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ADVANCE SHEET HEADNOTE November 23, 2020

No. 19SA150, United Water & Sanitation Dist. v. Burlington Ditch Reservoir & Land Co.—Water Law—Intent as to Use of Water—Anti-Speculation Doctrine.

The Water Court in Division 1 rejected United Water and Sanitation

District’s application for a conditional water right on the grounds that it failed to

demonstrate a non-speculative intent. The water court reasoned that United did

not qualify for the governmental planning exception to the anti-speculation

doctrine and could not satisfy the anti-speculation standards applicable to private

appropriators. The supreme court agrees. United, a one-acre special district

incorporated in Elbert County, has no governmental or agency relationship with

the end users proposed to be benefited by its appropriation in Weld County and

is thus ineligible for the governmental planning exception. The contract that

United offers to support its application is insufficiently definite and binding to

satisfy the anti-speculation standards applicable to private appropriators.

Accordingly, the supreme court affirms the judgment of the water court below. The Supreme Court of the State of Colorado 2 East 14th Avenue • Denver, Colorado 80203

Supreme Court Case No. 19SA150 Appeal from the District Court Weld County District Court, Water Division 1, Case No. 16CW3053 Honorable James F. Hartmann, Water Judge

Concerning the Application for Water Rights of United Water and Sanitation District, acting by and through the United Water Acquisition Project Water Activity Enterprise in Adams, Arapahoe, Denver, Douglas, Elbert, Morgan, and Weld Counties.

Applicant-Appellant: United Water and Sanitation District, acting by and through the United Water Acquisition Project Water Activity Enterprise,

v.

Opposers-Appellees: Burlington Ditch Reservoir and Land Company; Centennial Water and Sanitation District; City of Aurora; City of Boulder; City and County of Denver, acting by and through its Board of Water Commissioners; City of Englewood; City of Brighton; City of Thornton; Edmundson Land, LLC; The Farmers Reservoir and Irrigation Company; Fort Morgan Reservoir & Irrigation Company; Henrylyn Irrigation District; Irrigationists’ Association, Water District 1; Lower Latham Reservoir Company; Platte Valley Irrigation Company; Public Service Company of Colorado; South Adams County Water and Sanitation District; Todd Creek Village Metropolitan District; Town of Lochbuie; and The Board of County Commissioners of the County of Weld, State of Colorado,

and Concerning

Appellee Pursuant to C.A.R. 1(e): Corey DeAngelis, Division Engineer, Water Division 1 Judgment Affirmed en banc November 23, 2020

Attorneys for Applicant-Appellant: Law Offices of Tod J. Smith, LLC Tod J. Smith Boulder, Colorado

Ann Rhodes, LLC Ann M. Rhodes Boulder, Colorado

Attorneys for Opposer-Appellee Burlington Ditch Reservoir and Land Company: Lyons Gaddis Kahn Hall Jeffers Dworak & Grant, P.C. Scott E. Holwick Kara N. Godbehere Longmont, Colorado

Attorneys for Opposer-Appellee City of Aurora: Brownstein Hyatt Farber Schreck, LLP Steven O. Sims Dulcinea Z. Hanuschak Benjamin J. Saver Denver, Colorado

City of Aurora Stephanie Neitzel Aurora, Colorado

Attorneys for Opposer-Appellee The Farmers Reservoir and Irrigation Company: Fairfield and Woods, P.C. Joseph B. Dischinger Beth Ann J. Parsons Beth Van Vurst

2 Dean C. Hirt, III Denver, Colorado

Attorneys for Appellee Pursuant to C.A.R. 1(e): Philip J. Weiser, Attorney General Paul L. Benington, First Assistant Attorney General Philip E. Lopez, Senior Assistant Attorney General Denver, Colorado

Attorneys for Amicus Curiae City of Colorado Springs: City Attorney’s Office Michael J. Gustafson Colorado Springs, Colorado

