35th Annual American Bar Association Water Law Conference

       Los Angeles, California                           March 29, 2017

The Future of Indian Water Right Settlements in an Age of Uncertainty

 

Jennifer Gimbel, a senior research scientist at Colorado State University, moderated the panel discussion entitled, “The Future of Indian Water Right Settlements in an Age of Uncertainty.” Gimbel began her introduction by acknowledging that certainty is the main goal when identifying water rights; states and water users want to know what belongs to Indians and how they want to use it. Gimbel introduced two of the most pressing sources of uncertainty—funding and resources.   Over the last few years, states “ponied up” a considerable amount for successful settlements. Nonetheless, states want to maintain control over water, making it difficult to determine how water rights should be administered.

Pamela Williams, Director of the Secretary’s Indian Water Rights Office in the U.S. Department of Interior (“Department of Interior”), began her discussion by quoting Secretary Ryan Zinke:

I believe Indian water right settlements are a critical part of the United States government’s responsibility for tribes across the country. During my time as a Montana congressman, I fought [to ratify] the Blackfeet Nation’s water compact because water is both life to the Tribe and also a key resource for the surrounding community. Not only is water an economic driver, it is an important component of [Blackfeet Nation’s] culture and traditions. As Secretary of the Interior, I recognize the importance of maturing these resources.

Williams then said that water right settlements are not over, they will continue. By Williams’s count, over the past thirty years, Congress enacted thirty-one settlements. The Department of Interior is “hard at work” on the eighteen settlement negotiations in place and are implementing the recently enacted settlements.

Williams continued by discussing the way in which the Department of Interior handles Indian water right settlements. A group called “Working Group on Indian Water Right Settlements,” which is composed of high-level decision makers, including all assistant secretaries and the Solicitor, makes recommendations to the Secretary of Interior regarding Indian water right settlements. The Secretary’s Indian Water Rights Office coordinates Indian water rights settlements through teams in the field that include representatives from, inter alia, the U.S. Bureau of Indian Affairs, the U.S. Bureau of Reclamation (“Reclamation”), the Solicitor’s Office, and the U.S. Department of Justice.

In 1990, the Criteria and Procedures for Participation of Federal Government in Negotiating for Settlement of Indian Water Rights Claims was published in the Federal Register. Williams clarified that these Criteria and Procedures are not regulations, but rather they are guidelines agencies and administrations follow to determine what settlements it will support and the extent of federal contributions. Since the 1990 publication, every administration has applied the Criteria and Procedures with varied interpretations. Williams acknowledged that some individuals think they are poorly written, while others think they are a masterpiece of flexibility.

Williams then discussed a recent development regarding negotiating water rights settlements. In February 2015, Representative Rob Bishop, Chairman of the United States House Natural Resources Committee, sent a letter to the Department of Interior and the Department of Justice outlining the process that the House Resources Committee would follow when entertaining Indian water rights settlements. Specifically, he requested a formal statement from the Department of Interior and Department of Justice affirming post-settlement compliance with his additional criteria that emphasize compliance with the 1990 Criteria and Procedures focusing on financial aspects of settlements. The Department of Interior complied and provided statements on binding water right settlements, including the four passed in the 114th Congress. Those four included Blackfeet Water Rights Settlement Act – a “tremendous victory” – Pechanga Band of Luiseno Mission Indians Water Rights Settlement Act, amendments to the San Luis Rey Indian Water Rights Settlement Act, and Chocktaw Nation of Oklahoma and the Chickasaw Nation Water Settlement. Williams noted the Bishop process is functioning—although it is not followed in the Senate, it is followed in the House.

Vanessa Ray Hodge, an attorney at Sonosky, Chambers, Sachse, Endreson & Perry, continued the discussion by focusing on the Criteria and Procedures applied to Indian water rights settlements. The 1990 Criteria and Procedures purport to guide Indian water rights settlement negotiations. Hodge noted that the sixteen criteria were developed in response to a Federal executive branch desire to have a more principled negotiating role and intended to outline general policy goals that water settlements should reflect. These include substantive goals such as federal waivers, legal claims, appropriate financial contribution (including federal government and non-Indian parties), and procedural goals such as how to budget the settlements, types of funds to create settlement, and calculating infrastructure cost.

At the time the 1990 Criteria and Procedures were developed, Congress passed few settlements. Indian water rights settlements significantly increased and, over time, the Department of Interior and Department of Justice developed a specific approach to their application of criteria and procedures for settlements. Hodge opined that Department of Interior generally applies those procedures to all Indian water rights settlements, notwithstanding factual histories or circumstances related to individual tribes and their specific negotiations. In that regard, Hodge believes that, although the 1990 Criteria and Procedures are useful, they should be updated to reflect a more holistic approach to Indian water rights settlements.

Maria O’Brien of Modrall Sperling in Albuquerque, NM, took a step back from the technical discussion and first asked, “Why should we care about Indian water rights settlements?” The answer, she said, “Start[s] with the premise that Indian water rights require a source and certainty of access to supplied water to sustain homelands and economic development.”

Indian water rights settlements play a significant role by acting as a mechanism for solving a “complex conquest over water.” Thus, O’Brien continued, irrespective of ever-changing administrations, we will continue needing Indian water right settlements. Conflicts over water are consistent, and a myriad tribes throughout the United States are still without water rights settlements.

