Phelps Dodge fights Denver to keep its water flowing

Jerd Smith, Rocky Mountain News

Published July 21, 2007 at midnight

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Mining giant Phelps Dodge is going head-to-head with Colorado's largest water users to shore up water supplies for the Climax molybdenum mine it hopes to reopen high above Dillon Reservoir.

At stake is a watershed whose streams are critical to the Front Range, the Western Slope and a superheated international molybdenum market.

Phelps Dodge has asked, in a case pending in federal district court, to affirm its right to divert water sooner than it has been allowed to in the past, a move that would make it harder for Denver to fill Lake Dillon during times of drought.

Phelps is a unit of Freeport- McMoRan Copper & Gold Inc.

The lake sits in the heart of Colorado ski country and is the largest storage reservoir in Denver Water's system, which serves 1.2 million people.

The dispute doesn't involve large amounts of water. Climax uses about 5,000 acre feet a year when it's open, enough for about 10,000 homes.

But the water in question sits at the top of headwaters to the Colorado River. Anytime there are changes in the water delivery system here, it affects everyone downstream.

"This is a potentially big dispute because of where this water is located. It's vital and that means it's controversial," said Peter Fleming, general counsel for the Colorado River Water Conservation District in Glenwood Springs, a party in the case.

Much in this dispute hinges on water rights and their dates.

In Colorado, water is delivered from streams based on the date it was claimed. Those with the oldest rights get their water first, especially in dry years. Climax Mine's water rights date back to the 1930s, well ahead of Denver's 1940s-era rights.

This fight has been brewing for years, in part because of a 52-year-old legal settlement between the U.S. Bureau of Reclamation and the state of Colorado, as well as several other entities, including Denver Water.

But Phelps Dodge wasn't included in the arrangement. Most of the entities involved were cities and water districts.

The settlement, known collectively as the Blue River Decrees, was crafted after the federally owned Green Mountain Reservoir was completed in 1943.

The decrees give Denver, and Green Mountain, the ability to divert water ahead of the mining company. At the time it was seen as a way to incorporate the new federal water project into the state's water rights system.

Now, Phelps Dodge wants its water rights reaffirmed, something the state has refused to do because of its agreement with the U.S. government. Until now, taking the matter to court has not been worth the tens of thousands of dollars it's likely to cost to resolve the question.

But with molybdenum prices at historic highs and worldwide demand skyrocketing, Phelps Dodge is ready to pay the legal tab to ensure the mine gets its water even in dry years.

The issue "casts a shadow over Climax's plan to resume operations of the Climax Mine by raising uncertainty about the mine's ability to operate," Phelps Dodge said in a court filing. Climax tentatively plans to reopen in 2009.

The controversy also comes at a time when growth on the Front Range, and mining and oil and gas operations on the Western Slope have sharply increased pressure on high country water supplies.

"This is about increasing demand for water and the fight over the last drop," Fleming said of the river district.

Chips Barry, manager of Denver Water, said the problem won't affect the utility's overall water supplies, but it could make it harder to fill Lake Dillon, particularly in dry years. The utility wants the court to affirm its historic spot on the river.

The case is being closely watched because anytime the Blue River Decrees are reopened, other arrangements it governs also can be re-examined, something everyone dreads.

"The real concern is the reopening of the decrees and what other things might come along with it," said Eric Wilkinson, manager of the Northern Colorado Water Conservancy District, which is also a party to the decrees.

Ken Vaughn, a spokesman for the mine, said the company doesn't discuss pending litigation. But in a prepared statement, he said the water rights in question are crucial to the mine's long-term success.

"Climax water rights were adjudicated and appropriated in the 1930s, and the company wants to defend its rights."

At issue

Whether the Climax molybdenum mine should be allowed to divert its water ahead of Denver Water and other users on the Blue River and its tributaries.

• What Phelps Dodge says: It needs more protection for its water rights to ensure the mine can operate even in dry years, and it deserves that protection because its rights are older than those of entities such as Denver Water.

• What Denver Water says: It wants the system to stand as it is because changes could affect its ability to fill Dillon Reservoir in dry years.

smithj@RockyMountainNews.com or 303-954-5474

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