ASPEN – The nine people behind a lawsuit against City Hall challenging its proposed hydro plant all own multimillion-dollar Aspen-area properties and some hold consumptive water rights on Castle and Maroon creeks.
The city of Aspen, through its Denver-based water attorney, filed a motion in to dismiss the lawsuit this past fall based on the notion that the plaintiffs don’t have standing to challenge the city’s water rights.
The plaintiffs recently submitted information to the court either detailing their water rights or giving other reasons why they should be allowed to sue the city over its water rights.
In the mix of property owners are two billionaires and two Aspen locals with a history of successfully taking on local governments.
The property owners sued the city in September 2011 in state water court (case number 2011CW130) in an effort to strip the city of its right to use water from the creeks for a new hydropower plant.
The city responded three weeks later by telling Judge James Boyd that the property owners don’t have the right to make their claims.
“The complaint does not identify which plaintiffs own water rights, what water rights they may own, or how those are or may be affected with respect to the alleged abandonment of the hydropower component of the subject water rights,” Cindy Covell, the city’s water attorney, told the court in a motion to dismiss the case.
The plaintiffs responded Oct. 24 with a 16-page brief and 139 pages of exhibits documenting their water rights and other interests.
The plaintiffs’ initial claim was that since the city has not used its hydropower water rights on the two creeks since 1961, it no longer has the right to divert 25 cubic-feet-per-second of water from Castle Creek and 27 cfs from Maroon Creek for hydropower use.
One of the most recognizable names in the lawsuit is that of Bill Koch, a billionaire who now owns one of the most scenic homesites in the Aspen area in the upper Castle Creek Valley.
Koch owns four contiguous properties 10 miles up Castle Creek from Aspen that he paid $55 million to assemble in May 2007. Forbes estimates Koch’s net worth at $4 billion, putting him 81st on the Forbes 400 list.
An entity owned by Koch called Elk Mountain Lodge LLC controls the right to divert 1.3 cfs from Kaiser Creek, a tributary of Castle Creek. A cubic foot of water is equal to about 7.5 gallons of water.
The water can be used to fill two man-made ponds on the property that hold 1.58 and 3.05 acre-feet of water, respectively. An acre-foot of water is enough to flood an acre of land with a foot of water.
There is also a well on the property to provide water for domestic and household uses.
The well was once authorized to provide enough water to meet the needs of up to 46 guests at the former Elk Mountain Lodge, which is now Koch’s private residence.
The water rights on this property are junior to the city’s water rights on Castle Creek, which means that if the city needs the water, Koch might have to stop diverting water from Kaiser Creek.
Koch also has the right to divert 6.25 cfs from Devaney Creek, another tributary of Castle Creek. That water can be used to fill six small ponds, controlled by small dams, on property below the American Lake trailhead owned by Koch in the name of Crystal LLC.
In all, the six connected ponds on the Crystal LLC property can store 3.49 acre-feet of water.
This water right is also junior to the city’s hydropower rights, and it’s also junior to a state-mandated minimum stream flow level in Castle Creek, which is in place to help ensure that at least 12 cfs of water is always flowing down Castle Creek to its confluence with the Roaring Fork River.
Koch also has another small bundle of water rights tied to wells and ponds on two other adjoining properties he owns in the name of Ashcroft LLC and American Lake LLC.
These rights are also junior to the city’s rights and the state’s minimum stream flow rights.
Koch is not specifically named as a plaintiff in the lawsuit, but the four LLCs he owns that control his Ashcroft-area properties are named. (See related story).
And Koch’s role in the lawsuit against the city has caught the attention of Aspen Mayor Mick Ireland.
Mayor not pleased
At a City Council meeting on Oct. 24, Ireland was waving a copy of the lawsuit around and had a back-and-forth with Maureen Hirsch, who is another plaintiff in the lawsuit along with Koch.
(Online video of the Oct. 24 meeting is available. The relevant section of the meeting starts at 3:10:00).
Ireland, who is an attorney, called the litigation from Koch, Hirsch and others “very hostile.”
“It is very aggressive” he added. “And it’s very divisive. And I can’t say that I appreciate it.”
Ireland also characterized the lawsuit as an attempt to “take” city water.
“I think this litigation has made it very difficult to work with you and other opponents, because you are seeking to take city water,” Ireland said. “I don’t know who is paying for it — you aren’t disclosing that, I have my guesses — but I’m in a position of somebody in a bar who punches them and then says, ‘Let’s talk about our differences.’”