Hill & Robbins, P.C. David W. Robbins Matthew A. Montgomery Denver, Colorado

Attorneys for Amicus Curiae City and County of Denver: Jessica R. Brody, General Counsel Casey S. Funk Daniel J. Arnold James M. Wittler Denver, Colorado

No appearance on behalf of: Centennial Water and Sanitation District; City of Boulder; City of Englewood; City of Brighton; City of Thornton; Edmundson Land, LLC; Fort Morgan Reservoir & Irrigation Company; Henrylyn Irrigation District; Irrigationists’ Association, Water District 1; Lower Latham Reservoir Company; Platte Valley Irrigation Company; Public Service Company of Colorado; South Adams County Water and Sanitation District; Todd Creek Village Metropolitan District; Town of Lochbuie; and The Board of County Commissioners of the County of Weld, State of Colorado.

JUSTICE MÁRQUEZ delivered the Opinion of the Court.

3 ¶1 This appeal arises out of an application for a conditional water storage right

filed by United Water and Sanitation District, a special water district formed in

Elbert County, acting through the United Water Acquisition Project Water Activity

Enterprise (“United”). Since 2013, United has been seeking to secure various water

rights in Weld County. United’s original applications—which sought, in part,

conditional water storage rights for two reservoirs, conditional and absolute

storage rights for a third reservoir, and conditional recharge rights—were

consolidated in a set of four cases. In response to a motion for determination of

questions of law from opposer Farmers Reservoir and Irrigation Company

(“FRICO”) in the consolidated cases, the District Court for Water Division 1

(“water court”) concluded that United’s applications failed to demonstrate non-

speculative intent to appropriate water. In response to this ruling, United

withdrew its applications in the consolidated cases and, a week later, filed a new

application in Case No. 16CW3053 for a conditional water storage right that is the

subject of this appeal.1 Relevant here, United seeks to appropriate water for use

in a proposed residential development in another county. In support of its new

1 United filed new applications in separate cases for the other conditional water rights sought in the initial applications.

4 application for a conditional storage right, United offered a new, purportedly

binding contract with the landowners of the proposed development. United also

claimed for the first time that its status as a special district qualifies it for the

governmental planning exception to the anti-speculation doctrine.

¶2 After opposer FRICO filed another motion for determination of questions of

law, the water court concluded that United’s new application likewise failed to

demonstrate non-speculative intent to appropriate water. The water court found

that United was acting as a water broker to sell to third parties for their use, and

not as a governmental agency seeking to procure water to serve its own municipal

customers. Consequently, the water court held, United did not qualify for the

governmental planning exception to the anti-speculation doctrine. Applying

instead the anti-speculation standards applicable to private appropriators, the

court held that United’s application failed because it did not have a binding

contract or an agency relationship with the end users of the water. United now

challenges the water court’s ruling denying in part its application for conditional

water rights.

¶3 We conclude that United is ineligible for the governmental planning

exception to the anti-speculation doctrine because it has no governmental agency

relationship with the end users proposed to be benefited by its appropriation. We

5 further conclude that the contract between United and the end users is

insufficiently binding to satisfy the anti-speculation standards for private

appropriators under Colorado River Water Conservation District v. Vidler Tunnel

Water Co.,

(Colo. 1979). Accordingly, we affirm the judgment of the

water court.

I. Facts and Procedural History

¶4 United is a special district formed under Title 32 of the Colorado Revised

Statutes with territorial boundaries encompassing approximately one acre of land

in Elbert County. There are no residents within its territorial boundaries, and

United’s service plan specifies that it was not formed for the purpose of providing

water to individual users. Instead, according to a prior version of its website,

United was formed to serve as “a water district for other water districts.” About

