Water & Sanitation Dist. v. Burlington Ditch Reservoir & Land Co

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ADVANCE SHEET HEADNOTE
November 23, 2020
2020 CO 80
No. 19SA150, United Water & Sanitation Dist. v. Burlington Ditch Reservoir &
Land Co.—Water Law—Intent as to Use of Water—Anti-Speculation Doctrine.
The Water Court in Division 1 rejected United Water and Sanitation
District’s application for a conditional water right on the grounds that it failed to
demonstrate a non-speculative intent. The water court reasoned that United did
not qualify for the governmental planning exception to the anti-speculation
doctrine and could not satisfy the anti-speculation standards applicable to private
appropriators. The supreme court agrees. United, a one-acre special district
incorporated in Elbert County, has no governmental or agency relationship with
the end users proposed to be benefited by its appropriation in Weld County and
is thus ineligible for the governmental planning exception. The contract that
United offers to support its application is insufficiently definite and binding to
satisfy the anti-speculation standards applicable to private appropriators.
Accordingly, the supreme court affirms the judgment of the water court below.
The Supreme Court of the State of Colorado
2 East 14th Avenue • Denver, Colorado 80203
2020 CO 80
Supreme Court Case No. 19SA150
Appeal from the District Court
Weld County District Court, Water Division 1, Case No. 16CW3053
Honorable James F. Hartmann, Water Judge
Concerning the Application for Water Rights of United Water and Sanitation
District, acting by and through the United Water Acquisition Project Water
Activity Enterprise in Adams, Arapahoe, Denver, Douglas, Elbert, Morgan, and
Weld Counties.
Applicant-Appellant:
United Water and Sanitation District, acting by and through the United Water
Acquisition Project Water Activity Enterprise,
v.
Opposers-Appellees:
Burlington Ditch Reservoir and Land Company; Centennial Water and Sanitation
District; City of Aurora; City of Boulder; City and County of Denver, acting by
and through its Board of Water Commissioners; City of Englewood; City of
Brighton; City of Thornton; Edmundson Land, LLC; The Farmers Reservoir and
Irrigation Company; Fort Morgan Reservoir & Irrigation Company; Henrylyn
Irrigation District; Irrigationists’ Association, Water District 1; Lower Latham
Reservoir Company; Platte Valley Irrigation Company; Public Service Company
of Colorado; South Adams County Water and Sanitation District; Todd Creek
Village Metropolitan District; Town of Lochbuie; and The Board of County
Commissioners of the County of Weld, State of Colorado,
and Concerning
Appellee Pursuant to C.A.R. 1(e):
Corey DeAngelis, Division Engineer, Water Division 1
Judgment Affirmed
en banc
November 23, 2020
Attorneys for Applicant-Appellant:
Law Offices of Tod J. Smith, LLC
Tod J. Smith
Boulder, Colorado
Ann Rhodes, LLC
Ann M. Rhodes
Boulder, Colorado
Attorneys for Opposer-Appellee Burlington Ditch Reservoir and Land
Company:
Lyons Gaddis Kahn Hall Jeffers Dworak & Grant, P.C.
Scott E. Holwick
Kara N. Godbehere
Longmont, Colorado
Attorneys for Opposer-Appellee City of Aurora:
Brownstein Hyatt Farber Schreck, LLP
Steven O. Sims
Dulcinea Z. Hanuschak
Benjamin J. Saver
Denver, Colorado
City of Aurora
Stephanie Neitzel
Aurora, Colorado
Attorneys for Opposer-Appellee The Farmers Reservoir and Irrigation
Company:
Fairfield and Woods, P.C.
Joseph B. Dischinger
Beth Ann J. Parsons
Beth Van Vurst
2
Dean C. Hirt, III
Denver, Colorado
Attorneys for Appellee Pursuant to C.A.R. 1(e):
Philip J. Weiser, Attorney General
Paul L. Benington, First Assistant Attorney General
Philip E. Lopez, Senior Assistant Attorney General
Denver, Colorado
Attorneys for Amicus Curiae City of Colorado Springs:
City Attorney’s Office
Michael J. Gustafson
Colorado Springs, Colorado
Hill & Robbins, P.C.
