Ridenbaugh Press/Water Rights

The Colorado Supreme Court heard oral arguments in two cases on
January 20, at the University of Denver Sturm College of Law before an audience of students. One was a water rights case.

The visit is part of an emphasis by the Colorado Judicial Branch on public outreach and education, and an extension of the 25-year-old Courts in the Community program, in which the Supreme Court and Court of Appeals visit high schools around Colorado to hear arguments in actual cases.

“I think all of us on the bench believe trust and confidence in our court system depends very much on public understanding of what the courts do every day, and how they do it,” said Chief Justice Michael L. Bender. “Getting the appellate courts out in the community for a real hearing like this is not only a breath of fresh air for us, it helps further that goal. It introduces more of Colorado’s residents to the people behind the bench in their courts, and helps them learn more about what we do and what the rule of law means to us in our daily jobs.”

These are not mock proceedings, they are oral arguments in actual cases.

All seven justices hear cases together.

The water case is 09SA133, Concerning the application for Water Rights by Burlington Ditch, Reservoir & Land Co., et al.: This appeal primarily involves a change of direct flow and storage water rights decreed in 1885 to the Burlington Ditch, Reservoir and Land Company.

The water court’s judgment and decree quantified the historic consumptive use credits for direct flow and storage rights attributable to Burlington shares. In order to protect against injury to other water rights, the water court disallowed consumptive use credits for what it found to be an illegal enlargement of Burlington direct flow water rights subsequent to 1885. The water court also limited the change of storage rights to the amount of water historically released for agricultural use, and it disallowed consumptive use credit for capture of water by the Barr Lake toe drains and for seepage into canals. In addition, the water court disallowed consumptive use credit for diversions made through the Metro Pumps, which the court found to be an undecreed point of diversion. Relying on prior decrees and the one-fill rule for storage rights, the applicants contest these and other
determinations of fact and law as well as decree conditions that the water court entered.

One of the problems long bedeviling the water users of the Lower Arkansas River area in Colorado has been the splintered jurisdiction, the many water districts in the area – 26 in Otero County – which aren’t always lined up the same way.

On June 17, with that in mind, the board of the Lower Arkansas Valley Water Conservancy District agreed unanimously to spend as much as $14,000 toward setting up a comprehensive water authority for the area.

Much of the immediate impetus for acting centers around water quality issues and the need to upgrade infrastructure. But water supply and rights issues also easily could come into play as well.

[see Pueblo (CO) Chieftain, June 17]

United States Senators Ken Salazar and Wayne Allard sponsored Senate Bill 499, which is expected to be included in a natural resources tax package to be reported out of the Senate Finance Committee on September 20. The provision will clarify that exchanges involving shares of stock in mutual ditch companies should be tax-free.
Mutual ditch companies are unique corporations, organized as non-profit organizations solely for the convenience of their members in managing a joint water distribution system. The shareholders are often farmers and ranchers who have an exclusive right to use the ditch company’s water in direct proportion to the number of shares they own.
As a result, the Colorado Supreme Court has ruled that ditch company shares represent a tangible property interest. The Internal Revenue Service, however, issued a General Counsel Memorandum in 1986, prior to the Colorado Supreme Court ruling, which concluded that Colorado mutual ditch company stock is not covered by Section 1031 of the Internal Revenue Code, which otherwise permits tax-free exchanges of like-kind property. The senators’ legislation will clarify that exchanges involving ditch company shares – like exchanges involving other kinds of real property – should be tax-free.
This technical change will provide predictability for Colorado’s mutual ditch companies as they enter into transactions to raise needed capital and for other purposes such as physical infrastructure maintenance.
Once the natural resources tax package is marked up, it will go to the Senate floor for final passage.
Contact: Stephanie Valencia (Salazar) – 202-228-3630; ?Steve Wymer (Allard) – 202-224-6207