Settlements allow flexible, creative approaches and solutions to issues involving infrastructure and water allocation—issues that could not be addressed by simply quantifying Indian water rights in the context of litigation. Settlements, as opposed to litigation, unite states, the federal government, tribes, and other significant water users, which can provide varied resources not limited to financial contributions, such as modeling resources and technical assistance. These broad contributions enable the settlements to move forward and solve disputes over Indian water rights as well as local concerns about the water supply in a way that is not possible when resorting to litigation.

O’Brien then discussed a recent success in Indian water rights settlement arena — Oklahoma’s first Indian water right settlement between Choctaw Nation of Oklahoma and Chickasaw Nation. Congress enacted this Indian water right settlement in December 2016, after five years of negotiation. It started with litigation, but Oklahoma and the Tribes decided to “roll up their sleeves” and reach a settlement. The federal government participated in the negotiation and was instrumental in its success. O’Brien considers every settlement to be unique, and in this one, Oklahoma and the Tribes needed work through policy issues that sourced their mutual conflict for many decades. Although settlements are unique, common issues do prevail, such as a mutual desire to reach a resolution and identify core principles at issue. It can take a substantial amount of time for parties to articulate their individual needs. Even so, settlements are favored over litigation because they encourage resolution rather that frame settlements as purely adversarial.

Next, Williams discussed the way in which the federal government funds these settlements. In 2009, from the same Omnibus Appropriations bill that enacted the Navajo Water Rights Settlement Act, Congress created a reservation settlement fund that is apportioned from the Bureau of Reclamation fund containing billions of dollars. The reservation settlement fund only applies to settlements with a Bureau of Reclamation component and does not relieve financial pressure on the Bureau of Indian Affairs. The reservation settlement fund is intended to last until 2029 and provide roughly $120 million per year for certain identified settlements. These include the Crow and Blackfeet Tribes in Montana that settled for roughly $400 million each, and the Navajo Tribe in Arizona that settled for one billion dollars.

Finally, O’Brien extended the dialogue by differentiating the types of available funding. She first explained that congressionally enacted settlements rely on discretionary funding which only authorizes appropriations for each individual settlement. This discretionary funding is given to the Bureau of Indian Affairs and the Bureau of Reclamation (when projects involve a water settlement component) when the agencies ask for funds in their programmatic budget to fulfill financial obligations when settlements are enacted.

On the other hand, the 2010 Claims Resolution Settlement Act provided mandatory congressional funding for Indian water rights settlements enacted under this statute. For Congress to appropriate mandatory funding, it must find a same-year offset, meaning Congress reallocates funding from one program into another needing the mandatory funds. One of the first Indian water settlements receiving mandatory funding was the Crow Tribe Water Rights Settlement Act, which is almost fully funded, unlike the discretionary funding for the Pechanga and Blackfeet Tribes water rights settlements which are funded over time.

 

Gia Austin

Image: Lake Powell and Grand Staircase-Escalante as seen from space. Flickr user NASA, not copyrighted.


I. INTRODUCTION AND SUMMARY OF HOUSE BILL 16-1392

Colorado House Bill 16-1392 was introduced in March 2016 within the context of increasing water demands, which, without proper management will outpace the available supply by 2050.[1] The House Committee on Agriculture, Livestock, and Natural Resources postponed the bill indefinitely in April 2016.[2] To date, growing demand has largely been addressed through water conservation, construction of new water infrastructure, and the permanent transfer of water rights from agricultural areas to support municipal supplies.[3] Unfortunately, conservation alone is insufficient, new storage projects are costly, and permanent acquisition of agricultural lands and water rights can have detrimental impacts on agricultural communities and may lead to habitat loss and impacts to recreational water uses.[4]

Colorado is a prior appropriation state, one of many across the American West.[5] Prior appropriation means that the right to use water follows a “first in time, first in right” approach, giving the first person to appropriate water from a river or stream the right to use the water over all subsequent users.[6] Unlike riparian systems in the Eastern United States, the Colorado system of prior appropriation does not limit an individual’s right to use water to those who own lands adjacent to the source. Therefore, water rights holders are free to transport water, sometimes great distances, to its intended place of use.[7]

In the prior appropriation system, rights can be transferred like any other property right.[8] However, transfer of water rights in Colorado can come at a high cost. Water transfers require adjudication before a Colorado water court. Before approving the transfer, the water court will assess the historic consumptive use of the water right to ensure that the amount transferred does not injure other water right holders, which may decrease the amount of the original appropriation—and therefore the value of the right.[9] That means if a farmer wants to transfer a water right originally decreed for one hundred acre feet of water, and the water court finds that he has only historically used seventy-five acre feet, his water right is reduced to seventy-five acre feet, significantly decreasing its value. The risk of this loss, along with the high transaction costs of the water court adjudication process, has limited the number of water transfers that take place.[10]

Legislators drafted House Bill 16-1392 to address some of these issues. The drafters of the bill intended to set rules for the creation of water banks and facilitate the temporary transfer of water rights at a reduced transactional cost, with limited court involvement.[11] The legislation would have placed the Colorado Water Conservation Board (“CWCB”) in charge of operating the water banks created under the program (consulting with the state engineer and with some responsibilities delegated to individual water districts).[12] The CWCB would have also been charged with establishing rules for their administration in accordance with specific guidelines for the rules in the proposed legislation.[13]

There is no universal definition for a water bank, and in fact, states that have developed water banks tailor them specifically to the resources available and the needs of the state.[14] In general, water banks are intended to pair water sellers with water users, to help facilitate the temporary exchange of water rights with reduced transaction costs, and decrease long-term liability for water right holders.[15] While the form of water banks varies, their basic purpose has typically been to encourage the transfer of water from areas with low economic use to areas of high economic use and high demand.[16]

At a basic level, this is the goal of HB 16-1392. The bill, if enacted, would have provided a powerful tool for Colorado municipalities to manage their future water demands while protecting vested rights and preserving Colorado’s agricultural heritage and local economies.

