Know Water Rights When Developing Land
Colorado Real Estate Journal, August 2, 2000
With the possible exception of dry-land farmers, people buying land in Colorado need water to go with it. In order to develop raw land, the city, county, or water district which will supply water to the development will require the developer to convey sufficient water rights to do so; how much water depends on who is making the rules. According to a recent press release from the Northern Colorado Water Conservancy District, two urban households (at an average of five people per household) will use one acre foot of water per year. Suppliers are requiring from one to four acre-feet per household. An acre-foot is the amount of water required to cover an acre of land to a depth of one foot, and is equal to nearly 326,000 gallons of water. Those familiar with obtaining water service in the Denver metropolitan area may not be prepared for how different the process is elsewhere.
In Northern Colorado, a discussion about acquiring water rights for development is almost always about water from the Colorado-Big Thompson Project (C-BT). Built from 1937 to 1957, the C-BT is the largest transmountain water diversion project in the State. It provides supplemental water to 30 cities and towns, and helps irrigate 615,000 acres of farmland in northeastern Colorado. A unit of C-BT water is one acre-foot. More water units changed hands in February than in any other month on record for the Northern Colorado Water Conservancy District, and about half of that water was being converted from agricultural to municipal use. When C-BT first began accepting applications in 1937-1938, an acre-foot of water cost $1.50. At that rate, whether a municipality or water district required the developer to dedicate one unit per rooftop (even counting multi-family units the same as detached single family homes), or would take less, would not pose much of a problem. But with recent asking prices for C-BT water reportedly reaching $17,500, it makes a big difference. The developer has to pass the water cost on to the consumer. That can make it impossible to build affordable housing.
There was a time when municipalities and water districts accepted cash in lieu of water dedications. The water supplier would then use the money to go buy the water rights. As development pressure increased, suppliers quit accepting cash, making it the developer's job to find and pay for the water. In many cases, C-BT water is the only water that will be acceptable to the supplier, because it allows for the most flexible use.
The Colorado-Big Thompson Project transports water from west of the Continental Divide through 12 reservoirs, 35 miles of tunnels, 95 miles of canals, and 700 miles of transmission lines. There is even a hydroelectric component to the system, with water falling almost a half-mile as it travels from Grand Lake and Lake Granby through five power plants on its way to the Front Range. Although 80% of Colorado's surface water is on the western slope, 80% of its people are on the eastern slope, and the water gets moved to where the people are. The legal basis for this state of affairs has its roots in territorial days. In the West, where water is scarce, water law evolved quite differently from that of England and the Eastern Seaboard. When Congress carved the Colorado territory out of the Kansas and Utah territories in 1861, the first Territorial Legislature provided that water could be taken from the streams and conveyed across lands of another to grow crops. This is still "good law" in Colorado; miners and irrigators have a constitutional right to convey water across the lands of another, and the right has been expanded by statute (§37-86-102). This can come as a surprise to developers with unrecorded irrigation ditch easements on their land. The easement doesn't have to be recorded, and the ditch company has almost an absolute right to use it. While water rights are akin to real property rights in Colorado, and are conveyed by deed, they are not covered by title insurance, and are not listed in any central registry. Furthermore, water rights can be lost by non-use. All these elements can create numerous traps for the unwary.
The rules regarding the use of surface water in the West originated in the California Gold Rush in 1849, and were imported into Colorado during its Gold Rush ten years later. Any miner who used the water first had the right to use it over anyone who used it later. This system became known as the Doctrine of Prior Appropriation. In 1872, Colorado's Territorial Supreme Court identified Colorado water law as arising from "natural law" and the "necessity" of being in an "arid region." Upon its admission to the Union in 1876, Colorado adopted a Constitution which declares the water of every natural stream in the State to be "the property of the public. . .dedicated to the use of the people of the state," codifying the Doctrine of Prior Appropriation. From an aggressively pro-development interpretation of this law in Colorado's early days, State statutes and court decisions came to reflect a growing understanding of the need to preserve natural beauty, protect ecosystems, and recognize the recreational and aesthetic values of Colorado's water. The concept of "beneficial use" has expanded, from a fairly short list (agriculture, mining, domestic, municipal, and flood control) to a list that includes fish and wildlife propagation, nature centers, boat chutes, mined land reclamation, and dust suppression. Since 1957 the Doctrine of Prior Appropriation has also applied to ground water.
