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Water allocation institutions in Colorado

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Water allocation institutions in Colorado an evaluation
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Ryder, Stephen D
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115 leaves : map ; 28 cm

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Water rights -- Colorado ( lcsh )
Water rights ( fast )
Colorado ( fast )
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bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

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Bibliography:
Includes bibliographical references (leaves 112-115).
General Note:
Submitted in partial fulfillment of the requirements for the degree, Master of Planning and Community Development, College of Design and Planning.
Statement of Responsibility:
by Stephen D. Ryder.

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University of Colorado Denver
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Full Text
WATER ALLOCATION INSTITUTIONS IN COLORADO: AN EVALUATION
By Stephen D. Ryder
A thesis submitted in partial fulfillment of the requirements for the Masters of Planning and Community Development degree, University of Colorado at Denver December 1984
Eli DES Thesis PCD


fATER ALLOCATION INSTITUTIONS IN COLORADO:
AN EVALUATION
By Stephen
A thesis submitted in partial fulfillment of the requirements for the Masters of Planning and Community Development degree, University of Colorado at Denver December 1984
ENVIRONMENTAL DESIGN AURARIA LIBRARY


TABLE OF CONTENTS
Page
Figures ........................................... i
Chapter OneIntroduction .......................... 1
Chapter Two--Evolution of Water Allocation in
the Western United States ....................... 7
EndnotesChapter Two...............................21
Chapter ThreeWater Allocation in Colorado .... 23
EndnotesChapter Three ........................... 50
Chapter FourDefining Effective Institutional
Water Allocation.................................53
EndnotesChapter Four..............................65
Chapter FiveEvaluation of Colorado Water
Institutions.....................................67
Endnotes--Chapter Five ........................... 88
Chapter SixAlternatives, Recommendations,
Conclusions......................................89
EndnotesChapter Six..............................110
Bibliography......................................112


FIGURES
Page
Summary of Western Water Law.....................20
Water Divisions in Colorado......................25
Water Court System in Colorado...................28
Summary of Evaluation of Colorado Water
Institutions ................................ 85
Average Annual County Population Change in
Colorado, by Year, 1970-1980 ................ 89
Population Change in Colorado, by Decade ... 90
Industry Sectors, Employees, and Personal
Income Generated in Colorado, 1981 .......... 93


"There is an inward voice that in the stream
Sends forth its spirit to the listening ear, and in a calm content it floweth on."
Thoreau
Every drop of water that runs to the sea without rendering a commercial return is a public waste."
Herbert Hoover


CHAPTER ONE
INTRODUCTION
This paper examines institutions managing water allocation in Colorado in an attempt to evaluate their effectiveness in an era of rapid change. Institutions are sets of ordered relationships between people which define common goals. The major (though not explicit) goal for water management institutions in Colorado has been to provide water for agriculture, industry, and municipalities to be used benefically within the state. Explicit goals for water management are non-existent as the water system is seen as an inherent good and provision of the resource occurs in a uniquely decentralized manner.
Who runs Colorado's water system? State administrative agencies, sub-state regional entities, the larger municipalities, and the federal government all act in formulating water policy. But their behavior is constrained by the activities of the state water court system.
This paper focuses on the evolution of these institutions, how they work (or don't work) today, and the broad issues of water management in the arid west. Finally, alternatives to the present Colorado system are proposed.


2
Defining the Problem
The laws and institutions guiding Colorado water management have evolved for over one hundred years, when in the 1870's the courts were the prime arbiter of disputes involving water. Before the courts existed there was usually enough water to go around in Colorado mainly due to the fact that there were not many people making demands on the resource.
The early role of the courts was complemented by parallel institutions. For example, groups of individuals united into irrigation companies. Later water conservancy districts sought to develop and manage the resource. In the recent past, Colorado has seen a rapid growth in population, especially in the Denver area. This extra demand for water, along with a new economic and political power, has allowed Front Range water users to divert nearly a half million acre-feet* of water from the Colorado River Basin west of the Continental Divide to the South Platte River Basin.
Evolving as they have during the last century, are these institutions able to manage changes in water demand arising from a still rapidly increasing population, energy
*An acre-foot of water is the volume of water that covers one acre to a depth of one foot, or 325,851 gallons. A family of four (in Colorado) uses approximately one acre-foot of water in a year. Colorado water use is very high compared to national and worldwide averages. Per capita water use in 1980 for Denver was 230 gallons/day; U.S. average was 90 gallons/day; and worldwide average was 30 gallons/day.


3
development in the form of coal, oil and gas, and oil shale, increasing demand on the Colorado River from Arizona and California, increased demands for hydroelectric power, and the emergence of new recreational and aesthetic values?
Will they be able to effectively manage the changing of water management power from agriculturewhich is legally and traditionally rich, but politically and economically poorto industry which is economically rich, and municipalities which are both politically and economically wealthy?
Current institutions have been criticized as being out-dated, functioning well only during an era of water development which has passed. What is now needed are institutions which effectively manage currently existing water resources rather than develop new ones. These institutions should be judged by their flexibility in accommodating new users, be accountable to the public, be economically efficient when possible, and provide for non-market amenities.
Has Colorado passed from an era of water development to that of management? This thesis argues the answer is yes and no. The era of development is ending. Most of the major dam sites are now occupied by earth or concrete. But there are still many who feel that much more development in the form of dams, reservoirs and canals needs to occur.
They feel that it is merely a matter of funding and that the federal government has a responsibility to develop Colorado's
water.


4
Another school of thought believes that institutions must be altered to fit into an era of management, that large-scale development is no longer necessary and that the state should now manage more effectively what it has already developed. Institutions should be flexible as possible to permit changes in water use as demands for the resource change.
A third school of thought in Colorado is that of conservationists. This growing cadre of individuals and groups view large-scale development as unnecessarily wasteful of the state's natural and financial resources.
They are generally not proponents of using water to restrict growth, but to manage or somehow to control the development required due to the influx of people along the Front Range. As wilderness areas and free-flowing rivers are at stake, conservationists are formidable opponents of many potentially destructive water projects.
The 1980's are a transition period for water institutions in Colorado. Vestiges of large-scale development remain in the form of the Denver Water Board's Two Forks, Eagle-Piney, and Eagle-Colorado projects; and the Bureau of Reclamation's Animas-LaPlata and Narrows projects. But innovations involving conservation, shared used of reservoirs, and water banking are also being proposed.
There is also a demand for keeping concrete out of the remaining free-flowing rivers for recreational and aesthetic reasons as well as protecting fisheries and sustaining
wildlife values.


5
Must water institutions in Colorado be altered to meet these new demands? What are the possibilities of any significant changes being made? Who is to benefit and who will suffer from changes in the current system? These are some of the questions which, hopefully, I can provide insight and offer possible solutions.
Methodology
When discussing water in Colorado one has to carefully define the limits of the study. The overwhelming body of knowledge and guidelines concerning water management comes from the judiciary. Water is the most litigated topic in the state, requiring seven water courts and the State Supreme Court as the final arbiter. The boundaries of this study were drawn to exclude an examination of water quality and a more than basic introduction to water law. It is felt these areas are of concern to this topic, but are omitted due to their complexity and potential lengthy addition to this study.
In this paper I discuss the evolution of water institutions in the arid west, this information gained from library research. The Colorado system was gleaned from many different sources but primarily from the Colorado Revised Statutes. The remainder of the information in the paper not of my own knowledge comes from the innumerable books and articles on the subject as well as discussions with water attorneys, state employees and private consultants, and many


6
attorneys, state employees and private consultants, and many in the environmental community.
Organization
Chapter Two traces the evolution of water institutions in the arid west. The doctrine of prior appropriation, a uniquely western invention, is viewed as the primary tool for water development.
Chapter Three is a discussion of water allocation in Colorado at the present time. Institutions such as the water court system, municipalities, the federal government, and state agencies are examined.
Chapter Four attempts to define effective water allocation by introducing effectiveness criteria with which to evaluate water institutions.
Chapter Five is a discussion of the evaluation of water institutions using the effectiveness criteria developed in the previous chapter.
Chapter Six includes recommendations for changing the present allocation system and presents alternatives and final conclusions.


CHAPTER TWO
EVOLUTION OF WATER ALLOCATION IN THE WESTERN UNITED STATES
The State of Colorado lies entirely west of the 98th meridian, the line which traditionally has divided the humid eastern half and the arid western half of the United States. East of the meridian irrigation is generally not required for agriculture but, to the west, irrigation is essential if agricultural activity beyond lower value dryland crops is to occur. Northern California, western Oregon, and western Washington are separate from the arid west, but in these states water allocation systems are similar to those in arid regions.
Colorado is considered a semi-arid state.
Precipitation varies here from eight inches per year along the Utah border in western Colorado to 80 inches per year in some areas of the San Juan Mountains.^ Rain and snow fall mostly on the western slopes of the Rocky Mountains which dominate the geography of the state and run mostly along a north-south axis across the state. These mountains form the headwaters of four major river basins; South Platte, Arkansas, Rio Grande, and Colorado (with major tributaries San Juan, Gunnison, White, and Yampa) (See Figure 3.1).


8
The Continental Divide bisects the state from north to south and separates the areas commonly called the East Slope and the West Slope. The East Slope is where roughly 80 percent of the population resides and is in the rain shadow of the Rockies.2 The West Slope is sparsely populated and has approximately 80 percent of the state's precipitation.
As the population of the state grew, competition for water intensified. Agriculturalists in the South Platte basin looked toward the West Slope for water. The urban Front Range also looked to the West Slope. The boom-bust energy and minerals industries growing on the West Slope looked at the Colorado River and its tributaries. Finally, other states had their eyes on water originating in Colorado. California has been using water from the Colorado River for domestic and agricultural purposes since early in this century. The Colorado River Compact of 1922 divides the river between the western states so as to minimize conflicts from the increasing demand of population growth in southern California, begun in the 1950's and still growing today. Arizona will appropriate its share of Colorado Compact waters in 1985. Over 1 million acre-feet which California has been using will go through pipes and canals to Phoenix. California again looks to the Colorado River.
With this increasing competition and the demand for transfers of water for other than traditional uses, a complex structure of water allocation institutions has evolved to partition the waters.


9
Riparian Doctrine
The European settlers on the eastern coast of the United States came from an environment where water was plentiful. The eastern U.S. presented a similar climate so naturally, European guidelines which had evolved for centuries came to be used in the New World. The English common law as it applied to water became embodied in the riparian doctrine which gave owners of land adjacent to a watercourse the right to use the water, whether the right was exercised or not.3
Most early uses of water on a greater than domestic scale were to power water wheels for minor manufacturing and grain milling.4 This use of water diminished neither the quality nor quantity of the resource and thus fit in well to the riparian system. As cities grew and the Industrial Revolution began to flourish, major consumptive users of water such as municipalities and larger industrial processes forced the modification of the riparian doctrine to allow withdrawals of water with compensation to those claims damaged by such action.5
Today, many states have now modified the riparian doctrine for many different purposes. Most have adopted some features of the "prior appropriation system" discussed below.
I


10
Doctrine of Prior Appropriation
Prior appropriation has been the dominant doctrine used to develop water in the eleven western states and is attributed to the migrants from the eastern United States to the gold fields of California in 1849.6 Those seeking gold in the foothills of the Sierra Nevada soon realized that the mineral occurred away from streams as well as in the stream beds. As the preferred technology at the time was the washing of placers,7 water had to be diverted from streams in order for mining to occur outside the stream beds. No formal laws yet existed in California controlling the use of water so the miners established a system with the same rules they had used for land ownershipthe first to use the resource had the better right. This "first come, first served" concept came to be what is known as the doctrine of prior appropriation.8
Concepts from Eastern law then applied to the appropriation doctrine were the "usufruct right" and "beneficial use." From the western mining camps were added the concepts of "private property," "equality of uses," and "transferable ownership rights."9
A water right in the appropriation system is a usufructory right, a right of use but not the ownership of water. The holder of the right may draw all the profit, utility, and advantage it may produce without altering its substance.10 The actual ownership of the water is usually vested in the state.


11
In order for a water user to obtain a right the user must put it to a beneficial use. Western water law views beneficial use equal to direct economic return.H In Colorado, the constitution recognizes three categories of beneficial use. Municipal is the highest valued use and agricutural uses are subservient to municipal but dominant over industrial uses.12 This means that, within reason, municipalities can legally take water from agricutural or industrial users. Compensation must be paid, but municipalities have a distinct advantage over other uses.
Uses of water which do not provide direct economic return, such as instream flows for wildlife and fisheries, are just beginning to be recognized as "beneficial." In 1969, the Colorado Legislature allowed the state to acquire instream flow rights for fish and wildlife for the first time.13
A time limit on use is set in states that use the appropriation system. If the right is not used for a number of years (varying by state), the user loses the right through "abandonment." Abandonment is a principle of the appropriation system which, along with beneficial use, was supposed to insure efficient use of the water. In effect, these principles have tended to encourage inefficient use and waste of water. An appropriator, once he or she obtains the water right, must use that water for a particular use and must use the entire appropriation or risk losing part or all of the right. If conservation techniques lessen the


12
need for a certain volume of water, the appropriator loses the right to use that water (the water "belongs" to the river). The present system punishes the conserving individual.
The problems and opportunities of these principles of the appropriation system and the doctrine itself will be studied in greater detail elsewhere in the paper.
Colorado Doctrine
During the summer of 1859, miners from two Colorado mining districts gathered separately and wrote into their code the concept of "first in time, first in right."14 At that time the riparian system had been used in Colorado due to the lack of competition for the water resource. The appropriation doctrine gained favor first in the mining camps then spread to the agricultural valleys when a threshold number of users required that a system of priority be developed. The Colorado territorial legislature validated the rules and customs of the miners, 15 and when the Colorado Constitution was adopted in 1876, prior appropriation as well as the Roman law concept of water as public property were included.16
The two landmark cases which helped to establish the appropriation doctrine in Colorado were Yunker v. Nicholsl7 and Coffin v. Left Hand Ditch Co.18 in Yunker v. Nichols the first decision in Colorado concerning the appropriation doctrine, the Colorado Supreme Court declared prior
'


