On May 1, 2023, the Colorado Supreme Court defined the State Engineer’s authority to enforce terms and conditions of Substitute Water Supply Plans (SWSP). SWSPs are a common tool to assist developments, golf courses, and other projects get off the ground, or continue operating, while their water cases proceed through court. Stated simply, an SWSP is a temporary legal water supply.

Colorado Revised Statutes section 37-92-308 extensively outlines the State Engineer’s authority to approve, deny, and curtail SWSPs. However, the statute fails to adequately describe the State Engineer’s authority to enforce specific terms of an approved SWSP. That enforcement uncertainty came to a head in Front Range Feedlots, LLC v. Rein, 2023 CO 20 (Front Range Feedlots).

The State Engineer Flexes its Enforcement Muscles

Front Range Feedlots, LLC, (Front Range) supplied stockwatering to its cattleyard with wells tributary to the South Platte River. However, Front Range’s water right was only decreed for irrigation use. After receiving an anonymous tip, the State Engineer discovered that for the last 30 years Front Range illegally used its water right for stockwatering.

The State Engineer quickly issued a Show Cause Order requiring Front Range to either cease stockwatering or obtain an SWSP and apply for a new junior water right and augmentation plan. To continue its cattle operation, Front Range proceeded under the latter option. However, the State Engineer included onerous and expensive terms and conditions in the SWSP—including that Front Range must replace all illegal well depletion since 1985.

Shortly after, Front Range obtained a new water supply. Believing it no longer required the SWSP, Front Range filed a motion to withdraw its pending water court application. But the State Engineer sought to require Front Range to continue complying with the SWSP by issuing an Order to Comply, thereby requiring Front Range to continue replacing the previous depletions. Front Range challenged the Order to Comply all the way to the state’s highest court.

The State Engineer’s SWSP Enforcement Authority Is Expansive

The Supreme Court disagreed with Front Range. First, the Court found that not only can the State Engineer approve, deny, and curtail SWSPs, but it can also require compliance with an SWSP’s terms and conditions. While such authority is not found expressly in Colorado Revised Statutes section 37-92-308, the statutory scheme as a whole (specifically Colorado Revised Statutes sections 37-92-501(1), 37-92-502(1), and 37-92-50.5) “plainly give the State Engineer the authority to issue SWSPs and orders.”

Second, the Court found Front Range cannot simply avoid its SWSP obligation by allowing it to expire, or by withdrawing the corresponding water court application. Similarly, an SWSP’s terms and conditions must continue after expiration when it covers delayed depletion. Otherwise, SWSP holders could avoid SWSP obligations, cause injury to water right holders, and avoid the related liability. The Court stated such a result would be absurd.

Third, the Court established the State Engineer has authority to require an SWSP holder to replace depletions caused by pre-application pumping. The Court referred to In re Application for Water Rights of Well Augmentation Subdistrict of the Cent. Colo. Water Conservancy Dist., 221 P.3d 399, 413 (CO 2009), which previously held the water court has such authority pursuant to Colorado Revised Statutes section 37-92-305 and the Water Right Determination and Administration Act of 1969’s purpose “of integrating groundwater into the surface water priority system without causing harm to senior vested rights.” The Court found this reasoning “applies with equal force to the State Engineer’s authority under an SWSP.”

Finally, Front Range was ordered to pay the State Engineer’s attorneys’ fees and costs.

Outcome

Both current SWSP holders and future applicants need to be aware that Front Range Feedlots clarifies and reinforces the State Engineer’s enforcement authority over SWSPs. Resultingly, the State Engineer may seek to include more aggressive and/or creative terms and conditions in SWSPs. Further, Front Range Feedlots may encourage the State Engineer to more aggressively pursue non-compliance with current SWSPs.

For any inquiries or additional information, please contact:

• Ryan J. Mitchell, rmitchell@somachlaw.com

Somach Simmons & Dunn provides the information in its Environmental Law & Policy Alerts and on its website for informational purposes only. This general information is not a substitute for legal advice, and users should consult with legal counsel for specific advice. In addition, using this information or sending electronic mail to Somach Simmons & Dunn or its attorneys does not create an attorney-client relationship with Somach Simmons & Dunn.