proponents of the Frees decision boast allowing hydropower as a less environmentally damaging alternative than dams and reservoirs and an economically feasible way for developers to utilize water, the impact the case may pose for future water and senior water rights holders could be detrimental to waterways. A seemingly harmless judicial decision for the Frees and Tidd families, a decision that puts the finishing touches on the speedway toward hydropower in Colorado, could create quite the traffic jam as policymakers and water courts figure out how to work in its aftermath.

Kelsey Holder

Image: Fuji Speedway at the base of Mount Fuji in Japan. Flickr User Alexander Nie, Creative Commons.

SOURCES:

Neillie Fields, Frees v. Tidd, U. Denv. Water L. Rev. (Jan. 6, 2016), http://duwaterlawreview.com/frees-v-tidd/.

Courtney Krause, Edalin Koziol, Matthew Merrill, Incorporating Small-Scale Hydropower Projects into Our Energy Future, Nat. Resources & Env’t (Spring 2016), http://www.white-jankowski.com/wp-content/uploads/2016/04/Natural-Resources-Environment.pdf.

Christopher Ainscough, New Opportunities for Small-Scale Hydropower in Colorado, 19 U. Denv. Water L. Rev. 157 (2016).

William A. Paddock, What’s Yours is Mine: Frees v. Tidd and the Modern Rule of Property, Denv. Bar. Assoc. CLE Presentation, http://www.cba.cobar.org/repository/Insi de_Bar/Water%20Law/Frees%20v%20Tidd%20CLE%20Presentation%20(00167545xCEF9F).pdf.

Paul Noto, Water Law Basics for Real Estate Practitioners, Colo. Law. 63 (Nov. 2015).

L. of Water Rights and Resources § 5:16.

L. of Water Rights and Resources § 5:24.

1 Real Estate Law Digest 4th § 11:9.

3 Tiffany Real Prop. § 721 (3d ed.).


Wrenches, piping, transport trucks, and hoses. These are the tools of thieves in the American West of the Twentieth Century, and stealing televisions, cars, or wallets may not have the appeal it once did for a previous generation. Water, an increasingly in-demand resource, has replaced those quick moneymakers of yesterday as the new liquid gold quickly climbs the ranks as one of the hotbeds of theft activity across the country.

A bizarre incident in October 2016 in the small town of Erie brought to light the situation of water theft in Colorado. Thieves pumped out 100,000 gallons from a rental residence, equivalent to 2000 full bathtubs of water. The rental house owner became aware of her booming water bills after a four-month period of unnoticed automatic payments that were racking up significant charges. Once she realized the issue could be more than just a leaky faucet, she taped off the faucet, removed the handle, and shut off the valve under the house. Someone returned and removed the tape from the faucet, and when nothing came out they moved their efforts elsewhere. The water bill returned to normal charges, and police continue to investigate the issue.

As the United States passed its fifth year of less-than-average precipitation, and California’s third year of a declared drought state of emergency, Americans’ water usage must be monitored much more closely than in previous years. Besides the obvious health-related uses of water, we utilize water in agriculture, energy production, navigation, recreation, and manufacturing fields. Without the close examination of water distribution and usage, the effects of climate change could create real issues for each of these industries. And as the general public begins to become more aware of the scarcity—and thus value—of water, the number of water theft incidents throughout the country have also continued to grow.

In light of the increase of smuggling incidents, The Brookings Institution recently published a report analyzing the phenomenon of water theft across the globe. The report not only compares recent incidents of theft in various countries to identify multiple causes, but it also addresses the problems of defining what is water theft in the context of water as a human right and the various ways different countries approach water as a resource. Ultimately the report’s author calls for a wide range of measures to address the underlying causes behind water theft globally, one of which is stricter monitoring and enforcement in the allocation and use of water rights—while still recognizing that basic access to water for the poor is a necessity. The report suggests that punitive damages would help protect against increasing water scarcity, and a uniform set of laws or regulations could help to solve the issue in the future.

This fundamental disregard of enforcement or creation of laws may be one reason why the United States is starting to see so many of the same types of issues occurring so regularly. Without the uniformity of a system of water management, each local entity or state entity is required to create their own form of regulation and enforcement. As a result of this, the country has seen a variety of issues popping up, especially in places where water scarcity is a fear.

