Aspen’s water rights for hydro questioned

The city of Aspen's diversion structure on Castle Creek, in late winter 2011. Water from this point would be used for the city's proposed hydro plant.

Brent Gardner-Smith / Aspen Journalism

The city of Aspen's diversion structure on Castle Creek, in late winter 2011. Water from this point would be used for the city's proposed hydro plant.

A group of citizens opposing the city of Aspen's proposed hydro power plant has threatened to file a lawsuit, claiming the city effectively abandoned its water rights for power generation when it closed the original Castle Creek hydro plant in 1958.

"The city of Aspen water department does not have the water rights for a hydro plant on Castle Creek, period," Dick Butera told Aspen City Council at a June 27 meeting.

Butera owns a large home just below the city's diversion dam on Castle Creek, which is 2.4 miles above the Castle Creek bridge and the planned hydro plant.

He told the council that he and a group of other local landowners are willing to sue the city to prevent the hydro project from going forward.

"Two of the leading water attorneys in the state of Colorado have both said to our committee that we have a 90 percent chance of winning the case to prove that the water department does not even have the water rights," Butera said.

But the city's water attorney maintains the city's senior water rights remain in good standing and that the city has never intended to abandon its option to use the water for hydro power.

"The city has decreed absolute water rights," said Cynthia Covell, an attorney with Alperstein and Covell in Denver. "They are decreed for power purposes and they have never been found to be abandoned in any court proceeding. I think that the city can do the project that it wants to do with the water rights it has."

The proposed hydro plant would divert up to 25 cfs from Castle Creek and 27 cfs from Maroon Creek and send most of that water through the hydro plant to spin turbines and make electricity.

Sarah Klahn, an attorney hired by Pitkin County to independently review the city's hydro project, said this week even if an abandonment lawsuit was successful, the city could still likely obtain new water rights for the hydro plant.

Maroon Creek, just above the city's diversion dam, flowing low and slow in late summer 2010.

Brent Gardner-Smith / Aspen Journalism

Maroon Creek, just above the city's diversion dam, flowing low and slow in late summer 2010.

"I know that it is possible to still get a new appropriation, especially on a non-consumptive use," said Klahn, who is with White & Jankowski in Denver. "It may not be easy or cheap, but it can be done."

The use of the water by the city for a new hydro plant would be considered non-consumptive because the same amount of water diverted from the stream would be returned to the stream after having passed through the hydro plant.

And along the 2.5-mile stretch between the city's diversion point and the plant's tailrace on Castle Creek, there is only one other water right - the Targert Ditch for 3 cfs. Both those factors might make it easier to obtain a new - and very junior - water right.

But the threat of a lawsuit from a group of local landowners — some of them very wealthy — now hangs over the hydro project.

Still using the water?

Abandonment cases in water court usually rest on two primary questions: Has the water been used consistent with its decree, and did the owner intend to abandon the water right?

The city water rights in question date back to the late 1880s. They include 160 cubic feet per second of water from Castle Creek and 68.4 cfs of water from Maroon Creek.

The water rights from both Castle and Maroon were decreed by the state water court to be used " ... for generating electrical energy in claimant's electric plant and for power purposes, and for supplying water to residents of the town of Aspen and environs for domestic purposes ..."

Water tied to those rights is still used to supply Aspen's 3,500 municipal water customers and was used from 1892 to 1958 to power the original Castle Creek hydro power plant and provide Aspen with electricity.

The hydro plant was taken off line in 1958 after Aspen City Council learned it would be cheaper to buy federal electricity than make necessary upgrades to its hydro power system.

"The Castle Creek Power Plant was closed, the equipment removed, sold, or discarded as scrap," wrote Paul Andersen in the book "Power in the Mountains." "The brick and stone building was converted into city shops and Aspen lost the energy independence it had enjoyed for over 70 years."

