Water Rights Related to Oil Shale Development in the Upper Colorado River Basin

Water Rights Related to
Oil Shale Development in
the Upper Colorado River Basin
Cynthia Brougher
Legislative Attorney
American Law Division
Summary
Concerns over fluctuating oil prices and declining petroleum production worldwide
have revived interest in oil shale as a potential resource. The Energy Policy Act of 2005
(P.L. 109-58) identified oil shale as a strategically important domestic resource and
directed the Department of the Interior to promote commercial development. Oil shale
development would require significant amounts of water, however, and water supply in
the Colorado River Basin, where several oil shale reserves are located, is limited.
According to news reports, oil companies holding water rights in the region have not
exercised those rights in decades, which has allowed other water rights holders to use
the water for agricultural and municipal needs. Because of the nature of the water rights
systems in the relevant states, these users might face significant limitations in their
future use of water from the Basin if the oil companies exercise their rights. This report
will provide a brief overview of water rights in Colorado, Utah, and Wyoming,
including changes that may be made to currently held water rights and the possibility for
abandonment of unused water rights.
Concerns over the price of oil and supply of petroleum have revived interest in
alternative energy supplies, including the development of oil shale to help address energy
needs in the United States.¹ The process used to develop oil shale resources requires a
plentiful water supply. According to news reports, oil companies currently hold senior
water rights in the states where oil shale reserves are located.² As explained below,
appropriation of water in these states is based on a priority system, under which water

¹ For more information on oil shale development, see CRS Report RL33359, Oil Shale: History,
Incentives, and Policy, by Anthony Andrews.
² Gary Harmon, ‘Oil Shale 800-pound Gorilla’ With Predictions of Water Use, GJSentinal.com,
September 19, 2008; Todd Hartman, Groups Seek Answers About Oil Shale’s Impact on Water,
Rocky Mountain News, June 8, 2007; Leslie Robinson, Commentary: Oil Shale Development
Could Force a Choice Between Gas and Food, The Colorado Independent, June 26, 2008.

rights holders have seniority over other water rights holders who acquired rights later.
These senior rights reportedly have not been exercised for decades, allowing junior water
rights holders to use the water.³ Because of the nature of the water rights systems in the
relevant states, junior water rights holders might face significant limitations on their
future use of water from the Basin if the oil companies exercise their rights. This report
will provide a brief overview of water rights in Colorado, Utah, and Wyoming; changes
that may be made to currently held water rights; and the possibility for abandonment of
unused water rights.
Water Rights in the Colorado River Basin Generally
The law of water rights is traditionally an area regulated by the states, rather than the
federal government. Individual states may choose the system under which water rights
are allocated to water users.⁴ Western states, including Colorado, Utah, and Wyoming,
generally follow the prior appropriation doctrine of water rights, often referred to as “first
in time, first in right.” These states typically are drier and experience regular water
shortages. The prior appropriation system allows water users to acquire well-defined
rights to certain quantities of water by designating senior and junior rights to avoid
uncertainty during times of water scarcity.
Under the prior appropriation doctrine, a person who diverts water from a
watercourse and makes reasonable and beneficial use of the water acquires a right to use
of the water.⁵ The user’s location relative to the watercourse (whether upstream,
downstream, adjacent, or remote) does not affect the ability to obtain a water right.
Typically, under a prior appropriation system of water rights, users apply for a permit
from a state administrative agency which manages the acquisition and transfers of such
rights. The prior appropriation system limits users to the quantified amount of water the
user secured under the permit process with a priority based on the date the water right was
conferred by the state. The user’s right that was appropriated first (the senior water right)
is considered superior to later appropriators’ rights to the water (the junior water right).
Appropriators fill their needs according to the order in which they secured the right to the
water and not based on the available quantity. Therefore, in times of shortage, junior
rights holders could be without the water they need.
Colorado Basin States’ Laws Affecting Water Rights
The issues regarding water rights in the Colorado River Basin arise from the fact that
a limited supply of water is sought after by many different users. Junior rights holders

³ Id.
⁴ Depending on the individual state’s resources and historical development, it may use one of
three doctrines of water rights: riparian, prior appropriation, or a hybrid of the two. Under the
riparian doctrine, a person who owns land that borders a watercourse has the right to make
reasonable use of the water on that land. Rather than having appropriated quantities of water per
user, users must share the water resources and reduce their usage proportionally in times of
shortage. See generally A. Dan Tarlock, Law of Water Rights and Resources, ch. 3, “Common
Law of Riparian Rights.”
⁵ See generally id. at ch. 5, “Prior Appropriation Doctrine.”

