However, the court also rejected Trout Unlimited's argument that the Pagosa district should be able to plan for population growth only through 2040.
The case now will return to the district court for a third time to let the Pagosa Area Water and Sanitation District enter evidence of future population growth.
In a unanimous opinion written by Justice Greg Hobbs, the court noted that the utility's prediction of a 2055 population of 63,000 is much higher than a recent state study, which predicted a population of 35,000 to 42,000 in Archu-leta County.
Trout Unlimited has fought the district's request for a large amount of water for its Dry Gulch Reservoir, which district leaders say forms the cornerstone of their future water system.
Pagosa originally had claimed 64,000 acre-feet of water, based on demands projected through 2100. In 2007, the Supreme Court tossed out that decree, saying 100 years is too long of a planning horizon.
So the district scaled its forecast back to 50 years and asked for 25,300 acre-feet a year.
Trout Unlimited argued that a 35-year demand should be used, but the high court Monday said Pagosa should be allowed to use the 50-year time frame. However, the district hasn't proved how much water it will need in 50 years, Hobbs wrote.
A 2003 study by the district predicted it would need 12,000 acre-feet by 2040, or half of what the district wants for its 2055 demands.
The Pagosa utility is worried the state or the U.S. Forest Service might claim water for environmental uses or a future kayak park would require water to stay in the San Juan River. But Hobbs wrote that the mere speculation someone will claim water for environmental or recreational use is not enough to justify a big water right for the utility.
Water districts across the state - including Southwestern Water Conservation District - filed briefs in the case, because it will affect how the Supreme Court deals with water demand for future population.
The court dealt water districts a setback Monday, when it said the courts do not owe "deference" to official water utilities' claims.
"Both public and private appropriators must carry the burden of proving their claims for a conditional decree," Hobbs wrote.
District spokeswoman Sheila Berger said district officials had not had time to review the decision and couldn't comment Monday. Trout Unlimited lawyer Drew Peternell also couldn't comment because he was out of the office Monday.
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