If you are a real estate developer, you already know that water rights in Colorado are complicated. Before embarking on a new project, you should consider contacting an attorney who specializes in Colorado water law issues.
Water is a finite and valuable resource. When developers seek to build, be it commercial or residential, they must obtain water rights. Due to its finite nature and importance, obtaining water rights is not easy.
Basic Water law
The Colorado Constitution mandates the framework establishing Colorado water law. It is known as the prior appropriation system and it regulates river water rights in Colorado. Water rights include the use of surface water in rivers or tributary groundwater connected to a river basin.
While water, like real estate, is a private property right, it is a special type of right called a usufructuary right. This means that water rights are a right to use water, not to possess or own water. It is misconception that a water right in Colorado grants its owner a certain amount of water to use in any way the owner of that right wants. In fact, a water right does no such thing. Instead, a water right allows its owner to divert water for a “beneficial use” only. Colorado law defines beneficial use broadly to include a variety of applications, from municipal and industrial, to environmental and recreational.
Obtaining Water Rights
To be granted a water right, one must petition the Water Courts for such a right. Water Courts are unique to Colorado and exist because Colorado is a semi-arid state and water is crucial to human existence. As such, attaining a water right is not an easy task. Furthermore, nearly every river in the state is over-allocated so that the combined rate of all established and vested water rights exceed the available flow of the river being appropriated.
Tracking water rights is unique in Colorado. Water rights are generally conveyed like real estate and recorded as a deed within the county where the rights are located.
As mentioned, the “beneficial use” requirement is construed broadly. However, all beneficial uses in Colorado come with two explicit limitations: the prohibitions against waste and speculation. For waste, a water right may only be used in the amount necessary to accomplish its purposes using reasonably efficient practices. For speculation, there must be a present demand for the water delivered by the water right, one cannot divert and hoard water, without some immediately apparent need.
Consider how much water is used daily and how often it rains. While Colorado receives significant snowpack, 10 inches of snow equals just one inch of water. Thus, Colorado requires special water rules to assure that it allocates water correctly.
Another unique aspect of Colorado water laws is the judicial system. For other courts, those seeking an appeal of a lower court appeal to an intermediate court. Regarding Water Courts, those appealing the ruling of a Water Court appeal directly to the Colorado Supreme Court.