This did not escape the attention of Paul Noto, a water attorney with Patrick, Miller and Kropf in Aspen, who is representing Butera and other citizens fighting the city's hydro facility.

In November 2009, Noto wrote a letter to the secretary of the Federal Energy Regulatory Commission asserting that Aspen no longer had the right to use its water rights to produce hydro power. The city needs a permit from FERC for the hydro plant.

"... The city has not used its Castle Creek hydroelectric facility and water rights in over 50 years," Noto wrote. "In Colorado, non-use of water rights for an unreasonable period of time coupled with intent constitutes abandonment. Intent can be inferred from long periods of non-use."

And in follow-up comments to FERC in a January 21, 2011 letter, Noto told the federal agency that Aspen had "likely abandoned" its water rights for the purpose of producing hydro.

And, he said, the city couldn't just start using the old water rights again for the new project.

"... Aspen's recent efforts toward bringing the Castle Creek hydroelectric plant back online cannot resuscitate water rights that are legally abandoned, and the proposed use of water to generate power is therefore contrary to Colorado law," Noto claimed.

Rights in good standing?

Covell, the city's water attorney, has a different take on the matter.

"The fact that the city stopped generating electricity at that time does not mean they abandoned the right to do so," Covell said. "The city has not intended to abandon. And intent is a piece of abandonment. We think we can defend an abandoment case."

Still, city officials are aware there is a danger of losing all or some their water rights by not exercising them.

Castle Creek flowing under the Castle Creek highway bridge late last winter. The brick building to the right is the old Castle Creek hydro plant. The new plant would be built next to it, just upstream.

Brent Gardner-Smith / Aspen Journalism

Castle Creek flowing under the Castle Creek highway bridge late last winter. The brick building to the right is the old Castle Creek hydro plant. The new plant would be built next to it, just upstream.

A "frequently asked questions" document on the water department's website cites the threat of losing the rights as one reason to move forward with the hydro plant.

"Under Colorado law, if you don't 'use' water, you lose it," the FAQ documents states. "A use, like hydropower production, is unique in that it is enough to protect our water rights as a use, but it also returns the water to the stream. If we don't exercise our rights, they can be lost forever.

"Years ago, there was a private hydroplant that operated on Hunter Creek in Aspen in the 1800s. The hydroplant was eventually abandoned and the water rights were as well in the early 1900s."

And now the citizens opposed to the hydro plant may seek to reduce the city's water rights.

"We haven't filed the lawsuit because of all the spirit of mediation. Everybody is trying to get along and figure this out," Butera said. "We haven't yet, but we're going to have to to stop this out of control, reckless, reckless project,"

In November 2007, attracted by the idea of avoiding the release of 5,167 tons of carbon dioxide emissions each year from electricity-producing coal plants, Aspen voters approved a $5.5 million hydropower plant.

The vote tally was 576 to 228, which combined was less than 17 percent of Aspen voters.

And the city issued a $5.2 million electric facility bond in 2008 that will cost $10.78 million to pay off by 2035.

The bonds are to be paid off with electric utility fees and with additional property taxes if needed.

Costs of the hydro project are to be offset with savings from buying less electricity from the Municipal Energy Agency of Nebraska.

Aspen City Council has now authorized spending $8 million on the project. And Butera told the council he thought the project would cost at least $10 million before it was complete.

Still slated by the city to open in 2014, the project has run into opposition from citizens, and Pitkin County's Healthy Rivers and Streams board, on the issue of taking too much water from the Maroon and Castle creeks for hydro.

Some council members say they would support leaving more water in the rivers at low-flow period to protect the environment.

But if the city uses less water, the new hydro plant will produce less electricity. And that lowers the financial return on the project.

Butera told the city council the project would cost $250,000 to $500,000 a year "to make somebody environmentally feel good."

And the city is also rethinking its FERC permitting process after American Rivers protested the city's request for a regulatory exemption with less oversight from the federal agency.