II. Benefits of Passing HB 16-1392 

HB 16-1392 is favorable because it would: (A) provide a cost-effective mechanism for temporarily transfering water from consumptive agricultural uses to municipal use while reducing impacts on farming; (B) address specific issues with previous attempts at water banking in Colorado; and (C) reduce transaction costs and long time periods for transfers.

A. Water banks allow for temporary transfers of water from agricultural areas while preserving Colorado’s agricultural heritage

Open water markets, where water is exchanged as any other fungible commodity, is conceptually appealing, particularly in the West where supplies are limited.[17] Water markets prioritize higher value uses of water, specifically low consumption-high value municipal use over highly consumptive agricultural uses.[18] The prior appropriation system, while bearing some resemblance to a market with the ability to sell and exchange water rights, actually works counter to the market favoring older priority uses over newer, growing demands.[19]

Open water markets, however, can have devastating effects on smaller farming communities. Allowing a market driven approach, especially given the disparity in value, may encourage “buy and dry” approaches, where water is sold or permanently transferred to municipal use.[20] “Dry” agricultural lands can be overcome with noxious, invasive species, and the permanent loss of agricultural land can have severe impacts on local farming communities that rely on agricultural production for a wide range of economic activities.[21] As a result, while the market may incentivize individual farmers to sell their water rights for individual gain, the economic loss on the community as a whole may be far reaching.[22]

The Colorado legislature agrees the danger of “buy and dry” approaches must be mitigated,[23] and the proposed HB 16-1392 attempts to mitigate that danger by restricting the market’s ability to fully control water transfers. Under the proposed legislation, transfer of a full water right would only be allowed for up to three years in a ten-year period, or alternatively, thirty percent of a water right could be transferred over a ten-year period.[24] The proposed legislation ensures that market incentives don’t result in the whole-sale transfer of agricultural water rights. This preservation of agricultural use will protect against encroachment of invasive species (and, therefore, protect agricultural economies) while still allowing transfers to supplement farmer’s incomes and supplement municipal water supplies.

B. HB 16-1392 is specifically tailored to address Colorado’s water needs and agricultural traditions.

Previous attempts in Colorado, most notably the Arkansas River Water Bank (“ARWB”), have not been successful.[25] Stakeholders have identified several reasons for the failure of the ARWB, among them were the high prices of banked water, that fact that the ARWB was a virtual bank with no firm storage for physically banking the water, and uncertainty about the ARWB’s ability to deliver water to various regions.[26]

HB 16-1392 is an attempt to rectify some of ARWB’s failings by better tailoring the approach to Colorado’s needs. First, by expanding the banking system to basins outside of the Arkansas River basin, it includes markets that can accommodate the higher cost of water, such as markets with larger urban populations.[27] Additionally, the transfers under HB 16-1392 will hopefully provide a stronger incentive for participation by allowing the transfer of surface water.

C. Unlike traditional transfers, water bank transfers under HB 16-1392 would have lower transaction costs and are less likely to run afoul of the “no-injury rule”.

One major impediment to traditional water transfers is the high transaction cost. In addition to the transaction costs of obtaining court approval, transfers are also forced to absorb any third-party costs intended to prevent material injury to other vested rights owners, and not run afoul of the “no-injury” rule.[28] In some markets, this “potential” for injury can add significant costs to a transaction and may eliminate the value of the transfer entirely.[29] Unlike other western states, under Colorado’s prior appropriation law, the transfer of a water right requires adjudication from a water court rather than an administrative agency.[30] Like many of Colorado’s water laws, this approach is highly protective of existing water users, but is costly, reduces flexibility in the system, and can discourage otherwise beneficial transfers. In order to file for a transfer, the water right holder must file an application with the water court, which allows any person to file a statement of opposition within two months of the application, forcing a public hearing.[31] A final decree is not awarded until after the hearing. The result is that a single transfer can be costly and may take up to five or ten years.[32]

Additionally, in order for any water transfer to be approved it must pass the “no-injury rule.” The “no-injury” rule states that changes in water type, place, or time of use can only be approved if it will have no injury to other users.[33] To determine if an injury may occur, the “historic consumptive use” must be calculated. In addition to being a time-consuming and possibly costly calculation, determining the historic consumptive use can result in a permanent reduction in the water right itself. [34] The uncertainty of how the court will calculate historic consumptive use can reduce the incentive for any temporary transfers.[35]

HB 16-1392 addresses the cost and injury issues raised by traditional water transfers. First, deposits and withdrawals from the bank would not require a court adjudication or a change of use approval.[36] However, the state engineer’s would still need to certify water bank applications and would review each application to ensure beneficial use of the water and avoid potential injury.[37] Furthermore, notice is still required and interested parties can comment on deposit and withdrawal applications.[38] As opposed to a hearing, commenters are invited to have a conference with all parties and the state engineer to discuss ways in which the withdrawal or deposit can be structured so as to avoid material injury.[39] While the goal of the bill is to limit challenges and hearings, it preserves the rights of interested parties to challenge deposits and withdrawals that may injure their vested rights.