The incident in Erie has been repeated in a myriad of ways, not only in the West, but across the country. In New York for example, a small city’s mayor was accused of stealing water in 2004 by loosening the screws on his meter when he was overusing. In south Atlanta during the month of October in 2015, 160 people faced charges of water theft. All of these incidents involved tampering with the water meter or valves installed in the residence’s water box. One man, caught three times removing his service company issued meter, decided to install a pipe running to his house from his neighbor’s water meter box. The other incidents involved refusing to pay for water, stealing from neighbors, removing meters, or installing joiner pipes to trick the meter from measuring complete water usage.

In California and the Midwest, the drought has contributed to wells drying up. Some people, in response, decide to build a new well or pay to have water delivered by truck. Other people, however, have turned to taking water from neighboring wells that have not gone dry as a much cheaper and easier approach.

In addition to these household, private theft issues, there have also been instances of people stealing from public water sources. In March of 2016 in Boulder, a pair of men who worked for a ditch company had a permit allowing them to divert a certain amount of water for agricultural use. They applied for the permit using their work information, but took the water from the permit by truckload to sell at a complete upcharge to fracking companies. In Washington, water theft from fire hydrants caused loss of an estimated $145 million around the state in July 2016. People would hook up a hose to the hydrant and pump the water into trucks to be transported elsewhere. This is hazardous because hydrants could potentially deplete the water from the reservoirs. Firefighters, unless they are consistently checking the hydrants, would find out they were out of water only when they went to turn the hose on to fight a fire.

As the interest in the cannabis industry grows, so does the need for water by marijuana grow operations. This demand has inspired many water thieves to sell to black market grow houses across the West. These occurrences have taken place around the state, but most recently and most detrimentally, in the San Luis Valley in Colorado during August 2015. According to local officials the majority of the theft was happening in Costilla County, a county that requires grow operations to obtain local permits. The permits require the operators to disclose their water source because these cultivation endeavors require a large amount of water to operate. If grow operations continue to grow without a local permit, finding a source of legally obtained water is not typically economically attainable. In cases where medical or recreational grow operations cannot locate a legal water source, the operation does not typically cease operations, it finds a legally illegitimate water source and continues to operate as an unlicensed entity.

Another reason Costilla County was so popular with water thieves during this time was because of the price of land. Cheap land encouraged those looking to acquire monthly camping or RV permits to move in and “go off the grid”. These outsiders then are required to obtain a water and septic system, and are often unable to find a cheap, legal source of water to supply to their new homesteads. This causes many newcomers to turn to non-legal sources in order to stay in compliance with the county’s rules, a practice causing many of the locals to come into conflict with these new communities. The most prominent ways of stealing water in Costilla County were from private wells, community irrigation ditches, and local streams.

Thieves continue to draw up new ways to steal water from public spaces or neighbors, and there is no sign of it slowing. Thieves caught in the act of pumping from a stream or community water source are only required to obtain a permit in most states, and they can continue to pump without any fines or legal actions taken against them. Many household cases are never solved because water theft recidivism rates for the same source is low once necessary preventative actions are taken by the owner. For those who have a legal permit to use water, it is an issue of monitoring usage. People who do have permits are required to report usage, but in many cases they are trusted with self-policing their usage. This results in the temptation to utilize more water than originally allocated, or to utilize the water for additional operations than originally applied for. The enforcement of punishments is seemingly low across the nation as many water divisions do not completely know when or how to get law enforcement involved. The best thing that cities and individuals can do is take extra steps to prevent theft within their own water rights, and be more proactive in their security initiatives.

There has not been a proven way to completely prevent these kinds of acts of theft besides alerting the community and taking initiative to report any suspicious activity involving water trucks or piping. Victims of water theft have prevented future loss by purchasing bib locks or lock boxes and securing them over openings to wells, meters or any other potential access point to private water sources. Although this may seem excessive to some, it is undisputedly better than opening a water bill for hundreds of dollars more than expected, and subsequently defending your reputation to the court.

These water savvy thieves continue to map out new, complex ways to make a quick buck off water that is not theirs. This issue is heightened now more than ever not only because of the state of drought, but because of the unpredictable affects climate change is on water supplies. Scientists predict the increase in demand of water will come with the decrease of supply and the quality of supply. The recent increase in water thefts only add another unknown variable to a water future that is projected to be more dry and less predictable.

 

Rebecca Spence

Image: Flickr User ZeroOne, Creative Commons.

