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Front Range Resources, LLC v. Colorado Ground Water Commission

Supreme Court of Colorado, En Banc

April 9, 2018

Front Range Resources, LLC, Plaintiff-Appellant/Cross-Appellee,
v.
Colorado Ground Water Commission; Henrylyn Irrigation District; Morgan County Quality Water District; Weldon Valley Ditch Company; Northern Colorado Water Conservancy District; and Irrigationists' Association, Water District 1, Defendants-Appellees, and Lost Creek Land and Cattle Company, LLC; Equus Farms, Inc.; and Lost Creek Ground Water Management District, Defendants-Appellees/Cross-Appellants

          Appeal from the District Court Adams County District Court, Case No. 15CV30493 Honorable Patrick Thomas Murphy, District Court Judge

          Attorneys for Plaintiff-Appellant/Cross-Appellee: Buchanan Sperling & Holleman PC Paul F. Holleman John D. Buchanan.

          Attorneys for Defendant-Appellee Northern Colorado Water Conservancy District: Trout Raley Douglas M. Sinor William D. Wert.

          Attorneys for Defendant-Appellee Irrigationists' Association, Water District 1: Carlson, Hammond & Paddock, LLC Karl D. Ohlsen Mason H. Brown.

          Attorneys for Defendant-Appellee/Cross-Appellant Lost Creek Land and Cattle Company, LLC: White & Jankowski, LLP Alan E. Curtis David C. Taussig Courtney J. Krause.

          Attorneys for Defendant-Appellee/Cross-Appellant Equus Farms, Inc: Porzak Browning & Bushong LLP Michael F. Browning Corina A. Hach.

          Attorneys for Defendant-Appellee/Cross-Appellant Lost Creek Ground Water Management District: Lawrence Jones Custer Grasmick LLP Pollowing issues:. Andrew Jones Curran A. Trick.

         No appearance by or on behalf of: Colorado Ground Water Commission, Henrylyn Irrigation District, Morgan County Quality Water District, or Weldon Valley Ditch Company.

          OPINION

          HOOD, JUSTICE.

         ¶1 About a decade ago, Front Range Resources, LLC, a private company that owns or manages various water rights, applied for a replacement plan in the Lost Creek Designated Ground Water Basin. A replacement plan allows an applicant to withdraw designated ground water from an alluvial aquifer where no ground water is available for appropriation by replacing the withdrawn ground water with other sources of water. Under the plan, Front Range sought to divert water from its existing water rights (including some rights it had in the South Platte River) to recharge the Lost Creek Basin's alluvial aquifer. It then planned to withdraw the recharged water by increasing the use of its existing wells and by constructing new wells.

         ¶2 Defendants (parties that believed their water rights would be impaired by the plan) objected to Front Range's replacement plan, and the Ground Water Commission ultimately dismissed Front Range's application with prejudice. This allowed Front Range to appeal to the district court. Meanwhile, Front Range and the City of Aurora entered into an option contract for Aurora to purchase some or all of the replacement-plan water upon the replacement plan's approval.

         ¶3 On appeal, the district court rejected Front Range's use of water rights in the South Platte River in the replacement plan. It further found the replacement plan involved new appropriations and changes of water rights, triggering the anti-speculation doctrine. The anti-speculation doctrine prohibits changes of water rights or new appropriations based on a speculative sale or where an applicant has not demonstrated a specific plan and intent to put the water to beneficial use. In granting summary judgment against Front Range, the district court concluded Front Range's planned use of the replacement-plan water (including its option contract with Aurora) violated the anti-speculation doctrine. Some of the Defendants then pursued attorney fees, arguing Front Range's claims lacked substantial justification. But the district court denied their motion.

         ¶4 We hold that the anti-speculation doctrine applies to replacement plans involving new appropriations or changes to designated ground water rights. Because Front Range could not demonstrate that it or Aurora would put the replacement-plan water to beneficial use, the district court did not err in granting Defendants' motion for summary judgment. We further conclude the district court did not abuse its discretion in denying Defendants' motion for attorney fees.

         ¶5 Thus, we affirm.

         I. Facts and Procedural History

         ¶6 In 2008, Front Range Resources, LLC ("Front Range") applied for a replacement plan in the Lost Creek Designated Ground Water Basin with the Colorado Ground Water Commission ("the Commission"). Under the plan, Front Range proposed to divert water from its existing water rights (including rights it had in the South Platte River), recharge the Lost Creek Basin Alluvial Aquifer, and then recover the recharged water within ten years through increased use of Front Range's existing wells and by constructing thirty-one new, large-capacity wells.

         ¶7 The Defendants objected, and the Commission assigned a hearing officer to review the matter. The hearing officer dismissed Front Range's South Platte Water Rights from being used as replacement sources in the plan. The parties then stipulated to dismiss the application with prejudice, thus allowing Front Range to file a de novo appeal with the district court under section 37-90-115, C.R.S. (2017).

         ¶8 Front Range simultaneously entered into an option contract with the City of Aurora, under which Front Range granted Aurora the option to purchase some or all of the replacement water under the proposed replacement plan.

         ¶9 In the district court, the Defendants filed a motion for a determination of a question of law and partial summary judgment regarding whether the South Platte Water Rights could be used as a source of replacement water in the plan. Finding in the Defendants' favor, the district court, like the hearing officer, concluded the South Platte Water Rights could not be used as a source of replacement water because those rights were not decreed for replacement use in the Lost Creek Basin.

         ¶10 Defendants then moved for summary judgment to dismiss the replacement plan, arguing it violated the anti-speculation doctrine. Front Range countered that the anti-speculation doctrine didn't apply because its replacement plan involved neither new appropriations nor changes of water rights. But if the doctrine did apply, the argument went, then Front Range asserted it had shown a specific plan and intent to beneficially use replacement-plan water through its option contract with Aurora and for use in a planned unit development called the Pioneer Development on land Front Range owned.

         ¶11 Relying on language in Front Range's proposed decree-which included modifying its existing wells in the Lost Creek Basin to provide for increased use and constructing new wells in the Basin to withdraw the recharged water-the district court concluded the replacement plan involved new appropriations and changes of water rights. So, it held the anti-speculation doctrine applied.

         ¶12 Further, the district court determined Front Range's replacement plan violated the anti-speculation doctrine's beneficial use requirement. Specifically, the district court observed that because Aurora alone had the discretion to purchase replacement-plan water, the option contract did not evince any actual commitment to beneficially use the plan water. Similarly, the court concluded Front Range's evidence regarding its need for water in the Pioneer Development didn't satisfy the anti-speculation doctrine because it failed to show how replacement-plan water would be beneficially used there. Thus, it granted summary judgment in Defendants' favor. Front Range later filed a motion for reconsideration on anti-speculation, or in the alternative, to amend its application, which the district court denied.

         ¶13 Some of the Defendants moved for attorney fees, arguing Front Range's replacement-plan application lacked substantial justification.[1] In denying the attorney-fees motion, the district court observed that this case involved complex legal issues and ...


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