13
appropriation the preferred doctrine and also established the procedure by which an appropriator could convey water across another's land so as to be put to a beneficial use.19
In the 1870's, the Left Hand Ditch Company diverted St. Vrain Creek for use on lands for growing crops. During the dry season of 1879, a dispute arose when the ditch company diverted so much of the creek that downstream water users suffered crop damage. The subsequent lawsuit pitted the ditch company's prior right to appropriate water from the stream against the downstream users' assertion that their riparian rights were damaged. In 1882, the State Supreme Court, in Coffin v. Left Hand Ditch Co., ruled that the appropriation doctrine had been in effect since the beginning, not only after the adoption of the state constitution. The riparian doctrine was repudiated in favor of the appropriation system. Colorado being the pioneer of this new legal principal, gave its name to the doctrine which is known as the Colorado Doctrine.
Colorado's use of the appropriation doctrine is the purest of any state in the Union. However, some major institutional device was required to oversee the day-to-day workings of the system and settle the inevitable conflicts. The Colorado Legislature, since its inception, has viewed the "determination of property rights as the province of the
courts rather than of an administrative officer."20


14
The judiciary has become the dominant institution in Colorado involved in water allocation. From the beginning, this lack of administrative organization has resulted in overappropriation of watercourses and scattered record keeping.21 The courts, basing decisions on little or no hydrographic information, have been pawns in adversary adjudications that pitted one water engineer against another, each trying to prove his client's case.22
Other states in the West have not embraced so boldly the appropriation doctrine but have tempered it with varying forms of administrative control. Wyoming developed a system which corrected many of the shortcomings of the Colorado system and has been accepted, at least in part, by most other western states.
Water Allocation in Wyoming23
Elwood Mead, who would become the primary architect of the Wyoming system and later a commissioner of the Bureau of Reclamation, observed the evolution of the Colorado Doctrine while teaching mathematics at the Colorado Agricultural College in Fort Collins. The weaknesses of the Colorado system soon became apparent to Mead and other reformers who had little success in changing the system. These shortcomings, some mentioned previously, included overappropriation of some streams, lack of water data save from initial adjudications, and, later, the expense of court adjudication. These unsuccessful reformers proposed a state


15
level water board to issue water privileges and statewide register of claims to water.
Mead was disturbed that the Colorado system viewed a water right as separate and distinct from the land. He learned that in Spain, where water laws evolved from Roman law, water was tied to the land and peace prevailed; but in areas where land and water were separate, exploitation and dissension prevailed. He quoted from John Wesley Powell's Report on the Lands of the Arid Region of the United Statesthe "right to use water should inhere in the land to be irrigated, and water rights should go with land titles." It should be remembered that most of Powell's advise fell on deaf ears.
Mead became Wyoming's first territorial engineer in 1888 and immediately found similar problems to those in Colorado overappropriated streams, records scattered to the county seats, excessive and inconsistent decreed rights, and no control over ditch construction.
When the Wyoming Constitution was written, Mead was the primary author of the five sections concerning water. The principles set forth were a radical departure from the Colorado system. First, the state declared control of waters; second, irrigation institutions were to be adapted to the geography and needs of the state; third, the state was to oversee construction of efficient ditches; fourth,
determination of water rights was to be accomplished by


16
persons knowledgeable in hydrology; and fifth, stream administration was to be centralized in one office under one official.
The system which evolved from these principles exists today. It is a primarily administrative system involving centralized control over water at the state level and requiring permits for the acquisition of water rights.
The New Mexico System
The first irrigators in New Mexico were the Pueblo Indians in the 13th century. Theirs was a "waterwork society," which involved a strong cooperative effort including public action and a strong government.24
The Spanish arrived 300 years later and brought with them a long history of life in semi-arid environments and a long precedent of water law adapted to arid environments.
The Spanish realized the importance of water in the arid climate and saw the need to share and equitably distribute scarce water. In Spanish law "need" was the primary basis for allocation and senior priority a secondary concern.25 This system also required strong governmental enforcement.
The Anglo-Americans arrived during the 19th century and brought with them a system based on private property rights in water. The resulting system is a mixture of English
common law, Roman civil law, and aboriginal Indian customs and attitudes toward their environment.26


17
More specifically, the New Mexico system involved the Wyoming permit method of acquiring rights and the Colorado judicial adjudication procedure. The state administrative agencies were given powers beyond that of Colorado but not as extensive as those in Wyoming.27
Utah
In Utah, the appropriative right was developed by the Mormons, whose communal nature spawned a blend of the appropriation and riparian systems. There were two categories of rightsprimary (earliest) and secondary (later). Within these categories water was divided coequally. Division was by fraction of flow rather than in second-feet.28
Today, Utah's system is similar to that of New Mexico, having parts of the Wyoming system while retaining judicial adjudication.
Other Western States
California uses both the riparian and appropriation systems. In 1913, it adopted the Wyoming system of acquiring rights along with the Oregon system of adjudication, which subjects administrative determination by a state board of control to judicial review.29
Montana had Colorado's local control system until the 1930's when it tried negotiating an interstate compact with Wyoming concerning the Yellowstone River and found itself at


18
a disadvantage to Wyoming's superior record-keeping. The state gradually moved toward administrative involvement in water allocation, and in 1973 the state passed the Montana Water Use Act which incorporated the Oregon procedure for rights determination, the Colorado system of stream administration by district court, and the Wyoming permit system of acquiring rights.30
Nevada and Idaho adopted parts of the Wyoming system, the latter having an adjudication procedure whereby the state engineer serves as a referee of the court.31
Summary
As is evident from the discussion above, two primary systems of water allocation are currently at work in the arid west. First, the appropriation system from Colorado which involves decentralized court adjudication, some state administration, and acquisition of water rights through the judiciary with administrative agencies playing minor roles. The second is the administrative allocation system from Wyoming, which involves more centralized management of water at the state level.
There is no pure appropriation system nor pure administrative system, but rather various mixtures of the two with the riparian system playing little or no part in the arid west.
Allocative systems in the West have evolved from English common law, Roman civil law, but primarily from 19th


19
century individualism based on freedom from centralized government and the right to private property.
Figure 2.1 illustrates western water law specifics for eight states.
The next chapter is devoted to an explanation of how the Colorado Doctrine works today, involving the roles of judicial and administrative agencies.


FIGURE 2.1. SUMMARY OF WESTERN WATER LAW Water Law Doctrines Evidence of Basis of Preference of
State S.W. G.W. Ownership Water Right Allocation Use (Order) Appurtency
ARIZONA P. A. R.U. public permit B.U. 1-2-3-4-5 strict
CALIFORNIA P.A.&R C.R. people permit B. S. R.U. 1-2 unlimited
COLORADO P. A. P.A. public SW-decree GW-permit B.U. 1-2-over 5 none
IDAHO P. A. P.A. state license B.U. 1-2 unlimited
NEW MEXICO P. A. P.A. public permit B.U. none
NEVADA P.A. P.A. public permit B.U. none
UTAH P. A. P.A. public permit B.U. 1-2
WYOMING P.A. P.A. state permit B.U. 1-5 strict
KEY: P.A.prior appropriation, R.riparian, R.U.reasonable use, B.U.beneficial use,
S.W.surface water, G.W.ground water
*l=domestic and municipal, 2=agricultural, 3=power, 4=mining, 5=manufacturing/industrial
Source: George E. Radosevich, "Better Use of Management Tools," in Western Water Resources, ed.
Ved. P. Nanda (Boulder Colo.: Westview Press, 1977), pp. 258-259.
isj
O


ENDNOTESCHAPTER TWO
^Mel Griffiths and Lynnell Rubright, Colorado; A Geoqraphy, (Boulder, Colo.: Westview Press, 1983), pp. 52, 132.
2a rain shadow occurs on the lee or downwind side of a mountain range. When moist air flows up and over the range, it cools, forcing condensation of water vapor to rain or snow. When the air mass flows past the range it is depleted of moisture, loses elevation, is warmed and therefore able to hold more moisture as water vapor. Hence, the lee side of the range sees a small fraction of the precipitation falling on the windward side.
^Griffiths and Rubright, p. 140; G.E. Radosevich, et al., Evolution and Administration of Colorado Water Law: 1876-1976 (Fort Collins, Colo.: Water Resources Publications, 1976), p. 16; Timothy D. Tregarthen, "Water in Colorado: Fear and Loathing of the Marketplace," in Water
Rights: Scarce Resource Allocation, Bureaucracy, and the
Environment, ed. Terry L. Anderson (Cambridge, Mass.: Ballinger, 1983), p. 122.
^Radosevich, et al., pp. 18-19.
5ibid.
^Ibid., p. 20.
7Placers are alluvial deposits (usually sand and gravel) which contain valuable mineral deposits.
Terry L. Anderson, Water Crisis: Ending the Policy Drought (Baltimore, Md.: Johns Hopkins University Press, 1983), pp. 27-28; Radosevich, et al., pp. 20-22.
^Anderson, pp. 28-29.
lORadosevich, et al., p. 21 (footnote 16).
ll-Griffiths and Rubright, p. 140.
12COLORADO CONSTITUTION, Article XVI, Section 6.
13C.R.S. § 37-92-102(3).
14Robert C. Dunbar, Forging New Rights in Western Waters (Lincoln, Neb.: University of Nebraska Press, 1983), p. 74.
l^Ibid.


22
16Ibid., p. 79.
171 Colo. 551 (1872) .
186 Colo. 443 (1882). l^Radosevich, et al.f pp. 24-25.
20ounbar, p. 92.
2^-The Cache LaPoudre River was overallocated by 1884.
22D.A. Seastone and L.M. Hartman, "Alternative Institutions for Water Transfers: The Experience in Colorado and New Mexico," in Land Economics 39 (1) (February 1963): 35-6; also Dunbar, p. 98.
28See Dunbar, Chapter 9.
24Judith L. Gamble, "New Mexico, Its People and Its Water: Anglo-Americans Encounter an Indian and Spanish
Water Ethic," Thesis, University of Colorado, 1979, pp. iii, 28.
28ibid., 28 Ibid., 27Dunbar, 28Ibid., 29Ibid., 3C>Ibid. ,
31ibid.,
pp. . ii, 45.
pp. . iv, 3-4
p- , 122.
p- (N 00
p- 124, 128
p- 131.
p- 129.


CHAPTER THREE
WATER ALLOCATION IN COLORADO IntroductionColorado Constitution
The starting point for any discussion of water allocation in Colorado is the State Constitution. Article XVI, Section 5 declares all water "not heretofore appropriated" to be the property of the public "subject to appropriation." As nearly all water in the state is either appropriated or reserved via interstate compacts, the public's effective property in water is insignificant.
The constitution further states that "(T)he right to divert the unappropriated waters of any natural stream to beneficial uses shall never be denied."1 This statement along with the assertation that "priority of appropriation shall give the 'better right' as between those using the water for the same purpose,"2 have established the doctrine of prior appropriation as the law of the land in perpetuity (or until the constitution is amended).
The constitution extends the priority of uses to municipal over all other uses. Agricultural is then preferred over manufacturing.1 Section 7 of the same article allows appropriators right-of-way across public, private, and corporate lands for the purpose of conveying water to a beneficial use, while Section 8 empowers county


24
commissioners to set "reasonable maximum rates" for the use of water, "whether furnished by individuals or corporations."
These four sections of the Colorado Constitution have insured the dominance of the prior appropriation doctrine as well as the decentralization of water allocation in Colorado. No comprehensive statements of state concern or management exist leaving allocation of waters to the judiciary, where it exists today.
Water Court System
Before 1969 adjudication of water rights was carried out in the district court of the county in which the appropriation was to occur. The general assembly, realizing the cumbersome nature of this process and also wishing to integrate ground water and surface water management, passed the Water Right Determination and Administration Act of 1969.4
The Act established the water court system which is in effect today. The State Supreme Court designated one district court within each of seven water division (see Figure 3.1) as the water court and a judge who has exclusive jurisdiction over water matters. The judge is a district judge whose duties include all those expected of the position with water matters taking priority.5 The water judge appoints a referee who is qualified to render expert opinions and acts as a clearinghouse for the judge.


TTGURE 3.1.
WATER DIVISIONS IN COLORADO
Colorado
WATER DIVISION NO. 1 NO. 2 NO. 3 NO. 4 NO. 5 NO. 6 NO. 7
LOCATION
Greeley
Pueblo
Alamosa
Montrose
Glenwood Springs Steamboat Springs Durango
fO
U1


26
The water judge is guided by the following procedures:
- Hearings are set every six months for matters upon which protests have been filed or orders of referral have been entered by the referee.
- With respect to a protested ruling by the referee, the water judge shall either confirm, modify, reverse, or reverse and remand; and may also grant a different priority and specify certain terms and conditions to the water right.
- With respect to a matter rereferred by the referee, the water judge shall fully dispose such matter.
- With respect to an uncontested ruling by a referee, the water judge shall confirm and approve by judgement and decree, but may reverse and remand any matter deemed contrary to law.
- If any application is granted by a referee which may damage a third party, such party may ask the judge for a stay pending further judicial review.
- Appellate review of a referee's decision is allowed to the water judge, however no review is granted when a decision is not protested.6
The referees of each water court have the authority and duty to
Rule upon determinations of water rights and conditional water rights and the amount and priority thereof, including a determination that a conditional water right has become a water right by reason of completion of the appropriation, determinations with respect to changes of water rights, plans for augmentation, approvals of reasonable diligence in the development of appropriations under conditional water rights, and determination of abandonment of water rights or conditional water rights .7
Plans for augmentation, provided for in the 1969 Act,
are
Detailed programs to increase the supply of water available for beneficial use ... by development of new or alternative means or points of diversion, pooling of water resources, by water exchange projects, by providing substitute supplies of water development of new sources of water .


27
These plans have been interpreted differently by the water courts. In Kelly Ranch v. Southeastern Colorado Water Conservancy District,9 the State Supreme Court reversed the decision of the v/ater Court, Division No. 2 that a plan for augmentation was invalid because there was no new water created by the plan.
In Cache LaPoudre Water Users Association v. Glacier View Meadows,10 the high court affirmed a decision of the Water Court, Division No. 1 that an augmentation plan was valid even though all the water drawn from wells was not to be replaced as it did not injure holders of senior water rights.
The Colorado Supreme Court has chosen to view plans for augmentation as valid even if no new water is created or existing water is not replaced for use by senior appropriators if they are not injured, although the statute clearly states the programs are to "increase the supply of water. "
The water court system is summarized in Figure 3.2.
The judiciary determines and adjudicates water rights in Colorado while state administrative agencies carry out the day-to-day management of water allocation. The Office of the State Engineer is in charge of this allocation through the seven water division engineers.


