HORIZONTAL DRILLING AND COMPLETION FALL SYMPOSIUM
Denver, Colorado, October 23, 2012

Niobrara Water Use and Reuse

At the Horizontal Drilling and Completion Fall Symposium in Denver, John Jaffee, the Water Manager for Anadarko Petroleum Corporation’s Rocky Mountain region operations, gave a presentation on the Niobrara Wattenberg Field’s water treatment plan.  His presentation focused primarily on water use in shale play horizontal slickwater fracing and water sourcing challenges.

Jaffee started his presentation by explaining that the same general rules for drilling a vertical well apply to horizontal drilling, except horizontal wells require more water and larger production casings.  Each horizontal well operation requires a total of 48,000 to 120,000 barrels of water, as opposed to 2,400 to 24,000 barrels for each vertical well.  “Slickwater” refers to fracing solution that contains surfactants, which decrease surface tension, thereby increasing the fracing rate into the formation.  Hydraulic fracturing (“fracing”) injects highly pressurized frac fluid into the wellbore to create small cracks or fractures in the shale formation.  These cracks release hydrocarbons such as oil or gas trapped within the formation.  Water is the most effective frac solution solvent because it is inert.  Approximately 20% of the total water injected into a formation returns to the surface as flowback.  Multiple layers of cemented steel casings in the wellbore protect ground water from the migration of injected frac fluid, returned backflows, and hydrocarbons.

Jaffee next addressed water-sourcing issues in Colorado.  Slickwater fracing is a completely consumptive use because flowback is briny and contains too many frac fluid contaminants to allow the water to return to the water cycle.  While fracing consumes only 0.08% of Colorado’s total annual water use, many communities are sensitive about sourcing water to oil and gas producers because fracing is controversial.  Accordingly, industry considers community sensitivities when sourcing water.

There are currently many water sourcing limitations.  For example, in Colorado, different types of water sources implicate different laws, regulations, and water availability.  Almost all surface water supplies in Colorado are over-appropriated.  Tributary well water withdrawals affecting an over-appropriated stream system require augmentation plans.  Designated basins are rapidly depleting and the state is currently in a drought.  Therefore, while fresh water is preferred, Anadarko entered into a five-year water lease for effluent water from a municipal waste treatment facility.

Jaffee then explained that water-transporting issues are also very controversial.  Onsite water storage systems are difficult to deliver and manage because each platform requires up to 900 truck trips for water delivery and waste removal.  People criticize the fracing industry for the cumulative impacts of its noisy, high-volume, big truck traffic because it causes severe road damage, consumes excessive amounts of fuel, and increases carbon emissions.  Moreover, winter compounds these problems.  Iced-over roads complicate travel.  Stored water freezes and expands, requiring complicated heating mechanisms.  Accordingly, Anadarko is exploring alternatives to onsite storage.

Recently, Anadarko installed twenty miles of 24 in. diameter high-density polyethylene pipe through the heart of its operations to deliver water directly to the Wattenberg Field.  Their onsite gathering system supplies water at an effective fracing rate of 60 barrels/minute (“fracing rate”), utilizing a pressure-rated mine hose.  This change significantly decreased truck traffic and water stored onsite.  This system, however, still requires large vessels for post-fracing storage and requires enough horsepower to deliver the water at a fracing rate along the length of the entire system.

Anadarko is also investigating enclosed ferrocement storage systems.  These modular containment units consist of grout walls built around gravel where the porosity of the grout holds the water in place.  This method prevents the contaminated water from evaporating, is inexpensive, and has a sand filtration effect.

Jaffee summed up by noting in 2011, Anadarko recycled 95% of its total flowback water from the Wattenberg Field.  Although Jaffe did not spend much of his presentation on water reuse or recycling, he discussed preventative measures Anadarko is taking and investigating to address current water issues in this industry.


2012 ANNUAL WATERWISE WATER CONSERVATION SUMMIT
Denver, Colorado, October 19, 2012

At the 2012 Colorado Conservation Summit, a variety of speakers from Colorado’s water community presented on a diverse range of topics.  These presentations covered issues including the current state of Colorado’s water supplies, recent water conservation policy and legislation, new water fixture technology, drought planning, and the political impact of revenue loss on water conservation programs.

