People ex rel. Simpson v. Highland Irr. Co.

• Decision Date: 10 April 1995
• Docket Number: No. 94SA136,94SA136
• Parties: The PEOPLE of the State of Colorado, ex rel. Hal D. SIMPSON, State Engineer, and Steven J. Witte, Division Engineer for Water Division 2, Plaintiffs-Appellees, v. The HIGHLAND IRRIGATION COMPANY, a mutual ditch company, and The Nine Mile Canal Company, a mutual ditch company, Defendants-Appellants.
• Court: Colorado Supreme Court

Page 122

893 P.2d 122

The PEOPLE of the State of Colorado, ex rel. Hal D. SIMPSON,

State Engineer, and Steven J. Witte, Division

Engineer for Water Division 2, Plaintiffs-Appellees, v. The HIGHLAND IRRIGATION COMPANY, a mutual ditch company, and The Nine Mile Canal Company, a mutual ditch

company, Defendants-Appellants.

No. 94SA136.

Supreme Court of Colorado,

En Banc.

April 10, 1995.

As Modified on Denial of Rehearing

April 24, 1995.

Gale A. Norton, Atty. Gen., Stephen K. ErkenBrack, Chief Deputy Atty. Gen., Timothy

M. Tymkovich, Sol. Gen., Patricia S. Bangert, Deputy Atty. Gen., Wendy C. Weiss, First Asst. Atty. Gen., Natural Resources Section, Denver, for plaintiffs-appellees.

Grimshaw & Harring, P.C., Wayne B. Schroeder, Denver, for defendants-appellants.

Fairfield and Woods, P.C., Howard Holme, Stephen H. Leonhardt, Denver, for amicus curiae Southeastern Colo. Water Conservancy Dist.

Justice VOLLACK delivered the Opinion of the Court.

Defendants-Appellants The Highland Irrigation Company and The Nine Mile Canal Company (the defendants) appeal a ruling by the District Court, Water Division 2 (the water court), which enjoined the defendants from diverting water in contradiction to the orders of the Division Engineer for Water Division 2 (the division engineer). The water court held that the defendants were without standing to assert, as an affirmative defense to the injunction action initiated by the People of the State of Colorado (the State), that the division engineer's curtailment orders were invalid.

We find that the water court erred in concluding that the defendants lacked standing to pursue their affirmative defense. We therefore reverse and remand the case for further proceedings.

I.

This case involves a dispute over the administration of water rights on the Arkansas and Purgatoire Rivers in southeastern Colorado. ¹ The defendants are two mutual ditch companies which divert water upstream from the John Martin Reservoir on the Purgatoire River. In order to focus the issue in this case, it is necessary to give some background in how these waters are managed.

The administration of water rights along both rivers is affected by an agreement between Kansas and Colorado called the Arkansas River Compact (the Compact). The Compact was intended to settle disputes between Kansas and Colorado over water in the Arkansas River, to allocate water between the two states, and to promote the efficient administration of the John Martin Reservoir for the benefit of both states. See Arkansas River Compact, ch. 155, art. I, 63 Stat. 145 (1949); § 37-69-101(art. I), 15 C.R.S. (1990). ²

The Arkansas River Compact Administration (ARCA), an interstate agency created by the Compact, has authority to administer the provisions of the Compact. In particular, the ARCA has the power to adopt rules and regulations consistent with the Compact, to prescribe procedures for the administration of the Compact, and to perform all necessary and proper functions for its implementation. The ARCA is comprised of three representatives each from Colorado and Kansas, and every decision of the ARCA must be unanimous. § 37-69-101(art. VIII)(D), 15 C.R.S. (1990).

The Compact itself provides a fairly straight-forward method for administering water that enters John Martin Reservoir. For purposes of water storage and release, the calendar year is divided into two storage periods: a winter storage period and a summer storage period. Winter storage commences on the first of November of each year and continues through the last day of March. During the winter storage period, all of the water entering the John Martin Reservoir is stored. ³ § 37-69-101(art. V)(A), 15 C.R.S. (1990). The summer storage period commences on the first of April, and continues through the end of October. Generally speaking, water entering the reservoir during the summer storage period is also stored.

Under the terms of the Compact, both Colorado water users downstream from the John Martin Reservoir, and Kansas, can demand a release of stored water beginning April 1 of each year, the beginning of the summer storage period, in amounts not to exceed a specified rate. § 37-69-101(art. V)(C), 15 C.R.S. (1990). Neither Kansas nor Colorado is given a specific volume of water. Instead, the Compact employs a common pool concept, which means that the water can be released to Colorado and Kansas on demand, limited only by the Compact requirement that any release of water be applied "promptly to beneficial use." § 37-69-101(art. V)(E)(2), 15 C.R.S. (1990).