Sources:

Climate Impacts on Water Resources, EPA, https://www.epa.gov/climate-impacts/climate-impacts-water-resources#main-content (last visited Dec. 30, 2016).

Governor Brown Declares Drought State of Emergency, Office of Governor Edmund G. Brown Jr. – Home, https://www.gov.ca.gov/news.php?id=18368 (last visited Nov. 22, 2016).

Jamie Knotts, You’d Be Surprised Who’s Stealing Your Water On Tap Magazine – Winter 2004, http://www.nesc.wvu.edu/ndwc/articles/ot/wi04/stealing.html (last visited Nov. 23, 2016).

Amelia Arvesen, Police Investigating Theft of 100,000 Gallons of Water from Erie Residence, Boulder Daily Camera (Oct. 11, 2016, 9:15 AM), http://www.dailycamera.com/top-stories/ci_30457679/police-investigating-theft-100-000-gallons-water-from.

John Eligon, Drought Disrupts Everyday Tasks in Rural Midwest, N.Y.Times, http://www.nytimes.com/2012/08/24/us/midwest-water-wells-drying-up-in-drought.html (last visited Dec. 7, 2016).

Matt Hildner, Officials Perplexed by Water Thievery, Pueblo Chieftain (Aug. 15, 2015, 4:00 AM), http://www.chieftain.com/special/water/3851010-120/county-cotten-enforcement-officials.

Matt Weiser, California Drought Puts Spotlight on Water Theft, Sacbee (Mar. 23, 2014, 12:00 AM), http://www.sacbee.com/news/politics-government/article2593633.html.

Mitchell Byars, Pair Charged with Selling Boulder Agricultural Water to Frackers, Boulder Daily Camera (Mar. 22, 2016, 5:19 PM), http://www.dailycamera.com/boulder-county-news/ci_29672200/pair-charged-selling-boulder-agricultural-water-frackers.

Monique Griego, Thieves Steal Water from Phoenix Homeowners, KPNX (Oct. 6, 2016, 11:37 AM), http://www.12news.com/news/local/valley/thieves-steal-water-from-phoenix-homeowners/329451291.

More Than 150 People Charged with Stealing Water, WSB-TV Atlanta (Oct. 29, 2015, 4:36 PM), http://www.wsbtv.com/news/local/exclusive-150-people-arrested-charged-stealing-wat/27332227.

Nathaniel Minor, In Costilla County, Tempers Flare in a Fight Over How To Live, Colo. Public Radio, http://www.cpr.org/news/story/costilla-county-tempers-flare-fight-over-how-live (last visited Nov. 20, 2016).

Todd C. Frankel, New NASA Data Show How the World is Running out of Water, Wash. Post, https://www.washingtonpost.com/news/wonk/wp/2015/06/16/new-nasa-studies-show-how-the-world-is-running-out-of-water/ (last visited Nov. 23, 2016).

Tom Philpott, A Single Pot Plant Uses HOW Much Water?!, Mother Jones (Apr. 16, 2014, 5:00 AM), http://www.motherjones.com/tom-philpott/2014/04/your-pot-habit-sucks-salmon.

WSSC Kicks Off Water Theft Prevention Program, WSSC (July 16, 2016, 10:07 AM), https://www.wsscwater.com/contents/news/2016/wssc-kicks-off-water-theft-preve.html.

Vanda Felbab-Brown, Water Theft and Water Smuggling, Brookings, https://www.brookings.edu/research/water-theft-and-water-smuggling/ (last visited Apr. 3, 2017).


The Other Black Gold

Historically, water has been a nuisance in oil and gas production because companies have to transport and dispose of water that is produced along with the fuel that is pulled from the reservoir.  However, produced water became even more of a nuisance for coal bed methane (“CBM”) producers in 2009 after the Colorado Supreme Court held in Vance v. Wolfe that dewatering of a coal bed to produce methane gas was a beneficial use as defined by the Ground Water Act of 1969.  The Vance ruling made it so CBM producers have to obtain a water well permit and an augmentation plan to protect vested water rights when dewatering a coal bed to produce methane gas.

