Neco v. Upper Gunnison River Water Conserv.

Decision Date11 September 2006
Docket NumberNo. 05SA267.,05SA267.
Citation142 P.3d 1265
PartiesConcerning the Application for Water Rights of Natural Energy Resources Company (NECO) in Gunnison County. NATURAL ENERGY RESOURCES COMPANY, Applicant/Appellant v. UPPER GUNNISON RIVER WATER CONSERVANCY DISTRICT; Crystal Creek Homeowners; Milton Graves, Douglas Bryant, and Nancy Williams as Trustees of (1) the Trust under the Will of Ernest Cockrell Jr., for the benefit of Ernest Cockrell and (2) the Louisiana Trust under the Will of Virginia Cockrell for the benefit of Ernest D. Cockrell II and (3) the Louisiana Trust under the Will of Virginia Cockrell for the benefit of David Cockrell; Colorado River Water Conservation District; Board of County Commissioners of Gunnison County; High Country Citizens' Alliance; City of Gunnison; Colorado Water Conservation Board; Frank Kugle, Division Engineer, Water Division No. 4; Taylor Park Cattle Association; Uncompahgre Valley Water Users Association; United States Department of the Interior, National Park Service; Department of Agriculture, Grand Mesa, Uncompahgre, and Gunnison Range District; Department of the Interior, Bureau of Reclamation, Western Colorado Area Office; and Trout Unlimited, Opposers/Appellees.
CourtColorado Supreme Court

M.E. MacDougall, Julianne M. Woldridge, Henry D. Worley, MacDougall, Woldridge & Worley, P.C., Colorado Springs, Colorado, Attorneys for Applicant/Appellant, Natural Energy Resources Company.

John H. McClow, John R. Hill, Jr., Bratton & McClow, LLC, Gunnison, Colorado, Attorneys for Opposer/Appellee, Upper Gunnison River Water Conservancy District.

Charles B. White, David S. Hayes, Petros & White, LLC, Denver, Colorado, Attorneys for Opposer/Appellee, Crystal Creek Homeowners; Milton Graves; Douglas Bryant; and Nancy Williams.

Peter C. Fleming, Taylor E.C. Hawes, Kristin M. Gillespie, Glenwood Springs, Colorado, Attorneys for Opposer/Appellee, Colorado River Water Conservancy District.

David Baumgarten, Gunnison County Attorney, Thomas A. Dill, Deputy County Attorney, Gunnison, Colorado, Attorneys for Opposer/Appellee, Board of County Commissioners of Gunnison County.

Western Resources Advocates, Bart Miller, Boulder, Colorado, Attorneys for Opposer/Appellee, High Country Citizens' Alliance.

Victor T. Roushar, Montrose, Colorado, Attorney for Opposer/Appellee, Uncompahgre Valley Water Users Association.

Timothy J. Beaton, Gabriel D. Carter, Moses, Wittemyer, Harrison and Woodruff, P.C., Boulder, Colorado, Attorneys for Opposer/Appellee, City of Gunnison.

David W. Gehlert, U.S. Department of Justice, Environment and Natural Resources Division, General Litigation Section, Denver, Colorado, Attorneys for the United States of America.

Justice MARTINEZ delivered the Opinion of the Court.

Petitioner-Applicant, Natural Energy Resources Company ("NECO"), appeals the decision of the Water Court for Water Division No. 4 ("water court"), dismissing its application seeking a finding of reasonable diligence for its conditional decree ("Decree") entered in Case No. 82-CW-340 for storage rights in the Union Park Reservoir. The Decree's use provision contemplated using Taylor Park Reservoir as a forebay and afterbay for the proposed higher-elevation Union Park Reservoir in the production of hydroelectric power.

The Decree was originally granted in 1984. In 1986, NECO sought to expand the Decree as part of a proposed water development known as the Union Park Project. The Union Park Project sought to transfer water from the Upper Gunnison River Basin via a series of tunnels, pipelines, siphons, and flumes to Arapahoe County. A number of parties challenged the proposed project and NECO's water rights applications were litigated in two proceedings, Case Nos. 86-CW-226 and 88-CW-178, aff'd in part, rev'd in part, In re Application for Water Rights of the Bd. of County Comm'rs of the County of Arapahoe, in Gunnison County, 891 P.2d 952 (Colo.1995) (hereinafter Arapahoe I), aff'd on reh' g sub nom. Bd. of County Comm'rs of County of Arapahoe v. Crystal Creek Homeowners' Assoc., 14 P.3d 325 (Colo.2000) (hereinafter Arapahoe II).