Drought Planning Perspectives: A Snapshot on Action and Intent

Peter Mayer of Aquacraft, Inc. moderated the multi-city panel discussion on drought planning and prompted the panelists with questions about actions their respective cities are taking to prepare for another dry winter.

Taryn Finnessey, Colorado Water Conservation Board (“CWCB”) drought climate-change technical specialist, opened up the discussion by describing CWCB’s current Drought Mitigation and Response Plan (“Drought Plan”), approved by the Federal Emergency Management Agency in January 2011.  Finnessey explained that the Drought Plan tracks drought impacts across Colorado and seeks to better manage drought from the state prospective by compartmentalizing regions of the state and providing flexible and individualized response to those affected regions.  The Drought Plan also employs a drought task force, consisting of executive directors from the Colorado Department of Natural Resources, Department of Local Affairs, and Department of Agriculture, to brainstorm and implement drought response and mitigation strategies.

Russ Sands from Boulder’s Water Quality and Environmental Services spoke next and noted that cities must have emergency plans to respond effectively to drought.  He outlined several important components to a drought emergency response: 1) creating a unified message; 2) effectively disseminating information to the public through thinks like brochures or yard signs; 3) pursuing public education within the first seventy-two hours following the declaration of a drought emergency, as this time is often the most effective to disseminate a message; and 4) creating a drought plan that realistically manages expectations and is achievable.  Sands also noted that a city must be prepared to act the moment after declaring a drought emergency.  When a city instead tries to assemble all these pieces subsequent to declaring an emergency, the plan will likely fail.

Lucas Mouttet, water conservation coordinator for Fort Collins Utilities, discussed the recent issues caused by the High Park fire, and the consequences of a fire occurring in a city’s watershed during a drought.  He spoke about the importance of a flexible drought plan to accommodate these tangential issues and the resulting contaminated water.  Mouttet also explained that Fort Collins avoided employing city wide water restrictions this year, although many neighboring cities employed water restrictions during drought, because of its particular water plan that employs alternative water sources.  Additionally, Fort Collins has developed multiple water use plans to account for the various water condition scenarios that may occur in 2013.

Ruth Quade with the City of Greeley spoke about the recently codified Greeley water drought plan.  She stressed that the focus of drought plans must get the message out to customers on the importance of water wise use.  She described the use of social media and the internet as an important outreach component to implement utility drought plans.  Such outlets help keep the public informed during the drought, especially when water restrictions change throughout the year.  She also acknowledged potential problems with awareness among specialty population groups, such as Hispanic and elderly customers, who may not otherwise be informed of restrictions in their community.  She stressed that utilities do not want to punish customers or their landscapers for breaking restrictions about which they were ignorant.

Last to present from the panel was Linn Brooks with Eagle River Water and Sanitation District who spoke about the importance of planning early for a drought and effectively communicating the drought plan to the public.  Utilities should acknowledge the reality of current operations, by setting objectives and priorities and communicating them both internally and to the customers.  Yet utilities must balance such known elements with the unlikely ones in order to be fully prepared during a drought.  An assessment of potential drought impacts, such as fire or other water supply emergencies, is necessary to provide such data.  Brooks also emphasized the fact that during a drought demand is high, yet supply is limited.  Because flexible system operation can maximize any available stream flows, Brooks noted that flexible operation of water systems can narrow the supply and demand gap.

When asked by the moderator whether Colorado is more prepared today than in 2001, all participants on the panel agreed that Colorado is more prepared today, due, in part, to statewide mitigation plan which incorporates lessons from the 2002 drought.


2012 ANNUAL WATERWISE WATER CONSERVATION SUMMIT
Denver, Colorado, October 19, 2012

At the 2012 Colorado Conservation Summit, a variety of speakers from Colorado’s water community presented on a diverse range of topics.  These presentations covered issues including the current state of Colorado’s water supplies, recent water conservation policy and legislation, new water fixture technology, drought planning, and the political impact of revenue loss on water conservation programs.

