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Gallegos Family Properties, LLC v. Colorado Groundwater Commission

Supreme Court of Colorado, En Banc

June 19, 2017

Gallegos Family Properties, LLC; Marianne Gallegos; Ellen Gallegos; Gene J. Gallegos; and Reinaldo Gallegos, Plaintiffs-Appellants
v.
Colorado Groundwater Commission, an administrative agency of the State of Colorado; Dick Wolfe, in his capacity as the Colorado State Engineer, and as ex officio Executive Director of the Colorado Ground Water Commission, and as a non-voting member of the Colorado Ground Water Commission; Joseph B. Grantham, in his capacity as a Hearing Officer for the Colorado Ground Water Commission; Edna B. Anderson; William Anderson; BCK Heath Property LLC; Larry L. Croissant; Jean L. Croissant; Deerco LLC; Kenneth Everitt; Penny Everitt; Four Diamonds Ranch LLC; Hereford Farms, LLC; Rosella J. Jessen; Anita R. Johnson; Rod Johnson; Carl A. Johnson; James L. Karst; Judy Karst; James M. Konig; Janet F. Konig; Michael D. Konig; Konig Investments LLC; Larry Lang; Dan Loyd; Loyd Farms; Loyd Farms General Partnership; Jesse E. Loyd; Evelyn T. Loyd; F & R Marick; Fred D. Marick; Roxanne L. Marick; Philip McKinley; Diane McKinley; Colin W. Nicklas; Charles E. Nussbaum; Dorothy Nussbaum; C & D Nussbaum; Richard L. Pettinger; Lisa R. Pettinger; Rory J. Pettinger; Rocky Plains LLP; TR, Inc.; Lee A. Tappy; Tennick Land & Cattle Co.; Clarence W. Tietmeyer; Vonda J. Tietmeyer; Clarence E. Tietmeyer; Scott W. Tietmeyer; Paula J. Tietmeyer; Vonda Jean Tietmeyer; Darrell J. Timm; Donald L. Timm; Town of Grover; and Sharon C. Young, Defendants-Appellees Gallegos Family Properties, LLC, Plaintiff-Appellant
v.
William Anderson, Larry Lang, Dan Loyd, Loyd Farms, Loyd Farms General Partnership, Jesse E. Loyd, Evelyn T. Loyd, Richard L. Pettinger, Lisa R. Pettinger, Rory J. Pettinger, Clarence W. Tietmeyer, Vonda J. Tietmeyer, Clarence E. Tietmeyer, Scott W. Tietmeyer, Paula J. Tietmeyer, and Vonda Jean Tietmeyer, Defendants-Appellees

         Appeal from the District Court Weld County District Court, Water Division 1, Case No. 03CV1335 Honorable James F. Hartmann, Designated Groundwater Judge

          Attorneys for Plaintiffs-Appellants: Buchanan Sperling & Holleman, PC Timothy R. Buchanan John D. Buchanan Arvada, Colorado

          Attorneys for Defendants-Appellees Colorado Groundwater Commission, an administrative agency of the State of Colorado; Dick Wolfe, in his capacity as the Colorado State Engineer, and as ex officio Executive Director of the Colorado Ground Water Commission, and as a non-voting member of the Colorado Ground Water Commission; and Joseph B. Grantham, in his capacity as a Hearing Officer for the Colorado Ground Water Commission: Natural Resources & Environment Section Office of the Colorado Attorney General Cynthia H. Coffman, Attorney General