Second, the proposed 37-80.3-104(n)–(r), requires the CWCB to develop a streamlined process for calculating historic consumptive use, return flow obligations, and material injury.[40] CWCB must establish a website where users can confidentially review their historic consumptive use and return flow obligations.[41] As further protection, “[p]articipation in the water bank cannot serve as a basis for a reduction of the historical consumptive use, loss, or abandonment of a water right.”[42] However, if a deposit is made and there is no withdrawal of the banked water after two years, then it may be considered a failure to put the water to beneficial use.[43] This provision is intended to prevent water users from using the bank as a means of preserving unused water rights when there is no demand for withdrawal.

The streamlined process is one of the key features of HB 16-1392, and is essential to water banking in general. While the adjudications place a higher burden on those challenging the transactions, that is inevitable when attempting to facilitate the quick and easy transfers and necessary to promote efficient water use and support the growing municipal need.

III. Conclusion

Although water banking is likely to serve as only one tool in meeting the growing needs for municipal water in the state, it can be a powerful means of making water available to growing cities without endangering local economies or Colorado’s traditional agricultural heritage. Although the failure of the ARWB identified some of the problems facing water banking in Colorado, the specific approach proposed under HB 16-1392 should help address the issues that resulted in the previous failures. Although the Bill has been indefinitely postponed due to lack of support, water banking likely represents a necessary tool for Colorado’s water future.

Thomas Witt

Image: The Colorado Capitol. Flickr User Onasill ~ Bill Badzo, Creative Commons.

Footnotes

[1] Colo. Water Conservation Bd., The Colorado Water Plan, 1-9 (Nov. 2015), https://www.colorado.gov/pacific/sites/default/files/CWP2016.pdf. In Colorado, there is an increasing gap between supply and demand in municipal water supplies, particularly along the Front Range. The completion of new water projects is likely to be insufficient to address this gap, and by 2050 water shortfalls are predicted statewide. Id.

[2] Hearing on H.B. 16-1392 Before the H. Comm. On Agric., Livestock & Nat. Res., 70th Gen. Assemb., 2nd Reg. Sess. (Colo. 2016) (voting to postpone indefinitely on April 11, 2016).

[3] Id. at 6-1, 6-59, 6-115–116, 6-127.

[4] Id. at 6-1, 6-8, 6-59, 6-142.

[5] Chennat Gopalakrishnan, The Doctrine of Prior Appropriation and Its Impact on Water Development: A Critical Survey, 32 Am. J. Econ. & Soc. 61, 61 (1973).

[6] Janis M. Carey & David L. Sunding, Emerging Markets in Water: A Comparative Institutional Analysis of the Central Valley and Colorado-Big Thompson Projects, 41 Nat. Resources J. 283, 308 (2001).

[7] Id. at 307–08.

[8] Justice Greg Hobbs, The Public’s Water Resource: Articles on Water Law, History, and Culture, 71–72 (2d ed. 2010).

[9] Megan Hennessy, Colorado River Water Rights: Property Rights in Transition, 71 U. Chi. L. Rev. 1661, 1670 (2004), see also David C. Taussig, The Devolution of the No-Injury Standard in Changes Cases of Water Rights, 18 U. Denv. Water L. Rev. 116, 117–18, 144 (2014).

[10] Anne J. Castle & Lawrence J. MacDonnell, An Enhanced Water Bank for Colorado 2 (Getches-Wilkinson Ctr. for Nat. Resources, Energy and the Env’t, Univ. of Colo. Law Sch. (2016), https://www.colorado.edu/law/sites/default/files/An%20Enhanced%20Water%20Bank%20for%20Colorado.pdf.

[11] H.B. 16-1392 §§ 1 (37-80.3-102(1)(a),(b)(I)), 70th Gen. Assemb., 2nd Reg. Sess. (Colo. 2016).

[12] H.B. 16-1392 §§ 1 (37-80.3-104(1),102(a), 70th Gen. Assemb., 2nd Reg. Sess. (Colo. 2016).

[13] H.B. 16-1392 §§ 1 (37-80.3-102(1)(a), 104(2)), 70th Gen. Assemb., 2nd Reg. Sess. (Colo. 2016).

[14] Amanda E. Cronin and Lara B. Fowler, Northwest Water Banking: Meeting Instream and Out of Stream Water Needs in the Pacific Northwest, 102 Water Rep. 10, 10., (Aug. 15, 2012), http://www.coloradowatertrust.org/images/uploads/resources/Northwest_Water_Banking.pdf.

[15] Id.

[16] See Loretta Singletary, Water Banking: What it is and How Does it Work?, W. Resource Issues Educ. Series, no. 6., (n.d.), https://www.unce.unr.edu/publications/files/ho/other/fs9809.pdf. (providing an overview of water banking).

[17] Id.

[18] Mark Squillace, Water Transfers for a Changing Climate, 53 Nat. Res. J. 55, 56 (2013) (stating that “[w]ater markets have special appeal in the western United States where the prior appropriation doctrine favors historic, low-value agricultural water rights over far more valuable domestic water rights”).

[19] Id.

[20] Id. at 62. See also 26th Annual Water Law Conference: Twenty-First Century Water Supply,

Use and Distribution: Do the Rules Still Apply?, 11 U. Den. Water L. Rev. 389, 405–06 (2008)

(“‘[B]uy and dry’ [is] the permanent transfer [of water] from agricultural use to municipal use that can dry the land. . . . [T]he transfer is a one-time deal where municipalities buy shares in a ditch company, often far from the municipality, and the water is permanently removed from irrigation use by the ditch company. The irrigator and the region then can suffer from the limited or lost agricultural productivity resulting from the water transfer.”).

