In Colorado, the State Engineer has added flexibility to perfecting junior conditional water rights.  Under a Written Instruction issued by the Colorado State Engineer on July 21, 2020, Division of Water Resources officials who participate in water court proceedings will no longer oppose water right applications to perfect junior water rights so long as the applicant’s out-of-priority diversions are taking place lawfully under a court-decreed augmentation plan, exchange, or similar administrative approval.

Background – Colorado Law

• Absolute and conditional water rights: In Colorado, absolute water rights are legally recognized in a special water court, once a water user physically diverts and uses water, and proves the use to the water court.  Once a right is absolute, no further court proceedings are required – the absolute water right is perfected.  Conditional water right decrees authorize future diversions and fix the appropriation date to the first step taken toward the appropriation. The conditional right-holder completes the appropriation—“perfects” the conditional right—by physically putting the water to beneficial use, at which point the conditional right holder can apply to the water court to make the water right absolute.  Within six years of the conditional decree, and then every six-year period thereafter, the holder must either perfect a conditional right or secure a “diligence decree” confirming they have continued to diligently pursue the steps necessary to put the water to actual use within a reasonable time.  The policy for allowing conditional rights to take a place in a priority system is to protect economic investments while rights are being developed.
• Priority date – appropriation vs. adjudication: A water right is created through actual use (appropriation), but only becomes enforceable against others upon entry of a decree (adjudication).  So, in Colorado, the adjudication date, not the appropriation date, primarily determines a water right’s priority:  Water Right A appropriated in 1980 but decreed in 2010 would be junior to Water Right B appropriated in 1990 but decreed in 2000.  Water Right C appropriated in 1950 but never decreed could not be enforced as a senior right against either of the more junior rights.
• Augmentation plans and exchanges: Ordinarily, in a dry water season, a junior water right must stop diverting if its withdrawal would cause a call by a downstream senior water right.  Colorado has developed augmentation plans, exchanges, and similar mechanisms to allow junior water rights to continue their out-of-priority diversions by providing downstream seniors with an alternative supply of water to meet senior entitlements.

The SEO’s Written Instruction

Historically, the State Engineer and the Division of Water Resources’ (DWR) position was that in order to perfect a conditional water right, diversions had to take place in priority.  Under that stance, diversions authorized under augmentation plans, exchanges, or similar arrangements—legally allowed diversions taking place out of priority by definition—could never be made absolute.  This had two undesirable effects:  First, conditional right-holders lawfully diverting out of priority would have to file perpetual diligence applications because even though they were putting the water to beneficial use, they could not perfect the right.  This effort cost water users and the state significant time and money.  Second, augmentation plans allowing non-decreed diversions would increasingly have to replace decreed downstream diversions that actually appropriated water later than the non-decreed diversions—since the newer diversions had obtained decreed priority dates, they would become senior to the non-decreed diversions despite a later appropriation.  At the direction of the Office of the State Engineer (SEO), the Colorado Attorney General’s Office conducted a complete review of statutory and case law, including a review of changes in the law since the SEO/DWR originally formulated a position about making water rights absolute.  The SEO developed its new policy based on that review.

The SEO’s new policy is that:

a conditional, tributary water right becomes absolute when a water user applies water to beneficial use in priority, or out of priority pursuant to procedures prescribed by law. Procedures prescribed by law include decreed plans for augmentation, decreed exchanges, and administrative approvals, described individually [at Pages 2–4 of the Written Instruction].

Accordingly, the Instruction directs the division engineers, in the water court consultation process, to refrain from opposing applications to perfect conditional water rights as long as the applicant shows the water has been put to beneficial use “in accordance with procedures prescribed by law,” such as augmentation plans, exchanges, or administrative approvals.

In a technical sense, the effect of the Instruction is relatively narrow.  The direction pertains only to DWR staff participating in water court proceedings; it is not a regulation or statute carrying the force of law to which the state’s water referees and judges would themselves have to adhere.  Its practical effect, however, will be significant.  The consultation process carries significant weight in water court proceedings, and applicants seeking to perfect the sort of water rights covered by the Instruction can now count the state as an ally where once it stood as an impediment.  Further, water judges and referees are not technically bound by the Instruction, but are likely to recognize the practical outcome is a benefit.  Nonetheless, any of the 14 water judges and referees across the state may think otherwise.  We expect to see the new policy play out across the state’s seven water courts, and if there are negative consequences for some water users, the Colorado Supreme Court or General Assembly could weigh in.

For more information about how the SEO’s new policy might affect you, or for assistance in perfecting a water right, please reach out to Dan Condren at dcondren@somachlaw.com.

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