The Pagosa Doctrine: Narrowing the Municipality Exception to the Anti-speculation Doctrine
| Publication year | 2010 |
| Pages | 57 |
2010, May, Pg. 57. The Pagosa Doctrine: Narrowing the Municipality Exception to the Anti-Speculation Doctrine
May 2010
Vol. 39, No. 5 [Page 57]
Natural Resource and Environmental Law articles are sponsored by the CBA Environmental Law, Water Law, and Natural Resources and Energy Law Sections. The Sections publish articles of interest on local and international topics.
Coordinating Editors
Melanie Granberg (Environmental), Denver, Gablehouse Calkins and Granberg, LLC-(303) 572-0050, mgranberg@gcgllc.com; Kevin Kinnear (Water), Boulder, Porzak Browning and Bushong LLP-(303) 443-6800, kkinnear@pbblaw.com; Joel Benson (Natural Resources and Energy), Denver, Davis Graham and?Stubbs LLP-(303) 892-7470, joel.benson@dgslaw.com
About the Author
Preston V. Hartman is an appellate clerk for Hon. Laurie A. Booras, Colorado Court of Appeals, and a 2009 graduate of the University of Virginia School of Law-preston.hartman@judicial.state.co.us, (303) 837-3727. He thanks David S. Hayes for suggesting the subject of this article.
In two recent decisions, the Colorado Supreme Court defined more specifically than ever before what governmental agencies must establish in conditional water rights proceedings. This article discusses the most important legal and practical effects of these decisions.
The Colorado Supreme Court's 2007 and 2009 decisions in Pagosa Area Water and Sanitation Dist. v. Trout Unlimited (Pagosa I and Pagosa II, respectively)(fn1) are the most recent decisions that directly address the exception to the anti-speculation doctrine afforded to governmental water agencies, also known as the "great and growing cities" doctrine. The Court adopted what it termed a "narrow construction" of the exception and twice vacated the water court's decree.
This article discusses how Pagosa I and Pagosa II narrowed the governmental agency exception. It begins with a brief overview of the exception and then summarizes thedecisions and focuses on what each added to the law related to the exception. Finally, the article examines the effects of the most important elements of the decisions and what they mean for governmental agencies seeking conditional decrees and those who oppose their applications.
The Governmental Agency Exception
The Colorado Supreme Court recognized the unique water needs of municipalities more than seventy years ago in City and County of Denver v. Sheriff.(fn2) There, the Court distinguished municipal water users such as Denver, which must meet the needs of a growing population, from agricultural users, whose needs are static by comparison.(fn3) The Court opined that a municipality's efforts to appropriate water to meet its growing needs are "not speculation but the highest prudence."(fn4)
In 1954, the Court revisited the great and growing cities doctrine in the context of Denver's burgeoning water needs in City and County of Denver v. Northern Colorado Water Conservancy District.(fn5) In that case, the water court's decree was based solely on the city's future needs.(fn6) In upholding the decree, the Court again held that growing cities must be given the flexibility to account for their reasonably anticipated requirements, not merely their current needs.(fn7)
In the 1996 opinion City of Thornton v. Bijou Irr. Co.,(fn8) the Court reaffirmed that municipalities enjoy significant flexibility within the anti-speculation doctrine. The Court held that municipalities could obtain conditional decrees to meet the requirements of future growth areas outside their current municipal boundaries.(fn9) The Court also discussed the limited immunity from statutory anti-speculation provisions enjoyed by municipalities, specifically the requirement that an applicant must have in place contractual commitments for the sale or transfer of any water it does not put to beneficial use.(fn10)
The Exception Before Pagosa I
Heading into Pagosa I, it was well-established that the great and growing cities doctrine substantially insulated governmental agencies from a strict application of the anti-speculation doctrine. The following summarizes the state of the law at that time.
To obtain a conditional water right, an applicant must show that: (1) it has taken a "first step," which includes an intent to appropriate and an overt act; (2) its intent is not based on a speculative sale or transfer; and (3) there is a substantial probability that the applicant can and will complete the appropriation with diligence and within a reasonable time.(fn11) Under the anti-speculation doctrine, a private appropriator can establish its non-speculative intent only by showing that it has contractual commitments for any appropriations that are not planned for its own use.(fn12)
Governmental agencies are exempted from this contractual commitment requirement.(fn13) They may obtain a conditional decree, based solely on future needs, in an amount of water consistent with their reasonably anticipated requirements based on substantiated projections of future growth within their service area.(fn14) The decreed amount must not be based on a conjectural population projection that becomes a self-fulfilling prophecy of growth.(fn15) Also, the amount is best expressed in volumetric terms, rather than flow rate standards, to curb the speculative tendency of a lengthy conditional appropriation period.(fn16)
The conditional appropriation period-the "planning period"-must be reasonable.(fn17) Before Pagosa I, the longest planning period upheld by the Supreme Court was fifty years, but the Court did not explain why that length of time was reasonable.(fn18)
The "can and will" requirement, although nominally distinct from the anti-speculation doctrine, serves much the same purpose. A governmental agency must show-just as a private entity must-that it can and will put the water it seeks to beneficial use and that the project can and will be completed with diligence within a reasonable time.(fn19) This is an imprecise exercise, but the applicant nevertheless must show that there is a substantial probability that the intended appropriation will reach fruition.(fn20)
Finally, the Supreme Court defers to the water court's findings of fact if the evidence supports them.(fn21) For this portion of the applicable standard of review, Pagosa I cited Thornton v. Bijou Irrigation Co.,(fn22) which held that the findings of fact to which the Court defers include a determination of a municipality's reasonably anticipated requirements and intended use.
The Pagosa I Opinion
In 2004, the San Juan Water Conservancy District and the Pagosa Area Water and Sanitation District (the districts) applied for a conditional water rights decree allowing them to fill the planned Dry Gulch Reservoir to its 35,000 acre-feet capacity, with a planning period extending to year 2100.(fn23) One of the districts already held a conditional decree allowing storage of 6,300 acre-feet in the reservoir.(fn24)
Trout Unlimited, among others, opposed the application in the water court. Trout Unlimited argued that the application ran afoul of the anti-speculation doctrine because the proposed amounts were not consistent with the district's reasonably anticipated requirements.(fn25)
The water court entered a decree granting the districts a conditional storage right of 29,000 acre-feet, approximately the difference between the districts' existing storage right and the capacity of the planned reservoir, with a planning period extending to year 2100.(fn26) The decree also granted a right to continuously fill and refill the reservoir by a 100 cubic feet per second (cfs) diversion to achieve a total annual amount of 64,000 acre-feet, the right to reuse the water, and a separate direct flow diversion of 80 cfs that could be used to fill the reservoir or for other purposes.(fn27)
Trout Unlimited appealed the decree to the Colorado Supreme Court. The Court set aside the decree and remanded the case, holding that the water court had failed to make findings of fact sufficient to allow...
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