David W. Robbins
Matthew A. Montgomery
Denver, Colorado
Attorneys for Amicus Curiae City and County of Denver:
Jessica R. Brody, General Counsel
Casey S. Funk
Daniel J. Arnold
James M. Wittler
Denver, Colorado
No appearance on behalf of: Centennial Water and Sanitation District; City of
Boulder; City of Englewood; City of Brighton; City of Thornton; Edmundson
Land, LLC; Fort Morgan Reservoir & Irrigation Company; Henrylyn Irrigation
District; Irrigationists’ Association, Water District 1; Lower Latham Reservoir
Company; Platte Valley Irrigation Company; Public Service Company of
Colorado; South Adams County Water and Sanitation District; Todd Creek
Village Metropolitan District; Town of Lochbuie; and The Board of County
Commissioners of the County of Weld, State of Colorado.
JUSTICE MÁRQUEZ delivered the Opinion of the Court.
3
¶1 This appeal arises out of an application for a conditional water storage right
filed by United Water and Sanitation District, a special water district formed in
Elbert County, acting through the United Water Acquisition Project Water Activity
Enterprise (“United”). Since 2013, United has been seeking to secure various water
rights in Weld County. United’s original applications—which sought, in part,
conditional water storage rights for two reservoirs, conditional and absolute
storage rights for a third reservoir, and conditional recharge rights—were
consolidated in a set of four cases. In response to a motion for determination of
questions of law from opposer Farmers Reservoir and Irrigation Company
(“FRICO”) in the consolidated cases, the District Court for Water Division 1
(“water court”) concluded that United’s applications failed to demonstrate non-
speculative intent to appropriate water. In response to this ruling, United
withdrew its applications in the consolidated cases and, a week later, filed a new
application in Case No. 16CW3053 for a conditional water storage right that is the
subject of this appeal.1 Relevant here, United seeks to appropriate water for use
in a proposed residential development in another county. In support of its new
1 United filed new applications in separate cases for the other conditional water
rights sought in the initial applications.
4
application for a conditional storage right, United offered a new, purportedly
binding contract with the landowners of the proposed development. United also
claimed for the first time that its status as a special district qualifies it for the
governmental planning exception to the anti-speculation doctrine.
¶2 After opposer FRICO filed another motion for determination of questions of
law, the water court concluded that United’s new application likewise failed to
demonstrate non-speculative intent to appropriate water. The water court found
that United was acting as a water broker to sell to third parties for their use, and
not as a governmental agency seeking to procure water to serve its own municipal
customers. Consequently, the water court held, United did not qualify for the
governmental planning exception to the anti-speculation doctrine. Applying
instead the anti-speculation standards applicable to private appropriators, the
court held that United’s application failed because it did not have a binding
contract or an agency relationship with the end users of the water. United now
challenges the water court’s ruling denying in part its application for conditional
water rights.
¶3 We conclude that United is ineligible for the governmental planning
exception to the anti-speculation doctrine because it has no governmental agency
relationship with the end users proposed to be benefited by its appropriation. We
5
further conclude that the contract between United and the end users is
insufficiently binding to satisfy the anti-speculation standards for private
appropriators under Colorado River Water Conservation District v. Vidler Tunnel
Water Co., 594 P.2d 566 (Colo. 1979). Accordingly, we affirm the judgment of the
water court.
I. Facts and Procedural History
¶4 United is a special district formed under Title 32 of the Colorado Revised
Statutes with territorial boundaries encompassing approximately one acre of land
in Elbert County. There are no residents within its territorial boundaries, and
United’s service plan specifies that it was not formed for the purpose of providing
water to individual users. Instead, according to a prior version of its website,
United was formed to serve as “a water district for other water districts.” About
United Water and Sanitation District, United Water and Sanitation District (archived
version of the website as of Apr. 2, 2016),
https://web.archive.org/web/20160402063546/http://unitedwaterdistrict.com
/about.html (last visited Oct. 28, 2020).2
2 In a since-deleted passage on the “Frequently Asked Questions” portion of its
website, United explained:
6
¶5 In Case No. 13CW3182, United filed an application for a conditional water
storage right for the (as yet unconstructed) Highlands Reservoir, proposing to
provide some of the water to the Highlands Development, a 665-acre proposed
residential development near Lochbuie in Weld County. The application was
consolidated with three other applications submitted by United in cases
13CW3180, 13CW3183, and 14CW3173 for conditional and absolute storage rights
and conditional recharge rights throughout Weld County. A number of parties
opposed these applications, including FRICO.