[21] Squillace, supra note 13A, at 62.

[22] Peter D. Nichols, Leah K. Martinsson & Megan Gutwein, All We Really Need to Know We Learned in Kindergarten: Share Everything (Agricultural Water Sharing to Meet Increasing Municipal Water Demands), 27 Colo. Nat. Res., Energy & Envtl. L. Rev. 197, 202–03 (2016).

[23] Id.

[24] H.B. 16-1392 § 1 (37-80.3-104(2)(i)), 70th Gen. Assemb., 2nd Reg. Sess. (Colo. 2016).

[25] Ralph Scanga Jr., Update of Water Banking in the Arkansas Presented to the Interim Water Resources Review Committee, (Aug. 21, 2013), https://www.colorado.gov/pacific/sites/default/files/13WaterResourcesUpdateonWaterBanking.pdf (stating that while some water “deposits” were made into the bank, no withdrawals were ever made).

[26] Id.

[27] Colorado is divided into seven different management division based on hydrological basins. State of Colo. Dep’t of Nat. Res. Div. of Water Res., Colorado River Basins (2005), https://www.colorado.gov/governor/sites/default/files/documents/colorado_river_basins.pdf.

[28] Hennessy, supra note 7, at 1670. (describing the operation of the “no injury rule” in water transactions).

[29] Id.

[30] Nichols, Martinsson & Gutwein, supra note 14, at 205.

[31] Id. (If there is no opposition, or if a settlement can be reached with any opposing parties, the court can approve the transfer with stipulations, if necessary).

[32] Id. at 206.

[33] See Hennessy, supra note 7, at 1669–70.

[34] See Taussig, supra, note 7, at 144.; See Justice Greg Hobbs, supra note 6, at 72; See Empire Lodge Homeowners’ Ass’n v. Moyer, 39 P.3d 1139, 1157–58 (Colo. 2001) (The burden of showing no injury is on the party seeking the transfer. The challenge of proving a negative leads to both higher costs and greater uncertainty in the outcome of a hearing. In fact, in the Arkansas River Basin, the Colorado Supreme Court has held that there is a presumption of injury that must be overcome for some transfers).

[35]See Hennessy, supra note 7, at 1670; See, e.g., In Re Water Rights of Cent. Colo. Water Conservancy Dist., 147 P.3d 9, 20 (Colo. 2006) (a rather extreme example of how uncertainty regarding the calculation of historic consumptive use can result in the permanent reduction of water rights).

[36] H.B. 16-1392 § 1 (37-80.3-104(2)(e)), 70th Gen. Assemb., 2nd Reg. Sess. (Colo. 2016).

[37] Id. at (g),(k).

[38] Id. at (m)(II)–(III).

[39] Id. at (m)(IV).

[40] Id. at (n)–(r).

[41] Id. at (s).

[42] Id. at (8).

[43] Id.


Rand Props., LLC v. Filippini, No. 66933, 2016 WL 1619306 (Nev. Apr. 21, 2016) (holding that: (i) a person who has acquired a right to a quantity of water from a stream may take it at any point of the stream and may change the character of use as long as it does not affect the rights of others; (ii) stock water rights on public lands pass by chain of title in Nevada; and (iii) a private party may convey a stock water appropriation certificate).

On June 7, 2011, Daniel and Eddyann Filippini (“Filippini”) filed a complaint to adjudicate stock and irrigation water rights on Trout Creek against Julian Tomera Ranches, Inc. (“Tomera”), and Rand Properties, LLC. (“Rand”). The Sixth Judicial District Court, Lander County adjudicated the case on April 8, 2013, and established priority dates for each party’s stock and irrigation water rights. Rand appealed to the Supreme Court of Nevada on grounds that the district court erred in its finding of priority dates, stock water rights title passage, and conveyance of a stock appropriation certificate.

First, Rand asserted that its priority date began in 1869, and that the district court erred by finding that Rand’s priority date began in 1901. The district court found that a change in the place of use on Trout Creek by Rand’s predecessors in interest created a new appropriation instead of a continuation of the chain of title because it occurred before statutory enactment of a law allowing for one to change the place of use. By setting a later priority date, the district court did not rule on whether Rand had proper title to its claim dating to 1869.

The Court overturned the district court, finding it relied on an erroneous conclusion of law. The Court looked to Nevada common law and held that a person who has acquired a right to a quantity of water from a stream may take it at any point of the stream, and he may change the character of its use at will as long as it does not affect the rights of others. The Court then vacated and remanded the issue for further proceedings as to Rand’s connection to the chain of title.

Second, Rand argued that the district court did not sufficiently explain its decree that Filippini’s priority date began in 1871 through a connection by title to a predecessor in interest named James Hughes and lacked the evidentiary support of a conveyance. The petitioner claimed that Filippini did not offer evidence that established a connection of title between 1891 and 1897. The Court concluded the district court’s ruling relied upon was insufficient. Under the district court’s ruling, it did not need to rule on the connection of title because it held that Rand’s priority date did not predate 1897. Accordingly, the Court vacated and remanded for further proceedings on the issue.