who use waters from the Basin to meet agricultural and municipal interests potentially are
limited by what oil companies, as senior rights holders, use. These junior rights holders
have been able to use water to fill their needs for decades, while senior rights holders have
not used the water. The dispute over a possible water shortage when both groups wish
to use water likely will raise questions about the nature and administration of water rights,
whether existing water rights may be amended to account for the changed circumstances,
and the options available for users who seek to claim unused water rights from other
users.
Water rights typically are established through an administrative permit system of the
state in which the water is being appropriated. Water rights seekers must file an
application with the proper state administrative organization, which dates the seniority of
the water right. State law provides that the water is the property of the state, but a water
right is considered an individual’s property right in the priority of the use of the state’s
water.⁶ The specific nature of water rights may vary depending on the state. For example,
in Colorado, water rights can be either absolute or conditional.⁷ Absolute rights are
assigned to users who have diverted water and put the water to beneficial use, whereas
conditional water rights allow the user to maintain the priority of the right he intends to
acquire until the diversion is complete.⁸ In other words, a user with an absolute right has
fulfilled all the requirements necessary to acquire a right to the water. A user with a
conditional right has asserted an intention to acquire a right but has not yet fulfilled all of
the requirements necessary to do so, and that right is conditioned on the completion of all
requirements. Utah law provides that water rights become real property only when the
application has been perfected under the required legal process, meaning that title of the
right is properly filed with the state.⁹ Wyoming issues permits to applicants for water
rights, which allow the user time to construct and complete a project to put water to a
beneficial use.¹⁰ The water right is not considered permanent until the process is complete
and may be disputed or removed until that time. In the context of oil shale in the Colorado
River Basin, oil companies hold both absolute and conditional rights for water in
Colorado. The nature of the rights held could influence the future use of the water and
may provide a basis for junior rights holders to challenge the continuing validity of the
senior rights holders’ rights.
Both junior and senior rights holders may seek to alter certain water rights if
circumstances of water use change. For example, in Colorado, senior rights holders may
seek to convert their conditional rights to absolute rights, as discussed. Other state laws

⁶ Colo. Const. art. XVI, §§ 5-6; Utah Code Ann. § 73-1-1 (2007); Wyo. Stat. Ann. § 41-3-101
(2007).
⁷ Colo. Rev. Stat. § 37-92-301 (2007).
⁸ Conditional rights holders must demonstrate reasonable diligence in completing the diversion
every six years in order to maintain the conditional water right. Upon completion of the
diversion, the user may apply for an absolute water right, which would have a priority dating back
to the date of the conditional right. Id.
⁹ Utah Code Ann. § 73-1-10. The distinction of a real property right from a personal property
right affects the options available to water users regarding transferability. As real property,
perfected water rights must be conveyed by deed to the new holder.
¹⁰ See Wyo. Stat. Ann. § 41-4-501 et seq.

provide for water rights to be altered as circumstances change. Junior or senior rights
holders may seek to change the geographic or purpose parameters set at the time they
acquired their rights. Water rights generally are allocated based on a specific point of
diversion, location of use, and purpose of use. In order to change the point from which
water is diverted from its source or to change the place or purpose of use, a water right
holder must apply to the appropriate state office for approval.¹¹ The state office
considering the change may consider factors such as whether the change would exceed
historical levels and whether other users’ vested water rights would be impaired by the
change.¹²
Junior rights holders may seek to secure water by acquiring the rights of senior rights
holders under the water rights transfer process in each state. In Colorado, a water right
may be bought, sold, or leased to other entities if the transfer is filed with the appropriate
state office and the transfer would not injure the vested rights of another user.¹³ Similarly,
Utah water law provides that a water right may be bought or sold if the transfer is
approved by the state.¹⁴ Under Wyoming law, a water right attaches to the lands or the
place of use in the permit rather than to an individual.¹⁵ Water rights may be transferred
only if included in the sale of land, or by petition for a change in place of use to the
appropriate state office.
Senior rights holders may lose their rights if those rights are not used. Conditional
rights in Colorado require rights holders to demonstrate continuous efforts in developing
the water right on a regular basis.¹⁶ Other water rights also may be lost under certain
circumstances according to state law. If senior rights holders lose their rights, the water
supply available for junior rights holders to fill their needs would increase. In Colorado,
a water right may be considered abandoned if it is not used for a 10-year period and there
is an intent to abandon.¹⁷ In Utah, water rights may be abandoned or forfeited.¹⁸ For a
water right to be abandoned, there must be intent to abandon by the user and there is no
time requirement. For a water right to be forfeited, the water right must not be used for
a five-year period. In Wyoming, abandonment may take three forms.¹⁹ First, the user may
voluntarily abandon the water right. Second, one user may allege that another user’s right
has been abandoned because the other user has not used the right for a five-year period
and that reactivation of that right would injure the user’s right. Third, the state may allege