United Water and Sanitation District, United Water and Sanitation District (archived

version of the website as of Apr. 2, 2016),

https://web.archive.org/web/20160402063546/http://unitedwaterdistrict.com

/about.html (last visited Oct. 28, 2020).2

2 In a since-deleted passage on the “Frequently Asked Questions” portion of its website, United explained:

6 ¶5 In Case No. 13CW3182, United filed an application for a conditional water

storage right for the (as yet unconstructed) Highlands Reservoir, proposing to

provide some of the water to the Highlands Development, a 665-acre proposed

residential development near Lochbuie in Weld County. The application was

consolidated with three other applications submitted by United in cases

13CW3180, 13CW3183, and 14CW3173 for conditional and absolute storage rights

and conditional recharge rights throughout Weld County. A number of parties

opposed these applications, including FRICO.

¶6 In February 2016, FRICO filed a motion for determination of questions of

law under C.R.C.P. 56(h) in the consolidated cases, asking the water court to

determine whether United qualified for the governmental planning exception to

Why did United organize as a special district, rather than as a private company? One of the services United provides is the legal transfer of water rights from an agricultural designation to a municipal designation. Colorado’s water laws significantly restrict a private company’s ability to adjudicate these water rights, so United sought and received designation as a special district. Frequently Asked Questions, United Water and Sanitation District (archived version of the website as of Apr. 2, 2016), https://web.archive.org/web/20160402064816/http://unitedwaterdistrict.com /aboutfaqs.html (last visited Oct. 28, 2020).

7 the anti-speculation doctrine and, if not, whether United had satisfied the anti-

speculation standards applicable to private parties. In its response to this motion,

United stated that it “has not asserted that [the governmental planning] exception

applies and . . . does not intend to make such an assertion.” Instead, United

argued that its applications “meet the private party standards of the anti-

speculation doctrine.”

¶7 In April 2016, the water court issued an order on FRICO’s motion. Because

United did not assert the governmental planning exception, the court declined to

address that issue. The water court concluded that United could not satisfy the

anti-speculation standards applicable to private parties because it did not have

binding contractual commitments or an agency relationship with the end users of

the water United sought to appropriate at the time its applications were filed.

Following this ruling, United withdrew its applications in the consolidated cases.

¶8 Six days after the water court’s ruling, United entered into a water supply

agreement with TRS Equities, L.L.C.; Highland Equities, L.L.C.; Weld Kil 270,

L.L.C.; and the Damiano Family Trust (collectively, the “Highland Owners”) to

provide water to the Highlands Development. The next day, armed with this

agreement, United filed the present application in Case No. 16CW3053, again

8 seeking a conditional water storage right in the Highlands Reservoir to provide

the Highland Owners with water for the Highland Development.3

¶9 FRICO and others again opposed United’s application.4 In January 2019,

FRICO filed a motion for determination of questions of law and partial summary

judgment. Relevant here, FRICO asked the court to determine that United must

satisfy the anti-speculation doctrine standards applicable to private appropriators

to obtain a conditional storage right decree in the Highland Reservoir. FRICO also

asked the court to find that United’s water supply contracts are insufficiently

3 United’s application in 16CW3053 sought additional uses for the conditional storage right, namely, for irrigation of a fifteen-acre parcel (“DeSanti Parcel”) owned by United, and as a source of water to meet contractual obligations to East Cherry Creek Valley Water and Sanitation District (“ECCV”) and Arapahoe County Water and Wastewater Authority (“ACWWA”). The application also sought conditional appropriative rights of exchange. United later dismissed all of these claims. Because they are not at issue in this appeal, we do not discuss them in detail in this opinion. 4 Burlington Ditch, Reservoir and Land Company; Centennial Water and Sanitation District; City of Aurora; City of Boulder; City of Brighton; City and County of Denver, acting by and through its Board of Water Commissioners; City of Englewood; City of Thornton; Edmundson Land, LLC; FRICO; Fort Morgan Reservoir and Irrigation Company; Henrylyn Irrigation District; Irrigationists’ Association, Water District 1; Lower Latham Reservoir Company; Platte Valley Irrigation Company; Public Service Company of Colorado; Riverside Irrigation District and Riverside Reservoir and Land Company; South Adams County Water and Sanitation District; Todd Creek Village Metropolitan District; Town of Lochbuie; and The Board of County Commissioners of the County of Weld, State of Colorado all filed statements of opposition.