¶6 In February 2016, FRICO filed a motion for determination of questions of
law under C.R.C.P. 56(h) in the consolidated cases, asking the water court to
determine whether United qualified for the governmental planning exception to
Why did United organize as a special district, rather than as a private
company?
One of the services United provides is the legal transfer of water
rights from an agricultural designation to a municipal designation.
Colorado’s water laws significantly restrict a private company’s
ability to adjudicate these water rights, so United sought and received
designation as a special district.
Frequently Asked Questions, United Water and Sanitation District (archived version
of the website as of Apr. 2, 2016),
https://web.archive.org/web/20160402064816/http://unitedwaterdistrict.com
/aboutfaqs.html (last visited Oct. 28, 2020).
7
the anti-speculation doctrine and, if not, whether United had satisfied the anti-
speculation standards applicable to private parties. In its response to this motion,
United stated that it “has not asserted that [the governmental planning] exception
applies and . . . does not intend to make such an assertion.” Instead, United
argued that its applications “meet the private party standards of the anti-
speculation doctrine.”
¶7 In April 2016, the water court issued an order on FRICO’s motion. Because
United did not assert the governmental planning exception, the court declined to
address that issue. The water court concluded that United could not satisfy the
anti-speculation standards applicable to private parties because it did not have
binding contractual commitments or an agency relationship with the end users of
the water United sought to appropriate at the time its applications were filed.
Following this ruling, United withdrew its applications in the consolidated cases.
¶8 Six days after the water court’s ruling, United entered into a water supply
agreement with TRS Equities, L.L.C.; Highland Equities, L.L.C.; Weld Kil 270,
L.L.C.; and the Damiano Family Trust (collectively, the “Highland Owners”) to
provide water to the Highlands Development. The next day, armed with this
agreement, United filed the present application in Case No. 16CW3053, again
8
seeking a conditional water storage right in the Highlands Reservoir to provide
the Highland Owners with water for the Highland Development.3
¶9 FRICO and others again opposed United’s application.4 In January 2019,
FRICO filed a motion for determination of questions of law and partial summary
judgment. Relevant here, FRICO asked the court to determine that United must
satisfy the anti-speculation doctrine standards applicable to private appropriators
to obtain a conditional storage right decree in the Highland Reservoir. FRICO also
asked the court to find that United’s water supply contracts are insufficiently
3 United’s application in 16CW3053 sought additional uses for the conditional
storage right, namely, for irrigation of a fifteen-acre parcel (“DeSanti Parcel”)
owned by United, and as a source of water to meet contractual obligations to East
Cherry Creek Valley Water and Sanitation District (“ECCV”) and Arapahoe
County Water and Wastewater Authority (“ACWWA”). The application also
sought conditional appropriative rights of exchange. United later dismissed all of
these claims. Because they are not at issue in this appeal, we do not discuss them
in detail in this opinion.
4 Burlington Ditch, Reservoir and Land Company; Centennial Water and
Sanitation District; City of Aurora; City of Boulder; City of Brighton; City and
County of Denver, acting by and through its Board of Water Commissioners; City
of Englewood; City of Thornton; Edmundson Land, LLC; FRICO; Fort Morgan
Reservoir and Irrigation Company; Henrylyn Irrigation District; Irrigationists’
Association, Water District 1; Lower Latham Reservoir Company; Platte Valley
Irrigation Company; Public Service Company of Colorado; Riverside Irrigation
District and Riverside Reservoir and Land Company; South Adams County Water
and Sanitation District; Todd Creek Village Metropolitan District; Town of
Lochbuie; and The Board of County Commissioners of the County of Weld, State
of Colorado all filed statements of opposition.