FIGURE 3.2. WATER COURT SYSTEM IN COLORADO
APPLICATION AND ADJUDICATION PROCEDURES FOR WATER RIGHTS IN COLORADO
File with Clerk for Water Right
I i
Copies of application and OPPOSITION PROVIDED TO STATE
Resume of applications PUBLISHED IN NEWSPAPERS
Statements of
OPPOSITION FILED
No OPPOSITION TO APPLICATION
Opposition to application
Referee makes a ruling ___________i____________
Disapproves all or part
____________i_____________
---------------!----------
Referred to judge for ruling i
Hearing held
_______________I________________
Approves application
____________i
NO PROTEST
I
Application confirmed and approved
NO APPELLATE REVIEW ALLOWED
PROTESTED RULING
I
Judge may
Confirm Modify Reverse Reverse and remand Appellate review allowed
Source: G.E. Radosevich, et al., Evolution and Administration of Colorado Water Law:
1876-1976, Fort Collins, Colo.: Water Resources Publications, 1976, p. 112.
ro
CD


29
State Administrative Agencies
State Engineer
The role of the state engineer which began in 1889, has evolved from implementing judicial orders to managing interstate compacts; supervising the work of the division engineers; coordinating activities with other state agencies, local and municipal governments, and educational institutions; collection and distribution of data on snowfall and runoff; keeping and preparing records and investigations; and general supervisory control over measurement, record-keeping and distribution of public waters.H
Senate Bill 149, in the current (1984) legislature, may give the state engineer authorization to accept and operate equipment associated with a satellite monitoring system to be acquired by the Colorado Water Resources and Power Development Authority and dedicated to the state. The system would monitor river flows which would aid in forecasting flood dangers and also keep an accurate record of interstate compact obligations.
Concerning diversion of waters from the state, the state engineer is to see that water is available for the use and benefit of the citizens of the state while preventing water from being transported to other states unless under specific obligation.12 No water may be diverted out of Colorado


30
for a use which contemplates or involves the transportation of such water into or through another state whether as a vehicle or medium for the transportation of another substance unless the amount so diverted or appropriated ... is credited as a delivery to such other state or states by Colorado.H
This statute makes clear the position of the state concerning coal slurry pipelines. If a pipeline carries coal to California from Colorado, the water used to carry the coal is to be credited as a delivery to California under interstate compact agreements. It remains to be seen whether this statute will hold up in court as it is not part of any interstate compact.
The state engineer is the ex officio executive director of the state ground water commission and carries out and enforces decisions, orders, and policies of that body.14 This authority includes approval of permits for small capacity wells (not exceeding 50 gallons per minute) in designated ground water basinsl^ and the issuing of permits for larger wells. The state engineer issues a conditional permit to an applicant who then has one year to construct the well and three years to apply the water to a beneficial use. A final permit is issued if all conditions have been met .16
Outside of designated ground water basins, the state engineer may issue a permit to construct a well only if unappropriated ground water is found, vested water rights holders are not injured, and the permit is sustained by geological and hydrological facts.1? Nontributary ground


31
water in areas not designated as within ground water basins is also subject to determination and adjudication by a water court.
Colorado Water Conservation Board
This state agency, established in 1937, is responsible for promoting the conservation of water in order to secure its greatest utilization, fostering and encouraging all collective water use entities, assisting such entities in financing (while not lending or pledging credit or faith of the state), gathering data and information on water resources, acquiring property for the purpose of preventing floods, filing for appropriation of water in the name of the Department of Natural Resources, and cooperating with
federal agencies.19
The Board is involved with floodplain management in the state as well as investigating and determining the nature and extent of ground water resources in the state.20 Authority is also vested with the Board to implement the minimum stream flow as enacted by the legislature. The Board, acting within the water court system, may appropriate water for wildlife conservation and outdoor recreation.21 The Board must stand in line with all other potential appropriators to gain access to public water for a public purpose. This subservient posture of a state agency acting in the public interest is part of a long history of intentional actions by the legislature to minimize state control of water in Colorado.


32
Ground Water Commission
The Colorado Ground Water Management Act of 1965 states that "all designated ground waters in this state are declared to be subject to appropriation."22 The Act created the Ground Water Commission whose powers include supervising and administering all water rights acquired to the use of designated ground water, establishing a reasonable ground water pumping level in areas having a common ground water supply, and ordering partial or complete shutdown of wells whose waters are not being put to a beneficial use.22
The Act allows for the formation of ground water management districts within areas determined as designated ground water basins.24 The board of directors of all the districts (discussed later in the chapter) is required to consult with the Ground Water Commission on all ground water matters affecting the district.
State Board of Examiners of Water Well and Pump Installation Contractors
This board was established to regulate the construction, location, repair, and abandonment of water wells and the installation and repair of pumps and pumping equipment.25
Colorado Water Resources and Power Development Authority
Although the Authority is relatively independent of the state, it appears in this section due to its statewide impact.


33
This authority was established in 1981 to provide
financing for state and local water projects. It is to be a
body corporate and a political subdivision of the state (and) shall not be an agency of state government nor subject to administrative direction by
the state.26
Before the Authority can fund any project it must first be reviewed by the Colorado Water Conservation Board and then submitted to the general assembly for authorization.27 The Authority may also issue bonds when necessary to provide funds for any of its corporate purposes.
While the state has had limited control over water allocation, sub-state water use entities have been important actors in developing water resources. These entities include conservancy districts, irrigation districts, water conservancy districts, water conservation districts, and ground water management districts.
Sub-State Regional Entities Conservancy Districts
The Conservancy Law of Colorado, passed in 1922, provided for the protection of citizens' and public and private property from floods and other uncontrolled waters.28 Districts are established by petition with no vote subject to approval by a district court.29 The board of directors of each district is authorized to plan for improvements, enter into contracts with federal agencies, and has the power of "dominant eminent domain."


34
Improvements are financed by conservancy bonds issued by the Board. These districts' duties have been mostly usurped by the Colorado Water Conservation Board and other entities involved with flood control and play little or no part in water allocation today.
Irrigation Districts
Irrigation districts were established early in this century in an effort to pool capital resources for the purpose of constructing irrigation works. The Irrigation District Laws of 1905 and 1921^0 allow for a majority of landowners to form a district for irrigation and drainage as well as to cooperate with federal agencies under the federal reclamation laws for the purpose of construction of irrigation works.
An early shortcoming of these districts was that revenues were collected only from landowners whose lands were irrigated. As service industries and businesses also benefitted from irrigation of nearby lands but did not help pay for the construction, operation, or maintenance of irrigation works, a free rider problem was seen to exist.
During the depression of the 1930's, irrigators along the Front Range were battling drought as well as hard financial times. They saw most of the winter snow and summer rain fall on the western slopes of the mountains


35
while their fertile croplands went dry. The institutional response to these problems was to create a unique entity, a water conservancy district.
Water Conservancy Districts
Water conservancy districts ended the free rider problem by obtaining revenue from all of those living within the district boundaries, whether irrigators or not. The districts also provided a much larger pool of capital and were allowed to contract with federal agencies to fund and construct large-scale irrigation projects.
District courts are vested with jurisdiction to establish the districts after a complicated petition and election process which requires different numbers of signatures for landowners of irrigated land and those of nonirrigated land. This system was recently challenged in the courts by the Taxpayers for the Animas-LaPlata Referendum (TAR), a group opposing the Animas-LaPlata reclamation project in southwestern Colorado. The general assembly, seeing all 45 water conservancy districts in jeopardy, quickly recreated all the districts by statute thereby rendering the TAR suit moot.31
The Northern Colorado Water Conservancy District was the first district created by the Water Conservancy Act of 1937 and the prototype organization in the United States.32 This district contracted with the Bureau of Reclamation to build the Colorado-Big Thompson project (C-BT) which now


36
diverts water from the upper Colorado River under Rocky Mountain National Park into the Big Thompson River near Estes Park for irrigation of crops and domestic use (via a municipal sub-district) along the Front Range.
Water from C-BT makes up approximately 25% of the supply of the district and is managed independently of Colorado water law.33 The district has fostered a free market approach to managing this water which will be discussed in Chapter Five.
Water Conservation Districts
The three water conservation districts existing today were organized to safeguard the waters of the state entitled to it under various river compacts. The Colorado River, Southwestern, and Rio Grande Water Conservation Districts oversee the waters of the Colorado River, San Juan and Dolores, and Rio Grande basins, respectively.
The board of directors of each entity consists of a representative from each county in the district and exercises the following powers
- Conducts surveys and investigations to determine the best manner of water utilization
- Contracts with federal agencies
- Organizes special assessment districts for funding of reservoirs and irrigation works
- Has and exercises the power of eminent domain (which cannot be used against any state agencies)
- Issues revenue bonds to finance construction or acquisition of works, reservoirs, or other improvements.34


37
Water conservation districts are to take the lead in resolving conflicts or problems in a regional manner or if more than one conservancy district is involved.35
Ground Water Management Districts
These districts may be established under the auspices of the Ground Water Management Act in order to assess the extent of ground water in designated basins and control the use thereof.
The board of directors of any ground water management district has the following duties:
- Consult with the ground water commission on all ground water matters affecting the district
- Regulate the use, control, and conservation of ground water by providing for spacing of wells; acquiring lands for drainage and recharge of ground water; developing comprehensive plans for efficient use of ground water, promoting reasonable rules and regulations for the purpose of conserving, preserving, protecting and recharging of ground water; carry out research projects, develop information, and determine limitations to be made on ground water withdrawals; prohibiting the use of ground water outside district boundaries; and finally to promote reasonable rules and regulations with respect to protection and compensation of owners of domestic wells injured by irrigation wells.36
Municipal/Domestic Water Agencies
Municipal Agencies
Municipalities in Colorado are either statutory or home rule in nature. Statutory cities and towns follow the provisions of the general assembly while home rule cities are somewhat more independent due to their adherence to a


38
city charter which is written within the bounds of the State Constitution and statutes.
Both types of municipalities are granted authority to construct and manage water facilities for the purpose of providing domestic water to their citizens. Municipalities must abide by the state water law system by acquiring water rights and applying them to beneficial uses.
The State Constitution allows home rule cities and towns to
construct, condemn and purchase, purchase, acquire, lease, add to, maintain, conduct, and operate water works within or without its territorial limits .37
These broad powers granted to municipalities have given rise to the idea that the state's largest municipal water agency, the Denver Water Department, may become the primary water broker in the state. With authority to construct and maintain facilities outside municipal boundaries and with the statutory mandate allowing municipalities to supply water from its water system to consumers outside their boundaries,38 the Denver Water Department may well provide the Denver metropolitan area with most of its supply in the near future.
The Condemnation of Water Rights Act of 197539 was an effort by the general assembly to make municipal planning for water supply more of a statewide concern. It required municipalities which sought to condemn water rights to petition a district court which would then appoint a


39
commission to determine the issue of necessity for exercising eminent domain. Other sections of the Act forbade municipalities from condemning water rights for future needs beyond 15 years and prohibited condemnation of water already being used for a public purpose.
The Act also required municipalities to prepare or update a community growth development plan before petitioning for water rights in the district court.40 The plan was to be a detailed statement describing water rights to be acquired, economic and environmental effects on the county, unavoidable adverse and irreversible effects, and alternate sources of water supply.
The Act allowed for greater attention being paid to water supply planning while it restricted the power of municipalities to condemn mostly agricultural water rights. It professed noble intent but was poorly written and researched. All of these provisions were declared unconstitutional in 1978.41-
Municipalities have the State Constitution and statutes in their favor and along with access to capital generated by water rates and bonds are able to outbid irrigators for the use of water now being used for agriculture.
Special Districts
There are currently 245 special districts in Colorado providing water for domestic uses. Of the 245 districts,
160 are water and sanitation districts while 85 are water districts. Approximately 54% of the districts are located


40
in the Denver metropolitan area.4^ These districts are created by a petition-hearing-election method4^ outside of metropolitan areas and by ordinance for a metropolitan water district.44
Their powers include those similar to all water management agencies: to enter into contracts not limited to federal or state government, occur indebtedness and issue bonds, to acquire and dispose of real and personal property including water rights and water works, and collect ad valorem taxes on and against all taxable property in the district.45
These special districts along with numerous other types have come under criticism as being a hidden bureaucracy and a hindrance to comprehensive public utilities planning.
These districts are used primarily to provide services in unincorporated or undeveloped areas of the state or where county or municipal governments are unwilling or unable to provide these services.
River Basin Authorities
The general assembly has authorized the establishment of thirteen river basin authorities which, when created, are directed to promote the stability of ground and surface water supplies by planned management.4^
The powers of river basin authorities include construction and operation of wells, dams, ditches, reservoirs, and storage and irrigation structures; the power


41
of eminent domain when used to condemn structures or establish rights-of-way; and the raising of revenue by a tax upon the "Taxable real property right of the right to use water. "47
The authorities may issue bonds payable out of a general ad valorem tax upon all taxable property within authority boundaries which, when added to a tax on water rights levied by county commissioners, would finance water projects. The authority is to satisfy vested water rights within or without of the authority's boundaries with water from sources other than natural stream flow.48
This management by river basin would at first seem a welcome initiative to comprehensive planning for water supply, but is in effect, merely tacked on to the existing array of ground and surface water management institutions.
An amendment to the act creating river basin authorities was added in 1981 which exempted the Denver metropolitan area from inclusion into an authority has diluted its potential effectiveness.49
Interstate Compacts
The State of Colorado is a party to nine interstate compacts which now govern all of the major watercourses flowing out of the state. Colorado has signed agreements with New Mexico concerning the LaPlata River and the Animas-LaPlata project; with Nebraska concerning the South