However, the Vance decision left the door open for produced water to become an asset instead of a nuisance for traditional and shale wells.  The decision clarified that the State Engineer, not the Colorado Oil and Gas Conservation Commission, has the authority to regulate produced water.  Produced water from these operations is naturally occurring brackish or brine water that was trapped in the oil reservoir.  This regulatory authority, codified in Colo. Rev. Stat. § 37-90-137(7)(c), allows the State Engineer to classify Colorado’s formations and basins, in whole or in part, as nontributary groundwater for the purpose of dewatering for mineral extraction.  In Colo. Rev. Stat. § 37-90-137(7)(a), the state legislature authorized non-CBM operators to use nontributary groundwater removed during extraction for various drilling operations within the same basin including well stimulation, well maintenance, dust control, pump operation, injection in a properly permitted disposal well, and disposal at a properly permitted commercial facility without a water well permit.

This development presents non-CBM operators with the unique opportunity to harness produced water from designated nontributary groundwater formations and basins for a variety of purposes without being subject to the state doctrine of prior appropriation.  In essence, as long as the same operator continues to use the produced water in the same basin for any of the enumerated uses above, the operator can use the water to its extinction and can transfer it without ever being subject to challenges of injury under the doctrine prior appropriation.  The ability to obtain and use water that is not subject to prior appropriation rather than lease or purchase water rights has the potential to save the oil and gas industry a substantial amount of money.  The economic impact for the oil and gas industry, as well as other industries, could be tremendous given that oil and gas operations produced more than 41,000 acre-feet of water in 2012.

The potential to use produced water for well stimulation could be a game changer in Colorado where approximately ninety-five percent of new wells are stimulated by hydraulic fracturing (“fracking”). Fracking a vertical or directional well requires between 100,000-1,000,000 gallons of water per well, while fracking a horizontal well require two to five million gallons of water per well.  Clearly, when the industry is thriving their water needs quickly increase putting added strain on Colorado’s stressed water supply.

For example, in 2012, 1500 vertical/directional wells were drilled and 1000 horizontal wells were drilled using approximately 19,947 acre-feet of water accounting for 0.13% of Colorado’s total water use.  Even if operators use a mixture of freshwater and produced water for fracking, their savings would be immense given the rising prices of water in Colorado.

Furthermore, oil and gas operations in Texas have already begun to experiment with using a mixture of brackish water and produced water in the fracking process with some success.  However, using produced water presents several challenges, because produced water contains metal salts, and can range from brackish water (which is less saline than sea water) to brine water (which is more saline than sea water).  The salt and mineral makeup of produced water reacts differently given the type of rock formation or chemicals used in the fracking fluid, which requires operators to vary formulas.  Despite the challenges and costs associated with varying formulas, the use of produced water for fracking in Colorado could save operators money, especially if they could become a self-sustaining water user, and thereby decrease demand for freshwater reducing the price for other industries around the state.

In addition to permitted drilling operation uses, non-CBM operators are also authorized to dispose of nontributary produced water without a water well permit by injection in a properly permitted disposal well, or at a properly permitted commercial facility.  Most oil and gas producers prefer to dispose of wastewater through injection wells because it is cost effective and quick.  However, environmental pushback and concerns about increased seismic activity around injection sites has made water treatment a more attractive option, which has pushed the industry to innovate and become more cost effective.  Along these same lines, the water treatment industry has been able to successfully turn even brine water into freshwater through the process of reverse osmosis, which makes recycled water a viable option for a variety of uses.

If treatment becomes even more cost effective, then recycling produced water could be an attractive venture in drought-stricken states like Colorado where oil and gas, and other water intensive industries are major economic drivers. In 2015, Colorado came in as the sixth highest producer of natural gas in the United States and the seventh highest producer of crude oil in August, 2016.  The oil and gas industry contributes over thirty-one billion dollars to the state’s economy in 2014. Colorado was also the twenty second highest agriculture producing state in 2015, and the agricultural industry in Colorado uses eighty-nine percent of consumed water.  Agriculture also contributes forty-one billion dollars to the state’s economy. Recycling produced water that could be used for agriculture could protect the industry as the state’s population grows and municipal demands grow.

The impact of using treated or desalinated water can be seen in Israel where treated sources are almost the exclusive source of water for the agricultural industry. Additionally, recycled water could be used for river recharge or as augmentation water for shallow freshwater basins.

