Colorado Supreme Court Limits How Transbasin Water May Be Used and Holds That Unjustified Non-Use of Water Rights Will Count Against Water Users When They Change Their Water Rights

The Colorado Supreme Court recently addressed two previously unsettled issues that will impact other water users in Grand Valley Water Users Ass’n v. Busk-Ivanhoe, Inc., 14SA303 (2016).  First, the Court held that imported transbasin water may not be stored in the basin of import prior to first use unless the decree expressly authorizes it.  The Court reasoned that “just as the right to store water is not an automatic incident of a direct flow right, the right to store water in the basin of import prior to use is not an automatic incident of trans mountain water rights.”  Id. ¶ 49 (citations omitted). Second, the Court held that undecreed uses of the decreed amount of water could count as zero use in historical beneficial use analyses rather than be omitted from the study period.  The Court reasoned that the use of water for an undecreed purpose could be treated as “unjustified non-use” and should not be ignored by excluding it from the study period.  Id. at ¶ 71.  

The Court was split on the first issue of storing transbasin water in the basin of import prior to first use.  The dissent argued that the specific decree at issue implicitly permitted such storage.  Id. ¶ 84. It also argued generally that once water is exported it is fully consumed with respect to the basin of export so no further injury can occur there, and no one in the basin of import has any right to the imported water and can therefore not be injured regardless of its use, so the importer can use the water however it sees fit without injuring anyone in either basin.  Id.  ¶ 85.  Thus, the dissent argued, no explicit decree language is needed for storage of imported water.  Id.  

The majority, however, correctly pointed out that undecreed storage of water prior to first use for the decreed purpose makes it possible to enlarge the water right.  Id. ¶ 49.  A direct flow right can be exercised only when there is both water available for diversion and a need for the water for the decreed beneficial use.  If a water user is able to store the water prior to its actual use, the water user can divert at other times when water is available (for example outside of the irrigation season) and then apply it to its actual use later when the water is needed.  Thus, the right to store may greatly expand a water right when there is a disconnect between the timing of need and availability.  This may lead to greater diversions in the basin of export than originally contemplated by a direct flow right even if the volumetric limits of the decree are not exceeded because the ability to put the water to a beneficial use when available is the ultimate measure of the water right regardless of the maximum limits set in the decree.  Thus, junior users in the basin of export may be injured if the Court had allowed storage prior to first use to count in the historical use analysis because the actual water right that had ripened through historical beneficial use in accordance with the decree might have been much smaller than the decreed limits without such storage.  See id. ¶ 44.

One wrinkle not fully addressed by the Court was that the decree at issue permitted some storage within the basin of export.  The case was ultimately remanded, so this issue and the effect it may have on whether junior users have been injured has not yet been fully determined.

The Court used the second issue to distinguish and clarify the scope of its ruling in Burlington Ditch Reservoir & Land Co. v. Metro Wastewater Reclamation Dist., 256 P.3d 645 (Colo. 2011), as modified on denial of reh’g (June 20, 2011), where it held that it was appropriate to exclude undecreed expanded use from the historical use analysis used to determine the scope of the water right. Grand Valley Water Users Ass’n, ¶ 71.  The Court explained that it would be inappropriate to exclude from consideration use of the decreed amount of water for undecreed purposes, as opposed to use of additional amounts of water for the decreed purposes.  Id.  Periods where none of the water was used for decreed purposes should be counted in the historical use analysis as zero use periods rather than be excluded from the analysis – at least to the extent that the non-use was unjustified.  Id.  

The legislature, however, passed Senate Bill 15-183 while this case was pending before the Supreme Court, and it was signed into law a few months prior to oral argument.  At oral argument, the parties agreed that Senate Bill 15-183 did not apply to this case, but they also agreed that it requires that water courts, in other pending and future cases, exclude all years of undecreed use from the study period, contrary to the eventual holding in this case.  It is therefore unclear what effect this decision will have on cases filed after Senate Bill 15-183 was adopted.  Further adding to these uncertainties is the fact, pointed out by counsel during oral argument, that Senate Bill 15-183 may be subject to constitutional challenge as impermissibly retroactive or even an unconstitutional taking of private property. 
  
The takeaways for other water users from this case are that although transbasin water can be a very flexible source of supply, one still must comply strictly with the terms and authorized uses provided in the decree.  Additionally, the case could have a broader impact in its analysis of undecreed use, and what the Court labeled “unjustified nonuse.”  This part of the holding applies to both transbasin and other, native flow water rights.  While Senate Bill 15-183 may limit this decision’s impact regarding the effect of undecreed uses on historical use analyses, the decision still clearly holds that “unjustified nonuse” can count against a water right holder that seeks to change the water right to a new use.  The court has not provided any guidance as to what constitutes “unjustified nonuse,” however, so it is likely that there will be more litigation in the coming years that wrestles with that question.