9 binding to form a non-speculative basis for appropriation. In its response, United

asserted for the first time that it qualifies for the governmental planning exception

to the anti-speculation doctrine. In the alternative, United argued that it met the

anti-speculation standards for private parties.

¶10 In March 2019, the water court issued an order on FRICO’s motion. The

court acknowledged that United was formed as a water and sanitation district and

may meet the definition of a quasi-government entity for purposes of some

activities. But in this instance, the court reasoned, United is acting as a water

broker to obtain water to sell to third parties for their use; it is not procuring water

as a governmental agency to serve its own municipal customers. Thus, the court

concluded, United does not qualify for the governmental planning exception.

Applying the anti-speculation criteria applicable to private appropriators, the

water court then found that the contract between United and the Highland

Owners “is non-binding as to several essential terms,” most notably in that “the

Highland Owners are not obligated to purchase any amount of water from

United.” Accordingly, because United lacked a firm contractual commitment with

the Highland Owners, the court concluded that the claimed conditional storage

right was speculative. The court entered summary judgment for FRICO and

against United as to this claimed use of the conditional storage right.

10 ¶11 United moved for reconsideration, which the water court denied.

Thereafter, the court granted United’s motion to dismiss its remaining claims and

entered final judgment. United appeals the water court’s judgment directly to this

court pursuant to section 13-4-102(1)(d), C.R.S. (2020).

II. Analysis

A. Standard of Review

¶12 “Whether an applicant has met the legal standards for a conditional

appropriation presents mixed questions of law and fact that we review de novo.”

Pagosa Area Water & Sanitation Dist. v. Trout Unlimited,

(Colo.

2009) (Pagosa II). However, “[w]e defer to the water court’s findings of fact unless

the evidence is wholly insufficient to support those determinations.”

B. Legal Principles

1. Conditional Water Rights

¶13 A conditional water right is “a right to perfect a water right with a certain

priority upon the completion with reasonable diligence of the appropriation upon

which such water right is to be based.” § 37-92-103(6), C.R.S. (2020). “A

conditional water right preserves an applicant’s position in the priority system

while the applicant takes the necessary steps (such as obtaining financing,

complying with regulatory and access requirements, and completing engineering,

11 etc.) to put the appropriated water to beneficial use.” Vermillion Ranch Ltd. P’ship v.

Raftopoulos Bros.,

,

.

¶14 To obtain a conditional water right, an applicant must demonstrate that:

“(1) it has taken a ‘first step,’ which includes an intent to appropriate the water

and an overt act manifesting such intent; (2) its intent is not based on a speculative

sale or transfer of the water to be appropriated; and (3) there is a substantial

probability that the applicant ‘can and will’ complete the appropriation with

diligence and within a reasonable time.” Id. at ¶ 33,

.

¶15 At issue in this case is whether United’s application for a conditional water

right satisfies the second prong of this test—demonstration of a non-speculative

intent to appropriate. For the reasons set forth below, we agree with the water

court’s determination that it does not.

2. The Anti-Speculation Doctrine

¶16 The right to appropriate water for beneficial uses is enshrined in the

constitution. Colo. Const. art. XVI, § 6; Wheeler v. N. Colo. Irrigating Co.,

,

489 (Colo. 1888).5 But the constitution guarantees only “a right to appropriate, not

5 Water is the property of the public. Colo. Const. art. XVI, § 5. Thus, one cannot claim a right to own water, but instead may only claim a right to use water. Kobobel v. State, Dep’t of Nat. Res.,

, 1134 (Colo. 2011).

