Canal company to confront key issues

February has historically been the month shareholders of the Shell Canal Company approve a budget, adjust assessments, select board members and begin planning for the arrival in mid- to late-April of irrigation water for their crops, lawns and gardens.

Not this year.

The second month of the year instead produced a series of unprecedent events, starting Feb. 10 with the abrupt postponement of the annual shareholders meeting, followed hours later by the resignation of four of the five board members and the appointment of two to take their place, including Boyd Van Fleet, who sued the canal company in 2021

The drama continued at the rescheduled annual meeting on Feb. 27 when the new board, over the protests of shareholders critical of the manner in which they were appointed, called for votes to turn back the clock to an older version of the company bylaws and presented proposals that would result in some users paying 10-15 times more for water than they have in the past.

Fast forward six weeks. The canal board —Van Fleet, Ken Rempel, Barbara Burbridge, Robert Shannon and Thomas Loewen — has scheduled a special membership meeting for 8 p.m. Monday, April 7 in the meeting room of the Greybull Public Library.  

With significant user fee increases on the table, what will be decided that night will impact all 141 of the company’s shareholders, not only this year but for years to come.

Background

The Shell Canal Company is a private corporation, rather than a water district, and votes on maters outside of routine business — the adoption of the budget, setting of assessments, spending on improvements and bylaw changes — must clear either a majority or a two-thirds vote to pass.

Rempel, who chairs the board, said at a recent meeting that there are 141 shareholders who collectively own 3,886 adjudicated acres.  Of those 141, 68 own between 0 and 5.9 acres, and 23 own between 6 and 10.9 acres.  According to the bylaws appearing on the canal website, the largest shareholders are Van Fleet, with 1,328 adjudicated acres, and Rempel, with 452, giving them approximately 46% of the shares.

At the 2024 annual meeting, the majority of shareholders present supported a bylaw change, replacing proxy voting — a practice that allowed shareholders who could not attend to assign their voting power to someone who would vote their interests — with an absentee voting system.

Because of that, shareholders woke up on Feb. 10 expecting the absentee ballots that were included with their annual meeting notice to be used to decide whether to proceed with a significant improvement project and set assessments for the coming year.

But those ballots became moot in the middle of the afternoon when the board circulated word that it was postponing its annual shareholder meeting.  The board met a few hours later at the library to pay bills, but after doing so, board members Sam Donahue, Roger Hall, Marian West and J.T. Collingwood resigned. The meeting was adjourned by the chairman, Donahue.

An hour later, the only remaining board member, Rempel, called the meeting back to order. According to the approved minutes, he was joined by Pat Weiner, VanFleet, Loewen and Burbridge.  Weiner proceeded to nominate Van Fleet, Loewen and Burbridge to fill the vacant seats, but Loewen did not immediately accept and the board agreed to consult an attorney to verify his status as a shareholder.

The minutes that were approved by the board on March 3 stated that “a quorum of board members had already been established” after the four board members resigned but before they left their posts, and that Werner’s nomination of Van Fleet, Loewen and Burbridge “did not need to be seconded as per Robert’s Rules of Order.”

Both positions were heavily criticized when the rescheduled annual meeting was held Feb. 27, as a vocal group of shareholders challenged the legitimacy of the new board and in particular Loewen’s place on it.  

Using proxy voting, a majority of shareholders present voted to proceed with the first phase of repairs to address erosion concerns at the Thompson Lateral.  The canal company has secured a 60/40 grant from the DEQ in the amount of $349,399, with the DEQ paying $209,639 and shareholders $139,759, but Rempel told the group that the money must be spent by the end of 2026.  For the canal’s share, a special assessment of $37 per share was proposed and passed.  Some shareholders contend the Thompson Lateral project would only benefit the largest landowners, VanFleet and Rempel, and that there are less expensive options than the one they are promoting.

A vote was also taken at the Feb. 27 meeting to begin the process of restoring the canal company’s 1974 bylaws, with the majority again in favor.  Van Fleet has argued that the current bylaws, which went into effect in 2016, were written for a water district and not a corporation and that they do not comply with state statute.  He said the same applies to the company’s articles of incorporation. 

Among other things, the 1974 bylaws would lower the threshold for establishing a quorum, from one-half to one-third.

Most of the Feb. 27 meeting was spent on the canal company’s finances, the proposed budget and options to fund it.  

Last year’s budget of approximately $120,000 was funded by an across-the-board, $21 per share assessment of all shareholders, consistent with current bylaws which state that “equal assessments on the outstanding shares” be used to operate, maintain and manage the company.