          Patrick E. Kowaleski, Senior Assistant Attorney General Denver, Colorado Attorneys for Defendants-Appellees William Anderson, Larry Lang, Dan Loyd, Loyd Farms, Loyd Farms General Partnership, Jesse E. Loyd, Evelyn T. Loyd, Richard L. Pettinger, Lisa R. Pettinger, Rory J. Pettinger, Clarence W. Tietmeyer, Vonda J. Tietmeyer, Clarence E. Tietmeyer, Scott W. Tietmeyer, Paula J. Tietmeyer, and Vonda Jean Tietmeyer: Lawrence Jones Custer Grasmick LLP David P. Jones Wesley S. Knoll Johnstown, Colorado No appearance by or on behalf of: Edna B. Anderson; BCK Heath Property LLC; Larry L. Croissant; Jean L. Croissant; Deerco LLC; Kenneth Everitt; Penny Everitt; Four Diamonds Ranch LLC; Hereford Farms, LLC; Rosella J. Jessen; Anita R. Johnson; Rod Johnson; Carl A. Johnson; James L. Karst; Judy Karst; James M. Konig; Janet F. Konig; Michael D. Konig; Konig Investments LLC; F & R Marick; Fred D. Marick; Roxanne L. Marick; Philip McKinley; Diane McKinley; Colin W. Nicklas; Charles E. Nussbaum; Dorothy J. Nussbaum; C & D Nussbaum; Rocky Plains LLP; TR, Inc.; Lee A. Tappy; Tennick Land & Cattle Co.; Darrell J. Timm; Donald L. Timm; Town of Grover; and Sharon C. Young.

          OPINION

          BOATRIGHT, JUSTICE

          ¶1 Gallegos Family Properties, LLC ("Gallegos"), returns to this court for a second time in its effort to de-designate a portion of the Upper Crow Creek Designated Ground Water Basin ("the Basin") and redraw the Basin boundaries to exclude twenty-five wells so that the State Engineer can curtail these junior groundwater rights in favor of Gallegos's senior surface water rights on Crow Creek. The defendants-appellees ("Well Owners") oppose this petition because if their properties remain within the Basin, the State Engineer cannot curtail their junior groundwater rights.

         ¶2 This opinion addresses appeals from two related cases: Gallegos's petition to de-designate a portion of the Basin, Case No. 15SA118, and an order awarding the Well Owners a portion of their litigation costs, Case No. 15SA277. We must decide whether Gallegos satisfied the statutory standard for de-designating a portion of the Basin set forth in section 37-90-106(1)(a), C.R.S. (2003), [1] and as interpreted by this court in Gallegos v. Colorado Ground Water Commission, 147 P.3d 20 (Colo. 2006), [2] and whether Gallegos should bear the Well Owners' costs.[3] Specifically, we must determine whether Gallegos successfully showed by new evidence not before the Designated Groundwater Commission in 1987 ("1987 Commission") that "future conditions require and factual data justify" de-designation because well pumping in the Basin has greater than a de minimis impact on Gallegos's surface rights. The designated groundwater court concluded that Gallegos had failed to make new showings sufficient to justify de-designating a portion of the Basin and taxed Gallegos for a portion of the Well Owners' costs. We affirm.

         ¶3 We conclude that Gallegos failed to prove by evidence not before the 1987 Commission that the Well Owners are pumping water connected to Crow Creek such that future conditions and factual data justify de-designating a portion of the Basin. Because a party must show connectivity to prove impact, Gallegos failed to meet its burden, and de-designation is improper. Accordingly, we affirm the designated groundwater court's order denying Gallegos's petition. Furthermore, because the designated groundwater court properly denied Gallegos's petition for de-designation, we conclude that the court did not abuse its discretion in concluding that the Well Owners were prevailing parties for purposes of C.R.C.P. 54(d), that the costs awarded were reasonable and necessary, and that Gallegos should pay these costs pursuant to Rule 54(d).

         I. Facts and Procedural History

         ¶4 Gallegos's surface water rights consist of a combined flow of 413 cubic feet per second in the Consolidated Larson Ditch and storage of 59.5 acre-feet in Larson Reservoir #1. These rights were decreed in 1914 to irrigate up to 1, 920 acres of land in Weld County. This consolidated decree, known as the Larson rights, is senior to the Well Owners' groundwater rights in the Basin, most of which date back to the 1940s and '50s. The Larson rights divert from a headgate on Crow Creek, a tributary of the South Platte River that originates in Wyoming and flows into Colorado. Before 1950, Crow Creek had a reliable base surface flow in Colorado, but as surface use and pumping increased in Wyoming, water users in Colorado turned from increasingly unreliable surface rights to pumping from the aquifers underlying Crow Creek.

