TELLURIDE — The Town of Telluride won critical water rights in Bridal Veil Basin that will enable it to proceed with construction of the Pandora water treatment plant it has pursued since 1992, according to the ruling on the town’s lawsuit against the Idarado Mining Company handed down by District Court Judge James W. Schrum earlier this week.
“We are extremely pleased that we were able to secure the water we need to have,” said Mayor Stu Fraser. “If there was one thing we needed to win it was the water.”
“We have more than doubled our current capacity,” said Town Attorney Kevin Geiger, who described the town’s current Mill Creek system as “challenged.” He noted that at times of peak use, such as during the Bluegrass Festival, demand on it can come “perilously close” to capacity.
“We’re very gratified to know that’s the ruling,” he said.
But while the town prevailed on what officials here considered the most important element of the case, it did not win the damages it sought to compensate for higher construction costs resulting from delaying the project while the lawsuit ensued.
Instead the Schrum awarded Idarado certain trial costs and damages that the town will be obligated to pay.
Neither party was awarded the attorney fees each sought.
“We didn’t win everything we filed for,” Fraser said. “The judge did a pretty good job in acting like Solomon and splitting the baby.”
The amount owed by the town is not yet known. Idarado has until March 10 to submit a bill for reimbursement of its trial costs including the docket, court reporter and witness fees, among others, according to Geiger.
“Typically they’re not terribly high,” he said.
The damages the town owes are related to a countersuit filed by Idarado in which it alleged that after authorizing the town to enter its property to replace portions of the pipeline from Blue Lake, the town undertook some unauthorized work and damaged the property in the process.
The court awarded Idarado only a portion of the damages it sought, however, and a jury will determine the amount of that award.
Geiger declined to speculate on how much it might be stating a desire to not prejudice the potential jury pool.
The genesis of the lawsuit dates to the late 1980s when the town discovered that the Town Park water supply it sought to develop for municipal use had been contaminated with hexavalent chromium by Idarado’s mining operations.
In 1992 the parties began discussing the provision of water rights in Bridal Veil Basin to the town by Idarado because of the contamination. Eventually they agreed upon a settlement in which the town would receive water from Blue Lake; however, Idarado retained certain “callback” water rights.
The thrust of the lawsuit, heard in Montrose for two weeks beginning on Jan. 5, centered on the extent of those callback rights, and whether or not the mining company also had an interest in the structures and treatment plant that the town planned to build.
Idarado maintained that it had an interest in those structures, while the town maintained that it did not.
The court sided with Idarado.
“The Court agrees with Idarado’s interpretation of the deed. The express language of the Residual Water Rights deed, together with its clear implication, is that Idarado would have a right to recall the water rights, including the proportionate interest in the water structures,” the decision states.
“It is reasonable for Idarado to expect that the structures would be reconveyed with the water rights. Conversely, it is unreasonable for the Town to expect that the structures would not be reconveyed if the water rights were recalled.”
Although the voters authorized the financing needed to pay for the project by means of a $10 million bond approved in 2005, the town did not break ground on the project because it worried that Idarado could take back the water rights and leave the town with a treatment plant but nothing to treat, according to Town Manager Frank Bell.
Although Idarado has 45 days from the date of the decision to file an appeal, “Our immediate strategy is to move ahead and build the water plant,” said Bell.
“The plan has been in mothballs for years; the plan is to get it out of mothballs,” he said.
The town must trigger the 2005 bonds to pay for the project, and on Friday Bell was in Denver consulting with the town’s bond advisor to determine when the best time to do that might be.
“Given the shaky market, we want to make sure we trigger them at the right time,” he said. “Just because you’ve got $10 million in bonds doesn’t mean you can’t get $11 [million].”
In the meantime the town has money in its Water Fund to begin site preparation work that must be completed before the project begins. That work includes removing a large storage tank and soil testing and remediation, according to Bell.
“That could take place early this summer if the stars line up correctly,” he said.
“Water is the future. It is the base on which we’ll be able to provide for the needs of the community now and in the future,” said Fraser. “It is the critical issue and we came out very well in that area.”
When reached by telephone John DeSisto, lead council for Idarado in the case, said he was unauthorized to comment and had forwarded the request to Idarado.
At press time a call to Newmont Mining Corporation, Idarado’s Denver-based parent company, had not been returned.