9
binding to form a non-speculative basis for appropriation. In its response, United
asserted for the first time that it qualifies for the governmental planning exception
to the anti-speculation doctrine. In the alternative, United argued that it met the
anti-speculation standards for private parties.
¶10 In March 2019, the water court issued an order on FRICO’s motion. The
court acknowledged that United was formed as a water and sanitation district and
may meet the definition of a quasi-government entity for purposes of some
activities. But in this instance, the court reasoned, United is acting as a water
broker to obtain water to sell to third parties for their use; it is not procuring water
as a governmental agency to serve its own municipal customers. Thus, the court
concluded, United does not qualify for the governmental planning exception.
Applying the anti-speculation criteria applicable to private appropriators, the
water court then found that the contract between United and the Highland
Owners “is non-binding as to several essential terms,” most notably in that “the
Highland Owners are not obligated to purchase any amount of water from
United.” Accordingly, because United lacked a firm contractual commitment with
the Highland Owners, the court concluded that the claimed conditional storage
right was speculative. The court entered summary judgment for FRICO and
against United as to this claimed use of the conditional storage right.
10
¶11 United moved for reconsideration, which the water court denied.
Thereafter, the court granted United’s motion to dismiss its remaining claims and
entered final judgment. United appeals the water court’s judgment directly to this
court pursuant to section 13-4-102(1)(d), C.R.S. (2020).
II. Analysis
A. Standard of Review
¶12 “Whether an applicant has met the legal standards for a conditional
appropriation presents mixed questions of law and fact that we review de novo.”
Pagosa Area Water & Sanitation Dist. v. Trout Unlimited, 219 P.3d 774, 779 (Colo.
2009) (Pagosa II). However, “[w]e defer to the water court’s findings of fact unless
the evidence is wholly insufficient to support those determinations.” Id.
B. Legal Principles
1. Conditional Water Rights
¶13 A conditional water right is “a right to perfect a water right with a certain
priority upon the completion with reasonable diligence of the appropriation upon
which such water right is to be based.” § 37-92-103(6), C.R.S. (2020). “A
conditional water right preserves an applicant’s position in the priority system
while the applicant takes the necessary steps (such as obtaining financing,
complying with regulatory and access requirements, and completing engineering,
11
etc.) to put the appropriated water to beneficial use.” Vermillion Ranch Ltd. P’ship v.
Raftopoulos Bros., 2013 CO 41, ¶ 32, 307 P.3d 1056, 1064.
¶14 To obtain a conditional water right, an applicant must demonstrate that:
“(1) it has taken a ‘first step,’ which includes an intent to appropriate the water
and an overt act manifesting such intent; (2) its intent is not based on a speculative
sale or transfer of the water to be appropriated; and (3) there is a substantial
probability that the applicant ‘can and will’ complete the appropriation with
diligence and within a reasonable time.” Id. at ¶ 33, 307 P.3d at 1064.
¶15 At issue in this case is whether United’s application for a conditional water
right satisfies the second prong of this test—demonstration of a non-speculative
intent to appropriate. For the reasons set forth below, we agree with the water
court’s determination that it does not.
2. The Anti-Speculation Doctrine
¶16 The right to appropriate water for beneficial uses is enshrined in the
constitution. Colo. Const. art. XVI, § 6; Wheeler v. N. Colo. Irrigating Co., 17 P. 487,
489 (Colo. 1888).5 But the constitution guarantees only “a right to appropriate, not
5 Water is the property of the public. Colo. Const. art. XVI, § 5. Thus, one cannot
claim a right to own water, but instead may only claim a right to use water.
Kobobel v. State, Dep’t of Nat. Res., 249 P.3d 1127, 1134 (Colo. 2011).
12
a right to speculate.” Vidler, 594 P.2d at 568. In other words, “[t]he right to
appropriate is for use, not merely for profit. . . . To recognize conditional decrees
grounded on no interest beyond a desire to obtain water for sale would as a
practical matter discourage those who have need and use for the water from
developing it.” Id. This fundamental principle is commonly referred to as the
“anti-speculation doctrine.”
