Judge dismisses Two Rivers’ suit against Welton Water
July 3, 2018
The shareholders of the Welton Land & Water Co. have been fighting a long battle to maintain their senior direct flow water rights, which date back to 1861. These shareholders are farmers and ranchers raising diversified crops and livestock in their rural community along the Arkansas Valley in eastern Pueblo County, Colorado.
In a three-year lawsuit, Two Rivers Water & Farming Co., a publicly traded company whose focus is providing infrastructure and properties for marijuana cultivation, has accused Welton Water and its shareholders for "wasteful and inefficient water use practices."
Two Rivers has a vested interest in the available water given that it had obtained ownership of, or a controlling interest, in entities which own junior water storage rights decreed to two reservoirs located on the Cucharas and Huerfano rivers south of Pueblo.
However, Welton Water's senior rights, with water being allocated from the Huerfano River, takes priority, and in order to satisfy those senior water rights for beneficial uses by Welton's shareholders, Colorado law dictates that Two Rivers may sometimes be precluded from filling its storage reservoirs.
“This case has been going on and on and on, and it’s spiraling out of control. It’s draining our pocket book, as well as I’m sure the stakeholders of the ditch. ”
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In a 2017 letter to The Fence Post, Two Rivers' attorney, Richard A. Westfall, wrote, "The Welton 'winter call' is unlike anything used by other landowners in the region. The evidence available to Two Rivers shows that the 'winter call' (which has been nearly continuous for a number of winters and is extraordinary for that fact alone) is making the refurbishment of the Cucharas Dam uneconomic, and the water that is ordered to be transmitted downstream is not being put to beneficial use but is being wasted."
Meanwhile, Welton Water's attorney, John P. Justus, contends that whether water must be bypassed by Two Rivers' reservoirs isn't under the discretion of Welton or its shareholders; it's the state and division engineers who under their statutory duty and authority determine how much or how little water must be bypassed by Two Rivers to satisfy Welton's senior water right when needed for beneficial use, or whether attempting delivery to that water right, under the then present conditions, would be futile.
And for the Welton shareholders, those winter calls are critical for maintaining the top soil and managing the salinity of the soil, even outside of what many consider to be the traditional growing season, to ensure the productivity of their land for future crops.
"Two Rivers fails to understand that the winter irrigation practices by Welton's shareholders, just like those historically practiced by the shareholders of the various mutual ditch companies now participating in the Winter Water Storage Program in Pueblo Reservoir, constitute legal beneficial use and exercise of those shareholders' water rights," Justus said. "Winter soil moisture replenishment is a very common means for maintaining both the productivity and viability of the lands in the Arkansas Basin, and the shareholders are entitled to continue this beneficial water use."
Yet, the heated back-and-forth discussions between attorneys representing Two Rivers and Welton Water may have finally come to an end — at least for now.
On June 8, 2018, the case was dismissed on the court's order granting Two Rivers' motion to dismiss its claims without prejudice on the condition that it pay Welton and the shareholders' attorney fees and costs incurred in defense against Two Rivers' claims.
"On June 22, we filed affidavits in support of attorney fees, costs and claims," Justus said. "Welton is requesting approximately $204,000 from Two Rivers, which includes $147,000 in attorney fees, which have already been significantly reduced as a result of generous professional discounts by our firm, approximately $7,000 in additional costs, and just under $50,000 for expert witness and consulting fees that Welton had to incur to defend against Two Rivers' claims. Our first goal is to validate the attorney's fees and costs requested. If the court determines that the fee and cost request is appropriate, and Welton is actually able to collect on that award, Welton will be back on 'even ground' where it can afford to defend itself in any future litigation with Two Rivers, or it successors, without having to absorb the costs of this three-year litigation that failed to resolve the contested issues."
"This case has been going on and on and on, and it's spiraling out of control," said Two Rivers CEO Wayne Harding. "It's draining our pocket book, as well as I'm sure the stakeholders of the ditch. Yet, I still believe that we can work together to come up with a sane solution to be good neighbors and share the water with the rights that we both have. We've agreed to take a look at the sharing of attorney fees, as well as helping to maintain the ditch."
Harding, who took on the role of chief executive Officer in June 2016 — a year into the case — said Two Rivers' long-term plan has always been to work toward maintaining the long-term strategic value of the water.
"These two river basins are the last undeveloped water basins in the front range of Colorado," Harding said. "Our intent is to raise capital to be able to redevelop the water assets for an improved water system. One of the things we inherited were these two larger reservoirs that also help serve the Welton ditch. Our position has been that Welton Water has been doing futile calls on the water. The state of Colorado has wanted us to fix the Cucharas Dam and spend millions of dollars to do it, but for us, it doesn't make sense to spend so much money on infrastructure if we are facing these types of futile calls."
SETTING A PRECEDENT
This case has been closely watched by landowners who rely heavily on maintaining their water rights to stay in business. Given the length and cost the shareholders have incurred in trying to defend their century-old senior water rights, the decisions made in this case could set a precedent for future rulings and policies made regarding future water management in the state.
"Because the judge dismissed the case with no prejudice, Two Rivers could come back and sue us again," said Larry Morgan, a farmer and shareholder of the Welton ditch. "This has been a long three years, but for right now, we are thankful for the case to go this way. We still have our water, which is the point of value. Whether we make it through this ordeal or not, it's going to be a hardship for everyone of the shareholders. We aren't ever going to quit though. This is our livelihood. This is our home. For these people to come in and try to take this away form us is just wrong. We might lose our farms before this is all said and done, but we are going to keep pushing forward and fighting for what's right. We believe in what we are doing. It's rough, but we'll keep fighting."
Yet, Two Rivers contends that it wants to move forward, reasonably and peacefully, in the future, with Welton and its shareholders.
"I'm almost positive we can work something out," Harding said. "If our plans come to fruition in the basin, there will be more water for everybody. I think there's a misconception that we are the big, bad boys from Denver who are messing with the locals and their water. We are decent people who want to invest our money to benefit the community and the stakeholders in the area. We want to be good corporate citizens and manage a precious resource well, so everybody has the ability to access what they need. Before we continue to fight over it, we just want to find a reasonable solution for everybody. This is water under the bridge; let's move forward and figure things out."
In a parallel issue, Two Rivers, in failing to comply with the terms of its Consent Decree regarding the public safety risk posed by the Cucharas Reservoir, is now facing contempt proceedings before the court. ❖