The community saw evidence of that most readily last week when a misunderstanding over the Town of Telluride’s willingness to provide water to an affordable housing project being proposed for joint development with San Miguel County led the board of county commissioners to suspect town council of an attempted land grab.
The saga began at council’s most recent meeting nearly two weeks ago when the county sought to clarify the town’s willingness to provide water and sewer services to the Sunnyside affordable housing development proposed for a vacant county-owned lot adjacent to the Eider Creek development.
“We have stopped committing to water and sewer until we have a resolution with Pandora,” Mayor Stu Fraser told County Planning Director Mike Rozycki, referring to the town’s pending lawsuit with Idarado concerning the construction of a new water treatment plant above the Pandora Mine located in the Bridal Creek Basin.
Without the addition of this new water supply, officials say the town will not be able to meet its peak use demand, much less accommodate future growth.
Although the commissioners suspected the town was withholding its promise to deliver water to the project in exchange for the guarantee that the Sunnyside development would be annexed into it, the town maintained that the issue of water delivery was wholly dependent on the outcome of the Idarado lawsuit.
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 by Idarado’s mining operations, according to a history prepared by town staff and provided to The Watch in April 2005.
The Town’s claim was settled in 1992 when Idarado compensated the town with substantial water rights in Bridal Veil Basin as well as reservoirs, pipelines, diversion and conveyance structures associated with those rights, the history notes.
Although as part of that settlement, Idarado retained certain “callback” water rights, the company also agreed to convey the easements across its property required by the town for the construction, maintenance, repair, operation and replacement of all structures and facilities it would need to divert water pursuant to the rights it had obtained, court documents state.
Because the historic water rights were industrial in nature, the town and Idarado in 1996 jointly pursued a “change case” in water court that sought to convert the rights to municipal use.
In December of 2002, the water court allowed the conversion, thereby enabling the town to move forward with the development of a Bridal Veil Basin water treatment and delivery system.
As a result of that decree, the town invested approximately $1 million into that system, while Idarado’s contribution has been $30,000 and an unknown amount of in-kind contribution, according to court documents filed by the town.
Finally, in October 2006 after much negotiation, Idarado delivered to the town the easement deeds required by the 1992 settlement. However, each of the deeds contained a clause the town found objectionable: “Nothing in this deed shall affect Grantor’s rights to call for and receive a deed or deeds from Grantee reconveying water rights and proportionate ownership in decreed water storage and conveyance structures to Grantor pursuant to the provisions of Deeds recorded July 27, 1992…”
The town holds that within that language Idarado was attempting to reserve the right to not only recall title to a part of the Bridal Veil water rights for any reason, but also to the water structures and treatment plant the town planned to build after the voters in 2005 approved a $10 million bond to construct the system. That bond has not yet been issued.
“The town said, ‘I don’t think so, we’re not building this for Idarado, we’re building this for us,’” said Town Manager Frank Bell.
The town believes that if Idarado has the right to recall title to the water structures and chooses to exercise it, then the whole purpose and intention of the 1992 settlement agreement would be eliminated.
Idarado is seeking unspecified damages in a countersuit alleging that in 2006 the town undertook unauthorized work on Idarado property and subsequently caused damage to it.
The case is set to be heard in January and is expected to last about two weeks.