Two Rivers Water Co. is suing farmers under the Welton Ditch

Cucharas Dam via The Pueblo Chieftain

From The FencePost:

For generations, this community under the Welton Ditch has been growing hay, winter wheat, barley, oats, vegetables and livestock, but all of that could soon come to a crashing halt…

Two Rivers Water & Farming Co. (Two Rivers) is suing Welton Water and its shareholders for what they are calling “wasteful and inefficient water use practices.”

In accordance with Welton Water’s senior rights, water is allocated from the Huerfano River in priority; however, satisfaction of those senior water rights, in accordance with Colorado law, means Two Rivers is sometimes precluded from filling its storage reservoirs while Welton Water’s senior rights are unsatisfied. If Two Rivers wins the suit, Welton Water, and its shareholders, will lose its right to divert and use water in accordance with their water rights in certain months of the year and a new precedent will be set for future water rights of Colorado farming and ranching families.

“Two Rivers is suing each of the shareholders individually, and we believe that their game plan is to get us tied up in a legal battle that none of these farmers and ranchers can afford,” said Larry Morgan, Welton Land & Water Co. president. “If we can’t defend ourselves and we lose our water rights, we will all be in serious trouble.”

TENUOUS SITUATION
Welton Water’s senior rights are still junior to the water rights of appropriators who live higher up in the mountains, meaning that very little summer water is available to satisfy the water rights decreed to the Welton Ditch and therefore the shareholders receive very little summer water. Without the winter water, it could prove difficult for Welton Water’s shareholders to run livestock on this land, raise winter wheat or get the ground wet in the springtime for planting.

“We don’t know when we’ll go to court on this; I suppose, it depends on how much paperwork they throw at our attorneys,” Morgan said. “We think they are going to deep-pocket us to death, and without water, we won’t be able to water our cattle or crops, and our land becomes basically worthless.”

John Justus, legal counsel for Welton Water, says he questions the validity of Two Rivers’ claims.

“The litigation was initially triggered by a Colorado State Engineer’s enforcement action seeking enforcement of an unappealed administrative order requiring Two Rivers to cut down the dam associated with Cucharas Reservoir, one of Two Rivers two junior reservoirs,” Justus said. “That order was based on public safety concerns as a result of the condition of the dam at Cucharas Reservoir. Two Rivers, in its defense against the engineer’s enforcement action alleged that it was unreasonable to demand that the Two Rivers comply with the dam cut-down order, and the associated costs, unless the engineers addressed what Two Rivers characterized as ‘wasteful and unreasonable water practices’ by Welton Water and its shareholders. Consistent with that allegation Two Rivers brought a separate set of claims against Welton. Although Two Rivers ultimately entered into a consent decree with the state and division engineers, which requires it to cut down the dam and complete certain other tasks, it continues its litigation against Welton Water and its shareholders.”

According to Justus, Two Rivers has several “creative claims” against Welton Water.

The first is “Two Rivers claim that certain traditional winter irrigation practices of the Welton shareholders fail to constitute beneficial use of water under Colorado law,” Justus said. “Because of the nature of this claim and its impact on their individual water rights, the court required that Two Rivers join Welton Water’s shareholders to this action. However, many ditch companies and their shareholders utilize the same types of irrigation practices that Welton Water’s shareholders do, so this should be of great interest for other people with winter water rights across the state of Colorado.”

Justus further explained, “Prevention of the form of winter irrigation practiced under the Welton would mean irrigation practices that are necessary for maintaining viability of certain lands for agricultural production would no longer be permitted. Importantly, the Winter Water Storage Program in Pueblo Reservoir, and the decree confirming the change of water rights necessary for the operation of that program would have been improper if Two Rivers’ theories are correct.”

CONCRETE STRUCTURES
The second is “Two Rivers claim that Welton’s diversion structure from the Huerfano River must be a permanent concrete structure in order to be a reasonable means of diversion under Colorado law,” Justus said. “If that was to become the new standard, it would mean that hundreds and possibly thousands of structures in the state no longer constitute reasonable diversion methods. Although the court has declined to dismiss this claim at this point in the litigation, Welton Water is confident that the law paired with the facts to be demonstrated at trial will show Two Rivers’ allegations to ultimately be groundless.”

Third is “Two Rivers claim that stream losses which occur in the division engineer’s administration of the waters of the Huerfano River in response to a ‘call’ petition by Welton Water pursuant to its senior water rights constitute unreasonable and actionable waste by Welton Water.”

In a briefing to the court, which has yet to be decided, Justus said, “Both Welton Water and the state and division engineers have argued that no such claim is cognizable under Colorado law. The court has yet to issue an order on the matter.”

The concept is simple according to Justus, “an appropriator like Welton Water and its shareholders cannot legally waste water over which it has no control, until water is diverted by Welton Water, the water remains within the exclusive administrative control and authority of the state and division engineers.”

Not only is Two Rivers seeking year-round water rights for its cannabis business, but it appears development projects might be in the works.

“In an investor update to its shareholders dated December 2016, Two Rivers says they are a vegetable company, but that document suggests that the entity is pivoting its near term focus to utilizing its water to grow hemp and for the development of infrastructure for the cannabis industry,” Justus said. With respect to its long-term focus, “that document suggests Two Rivers wants to take its existing water rights and use it in a development fashion, generating revenue through selling taps for development. Interestingly, Two Rivers water rights are not decreed for nonagricultural uses like domestic or municipal purposes. Nonetheless that document suggests Two Rivers plans to invest approximately $42 million in Cucharas Reservoir over the next two years.”

Justus noted that “eliminating the effect of Welton Water’s downstream senior rights will however potentially increase the yield of Two Rivers more junior rights associated with its reservoirs and therefore its return on its investments.” 
The case is ongoing, and as Two Rivers is suing each shareholder individually, Justus said it’s unclear when this will go to trial; however, he anticipates a July setting conference with the court, with a trial following 6 to 9 months after.

COUNTER CLAIM
Meanwhile, Welton Water has a counter-claim against Two Rivers arguing that out-of-priority depletions to the Cucharas and Huerfano Rivers by Two Rivers’ Cucharas Reservoir, in amounts approaching 3,000-acre-feet per year, are injuring the water rights of Welton and others. Welton anticipates that the unabated depletions will continue again this irrigation season.

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