Butera reminded the council that he had successfully stopped Pitkin County from building a pedestrian trail along lower Castle Creek Road to connect the Aspen Music School with the Marolt dormitories by filing a lawsuit.

"The music school trail to nowhere ... we stopped it," Butera said. "We had to go to the courts. We won three times in the court."

The county has recently appealed for a fourth time, Butera said.

The "committee"

And the ad-hoc committee that Butera referred to includes at least two billionaires, presumably with significant resources to spend on a lawsuit in state water court.

According to Noto's Jan. 21 comment letter to FERC, his clients in opposition to the city's hydro plant at that time included Butera, Tom and Maureen Hirsch, Kit Goldsbury, Ed and Patricia Peterson, Joe and Sheila Cosniac, Jack and Yasmine DePagter, Dennis and Linda Vaughn, and Jody Guralnick.

The clients also include Elk Mountain Lodge LLC, Crystal LLC, American Lake LLC, Ashcroft LLC, Roaring Fork Land and Cattle Co., Bruce E. Carlson Trust; and B&C LLC.

Billionaire William Koch controls Elk Mountain Lodge LLC, Crystal LLC, American Lake LLC and Ashcroft LLC. Koch purchased the 40-acre Elk Mountain Lodge property, which is in the upper Castle Creek valley, for $26.5 million in 2007. The other LLCs control 30 acres of land near the main property.

Christopher "Kit" Goldsbury, also a billionaire, owns property on Castle Creek near the Aspen Meadows and the proposed new hydro plant under the Castle Creek bridge.

The Roaring Fork Land and Cattle Co. is owned by Tom and Margo Pritzker, who are members of the wealthy Pritzker family of Chicago and have a home in the Maroon Creek valley.

B & C LLC is controlled by Kristeen Church, who has a home right on Maroon Creek. And the Bruce E. Carlson Trust controls property on Maroon Creek near T Lazy 7.

"Sometimes citizens have to take actions," Butera told the city council. "We have to go to court to stop our government."

And so a judge, after what would likely be a multi-year process, could decide whether the city still has water rights to use for its proposed hydro plant or not.

"An abandonment case is always a crap shoot," said Klahn, the attorney hired by Pitkin County to review aspects of the proposed hydro plant. "And undoubtedly there is more to it than either one is saying.

"You could go back in Colorado case law and find abandonment cases that were more egregious than this, and the court said, 'Oh no, they didn't abandon them,' and you can find cases that are less egregious, where the court said 'They did abandon them.'"

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Editor's note: A "clarification and correction" about the story was published in the Daily News on Tuesday, July 12, that read: "An article on Sunday indicated Penny Pritzker was one of a number of clients of water attorney Paul Noto of Aspen who are opposing the city's proposed hydro project. Other Pritzker family members, Tom and Margot Pritzker, were formerly clients of Noto's, but Penny Pritzker is not. The same article references Bill Koch, a Noto client, as a 'national political activist.' This wrongly implies that he is one of his brothers, David and Charles Koch.'"

It should also be noted that the Roaring Fork Land and Cattle Co., which is controlled by Tom and Margot Pritzker, was listed as a client by Noto in a January 21 letter to FERC about the city's hydro plant. After the article was published on Sunday, Noto said that Roaring Fork Land and Cattle Co. was no longer a client. And he said that Jody Guralnick and Dennis Vaughn are also no longer clients.

And we have this disclosure note: Tim McFlynn, a board member of Aspen Journalism, served as a co-convener of a community mediation effort at the Aspen Institute on Aspen's proposed hydro facility on behalf of Public Counsel of the Rockies. He also, in his role as chair of Pitkin County's Open Space and Trails board, urged Pitkin County to hire a team of experts to independently review the city of Aspen's assumptions and consultant reports on the hydro project.

A version of this story was published on Sunday, July 10, 2011 in collaboration with the Aspen Daily News.

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