42
Platte River; with Kansas concerning the Arkansas River; and with New Mexico and Texas concerning the Rio Grande River.
Colorado is also a signatory state to the Colorado River Compact with six other states and the Upper Colorado River Compact with four other states.
The purpose of these compacts is to determine allocation of water between states and to end disputes which had frequently occurred. The compacts, however, have not been the final word in dividing the waters. Since the signing of many of the compacts, the states involved have been threatening lawsuits to settle matters of allocation. Colorado and Wyoming have met to decide the fate of the Laramie River, Colorado and Nebraska have sorted out the South Platte River, and perhaps the most acrimonious debate exists between Colorado and Kansas over the Arkansas River.
The most recent dispute began in 1980 when Kansas charged Colorado with storing water improperly in several reservoirs, which Kansas officials claim violates the Arkansas River Compact.50 Kansas now charges Colorado with not delivering up to 50,000 acre-feet per year since 1974 due to development in Colorado. The Attorney General of Kansas has threatened a lawsuit to sort out the claims.51
Colorado River Compact
The Colorado River Compact was signed in 1922 between the states of Arizona, California, Colorado, New Mexico, Nevada, Wyoming, and Utah. Its purposes were to


43
provide for the equitable division and apportionment of the Colorado; to establish the relative importance of different beneficial uses of water; to promote interstate comity; (and) to remove causes of present and future controversies .52
The compact divided the Colorado River into two basinsthe Upper Basin which included Colorado, New Mexico, Utah and Wyoming; and the Lower Basin which consists of Arizona, California, and Nevada.
At the time of the signing of the compact the mean annual flow of the Colorado River was thought to be 15 million acre-feet. Therefore, the compact divides the waters in half, allowing 7.5 million acre-feet per year to each basin but requires the Upper Basin to supply the Lower Basin with 75 million acre-feet over any ten year period.
Apparently the data used to derive the mean annual flow of the river was obtained during a series of very wet years. It has since been revised to approximately 13.5 million acre-feet per year.53 This leaves the Upper Basin states with providing the Lower Basin with 7.5 million acre-feet per year and using whatever is left.
Upper Colorado River Compact
The Upper Basin states met 26 years after the signing
of the Colorado River Compact to agree upon the equitable
distribution of its share of the earlier compact.
The states decided upon the following allocation:
- Arizona was entitled to 50,000 acre-feet per year. After this allocation, the states agreed upon these percentages: Colorado 51.75%; Utah 23%; New Mexico
11.25%; and Wyoming 14%. 54


44
Article XVI of the compact states,
The failure of any state to use the water, or any part thereof, the use of which is apportioned to it under the terms of this compact, shall not constitute a relinquishment of the right to such use to the Lower Basin or to any other state, nor shall it constitute a forfeiture or abandonment of the right to such use.
With this article the Upper Basin states hoped to preserve their allocation via the two compacts from being lost to the Lower Basin via the prior appropriation doctrine. The statement proved prophetic as the unused entitlement of the Upper Basin is being used by the Lower Basin, primarily in the fast-growing areas of southern California. One would think Article XVI would protect the Upper Basin from loss of water entitled to them but to many the thought of prying water away from California which has put such water to beneficial uses seems a very difficult task. One of the major justifications for water development of any kind (and sometimes at any price) in Colorado to this day goes back to a principal rule of the prior appropriation doctrine"Use it, or lose it."
Federal Government
The federal government is involved in many areas of water management in Colorado. The Environmental Protection Agency monitors water quality, the Army Corps of Engineers is involved with flood control and the Bureau of Reclamation builds multipurpose water projects. There are many more examples of federal involvement in the water matters of


45
Colorado, however this paper will focus generally on the Corps of Engineers and the Bureau of Reclamation and specifically on the question of federal reserved water rights.
Bureau of Reclamation
The Reclamation Act of 1902 was meant to encourage movement of settlers westward. The Act provided for the building of large-scale water projects primarily for irrigation. The Act granted subsidized irrigation for individuals wanting to farm a maximum of 160 acres. This 160 acre maximum acreage has since been subverted by agribusinesses in California and Arizona, but the legacy left by the Bureau is impressive. Its projects have made the desert bloom in the Imperial Valley of California and provides electricity for large parts of the Southwest including Las Vegas and Los Angeles. It has also drowned the Black Canyon of the Colorado under Lake Mead and Glen Canyon under Lake Powell. Perhaps no other water agency in the United States has been the subject of awe as well as ridicule.
The Colorado River Storage Act, passed in 1956, authorized hydroelectric production as part of the Bureau's river regulation scheme. Sales of electricity from these dams was to be used to defray part of the costs of irrigation projects in the two basins.55 jn Colorado, the Curencanti Unitthree reservoirs with power plants located


46
on the Gunnison Riverproduces hydroelectric power and regulates water flows downstream.
The second major project the Bureau was involved with in Colorado is the Colorado-Big Thompson project. The Bureau contracted with the Northern Colorado Water Conservancy District to build reservoirs and water conduits, including a tunnel under the Continental Divide which brings water from the upper Colorado to the East Slope.
Army Corps of Engineers
This federal agency is primarily involved with flood control and stream channelization and plays a major role in navigation regulation of the rivers of the United States.
In Colorado, the Corps is involved with flood control, primarily around the Denver metropolitan area and the issuance of 404 permits which control the drainage of wetlands. The Corps manages three flood control reservoirs on waters upstream from DenverCherry Creek, Chatfield, and Bear Creek.
Federal Reserved Rights
The U.S. Supreme Court, in Winters v. United States,56 initiated what is now known as the "Winters Doctrine"that "Congress had implicitly reserved the right to an amount of water sufficient to support the primary purpose of the creation of the reservation."57 These federal reserved water rights were exempt from state water laws,58 and to


47
this day are a source of conflict between Colorado and the federal government.
In 1963, the U.S. Supreme Court further broadened the reserved rights doctrine by asserting that the federal reserved right extended to other federal reserves and not just Indian reservations.59 This ruling brought speculation in the western states, where two thirds of the land is owned by the federal government, that chaos would result when the federal government decided to take water from state jurisdiction for use on national forests, parks, recreation areas, and the like.
In Cappaert v. United States,6 the U.S. Supreme Court tempered its Arizona v. California ruling by emphasizing that Congress reversed only the amount of water necessary to fulfill the purpose of the reservation.61
This narrowing of the interpretation of the reserved rights doctrine in the past twenty years has forced the federal government to "develop a new theory on which to base claims of water rights"62 for use on public lands.
In 1979, the Department of the Interior announced the existence of a nonreserved federal water right. This right was based on the doctrine of prior appropriation rather than legislative intent and were to be exempt from state definitions of appropriation and beneficial use, or by compliance with state permitting procedures.6 3
The nonreserved water right was seen as even more chaotic and with the Reagan Administration's ambivalence


48
towards federal control of traditionally state matters plus another Supreme Court decision64 denying state control by this water right, the nonreserved right is now on hold.
In Colorado, the federal government has been asserting its right to federal reserved water through the courts. In United States v. District Court In and For the County of Eagle,6^ the Colorado Supreme Court held that the United States was subject to state water statutes and came under jurisdiction of the District Court of Eagle County. On appeal to the U.S. Supreme Court, Justice Douglass affirmed the Colorado decree that federal reserved rights could be adjudicated in a state court.66
The Denver Water Board then squared off against the United States in sorting out water rights in Water Divisions 4, 5, and 6. The Colorado Supreme Court first had to decide if the federal government had any reserved rights and second whether the decrees entered in the District Courts (water courts) correctly determined the extent of the reserved rights.67 The 36 page decision is the culmination of fifteen years of adjudication. Reserved water right determinations and procedures for determination were entered for national forests, Dinosaur National Monument, Rocky Mountain National Park, public springs and waterholes, and mineral hot springs.
Justice Erickson, in the conclusion states,
the results reached in this case comport with controlling federal and state law and provide the foundation for a system of water rights adjudications


49
which will preserve the legitimate economic and environmental needs of both soverigns.68
Summary
The State of Colorado embraces a decentralized judicial water allocation system with limited authority given to the state government. State agencies, such as the Colorado Water Conservation Board and the Water Resources Division of the Department of Natural Resources, carry out the directives of the legislature and the governor, but are ultimately constrained in allocation matters by the water courts. There is a general unwillingness to grant power to state level agencies by the legislature for fear of losing local control over allocation.
The numerous sub-state allocative agencies, municipalities, and special districts have been the dominating water development agencies in the state.
Residents on the Western Slope see the Denver Water Department and other municipal water departments along the Front Range as threatening their diminishing supplies of water but are relatively powerless to stop this eastward flow.
And finally, uncertainties exist with respect to water supply and allocation in the forms of interstate compacts and federal reserved water rights. The interstate compacts are fairly straightforward but, like most international agreements, require verification. It is likely that Kansas and Colorado will end up in court over the Arkansas River,


50
but there is hope for a comprehensive management system which would aid in having each state obtain its share of water flowing from Colorado.
The question of federal reserved rights is another source of uncertainty but progress has been made in the courts in this area.
Chapter Three has introduced the water institutions of Colorado. Chapter Four will define evaluation criteria to be used against these institutions to measure their effectiveness, and in Chapter Five, these institutions will be evaluated.


ENDNOTESCHAPTER THREE
^COLORADO CONSTITUTION, Article XVI, 2Ibid.
3Ibid.
Section
6.
4c.r.s. §§ 37-92-101 to -602
5c.r.s. § 37-92-203.
6c.r.s. § 37-92-304.
7c.r.s. § 37-92-301(2).
8c.r.s. § 37-92-103(9).
9Colo., 550 P.2d 297 (1976).
10Colo., 550 P.2d 288 (1976).
1]-C.R.S. § 37-80-102.
12c.r.s. § 37-81-102.
13c.r.s. § 37-81-103.
14c.r.s. § 37-90-104(6).
15c.r.s. § 37-90-105.
16c.r.s. §§ 37-90-107, -108.
17c.r.s. § 37-90-137.
18c.r.s. § 37-92-303(1).
19c.r.s. § 37-60-106.
20c.r.s. § 37-90-117.
21c.r.s. § 37-92-102(3).
22c.r.s. §§ 37-90-101 to -141
23c.r.s. § 37-90-111.
24c.r.s. § 37-90-118.
25c.r.s. § 37-91-101.
26c.r.s. § 37-95-104(1).
27c.r.s. § 37-95-107(1)(a).
28c.r.s. § 37-1-103.
29c.r.s. §§ 37-1-101 to -105.
30c.r.s. §§ 37-41-101 to -160

33H.B. 1272 (1983); codified as 32C.R.S. §§ 37-45-101 to -153.
33L.M. Hartman and Don Seastone
C.R.S., § 37-42-101- to
C.R.S. § 37-45-153. Water Transfers:
Economic Efficiency and Alternative Institutions (Baltimore Md.: Johns Hopkins Press, 1970), p. 45.
34C.R.S. § 37-46-107.
35United States Department of the Interior, Bureau of Reclamation and State of Colorado, Water For Tomorrow: Colorado State Water Plan (Denver, Colo.: State of Colorado, August 1974), phase II, p. 3.8.
36C.R.S. § 37-90-130.
37COLORADO CONSTITUTION, Article XX, Sections 1, 6. 38C.R.S. § 31-15-708(1)(d).
39C.R.S. §§ 38-6-201 to -216.
40C.R.S. § 38-6-203.
41Thornton v. F.R.I.C.O., Colo., 575 P.2d 582 (1978).
42"Special Districts Criticized as Hindrance," Rocky
Mountain News, 18 March 1984, p. 10. 43C.R.S. §§ 32-4-104 to -108.
44C.R.S. § 32-4-404.
f


52
45C.R.S.
46c.r.s.
47c.r.s.
48Ibid.
49C.R.S.
§ 32-4-406(1). § 37-93-101.
§ 37-93-105.
§ 37-93-108.
88"Kansas Says Coloradoans 'Steal' Water," 19 February 1984, Sec. B, p. 1.
51Ibid.
52C.R.S. § 37-61-101.
53philip l. Fradkin, A River No More (New Alfred A. Knopf, 1981), pp. 190-1.
54C.R.S. § 37-62-101.
Denver
York, N.
88Mel Griffiths and Lynnell Rubright, Colorado: A Geography (Boulder, Colo.: Westview Press, 1983), p. 56207 U.S. 564 (1908).
87Gary K. King, "Federal Non-Reserved Water Rights Fact or Fiction?," Natural Resources Journal, 22, No.
(1982), p. 424. ........
58207 U.S. at 577 (1908).
59Arizona v. California, 373 U.S. 546 (1963).
6426 U.S. 128 (1976).
8^King, p. 425.
62ibid.
63Ibid., p. 426.
84California v. United States, 438 U.S. 645 (1978) 63Colo., 458 P.2d 760 (1969).
68 401 U.S. 520, 91 S.Ct. 998, (1971 ).
67Colo., 656 P.2d 1 (1982) at 4.
68Ibid., 36.
Post,
Y. :
243.
2


CHAPTER FOUR
DEFINING EFFECTIVE INSTITUTIONAL WATER ALLOCATION
When defining what constitutes effective water management, the roles of the private market and public agencies must also be delineated. This chapter focuses on definitions of effectiveness by those espousing both schools of thought. The first part explains Garrett Hardin's "tragedy of the commons" and the nature of water as having qualities of both a public and a private good. The second section defines and lists institutions to be evaluated, and then effectiveness is defined in the context of water allocation. Finally, effectiveness criteria to be used in the next chapter are listed, described, and justified.
Is Water a Public or a Private Good?
Garrett Hardin has explained the problems of a common pool resource; that is,
. a resource for which there are multiple owners (or a number of people who have rights to use the resource) and where one or a set of users can have adverse effects upon the interests of other users.^
The analogy Hardin uses is a pasture open to all. Each herdsman will attempt to maximize his economic welfare by adding as many cattle to the pasture as possible. The herdsman reaps full economic value from the addition of one