In these adjudications, NECO and NECO's successor and predecessor in interest, the County of Arapahoe ("Arapahoe"), sought to expand upon the conditional Decree obtained in Case No. 82-CW-340. The Decree was expressly incorporated into the new applications. The two applications in Case Nos. 86-CW-226 and 88-CW-178 were ultimately denied. While these cases were still being litigated, NECO and Arapahoe maintained the 1982 Decree by satisfying the ongoing diligence requirement of section 37-92-301(4)(a)(1), C.R.S. (2005)1. Although several adverse rulings stemming from issues litigated in Case Nos. 86-CW-226 and 88-CW-178 would have otherwise barred NECO and Arapahoe from satisfying the "can and will" requirement of the diligence application, the rulings were still being appealed at the time of the diligence applications. Accordingly, the applications were not dismissed on grounds of issue preclusion because the courts had yet to issue a final decision on the merits.

The current diligence application, Case No. 04-CW-120, in contrast, followed the final judgment of Case Nos. 86-CW-226 and 88-CW-178 in Arapahoe II. Consequently, the water court denied NECO's application on summary judgment motion after finding NECO's ability to demonstrate the reasonable diligence "can and will" test was precluded by issues decided in the earlier rulings. The court specifically found that prior orders precluded NECO from using Taylor Park Reservoir as a forebay or afterbay or from implementing a proposed pumping station—features necessary for both the proposed Union Park Project and the original 1982 Decree's proposed hydroelectric power installation. Consequently, the water court cancelled NECO's conditional water right.

We now affirm the water court's summary judgment order. The issues of whether NECO obtained the necessary government permits to use Taylor Park Reservoir and whether the proposed pumping plant was feasible were litigated and finally adjudicated in Arapahoe I and Arapahoe II. NECO was the original party to litigate issues pertaining to the Decree, and is in privity with the only other party to litigate these same issues, Arapahoe. Both NECO and Arapahoe had a full and fair opportunity to litigate whether Taylor Park Reservoir may be used as a forebay and afterbay and whether a pumping facility may be installed; and they have done so. As the water court determined that the conditional right was unfeasible in Case Nos. 86-CW-266 and 88-CW-178 and these decisions have been affirmed in relevant part by this court, NECO is precluded from litigating these issues again. Thus, we affirm the judgment of the water court dismissing NECO's application seeking a finding of reasonable diligence in maintaining its conditional water rights in the 1982 Decree.

I. Facts and Proceedings Below

NECO applied to the water court for a finding of reasonable diligence on a conditional storage right concerning Union Park Reservoir and Taylor Park Reservoir.2 NECO's application regards a conditional Decree which has been the subject of lengthy and complex litigation. The application was denied on summary judgment by the water court because the court found that NECO was precluded from demonstrating that Taylor Park Reservoir could be used as a forebay and afterbay of the proposed Union Park Reservoir or from demonstrating that a pumping plant would be installed at Taylor Park Reservoir. Prior and finally adjudicated court orders determined that NECO failed to satisfy the "can and will" requirement3 with respect to these features of the conditional Decree. Before addressing NECO's present application for a finding of diligence in maintaining the Decree and the Opposers'4 argument that the application is barred by issue preclusion, we briefly review the facts and procedural history of the water rights at issue.

In 1984, NECO successfully obtained a conditional water right Decree for storage of 325,000 acre-feet in the proposed Union Park Reservoir for use in a planned water development known as the Union Park Reservoir Project.5 The conditional water right was for the circulation of water between Taylor Park Reservoir and Union Park Reservoir for the generation of hydroelectric power. Specifically, the Decree contemplated using Taylor Park Reservoir as a pumping forebay and power generation afterbay for the proposed higher-elevation Union Park Reservoir.6

Taylor Park Reservoir is located just west of the Continental Divide in Gunnison County near the geographical center of Colorado. The proposed Union Park Reservoir would lie nearby on Lottis Creek, a tributary of the Taylor River. The Taylor River runs from the Upper Gunnison River Basin down to join the East River, forming the Gunnison River near the City of Gunnison. Both Taylor Park Reservoir and the proposed Union Park Reservoir lie upstream of the Aspinall Unit, which is composed of three reservoirs: Blue Mesa Reservoir, Morrow Point Reservoir, and Crystal Reservoir. Although the 1982 Decree was more limited in scope, the Union Park Project ultimately sought to appropriate waters from the Upper Gunnison Basin and transfer them north and east to Arapahoe County via a trans-mountain diversion.

In 1986, NECO applied for changes to the conditional right.7 NECO sought to increase the capacity of the proposed Union Park Reservoir from 325,000 acre-feet to 900,000 acre-feet, to direct flow rights for the project8, and to expand the decreed uses for the entire storage right from hydroelectric power generation to include a number of uses, including several non-consumptive uses: recreation, fish and wildlife propagation, and reservoir evaporation replacement. The application for the 900,000 acre-feet capacity incorporated the 325,000 acre-feet capacity decreed in Case No....

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