Drought Parallels and Lessons Learned: 2002 to 2012

Ashley Jackson

In the afternoon, the speakers began to focus on the impacts of drought on Colorado.  Nolan Doesken, climatologist for the Colorado Climate Center (“CCC”), presented the topic of progress and challenges in Colorado’s climate variability.  He focused on the parallels and lessons learned from both the 2002 and 2012 droughts in Colorado.  Both years experienced similar annual precipitation well below the seventeen-inch state average yet Doesken stressed how Colorado is currently more prepared than in 2002 because of lessons learned from the recent 2002 drought.  In contrast, the last major drought before 2002 occurred over two decades before, in 1980.  Doesken explained that the wet 1990s gave the state a false sense of security and the 2002 drought forced municipalities to reevaluate their water use demands.  Even giving the preparedness today, however, Doesken cautioned that utilities in 2002 could meet the increased demand because state reservoir levels were stable.  The less extreme temperatures and lower evapotranspiration rates allowed reservoir levels to maintain stability in 2002 whereas today the reservoir levels are much more variable.

Doesken then described CCC’s system of agricultural weather stations used to provide temperature and precipitation data across the state.  He noted that providing a constant water supply through variable drought years presents a very difficult challenge for municipalities hoping to encourage water users to become more willing and flexible in their water uses.  Municipalities often attempt to appropriately reflect the reality of surrounding environmental conditions with their water use, but this does not often translate to the end users and households using water.  Utilities continually face the challenge of meeting increased water demand pressures during droughts with depressed water supplies and Doesken expressed a desire for those in attendance to consider a historical perspective of how to approach water supply and demand conditions in a drought.

 

National Themes in Water Efficiency: Revenue Loss and Its Political Impacts on Conservation Programs

Andy McFadden

Mary Ann Dickinson, founder and CEO of the Alliance for Water Efficiency, presented the final talk of the conference and discussed, from a national perspective, water utilities’ inadvertent revenue loss due to successful water conservation measures.  Dickinson explained that decreased water usage caused by water conservation, reduction of new construction projects, and increased home foreclosures all combine to reduce overall water sales and revenue.  The decreased water consumption is catching many municipalities off-guard and forcing many to increase the price of water and cut most discretionary costs, such as water conservation programs.

Dickinson argued that the political process further complicates the problem because unhappy water consumers are demanding reduced water prices from their political representatives.  Although the cost of water continues to rise faster than any other basic utility, political officials are failing to adequately increase water rates to adjust for increased costs.  Instead of incrementally increasing water rates every two to three years, political pressure has postponed adjustments based on political cycle.  Aging municipal water systems are forcing officials to make drastic adjustments, often a decade’s worth of budget increases all at once, in order to keep municipal systems financially viable.  Dickinson explained that many political representatives must decide between yielding to their constituents’ pleas to keep water prices down and alienating their constituents by raising water prices during a recession.  Because consumers today do not fully understand the true cost of water, educating consumers about infrastructure costs in concert with detailed adjustment plans from municipalities should help take adverse pressure off political representatives, allowing them to develop better long-term solutions.

See also:


2012 ANNUAL WATERWISE WATER CONSERVATION SUMMIT

Denver, Colorado, October 19, 2012

At the 2012 Colorado Conservation Summit, a variety of speakers from Colorado’s water community presented on a diverse range of topics.  These presentations covered issues including the current state of Colorado’s water supplies, recent water conservation policy and legislation, new water fixture technology, drought planning, and the political impact of revenue loss on water conservation programs.

Colorado WaterWise, a non-profit organization that strives to promote and facilitate the efficient use of water in the State, sponsored the event.  Colorado WaterWise has been the face of water conservation since its conception in 2000 and promotes conservation practices among homeowners, business, and water providers.  By providing support to water professionals and communities across the State, WaterWise empowers them to offer more responsive and effective conservation programs to their customers, clients, and citizens.