Rempel told the group on Feb. 27 that the budget needs to increase in order to pay for deferred maintenance and rebuild the company’s coffers which have fallen below $20,000.  Board members argued at that level, the company is hamstrung when applying for grants and to pay for emergencies.

Rempel proposed two assessment options, both of which would generate approximately $178,000.  The first called for a new $350 administrative fee on all shareholders coupled with an increase in the per-acre assessment from $21 to $34. This option incluldes a tiered approach for small users, with those owning between 0 and 5.99 acres paying $170 (with the admin fee included, $520 total) and those between 6 and 10 paying $340 ($690). The second option called for all canal users to pay an administrative fee of $554, along with an assessment increase from $21 to $28.

The board did not call for a vote on the assessments, instead challenging shareholders to come up with a third option to present at a future meeting.

March meeting

Less than a week later, on March 3, the board held its monthly meeting at the library.  Once again shareholders turned out in force, resuming their challenge to the appointment of Loewen and the proposed assessments.

Van Fleet and Rempel fielded more questions about the proposal to revert to the 1974 bylaws. Rempel clarified the Feb. 27 vote was simply to give the board direction, emphasizing that the current bylaws would continue to be used.

A signed copy of the 1974 bylaws could not be located, so Rempel told shareholders that the bylaws and the minutes of a meeting when they were approved would be posted on the canal company website.  He conceded that the discussion may take a while, suggesting that a merging of the two sets of bylaws was possible.

An agenda for the April 7 meeting includes no mention of a vote on possible bylaws changes.

Instead, the focus will be on setting assessments for the coming year, which remains a controversial topic for small users.  Many voiced concerns at the March 3 meeting, venting that the canal company’s savings were greatly impacted by Van Fleet’s lawsuit, which was filed in 2021.

In it, Van Fleet contended that the Shell Canal Company took steps to short him of water that he was contractually entitled to, and that on or about Feb. 18, 2017, “the company made the conscious decision to cut the canal bank and allow the intentional release of the overflow of water from the Shell Canal on property and farm ground owned by Van Fleet and VF Limited.”

When it was settled in 2023, Van Fleet walked away with nearly $150,000, which included a $95,000 payment from the canal company’s insurance company, a reimbursement of $6,044.31 and 35% of the total value of the CDs owned by the Shell Canal Company.  To fund a portion of it, the canal company cashed out one of its CDs, valued at around $43,000. 

The company also agreed to reduce Van Fleet’s assessments by 25% for a period of five years, ending in 2027; the discount applies only to what the assessment was at that time, not to what it is now or will be the next two years.

Don Tranas, one of many shareholders to speak out at the March 3 meeting, said the lawsuit “put the canal in a hell of a hole,” and that if Van Fleet hadn’t taken a good chunk of its savings, the company wouldn’t be in this predicament.  Van Fleet countered that as the company’s largest shareholder, “The exact number Boyd took was the exact number Boyd paid in.”

Other shareholders spoke out about the proposed rate increases, including two from the Grandview Ditch Association.  The association consists of 17 property owners who collectively own 23.36 acres of adjudicated water rights and are solely responsible for the maintenance and upkeep of the mile-long ditch that carries water from their headgate just off Highway 14 to their properties.  The association’s smallest property, 0.14 acres, was assessed $2.94 last year; its largest, at 4.22 acres, $88.62.

Jan Mollenbrink said several shareholders in her neighborhood have begun relying on wells because they don’t consistently receive the water they’re entitled to.  “We’re lucky if we have a little ditch full,” she said. “Now you’re wanting to throw these big costs at us, for an acre?  It doesn’t seem fair at all. It’s not fair.”

Roger Hall, who lives on Rimrock, said he and other end-of-the-line users also felt shorted last summer.  Rempel responded, “We’ll do our level best to make sure it doesn’t happen again,” citing the installation of measuring devices along the canal.

Ted Menke, on Spur Road, challenged the need for administrative costs, saying, “The ditch rider has never been past our weir. Ours is a mile of ditch that we maintain. We burn it.  We clean it out.  We repair it. We’ve done all that work ourselves; you shouldn’t be charging us an administrative fee for work we do.”

As for the assessment proposals, Menke said $500 to $600 is out of line, given the amount of water reaching end-of-the-line users.  “You say that doesn’t make it, well I agree, that doesn’t make it,” he said. “But I’m not getting a corn crop out of it.  I’m watering a little grass.”