Nutrient Standards for Lakes and Reservoirs
Where Water Quality Law and Water Rights Law Intersect
January/February 2024
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This article surveys legal authority related to the intersection of water quality and water rights law, delves into how this interplay was resolved in the specific context of the 2023 rulemaking over nutrient standards, and concludes with several takeaways practitioners should keep in mind when handling matters at this legal crossroads.
Although there is extensive case law separately addressing the nuances of water rights law and water quality law, there is relatively little legal authority on their intersection. This was recently highlighted in the context of an April 2023 Colorado Water Quality Control Commission (WQCC) rulemaking proceeding to adopt new nutrient standards for lakes and reservoirs in Colorado (2023 WQCC nutrient rulemaking).1 This proceeding illustrated the intersection of water quality law and water rights law—two areas of law that are traditionally viewed and treated as distinct and independent—and highlighted the potentially significant impact that water quality regulations can have on water rights.
The 2023 WQCC nutrient rulemaking raised significant and novel issues about the impact the new rules could have on the operation and administration of water rights exchanges and augmentation plans, which are important mechanisms for maximizing the beneficial use of water. One critical issue concerned whether the State Engineer’s Office (SEO) could use compliance with the new water quality standards, as opposed to the actual historical water quality, as the basis to determine whether replacement water in exchanges and plans for augmentation met statutory water quality requirements. Ultimately, the SEO concluded, in a consultation report submitted to the WQCC (consultation report),2 that the new water quality standards would not provide the basis for the SEO to deny the operation of exchanges or plans for augmentation that were previously decreed or administratively approved. Instead, the consultation report confirmed that the quality of a replacement supply used in the operation of exchanges and plans for augmentation would be judged based on the actual historical water quality received by other water rights and not on compliance with any particular water quality standard.
The 2023 WQCC nutrient rulemaking drew attention to this increasingly important intersection of law. As the demands on Colorado’s finite water supply inevitably increase, the intersection of water rights and water quality will become a more frequent battlefield for disputes. This article discusses how the convergence of water quality law and water rights law was addressed in the 2023 WQCC nutrient rulemaking and offers practice tips to consider when dealing with issues that involve both areas of law.
Overview of Exchanges and Plans for Augmentation
The 2023 WQCC nutrient rulemaking established nutrient criteria for lakes and reservoirs. Releases from reservoirs are commonly used as replacement supplies for the operation of water right exchanges and plans for augmentation. As a result, water users were concerned about the effect of the new nutrient standards on the operation of exchanges and plans for augmentation, and in particular whether the new nutrient standards could be implemented to inhibit reservoir releases as a source of replacement supply.
A water right exchange is a trade of water that involves releasing water to the stream at one (usually downstream) location in exchange for diverting a like amount of water at another (usually upstream) location.3 A plan for augmentation is a mechanism that allows a water rights user to divert a junior water right out-of-priority by introducing another source of water to the stream in a manner that offsets the effect of the out-of-priority diversion on the stream in time, location, and amount.4 The water introduced into the stream system as part of the exchange or augmentation operation to offset injury is referred to as the “substitute” or “replacement” supply.
Exchanges and plans for augmentation maximize the beneficial use of water in Colorado and are crucial for maximizing the use of existing water supplies and creating additional water supplies. Indeed, many municipal water suppliers completely depend on water rights exchanges and plans for augmentation to meet their demands. Likewise, other water users depend on the successful operation of plans for augmentation to ensure they are not injured by the operation of junior water rights. Minimizing uncertainty with respect to the availability of replacement water will help protect all water users against the unexpected failure of an augmentation plan or the disruption of water uses that rely on exchanges and plans for augmentation.
Overview of the Law Intersecting Water Quality and Water Rights
Understanding the interaction between water rights law and water quality law in the context of WQCC rulemakings requires understanding the role and authority of state agencies, applicable statutes and administrative rules, and limited common law on this topic.