And the Survey Says… Insight from Northern Water

First to present was Eric Wilkinson, the General Manager of the Northern Colorado Water Conservancy District (“Northern Water”).  Wilkinson summarized the results of a 2010 survey of Northern Water’s municipal users.  The twenty-seven participating municipalities answered questions regarding water use, conservation, and Northern Water’s role in supporting conservation efforts.  Survey results revealed: thirteen of the twenty-seven municipalities have Colorado Water Conservation Board approved conservation plans in place; approximately sixty percent of municipalities indicated that water conservation is an element incorporated into their water supply planning; and nineteen of the municipalities claimed to have water conservation programs in place.  The various municipalities cited a variety of different reasons for participating in conservation efforts, including the belief that water conservation is “the right thing to do” to create a drought reserve, and to offset a portion of the increased demand of future growth.

According to Wilkinson, the survey results provided Northern Water with a greater understanding of the current conservation programs and an idea of how Northern Water will move forward with effective alternative conservation methods.  When discussing the solution to water conservation’s seemingly “insolvable problem,” Wilkinson ended with some light-hearted words of encouragement by joking: “you’ve got to eat the elephant one bite at a time.”

New Water Efficiency Plan Program and Colorado House Bill-1051

Kevin Reidy, the State Water Conservation Specialist for the Colorado Water Conservation Board spoke second.  Reidy presented on the current state of Colorado’s water conservation policy and legislation, focusing specifically on Colorado House Bill-1051 (“Bill-1051”).  State Senator Bruce Whitehead and State Representative Jack Pommer sponsored the bill and the Colorado legislature finally adopted Bill-1051 on February 1, 2012.  Bill-1051 builds on existing water efficiency and conservation programs and provides water planners with a more accurate picture of current conservation efforts.

Reidy emphasized data collection as a necessity for allowing the water community to work through uncertainties in Colorado’s future supply and demand.  He explained that Bill-1051 provides the means for this necessary date collection so water planners will have a more accurate picture of water efficiency efforts and access to centralized data of water efficiency plans throughout the state.  Ultimately, Reidy explained, the legislature will funnel the data gathered from Bill-1051 to the Colorado Water Conservation Board (“CWCB”), where they will provide the public with an access point for the data.  Reidy noted that this will allow water planners to acquire a comprehensive understanding of the gap between water supply and demand and an overall picture of efficiency efforts statewide.

The water community has received Bill-1051 relatively well.  The CWCB is currently creating the online database reporting tool to allow public access to the information.  Skeptics are uncertain as to whether the online database will be an effective means of relying information to the water community, however Roidy noted that only time will tell whether Bill-1051 will accomplish all that it set out to.

See also:


Estate of Hage v. United States, 687 F.3d 1281 (Fed. Cir. 2011) (holding that a rancher’s claim for a regulatory taking of water rights was not ripe for review since the mere existence of a requirement for a special use permit does not constitute a regulatory taking; and, in the absence of evidence that the government took water the ranchers could have put to beneficial use, the construction of fences near a water ditch did not amount to a physical taking).

In 1978, E. Wayne Hage and Jean Hage acquired a cattle-ranching operation in Nevada covering approximately 7,000 acres of private land where they used nearly 752,000 acres of adjoining federal lands under grazing permits from the Forest Service and BLM (collectively “the government”).  The acquisition included water rights obtained under Nevada state law to streams and ditches now located on federal lands.  The government required the Hages to obtain special use permits before performing any ditch maintenance on the federal lands.  The Hages complied, until 1986, when they stopped applying for the permits because they believed that they were not necessary, yet they continued to perform ditch-maintenance operations on the federal lands, including the clearing of trees along the ditch right of way.  Mr. Hage was subsequently charged and convicted of damaging and removing government property; however, the conviction was eventually overturned on the ground of inadequate proof of the value of the property affected.  In 1991, the Hages filed suit against the United States in the United States Court of Federal Claims (“claims court”) alleging a Fifth Amendment taking of private property, a right to compensation for range improvements, and breach of contract (discussion of range improvements compensation intentionally omitted here).  Nearly twenty years later, including two trials and multiple opinions by the claims court, the court awarded the Hages compensation for a regulatory and physical taking of their water rights with pre-judgment interest.  The Government appealed to the United States Court of Appeals for the Federal Circuit (“court of appeals”).  The government argued that: (1) the regulatory takings claim was not ripe because the Hages failed to obtain a permit to maintain the ditches; and (2) a physical taking had not occurred because: (a) the claims relating to the construction of fences surrounding water sources on federal lands in which they held grazing permits were time-barred; (b) Mr. Hage already testified that fences erected in 1988 and 1990 did not exclude cattle from the water sources; (c) a “water right has no ‘access’ component” and there is no “appurtenant right to use and occupy federal rangelands for access to the water;” and, (d) the Hages failed to prove that they could have put the water to beneficial use.