54
(or many) animal(s) while the additional overgrazing is
shared by all. Thus, Hardin asserts,
Each man is locked into a system that compels him to increase his herd without limitin a world that is limited Freedom in a commons brings ruin to all.2
Examples of common pool resources include wildlife, fish, oil, groundwater, lakes, streams, and the atmosphere.3 In the larger sense then, water can be considered a common pool resource. But to the extent water is managed daily for the welfare of private as well as public entities, water must be considered a common pool resource which is managed as a public as well as private good.
According to Foss and Ostrum, private goods are goods and services that are highly separable and homogenous, have the ability to be exclusive of other potential users, have exclusive possession, and can be measured in definite units.4 An example is private land. It is highly separable and homogenous in that a parcel of land is spatially unique and may be used for a number of different activities. Exclusive possession may exist in the form of a title and exclusion of other users is enforced by common law trespass. Finally, land can be easily measured in discrete units.
Public goods are those which benefit all and which cannot usually be provided in a free market. These goods also have the opposite qualities of private goods. Air is an example of a common pool resource and clean air may be considered a public good. It is neither homogenous nor highly separable; it cannot be excluded from use by others;


55
and it is measurable but not in discrete units. A significant common pool resource problem exists currently in the Denver area in the form of a public "bad"air pollution. The motorist (prime contributor to this problem) gains freely from the use of an automobile while sharing only minutely the responsibility for the public bad. Hence, the motorist has little incentive to act individually, for by foregoing personal transportation and using less polluting alternatives, s/he gives up the advantages of the auto at significant cost and for little overall benefit.
Water is managed as both a private and a public good. Water the private good exists when those holding a water right have the water delivered at a price and uses the water to produce a good or service for profit. Examples include agricultural and manufacturing uses.
Water is considered a public good when it is impounded behind flood control structures, is provided as instream flows for fisheries and wildlife, is used for recreational and aesthetic purposes, and as a source of domestic water supply. Water may also be managed simultaneously as a public and a private good. For example, when a reservoir is used for public water supply is closed off to recreational use except to those paying a fee, it becomes a confusing question of management, ownership, and responsibility.
Given this background concerning the role of water as a
public and private good, the next section defines, lists,


56
and explains water institutions, measurements of effectiveness, and effectiveness criteria.
Institutions
Institutions are "sets of ordered relationships among people which define either rights, exposure to the rights of others, privileges, and responsibilities."5 They "provide decision rules for resource management," and display the following characteristics:
- They are not simply structure but involve people in patterned behavior
- They involve identifiable expectations
- They influence or establish sets of social norms and effect the views and values of those associated with them
- Most evolve over time by a process of accretion.7 Institutions, then, define the "rules of the game" by which everyone in the state plays. In Colorado, the following are considered water institutions.
The water court system, the embodiment of the doctrine of prior appropriation, is the predominant water institution in the state. The decisions made by this institution are law, subject to review by the State Supreme Court.
An agglomeration of state administrative agencies is also considered to be institutional. The growth of these agencies may be viewed as legislative power delegated to the executive branch. These agencies exist and are funded through legislative action but are administered by the


57
governor through his appointees. These state-level entities have been created to aid and oversee water development, conduct research, and help provide funding for water projects.
Sub-state regional agencies, particularly irrigation, water conservancy, and water conservation districts comprise another water institution. The regional entity is actually a multi-tiered bureaucracy with fragmented rules, jurisdictions, constituencies, and goals. Conservation districts are mostly researchers, developers, and financiers; conservancy districts are developers and wholesalers; and irrigation companies, once the primary developer of water, are now retailers of water to mostly agricultural consumers.
The fourth institution is the municipality. Domestic uses of water are given favored status in the state constitution, have the greatest share of power, both political and financial, and have statutory authority to develop and operate water works outside municipal boundaries. The Denver Water Board, the most famous and powerful water agency, has a multi-million dollar budget and facilities scattered within 100 miles of Denver in nine counties. Municipalities use only three percent of all water in the state but as mentioned before, have the resources to dominate future water allocation as well as any restructuring of the allocation system when it becomes necessary.


58
Two institutions affecting water allocation in Colorado come from outside the state. Interstate compacts and the federal government directly and indirectly control the amount of water under state control as well as Colorado's relationship with the other western states. Interstate compacts meet all the criteria for collectively being considered an institution. They have defined the rights to water between states as well as regions. Significant uncertainty remains in most existing compacts, so this institution is seen as a dynamic variable in water allocation in the future.
The federal government is in the process of defining its rights to water in Colorado through the judiciary. One significant case, United States v. District Court In and For the County of Eagle,8 in the Colorado Supreme Court has attempted to define federal reserved rights quantitatively. The federal government through its land management agencies also controls water development by way of permits, and federal funding (or the lack thereof) has always played a major role in water allocation in the state.
Effectiveness
A general definition of effectiveness includes concepts such as adequacy to accomplish a purpose, usually to produce an intended or expected result. Effectiveness implies two


59
corollary principles, the first being efficiency or competency in performance. Efficiency is usually measured quantitatively and in terms of economic criteria. The second corollary of effectiveness is equity, or the quality of being fair and just. An example of an equity problem in water resource management is the role of Native Americans in the Southwest water scheme. Potential claims to water in particular basins by Indian tribes, the federal government, and established water right holders exceed available water supply.^ The sorting out of these claims is of intense interest to all partiessome will win, others will lose.
Dr. Phillip 0. Foss, a political scientist at Colorado State University has developed goals for effective water management in Colorado.10 Among those include:
First, the water management system should be equitable in terms of lack of individual or group discrimination and equal sharing of costs. "Taxes should be based upon benefits received and upon ability to pay."H Second, the system should be responsive to democratic values. That is, a system structured to be representative of and responsible to all the people of the state. Third, changes in the water management system should recognize the social values of water in addition to the dollar values of the water market.
A shift in values to a greater appreciation of the intangible nature of water demands that use the resource for scenic, aesthetic, recreational, fish and wildlife, and


60
other noneconomic values be protected, maintained, or enhanced. Finally, the water management system should be responsive to change. Flexibility of water institutions is needed in order to maintain stability of the same. Many water authorities have decried the institutional rigidity which grips western water allocation systems.12
Other goals for effective water management include efficient utilization and provision of an adequate supply of water to meet all needs, and environmental quality.13 The extent to which people want to protect environmental values has been equated with political power of conservationists versus water developers. A way must be found to make explicit the intangible and/or environmental values of the resource so they may be least internalized in the ideal management scheme.
In view of the previous discussion effectiveness criteria have been developed which will be used in the next chapter to evaluate Colorado water institutions. These criteria are designed to focus on shortcomings of existing institutions in order to help identify those most in need of reform. Alternative futures, addressed in the last chapter, are designed to alleviate present shortcomings.
The first criterion is institutional flexibility. This ability to respond to changes in resource use and human attitudes and preferences is seen as a primary component of any alternative system. In some cases this flexibility may take the form of reducing impediments to the functioning of


61
a free market while in other cases it would mean enhancing opportunities for nonmarket values to be expressed institutionally. Advocates of a freer market for water transfers (Kneese and Brown, Hartman and Seastone, Tregarthen, Anderson, and others) view this flexibility as streamlining the now judicial process for transferring water rights between uses, making it less time consuming and costly to the user.
Those favoring more protection for social and environmental values see institutional flexibility as creating a forum for the expression of these values most probably at the state or sub-state regional levels.
Economic efficiency is another effectiveness criterion. Any allocation system must recognize the significance of the private market system for water in Colorado. Noneconomic values which are not expressed in the marketplace cannot be ignored either, but the market system must exist in any alternative system due to its economic efficiency and its political and cultural popularity. The institutions in Colorado concerned with water allocation will be evaluated as to their ability to allow a free market to exist while also having the means necessary to protect third parties from spillover effects.
The third effectiveness criterion is the ability of the institution in question to minimize waste of the resource. Whether this conservation is accomplished by the free market or is regulatory, everyone (it is assumed) would agree with


62
i
the assertion that water conservationusing the appropriate amount and quality of water for an appropriate use with little or no wastage is a desirable goal. Institutions will be evaluated as to the extent to which they foster effective water use by minimizing waste.
Response to democratic values, the fourth criterion, measures the extent to which existing institutions are democratically structured. Democratic values are conceptualized as representation of the people of Colorado in water institutions by those who are directly responsible to the people, and also, institutions which function to reflect the values of the electorate. In Colorado, most of those people managing water institutions are not elected by the people but are appointed to their positions. This has been done purposely to insulate decision makers from political favoritism. In effect it has insulated the people from the process. It is encouraging to note, however, that election rather than appointment of water conservancy district board members has become an issue on the West Slope. In September of this year, the Pitkin County Commission unanimously passed a resolution calling for election of district board members. The document charges appointed members lack accountability, discourage public debate, and "deprive the public of an opportunity to participate in major economic and environmental decisions."I4 The resolution also calls on state


63
legislators to introduce and support legislation to allow election of board members to occur.
The fifth effectiveness criterion is access to the water resource. This is an extension of the last criterion involving democratic values and leads to the final criterion which is recognition of social values of water.
Although the state constitution gives ownership of water to the public, it tempers that assertion with the right to private use by appropriation. It is my view that water is a public resource and should be controlled by public institutions with the private market system encouraged but subservient to the public interest. The access issue revolves around local control (little if any public access) versus comprehensive management (potential for maximizing public access and oversight).
The final effectiveness criterion is recognition of the social values of water. This criterion concerns the provision of water as a public good and/or the management (minimization or elimination) of public "bads." With the previously mentioned statement of the increasing value of noneconomic uses for water, alternative institutions must reflect this concern as a democratic necessity. Water institutions need to either openly provide for these values or at least recognize their existence and allow them to be expressed.
In the next chapter these effectiveness criteria will be applied to existing water institutions. The narrative


64
will discuss this evaluation and a summary table will be presented which lists the positive and negative aspects of currently existing institutions.


ENDNOTESCHAPTER FOUR
Ijohn Baden, "A Primer for the Management of Common Pool Resources," In Managing the Commons, eds. Garret Hardin and John Baden (San Francisco: W.H. Freeman and Co., 1977), pp. 138-139.
^Garrett Hardin, "Tragedy of the Commons," In Managing the Commons, eds. Garrett Hardin and John Baden (San Francisco: W.H. Freeman and Co., 1977), p. 20.
^Vincent Ostrum and Elinor Ostrum, "A Theory for Institutional Analysis of Common Pool Problems," In Managing the Commons, eds. Garrett Hardin and John Baden (San Francisco: W.H. Freeman and Co., 1977), p. 157.
4Phillip 0. Foss, Institutional Arrangements for Effective Water Management in Colorado (Fort Collins, Colo.: Colorado Water Resources Research Institute, November 1978), pp. 50-51.
^A. Alan Schmid, "Analytical Institutional Economics: Challenging Problems in the Economics of Resources for a New Environment," American Journal of Agricultural Economics, 54 (1976), 893. See also David Mulkey and Ray Carriker, "Water Management: A Problem of Institutional Design," Irrigation
and Drainage and Water Resources Planning and Management, proceedings of the American Society of Civil Engineers, July 26-28, 1978, 426-435.
^Schmid, p. 428.
7Foss, p. 7.
8Colo., 458 P.2d 760.
9Foss, pp. 151-154.
10Ibid., p. 151.
Hlbid.
l2See Terry L. Anderson, Water Crisis (Baltimore, Md.: Johns Hopkins Press, 1983); Kneesee and Brown; Timothy Tregarthen, "Water in Colorado: Fear and Loathing of the Marketplace," In Water Rights, ed. Terry L. Anderson (Cambridge, Mass.: Ballinger, 1983); and D.A. Seastone and L.M. Hartman, "Alternative Institutions for Water Transfers: The Experience in Colorado and New Mexico," Land Economics 39 (1) (February 1963): 31-43.


l^Foss, p. 152; Kneese and Brown, pp. 74-75.
l^Heather McGregor, "Water Board Election Efforts Gaining," The Daily Sentinel (Grand Junction, Colorado), September 1984, p. 4B.


CHAPTER FIVE
EVALUATION OF COLORADO WATER INSTITUTIONS
Chapter Four outlined the Colorado water institutions which are evaluated in this paper. They are the water court system, state administrative agencies, sub-state regional entities, municipalities, interstate compacts, and the federal government.
Effectiveness criteria, also developed in the last chapter, are institutional flexibility, economic efficiency, minimization of resource waste, response to democratic values, access to the resource, and recognition of the social values of the resource.
The "public interest" is mentioned frequently in this chapter. Although the term is defined in many different ways, for this paper the following definition is used.
1. The public interest is made up of those who do not derive their livelihood from direct use of the resource.
2. The public interest (in water matters) wants representation in the decision making process of water management. This participation enables the resource to be used for activities not expressed in the market system.
3. The public interest is not homogenous but has many different, sometimes competing, interests.


68
4. The public interest is not currently represented in the market system for water rights.
Methodology for the Evaluation
Each of the water institutions is evaluated in terms of their positive, negative, or neutral effect on the effectiveness criteria. The positive aspects of the institution are discussed using evidence from water experts as well as the author's insight. The negative aspects are presented in the same manner. A value is given to the institution as to its summary effect on the effectiveness criteria. These values are summarized in Figure 5.1 at the end of the chapter.
Water Court System
The doctrine of prior appropriation, or the Colorado Doctrine, is maintained in Colorado by the water court system. The Doctrine has been criticized by many as being too inflexible to meet the changing water demands of the arid west. The water court system in Colorado is seen by many as a complex legal and political structure which is destined to become paralyzed as demands for changes of use increase and competition for the finite resource intensifies.1
Some claim the prior appropriation system is far too rigid for today's increasing dynamism:


69
. water transfer procedures must be generally described as cumbersome, ill-defined, and as consuming disproportionately large amounts of time and money.2
Others, while recognizing its weaknesses, still embrace
the system due to two major strengths. First, the
appropriation right provides the security of a property
right. This security allows holders of right the confidence
to invest in activities requiring a dependable source of
water. The second strength of the appropriation right,
according to Dunbar, is its flexibility due to the
transferability of water (in most states) separate from the
land. In Dunbar's opinion the appurtenancy doctrine was
used explicitly to stop power-grabbing water companies of a
century ago and is no longer necessary.3
Free market economists feel the appropriation right is
an excellent beginning toward a complete private market for
water rights,4 while others see it as anachronistic,
fragmented, and parochial.5 These theorists see the water
right in its purest form (with a nonexistent water court
system) as a well-defined property right fitting easily into
a private market system. They feel the primary constraint to
the operation of a market system is the creation of
uncertainty fostered by the judicial whim of the water
courts.6 The water court system "creates unnecessary
uncertainty, high transaction costs, and perverse
incentives,"7 and, more than state administrative agencies
which have much less power, the water courts are generally


70
the biggest obstacle to a private market system being established in the state.
The uncertainty that the water courts foster may take the form of determining the extent of a water right. In Colorado, the amount of water transferable is not the diverted amount, but the amount consumptively used. In this way, the court protects third parties, usually downstream appropriators which the private markets sans water court could overlook.
The water court system has many mechanisms for encouraging conservation of water. The three most important are the doctrines of beneficial use, due diligence, and abandonment.
The beneficial use doctrine requires that appropriators put water to a use which is constitutionally defined as municipal/domestic, agricultural, or manufacturing. The court must find that a proposed use fits the definition of beneficial use before it will grant a conditional or absolute water right.
In perfecting a water right (making a conditional right absolute) the appropriator must show due diligence, that is, proof that physical work has been done toward diverting water and putting it to a beneficial use. If the holder of a conditional water right is making questionable progress toward developing the right, another party may file for the right claiming the first party has not proceeded with due diligence.