Agency Actors
The Colorado Water Quality Control Act (WQCA) governs the regulation of water quality in Colorado and delegates authority to the WQCC to adopt water quality standards in accordance with the Act.5 The WQCC is authorized to “develop and maintain a comprehensive program for the prevention, control, and abatement of water pollution, and water quality protection.”6 The Colorado Water Quality Division (Division) acts “as staff to the [WQCC] in [WQCC] proceedings other than adjudicatory or appellate proceedings in which the division is a party,” such as rulemaking proceedings.7 The Division’s role as staff to the WQCC applies only in certain limited circumstances.8
The Water Right Determination and Administration Act of 1969 generally governs the adjudication and administration of water rights.9 The SEO has the duty to administer water rights in compliance with the prior appropriation system and the terms of water court decrees.10 Generally, the SEO operates independently of the WQCC and Division.11 However, overlap does occur, as described in CRS § 25-8-104(2)(d), when the WQCC and Division are required to “consult with the state engineer and the water conservation board or their designees before making any decision or adopting any rule or policy which has the potential to cause material injury to water rights.” CRS § 25-8-202(7) also contemplates cooperation between the WQCC, the Division, and the SEO as an “implementing agency,” and, as discussed below, the SEO has adopted regulations pursuant to this authority.
Statutes
The overarching limit on the application of water quality regulations to the operation and administration of water rights is found in CRS § 25-8-104(1). Section 104(1) prohibits water quality regulations that “supersede, abrogate, or impair rights to divert water and apply water to beneficial uses”; states that “[n]othing in this article shall be construed, enforced, or applied so as to cause or result in material injury to water rights”; and confirms that questions about material injury to water rights shall be determined by the water court. As the Colorado Supreme Court has noted: “Although [the WQCC and Division] exercise considerable authority over water users, the legislature made clear its intention that this authority cannot be exercised in a manner that significantly compromises the appropriative rights of present or future water users.”12
The overlap of water rights and water quality is also addressed in CRS §§ 37-80-120(3) and 37-92-305(5). Section 37-80-120(3) governs the quality of replacement water provided in the operation of substitutions and exchanges and requires that “[a]ny substituted water shall be of a quality and continuity to meet the requirements of use to which the senior appropriation has normally been put.” Section 37-92-305(5) governs the quality of replacement water used in the operation of plans for augmentation and is nearly identical to § 37-80-120(3). Many water court decrees also recite these statutory requirements with respect to the quality of replacement water.
Administrative Rules
In 1992, the SEO adopted a series of rules at 2 CCR 402-8 (known as the Senate Bill 89-181 rules) that relate to the SEO’s consideration of water quality in the administration of undecreed exchanges and substitute water supply plans (Rule 6) and decreed exchanges and plans for augmentation (Rule 7).
Rule 6 and its subparts give the SEO discretion to require “that the substitute supply shall be of a quality to meet the requirements of use to which the senior appropriation receiving the substituted supply has normally been put” and the power to determine whether that quality standard has been met. Rule 7 and its subparts govern the SEO’s actions with respect to decreed exchanges and plans for augmentation and allows the SEO to consider “water quality standards and/or classifications . . . in evaluating water requirements of senior appropriators.” These rules fueled water users’ concern that the new nutrient standards could impact the administration of water rights exchanges and augmentation plans.
Case Law
There are only two Colorado Supreme Court cases that directly address the intersection of water rights and water quality, both involving the City of Thornton.