Nevertheless, recycling produced water to be used in other industries raises questions about classification and ownership. Colo. Rev. Stat. § 37-90-137(7)(a) states that, in regard to nontributary groundwater, an operator does not need a well permit unless the produced water will be beneficially used—which recycling for future use would seem to be.  However, Colo. Rev. Stat. § 37-90-137(7)(c) allows non-CBM to dispose of water at a properly permitted commercial facility without having to obtain a well permit—which seems to label recycling of produced water as not a “beneficial use” within the definition of the Groundwater Act of 1969.  Theoretically water treatment facilities could be producing freshwater from a nontributary source that in turn could be used for a variety beneficial uses.  Thus, despite the costs of recycling the produced water, whoever owns the produced water could then sell, trade, or augment a water source with water that to that point hasn’t been subject to prior appropriation.

Ultimately, the administrative leeway encourages non-CBM producers to properly dispose of water by not imposing the costs of well permitting or augmentation plans, but also creates a situation where a new water source could be created without being subject to prior appropriation.  Even if the newly recycled water would be subject to prior appropriation upon sale or trade, the owner of the newly recycled produced water could potentially gain financially without having to obtain a water well permit to recover the water in the first place.  Therefore, mineral rights agreements between the oil and gas producer and the lessor would be critical to establish who owns the nontributary produced water. However, there is dicta in the Colorado Supreme Court case, Board of County Commissioners of County of Park v. Park County Sportsmen’s Ranch, LLP (“Park County Sportsmen’s Ranch”) that could further complicate the analysis.

Park County Sportsmen’s Ranch was a 2002 case involving a trespass claim from artificial recharge into storage space in subsurface aquifers.  In the case, the Colorado Supreme Court accepted the Ohio Supreme Court’s rationale that surface owners do not enjoy absolute ownership of waters below their land, because the water below their properties, including the native brine, are classified as waters of the state.  The Colorado Supreme Court found this distinction particularly significant to Colorado’s long standing constitutional, statutory, and jurisprudence that all water in the state is a public resource which the state decrees rights to.  Starting from the foundation that there are limitations to absolute subsurface rights, and that all water in Colorado is public including the native brine, it seems that the state, surface owner, split estate subsurface owner, and producer could all have claims to the produced water.

Ultimately, post Vance v. Wolfe rulemaking was positive in the respect that it cut administrative costs for non-CBM producers and the state by not requiring a water well permit for nontributary produced water.  The rulemaking also encourages non-CBM producers to use produced water in new ways, and incentivizes them to dispose of produced water properly.  However, the economic benefit of using produced water in new ways and the potential to use recycle produced water for other beneficial uses will sooner or later spark questions of ownership.

Dalton Kelley

Image: Photo of Ambassador Daniel Shapiro’s visit to the Hadera Desalination Plant in Israel. Flickr user U.S. Embassy Tel Aviv, Creative Commons.

Sources:

Bill Bailey et al., Water Control, Oilfield Rev. 30, (Spring 2000), available at https://www.slb.com/~/media/Files/resources/oilfield_review/ors00/spr00/p30_51.pdf.

Vance v. Wolfe, 205 P.3d 1165, 1173 (Colo. 2009).

Colo. Rev. Stat. Ann. § 37-90-137(7)(c) (West).

Colo. Rev. Stat. Ann. § 37-90-137(7)(a) (West).

CDR Associates Et Al., Produced Water Beneficial Use Dialogue: Opportunities and Challenges for Re-Use of Produced Water on Colorado’s Western Slope, https://www.colorado.gov/pacific/energyoffice/atom/14121 (last visited Jan. 5, 2017).

Denver Metro Chamber of Commerce, Energyhttp://www.denverchamber.org/policy_committees/energy.aspx (last visited Jan. 5, 2017).

Colorado Oil & Gas Association, Water Use Fast Factshttp://www.coga.org/wp-content/uploads/2015/09/15-Fact-Sheet_WaterUseFF.pdf (last visited Jan. 5, 2017).

Water Market Research LLC., Colorado’s South Platte Basin Water Rights Market, http://www.waterexchange.com/wp-content/uploads/2016/02/16-0217-Q1-2016-WWInsider-LO-singles.pdf (last visited Jan. 5, 2017).

Mose Buchele, Fracking Boom Spurs A Rush to Harness Brackish Water, State Impact (Mar. 28, 2013, 6:00 AM), https://stateimpact.npr.org/texas/2013/03/28/drilling-boom-spurs-a-rush-to-harness-brackish-water/.