71
Abandonment of a water right occurs when the holder of
a right fails to use it for a specified time which differs
in each state. In Colorado, abandonment is defined as
the termination of a water right in whole or in part as a result of the intent of the owner thereof to discontinue permanently the use of all or part of the water available thereunder.9
The appropriation system has been an excellent developer of water and of beneficial uses for that water.
An appropriator obtained all the water which could be beneficially used, made full use of it or lost it. In reality this system is wasteful, mainly due to its outdated view of water conservation. During the development era, the three conservation doctrines previously discussed were all that was required to insure orderly conservation. In the transition to the era of management, these measures are inadequate. In a fully appropriated basin, such as the South Platte, appropriators scramble to use all the water allotted them so as to receive the full benefit of their right, when modern conservation methods could cut down on the amount of water required for a particular activity.
This freeing up of an amount of water for others to use is an altruistic act which most established appropriators would not care to be a part of.
The water court system negatively effects democratic values. The courts are isolated from the electoratewater judges are appointed by the State Supreme Court, and somewhat isolated from legislative impact by the State


72
Constitution. Any judicial system is intended to be isolated from the public due to its impartial, nonpartisan structure, and this is where the weakness lies when managing a public resource.
The court system does not allow the public access to the resource. Private access is by acquiring a water right which is then used according to state laws. The public gains access to the resource throughout its domestic water system. The public may also "use" water for nonmarket purposes by going to public areas where water is present (public parks, national forests, and parks, or other public lands).
The water court system, an agglomeration of private market rights with judicial oversight, pays little if any attention to recognizing the social values of water. The instream flow law is the only explicit protection of the public demand for water used scenically, aesthetically, or for outdoor recreation and wildlife.
State Administrative Agencies
The major state agencies involved with water management are the State Engineer's Office and the Colorado Water Conservation Board. These agencies play both positive and negative roles concerning institutional flexibility. That they exist at all is evidence that they are added flexibility to the appropriation system. These agencies oversee water development, water research, ground water


73
management, financing, and other activities. These administrative agencies have been left purposely (and necessarily) weak due to the limitations of power allowed them by the constitution. They have little say in the establishment of water rights but are the prime manager of these rights.
State agencies are difficult to evaluate in terms of economic efficiency. These agencies exist to provide a good or service which the market system supplies inadequately or ignores. The legislature has given these agencies the task of subsidizing water development or otherwise providing an institutional forum for development of the resource.
The appropriation system determines the nature and extent of water conservation and state agencies merely manage mandates from the courts. The introductory sections to statutes which guide state agencies all proclaim to conserve to the greatest extent possible and to manage it with the public good foremost, but these agencies play a small role in conservation. This is also where the greatest potential lies for improving water conservation.
State-level programs, if allowed, could encourage greater efficiency of use than currently exists.
State agencies may be described as having both positive and negative aspects when concerned with democratic values. Although more in the public eye with their purposes better known than the water courts, these agencies are directed by appointees who answer to the governor and the legislature.


74
State agencies act as vehicles for public access to the resource and also in recognizing the social values of water. The instream flow law is an example. As has been mentioned, this law allows the Colorado Water Conservation Board to acquire water rights to be left in the streams for the management of fish and wildlife and to provide opportunities for outdoor recreation. The state agencies have potential in the areas of democratic values, access to the resource, and recognition of social values, but have limited authority due to the constitution and the state legislature.
Sub-State Regional Entities
These entities include irrigation companies, conservancy districts, water conservancy districts, and others. For this evaluation, the Northern Colorado Water Conservancy District (NCWCD) is used as an example.
The NCWCD is frequently looked upon as a model for institutional flexibility and economic efficiency. The District has wide latitude in apportioning waters, especially from the Colorado-Big Thompson Project (C-BT).
It enters into contracts with users for an allotment of water to be delivered for a specific purpose and length of time. The petitioners have only to convince the District that there is a need for the water and that it will be put to a beneficial use.10 The water courts are not involved in allocating C-BT water.


75
The District obtains revenue from five contract classes including municipal, irrigation, private irrigation, corporation and ditch companies, and temporary use permits. Transfers of water within NCWCD are not difficult to obtain because there are not adjudication proceedings necessary to sort out third party effects. As C-BT water augments natural stream flow, no injury to other appropriators should occur. To transfer water, two parties agree on a price and then a petition of transfer is sent to the District, which can approve, approve with modification, or deny.H NCWCD plays no role in setting the price. This mechanism for managing water is an excellent example of a market for water with administrative oversight.
Sub-state regional entities have potential for minimizing waste but are hampered by the appropriation doctrine. The NCWCD is unique in that it has the freedom to allocate water without the water court's watchful eye.
NCWCD and other beneficiaries of west-to-east diversion of water are an example of market freedom which may promote more efficient use of water.
As to democratic values, sub-state entities are well-known for a well-established good-old-boy network. Members of the boards of directors of the districts are appointed by the district court and are subject to little exposure to the public. They all support one another's pet projects at the state legislature and expect and receive loyalty from water developers across the state.


76
An encouraging example of citizen action in
water
conservancy district matters occurred recently over the Stagecoach Reservoir project in Routt County.^2 Citizens began attending meetings of the District's board of directors and found some with expired terms in decision making roles. The district court hurriedly reappointed them and a subsequent vote on the project yielded a 1,500 to 1,200 defeat for those opposing the project. This was one of the first times ever that water conservancy district matters were made public and the vote so close.
As to access to the resource and recognition of social values criteria, these regional entities suffer the same shortcomings inherent in the appropriation system. The public interest in this area is simply too diverse and decentralized for it to be a viable constituency for any politician or administrative decision maker to embrace.
Most of these districts were formed to develop water for agricultural and, to a much lesser extent, municipal/domestic uses.
Municipalities
As a general observation, municipalities are rigid institutions which rely on engineering solutions to water supply problems and on public relations efforts to sell the electorate at bond issue and rate review time. Less


77
cynically, municipalities, if guided by a majority of concerned citizens, can be at the forefront of institutional innovation especially in the area of water conservation. Nowhere else in the state can conservation measures make a dramatic impact on water use with the least amount of political resistence.
As to the first criterion, institutional flexibility, municipalities possess distinct advantages over other institutions. First, municipal/domestic uses have the highest use in the state's preferential use system. The constitution places this use above agricultural and industrial uses. Municipalities can obtain water from other uses by condemnation if necessary. Suburbs of Denver have acquired much of their water from ditch companies which used to supply water to farms which have now been converted to subdivisions. Second, home-rule cities are guided by their city charters which are statements of goals and responsibilities for city government. Water supply is among the most important services a municipality is required to supply its citizens. Cities are also given statutory authority to construct and operate works outside municipal boundaries. This allows these entities to acquire water from agriculture, and the West Slope and construct the means of transporting the resource to the city.
Municipalities also have a wide latitude in the way they use water. A substantial amount of water is used for irrigation, that is, watering lawns and public parks. All


78
in all, municipalities have the most freedom of any institution and are considered to be quite flexible in nature. This flexibility also allows for considerable waste of water which is discussed below.
Municipalities are not very efficient economically.
Many charge a flat rate to consumers and charge lower, bulk rates for large volume consumers. Solutions to water supply problems usually involve large-scale, capital-intensive projects. Consumers are asked to vote for bond issues to fund these projects under the fear that if they do not, their taps will eventually run dry. Innovative projects to conserve water (providing more for others) are rarely taken seriously even though the costs are usually a fraction of what it would cost to build a reservoir with pumps, treatment plants, and a transportation network. Municipalities have an endless supply of money and as long as they are allowed these sums, will continue acting in a wasteful manner.
Although only three percent of the water in Colorado goes to municipal uses, the potential for conservation is great. Ripe areas for conservation include landscaping to fit the climate, various household water-saving devices, recycling and reuse, and secondary use agreements with downstream users. The flat rate municipalities charge is an impediment to water conservation (there is no incentive to reduce the amount of water used if the bill is the same every month), but this rate provides an even cash flow which


79
is necessary to pay off large water projects. Water conservation in municipalities involves minor lifestyle changes and many small but collectively important adjustments. Cities are understandably reluctant to mandate changes which some citizens may view as government infringement on personal freedoms. My advice is to let the market decide the price, and then conservation will occur with all but the wealthy or obstinate included.
Municipalities have primary access to the resource (via the State Constitution) as well as provide access to its citizens. Cities are required by their charters or state statutes to provide water for domestic purposes. However, cities also provide water for recreational uses such as lakes and streams. The Denver Water Department operates Dillon Reservoir in Summit County, which is a recreational and scenic use for people 70 miles from Denver.
As to democratic values, municipalities water departments are rarely open to public view. Water supply is usually seen as a legal/engineering problem which the layman would be little interested in. Times are changing, however, and the public should demand a larger part in the decision making process. Boards of commissioners overseeing water departments are appointed by mayors, city managers or city councils, rather than elected by the public. Many changes need to occur before municipal water supply is indeed a democratic activity.


80
The social values of waterfish and wildlife, scenic, aesthetic, and recreationalare provided as secondary or positive spillover effects. In some cases these values are actually transferred from one region of the state to another. For example, the Denver Water Department owns rights to and has diverted water from the Fraser River to the Denver area. This water used to provide scenic, recreational, and fish and wildlife amenities in the Fraser Valley (from Berthoud Pass to Granby), which have now been transferred to Denver as by-products of the original domestic use purpose.
In sum, municipalities are the most dynamic of water institutions. They provide for irrigation, recreational, scenic, and wildlife benefits as well as domestic use. They affect land use miles away from their boundaries. They have the constitution, wealth, and political power on their side. And they have a long way to go. Although many feel quibbling about 3% of the state's water is unnecessary, this is where water as well as money, can be conserved.
Interstate Compacts
These compacts, involving Colorado's rights to water with every surrounding state and many beyond, are seen as negatively affecting institutional flexibility and economic efficiency. A primary example is the Colorado River Compact of 1922. This compact which was discussed in the third chapter, divides the Colorado River basin into the Upper and


81
Lower Basins and apportions waters to all states involved. The problem lies in the fact that Colorado has yet to find beneficial uses for some of its apportionment. This water has been left in the Colorado River (and its tributaries) and subsequently used by California. That state has used this water beneficially for many years, and it is feared that unless Colorado develops uses for this water and the necessary storage that the state will lose this water to California via the appropriation doctrine. The executive director of the Department of Natural Resources, a former professor of water law, feels this concern is unwarranted and that the compact will protect Colorado's share of the Colorado River.13 Still, there is widespread fear that Colorado must either put this water to beneficial use or forever lose it to the Lower Basin states.14
Interstate compacts have little effect on other effectiveness criteria except conservation of the resource. In order to increase beneficially used water in Colorado, it is necessary to increase the amount used for all areasmunicipal, agriculture, and industry. Water conservation is viewed by most as a municipal problem/ opportunity. In no way would agricultural conservation be proposed on the West Slope. This would free up greater amounts of water which would then flow out of the state. Increased consumption of water is what will keep Colorado's share of the Colorado River in the state. Unfortunately,


82
this increased consumption could foster inappropriate activities for the long-term benefit of the state. Water used for water-intensive agriculture and large-scale industry have drawbacks such as lowered water quality, air pollution, and displacement of traditional water users.
Federal Government
The federal government affects water allocation in Colorado in the following ways. First, any water development that occurs on or affects federal lands requires agencies such as the U.S. Forest Service, National Park Service, and Bureau of Land Management to approve the project; water quality concerns are addressed by the Environmental Protection Agency; and any action affecting navigatable waters are subject to the U.S. Army Corps of Engineers' review. Usually, an environmental impact statement is required when any federal agency is involved.
Second, the federal government asserts reserved rights to water for federal lands in the amount necessary to accomplish the purpose of the reservation. Indian reservations are currently fighting for water throughout the West and reserved rights for wilderness areas has now become an issue due to a Sierra Club lawsuit which asks the federal government to assert its reserved rights in areas covered by the 1984 Colorado Wilderness Bill.
Third, the federal government has played the primary role in water development in Colorado and through the West


83
by funding large-scale projects that would have otherwise never been built.
As to institutional flexibility, the federal government as an institution has played a mostly negative role. Its actions are above state law and certain proposals made by this institution, such as nonreserved water rights, would create chaos in a state system. Federal regulations usually hinder state-level operation of the water system, although sometimes for good reason (ex., water quality control).
The federal government operates outside the bounds of economic efficiency, and funding of projects is a political rather than economic matter. The pork barrel projects of the past seem to be monuments to an era of federal largess.
To the other criteria, this institution is thus graded:
The federal government has done little to encourage water conservation even though it controls the headgates to the Colorado River. As to democratic values, the public is involved only at the U.S. Congressional level and when public meetings are held to gather opinion on some federal action. The federal government has acted to enhance the public's access to the resource although potentially at private expense, and has been in the lead in recognizing the social values of water, particularly water quality and protection of aesthetic, scenic, and recreational values on federal land.