First, the court of appeals found the Hages claim for a regulatory taking of their water rights was not ripe.  There was no proof that the Hages would have been denied a permit had they applied for one.  The court of appeals rejected the Hages argument that the mere existence of a requirement for a permit constituted a regulatory taking.  Accordingly, the court of appeals concluded that the claims court had erred in finding a regulatory taking of the Hages’ water rights.  The Hages did not have to apply for a permit because it would be “futile” based on the history of the parties involved and the permit requirement itself would amount to a prohibition of their use, and thus a taking of their water rights.

Next, the court of appeals agreed with the government’s claim that any physical takings claim based upon fences built in 1981 and 1982 were time-barred pursuant to the six-year statute of limitations period prescribed in 28 U.S.C. § 2501.  The Hages, in fact, filed the suit in 1991; nearly a decade after the BLM built fences on the property.  The court of appeals sided with the Hages assertion that the government could not prevent them from accessing the water without just compensation, and entirely fencing off a water source could amount to a physical taking.  However, the court of appeals held that in the absence of any evidence that the government actually took water that the Hages could have put to beneficial use, the Hages did not satisfy a Fifth Amendment takings claim.  Therefore, the court of appeals held that the claims court erred in ruling that construction of fences amounted to a physical taking because there was no evidence that the government’s actions actually resulted in taking the Hages water rights.

Accordingly, the court of appeals affirmed the claims court’s ruling that the erection of fences in 1981 and 1982 were time-barred, reversed the claims court’s ruling that there had been a regulatory and physical taking of the Hages’ water rights, vacated any damages awards, and remanded the case without costs.


Magna Water Co. v. Strawberry Water Users Ass’n, 285 P.3d 1 (Utah Ct. App. 2012) (holding that objectors, Magna Water Company and South Farm LLC, lacked constitutional standing to challenge a proposed determination by the Utah State Engineer.  However, objectors had alternative standing to challenge the recommendation which allowed for the recapture and reuse of water once return flows commingled with natural water drainage).

Under the Strawberry Valley Project, water is imported, as part of a federal reclamation project, into the Utah Lake Basin and Jordan River from the Uintah Basin, in the Colorado River drainage.  The imported water is subsequently used and administered by the Strawberry Water Users Associations and Strawberry Highline Canal Company (collectively “SWUA”) to fulfill federal contracts with the United States Bureau of Reclamation.  After the imported water’s use, some of the water returns to the Utah Lake-Jordan River hydrological system through surface runoff or groundwater seepage.  In an effort to ensure the reuse of such water, SWUA petitioned the district court to establish its right to use the return flows.  The district court ordered the Utah State Engineer to prepare a recommendation for how to proceed with the return flow issue.  The State Engineer proposed that the return flow could be recaptured and reused by SWUA even after the imported water had commingled with the natural drainage water in the Utah Lake-Jordan River system.

Following the State Engineer’s proposal, Magna Water Company and South Farm, LLC (collectively, “Objectors”) filed an objection in the Third District Court of Utah (“district court”), stating the proposal would adversely affect their water rights and interests, because their water rights would be subject to reduced diversions during drought years and they would incur considerable expenses to defend their rights.  The district court dismissed Objectors claims because they did not have standing for the following reasons: (i) Objectors’ ground water rights were “up-gradient” from the Jordan River, and were not connected to or affected by water levels in Utah Lake or the Jordan River; (ii) Objectors did not have a legally protected interest in the controversy; (iii) Objectors were not appropriate parties because they were not interested or positioned to effectively assist the court; (iv) the issues raised by the State Engineer’s proposal were likely to be raised by other parties with a stake in the matter; (v) Ownership of stock in Utah Lake-Jordan River water companies did not confer standing; and (vi) Objectors did not present evidence to support a finding that they would have suffered a distinct and particularized injury based on the proposal.