Hirsch responded by telling Ireland that the plaintiffs are not trying to take the city’s water.
“We are not taking your water, the water would go back to the stream, if in fact we are successful at the lawsuit,” Hirsch said. “But we are not taking it, we are not taking it anywhere, we are not putting it in a gunny sack and taking it away. It is going back to the stream.”
Ireland said he found that viewpoint “naive.”
“Because if the water goes back into the stream, that doesn’t mean that the other benevolent eminencies behind this litigation won’t appropriate it for their own uses,” Ireland said. “We don’t have any assurance of that.”
Hirsch repeated her assertion that it was not the intent of her nonprofit group, Saving Our Streams, which is the lead plaintiff in the suit, to do that.
“Yes, but you don’t speak on behalf of Elk Mountain Lodge LLC, Crystal LLC, American Lake LLC, Ashcroft LLC,” Ireland said, referring to the LLCs owned by Koch. “You don’t speak on behalf of them. You can’t bind them.”
Koch, however, did put his name to a full-page advertisement from Saving Our Streams in the Aspen Daily News that indicated their intention to leave the hydropower water in the stream.
“We will never divert or sell any water in Castle or Maroon creeks to the Front Range or any out-of-basin area,” stated the ad, which was also signed by the other plaintiffs in the case. “It is our fervent desire to keep the water in the streams.”
The ad also stated, “If another party seeks to transfer water from Castle and Maroon creeks, we will vigorously oppose any efforts to do so.”
Does Koch have standing?
The fact that Koch’s water rights are junior to the city’s gives him standing to sue the city and claim it has abandoned its hydro rights, according to attorney Paul Noto of the Aspen water law firm of Patrick, Miller and Kropf, which is representing the plaintiffs.
“ … Aspen’s proposed water use would in fact result in a classic form of injury — diminished water availability due to an impermissible expansion of use,” Noto told the court in a brief.
It is Noto’s contention that the city has abandoned its historical rights to use water from Castle and Maroon creeks for hydro. Therefore, if the city started to use water for hydro again, it would be an “impermissible expansion of use,” according to Noto.
Noto also tells the court how that extension of use would hurt his clients who have water rights along on Castle Creek.
“Plaintiffs with upstream water rights would be curtailed when they are not historically,” Noto wrote. “Plaintiffs with downstream water rights will suffer diminished water supplies.”
Koch’s properties are about eight miles above the city’s dam and diversion point on Castle Creek. He is the only plaintiff in the suit against the city who owns property above the city’s diversion dam on Castle Creek.
Dick Butera, a longtime Aspenite who has been an outspoken critic of the city’s proposed hydro plant, is the first plaintiff downstream of the city’s diversion point.
In fact, he’s immediately downstream of the diversion structure and shares a driveway off of Castle Creek Road with the city, which is used by water department employees to reach the diversion facilities.
Butera, a developer who once helped renovate the Hotel Jerome during his tenure in town, owns a 30-acre parcel of land along Castle Creek. It’s located two-and-a-half miles upstream of the Highway 82 Castle Creek Bridge.
Butera built a house and garage with a caretaker unit next to the creek in 2003. Today, the county assessor values the estate at $12 million.
He has the right to divert up to one cfs of water from Castle Creek to feed a dam-controlled pond he spent $250,000 to build on the property, according to a document on file with Pitkin County. The pond holds three acre feet of water, and the water then flows back into the creek.
Butera can use the water for domestic purposes, to irrigate 15,000 square feet of land, and for other purposes.
He has installed a large, well-maintained lawn along the banks of the creek, and he’s also built a small bridge from his yard to a natural island in the creek.
Butera’s water rights are junior to both the city’s water rights and to the state’s minimum stream flow rights.
During the construction phase of his estate, Butera was “red-tagged” by the county and had to stop work due to alleged violations of county regulations related to the work near and in the creek.
A Pitkin County zoning technician sent Butera a letter in November 2001 informing him that the “stop work order” would not be lifted until he applied for the required county permits for the work that was being conducted on his property and along the creek.
The county said that Butera needed a floodplain permit, a “drainage and erosion control plan for the disturbed areas of the sides of the creek and the island,” and a revegetation plan.