The Court then turned to the district court’s finding that a predecessor in interest named J.R. Bradley established the domestic stock water priority date held by Filippini in 1862 because Bradley’s outfit drank and diverted water from Trout Creek. The district court found that federal grazing permits acted as a proxy for establishing stock water rights and that proof of a chain of title is unnecessary for stock water rights on public lands owned by the United States and that each party held federal grazing permits. The Court disagreed, finding that stock water rights on public domains pass by chain of title in Nevada and that federal grazing rights and water rights are separate issues. Subsequently, the Court vacated and remanded to the district court to find on the issue of the party’s current rights to the disputed stock water that had passed by a chain of title.

Finally, the Court overturned the district court’s decision to prohibit the conveyance of a grazing certificate to Rand. Leroy Horn originally secured the certificate, certificate 12160, by building the Trout Creek pipeline to water his 600 cattle on a federal grazing allotment in 1979. In 1989, Horn agreed to sell his grazing preferences to Tomera and to sell Badger Ranch to Filippini in a three-way contract. The contract included the federal grazing privileges and all water rights, including stockwatering rights used in connection with the land. However, when Rand purchased Trout Creek Ranch from Broughton in 2009, the deed purported to convey certificate 12160 to it. On appeal, Rand argued that, because a Nevada statute requires conveyance of water rights by deed, Tomera cannot be the proper owner, and Rand was a bona fide purchaser nonetheless.

The district court relied on a Nevada statute prohibiting conveyance of stock water appropriation certificates to conclude that Rand could not own certificate 12160. The district court found that Rand could not put the water to beneficial use under the statute since it did not possess a grazing preference for 600 cattle at the place of use. The Court concluded that the district court erred in determining that the statute prohibited the conveyance to Rand; although the statute prevents issuance of a certificate from the State Engineer, it does not prohibit conveyance of certificates by a private party. Nevertheless, the Court found that Tomera could be the proper owner, since the conveyance occurred prior to the enactment of the statute requiring a person to obtain title to a certificate by deed. The Court then vacated and remanded to the district court to properly review Rand’s bona fide purchaser defense.

Accordingly, the Court reversed the judgment of the district court and remanded for further proceedings.

 

Dalton Kelley

A stock watering tank in Nevada. Flickr user Thure Johnson, Creative Commons.


Annual Symposium 2017: At The Confluence: The Past, Present, and Future of Water Law

Denver, Colorado                         April 7, 2017

The Clean Water Act and The Scope of Federal Power

(Scroll down for full video of panel)

For this panel discussion, David Ivester, Melinda Kassen, Peter Nichols, and Paul Kibel each spoke about a different aspect of the Clean Water Act (“CWA”) and its various intersections with federal power.

First, David Ivester, partner at the land use, environmental, and water law firm Briscoe Ivester & Bazel, detailed the background of the CWA and the two different types of jurisdiction contained within it. Simply put, the CWA regulates discharges of pollutants from point sources into navigable waters. Under the relevant definitions, pollutants include dredge or fill material and navigable waters are simply “waters of the United States.” The CWA governs two types of jurisdictions: geographic and activity. Geographic jurisdiction allows the CWA to protect all waters with a “significant nexus” to traditionally navigable waters. This theory derived from three Supreme Court opinions interpreting the CWA. First, in United States v. Riverside Bayview Homes, the Court upheld the Army Corps of Engineer’s claim that the CWA’s geographic reach includes wetlands adjacent to navigable waters. Then, in Solid Waste Agency of Northern Cook County v. Army Corps of Engineers (“SWANCC”), the Court found that Congress did not intend the CWA to reach isolated, non-navigable, intrastate waters. Finally, the Court in Rapanos v. United States issued a plurality opinion holding that the CWA extends only to relatively permanent, standing, or continuously flowing bodies of water and those wetlands attached to such bodies of water. Interestingly enough, Kennedy’s concurring opinion in SWANCC used a significant nexus as a test for determining CWA jurisdiction.

Mr. Ivester then discussed activity jurisdiction of the CWA, specifically in reference to plowing. An Army Corps of Engineers regulation excludes plowing as a discharge. Mr. Ivester then pointed out that, while the regulation defines and excludes plowing, it does not include redistribution of soil that changes any water to dry land. Finally, Mr. Ivester showed a picture of a freshly-tilled land asked the audience to consider whether plowing had occurred.

Next, Melinda Kassen, Interim Director of the Theodore Rooosevelt Conservation Partnership’s Center for Water Resources, explained the CWA’s statutory and regulatory landscape, specifically focusing on the “waters of the United States” rule. First, Ms. Kassen discussed various health and safety issues with rivers prior to the CWA. For instance, rivers were burning and life within them was dying. Even following the Water Quality Act of 1965, these same issues persisted. As a result, Congress passed the CWA in 1972. From around the 1970’s until 2006, the CWA utilized a definition of the “waters of the United States” that included all waters subject to the ebb and flow of the tide, the territorial seas, and all interstate and intrastate waters and their tributaries, including lakes, rivers, and streams.

Moreover, a series of opinions – elaborated in depth by Mr. Ivester – examined this definition, and Ms. Kassen pointed out interesting parts of two of the opinions. For instance, in SWANCC, the court held that waters need not literally be navigable, yet it also said that all words must have meaning. Moreover, in Rapanos, the Court required a significant nexus to navigable waters alone or in combination with similarly situated navigable waters. In this opinion, the Chief Justice himself mentioned that the best way to deal with the continuous stream of navigable water issues was to adopt rules. Finally, in 2015, the agencies adopted a rule defining the waters of the United States using connectivity and bright line theories. For connectivity, the rule required some form of nexus to a river, stream or body of water. The rule also introduced what Ms. Kassen referred to as “bright lines.” That is, the rule dictates that waters within a given distance of navigable waters are automatically within the definition. Many states objected to this rule and filed suit. The Sixth Circuit consolidated all of the cases and as recently as January 20, 2017, the parties filed the opening briefs in the case. Moreover, President Trump issued an Executive Order in February 2017 regarding the waters of the United States rule.

