Water Law Basics for Real Estate Practitioners
| Publication year | 2015 |
| Pages | 63 |
Articles
Real Estate Law
Water Law Basics for Real Estate Practitioners
By Paul Noto
Real Estate Law articles are sponsored by the CBA Real Estate Law Section.
Coordinating Editors
Christopher D. Bryan—(970) 925-1936, cbryan@garfieldhecht.com; Stefanie L. Sommers —stefanie. sommers@gmail. com
About the Author
Paul Noto is a shareholder with Patrick, Miller & Noto, P.C., a firm based in Aspen, with offices in Basalt, Denver, Scottsdale, and Tulsa. His practice focuses on water rights law, water quality law, hydropower licensing, and related municipal, environmental, and natural resources law.
This article provides basic background information about water law principles useful to the real estate practitioner handling real estate matters involving water rights.
Real estate lawyers often handle transactions involving water rights and water resources. Typically, the real estate lawyer handling a transaction involving all but the simplest water issue will advise the client to engage a water lawyer during the due diligence period. Nevertheless, a basic understanding of certain background water law principles is helpful to the real estate practitioner for three reasons: (1) a basic understanding of water law fundamentals enables the real estate practitioner to ask the right questions and not overlook potentially significant issues; (2) understanding if and when to engage a water lawyer is an important client decision—and the advice of the real estate lawyer is often very important in making that decision; and (3) an ability to "speak the language" of water law will allow a better synergy between the real estate lawyer and water lawyer—likely resulting in better client representation as the two lawyers collaborate on the more complex issues. This article provides an overview of Colorado water law basics with an eye toward the real estate lawyer.
Prior Appropriation
Colorado water law is based on the law of prior appropriation.[1] This doctrine is sometimes summed up as "first in time, first in right."[2] Under this doctrine, when there is insufficient water available in a stream to meet the demands of a senior water right, the senior water right can obtain all of its decreed water before upstream junior water rights can receive any water.[3] In other words, water is allocated exclusively on the water rights' priority dates, and there is no equitable sharing of water during times of shortage. Colorado is a pure prior appropriation state,[4] meaning there is no preference for particular water uses over other uses.[5]
Historical Background
Colorado was an early adopter of the prior appropriation system of water rights.[6]In fact, Colorado recognized that water rights would be administered under this system long before statehood.[7] The reasons were largely practical in nature. The other major system of water rights in the United States is riparianism or riparian water rights.[8] Under that regime, any landowner whose property abuts a stream is generally entitled to make a reasonable use of water in the stream, so long as she does not unreasonably diminish the flow and quality of water for her downstream neighbors.[9] If there is insufficient water to satisfy the needs of all riparian water users, each user must curtail her use accordingly.[10] Typically, non-riparian landowners are not entitled to any use of stream water. [11] This last point is particularly problematic in semi-arid states such as ours, because in order to make non-riparian lands productive, it is often necessary to transport water far from a stream.[12]
The Union Colony, a promoter of agricultural settlements in the Colorado Territory, began to establish large-scale irrigation ditches on the South Platte River in the early 1870s.[13] Soon, other farmers began establishing ditches along the Poudre, usually larger and upstream.[14] The resulting competitions for water contributed to adoption of the prior appropriation principle. The Territorial legislature announced in 1861 that water could be taken from rivers to lands not adjacent to the streams, and thus departed from the riparian system of water rights generally applicable east of the 100th Meridian.[15] In 1872, the Territorial Supreme Court recognized rights of way (easements), citing custom and necessity, through the lands of others for ditches carrying irrigation water to its place of use.[16]
Colorado became the 38th state in 1876. Colorado's Constitution contains strong language concerning the great importance of water rights and ditch easements, including:
• "The water of every natural stream, not heretofore appropriated, within the state of Colorado, is dedicated to the use of the people of the state, subject to appropriation . . . ,"[17]
• "The right to divert the unappropriated waters of any natural stream to beneficial uses shall never be denied. Priority of appropriation shall give the better right as between those using the water. . . ,"[18]
• "All persons and corporations shall have the right-of-way across public, private and corporate lands for the construction of ditches, canals and flumes for the purpose of conveying water for domestic purposes, for the irrigation of agricultural lands, and for mining and manufacturing purposes, and for drainage, upon payment of just compensation."[19]
Thus, the prior appropriation system of water rights is the foundational predicate of Colorado's water laws. Colorado is somewhat unique, however, in how it confirms water rights and incorporates them into the system of stream administration.
The Colorado Adjudication System of Water Rights
Colorado eschewed the permitting system of water rights, now adopted in many other Western prior appropriation states,[20] under which water rights were confirmed administratively. Rather, in the Adjudication Acts of 1879 and 1881,[21] the new state provided for adjudication of irrigation water rights by amount and priority, with administration of the courts' decrees by state water officials.[22] However, in Colorado, water rights arise by the formation of intent to appropriate water coupled with application of water to a beneficial use.[23] In other words, the court decree does not award, but rather confirms, the preexisting water right.[24]
A Very Brief Colorado Water Law Primer
There are several fundamental water law principles real estate practitioners should be familiar with. These concepts are often encountered in real estate transactions involving water rights, and a working knowledge of them will be helpful.
Surface Water
There are two general classifications of water rights in Colorado: absolute and conditional.[25] Absolute water rights are perfected water rights by actual use of water.[26]Conditional water rights hold a place in line in the priority system for a water right that has not been completed, thus providing a measure of security for owners to invest in water development projects without the risk of losing their priority date.[27] The owner of a conditional water right must file an application in water court every six years to prove he has been reasonably diligent toward completion of the appropriation, or to claim the water right as absolute by completion of the appropriation, after which additional "diligence" filings become unnecessary.[28] A failure to file results in automatic cancellation of the conditional water right;[29] it is therefore vitally important to note the deadlines and understand whether current and prior owners met them if a client is acquiring property with conditional water rights.
Direct flow water rights are typically measured in "c.f.s." (cubic feet of water per second) or "g.p.m." (gallons of water per minute). One c.f.s. equals 449 gallons of water per minute. One can envision a unit of one c.f.s. by imagining an amount of water approximately the circumference of a basketball f lowing by each second. Storage water rights are decreed to ponds and reservoirs, and are measured volumetrically in "acre-feet" of water.[30] One acre-foot of water is approximately 325,900 gallons, or the volume of water that would inundate one acre of land (picture a football field without end zones) to a depth of one foot.
Changes of Water Rights
A water right owner has the right to change his water right to different types of uses or places of use, and maintain the water right's priority, so long as other water rights are not injured.[31] Typically, this means that historic return flow patterns from use of the water right are maintained, and that more junior water rights are entitled to maintenance of stream conditions at the time of their respective appropriations.[32] The measure of every water right for change purposes is its historic beneficial use at its decreed location.[33] The way most change of water rights decrees protect against injury is by limiting the change to the amount of water beneficially consumed in the course of applying the water to its decreed uses, and otherwise protecting against enlargement of the right in its new use or uses compared to how it was historically used.[34] In this way, other water rights are not deprived of water they had historically received.
Plans for Augmentation
Most stream systems in Colorado are over-appropriated.[35] This means that, at least at times, there are more decreed water rights on the stream than there is available water supply.[36]To allow further development of the state's water resources, the 1969 Water Right Determination and Administration Act[37] provided for plans for augmentation. Plans for augmentation are water supply plans decreed in water court under which junior water uses may continue when they would otherwise be shut down, because the owner replaces the stream depletions to the calling senior water...
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