12 a right to speculate.” Vidler,

. In other words, “[t]he right to

appropriate is for use, not merely for profit. . . . To recognize conditional decrees

grounded on no interest beyond a desire to obtain water for sale would as a

practical matter discourage those who have need and use for the water from

developing it.”

This fundamental principle is commonly referred to as the

“anti-speculation doctrine.”

¶17 We outlined the contours of the anti-speculation doctrine in Vidler. In doing

so, “we did not articulate a new legal requirement in that case, but rather merely

applied longstanding principles of Colorado water law.” City of Thornton v. Bijou

Irrigation Co.,

(Colo. 1996). Indeed, for well over a century, we have

made clear that the anti-speculation doctrine is best understood as a component

of the constitutional beneficial use requirement itself. See High Plains A & M,

LLC v. Se. Colo. Water Conservancy Dist.,

(Colo. 2005), as modified

on denial of reh’g (Oct. 11, 2005) (“[T]he anti-speculation doctrine is rooted in the

requirement that an appropriation of Colorado’s water resource must be for an

actual beneficial use.”); Combs v. Agric. Ditch Co.,

, 968 (Colo. 1892) (“The

constitution provides that the water of natural streams may be diverted to

beneficial use; but the privilege of diversion is granted only for uses truly

beneficial, and not for purposes of speculation.”).

13 ¶18 Anti-speculation challenges generally arise when a party seeks to

appropriate water that ultimately will be used by third parties. To satisfy the anti-

speculation doctrine under these circumstances, the party seeking a conditional

water right must show that it has a “firm contractual commitment” or an “agency

relationship justifying its claim to represent those whose future needs are

asserted.” Vidler, 594 P.2d at 568–69. Contracts between private parties generally

fail to satisfy the Vidler standards if they do not require the end user “to purchase

or use any specific quantity of water.” Raftopoulos, ¶ 38,

; see also

Front Range Res., LLC v. Colo. Ground Water Comm’n,

, ¶ 31,

.

3. The Governmental Planning Exception

¶19 The beneficial use and anti-speculation analysis, however, is “not as simple”

when applied to a governmental entity that is seeking to “assure an adequate

supply to the public which it serves.” See City & Cnty. of Denver v. Sheriff,

(Colo. 1939). A municipality’s population may increase in a relatively

short period of time, and its boundaries may expand. Accordingly, “it is not

speculation but the highest prudence on the part of the city to obtain

appropriations of water that will satisfy” these needs.

14 ¶20 Recognizing government entities’ need for flexibility in planning for

anticipated growth, we have held that the anti-speculation standards applied to

private parties in Vidler do not “apply with equal force to municipalities.” Bijou,

. While the governmental planning exception6 to the anti-

speculation doctrine does not “completely immunize municipal applicants from

speculation challenges,” it does allow a government entity to obtain conditional

water rights based on its projected future needs, so long as its reasonably

anticipated requirements are based on substantiated projections of future growth.

at 38–39; see also City & Cnty. of Denver v. N. Colo. Water Conservancy Dist.,

(1954) (Blue River) (“We cannot hold that a city more than others

is entitled to decree for water beyond its own needs. However, . . . when

appropriations are sought by a growing city, regard should be given to its

reasonably anticipated requirements.”).

6This exception is also sometimes referred to as the “limited governmental agency exception,” Pagosa II,

, the “limited governmental entity water supply exception,” Pagosa Area Water & Sanitation Dist. v. Trout Unlimited,

, 317 n.8 (Colo. 2007), as modified (Nov. 13, 2007) (Pagosa I), the “great and growing cities doctrine,”

and the “municipal planning exception,” Bijou,

.