City of Thornton v. Bijou Irrigation Co. In Thornton v. Bijou, a manufacturing facility alleged that Thornton’s operation of an exchange would cause injury to them because there would be less water available in the Cache la Poudre River to dilute the effluent from the facility’s wastewater treatment plant.13 The amount of water in the river at the facility’s discharge point had implications for the effluent limits in the facility’s discharge permit.14 In reaching its conclusion that the lack of dilution water was not the type of injury against which parties are protected in water court, the Colorado Supreme Court opined that “the system of water quality regulation in Colorado reflects a continued conflict with and subordination to the prior appropriation system.”15 The Court confirmed that “the legislature made clear its intention that this authority [of the WQCC and Division] cannot be exercised in a manner that significantly compromises the appropriative rights of present or future water users.”16 The Court concluded that “despite the importance of water quality regulation, the legislature’s primary emphasis in enacting this scheme is to maximize beneficial use and to minimize barriers to further beneficial appropriation.”17 The Court also provided guidance on interpreting water quality requirements in CRS § 37-80-120(3), stating: “This statutory standard is clearly directed at protecting the beneficial uses to which water has been applied by the senior appropriators prior to the exchange.”18
City of Thornton v. City and County of Denver. In Thornton v. Denver, the issue was whether the water court had erred in refusing to extend the retained jurisdiction period applicable to a plan for augmentation operated by Denver on the basis that the quality of the replacement water may cause injury to Thornton.19 While the outcome of this case hinged on the nuances of retained jurisdiction law, the Colorado Supreme Court again provided its views and some guidance on the interplay between water rights and water quality law, stating:
The purpose of the WQCA is to prevent injury to beneficial uses made of state waters, to maximize the beneficial uses of water, and to develop water to which Colorado and its citizens are entitled, and, within this context, to achieve the maximum practical degree of water quality in the waters of the state consistent with the welfare of the state.20
The Court elaborated that
the [WQCA] sought to provide the maximum protection for water quality possible without threatening the prior appropriation system and the state’s policy of maximum beneficial use of the water.21
. . . .
. . . Because the WQCA explicitly provides that it is not to interfere with the water court’s role in adjudicating water rights, we conclude that the general assembly did not intend the WQCA to interfere with the water court’s ability to protect senior water appropriators as set forth in sections 37-92-304(6) and 37-92-305(5). The WQCA explicitly preserves the water court’s authority over the question of injury to senior appropriations and the appropriate remedies for such injuries.22
Concluding that the water court erred in not holding a hearing to evaluate Thornton’s request to extend the period of retained jurisdiction, the Court determined that Thornton’s property right would be impaired if the substitute supply provided by Denver’s augmentation plan was unsuitable for normal use when compared to the water it would have received if the augmentation plan had not been instituted.23
The Law of Water Quality and Water Rights Intersect Over Proposed Nutrient Standards for Lakes and Reservoirs
The 2023 WQCC nutrient rulemaking triggered the WQCC’s duty to consult with the SEO on the rules’ potential injury to water rights.24 The critical issue addressed in the consultation report was whether the SEO would use the new nutrient standards to determine whether replacement water used for the operation of exchanges and plans for augmentation satisfied the requirements of CRS §§ 37-80-120(3) and 37-92-305(5). As noted above, those statutes mandate that replacement water be “of a quality” to meet the requirements for which the senior appropriation has “normally been put.”
The crux of the issue was whether the new nutrient standards could prevent certain exchanges and augmentation plans from legally operating if the reservoirs used in these operations were not in compliance with the new water quality standards, or whether the new nutrient standards were inapplicable in light of the statutory direction that water quality need only be of a quality for which the senior appropriation had historically been used. This issue received attention and concern from many parties reliant on reservoirs for replacement water because, in most cases, the water quality of reservoirs reflects the quality of water diverted from the stream and is not the result of pollutants discharged into the reservoir itself.
In addressing this issue, the SEO was not without guidance. As explained above, both Thornton v. Bijou and Thornton v. Denver provide clear statements concerning the purpose of §§ 37-80-120(3) and 37-92-305(5). In Thornton v. Bijou, the Court stated that “[t]his statutory standard [CRS § 37-80-120(3)] is clearly directed at protecting the beneficial uses to which water has been applied by the senior appropriators prior to the exchange.”25 In Thornton v. Denver, the Court stated that “[i]f the substitute supply of water provided by Denver’s Augmentation Plan renders the water supply Thornton receives unsuitable for Thornton’s normal use of the water in comparison to the water it would otherwise receive at its point of diversion if Denver’s Augmentation Plan had not been instituted, Thornton’s property right in the use of its water is impaired by the substitute supply.”26 Both decisions indicated in dicta that the purpose of §§ 37-80-120(3) and 37-92-305(5) is to prevent exchanges and plans for augmentation from negatively impacting the status quo with respect to the quality of water received by others at the time of adjudication.