         ¶5 In 1983, a group that included the Well Owners (or their predecessors in interest) and Gallegos's predecessor in interest petitioned the Colorado Groundwater Commission to designate the Basin. Gallegos's predecessor was one of the main supporters of the designation effort because he, like the Well Owners, could no longer rely on his surface rights to meet his needs. Following a state-funded viability study, the results of which are detailed in a document that the parties call the Kirkham Report, the Commission's hearing officer held the initial designation hearing in 1986. After amending the proposed Basin boundaries to accommodate the sole objection to designation, the hearing officer designated the Basin pursuant to one of the two designation standards in section 37-90-103(6)(a), C.R.S. (2016).[4] Under the second standard (the standard under which the 1987 Commission designated the Basin), designation is proper for "groundwater in areas not adjacent to a continuously flowing natural stream wherein groundwater withdrawals have constituted the principal water usage for at least fifteen years preceding the date of the first hearing on the proposed designation of the basin." § 37-90-103(6)(a). The 1987 Commission affirmed the hearing officer's findings and decision to designate the Basin under this designation standard. No party appealed.

         ¶6 In 1999, Gallegos purchased the Larson rights and most of the associated farmland. Gallegos leased out the land and water rights until 2002, when the tenant farmer's alfalfa crop failed because insufficient surface flows precluded irrigation. Gallegos petitioned the State Engineer to curtail the Well Owners' pumping, claiming that the Well Owners' pumping had injured Gallegos's senior surface rights. When the State Engineer denied the request for lack of jurisdiction over designated groundwater basins, Gallegos appealed to the Commission. The hearing officer, and later the Commission, concluded that claim and issue preclusion barred Gallegos from seeking curtailment of the Well Owners' wells because (1) Gallegos's predecessor had notice of the designation proceeding, and (2) Gallegos's predecessor had actually sought the designation. The Commission also concluded that it lacked jurisdiction over surface waters and could not, therefore, curtail pumping in a designated groundwater basin to protect such waters. On appeal, the designated groundwater court disagreed, concluding that Gallegos was not barred by claim or issue preclusion and that the Commission had erred in concluding that it lacked jurisdiction. Although this result validated Gallegos's ability to seek de-designation from the Commission, it did not mandate that the Commission de-designate the Basin as Gallegos had hoped.

         ¶7 Gallegos appealed to this court. Gallegos v. Colo. Ground Water Comm'n (Gallegos I), 147 P.3d 20 (Colo. 2006). To resolve that appeal, we clarified two salient points of distinction between tributary groundwater managed under the Water Rights Determination and Administration Act, sections 37-92-101 to -602, C.R.S. (2016) ("1969 Act"), and designated groundwater managed under the Colorado Groundwater Management Act, sections 37-90-101 to -143, C.R.S. (2016) ("Management Act"). We first distinguished tributary groundwater from designated groundwater, explaining that "designated groundwater cannot, as a matter of law, impact surface flows by greater than a de minimis amount." Gallegos I, 147 P.3d at 28. Second, we affirmed that the Commission has jurisdiction to determine whether groundwater is tributary to surface water or designated groundwater, id. at 29-30, and that it retains jurisdiction over groundwater that it concludes is designated groundwater, id. at 31-32. Only if the Commission has determined that the disputed water is not designated groundwater does it lose jurisdiction. Id.

         ¶8 Having confirmed that the Commission had jurisdiction over Gallegos's claim, we also concluded, however, that claim and issue preclusion limited the evidence that Gallegos could offer to only that evidence that was not before the 1987 Commission. Id. at 33. We remanded the case to the hearing officer to afford Gallegos its opportunity to show by such evidence that the Well Owners' pumping has greater than a de minimis impact on-i.e., is connected to and injures-Gallegos's senior surface rights, and that future conditions and factual data justified de-designating a portion of the Basin.

         ¶9 On remand to the hearing officer, Gallegos retained several experts to substantiate and testify to its claim that the Well Owners' pumping impacted its senior surface rights. As to connectivity, Gallegos asserted that the 1987 Commission had not seen or considered evidence that Crow Creek was a gaining stream at the Larson headgate, and by implication, that the alluvial aquifer thinned to a neck at the Larson headgate, causing groundwater to come to the surface and become available for diversion. Gallegos's expert drilled test wells and observed stream flows in the immediate vicinity of the alluvial neck to substantiate this point. As to injury, Gallegos argued that the 1987 Commission had inadequate evidence of, and thus underestimated, the extent of depletion that pumping in Wyoming and Colorado would have on surface water availability in Crow Creek. The Well Owners disputed Gallegos's methodology and asserted that Gallegos had failed to meet its burden under section 37-90-106(1)(a) and Gallegos I.