The revegetation plan required remediation work to repair the damage done from the removal of natural vegetation along the banks of the creek.
The zoning technician also wrote that “the boulders placed in the creek river-right of the island must be removed as soon as possible with a county-approved plan.”
Butera, however, said the county stop-work order was a mistake on the county’s part and that he was in strict compliance with county regulations.
“I’ve never built an illegal anything in 50 years of developing,” Butera said, adding that he had a highly qualified consultant ensuring that his home was built in an environmentally sensitive manner.
“We played by all the rules and got all the permits,” Butera said.
Butera said he planted more willows along the stream bank than was required and that the project got consistently high marks from experts that came in subsequent years to inspect the property.
“I’ve been a good steward of anything I’ve ever touched,” Butera said.
In addition to being a plaintiff in the lawsuit against the city, Butera has also sued Pitkin County in an apparently successful effort to prevent the county from building a sidewalk along Castle Creek Road between the Aspen Music Festival and School campus and the Marolt housing complex.
At a City Council meeting last year, he called the city’s proposed hydro plant an “out of control, reckless, reckless project,” because of the increasing costs and the way the city has managed the project to date.
The next plaintiff along Castle Creek is Yasmine dePagter, who owns property with her family just upstream of the proposed hydropower plant, which the city wants to build next to the existing city shops facility on Power Plant Road.
The road got its name from the fact that the city of Aspen operated a hydropower plant there from 1893 until 1958.
DePagter does not own the right to directly divert water from Castle Creek, but she does own a well on the property that dates back to 1963 and can draw 20 gallons of water per minute from the Castle Creek watershed.
The family’s property, which it has owned since 1962, is now valued by the county assessor at $2.6 million.
DePagter has been an outspoken critic of the city’s approach to re-establishing a hydro plant in the old location, citing the costs of the plant, the industrial nature of the facility, and the potential damage to the stream because of the increased diversions.
“Our intent is to keep the water in the stream,” dePagter told Ireland during the contentious council meeting on Oct. 24. “Your intent is to take the water out of the stream. It’s as simple as that.”
DePagter has experience fighting City Hall, as she has long been part of a coalition working to preserve the Marolt Open Space and prevent the construction of another highway bridge over Castle Creek as part of an entrance to Aspen plan.
The dePagter family owns an interest in a “undecreed exempt well” on their property, which is different than owning a right to divert water from a stream.
“Exempt” wells are not subject to being dried up if more senior water rights holders — such as the city — make a “call” for their water, and so the prospect for injury to a water right is not present.
Nonetheless, Noto, the water attorney for the plaintiffs, told the court that “an interest in an exempt well is a legally protected interest sufficient to establish standing in a water court proceeding.”
Noto said the same circumstance applies to plaintiffs Joe and Sheila Cosniac, who live on the banks of Castle Creek three houses downstream from the proposed power plant.
The Cosniacs, who live in San Antonio, Texas, also have an undecreed exempt well on their property, which they purchased in 2004 and now is valued by the county assessor at $5.1 million.
Water rights necessary?
In his brief to the court, Noto concedes that some of the plaintiffs do not own water rights or even a well, but he argues that doesn’t prevent them from suing the city.
He told the court that the plaintiffs who do not own water rights “did not bring this case to allege injury to water rights. They filed the complaint to hold (the city of) Aspen to a standard of strict proof on whether its hydropower water rights still stand.”
A key maxim under Colorado water law can be described as “use it or lose it.”
The plaintiffs are arguing that since the city shut down the original hydro plant in 1958, and has not used its hydro rights since 1961 — when it used the plant for a day during a power outage — it has lost its right to now use the water for hydropower.
Notably, the plaintiffs are not arguing that the city has abandoned its rights to use the water for municipal and other purposes — only for hydropower.
The city currently has the right to divert at least 225 cfs of water from Castle and Maroon creeks for “municipal” purposes.
And so even if the plaintiffs are successful in stripping the city of its right to divert 52 cfs of water from the two creeks for hydropower, the city could still, in theory, take that same amount of water out of the creek to meet the community’s broader water needs, according to Covell, the city’s water attorney.
In any event, water rights abandonment cases are rarely straightforward, as it’s up to a given water court judge to make a call.
“An abandonment case is always a crap shoot,” said Sarah Klahn of the Denver law firm of White & Jankowski, who has worked on water issues for Pitkin County.