The SEO was also guided by the longstanding legal principle, which predates the adoption of §§ 37-80-120(3) and 37-92-305(5), that junior appropriators and vested water rights are entitled to the “maintenance of conditions on the stream existing at the time of appropriation.”27 In other words, appropriators are only entitled to maintenance of the water quality status quo that existed prior to the exchange or plan for augmentation.
Similarly, the issue of whether the SEO should consider the new nutrient standards when evaluating water replacement quality had to be resolved in a way that respects the need for finality with regard to existing water court decrees.28 Because of the time and expense of adjudicating exchanges and plans for augmentation and their important role in providing reliable water supplies for the citizens of Colorado, it is imperative that parties can rely on the terms and conditions of decrees concerning the adequacy of replacement water.
Finally, the Senate Bill 89-181 Rules, and specifically Rules 6 and 7, are relevant to the SEO’s consideration of water quality when administering undecreed and decreed exchanges and augmentation plans. For undecreed operations, Rule 6.5.2 states that if water quality standards have been established by the WQCC, they “shall be considered in determining water requirements of senior appropriators.” For example, the rule provides that “if the senior beneficial use is agricultural in nature, then the appropriate standards for agricultural water use may be applied, if such criteria have some factual correlation to the particular use of the senior appropriator.” At the same time, Rule 6.5.4 clarifies that even if the replacement supply “fails to meet water quality standards” but does meet “the requirements of use of the senior appropriator,” then the SEO shall approve the undecreed exchange or augmentation operation. A similar set of provisions found in Rule 7 directs the SEO’s consideration of decreed exchanges and augmentation plans.
With the background of this precedent, the SEO concluded in its consultation report that the proposed nutrient standards should not result in the SEO’s denial of an exchange or augmentation plan that has been previously approved administratively or by decree. For example, the consultation report states that
if after the standards’ implementation, the water quality of substitute supplies and lakes/reservoirs is the same or better than in the past, and this quality has met the requirements of use of the senior appropriator in the past, the water will continue to meet the requirements of use in the future and we are not aware of a scenario where newly-adopted nutrient standards would cause the SEO to deny such operations in the future.29
That is, if the water quality of the replacement supply fails to meet water quality standards but is of a quality that was acceptable for the senior appropriator’s use in the past, the SEO will not shut down an exchange or augmentation plan operation based on water quality.
With respect to decreed exchanges and plans for augmentation, the consultation report also provides some guidance on how the SEO interprets common decree terms related to water quality. The SEO takes the position that when a water court decree provides requirements for proposed substituted water and does not include specific obligations for the SEO, then the SEO has no obligation to meet specific water quality standards when administering the exchange.30 In such a case, the decree has either determined that the quality of the substitute supply is adequate or established a term and condition a senior appropriator could potentially seek to enforce in the future.31 The consultation report makes a nearly identical pronouncement concerning plans for augmentation.32
Ultimately, the WQCC memorialized the conclusions of the consultation report in its Statement of Basis and Purpose for the promulgation of its nutrient rules found in Regulation 31 and concluded that
[t]he [WQCC] accepts the content of the SEO consultation response, including its description of how the nutrient criteria will be considered in the administration of exchanges and plans for augmentation, as sufficient to respond to the concerns raised by parties regarding the potential for material injury to water rights through implementation of the nutrient criteria.33
This statement reflects the important role that the consultation report played in resolving the water rights issues raised and the WQCC’s reliance on that report.
Lessons for the Practitioner
Attorneys working in water rights law or water quality law may increasingly see overlap of these two practice areas. To navigate this intersection successfully, practitioners must understand where there is potential for overlap, be aware of how decree terms could affect responsibility for water quality, keep up with future WQCC rulemaking and policy, and know how to access historical water quality data.
Understand the Current Law and Overlap of Legal Issues
In the authors’ experience, few attorneys actively practice in both water rights law and water quality law, which can result in water rights lawyers being hesitant to get involved in water quality matters and vice versa. However, being able to practice at the junction of these two areas can be crucial for water rights attorneys seeking to protect their clients’ water rights as well as water quality attorneys whose clients may own water rights. Thus, it behooves both water rights attorneys and water quality attorneys whose clients own water rights to have a general understanding of the intersection of water rights and water quality law.
