Judge stops Denver Water's reservoir expansion project

Denver Water

Denver Water is fighting a federal judge's order to halt construction on a reservoir expansion project that has been the target of litigation since 2018.

The water utility said it has grave concerns about the ruling's impact on the Denver area's water supply in the wake of flooding and droughts. While an appeal of the order is planned, a 14-day stay was granted this week.

The order "leaves a critical project that is 60% complete on hold and puts at risk our ability to efficiently provide a safe, secure, and reliable water supply to 1.5 million people," according to a Denver Water statement on Friday. "Denver Water will do everything in its power to see this project through to completion." 

An expansion of the Gross Reservoir was included in a $1.5 billion, five-year capital program Denver Water announced in October 2020. The project will raise the Gross Dam 131 feet, tripling the reservoir's water capacity.

U.S. District Court Judge Christine Arguello last week issued a permanent injunction against the reservoir's enlargement including tree removal, water diversion, and wildlife impacts. She also preliminarily enjoined further construction on the dam pending a hearing on "what is reasonable and necessary to make the currently existing structure safe, including what is necessary for continued site stabilization, monitoring, and maintenance activities, to guide the court's decision on a tailored permanent injunction regarding construction of the dam."

The orders resulted from a lawsuit filed in 2018 by environmental groups against the heads of the U.S. Corps of Engineers and other federal agencies challenging permits they granted for the project. 

Denver Water said it began construction on the project in 2022 under an order from the Federal Energy Regulatory Commission stipulating its completion by 2027 and that it received "all required local, state and federal permits to move ahead with the project after a regulatory oversight process stretching over nearly two decades."

"From a high level, I can say that we do not believe the order impacts the security of the outstanding bonds." Travis Thompson, communications manager for Denver Water, said in an email. "Under the charter, the board is empowered to set rates for all of its customers. The board can modify rates at any time, without oversight by the Public Utilities Commission or any other state agency."

A total of $506.3 million of triple-A-rated revenue bonds were sold by Denver Water in 2021 and 2022 to finance capital improvements. The litigation was disclosed in official statements for the bonds, which are backed by the utility's net revenue, including rates and fees.

"Denver Water rolled the dice with ratepayers' money, which was a mistake," Gary Wockner, executive director of Save the Colorado, the lawsuit's lead plaintiff, said in a statement, adding his group is open to negotiations "to find a mutually agreeable path forward." 

The reservoir, which was completed in 1954, is a storage and regulating facility for water flowing under the Continental Divide through the Moffat Tunnel.