Covell said earlier this year that someone has to prove that a water rights owner in fact intended to abandon a water right, and not just that they were not actually using the water.
“The city has not intended to abandon,” Covell said.
Maureen Hirsch and SOS
The next plaintiff downstream on Castle Creek is Maureen Hirsch, who owns a home next door to the Cosniacs on Sneaky Lane valued by the county assessor at $5.4 million.
Hirsch bought the property in 1993 and owns a “decreed exempt well” that dates back to 1972, but does not own other water rights on Castle Creek.
Hirsch is also the director of a nonprofit corporation formed in December 2010 called Saving Our Streams.
Her daughter, Jessica Hirsch, is an officer of the corporation, along with dePagter.
The organization does not yet have a board of directors, Hirsch said.
Saving Our Stream’s mission, according to its articles of incorporation filed with the Colorado Secretary of State, is “furthering and ensuring the preservation of the natural environment, riparian habitat and stream flows of Castle Creek and Maroon Creek …”
Saving Our Steams, or SOS, does not own any water rights, but Noto argues to the court that it still has standing because the city is preventing the organization from reaching its goals, thus causing injury.
“An organization that has been injured as an entity suffers an injury-in-fact where the defendant’s conduct has made it difficult or impossible for the organization to fulfill one of its essential goals,” Noto told the court.
Noto claims that if the city diverts 25 cfs from Castle Creek and 27 cfs from Maroon Creek for hydropower, SOS won’t be able to fulfill its goals of preserving the health of the streams.
“Additionally, SOS has already been forced to divert substantial resources away from its regular environmental stewardship efforts to put toward preventing Aspen from resuming its use of hydropower water rights as currently proposed,” Noto wrote.
SOS’s “regular environmental stewardship efforts” to date appear to be limited to fighting the city’s hydro project.
Hirsch said the group proposed and helped produce a public workshop on the hydro project last summer.
And she and dePagter both say they are committed to increasing local awareness of the ecology of the watersheds of Castle and Maroon creeks beyond the issue of the hydro plant.
“It is our interest to do programs within the community to make people aware of these beautiful streams and the impact that any development along the streams could have,” Hirsch said. “And it just so happens that the hydropower project is now in the forefront.”
The next, and last, plaintiff on Castle Creek is Christopher “Kit” Goldsbury, also of San Antonio, who owns an estate at the end of Sneaky Lane valued by the county assessor at $16 million. The property, which he’s owned since 1984, is creekside and just down the hill from the Aspen Meadows.
Goldsbury, who sold the Pace Picante Sauce operation to Campbell Soup for $1.1 billion in 1996, is ranked 329th on the Forbes 400 list with an estimated net worth of $1.35 billion.
In 1999, Goldsbury paid an estimated $20 million for six nearly complete townhomes under construction by the Aspen Institute on the bluff above his home, according to The Aspen Times.
He had the townhomes demolished to protect his privacy. Several years before that, he paid $3 million for a lot next to the townhomes in order to keep it empty.
Goldsbury’s water rights on his Aspen property are tied to what’s known as the Snobble spring and fish pond.
The spring, along the banks of Castle Creek, produces about one cfs of water that is channeled to a small pond on the property.
Goldsbury has the right to impound up to two acre feet of water in the pond.
The Maroon Creekers
There are two plaintiffs in the suit against the city who own property on Maroon Creek.
The first is B&C LLC, which is controlled by Kris Church, an interior designer and developer who built a home immediately on the banks of Maroon Creek in 2007 that is on the market for $29.5 million.
The home has direct views of the creek from virtually every room.
B&C LLC and Church do not own any water rights in Maroon Creek, but Noto said that should not preclude her from being able to sue the city.
“As a landowner whose property sits on the banks of Maroon Creek, and who regularly visits and recreates on Maroon Creek, B&C LLC should be allowed to participate in order to ensure that Aspen’s use of the public’s water resources comports with law,” Noto told the court.
Mayor Ireland, in the Oct. 24 City Council meeting, was also critical of property owners on the streams who remove riparian habitat and put in rocks along the stream bank.
While he didn’t specifically mention Church’s or Butera’s home in his statements, it does raise the question of whether residents who live right on a stream can do so without hurting the environment.
For her part, Church says it is indeed possible, noting that she built her home in strict compliance with county regulations.