Finally, Ms. Kassen closed by asking the audience to consider who will implement the next version of the CWA. Originally based on cooperative federalism, the CWA did not maintain that mantra for long, especially in the expensive permitting process. For example, only two states currently issue their own 404 permits. Simply put, states are forced to do more in carrying out the CWA, but those states lack sufficient funding to provide the necessary services. As a result, CWA enforcement drops and a downward spiral may continue.

Peter Nichols, Board Member of University of Colorado Law School’s Getches-Wilkinson Center for Natural Resources, spoke third, and he discussed the intersection of water quality and water quantity. Specifically, he discussed physical water transfers and question of whether these transfers that do not add anything else to the destination body require permitting under Section 402 of the CWA. First, Mr. Nichols noted that, for most transfers, the destination body sees no impact. However, other transfers can exceed or contribute to exceeding current water standards by introducing more suspended solids such as nutrients and metals. Moreover, the National Pollutant Discharge Elimination System (“NPDES”) permitting include discharge limits that concern primarily with contamination. Thus, water transfers must meet NPDES compliance standards and often involve a water treatment plant.

At this junction, Mr. Nichols pointed out that compliance with NPDES standards for water transfers is difficult for three reasons. First, permitting, treating, and transferring are expensive practices, making the process almost economically infeasible. Second, the transfers must operate among a range of differences in water volume and water quality, presenting a technical challenge to transfers. Finally, transfer sites are limited and environmentally difficult to operate. Faced with these challenges, a transferer really only has two options. On one hand, it could cease waters when transfers do not meet the standards. This presents a problem, as stopping during a critical time may result in a chronic lack of water for the season. On the other hand, the transferor may continue transferring water and take the fines. Regardless, high NPDES standards lead to a significant reduction in water transfers and net loss of water supplies.

Mr. Nichols noted that this issue has occupied water transfers from the 1970’s through today. For example, the EPA’s water transfers rule in 2008 exempted certain water transfers from NPDES permitting requirements. Parties challenged the rule, and the Eleventh Circuit consolidated all of the cases, only to dismiss them for lack of jurisdiction. The claim reappeared in the Southern District of New York, which vacated the order. However, varying rulings still persist. Even this year, the Second Circuit held that water transfers do not require NPDES permits. Finally, Mr. Nichols laid out the bottom line of his presentation: that Western residents rely on water transfers daily. In many cases, these transfers are economically, technically, and environmentally impossible to meet. The critical issue here arises from concerns about traditional federal deference to the state water law.

The fourth and final panelist, Paul Kibel, professor of environmental, natural resource, and water law at Golden Gate University School of Law, detailed how the state of California is protecting instream flows. Mr. Kibel. First, he explained that fisheries are facing decline in California. Traditionally, the state has a robust commercial fishery industry with salmon stocks playing an important role in the economy. Moreover, federal laws and agency work has usually kept water in streams for fisheries. However, these fisheries face a future with uncertainty concerning continued support.

After laying out the problem, Mr. Kibel explained three major impacts of reduced instream flows on fisheries. First, the reduction in instream flow results in seawater intrusion into rivers, raising their salinity. Moreover, as the freshwater supply meeting the oceans decreases, the intrusion increases, pushing salt water further and further up the deltas. Increased saline levels in the water can even affect the fish. For instance, the Delta smelt lives well in brackish waters, but it dies in saline waters. Second, reduced instream flow results in increased water temperature. Without much water coming downstream, the rivers warm and, in some cases, decimate fish populations. Third, reduced instream flows result in slack water conditions. Then, these slowly flowing waters grow algae and parasites, which can harm the fish.

Next, Mr. Kibel gave examples of federal laws playing a big role in keeping instream water flows steady then explained how California has safeguards if the water rushes out. First and foremost, the Clean Water Act compels the EPA to review state water quality standards. Moreover, states also have the power to propose beneficial uses to the EPA for approval. Pursuant to this authority, the California State Water Board is updating its water plan to establish base instream flows for tributaries of the San Joaquin River. Next, Section 7 of the Endangered Species Act requires drafting biological opinions during consultation. Additionally, courts have upheld these biological opinions supporting instream flows for salinity and temperature concerns. Third, the Winters Doctrine allows tribes to hold federal water rights to fulfill the purposes for which reservations are created. This authority includes rights to instream water for supporting salmon stocks. Next, the National Environmental Policy Act compels creating Environmental Impact Statements, and Kibel pointed to the California Water Fix as a situation where an EIS protected water and salmon. Finally, Section 10 of the Federal Power Act requires non-federal dam permits to protect fish spawning.

What happens, Mr. Kibel posited to the audience, when these federal powers no longer support instream flows in California? Luckily, California has its own protections in place. For instance, California’s state Clean Water Act requires appropriation similar to the federal statute. Similar to the court-supported federal ESA, California courts have also held that state agencies have the authority to protect instream water for public services. As a response to the Winters Doctrine, both the California Constitution and its Water Code operate under a reasonable use law. Under this scheme, unreasonable methods of diversion are unlawful, which protects instream flows from improper diversion. Where biological opinions may not be available, the California Fish and Game Code requires dam operators to release enough water to maintain downstream fishers. Even better, this provision applies to federal dams within the state. Finally, Section 401 of the CWA requires the federal government to obtain water quality certification from the states for certain activities. While the state is considering the effect of a project on its waters, it may impose instream requirements on those water quality certifications to protect them.