Upon appeal, the Utah Court of Appeals held that the district court properly found that Objectors did not have constitutional standing.  Objectors again claimed that, as a result of the proposal, they would be subject to reduced diversions under their water rights during drought years and that they would have to spend considerable resources to defend their water rights against inaccurate return flow calculations.  However, the Court of Appeals agreed with the district court and found that Objectors’ water rights were “up-gradient” from the Jordan River and were in no way affected by water levels in Utah Lake.  In addition, the court determined that there was no hydrological connection between Objectors’ water rights and the Utah Lake-Jordan River system.  As such, the court held that Objectors’ claims did not show a particularized injury, as required to establish constitutional standing.  Furthermore, the court determined that Objectors did not show that a reasonable probability of future injury existed.

Conversely, the Court of Appeals reversed the district court’s determination that Objectors also lacked alternative standing, or standing based on an appropriate party raising issues of significant public importance.  To establish alternative standing, the Court of Appeals found: (i) Objectors were an appropriate party; and (ii) the issues raised were of sufficient public importance to warrant standing.  The court held that Objectors were an appropriate party to the litigation because they had an interest necessary to aid the court in reviewing all relevant and factual issues.  This interest stemmed from the fact that Objectors were water rights holders interested in preserving water resources and ensuring compliance with state laws and regulations.  Moreover, the court found that Objector’s were an appropriate party because no other objections had been filed regarding the State Engineer’s proposal.  As such, the court held that no other party with a stake in the matter was likely to raise the issue, contrary to the district court’s finding.  The Court of Appeals also determined that the issue was of sufficient public importance to warrant standing, in part because no court in the state had determined whether imported water could be recaptured and reused in the manner recommended by the State Engineer.  Ultimately, the court held that the dispute would resolve a novel issue in the state and that the resolution had the potential to impact a significant portion of the community.  Because Objectors were an appropriate party and because the public had an interest in having the issue litigated, the court held that Objectors established alternative standing.

Consequently, after affirming the district court’s determination that Objectors lacked constitutional standing, the court reversed the district court, and found that Objectors had alternative standing to challenge the State Engineer’s recommendation.  The court then remanded the case for further proceedings.


In re 2007 Administration of Appropriations of the Waters of the Niobrara River, 820 N.W.2d 44 (Neb. 2012) (holding (i) the law-of-the-case doctrine did not prevent junior rights holders from objecting to issues pertaining to the burden of proof and the Department of Natural Resources alignment as a party litigant; (ii) the alignment of the Department of Natural Resources as an adverse party was proper in a case where plaintiffs challenge their administrative methods; (iii) the burden of proof was on objecting junior rights holders when challenging closing notices; (iv) denial of a request to amend a complaint was not an abuse of discretion when the requested amendment is meritless; and (v) parties appropriately raised the issue of abandonment and forfeiture of appropriation rights through statutory and common-law methods).

The Nebraska Public Power District (“NPPD”) operates a hydropower facility on the Niobrara River near Spencer, Nebraska.  NPPD owns three appropriation rights for the facility.  Jack Bond and Joe McClaren Ranch (“junior appropriators”) own property upstream of the Spencer facility with surface water appropriation rights for agricultural use.  On March 7, 2007 NPPD called for the Nebraska Department of Natural Resources (“Department”) to curtail upstream junior users, asserting the Niobrara River flow was insufficient to satisfy the Spencer facility appropriation rights.  After repeated measurements of the Niobrara River, the Department determined that the flow was insufficient to satisfy the Spencer facility appropriation rights. Accordingly, the Department issued closing notices to the junior appropriators and approximately 400 other junior rights holders.

The junior appropriators filed an administrative hearing request before the Department alleging that NPPD abandoned its appropriation rights and that they were not subject to the closing notices under the futile call doctrine.  The Department appointed an independent attorney to act as the hearing office.  During the hearing, the junior appropriators objected to the Department appearing as a party.  The hearing officer determined that the Department was a proper party.

