By Jonathan Clyde

The Utah Supreme Court issued an amended decision in this case and clarified the distinction between impairment of and interference with water rights. Crucially, the Court held that a party need not protest a change application at the administrative phase in order to assert interference at a later date. [Rocky Ford Irrigation Company v. Kents Lake Reservoir Company, 2020 UT 47 (UT July 13, 2020).]

Factual and Procedural Background

This amended decision represents the end of a long running dispute between two water users’ groups. Kents Lake Reservoir Company (Kents Lake) and Rocky Ford Irrigation Company (Rocky Ford) divert and store water from the Beaver River in Central Utah. Each company owns direct-flow and storage water rights that were recognized in the 1931 Beaver River Decree. The Beaver River Decree held that all upper users were entitled to obtain their water rights prior to the lower users, irrespective of their relative priority dates. Kents Lake is located upstream of Rocky Ford and is considered to be in the upper basin, while Rocky Ford is in the lower basin.

Kents Lake filed change applications in 1938 and 1940 to store additional water in its reservoir. These change applications were both approved by the Division of Water Rights over the protests of Rocky Ford. Subsequently, the two companies entered into an agreement to “provide for the practical administration of storage … and to prevent future controversy concerning the diversion for storage.” Rocky Ford v. Kents Lake, 2019 UT 31, ¶ 9. This agreement provided that: 1) Rocky Ford would not protest Kents Lake’s planned change application seeking an option storage right in Three Creeks Reservoir, 2) Kents Lake would not oppose Rocky Ford’s enlargement of its reservoir, and 3) Rocky Ford has an exclusive right to store all water available to it from November 1 to the following April 1 each year.

As agreed, Kents Lake submitted a change application to the Utah State Engineer seeking to create an option storage right in Three Creeks Reservoir. Rocky Ford, as promised, did not protest the application. The State Engineer approved the application and granted Kents Lake’s request for these “direct-storage changes.” Kents Lake now had a direct-storage right, allowing it to either use the water directly or store it in Three Creeks Reservoir. Kents Lake subsequently perfected this change and received a certificate of beneficial use for the direct-storage right.

Beginning in the 1970s Beaver River water users gradually shifted to sprinkler irrigation, which requires less diversion of water and produces less return flows. Entities such as Kents Lake began to store these efficiency gains and this reduced the flow available to lower users, such as Rocky Ford. The reduction of return flows can adversely impact lower users as insufficient water is made available.

At the District Court

In 2010, after requesting assistance from the Division of Water Rights, Rocky Ford brought suit in state District Court against Kents Lake. The suit alleged water right interference, conversion of water rights, and negligence, and seeking declaratory relief, injunctive relief, and rescission of the 1953 Agreement. Rocky Ford contends that its water rights have been impaired by the approved changes to the direct-storage and other actions taken by Kents Lake. Essentially, Rocky Ford asserted that its water rights had priority over the direct-storage rights approved in Kents Lake’s change application when the issue of interference arises.

Following discovery, Rocky Ford moved for partial summary judgment. It asserted that: 1) the direct-storage changes maintain an 1890 priority date only to the extent they don’t injure Rocky Ford’s direct flow rights, and 2) Rocky Ford’s direct flow rights are not subordinated or waived under a plain language reading of the Agreement. The District Court denied the motion holding that Rocky Ford had “intentionally waived its direct flow rights against [Kents Lake] through its entrance into the 1953 agreement” and that Kents Lake could continue to store its water as it has “even to the detriment of [Rocky Ford]’s direct flow rights.” Id. at ¶ 15.

Following a bench trial, the District Court issued its written Memorandum Decision. The court first denied Rocky Ford’s request for injunctive and declarative relief regarding Kents Lake’s measurement obligations. Because Kents Lake had followed the instructions of the State Engineer with regard to measurement, the District Court concluded that Rocky Ford was not entitled to declarative or injunctive relief. The District Court also declined to rescind the 1953 Agreement. It concluded that Rocky Ford had not proved material breach, impracticability, frustration of purpose, or mutual mistake. Lastly, the District Court awarded attorney fees to Kents Lake and Beaver City sua sponte under Utah Code § 78B-5-825.

Issues on Appeal

Rocky Ford appealed the decision and asserted five principal questions for review. First, did the trial court commit legal error when it denied Rocky Ford’s motion for summary judgment? Second, did the trial court err in refusing to declare that Kents Lake could not store the water it saved through improved efficiency? Third, did the trial court err in refusing to declare that Kents Lake must measure its usage consistent with the requirements of the Beaver River Decree? Fourth, did the trial court err in refusing to rescind the 1953 Agreement? And fifth, did the trial court err in awarding attorney fees to Kents Lake and Beaver City?