15 4. Codification of the Doctrine and the Exception

¶21 In 1979, consistent with these constitutionally derived principles, the

General Assembly amended the definition of “appropriation” in the Water Rights

Determination and Administration Act of 1969 to codify both the anti-speculation

standards articulated in Vidler and the governmental planning exception

discussed in Sherriff and Blue River:

(3)(a) “Appropriation” means the application of a specified portion of the waters of the state to a beneficial use pursuant to the procedures prescribed by law; but no appropriation of water, either absolute or conditional, shall be held to occur when the proposed appropriation is based upon the speculative sale or transfer of the appropriative rights to persons not parties to the proposed appropriation, as evidenced by either of the following: (I) The purported appropriator of record does not have either a legally vested interest or a reasonable expectation of procuring such interest in the lands or facilities to be served by such appropriation, unless such appropriator is a governmental agency or an agent in fact for the persons proposed to be benefited by such appropriation. (II) The purported appropriator of record does not have a specific plan and intent to divert, store, or otherwise capture, possess, and control a specific quantity of water for specific beneficial uses.

Ch. 346, sec. 1, § 37-92-103(3)(a),

, 1368 (codified at

§ 37-92-103(3)(a), C.R.S. (2020)); Bijou,

.

¶22 Section 37-92-103(3)(a) establishes the Vidler test as the default anti-

speculation rule for most appropriators. If, however, a party is eligible for the

governmental planning exception, a more flexible rule applies and the

16 government agency appropriator may overcome a speculation challenge by

showing that the amount conditionally appropriated is necessary to satisfy the

government agency’s reasonably anticipated requirements based on substantiated

projections of its future population growth. See Upper Yampa Water Conservancy

Dist. v. Dequine Fam. L.L.C.,

(Colo. 2011).

¶23 To qualify for the codified governmental planning exception, an

appropriator must be a “governmental agency or an agent in fact for the persons

proposed to be benefited by such appropriation.” § 37-92-103(3)(a)(I). The parties

here disagree as to the proper reading of this provision. The Division Engineer

contends that the phrase “for the persons proposed to be benefited” modifies both

“governmental agency” and “agent in fact,” so the exception applies only to a

“governmental agency . . . for the persons proposed to be benefited.” That is, a

government entity must have a governmental agency relationship with the

intended end users of the water in order to qualify for the exception. By contrast,

United argues that “for the persons proposed to be benefited” modifies only

“agent in fact,” and thus the exception should be broadly interpreted to apply to

any “governmental agency,” period. We agree with the Division Engineer’s

interpretation.

17 ¶24 We have previously held that the governmental planning exception codified

by the General Assembly in section 37-92-103(3)(a)(I) “must be read as consistent

with the scope of the exception recognized for municipalities in those decisions

underlying Vidler, such as Sheriff and Blue River.” Bijou, 926 P.2d at 38–39. In both

of those underlying cases, we recognized the exception only with regard to

government entities planning for the needs of their own populations.

¶25 In Sheriff, the City of Denver appealed a trial court decision granting certain

water rights but applying conditions limiting the city’s ability to lease or sell excess

water under those rights in the event that the water was not necessary to meet the

city’s immediate needs. 96 P.2d at 838–40. This court struck down those

limitations. A city like Denver, we explained, needs “flexibility” in order to

“assure an adequate supply to the public which it serves.” Id. at 841 (emphasis

added). Accordingly, a practice that may have constituted speculation for a

private party was, when carried out by a governmental entity, simply an exercise

of “managerial judgment” necessary to the “furnishing of an adequate supply of

water to” the city’s population. Id. at 840.

¶26 In Blue River, Denver sought a decree for conditional direct flow water rights

from the Blue River.

. Several parties objected, arguing that,

because Denver had sufficient water for its current needs, a decree based solely on

18 future needs would be speculative.

. This court disagreed, explaining

that, while a city is not “entitled to [a] decree for water beyond its own needs,” courts

should account for the future needs of a city based on its “reasonably anticipated

requirements.”

(emphasis added).