¶17 We outlined the contours of the anti-speculation doctrine in Vidler. In doing
so, “we did not articulate a new legal requirement in that case, but rather merely
applied longstanding principles of Colorado water law.” City of Thornton v. Bijou
Irrigation Co., 926 P.2d 1, 37 (Colo. 1996). Indeed, for well over a century, we have
made clear that the anti-speculation doctrine is best understood as a component
of the constitutional beneficial use requirement itself. See High Plains A & M,
LLC v. Se. Colo. Water Conservancy Dist., 120 P.3d 710, 714 (Colo. 2005), as modified
on denial of reh’g (Oct. 11, 2005) (“[T]he anti-speculation doctrine is rooted in the
requirement that an appropriation of Colorado’s water resource must be for an
actual beneficial use.”); Combs v. Agric. Ditch Co., 28 P. 966, 968 (Colo. 1892) (“The
constitution provides that the water of natural streams may be diverted to
beneficial use; but the privilege of diversion is granted only for uses truly
beneficial, and not for purposes of speculation.”).
13
¶18 Anti-speculation challenges generally arise when a party seeks to
appropriate water that ultimately will be used by third parties. To satisfy the anti-
speculation doctrine under these circumstances, the party seeking a conditional
water right must show that it has a “firm contractual commitment” or an “agency
relationship justifying its claim to represent those whose future needs are
asserted.” Vidler, 594 P.2d at 568–69. Contracts between private parties generally
fail to satisfy the Vidler standards if they do not require the end user “to purchase
or use any specific quantity of water.” Raftopoulos, ¶ 38, 307 P.3d at 1065; see also
Front Range Res., LLC v. Colo. Ground Water Comm’n, 2018 CO 25, ¶ 31, 415 P.3d 807,
813.
3. The Governmental Planning Exception
¶19 The beneficial use and anti-speculation analysis, however, is “not as simple”
when applied to a governmental entity that is seeking to “assure an adequate
supply to the public which it serves.” See City & Cnty. of Denver v. Sheriff, 96 P.2d
836, 841 (Colo. 1939). A municipality’s population may increase in a relatively
short period of time, and its boundaries may expand. Accordingly, “it is not
speculation but the highest prudence on the part of the city to obtain
appropriations of water that will satisfy” these needs. Id.
14
¶20 Recognizing government entities’ need for flexibility in planning for
anticipated growth, we have held that the anti-speculation standards applied to
private parties in Vidler do not “apply with equal force to municipalities.” Bijou,
926 P.2d at 38. While the governmental planning exception6 to the anti-
speculation doctrine does not “completely immunize municipal applicants from
speculation challenges,” it does allow a government entity to obtain conditional
water rights based on its projected future needs, so long as its reasonably
anticipated requirements are based on substantiated projections of future growth.
Id. at 38–39; see also City & Cnty. of Denver v. N. Colo. Water Conservancy Dist.,
276 P.2d 992, 997 (1954) (Blue River) (“We cannot hold that a city more than others
is entitled to decree for water beyond its own needs. However, . . . when
appropriations are sought by a growing city, regard should be given to its
reasonably anticipated requirements.”).
6This exception is also sometimes referred to as the “limited governmental agency
exception,” Pagosa II, 219 P.3d at 779, the “limited governmental entity water
supply exception,” Pagosa Area Water & Sanitation Dist. v. Trout Unlimited, 170 P.3d
307, 317 n.8 (Colo. 2007), as modified (Nov. 13, 2007) (Pagosa I), the “great and