The Court heard argument on the appeal and published an opinion in July 2019. Rocky Ford Irrigation Co. v. Kents Lake Reservoir Co., 2019 UT 31. The parties filed petitions for rehearing, seeking substantive changes to Parts II(A) and (B) of the original opinion. The Court granted the petitions and reheard the case in March 2020.

The Supreme Court’s Amended Decision

There are five principal questions at issue: 1) Did the District Court err in denying Rocky Ford’s motion for summary judgment? 2) Did it err in refusing to declare that Kents Lake could not store its efficiency gains? 3) Did it err in refusing to declare that Kents Lake must measure its usage consistent with the requirements of the Beaver River Decree? 4) Did it err in refusing to rescind the 1953 Agreement? 5) Did it err in awarding attorney fees to Kents Lake and Beaver City?

The Court reversed the lower court’s denial of Rocky Ford’s motion for summary judgement, the denial of Rocky Ford’s request for declaratory judgment as to Kents Lake’s measurement obligations under the Decree, and the decision awarding attorney fees to Kents Lake and Beaver City. But the Court affirmed the lower court’s decision refusing to declare that Kents Lake could not store its efficiency gains and the decision refusing to rescind the 1953 Agreement. The case was remanded for further proceedings.

Changes Are Expressly Made Subject to Vested Rights at New Point of Diversion or Place of Use

The key clarification in this amended opinion is that the Court held that Kents Lake’s direct storage changes retain their original priority only to the extent they do not injure Rocky Ford’s direct flow rights. This is made clear in the Utah Code, which provides that a water user may seek to change its rights in a water source by filing a change application with the State Engineer. Utah Code § 73-3-3. A change application requests a change in the “place of diversion or use” of the water for a purpose other than that originally appropriated. Id. Because such a change is not permitted “if it impairs any vested right,” id., other water users are entitled to file a protest of a proposed change with the State Engineer. id. § 73-3-7. The State Engineer then reviews the impairment claims and approves the change if there is “reason to believe” that the approval will not impair vest water rights. Searle v. Millburn Irr. Co., 2006 UT 16, ¶ 31, also Utah Code § 73-3-3.

Because a change to a water right is made subject to preexisting water rights, it is clear that the change cannot harm those preexisting water rights. A subsidiary point is also implicit: The change maintains its original priority only so long as it does not harm preexisting rights. See, Hague v. Nephi Irrigation Co., 52 P. 765, 769 (Utah 1898) (“[w]hen water has been lawfully appropriated, the priority thereby acquired is not lost by changing the use for which it was first appropriated and applied, or the place at which it was first employed, provided that the alterations made … shall not be injurious to the rights acquired by others prior to that change.”) In this case, Kents Lake’s changed right retains priority over Rocky Ford’s rights so long as Kents Lake’s changed water storage does not injure Rocky Ford’s direct flow rights.

The Court held that there exists a presumption that a water right subject to a change application retains its original priority date. An aggrieved party may allege an injury sufficient to defeat the presumption of original priority by either protesting a change during the application process or bringing a claim after the change has been approved. A party can, in other words, allege either prospective injury stemming from another water user’s proposed change, or actual injury stemming from another water user’s actual change.

Distinguishing ‘Impairment’ from ‘Interference’

The Supreme Court noted that impairment and interference have historically been used interchangeably, but now holds that they are “distinct legal claims meriting distinct labels.” ¶ 37. The Court clarified that “impairment” claims are statutory claims brought under Utah Code §§ 73-3-3 and 73-3-7 during the change application process, and that “interference” claims are common-law claims brought under our case law after the change application process ends. The distinction between “impairment” and “interference” is important to the extent it highlights the two distinct roles our courts play in water law cases: 1) reviewing administrative decisions regarding water rights, and 2) adjudicating the water rights themselves (including their priority).

A determination of impairment is an administrative function and refers to a protest of proposed changes of water rights. Because the change is only proposed at this stage, the preliminary decision is whether there is “reason to believe” that injury will occur. At this stage the applicant seeking the change has the burden to show that there is reason to believe that no injury to vested rights will occur. Conversely, interference is a judicial function and refers to the determination of actual injury to a vested water right. Accordingly, once a change application is approved the burden shifts and the opponent of the change must show by a preponderance of the evidence that the change has interfered with their water rights.

Conclusion and Implications

The Utah Supreme Court’s earlier decision recognized that a change application did not alter the underlying priority date of a water right, but did not acknowledge the fact all changes are made subject to existing rights. This amended decision clarifies that a change is expressly made subject to vested rights at the new point of diversion or place of use. Further, it firmly delineates that impairment and interference are separate and distinct causes of action. The Utah Supreme Court’s Decision may be found at: https://www.utcourts.gov/opinions/supopin/Rocky%20Ford%20v.%20Kents%20Lake20200713_20170290_47.pdf