Seth M. Siegel, Let there be Water 115, 119, 139, 225 (Thomas Dunne Books, 2015).

Water Quality Ass’n, Glossary of Salt Waterhttp://www.pacificro.com/watercla.htm (last visited Nov. 18, 2016).

Maxwell B. Kallenger, Who Owns All This Fracking Water?, La. L. Rev., (Oct. 29, 2015), available at https://lawreview.law.lsu.edu/2015/10/29/who-owns-all-this-fracking-water/.

Dalton Kelley, Environmental New Federalism and Fracking; Lessons from the Colorado Experience, California State University Bakersfield Walter Stiern Library (2014), available at http://www.csub.edu/library/thesis/kelley_d_pa_w14.pdf.

David B. Burnett, Potential for Beneficial Use of Oil and Gas Produced Water, Global Petroleum Institute (2004), available at http://www.circleofblue.org/wp-content/uploads/2010/09/beneficialuses-produced-water.pdf.

Climate at a Glance, NOAA, https://www.ncdc.noaa.gov/cag/time-series/us/5/0/pmdi/1/10/1895-2016?base_prd=true&firstbaseyear=1901&lastbaseyear=2000 (last visited Nov. 18, 2016).

Colo. Office of Econ. Dev. & Int’l Trade, Key Industry Food & Agriculturehttp://choosecolorado.com/wp-content/uploads/2016/06/CO-Food-and-Ag-Profile.pdf (last visited Nov. 18, 2016).

U.S. Energy Info. Admin., Rankings: Natural Gas Marketed Production, 2015https://www.eia.gov/STATE/rankings/#/series/47 (last visited Nov. 18, 2016).

U.S. Energy Info. Admin., Ranking: Crude Oil Production, August 2016https://www.eia.gov/STATE/rankings/#/series/46 (last visited Nov. 18, 2016).

Colo. Oil and Gas Ass’n, University of Colorado Economic Study Shows Oil and Gas Industry is Key to Colorado’s Economic Health and Stabilityhttp://www.coga.org/wp-content/uploads/2015/12/Press-Release-CU-Oil-and-Gas-Economic-Study-Key-Economic-Driver.pdf (last visited Feb. 10, 2017).

USDA, Data Products,http://data.ers.usda.gov/reports.aspx?ID=53580 (last visited Nov. 18, 2016).

State of Colo., Colorado Water Plan, 5-10 (2015), available at http://cwcbweblink.state.co.us/WebLink/ElectronicFile.aspx?docid=197270&searchid=d37a7960-b4ef-4ce5-9279-a1916ddc8f60&dbid=0.

Joe Murphy, Chart: Colorado is the Second-Fastest Growing State in the U.S., The Denver Post (July 7, 2016, 4:23 PM), http://www.denverpost.com/2016/07/07/colorado-second-population-growth-2015/.

Seth M. Siegel, Let there be Water 115, 119, 139, 225 (Thomas Dunne Books, 2015).

Bd. of Cty. Comm’rs of Cty. of Park v. Park Cty. Sportsmen’s Ranch, LLP, 45 P.3d 693, 701 (Colo. 2002).

 


The effects of subdistrict requirements on agriculture in the San Luis Valley

For farmers, the future is never guaranteed. It’s filled with risk, uncertainty, and tough choices.  But for farmers in the San Luis Valley (“Valley”), that uncertainty is perhaps greater and the choices more difficult in the more than ten years since the Valley’s move towards groundwater subdistricting.

Following recent droughts and an increase pressure on local water supplies, Valley residents in 2005 faced an ultimatum to either develop a recharge plan for the area’s unique aquifer system or face government intervention in local water management. Choosing to avoid state involvement, the San Luis Valley, specifically the Rio Grande Water Conservation District paired with water users in the Valley, decided to move towards ground water management subdistricts to prevent depletion. But that move seems to have left many left local irrigators between an economic rock and a hard place, and it has created a situation where many are reevaluating the benefits of conservation easements.

While the long-term goal of ensuring the Valley’s sustainability by using the limited water resources wisely is one that is popular across the entire San Luis Valley, the change to subdistricts created a new set of challenges and economic consequences and changed the cost-benefit analysis for local land and water. These new market forces are forcing agriculturalists in the Valley to confront the purpose of why they are in the industry in new and more immediate ways. The choice essentially comes down either wanting to retain agricultural land as-is or wanting to increase one’s personal savings.