         ¶10 The hearing officer ultimately concluded that Gallegos had not met its burden of producing new evidence not before the 1987 Commission. As to connectivity, the hearing officer concluded that Plate 2 in the Kirkham Report, an image of a potentiometric[5] map of the Basin designation area, clearly shows the necking of the alluvial aquifer, and because the Kirkham Report was one of the primary pieces of evidence that the 1987 Commission relied on, this evidence was not new. As to injury, the hearing officer concluded that the lack of streamflow measurements on Crow Creek impeded Gallegos's showing of injury because there was no way to quantify stream depletion and the effect, if any, that curtailment would have on streamflow. The hearing officer also found, contrary to Gallegos's argument, that the 1987 Commission had received evidence of and anticipated increased pumping in Wyoming. More significantly, the hearing officer found that pumping in Colorado had actually decreased since the Basin was designated. Having concluded that Gallegos had failed to meet its burdens under section 37-90-106(1)(a) and Gallegos I, the hearing officer recommended denial of the petition in March 2012. The full Commission affirmed this recommendation on appeal.

         ¶11 Gallegos appealed to the designated groundwater court in de novo proceedings. On Gallegos's motion, the court issued three pretrial orders limiting the scope and focus of the litigation, the most significant for our purposes being one that found that evidence "before the [1987] Commission" included evidence actually presented during the designation proceedings and evidence available but not actually presented so long as the parties had notice of it. At trial, Gallegos refined its connectivity argument about the necking of the alluvium, arguing that the 1987 Commission had not known that water discharged to the surface at the neck when the aquifer was sufficiently saturated. As to injury, Gallegos's expert testified about monitoring the recharge rate and water table measurements in eight test wells, and extrapolated an injury quantity from similar measurements taken during the designation viability study. Gallegos also reiterated the arguments that it had raised about connectivity and injury to the hearing officer.

         ¶12 The designated groundwater court affirmed the decision not to de-designate a portion of the Basin. The court acknowledged the consensus among the parties that the groundwater in the Basin was connected to the surface water that feeds the Larson rights. However, it also noted that the 1987 Commission had considered Plate 2 of the Kirkham Report and other evidence of this connection, and that Gallegos had not, therefore, offered evidence that was not before the 1987 Commission. Consequently, the designated groundwater court rejected Gallegos's argument that the connectivity was a future condition pursuant to section 37-90-106. Under the injury prong, the court agreed with the hearing officer that the 1987 Commission had received evidence of increasing water use in Wyoming and that its designation decision anticipated that this trend would continue. It also found that pumping in the Basin had actually decreased since 1987 when the Basin was designated, and that Colorado pumping activity therefore could not have created a new injury arising as a future condition pursuant to section 37-90-106. Finally, the court found the Well Owners' primary expert to be more credible than Gallegos's primary expert, and it credited the former's testimony that the latter's injury estimates were incorrect and based on flawed modeling. The court thus concluded that Gallegos had failed to meet its burden in proving injury. The designated groundwater court ultimately concluded that Gallegos had failed to satisfy both its statutory burden and the standard we set out in Gallegos I, meaning de-designation of part of the Basin to exclude the Well Owners' wells was improper.

         ¶13 Having resolved the merits of the dispute, the designated groundwater court awarded $44, 746.92 in costs to the Well Owners. The court initially found that although the Well Owners were not the named defendants when Gallegos first filed its petition, they were nevertheless "parties" for purposes of awarding costs under C.R.C.P. 54(d). Because the Well Owners joined the litigation as indispensable parties to defend their interests in maintaining the Basin boundaries and they obtained this result, the court concluded that they had prevailed. Having established the Well Owners' general eligibility to move for and obtain a costs award, the court analyzed each claimed category of costs. The bulk of the costs related to expert witnesses. The court awarded those costs as being reasonable and necessary, particularly in light of the court's finding that the Well Owners' primary expert was "integral" to their challenge against Gallegos's petition. The court also exercised its discretion to award the other costs- mileage expenses, hotels, transcript preparation fees, and copying fees-as having been reasonable and necessary to resist Gallegos's attempt to de-designate a portion of the Basin.