Be Wary of Decree Terms and Conditions Tying the Quality of Replacement Water to Specific Water Quality Standards
Most water court cases do not go to trial but are instead resolved through negotiated settlements. These negotiations are typically focused on crafting decree terms and conditions necessary to prevent injury to other water rights. Given the current state of the law, it would be unwise for attorneys representing applicants for exchanges or plans for augmentation to accept decree terms that require measuring replacement water quality using future water quality regulations as opposed to historical water quality. As the frequency of conflicts between water rights and water quality law increase, and in light of the Colorado Supreme Court’s opinions that address the supremacy of water rights over water quality, we anticipate that those opposing applications will apply increased pressure for applicants to accept more stringent terms and conditions with respect to water quality than are supported by existing law. It is best to resist those attempts and be wary of any terms that undermine the finality of a decree as it pertains to the quality of the replacement water.
Follow WQCC Rulemaking and Other Similar Proceedings Affecting Water Rights
The WQCC and Division must consult with the SEO “before making any decision or adopting any rule or policy which has the potential to cause material injury to water rights.”34 This is a very low bar that applies to “any decision” and the adoption of “any rule or policy” and would seem to require frequent consultations. However, it is the authors’ understanding that this consultation has occurred only three times since this statute was adopted in 1989: (1) in the 2023 nutrient rulemaking described in this article, (2) in a 2017 rulemaking concerning molybdenum standards,35 and (3) in response to a proposal to adopt site-specific groundwater standards for total dissolved solids for the Upper Black Squirrel Creek Alluvial Aquifer.36 Given the increasing scarcity of water and the growing breadth of water quality regulations, it would be prudent for water users to follow or participate in WQCC policy discussions, permitting, and rulemakings to ensure that the exercise of water rights is protected and the WQCC is satisfying its consultation requirement with the SEO.
In addition to rulemaking proceedings before the WQCC and applications before the water court, the nexus of water quality and water quantity can appear in other contexts. For example, this issue has arisen in rulemaking proceedings before the Colorado Ground Water Commission, which exercises authority over designated ground water basins in Colorado. The Ground Water Commission has raised issues relating to water quality in its rulemaking proceedings affecting replacement plans and aquifer storage and recovery plans specially designed for designated ground water. Thus, practitioners should be attentive with respect to various venues in which questions of water quality may affect the operation of water rights.
Understand Available Sources of Water Quality Information
As described above, the historical water quality that existed at the time of adjudication of a plan for augmentation or exchange is the current litmus test for whether replacement water satisfies statutory quality requirements. Parties who are concerned about challenges to the quality of their replacement water should research and assemble sources of historical water quality data applicable to their situation. There are many sources of water quality data: some are publicly available, while others are only available to the parties who collected the data. Thus, it may take a fair amount of research to assemble applicable water quality data. This exercise is also appropriate for parties who will be adjudicating exchanges and plans for augmentation in the future. In the absence of historical data, parties may need to rely on current quality data and may need to create that data themselves if it does not currently exist. It is important to understand what data is available for your clients’ situation.
Conclusion
The law of water quality and the law of water rights have traditionally been treated as separate and independent practice areas. As highlighted by the WQCC’s 2023 rulemaking proceeding, the modern practitioner handling water rights matters for clients may need a broader perspective that considers the likely future impacts of water quality regulations on water rights and water rights operations. Colorado law’s stricture that water quality regulations must not injure water rights will undoubtedly find new testing grounds as water quality standards continue to develop and water supplies tighten.
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Notes
1. See 5 CCR 1002-31 to 5 CCR 1002-38, 5 CCR 1002-85 (effective June 14, 2023). See also 5 CCR 1002-31, § 31.60.IV (Statement of Basis and Purpose, Water Rights Concerns).