84
Summary of positive aspects of Colorado Water Management
are:
1. Water is owned by the public according to the State Constitution.
2. A private market for water rights exists in the state. This is economically, politically, and culturally desirable.
3. There is a maximization of local control via the water court system.
4. The state has a role in acquiring and providing the public some social values of water by way of the instream flow law.
5. Potential exists in municipalities and regional entities for institutional innovation.
6. Uncertainty of the role of interstate compacts and the federal government gives the potential for innovation and reform.
Summary of negative aspects of Colorado Water Management are:
1. The right of private appropriation shall never be denied. This is a hindrance to any reform of the appropriation system.
2. Judiciary creates uncertainty in the private market for water.
3. There is no statewide comprehensive management of water in the state.


85
4. Fragmentation of jurisdictions creates administrative overlap, conflicting messages sent to the public, and waste of public resources.
5. Lack of direct public involvement in water resource management makes for little public input to decision making.
6. Potential for financial and political resources in urbanized areas to overwhelm less powerful areas and uses.
7. Institutional rigidity in the form of prior appropriation limitations within the state and among other states.
8. Uncertainty in the role of interstate compacts and federal government (fear of arbitrary actions fuels a parochial attitude).
Chapter Six, the concluding chapter, presents an alternative scenario to the existing system and sums up water allocation in Colorado; required changes, innovations, and the potential for reform.


FIGURE 5.1. SUMMARY OF EVALUATION OF COLORADO WATER INSTITUTIONS.
Water Court System State Admini- strative Agencies Sub-state Regional Entities Munici- palities Inter- state Compacts Federal Govern- ment
Institutional Flexibility 4 2 1-2 1-2 3-4a 4c
Economic Efficiency 2-3 3 1-2 4 4 3
Conservation*5 of Resource 4 3 3 2-3 4 3-4
Democratic Values 4 3-4 4 4 3 3-4
Access to Resource 4-5 2-3 4 2 3 2-3
Social Values 4 2-3 4 3 3 2
KEY: Values are expressed on the effect the institution has on the evaluation
criterion. Notes are provided where values may be ambiguous after reading the text.
1 Strong positive effect; the institution actively promotes characteristics of the criterion.
2
Positive effect; the institution allows characteristics of the criterion to exist, either by statute or as an unintended side effect.
oo


FIGURE 5.1 (cont'd. )
3 Neutral or no effect; the institution either has no effect on the criterion or its positive and negative effects are neutralized.
4 Negative effect; the institution discourages characteristics of the criterion to exist or acts in a way which prohibits its expression.
5 Strong negative effect; the institution does not allow characteristics of the criterion to exist and actively discourages any expression of these characteristics.
a Interstate compacts do provide a measure of certainty to states and private appropriators in the form of quantitative measures of shares of water to states.
b Water conservation is a function of the prior appropriation system. This system is viewed as unable to provide incentives for water conservation.
Hence the low marks across the board.
c The fear of federal instrusion into state water management is constant
throughout the west. Large, subsidized water projects are fine, but federal assertions of reserved rights are an anathama to the state managers as well a private appropriators.


ENDNOTESCHAPTER FIVE
1-See Allen V. Kneese and F. Lee Brown, The Southwest Under Stress (Baltimore, Md.: Johns Hopkins Press, 1981), pp. 41-100; Robert G. Dunbar, Forging New Rights in Western Waters (Lincoln, Neb.: University of Nebraska Press, 1983) pp. 209-217; Wayne Peak, "Institutionalized Inefficiency: The Unfortunate Structure of Colorado's Water Resource Management System," Water Resources Bulletin, 13, No. 3 (1977), pp. 551-562.
^Kneese and Brown, p. 89.
^Ibid., p. 216.
^Timothy D. Tregarthen, "Water in Colorado: Fear and Loathing of the Marketplace," in Water Rights: Scarce Resource Allocation Bureaucracy, and the Environment, ed. Terry L. Anderson (Cambridge, Mass.: Ballinger, 1983), pp. 119, pp. 130-131.
5Peak, pp. 553-554.
^Tregarthen, p. 124.
^Ibid., p. 125.
9lbid.
9C.R.S. § 37-92-103(2).
IOl.M. Hartman and Don Seastone, Water Transfers: Economic Efficiency and Alternative Institutions (Baltimore Md.: Johns Hopkins Press, 1970), p. 51; see also Kelly N.
DiNatale, An Assessment of Water use and Policies in Northern Colorado Cities (Fort Collins, Colo.: Colorado Water Resources Research Institute, 1981).
^Hartman and Seastone, p. 51.
l^charla Palmer, "Can Western Slope Water Policy Be Developed? How Can Citizens Become Involved?," Water '84 Conference, Glenwood Springs, Colorado, 12 May 1984.
l^David Getches, "Western Slope WaterUse It or Lose It, or What Are the Alternatives?," Water '84 Conference, Glenwood Springs, Colorado, 12 May 1984.
l4See Robert Coats, "The Colorado River: River of Controversy," Environment 26, No. 2 (1984), 7-40.


CHAPTER SIX
ALTERNATIVES, RECOMMENDATIONS, CONCLUSIONS
This final chapter first discusses trends which are affecting water use in Colorado. Most important of these trends are increasing population along the Front Range, increasing demands for Colorado's energy wealth and the arrival of new industry, and the financial crisis now occurring in many sectors of the agricultural community.
The second section presents the alternatives most likely to find favor among those wishing for changes in the current allocation system. These include moving toward greater reliance on the free market, moving toward greater state administrative allocation, and most probable, changes within the existing system.
The third section presents an "ideal" water allocation system. Goals and objectives are first discussed followed by specific characteristics of the system.
The final section makes conclusions as to the inadequacy
of
the prior appropriation system to allocate water and the
need for comprehensive planning,
Trends in Colorado Affecting Water Use
Population growth along the Front Range has been constant since the 1950's economic boom. The area is seen


90
as having outstanding recreational amenities, a large military population many of which have chosen to retire here, and a strong, recession-resistant economy. Much of the movement west has been part of a generalized trend of migration to the Sunbelt. The cities are newer and provide new job opportunities for those wishing to escape the Snowbelt's declining industrial base.
From 1970 to 1980, Colorado's growth rate was 3.1 percent.^ Along the Front Range the non-landlocked counties were growing much faster. Figure 6.1 shows population changes for the six county Denver metropolitan area and Figure 6.2 shows Colorado population growth by decade.
FIGURE 6.1. AVERAGE ANNUAL COUNTY POPULATION CHANGE IN COLORADO, BY YEAR, 1970-1980
County Percent
Denver -0.43
Adams 3.24
Boulder 4.38
Jefferson 5.79
Arapahoe 8.11
Douglas 19.92
Source: U.S. Bureau of the Census, 1980 Census of
Population, Chapter A, "Number of Inhabitants," Part 7, "Colorado" (Washington, D.C.: Government Printing Office, 1981, Table 2), p. 7-8.


91
FIGURE 6.2. POPULATION CHANGE IN COLORADO, BY DECADE
Percentage
Change from
Previous
Year Population Decade
1860 34,277* ______
1870 39,864 16.3
1880 194,327 387.5
1890 413,249 112.7
1900 539,700 30.6
1910 799,024 48.0
1920 939,629 17.6
1930 1,035,791 10.2
1940 1,123,296 8.4
19 150 1,325,089 18.0
1960 1,753,947 32.4
1970 2,209,596 26.0
1980 2,889,964 30.8
*1860 population is for Colorado Territory and includes parts of Kansas, Nebraska, New Mexico, and Utah Territories.
Source: U.S. Bureau of the Census, 1980 Census of
Population, vo1. 1, Characteristics of the Population, Chapter A, "Number of Inhabitants,"
Part 7, "Colorado" (Washington, D.C.: Government Printing Office, 1981), Table 1, p. 7-7.
According to a 1978 Denver Regional Council of Governments (DRCOG) study, the five county (excluding Douglas County) population will grow from 1.7 million in 1980 to 2.35 million by the year 2000.2 This increasing population will demand large quantities of as yet undeveloped water. A study by the Denver Water Department shows a near tripling of water requirements from 380,000 to 900,000 acre-feet per year,3 while the DRCOG study projects a doubling of water demand to 660,000 acre-feet per year through the study period from 1975 to 2010.


92
The question is how long and at what rate this population will occur. It seems at least in the short term, this trend will continue.
The demands for water are not only municipal. Extensive energy development on the West Slope could have a profound impact on current water uses and demands. This is the second major trend affecting water demand in the future. Significant oil and gas activity occurs throughout the northwest quadrant of the state as well as in the South Platte Basin. These activities and coal mining occurring mostly west of the Continental Divide are not large users of water. The development of oil from shale will require enough water to change the landscape of much of western Colorado.
A "moderate development" scenario developed by the Colorado Department of Health projects regional output of oil from shale to be 529,000 barrels per day which would require 67,800 acre-feet of water per year. If this water is acquired from agricultural sources, a loss of over 35,000 acres of currently irrigated land would occur.4 Most probably the water would come from the unused portion of its Colorado Compact apportionment. Most of this unallocated water is in northwestern Colorado but not in the Colorado River.
Colorado, like many other states is encouraging industry to relocate within its boundaries. The scramble for "hi tech" industries will mainly be felt in the water arena as


93
additional population growth requiring municipal/domestic water. Recently however, hi tech has been foundering in what has become a soft market.
If water augmentation via large and expensive water projects does not occur, water for municipal and industrial growth will come from agriculture. The position of agriculture in water matters is strong in terms of law and tradition but weak economically.5 a farm credit crisis is now affecting farmers and ranchers throughout the country.
In Colorado, it is feared that over 50 percent of all farmers and ranchers will go out of business during the next five years if agricultural economic policies remain the same.^ Along with agriculture's usually marginal profit potential, there seems to be little doubt as to its bleak future. If agricultural activity slows enough, water used for growing crops and watering livestock may be transferred to other uses. Already there is question as to whether there is water enough along the Front Range to support both irrigated agriculture and a large increase in population.7
The demise of agriculture, aside from the obvious social distress, may not impact the state's economy to a severe degree. Figure 6.3 shows that agriculture in Colorado accounts for only 2.7 percent of the state's employees's and 1.9 percent of the personal income generated.
Future Trends
Long term trends which are affecting water today and will probably play a large part in future water allocation


94
FIGURE 6.3. INDUSTRY SECTORS, EMPLOYEES, AND PERSONAL INCOME GENERATED IN COLORADO, 1981
Sector Employees 1981 (Thousands) Personal Income Generated 1981 (Millions of Dollars)
Wholesale and retail trade 327 $4,365
Government 242 4,563
Services 275 4,634
Manufacturing 189 (14%) 4,301 (17%)
Transportation and utilities 85 2,190
Construction 82 1,860
Finance, insurance and real estate 82 1,592
Agriculture and related services 37 (2.7%) 497 (1.9%)
Mining 46 1,459
Total 1,365 $25,461
Sources: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System, "Personal Income by Major Sources, 1976-1981," Mimeograph, April 1983, Table 5.00; U.S. Department of Labor, Bureau of Labor Statistics, "Estimated Colorado Nonagricultural Wage and Salary Employment for 1981," Mimeograph, 1981; Colorado Department of Local Affairs, Division of Commerce and Development, and the University of Colorado College of Business Administration, Colorado Business/Economic Outlook Forum, 1983 (Denver: Division of Commerce and Development, December 1982), p. 7.


95
include Colorado's inability to use its Colorado River allotment, lack of federal investment in water development, the elusive promise of oil shale, and the continuing plight of agriculture.
Colorado lets approximately 400,000 acre-feet of its Colorado Basin entitlement run downstream to Arizona and California. As no development in the foreseeable future will be able to make use of that water, innovations such as the recent proposal to lease water to downstream users makes good sense in that water allocated to Colorado under the Colorado River Compact is claimed within the state. If a mutually beneficial agreement to lease water to users such as San Diego can be made, the water rights will not be lost and the value of the water will stay in the state. Lease agreements have a major flaw in the fact that they run counter to the prior appropriation doctrine. The Metropolitan Water District (Los Angeles area) has priority rights to the water San Diego would lease from Colorado. At this time the proposal by the Galloway Group Ltd. and the City of San Diego has been soundly ridiculed by other Lower Basin water interests as violating the appropriation doctrine and looked at with interest by Upper Basin states with current surpluses of water.
The lack of federal involvement in water development has been a severe shock to the Colorado water establishment. Almost all major water development in the state has been due to massive federal investment. The lack of funding has


96
given rise to many schemes for raising capital. Some experts believe that in the near future the State Legislature will attempt to levy a statewide tax, perhaps on income or sales, to subsidize water development. This is a disturbing trend due to the fact that the state has no useful water plan. With no explicit goals and objectives for water management this tax money would continue to be used for storage projects and the like with no apparent strategy. If the state is going to tax for water development, well-defined goals must be brought forth.
Development of oil shale is another activity that may or may not occur in the future. The impact from massive oil shale development may have a minor effect on water use, but may create significant problems in the areas of water and air quality and land use.
The chronic problems of agriculture seem to remain constant into the future. With so many farmers and ranchers going out of business, some water may be freed for other uses.
And finally, a trend which is not considered significant at this time is the possibility of exploiting Colorado's natural amenities for recreation and tourism. The state is well-known for its mountain vistas and scenic rivers and this "clean industry" could generate significant economic benefits. Many counties in the state derive most of their income from tourism and recreation. A water strategy for these activities would include snow making at ski areas,


97
creating or maintaining opportunities for Whitewater recreation (leaving some potential damsites unoccupied), and preservation of mountain scenery. A combined state effort to conserve agricultural land and water in the form of purchase or transfer of water rights and development rights would be a step in this direction.
With the following trends in mind the next section discusses conventional alternatives to the present system of water allocation in the state.
Alternatives
It is crucial for public welfare that, as water becomes increasingly scarce in relation to the demands placed on it, the mechanism through which transfers are made be responsive to changing values in use. 8
The free market, state administrative allocation, and
changes within the existing system are seen as the primary
alternatives to Colorado's judicially-oriented system.
Free Market
In Colorado a water right is considered a property right, and as there is not appurtency rule tying water to land, water rights are bought and sold freely under the eye of the water court.
The essence of the debate over the ability of the market to allocate water surrounds market failures (also called externalities, spillovers, and third party effects). Those supporting the market system believe there is little potential for market failures and that problems of water