“The stream hasn’t changed one bit since we’ve been down here,” she said. “I have not touched a stone in that river or touched the bank. And I wouldn’t want to hurt the environment in that way.”
Further up Maroon Creek, just below the T-Lazy-7 Ranch complex, Dr. Bruce E. Carlson has owned a parcel of land for 41 years that the county assessor now values at $4 million.
Carlson, a retired oral surgeon turned investor, owns 59 shares in the Willow Creek Ditch and Herrick Ditch Co.
The Willow Creek Ditch diverts water from Willow Creek, a tributary of Maroon Creek that flows in at the T-Lazy-7 Ranch. The Herrick Ditch diverts water directly out of Maroon Creek.
Together, the two ditches divert 97 cfs of water from the two creeks.
Carlson is one of the smallest shareholders in the ditch company, which has issued 3,720 shares.
Other large shareholders in the ditch company include the T-Lazy-7 Corp., the Maroon Creek Club and the city of Aspen, which has 107 shares that it leases to the Maroon Creek Club.
Carlson says he is concerned both about the environment of the streams and the cost of the proposed hydro project.
And he says that while he is a registered Republican, he has supported Ireland, a Democrat, for mayor and does not have an ax to grind with the city.
“I’m more concerned about the water flow in the stream,” he said.
A bad precedent?
The city’s motion to dismiss the lawsuit for lack of standing has caught the attention of Western Resource Advocates, which is based in Boulder.
The nonprofit organization filed a conditional “friend of the court” brief on behalf of the plaintiffs. The brief has not yet accepted by the court.
WRA says the city’s argument about certain plaintiffs lacking standing because they don’t own water rights could have “a chilling effect on organizations’ and individuals’ ability to participate in water court proceedings.”
Attorney Bart Miller of WRA says that the Water Right Determination and Administration Act passed by the Colorado Legislature provides for a broad interpretation of who has standing to file an action in water court.
Miller argues that under the law, “any person” has standing “to hold the holder of a water right or applicant for water rights” to “strict proof.”
“If the city of Aspen prevails on its motion, it will close off the water court system to many interested ‘persons’ in this case and others,” Miller wrote in his brief. “It could make water courts a private sanctum where entry is disallowed to all but a select few — the tiny portion of the state’s population that own water rights.”
He adds that “the city seeks a new precedent that would insulate it and other holders of vested water rights from complying with Colorado water law.”
Lawsuit not helping with mediation?
Ireland said at the Oct. 24 council meeting that the lawsuit is making it hard for the city to talk with opponents of the hydro project.
Ireland said that while some citizens were urging the city to continue a mediated discussion about the project, it could not because the city was now “under the gun.”
“Everything we say can be used against us in a court to prove that we abandoned our rights or admitted that we don’t have rights or something of that sort,” Ireland said. “And that puts us in a posture that makes a mediated solution very difficult.”
Ireland also said that another purpose of the lawsuit is to drive up the costs of the hydro project so that opponents can then claim it is too expensive to build.
“There are those who would use this to make it a losing proposition, and sue and then say ‘Gee, we litigated so much and now it doesn’t make money,’” Ireland said. “But that is a self-fulfilling prophecy, and that says that your economic decisions … will be made by who has the power to litigate you into a negative return on investment.
“ … if we accede to that argument,” Ireland concluded, “then we have conceded our autonomy, our sovereignty as a community to someone just because they have enough money to litigate. And I won’t do that.”
Water court next steps
Judge Boyd is presiding over the case of Saving Our Streams et al v. the City of Aspen, Colorado.
For now, the opening salvos of the case have been “fully briefed,” as the attorneys say.
Boyd is now faced with making a decision on the city’s motion to dismiss, based on its arguments that the plaintiffs lack standing.
If he rules against the city, the city will then need to try and convince the judge that it has not abandoned its water rights for hydropower, or at least convince the court that the plaintiffs have not effectively proven their abandonment case.
Editor’s notes: Aspen Journalism collaborated with the Aspen Daily News on this story. The Daily News published the article on Wednesday, Jan. 4, 2012. Two corrections were made in this online version of the story. One, the page count of the plaintiff’s response to the city’s motion is 16 pages, not 14, and there are 139 pages of exhibits, not 155. Two, Cindy Houben, the county’s director of development did not write a letter to plaintiff Dick Butera. Instead, the letter came from a county zoning technician.