¶27 Our subsequent opinions similarly have limited the governmental planning

exception to municipalities and other agencies responsible for supplying water to

their individual users. See Bijou,

; see also Upper Yampa,

(reaffirming that section 37-92-103(3)(a)(I) “perpetuat[es] the planning

flexibility previously allowed government agencies with respect to the future

water needs of their populations” (emphasis added)); Pagosa Area Water & Sanitation

Dist. v. Trout Unlimited,

(Colo. 2007), as modified (Nov. 13, 2007)

(Pagosa I) (“[A] governmental water supply agency has a unique need for planning

flexibility because it must plan for the reasonably anticipated water needs of its

populace . . . .” (emphasis added)).

¶28 By contrast, we have recognized that the governmental planning exception

does not apply where a government agency is “acting in the capacity of a water

supplier on the open market rather than as a governmental entity seeking to

ensure future water supplies for its citizens.” Bijou,

. This

interpretation of the exception is consistent with one of the basic goals of the

19 beneficial use requirement and the anti-speculation doctrine: preventing parties

from monopolizing water “for personal profit rather than for beneficial use.”

Vidler,

.

¶29 The plain text of the codified governmental planning exception incorporates

these principles. The exception applies only to a “governmental agency . . . for the

persons proposed to be benefited” by the appropriation at issue. See

§ 37-92-103(3)(a)(I) (emphasis added). In other words, the exception applies only

where a government agency is seeking to appropriate water on behalf of end users

with whom it has a governmental agency relationship.

III. Application

A. United Does Not Qualify for the Governmental Planning Exception

¶30 As a special district, United constitutes a “quasi-municipal corporation and

political subdivision,” see § 32-1-103(20), C.R.S. (2020), and thus falls within the

meaning of “governmental agency” for purposes of section 37-92-103(3)(a)(I). But

as explained above, this determination does not end the governmental planning

exception inquiry. To qualify for the exception, United must demonstrate that it

has a governmental agency relationship with the end users proposed to be

benefited by the water it seeks to appropriate in Weld County. Because it does not

have such a relationship, United does not qualify for the exception.

20 ¶31 United is organized as a one-acre, unpopulated special district in Elbert

County, three counties away from the proposed Highland Development in Weld

County. Although United purports to have a statewide service area,7 its service

plan clarifies that United does not intend to provide water to individual users.

Moreover, United has not indicated that it plans to expand its territorial

boundaries to encompass the proposed Highland Development or begin

providing water to individual end users within that area. In the absence of any

such connection to end users, United cannot demonstrate that it has a

governmental agency relationship to the persons proposed to be benefited by its

conditional appropriation.8 Rather, as the water court correctly found, United is

7 The Division Engineer argues that United’s claimed state-wide service area is inconsistent with those provisions of the Special Districts Act designed to allow counties a degree of control over special districts operating within their borders. See, e.g., § 32-1-202(1)(a), C.R.S. (2020) (requiring special districts to “submit a service plan to the board of county commissioners of each county that has territory included within the boundaries of the proposed special district”). Because this issue is not squarely before us and is not necessary for resolution of the governmental planning exception inquiry, we decline to address the Engineer’s argument. 8United’s reliance on the Special Districts Act to assert otherwise is unavailing. That act authorizes special water districts “[t]o acquire water rights . . . within and without the district.” § 32-1-1006(1)(e), C.R.S. (2020). But the fact that a special district is authorized to acquire rights outside of its boundaries does not speak to which anti-speculation standards should apply when it attempts to do so.

21 acting in this instance as a water broker to sell water to end users, not as a

government agency serving its own municipal customers. Thus, for purposes of

the conditional storage right it seeks here, United is ineligible for the governmental

planning exception and must satisfy the anti-speculation standards applicable to

private parties.

B. United’s Application Does Not Satisfy the Anti- Speculation Standards for Private Parties under Vidler

¶32 To satisfy the anti-speculation standards applicable to private

appropriators, United must demonstrate that it has a “contract or agency

relationship justifying its claim to represent those whose future needs are

asserted.” Vidler,

. United does not allege that it has an agency

relationship with the Highland Owners. Accordingly, our inquiry is limited to

determining whether United has “firm contractual commitments for the use of

water.” Bijou,

.