         ¶14 Gallegos now appeals the order denying de-designation of a portion of the Basin to exclude the Well Owners' wells and the order awarding the Well Owners a portion of their costs.

         II. Analysis

         ¶15 Although the designated groundwater court addressed both the connectivity and injury prongs in its order on de-designation, we find it unnecessary to do so. Because Gallegos must prove both connectivity and injury under the impact showing, failure to prove either is fatal to Gallegos's claim. We conclude that Gallegos failed to prove by evidence not before the 1987 Commission that the Well Owners are pumping water connected to Crow Creek such that future conditions and factual data justify de-designating a portion of the Basin. Because connectivity is an essential element of the impact showing, Gallegos failed to meet its burden, and de-designation is improper. We also conclude that the designated groundwater court did not abuse its discretion in concluding that the Well Owners were prevailing parties for purposes of C.R.C.P. 54(d), that the costs awarded were reasonable and necessary, and that Gallegos should pay these costs pursuant to Rule 54(d).

         ¶16 We begin by discussing the applicable law governing de-designation of a designated groundwater basin under section 37-90-106(1)(a). We then address connectivity and why Gallegos failed to meet its burden under the designation statute and Gallegos I. Finally, we address Gallegos's appeal of the designated groundwater court's order awarding the Well Owners a portion of their costs.

         A. De-Designation of the Basin-Case No. 15SA118 1. Standard of Review

         ¶17 This case presents questions of both law, which we review de novo, and fact, which we review for clear error. See Meridian Serv. Metro. Dist. v. Ground Water Comm'n, 2015 CO 64, ¶ 12, 361 P.3d 392, 395. We will only disturb the designated groundwater court's findings of fact if they are without support in the record. Id.

         2. Law and Application a. Designated Groundwater Basins and De-Designation

         ¶18 Subsurface water (i.e., groundwater) is generally presumed to be tributary to surface water and is thus managed within the prior appropriation system pursuant to the 1969 Act. Colo. Ground Water Comm'n v. N. Kiowa-Bijou Groundwater Mgmt. Dist., 77 P.3d 62, 69-70 (Colo. 2003). However, the groundwater in a designated groundwater basin is presumed to be designated groundwater-water that, as a matter of law, "has no more than a de minimis impact on any surface stream." Gallegos I, 147 P.3d at 28-29. Designated groundwater is managed by the Commission within a modified prior appropriation system pursuant to the Management Act. Chatfield E. Well Co. v. Chatfield E. Prop. Owners Ass'n, 956 P.2d 1260, 1268 (Colo. 1998).

         ¶19 The Commission designates a groundwater basin pursuant to its statutory authority under the designation statute, section 37-90-106(1)(a). The groundwater in the putative basin must meet one of two standards to be designated: It must be (1) "groundwater which in its natural course would not be available to and required for the fulfillment of decreed surface rights, " or (2) "groundwater in areas not adjacent to a continuously flowing natural stream wherein groundwater withdrawals have constituted the principal water usage for at least fifteen years." § 37-90-103(6)(a). The General Assembly created this designation mechanism for the express purpose of "permit[ting] the full economic development of designated groundwater resources." § 37-90-102(1), C.R.S. (2016); Upper Black Squirrel Creek Ground Water Mgmt. Dist. v. Goss, 993 P.2d 1177, 1183-84 (Colo. 2000). The designation criteria are meant to achieve this goal in a manner that also protects surface water rights from injury.

         ¶20 Apart from designation authority, the General Assembly also gave the Commission authority to de-designate, or "alter the boundaries or description" of, an already-designated basin to ensure that surface rights are not injured. § 37-90-106(1)(a). Under the version of the statute in effect at all times pertinent to these proceedings, the Commission could only alter a designated groundwater basin's boundaries where "future conditions require and factual data justify" de-designating a portion of the basin. Id.[6] To justify de-designation, the petitioner must prove that pumping of subsurface water within a designated groundwater basin has "more than a de minimis impact on their surface water rights and is causing injury to those rights." ...


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