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NATURAL RESOURCE AND ENVIRONMENTAL LAW³WATER LAW
Chad J. Lee is an associate at Balcomb & Green, P.C. in Glenwood Springs, Colorado. He practices water, real estate, oil and gas, and land use law. Sara M. Dunn is a partner at Balcomb & Green, P.C. who specializes in water law.
Colorado law preserves the historical consumptive use of a water right during a lease to the ColoradoWater Conservation Board for instream flow purposes so long as a change decree is obtained. The wateris fully consumable downstream of the instream flow reach.
Preserving
H
istorical
C
onsumptive
U
se
D
uring
W
ater
L
eases
f
or
I
nstream
U
se
by Ch
ad
J. L
ee
and
S
ara
M. D
unn
In 2008, the Colorado legislatureeliminated a major impediment toColorado¶s instream flow program byenacting House Bill (HB) 08-1280, whichallows owners of water rights to preservethe historical consumptive use of a water right during a lease to the ColoradoWater Conservation Board (CWCB).
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This law gives the CWCB a useful tool toincrease stream flows and preserve thenatural environment. It also allowspractitioners to preserve the value of clients¶ water rights while benefitting thenatural environment. This article providesa brief history of Colorado¶s instream flowprogram, discusses the mechanics of HB1280 leases, and analyzes the potentialimpact of HB 1280.
A Brief History of Colorado¶sInstream Program
Before 1973, Colorado did not recognizeinstream flow rights.
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The Water RightDetermination and Administration Act of 1969 defined ³appropriation´ as the³diversion of a certain portion of the watersof the state and the application of the sameto a beneficial use.´
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³Diversion´ meant³removing water from its natural course or location, or controlling water in its natural
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course or location, by means of a ditch . . .or other structure or device.´
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However, in 1973, the legislaturelegitimized instream flow rights byeliminating the need to divert water toobtain a priority.
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In so doing, Coloradorecognized the ³need to correlate theactivities of mankind with some reasonableprotection of the natural environment´ andauthorized the appropriation of instreamflows.
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The CWCB was appointed as theexclusive authority to appropriate ³minimumflows´ and lake levels ³to preserve thenatural environment to a reasonabledegree.´
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In 1979, the Colorado SupremeCourt upheld the constitutionality of theinstream flow program.
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Two years later, the legislature passed acompromise bill that added four principlesand limitations the CWCB was required tofollow in establishing instream water rights.These principles and limitations are: (1)instream flow rights could not constrain theuse of imported water; (2) instream flowrights were subordinated to any water usesand exchanges existing prior to theinstream right, even if not yet decreed; (3)the CWCB must make independent findingsthat the environment will be preserved to areasonable degree; and (4) a clarificationthat the program did not create a publicright to access streams or condemn rightsof way.
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The program gained momentum in the1980s, partially as a way to stave off federalintervention.
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Although the CWCB hadbeen authorized to acquire water for instream flows since 1973,
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the legislatureclarified the law in 1986 to empower theCWCB to acquire senior rights for instreamflow purposes by ³grant purchase, bequest,devise, lease, exchange, or contractualagreement.´
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The CWCB clearly had theauthority to acquire senior existing rights for instream flow purposes in the privatemarket.In 2002, the Colorado legislaturedeclined to enact certain provisions of a billthat would have allowed private individualsto hold instream flow rights.
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Thelegislature preferred to restrict ownership of instream flow water rights to the CWCB tobalance competing interests.
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Proponentsof the bill, however, struck a compromisethat expanded the CWCB¶s authority toappropriate instream flows to ³improve´ thenatural environment, whereas previouslythe CWCB had the authority to appropriateonly the bare minimum flows to ³preserve´the natural environment.
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CWCB Program
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The CWCB uses two primary tools toimprove streamflows: appropriations andacquisitions.
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Acquisitions, in contrast to junior post-1973 appropriations, enable theCWCB to acquire senior water rightspermanently through gifts or sales,temporarily through leases, or through other interests. Acquisition is the less-used of thetwo tools due to the complexity of water transactions and lack of funding, and leaseswere not used at all due to the penaltyincurred in the historical consumptive use of the water right.
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However, in 2008, thelegislature eliminated a major impedimentto leases of water rights for instreampurposes.
The
2008 Am
end
m
ent:
HB 08-1280
In 2008, the legislature allowedappropriators to claim historical use creditfor periods during which the water wasleased to the CWCB for instream flowpurposes. Previously, no appropriator wasbrave enough to lease water to the CWCBbecause of the risk that the historicalconsumptive use
the transferablecomponent of a water right
wouldgradually atrophy throughout the leaseterm. This risk was present because awater right must be used for its decreedpurposes at its decreed place of use,without waste, to be transferred.
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Further,even if the CWCB were to judicially changea leased water right to instream flow use,this nonconsumptive use likely would havebeen factored into a future historical useanalysis as a period of nonuse, therebyreducing the value of the water right.
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The value of any water right isdependent on its actual historical beneficialuse. Water rights can be transferred or sold,but only to the extent the water has beenactually historically beneficially used.
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Historical periods of nonuse or undecreeduse reduce the amount of transferablewater to protect junior appropriators.
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Thegeneral practice in water court is to factor ina zero for each year that a water right liesdormant or is used for an undecreed or nonconsumptive purpose, reducing theamount of water available for any changedpurpose, including for instream flow.Periods of nonuse or nonconsumptive usetherefore reduce the market value of thewater right.This means that although the CWCB hasbeen authorized to acquire water rights bylease since 1973, the risk of reducedhistorical consumptive use of a water rightstifled the lease market completely.
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However, in 2008, the legislature enacted aprovision that preserved the value of awater right during a lease to the CWCB for nonconsumptive instream flow purposes.
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