growing cities doctrine,” id., and the “municipal planning exception,” Bijou,
926 P.2d at 40.
15
4. Codification of the Doctrine and the Exception
¶21 In 1979, consistent with these constitutionally derived principles, the
General Assembly amended the definition of “appropriation” in the Water Rights
Determination and Administration Act of 1969 to codify both the anti-speculation
standards articulated in Vidler and the governmental planning exception
discussed in Sherriff and Blue River:
(3)(a) “Appropriation” means the application of a specified portion of
the waters of the state to a beneficial use pursuant to the procedures
prescribed by law; but no appropriation of water, either absolute or
conditional, shall be held to occur when the proposed appropriation
is based upon the speculative sale or transfer of the appropriative
rights to persons not parties to the proposed appropriation, as
evidenced by either of the following:
(I) The purported appropriator of record does not have either a legally
vested interest or a reasonable expectation of procuring such interest
in the lands or facilities to be served by such appropriation, unless
such appropriator is a governmental agency or an agent in fact for the
persons proposed to be benefited by such appropriation.
(II) The purported appropriator of record does not have a specific
plan and intent to divert, store, or otherwise capture, possess, and
control a specific quantity of water for specific beneficial uses.
Ch. 346, sec. 1, § 37-92-103(3)(a), 1979 Colo. Sess. Laws 1366, 1368 (codified at
§ 37-92-103(3)(a), C.R.S. (2020)); Bijou, 926 P.2d at 38.
¶22 Section 37-92-103(3)(a) establishes the Vidler test as the default anti-
speculation rule for most appropriators. If, however, a party is eligible for the
governmental planning exception, a more flexible rule applies and the
16
government agency appropriator may overcome a speculation challenge by
showing that the amount conditionally appropriated is necessary to satisfy the
government agency’s reasonably anticipated requirements based on substantiated
projections of its future population growth. See Upper Yampa Water Conservancy
Dist. v. Dequine Fam. L.L.C., 249 P.3d 794, 798 (Colo. 2011).
¶23 To qualify for the codified governmental planning exception, an
appropriator must be a “governmental agency or an agent in fact for the persons
proposed to be benefited by such appropriation.” § 37-92-103(3)(a)(I). The parties
here disagree as to the proper reading of this provision. The Division Engineer
contends that the phrase “for the persons proposed to be benefited” modifies both
“governmental agency” and “agent in fact,” so the exception applies only to a
“governmental agency . . . for the persons proposed to be benefited.” That is, a
government entity must have a governmental agency relationship with the
intended end users of the water in order to qualify for the exception. By contrast,
United argues that “for the persons proposed to be benefited” modifies only
“agent in fact,” and thus the exception should be broadly interpreted to apply to
any “governmental agency,” period. We agree with the Division Engineer’s
interpretation.
17
¶24 We have previously held that the governmental planning exception codified
by the General Assembly in section 37-92-103(3)(a)(I) “must be read as consistent
with the scope of the exception recognized for municipalities in those decisions
underlying Vidler, such as Sheriff and Blue River.” Bijou, 926 P.2d at 38–39. In both
of those underlying cases, we recognized the exception only with regard to
government entities planning for the needs of their own populations.
¶25 In Sheriff, the City of Denver appealed a trial court decision granting certain
water rights but applying conditions limiting the city’s ability to lease or sell excess
water under those rights in the event that the water was not necessary to meet the
city’s immediate needs. 96 P.2d at 838–40. This court struck down those
limitations. A city like Denver, we explained, needs “flexibility” in order to
“assure an adequate supply to the public which it serves.” Id. at 841 (emphasis
added). Accordingly, a practice that may have constituted speculation for a
private party was, when carried out by a governmental entity, simply an exercise
of “managerial judgment” necessary to the “furnishing of an adequate supply of
water to” the city’s population. Id. at 840.
¶26 In Blue River, Denver sought a decree for conditional direct flow water rights
from the Blue River. 276 P.2d at 995. Several parties objected, arguing that,
because Denver had sufficient water for its current needs, a decree based solely on
18
future needs would be speculative. Id. at 997. This court disagreed, explaining
that, while a city is not “entitled to [a] decree for water beyond its own needs,” courts
should account for the future needs of a city based on its “reasonably anticipated
requirements.” Id. (emphasis added).