¹¹ Colo. Rev. Stat. § 37-92-302; Utah Code Ann. § 73-3-3; Wyo. Stat. Ann. §§ 41-3-104, 41-3-

114.

¹² See, e.g., Colo. Rev. Stat. § 37-92-302.
¹³ Strickler v. Colorado Springs, 16 Colo. 61 (1891).
¹⁴ Utah Code Ann. § 73-1-10.
¹⁵ Wyo. Stat. Ann. § 41-3-323.
¹⁶ Colo. Rev. Stat. § 37-92-301.
¹⁷ Colo. Rev. Stat. § 37-92-103(2). Conditional rights may be considered abandoned if the user
does not demonstrate the reasonable diligence required by state law. See Colo. Rev. Stat. § 37-

92-301.

¹⁸ Utah Code Ann. § 73-1-4.
¹⁹ See Wyo. Stat. Ann. § 41-3-401.

an abandonment if the water is not put to beneficial use for a five-year period and
reallocation would serve the public interest. Water rights that are lost under these
processes revert to the state and may be appropriated in the future.
The Law of the River and Interstate Water Allocation
State water laws govern the allocation of water within the state, but water resources
rarely are confined to state boundaries. Rather, like the Colorado River Basin, water
basins spread across several states. As a result, states often compete for resources from
shared basins, and the competition often leads to water disputes between states in regions
with shared water resources.²⁰ Interstate water disputes may be resolved in various
manners. Two of the most common methods are equitable apportionment in the U.S.
Supreme Court²¹ and interstate compact negotiated by the parties and approved by
Congress.²² The Colorado River Basin is no exception to the likelihood of disputes and
is subject to a number of judicial decisions and interstate compacts, commonly referred
to as the Law of the River.
The Law of the River governs the waters of the Colorado River Basin in addition to
regulation by the individual states in which water rights are allocated. The Law of the
River is a collection of laws and agreements that govern the distribution of the water
throughout the Basin as a whole.²³ Because the Colorado River Basin includes seven
states, which have varying needs and all draw upon the same resources, a series of court
decisions, statutes, interstate compacts, and international treaties address the use and
management of Colorado River water.²⁴ The laws and agreements that form the Law of
the River attempt to allocate the waters of the Colorado River Basin among the states,
providing broad parameters for the distribution of the Basin’s waters. Thus, the Law of
the River would not govern individual water rights directly, but it would place limits on
the water available for allocation by each state.

²⁰ At least 47 states and the District of Columbia have been involved in interstate water disputes.
See Documents on the Use and Control of the Waters of Interstate and International Streams:
Compacts, Treaties, and Adjudications, H.R. Doc. No. 319, 90th Cong. 2d Sess. (1968). An
online collection of interstate compacts can be accessed at [http://ssl.csg.org/compactlaws/
comlistlinks.html ].
²¹ The U.S. Supreme Court has original jurisdiction to hear disputes between states. U.S. Const.,
Art. III, § 2, cl. 1. If a state pursues litigation against non-state parties, as occurred in the
Apalachicola-Chattahoochee-Flint dispute, the case must be initiated in lower courts, and only
reaches the Supreme Court as a final appeal.
²² Generally, an interstate compact, which creates a binding agreement between two or more
states, requires congressional approval in addition to approval by the states involved in the
agreement. U.S. Const., Art. I, § 10, cl. 3.
²³ Some of the laws and agreements that comprise the Law of the River include the Colorado
River Compact of 1922, the Boulder Canyon Project Act, the Mexican Water Treaty of 1944, the
Upper Colorado River Basin Compact of 1948, the Colorado River Storage Project of 1956, the
Colorado River Basin Project Act of 1968, and the U.S. Supreme Court decision in Arizona v.
California.
²⁴ The Colorado River Basin states include Arizona, California, Colorado, Nevada, New Mexico,
Utah, and Wyoming.