At Live Water Properties, one of the topics that most frequently comes up in our discussions with Ranch Sellers and potential Buyers is water rights. The subject of water right laws in western states is broad and nuanced from state to state. As Ranch Brokers it is critical that we have a thorough working knowledge of a myriad of topics related to ranch ownership including water rights, mineral rights, title matters, tax implications, recreational regulations and commodity markets. Having a working knowledge and being a subject matter expert however is a different ballgame – we feel it is equally as important to maintain a dynamic network of relationships with industry experts for the various topics we encounter daily, such that a quick call or email, can have questions answered by the best of the best. Our relationships with a multitude of experts related to ranch ownership, pre-purchase diligence and ranch preparation for a timely sale is unparalleled. One such contact is Denver-based water law attorney, Bill Wombacher who created the following article regarding fishery-specific water rights in Colorado:
Private Fishery Water Rights in Colorado
In Colorado, water rights can be obtained for almost any desired use, so long as that use is found to constitute a “beneficial use” in the eyes of the law. For nearly a century, the definition of “beneficial use” was thought to be expansive and to include essentially any use that a person could imagine. As a result, property owners devised creative ways to increase the value of their property through the use of water resources.
One such method used by the owners of ranch and agricultural properties was to improve irrigation ditches so that they had value beyond simply carrying water to a field. While water rights associated with most irrigation ditches are limited to use for irrigation purposes, landowners have some flexibility concerning how that water is conveyed to its ultimate place of use. This provides the opportunity for irrigation ditches to be improved for aesthetic and fishery purposes, so long as those improvements do not result in a substantive increase in consumptive use under the water right.
For example, ditches were improved to appear as natural water ways and were engineered to include fish spawning areas, riffle pools, shelter for young fish, and habitat for macroinvertebrates. Fishery related improvements were particularly viable for properties in close proximity to a natural waterway and where the irrigation ditches terminated in the same stream from which the water was originally diverted (i.e., there was flow through potential). However, the use of irrigation water rights to support in-ditch fisheries was limited by the fact that irrigation water rights can only be diverted during the irrigation season; typically April to October. As a result, fish that made their way into improved irrigation ditches could become stranded when the flow of water ceased at the end of the irrigation season.
Property owners interested in maintaining a year-round fishery would obtain new water rights specifically for the purpose of diverting water down improved irrigation ditches during the winter in order to sustain the fishery until the next irrigation season. Colorado water courts granted such rights for decades allowing for the creation of dramatic water features and recreational opportunities on properties throughout the state.
However, in 2015 in the case of St. Jude’s Co. v. Roaring Fork Club, LLC, the Colorado Supreme Court determined that diversions into and through a ditch for fishery, recreational, and aesthetic purposes, without impoundment, was not a “beneficial use” under Colorado water law thereby prohibiting such water rights. As a result of this decision, private parties can no longer obtain direct flow water rights for such purposes making it extremely difficult, if not impossible, to develop year-round fisheries in improved irrigation ditches. It is important to note that storage rights (ie. ponds and reservoirs) for these purposes are still lawful and may be obtained from the Water Court.
Much to the dismay of many water users, the St. Jude’s decision did not discuss what should become of the hundreds of existing direct flow water rights already decreed for fishery, recreational and aesthetic purposes. This uncertainty resulted in legislative efforts to clarify the status of existing water rights, which succeeded in 2017 with the passage of House Bill 17-1190. That bill confirmed that the St. Jude’s decision did not apply to water rights decreed prior to July 15, 2015, thereby protecting all existing water rights decreed for uses that the Colorado Supreme Court had found to be unlawful in the St. Jude’s case.
Because private parties can no longer obtain new direct flow water rights for fishery, recreational or aesthetic purposes, those that currently exist and are protected under HB 17-1190 are prized by parties seeking one-of-a-kind ranches and recreational properties in Colorado. Parties who currently own such rights should ensure that the rights are being properly managed to protect their long-term viability. These water rights cannot be replaced and are extremely rare and extremely valuable. Parties interested in unique recreational properties would be wise to search for properties that include these unique improvements.
If you have questions about water improvements for your property or the status of your Colorado water rights, contact Bill Wombacher at wwombacher(at)nswlaw(dotted)com or 720.647.5661 or though www.nswlaw.com.