¶27 Our subsequent opinions similarly have limited the governmental planning
exception to municipalities and other agencies responsible for supplying water to
their individual users. See Bijou, 926 P.2d at 38; see also Upper Yampa, 249 P.3d at
798 (reaffirming that section 37-92-103(3)(a)(I) “perpetuat[es] the planning
flexibility previously allowed government agencies with respect to the future
water needs of their populations” (emphasis added)); Pagosa Area Water & Sanitation
Dist. v. Trout Unlimited, 170 P.3d 307, 314 (Colo. 2007), as modified (Nov. 13, 2007)
(Pagosa I) (“[A] governmental water supply agency has a unique need for planning
flexibility because it must plan for the reasonably anticipated water needs of its
populace . . . .” (emphasis added)).
¶28 By contrast, we have recognized that the governmental planning exception
does not apply where a government agency is “acting in the capacity of a water
supplier on the open market rather than as a governmental entity seeking to
ensure future water supplies for its citizens.” Bijou, 926 P.2d at 40. This
interpretation of the exception is consistent with one of the basic goals of the
19
beneficial use requirement and the anti-speculation doctrine: preventing parties
from monopolizing water “for personal profit rather than for beneficial use.”
Vidler, 594 P.2d at 568.
¶29 The plain text of the codified governmental planning exception incorporates
these principles. The exception applies only to a “governmental agency . . . for the
persons proposed to be benefited” by the appropriation at issue. See
§ 37-92-103(3)(a)(I) (emphasis added). In other words, the exception applies only
where a government agency is seeking to appropriate water on behalf of end users
with whom it has a governmental agency relationship.
III. Application
A. United Does Not Qualify for the Governmental
Planning Exception
¶30 As a special district, United constitutes a “quasi-municipal corporation and
political subdivision,” see § 32-1-103(20), C.R.S. (2020), and thus falls within the
meaning of “governmental agency” for purposes of section 37-92-103(3)(a)(I). But
as explained above, this determination does not end the governmental planning
exception inquiry. To qualify for the exception, United must demonstrate that it
has a governmental agency relationship with the end users proposed to be
benefited by the water it seeks to appropriate in Weld County. Because it does not
have such a relationship, United does not qualify for the exception.
20
¶31 United is organized as a one-acre, unpopulated special district in Elbert
County, three counties away from the proposed Highland Development in Weld
County. Although United purports to have a statewide service area,7 its service
plan clarifies that United does not intend to provide water to individual users.
Moreover, United has not indicated that it plans to expand its territorial
boundaries to encompass the proposed Highland Development or begin
providing water to individual end users within that area. In the absence of any
such connection to end users, United cannot demonstrate that it has a
governmental agency relationship to the persons proposed to be benefited by its
conditional appropriation.8 Rather, as the water court correctly found, United is
7 The Division Engineer argues that United’s claimed state-wide service area is
inconsistent with those provisions of the Special Districts Act designed to allow
counties a degree of control over special districts operating within their borders.
See, e.g., § 32-1-202(1)(a), C.R.S. (2020) (requiring special districts to “submit a
service plan to the board of county commissioners of each county that has territory
included within the boundaries of the proposed special district”). Because this
issue is not squarely before us and is not necessary for resolution of the
governmental planning exception inquiry, we decline to address the Engineer’s
argument.
8United’s reliance on the Special Districts Act to assert otherwise is unavailing.
That act authorizes special water districts “[t]o acquire water rights . . . within and
without the district.” § 32-1-1006(1)(e), C.R.S. (2020). But the fact that a special
district is authorized to acquire rights outside of its boundaries does not speak to
which anti-speculation standards should apply when it attempts to do so.
21
acting in this instance as a water broker to sell water to end users, not as a
government agency serving its own municipal customers. Thus, for purposes of
the conditional storage right it seeks here, United is ineligible for the governmental
planning exception and must satisfy the anti-speculation standards applicable to
private parties.
B. United’s Application Does Not Satisfy the Anti-
Speculation Standards for Private Parties under Vidler
¶32 To satisfy the anti-speculation standards applicable to private
appropriators, United must demonstrate that it has a “contract or agency
relationship justifying its claim to represent those whose future needs are
asserted.” Vidler, 594 P.2d at 569. United does not allege that it has an agency
relationship with the Highland Owners. Accordingly, our inquiry is limited to
determining whether United has “firm contractual commitments for the use of
water.” Bijou, 926 P.2d at 37.