¶33 The water court concluded that the April 2016 water supply agreement

between United and the Highland Owners does not satisfy the anti-speculation

doctrine because “there is no provision in the contract that requires the Highland

Owners to purchase any amount of water from United.” United disagrees,

pointing to provisions that it claims render the contract binding.

22 ¶34 The recitals portion of the contract states that the agreement is intended to

facilitate “the supply of water to the Highlands Property based upon the estimated

demand for the Highlands Property under various development scenarios.” To

this end, various sections of the contract discuss the facilities to be used to provide

water, ongoing applications for water rights, and various price and quantity

estimates.

¶35 United focuses on three sections that it argues render the contract binding

and non-speculative: sections 4.5, 4.6, and 5.2. None of those provisions, however,

require the Highland Owners to purchase any water. Section 4.5 provides

approximations of the Highland Owners’ water demands but concedes that these

numbers are “conceptual and estimates only.” Section 4.6 lists the maximum

amount of water available to the Highland Owners but does not list any minimum

purchase amount. And while section 5.2 sets out a mechanism for determining

the purchase price of the water, it does not obligate the Highland Owners to

purchase any water at the determined price. Thus, none of these provisions,

considered individually or together, rise to the level of a firm contractual

commitment for purposes of the anti-speculation doctrine.

¶36 The contract at issue here is similar to those we rejected as speculative in

Vidler and Front Range. In Vidler, we held that a contract between the appropriator

23 and the City of Golden was speculative because the city “ha[d] not committed

itself beyond an option which it may choose not to exercise.”

.

Similarly, in Front Range, we held that a contract between the appropriator and the

City of Aurora was speculative because it did not require Aurora to commit to

purchasing any amount of water. ¶ 31,

(“Aurora might buy some

of the replacement-plan water, or it might even buy all of the water. But then

again, it might not. Thus, we agree with the district court that the option contract

is speculative.”).9 The same is true of the water supply agreement here between

United and the Highland Owners. The contract involves no commitment from the

Highland Owners to purchase any water and is thus insufficient to satisfy Vidler’s

“firm contractual commitments” requirement.

C. We Decline to Address United’s Ambiguity Argument

¶37 Finally, United argues that the water court should not have granted

summary judgment in favor of FRICO because the contract between United and

the Highland Owners is ambiguous. Generally, “issues not raised in or decided

by a lower court will not be addressed for the first time on appeal.” Melat,

9As we did in Front Range, we again decline to adopt a bright-line rule that option contracts can never satisfy the anti-speculation doctrine. See id. at ¶ 32.

24 Pressman & Higbie, L.L.P. v. Hannon Law Firm, L.L.C.,

,

. United cites to two motions filed in the water court that it alleges

preserved its ambiguity argument. However, inspection of those motions reveals

that United never raised the issue of ambiguity below. Indeed, even in its briefing

in this court, United continues to argue that “the Contract is clear.” Simply

providing an alternative interpretation of contractual terms is not the same as

arguing that the contract is itself ambiguous. Accordingly, because it was never

raised in the water court, we decline to consider this issue for the first time on

appeal.

IV. Conclusion

¶38 The governmental planning exception to the anti-speculation doctrine is

intended to give government entities the flexibility to plan for the future water

needs of the populace the government entity serves where those needs are based

on substantiated projections of future growth. It does not give carte blanche to

appropriate water for speculative purposes nor does it apply where a government

entity acts as a water supplier on the open market. United has not demonstrated

that it seeks the conditional storage right at issue here in order to serve end users

with whom it has a government agency relationship, and thus it does not qualify

for the governmental planning exception to the anti-speculation doctrine.

25 Moreover, United has failed to satisfy the applicable anti-speculation standards

for private appropriators. Accordingly, we affirm the judgment of the water court.

26