Water entering the John Martin Reservoir is stored in the reservoir's "conservation pool." The conservation pool is defined by the Compact as that portion of the total storage space in the reservoir which is not reserved for flood control purposes. § 37-69-101(art. III)(F), 15 C.R.S. (1990). The Compact contemplates that the conservation pool may be exhausted at some point during the year. In that event, the Compact provides for Colorado to administer the water rights of the ditches downstream from the John Martin Reservoir (Colorado water district 67 users) ⁴ under the priority system, until such time as water is available for release in the conservation pool. § 37-69-101(art. V)(F), 15 C.R.S. (1990). Accordingly, a water user in Colorado water district 67 who has priority can make a call for water against both Colorado water district 67 users, and against users upstream from the John Martin Reservoir. The Compact also specifically provides that, "when there is water in the conservation pool[,] the water users upstream from John Martin [R]eservoir shall not be affected by the decrees to the ditches in Colorado water district 67." Id. ⁵

In 1980, the ARCA adopted an Operating Plan for the John Martin Reservoir (the Operating Plan), which modifies the administration of the John Martin Reservoir under the Compact. As revised in 1984, the Operating Plan replaces the common pool concept included in the Compact with a system of water accounts. Under the Operating Plan, Colorado water district 67 users, and Kansas, are given the equivalent of savings accounts for water. Beginning the first of April, but no later than April 7 at 8:00 a.m., the stored water, or "conservation storage," is "released" into those accounts: forty percent for Kansas accounts, and sixty percent for Colorado water district 67 accounts. When water is "released" into the accounts pursuant to the Operating Plan, it is not physically released from the reservoir, but is rather transferred on paper for accounting purposes. Once all of the conservation storage has been transferred to accounts, the Operating Plan provides that, for the purposes of the Compact, "the conservation pool shall be deemed exhausted." (Emphasis added.) Since the conservation pool is deemed empty, Colorado water district 67 users, when they have a priority water right, can make a call against a water user upstream from the John Martin Reservoir under the Operating Plan, even though the reservoir might still physically contain storage water.

After the terms of the Operating Plan were initiated, some of the water users upstream from John Martin Reservoir apparently became concerned that they were subject to earlier calls under the Operating Plan than they had been before the Operating Plan. Those upstream ditches and the Colorado water district 67 users thereafter entered into an agreement which affected the administration of water under the Operating Plan with respect to when the downstream ditches could make a call through the reservoir to the upstream users (Agreement B). ⁶ Specifically, Agreement B provides that, as long as the downstream ditches have summer storage water in their accounts, the ditches cannot place a call upstream for water. Agreement B also provides that any water in a ditch's winter storage account which is not used by May 1 is automatically converted to summer storage water on that date.

II.

The circumstances giving rise to this case occurred in 1993. Each defendant owns water rights which are junior in priority to ditches downstream from the reservoir in Colorado water district 67. On April 26, 1993, the division engineer, acting on a call for water by three senior downstream ditches, issued an order under section 37-92-502, 15 C.R.S. (1990), ⁷ for the defendants to curtail their water diversions under their junior priorities. The defendants did not comply with the orders, and instead continued to divert water.

On May 13, 1993, the State filed complaints in the water court pursuant to section 37-92-503, 15 C.R.S. (1990), asking for preliminary and permanent injunctive relief against the defendants. The State alleged that the out-of-priority diversions by the defendants had caused material injury to downstream users with senior water rights.

In response, the defendants asserted an affirmative defense, arguing that the Operating Plan was not a lawful basis for the State's curtailment orders because the Operating Plan was in direct violation of the terms of the Compact. ⁸ Therefore, the defendants argued, the division engineer's orders, which were made pursuant to the Operating Plan, were unenforceable. The defendants also filed a notice of removal in the United States District Court for the District of Colorado (the federal district court) pursuant to 28 U.S.C. § 1441(b) (1988). They maintained that the State's complaint could properly be removed to the federal district court since the lawfulness of the orders under the Compact was a question of federal law. ⁹

The State objected to the removal and filed a motion with the federal district court requesting a remand of the case to the water court under 28 U.S.C. § 1447(c) (1988). The State's position was that there was no basis for federal jurisdiction over the case. The federal district court agreed, and on August 12, 1993, remanded the case to the water court, finding that the validity of the curtailment...