The junior appropriators filed a petition for condemnation of NPPD’s water rights in Boyd County Court (“county court”).  The county court granted a condemnation award to the junior appropriators with a 20-year compensation award for NPPD.  NPPD filed to dismiss the administrative proceedings because the condemnation award rendered moot the proceedings. Accordingly, the Department dismissed the administrative proceedings for lack of subject matter jurisdiction.  On appeal to the Nebraska Supreme Court (“Court”), the junior appropriators argued that the proceedings were not moot because a determination on the status of NPPD appropriation rights could benefit them since they would not need to pay NPPD for water if NPPD’s appropriation rights were void.  The Court held the proceedings were not moot and remanded for further proceedings.

On remand back to the Department, the junior appropriators sought to amend their complaint by adding a claim based on estoppel.  They also wished to add information asserting that NPPD had not called for administration of water in 50 years and the Department never previously issued closing notices on NPPD’s behalf. The Department appointed a different independent attorney to be the hearing officer.  This hearing officer refused to allow the junior appropriators to amend their complaint.  NPPD next filed a motion to impose Nebraska’s rules of evidence and to exclude evidence that the Spencer facility had wasted water through leakage. The hearing officer granted NPPD’s motion.

The hearing officer allowed several exhibits over the objections of NPPD because the exhibits were not relevant to the proceedings.  The Director of the Department soon issued his final order based on the hearing.  He overruled the hearing officer concerning the exhibits.  Additionally, he determined that the junior appropriators initiated the action under Neb. Rev. Stat. § 61-206; which places the burden of proof on the junior appropriators.  Further, the Department’s status as a party was proper because the junior appropriators were challenging the Department’s methods for water administration.

The director also determined that the dispute over whether NPPD had abandoned its water rights was irrelevant for an action brought under § 61-206 because the junior appropriators did not properly challenge NPPD’s water rights under Neb. Rev. Stat. §§ 46-229 to 46-229.05.  The director also noted that the junior appropriators did not provide any evidence that NPPD had abandoned its water rights.  The director then ruled that the junior appropriators failed to meet the burden of proof to dispute the futile call analysis and denied their claims regarding the propriety of the closing notices.

The junior appropriators appealed to the Nebraska Supreme Court (“Court”) claiming that the director erred in (i) aligning the Department as a party litigant; (ii) assigning burden of proof to the junior appropriators; (iii) excluding evidence that the Spencer facility had wasted water through leakage; (iv) declining to allow the junior appropriators to amend their complaint; (v) rejecting evidence after the hearing officer had admitted the evidence; (vi) determining that the claims against NPPD’s water rights were excluded from the proceedings; (vii) determining that NPPD had not abandoned a portion of its rights; (viii) concluding that NPPD could call for the full amount of its water rights; and (ix) determining that the Department conducted a proper futile call analysis.

First, the Court held that the junior appropriators were not prevented from objecting to the assignment of the Department as a party litigant based on the law-of-the-case doctrine.  The Court reasoned that the original appeal of this case did not address the issue of the Department’s status and the junior appropriators were not bound by the hearing officer’s original decision that the Department was a proper party.  The Court then ruled since the junior appropriators challenged the administration of the Departments enforcement of water rights, it is appropriate for the Department to defend its methods of administration.  The junior appropriators then argued that the Departments alignment as a party violated due process.  The Court held some mixing of judicial and prosecutorial functions is acceptable and that the functions were not improperly combined.

Next the Court held the burden of proof was on the junior appropriators to prove NPPD had abandoned its water rights because they raised questions outside the scope of the call for administration.  Additionally, the court held the junior appropriators request for hearing was more akin to a petition.  The Court then held the denial of the junior appropriators request to amend their complaint was appropriate and not an abuse of discretion.  The hearing officer sustained NPPD’s objections to the junior appropriators’ request to amend because the Department does not have general equitable jurisdiction and cannot be estopped from its legal duties.

Finally, the court held the director erred in refusing to address whether NPPD abandoned its water rights.  The Court held Neb. Rev. Stat. § 46-229 only specified a procedure the Department must follow when cancelling appropriations.  The statute did not remove common-law methods for challenging appropriations.

Accordingly, the Court again remanded that case back to the Department with direction to determine if NPPD’s appropriations were abandoned or forfeited.