The San Luis Valley is a unique hydrogeological area located in south-central Colorado. At an elevation varying between 7500 and 8000 feet above sea level, the hydrogeology of the area creates both a confined and an unconfined aquifer system. The confined aquifer resides below the unconfined aquifer, and relatively impermeable beds of clay and basalt separate the two. This confining layer of clay and basalt does not exist on the perimeter of the Valley allowing surface water to recharge the confined aquifer and generate artesian pressure.

This artesian pressure arises from the increase in pressure generated from the recharge areas that have higher elevations than the Valley floor. This unique aquifer system helps counterbalance the short growing season and low average annual precipitation of around 7.5 inches a year, and it helps sustain a productive agricultural economy that is dependent on irrigation pumped out of the dual aquifers.

In response to a multiyear drought beginning in 2002 and the over-appropriation of the region’s limited water supplies, the Rio Grande Water Conservation District (“RGWCD”), in conjunction with the State Engineer, initiated groundwater management subdistricts in 2005 pursuant to Senate Bill 04-222 (now codified as C.R.S. § 37-92-501(4)). The RGWCD implemented subdistricts to ensure sustainability and to allow a water management plan that accounts for varying hydrological conditions across the Valley, specifically the hydrological connection between surface water and groundwater relating to the confined aquifer.

Groundwater subdistricts divide specific areas into hydrologically-like sections that allow for more efficient and effective conservation matters across an area. Subdistricts impose a collection of taxes that subdistrict authorities can use to purchase augmentation water and replenish aquifer systems. Agricultural water users in the area either have to join their respective subdistrict or, alternatively, develop their own augmentation plan. A subdistrict creates a five-year rolling plan on how to return water to the aquifer system.  These plans help busy farmers in the area, allowing them to save time and resources by not having to draft personal augmentation plans.

The subdistrict money collected is also used to pay farmers to fallow certain plots to conserve water.  This tax continues a stepwise process to pursue regulation of the confined and unconfined aquifers in order to maintain a sustainable water supply. However, users within the subdistricts can avoid this tax by trading surface water for groundwater. Farmers who substitute surface water will receive credit for the recharge of the groundwater they pumped and avoid paying the tax. This has turned out to be a popular option, which has created even more demand for an already over-appropriated basin. As a result, the ability to substitute water has created a hefty increase in the value of all surface water rights in the San Luis Valley, the larger economic effects of which are just now becoming apparent over a decade after RGWCD’s subdistricitng implementation.

In particular, and perhaps most surprising, the increase in surface water value derived from the subdistricting has had an effect on agricultural conservation easements in the Valley and their economic value. Agricultural easements aim to protect agricultural land and interests. A push for this type of easement arose out of a fear of further development of the area as well as a fear of losing water to opposing interests, such as an exportation of water to municipalities that culminated in the Colorado Supreme Court Decision American Water Development, Inc. v. City of Alamosa. Generally, conservation easements offer tax incentives for a legally binding agreement that permanently restricts the development and future uses of the subject property to protect certain conservation values. With an increasing demand (and short supply) of surface rights, those who have conservation easements on their land face the reality that the value of these easement no longer adequately reflects the increasing value of the associated water rights that would necessarily be tied up in the easement. If the market price for surface water rights outweighs the benefit of the easements, it could cause easement implementation in the Valley to slow substantially. This financial calculus is further complicated by the increased demand for water around the state. Even beyond the Valley, water is becoming a resource that is exponentially increasing in value in Colorado—partially due to recent droughts and a rapidly increasing population.

As a result, farmers and ranchers in the San Luis Valley are facing a new and unexpected cost-benefit dilemma. On one hand, the fear of losing an already limited resource to an opposing interest, such as transbasin diversion, creates a great incentive to enter into a conservation easement.  On the other hand, the potential increase in value of surface water in relation to the new subdristrict rules creates an incentive to steer clear of conservation easements in the hope of one day selling high-value water rights at a premium.

Essentially, the choice for a farmer of whether to have an easement comes down to the farmer’s reasons behind having that easement. If he or she wants to keep the land undeveloped well into the future, then an easement is likely the best option. If a farmer does choose a conservation easement, he or she will likely face the fact that they will suffer deadweight loss in the short run in exchange for the ability to preserve the land. However, if money is the priority, then keeping their water rights free of any conservation easement is likely a better choice. The changes resulting from the volatile water market emphasize the need for farmers and ranchers in the area to create strategic goals to combat and account for the variable change in the agriculture industry generated when new challenges like a move in the water market are presented to agriculturalists of the area.