¶33 The water court concluded that the April 2016 water supply agreement
between United and the Highland Owners does not satisfy the anti-speculation
doctrine because “there is no provision in the contract that requires the Highland
Owners to purchase any amount of water from United.” United disagrees,
pointing to provisions that it claims render the contract binding.
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¶34 The recitals portion of the contract states that the agreement is intended to
facilitate “the supply of water to the Highlands Property based upon the estimated
demand for the Highlands Property under various development scenarios.” To
this end, various sections of the contract discuss the facilities to be used to provide
water, ongoing applications for water rights, and various price and quantity
estimates.
¶35 United focuses on three sections that it argues render the contract binding
and non-speculative: sections 4.5, 4.6, and 5.2. None of those provisions, however,
require the Highland Owners to purchase any water. Section 4.5 provides
approximations of the Highland Owners’ water demands but concedes that these
numbers are “conceptual and estimates only.” Section 4.6 lists the maximum
amount of water available to the Highland Owners but does not list any minimum
purchase amount. And while section 5.2 sets out a mechanism for determining
the purchase price of the water, it does not obligate the Highland Owners to
purchase any water at the determined price. Thus, none of these provisions,
considered individually or together, rise to the level of a firm contractual
commitment for purposes of the anti-speculation doctrine.
¶36 The contract at issue here is similar to those we rejected as speculative in
Vidler and Front Range. In Vidler, we held that a contract between the appropriator
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and the City of Golden was speculative because the city “ha[d] not committed
itself beyond an option which it may choose not to exercise.” 594 P.2d at 568.
Similarly, in Front Range, we held that a contract between the appropriator and the
City of Aurora was speculative because it did not require Aurora to commit to
purchasing any amount of water. ¶ 31, 415 P.3d at 813 (“Aurora might buy some
of the replacement-plan water, or it might even buy all of the water. But then
again, it might not. Thus, we agree with the district court that the option contract
is speculative.”).9 The same is true of the water supply agreement here between
United and the Highland Owners. The contract involves no commitment from the
Highland Owners to purchase any water and is thus insufficient to satisfy Vidler’s
“firm contractual commitments” requirement.
C. We Decline to Address United’s Ambiguity Argument
¶37 Finally, United argues that the water court should not have granted
summary judgment in favor of FRICO because the contract between United and
the Highland Owners is ambiguous. Generally, “issues not raised in or decided
by a lower court will not be addressed for the first time on appeal.” Melat,
9As we did in Front Range, we again decline to adopt a bright-line rule that option
contracts can never satisfy the anti-speculation doctrine. See id. at ¶ 32.
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Pressman & Higbie, L.L.P. v. Hannon Law Firm, L.L.C., 2012 CO 61, ¶ 18, 287 P.3d
842, 847. United cites to two motions filed in the water court that it alleges
preserved its ambiguity argument. However, inspection of those motions reveals
that United never raised the issue of ambiguity below. Indeed, even in its briefing
in this court, United continues to argue that “the Contract is clear.” Simply
providing an alternative interpretation of contractual terms is not the same as
arguing that the contract is itself ambiguous. Accordingly, because it was never
raised in the water court, we decline to consider this issue for the first time on
appeal.
IV. Conclusion
¶38 The governmental planning exception to the anti-speculation doctrine is
intended to give government entities the flexibility to plan for the future water
needs of the populace the government entity serves where those needs are based
on substantiated projections of future growth. It does not give carte blanche to
appropriate water for speculative purposes nor does it apply where a government
entity acts as a water supplier on the open market. United has not demonstrated
that it seeks the conditional storage right at issue here in order to serve end users
with whom it has a government agency relationship, and thus it does not qualify
for the governmental planning exception to the anti-speculation doctrine.
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Moreover, United has failed to satisfy the applicable anti-speculation standards
for private appropriators. Accordingly, we affirm the judgment of the water court.
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