98
allocation are not caused by the appropriation system but are the fault of restrictions placed on water markets.9 These restrictions, mostly judicial, place a significant amount of uncertainty in the system which thwarts the efficiency of the market.10
Free market theorists view the appropriation doctrine as a crucial beginning step in the functioning of water markets. To salvage the appropriation doctrine, Anderson views the following steps as necessary:
1. Beneficial use should be determined by the market rather than in legislative, judicial, or administrative forums.
2. Preferential use restrictions should be eliminated in favor of market determination.
3. Intra- and interbasin transfers should be deregulated.
4. Regulations on changes of use should be reformed or eliminated.11
The other side of this debate, usually in favor of movement toward greater administrative allocation, feels that market failures are so prevalent throughout any water allocation system that administrative and/or judicial entities are required to protect third parties. An additional weakness of the market system is the "inherent shortsightedness of market rationality."12 Actors in the market tend to discount the future for immediate benefits.
A third major weakness of the market is its inability to


99
provide for non-market amenities such as scenic and aesthetic uses of water.
Long-range comprehensive planning transcends the short-term, parochial demands of the market. Only by a state-level mechanism for water allocation can a cost-effective system by maintained which reflects the public interest and changes in uses and demands for the resource.
Foss takes a middle ground, believing that water has characteristics of both a public and a private good.13 Therefore any allocation system should have mechanisms which suit both the private market as well as protect the public values of water. Even most economists agree that the market is no panacea ant that a public role is necessary to deal with public goods and bads.
State Administrative Allocation
Much concerning administrative allocation has been discussed and following is how this type of system could work in Colorado.
Colorado has the most decentralized of water allocation systems in the West. Were it to move toward greater administrative allocation and rely less on the judicial branch, it would approach the allocation systems of Wyoming and New Mexico. These states have placed the powers given in Colorado to the water courts to the state engineer.
A state-level body engaged in comprehensive planning for water supply could determine rights administratively and


100
reduce the uncertainty involved in judicial allocation.
Peak, a supporter of this type of allocation feels a state board is needed to consolidate formal authority over now fragmented constitutencies to insure the advocacy of the public interest.
As expected, strong criticism of a state bureaucracy comes from the free marketeers who view this an even less acceptable alternative to the judicial allocation at present. A state allocative body also faces the prospect of widespread political unacceptability. Centralizing control over allocation means a loss of local autonomy, which is a cherished value in this state. Any support for consolidation of authority would have to come from the urban Front Range and over opposition from rural areas and conservatives throughout the state.
Changes within the Existing System
Incremental changes within the current system is the most likely scenario to occur in Colorado. Increased demands for water by industry and municipalities will be met by agriculture and agumentation by development of conditional water rights.
Some minor changes could have a significant impact on water allocation. Among these are the establishment of water banks and other mechanisms (instream flow laws, state acquisition of water rights, and transfer of water rights akin to transfer of development rights in land use planning) which require the liberalizing of the definition of


101
beneficial use, and also streamlining administrative overlap. Water banking is a marketlike mechanism designed to facilitate water transfers.15 The "bank" would be a state sanctioned authority and would act as a broker of water rights by providing a market for transfers. The bank could also be allowed to store rights for parties not needing them in wet years. These rights could then be leased for the season while the original owner keeps title. Unfortunately in Colorado water attorneys quietly shake their heads when water banks are mentioned. They feel the system is already too complex to stress it in such a way that could damage established water rights. Water banks would have to be declared a beneficial use, although the State Supreme Court upheld the instream flow law even though it had not been constitutionally defined as such.
Changes within the existing system will be inadequate to meet the changing demands of water use. It is not enough merely to further jury-rig a system which is already a patchwork of sometimes fragmented and conflicting interests. A comprehensive restructuring of the allocation system is the most desirable (if least politically acceptable) choice for the long-term benefit of the state. The following section proposes goals and objectives for an ideal water allocation system and also specific characteristics of such a system.
An "Ideal" Water Allocation System
Water has been the tool of economic development and
often the key to that development.


102
If it takes a specialist to understand and use the law,
have not members of the general public been denied the
opportunity to become meaningfully involved in water
allocation systems?!^
Following is an outline of goals and objectives for my version of an ideal water allocation system.
Goal: Constitutional realignment of the Colorado water
allocation system.
Objective: Eliminate doctrine of prior appropriation in
Colorado. Replace with water rights as property rights subject to regulation by a state water board.
Objective: Eliminate preferential use system along with
prior appropriation. Replace with all uses being equal and allow oversight by a state water board.
Goal; Statewide comprehensive management of surface and ground water.
Objective: Consolidate ground and surface water
management under the state engineer.
Objective: Management of water at sub-state level by
river basin. Establish seven basin engineers with roughly the same management areas as the now existing water districts.
Objective: Eliminate overlapping jurisdictions and
extraneous authorities, consolidate the Colorado Water Conservation Board as a research arm under the state board, work conservancy districts into the river basin management
scheme.


103
Objective: Determination of water rights by basin
engineer with appeal to the state engineer and a state water court.
Goal: Encourage flexible devices for protecting social
values of water.
Objective: Allow the state water board to acquire water
rights through a water bank system (to be discussed later) for preservation of recreational, scenic, aesthetic, and fish and wildlife uses.
Objective; State board would work closely with the state agencies involved with parks and recreation, tourism, and fisheries and wildlife.
Objective: Allow public referenda to decide the values
most important and desirable to the electorate.
Goal: Comprehensive water resources planning to direct
growth and economic development.
Objective; State-level user fee system directing growth by charging lower rates in areas of desired growth and vice versa.
Objective; Direct economic development type and magnitude by charging varying fees for different types of development.
Goal: Allow the free market to operate between user classes
and within river basins.
Objective; Willing buyers and sellers may transfer water rights for an agreed upon price equal to or above the


104
basic user fee. Transfers are subject to review by the state engineer.
Objective: Transfers between user classes are allowed
to occur but are subject to review by basin and state board (depending upon the magnitude of the transfer and the parties involved).
Objective: The state is involved in the market as an
equal via the RLF/Water Bank.
Goal: Resolve interstate compact uncertainty and federal
reserved rights questions.
Objective: Determine Colorado's share of the Colorado
River via the two compacts in numerical terms and devise protection from future lawsuits.
Objective: Settle judicially all federal reserved
rights claims attempt to subject federal water rights to the state allocation system.
Specific Aspects of the Ideal System
The entity which would oversee this system, a state water board, would have elected members representing all major river basins. The governor or lieutenant governor would sit on the Board as well as at-large members from state agencies involved with water matters. Committees within the Board would be concerned with surface water, ground water, finance, agriculture, industry, municipalities, social values, and tourism. Funding for the Board and the entire system would come from the State


105
Legislature as is now the case, and perhaps an authorized levy to fund special projects.
The Colorado Water Conservation Board (CWCB) would come under the authority of the State Board and would be slightly modified from its current structure and functions. The CWCB would have two major areas of concern under its jurisdiction: finance and research. The financial arm
would oversee all funds used by the system and be subject to oversight by the State Legislature and the appropriate committees of the State Board. A division of water research, where most of the water planning would occur, would coordinate with industry, agriculture, municipalities, appropriate state agencies, recreation and tourism officials. Recommendations for state acquisition of water rights (hopefully coordinated with appropriate land acquisition) through the RLF/Water Bank would be processed here and formal proposals then sent to the State Board. The user fee system to direct growth and economic development would operate within the research division and coordinate with state and local governmental entities and private interests to establish goals and objectives for cities, counties, and regions.
The State Engineer's Office is the other branch under the State Board. Technical management of water on a day-to-day basis would be the primary directive for this branch. The state engineer would be in charge of the seven basin engineers and be the final administrative arbiter of


106
determining water rights by development and transfer of water rights between types of uses and between places. When administrative appeals are exhausted, a state water court could be petitioned.
The seven basin engineers would operate in areas approximately those of existing water divisions.
Petitioners for establishing water rights or those wishing to buy, sell, or transfer water rights would go first to the basin engineer. S/he would then make recommendations after consulting with local, county, and/or regional officials and affected third parties. The basin engineer would also make recommendations after consulting with these authorities concerning the RLF/Water Bank. These recommendations would then be sent to the research division of the CWCB. The day-to-day allocation of water for irrigation and other uses would be carried out at the regional level by water conservancy districts, irrigation districts, and municipalities. The regional agencies would keep records of transfers, amounts used by those holding water rights, and any other statistics useful to the state engineer and the CWCB.
The now decentralized water courts would be consolidated into a state water court. This court would operate at the Court of Appeals level and, as now occurs, decisions at this level may be appealed to the State Supreme Court.
A revolving loan fund (RLF) would be combined with a water bank as an additional flexibility device to help


107
facilitate water transfers and allow a forum for state acquisition of water rights. The RLF/Water Bank would provide loans to users for improvement of water use efficiency. The conserved water would then be dedicated to the water bank where it would be transferred to other users through the market. Another alternative would be to allow the beneficiary of the conserved water to dispose of it to pay back the loan. The current system rewards water conservation by having it "belong to the river." That is, the water user loses the water due to his/her efficiency.
The possibilities for this device are many. Even if none of the parts of this ideal system are realized, an entity such as the water bank should be vigorously pursued.
Finally, no mention has yet been made concerning water quality. Most water experts agree that water quality and allocation must somehow be meshed. This paper has not discussed water quality at all, and it is my opinion that it is a subject for another study or should be included in any further expansion of this paper.
This ideal system is a radical departure from current water management practices and therefore has limited practicality. Some parts may be unconstitutional and most of it would have very little support if presented to the State Legislature and the water establishment. I do feel, however, that in the long term this type of system is more desirable than a continuation of the present one. It is


108
mostly a matter of proactive rather than reactive or non-existent planning for the state's most important natural resource.
Conclusion
This paper has cut a wide swath across water allocation in Colorado. It has not gone in depth in many areas and has avoided others completely (specifically water quality and water law). The reader is now familiar with the history of water allocation in Colorado, how the resource is managed today, problems and opportunities concerning the present system, and criteria appropriate to its evaluation. An "ideal" water management scheme has been presented which, although a major departure from the status quo, contains the characteristics necessary for long-term proactive management of water in Colorado.
With this in mind, the following conclusions are made. First, Colorado's extreme version of the prior appropriation system must be overhauled or eliminated in favor of a system more flexible and accountable to the public. This extreme appropriation doctrine is not well-established in the West and any departure from it, especially from the state which has embraced it so completely, would most probably cause quite a stir throughout the country but hardly bring down the state's economy. It is generally agreed that the appropriation system is an antiquated system which better suits an age of development rather than one of management.


109
What is not agreed upon is how to change it. There seems to be a universal fear of tampering with this delicate and complex system due to its lengthy and at times beneficial service for over a century.
Second, comprehensive planning and management of water is no longer an unnecessary luxury. The lack of clearly enunciated goals is beginning to cripple effective water management. Colorado recently lost 4000 acre-feet of water to New Mexico partly due to the court's opinion that ". Colorado has not committed itself to any long-term use for which future benefits can be studied and predicted."19
If future court cases base their decisions on how well the resource is planned for, Colorado must develop goals and objectives for water management or lose this water to other states more willing to take control of the resource. It makes little sense to adhere to the status quo, a pseudo-market system with judicial determination having no direction. The decentralized system lacks public accountability, does not provide for the expression of social values, lacks explicit goals and objectives for rational resource use, and is too inflexible to meet the changing demands of water use in Colorado. The public deserves a greater share in the decsion making process for what is essentially a public resource.


ENDNOTESCHAPTER SIX
^Mel Griffiths and Lynnell Rubright, Colorado; A Geography, (Boulder, Colo.: Westview Press, 1983), p. 189.
^Denver Regional Council of Governments, Regional Water Study (Denver, April 1978), pp. 4, 9.
^Denver Water Department, Metropolitan Water Requirements and Uses, 1975-2010, vol. 1 (Denver; Metropolitan Denver Water Study Committee, 1975), p. 38.
4Paul Ferraro and Paul Nazaryk, Assessment of the Cumulative Environmental Impacts of Energy Development in Northwest Colorado (Denver: Colorado Department of Health, March 1983), pp. 5, 17.
5Don Paarlberg, Farm and Food Policy; Issues of the 1980's (Lincoln, Neb.: University of Nebraska Press, 1980) pp. 194-223.
6joe Weber, "State May Lose Half Its Farmers, Ag Chief Says," Rocky Mountain News, 3 November 1984, p. 101.
7League of Women Voters, Colorado Water (Denver: LWV, 1975, rev. 1982), p. 29.
L.M. Hartman and Don Seastone, Water Transfers: Economic Efficiency and Alternative Institutions (Baltimore Md.: Johns Hopkins University Press, 1970), p. 25-26.
^Terry L. Anderson, Water Crisis: Ending the Policy Drought (Baltimore, Md.: Johns Hopkins University Press, 1983), p. 70.
lOTimothy D. Tregarthen, "Water in Colorado: Fear and Loathing of the Marketplace," in Water Rights: Scarce Resource Allocation, Bureaucracy, and the Environment (Cambridge, Mass.: Ballinger, 1983), p. 135.
11-Anderson, pp. 53-62.
l-^wayne Peak, "Institutionalized Inefficiency: The Unfortunate Structure of Colorado's Water Resource Management System," Water Resources Bulletin, 13, No. 3 (1977), p. 559.
l^Phillip 0. Foss, Institutional Arrangements for Effective Water Management in Colorado (Fort Collins, Colo. Colorado Water Resources Research Institute, 1978), pp. 50-55.


Ill
14Peak, p. 560.
^Frederick, p. 248 .
l^Gary Hart, "Emerging Values in Water Resources Management," in Water Needs for the Future, ed. Ved P. Nanda (Boulder, Colo.: Westview Press, 1977), pp. 133-134.
l7Michael D. White, "Legal Restraints and Responses to the Allocation and Distribution of Water," in Water Needs for the Future, ed. Ved P. Nanda (Boulder, Colo.: Westview Press, 1977), p. 131.
ISRobert Coats, "The Colorado River: River of Controversy," Environment, 26, No. 2 (1984), 7.
l^David H. Getches, "Colorado's Biggest Water Need is Planning, Rocky Mountain News 9 September 1984, pp. 85, 88.


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