While both subdistricts and easements are voluntary, the economic realities of the Valley are increasingly pushing San Luis Valley agriculturists to pick one or the other. And while the two options are technically not mutually exclusive, each does have a have large effect on the other, creating either a loss monetarily and in future options or in the ability to preserve the condition of one’s land for future use and enjoyment. And while there are easements available that would not encompass a water right, given their purpose in the San Luis Valley and the importance water plays in the traditional use of the land, such an easement would be hard to find.

Ultimately, the idea of subdistricting was inevitable, and the manner in which it came about in the San Luis Valley allowed input from local people.  The long-term goal of ensuring the Valley’s sustainability by using the limited water resources wisely is one that remains popular among agriculturalists. Nevertheless, the move has created a new set of challenges and economic consequences by increasing the value of surface rights in the Valley and changing the cost-benefit analysis for local land and water owners to enter into conservation easements. These new market forces are driving agriculturalists in the Valley to confront in new and more immediate ways the purpose of why they are in the industry. Those seeking the long-term satisfaction of retaining agricultural land for the purposes of agriculture will continue to find a higher value in conservation easements. But those seeking monetary gain and flexibility in the future will be drawn to avoiding any easements tying the water to the land.

While deciding between an easement and selling surface rights is a voluntary choice that one can make at his or her own leisure, economic conditions in Colorado are accelerating the need for a decision on the matter. Truly, Sun Luis Valley agriculturists need to develop strategic goals and determine the purpose of their operations.

            Kole Kelley

Image: A look at a fallow field in the San Luis Valley. Flickr user Ken Lund, Creative Commons.

References:

Findings of Fact, Conclusions of Law, Judgment and Decree, In re Rules Governing New Withdrawals of Ground Water in Water Division No. 3 Affecting the Rate or Direction of Movement of Water in the Confined Aquifer System (“Confined Aquifer New Use Rules for Division 3”), Case No. 04CW24, ¶ 523, ¶ 533 (Dist. Ct. Colo. Water Div. No. 3, Nov. 9, 2006), aff’d sub. nom. Simpson v. Cotton Creek Circles, L.L.C., 181 P.3d 252 (Colo. 2008).

Alamosa-La Jara Water Users Protect. Ass’n v. Gould, 674 P.2d 914, 918 (Colo. 1984).

American Water Development, Inc. v. City of Alamosa, 874 P.2d 352, 367 (Colo. 1994).

William A. Paddock, Groundwater Regulation in Water Division No. 3, A Work in Progress, prepared in conjunction with a presentation given for the Colorado Bar Association, Water Law Section (CLE), September 2010, page 7.

Simpson v. Cotton Creek Circles, L.L.C., 181 P.3d 252, 263 (Colo. 2008).

Colo. Rev. Stat.  § 37-92-501 (2016).

Martin Smith, Water Supply, Shortage, Human Impact & Public Health, http://panmore.com/water-supply-shortage-human-impact-public-health (last updated June 18, 2015).

San Antonio, Los Pinos & Conejos River Acequia Pres. Ass’n v. Special Improvement Dist. No. 1 of Rio Grande Water Conservation Dist., 270 P.3d 927, 948 (Colo. 2011).

Lora Abcarian, Subdistrict begins implementation of groundwater management plan, THE PRODUCE NEWS (Sept. 10, 2012), http://theproducenews.com/news-dep-menu/test-featured/8762-subdistrict-begins-implementation-of-groundwater-management-plan.

Matt Hildner, Groundwater sundistrict plan advances in valley, PUEBLO CHIEFTAIN (Mar. 5, 2016), http://www.chieftain.com/special/water/4514689-120/subdistrict-groundwater-valley-management.

American Water Development, Inc. v. City of Alamosa, 874 P.2d 352,3 58 (Colo. 1994).

Paige Blanfenbuehler, After years of drought and overuse, the San Luis Valley aquifer refills, HIGH COUNTRY NEWS (May 26, 2016), http://www.hcn.org/articles/after-years-of-drought-and-overuse-a-water-basin-refills-in-the-san-luis-valley.