2. See Letter from Kevin Rein, state engineer, and Rebecca Mitchell, Colorado Water Conservation Board director, to Jeremy Neustifter, WQCC administrator, Subject: Consultation Concerning WQCC Rulemaking Regarding Nutrients in Lakes (Mar. 13, 2023) (consultation report), https://dnrweblink.state.co.us/dwr/0/edoc/4046042/DWR_4046042.pdf?searchid=dcf0a821-b845-4d1c-ae5a-1be9313f5d5a.
3. See CRS § 37-80-120(4).
4. See CRS § 37-92-103(9).
5. CRS §§ 25-8-101 to -905; City of Thornton v. City and Cnty. of Denver, 44 P.3d 1019, 1028 (Colo. 2002).
6. City and Cnty. of Denver, 44 P.3d at 1029 (citing CRS §§ 25-8-201 to -202).
7. CRS § 25-8-301(4).
8. See WQCC Policy 98-2, A Guide to Colorado Programs for Water Quality Management and Safe Drinking Water (Jan. 31, 2020).
9. CRS §§ 37-92-101 et seq.
10. CRS § 37-80-102.
11. See City and Cnty. of Denver, 44 P.3d at 1029 (“Although the WQCA gives the WQCC general authority over water quality issues, the WQCA is not intended to interfere with the water court’s role in adjudicating water rights administered by the State Engineer.”).
12. City of Thornton v. Bijou Irrigation Co., 926 P.2d 1, 92 (Colo. 1996).
13. Id. at 89–90.
14. Id.
15. Id. at 91.
16. Id. at 92.
17. Id.
18. Id. at 96.
19. City and Cnty. of Denver, 44 P.3d at 1024.
20. Id. at 1028 (citing CRS § 25-8-103).
21. Id. at 1028–29.
22. Id. at 1029.
23. Id. at 1031–32 (citing Brighton Ditch Co. v. City of Englewood, 237 P.2d 116 (Colo. 1951)).
24. See CRS § 25-8-104(2)(d).
25. Bijou Irrigation Co., 926 P.2d at 94 (emphasis added).
26. City and Cnty. of Denver, 44 P.3d at 1031–32 (emphasis added).
27. Brighton Ditch, 237 P.3d at 120. See also Bijou Irrigation Co., 926 P.2d at 80.
28. Farmers Reservoir and Irrigation Co. v. Consol. Mut. Ditch Co., 33 P.3d 799, 814 (Colo. 2001) (“An operative feature of Colorado water law, including § 37-92-304(6), is to provide for final enforceable determinations on a case-by-case basis, so that owners of other water rights may proceed with security in the exercise of their allocated water under court decrees that the State Engineer, the Division Engineers, and the Water Commissioners administer pursuant to the terms of those decrees.”).
29. Rein and Mitchell, consultation report, supra note 2 at 3–4.
30. Id. at 5.
31. Id.
32. See id. at 6.
33. See 5 CCR 1002-31, § 31.60.IV (Statement of Basis and Purpose, Water Rights Concerns).
34. CRS § 25-8-104(2)(d).
35. See Letter from Kevin Rein, state engineer, and Rebecca Mitchell, Colorado Water Conservation Board director, to Trisha Oeth, WQCC administrator, Re: Consultation on Proposal by Climax Molybdenum Company to Adopt Revised Standards for Molybdenum 3–4 (Nov. 17, 2017), https://dnrweblink.state.co.us/dwr/0/doc/3240289/Page1.aspx?searchid=8d722ca8-a5d7-4bdf-a031-436308fad171.
36. See Letter from Dick Wolfe, state engineer, and James Eklund, Colorado Water Conservation Board director, to Trisha Oeth, WQCC administrator, Re: Consultation on Proposal by the Cherokee Metropolitan District (“Cherokee”) to Adopt a Site Specific Groundwater Standard for Total Dissolved Solids for the Upper Black Squirrel Creek Alluvial Aquifer, El Paso County (Aug. 4, 2016), https://dnrweblink.state.co.us/dwr/0/doc/4062937/Page1.aspx?searchid=0357cdbb-7931-4171-a09e-c6c4ddcd84c3.