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In a case on appeal from the water court, the Colorado Supreme Court held that Coors Brewing Company would have to adjudicate a new water right in order to add rights of reuse or successive use to its augmentation plan.  An augmentation plan can be amended to allow additional or alternative replacement water sources, but not to formally allow the reuse or lease of return flows as Coors had done since the 1970’s.

Although Colorado adheres to prior appropriation law, augmentation plans allow junior appropriators the flexibility to divert out of priority as long as they prevent injury to senior right holders by supplying replacement water.  An applicant for an augmentation plan must receive judicial approval, which is subject to several statutory standards.

Coors operates under three augmentation plan decrees at issue before Colorado’s Supreme Court.  The augmentation plans require Coors to release enough return flows to prevent injury to senior water right holders.  However, from the 1970’s to 2014, Coors reused and leased return flows with the approval of the State and Division Engineers.  In 2014, Coors challenged the State Engineer’s decision to not approve a new lease, and both parties asked the water court to determine certain questions of law, which were ultimately appealed to the Supreme Court.

The Supreme Court affirmed the water court’s ruling, focusing on three questions of law.

First, the Supreme Court held that Coors could not merely amend its augmentation plans to obtain rights to reuse or successive use of its return flows, and that the desired change required Coors to adjudicate a new water right.  The relevant statute allows amendments for additional or alternative replacement water sources if the plan provides a procedure for such a change, but not the type of amendment Coors sought.  The Court acknowledged that, while some augmentation plans allow for reuse or successive use, the plans at issue did not.  Rather, the augmentation decrees specifically provided for water to be returned to the stream.  The Court noted that even decades of approval from the State Engineer did not justify continued leasing and reuse.

Second, the Supreme Court determined that Coors’s return flows are native, tributary water, and subject to appropriation by other water users, rather than foreign or developed water with Colorado’s implied right of reuse.  This decision was based on the fact that Coors appropriates native, tributary water and does not import new water into the stream from a transbasin or hydrologically unconnected source.  Replacing the water under an augmentation plan, the Court found, did not change the water’s character.

The Supreme Court addressed the concern that requiring water users to replace depletions under their augmentation plan and relinquish return flows creates excess augmentation water, jeopardizing the value of augmentation plans to water users.  The Court found that Coors would not necessarily create excess augmentation water, as Coors’s augmentation plan allows replacement obligations to be reduced by the amount of return flow.  Additionally, the Court noted that creating excess water “is simply part of the normal functioning of augmentation plans.”  Creating excess augmentation water, the Court found, does not undermine the purpose of augmentation plans or the maximum beneficial use of water.

Third, the Supreme Court ruled that Coors’s augmentation plan decrees require Coors to permanently dedicate its return flows to the stream.  The Court based its decision on the plain language of the augmentation plan decrees, which expressly provide that Coors will return all unconsumed water to the stream system.  The Court noted that long-settled law also supports that unused native water must be returned to the stream for appropriation by other water users.

This decision clarifies that Colorado water users, using native water, who operate under an augmentation plan and wish to reuse return flows must do so pursuant to existing, explicit authorization in an augmentation plan decree.  Alternatively, such water users must adjudicate a new water right.  This standard still applies even if the water user fully augments its water supply.  For information about how this case may affect your augmentation plan, you can contact Ramsey Kropf at our Colorado office, rkropf@somachlaw.com.

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