 

Connor Pace

 

 


Lingenfelter v. Lower Elkhorn Natural Res. Dist., 881 N.W.2d 892 (Neb. 2016) (holding that (i) a farmer’s uncontroverted claim that he had received approval to irrigate his land did not constitute approval by a Natural Resource District to irrigate those lands; (ii) a Natural Resources District’s cease-and-desist order against the farmer was proper because the district created a rule that prohibited farmers from irrigating undesignated land without obtaining approval; and (iii) the district’s rules of land designation were not arbitrary and capricious and did not violate the farmer’s due process or equal protection rights).

The Nebraska Ground Water Management and Protection Act (“Act”) created twelve Natural Resources Districts (“NRDs”) within the state. NRDs have authority to regulate ground water. The NRDs’ legislative purpose is to develop, manage, utilize, and conserve groundwater and surface-water. NRDs set limits on total ground water usage, require practices that promote the efficiency of ground water usage, and “limit or prevent the expansion of irrigated acres.” This authority allows NRDs to protect groundwater quantity and quality. State legislators deemed this protection as “essential to the general welfare.” Since the Act’s adoption in 1975, NRDs have gained increasingly more authority to regulate Nebraska’s groundwater. By 1996, the NRDs’ authority was extended to regulate surface water that was hydrologically connected to groundwater.

The Lower Elkhorn Natural Resources District (“District”) is the NRD that regulates groundwater in northeastern Nebraska. The District has the authority to require reports and issue cease-and-desist orders in order to “administer and enforce” the Act and its goals. The District designates two types of lands that may be irrigated. First, it designates “Historically Irrigated Acres” as lands that were irrigated for at least one year between 1999 and 2008 or that are enrolled in a conservation plan. The second designation, “New Groundwater Irrigated Acres” covers other irrigated lands. The District sets rules that govern other irrigated lands. District Rules 13 and 15, promulgated in 2009, prohibited irrigators from receiving a certification for New Groundwater Irrigated Acres without a variance. Rule 14 outlines the certification process and requires either approval by the District’s board of directors or a “look-back” acknowledgement by the District that the land was irrigated between 1999 and 2008.

Lingenfelter, a farmer, purchased Rehfeld farm, located within the District, to use its well to irrigate the nearby Dunaway Farm. Prior to purchasing the farm, Lingenfelter met with a District employee. At this meeting, Lingenfelter and the employee calculated the amount of water available at the Rehfeld Farm. After purchasing the farm, Lingenfelter used the Rehfeld Farm well to irrigate the Dunaway Farm until 2013, when he received a cease-and-desist letter from the District. The letter explained that his irrigated land, which hydrologically connected ground water from the Rehfeld well to surface water on his other land, would likely be prohibited irrigation of New Groundwater Irrigated Acres under Rules 13 and 15.

Lingenfelter requested a hearing with the District over the cease-and-desist letter and sought the District’s certification of his water use. Before the hearing, he received a preliminary decision that the District would not approve his water use and that to continue irrigating, Lingenfelter had to obtain a variance. At the hearing, Lingenfelter could not show that he irrigated that land between 1999 and 2008, nor could he show that the land was certified. The District upheld the cease-and-desist demand, and Lingenfelter appealed to a district court.

Lingenfelter appealed under two causes of action. First, he requested judicial review of the District’s cease-and-desist order. Second, Lingenfelter requested a declaratory judgment that the District’s Rule 14, as well as its rule that defined Historically Irrigated Acres, violated his rights under the Nebraska Constitution and exceeded statutory authority.

Under the APA, the district court reviewed the District’s decision de novo. Under the first cause of action, Lingenfelter argued that the cease-and-desist order was not supported by the facts Lingenfelter presented. Lingenfelter first argued that he received approval to irrigate the Dunaway Farm in the meeting with a District employee and thus the district court should estop the District’s cease-and-desist order. He also argued that the District misapplied its own rules in determining the Dunaway Farm was not “irrigated acres.” Finally, he argued that Rule 14’s look-back provision was arbitrary and capricious.

The district court rejected all of these arguments. First, it stated that Lingenfelter could not prove that the District employee approved his project beyond his subjective assumption that irrigating the Dunaway Farm was “not an issue.” Second, the district court determined that the District did not misapply its own rules when it abstained from deciding whether Lingenfelter’s land constituted irrigated acres. The district court found that this analysis was not relevant because the District issued a cease-and-desist order because Lingenfelter had failed to ask for a variance and not because he was irrigating an area without a Historic Irrigated Acres designation. Third, the district court rejected Lingenfelter’s Rule 14 argument as convoluted and misplaced and because the record was insufficient for review of an administrative rule.

Under Lingenfelter’s second cause of action, he requested that the district court issue a declaratory judgment that Rule 14 violated the Nebraska Constitution’s equal protection and due process clauses. He claimed that because the rule was arbitrary and capricious, it violated his rights to due process. The district court ruled that the District’s rules had a purpose of responding to recent drought conditions, and therefore they could not be arbitrary.

Lingenfelter appealed all of the district court’s decisions to the Nebraska Supreme Court, arguing the district court failed to estop the District’s cease-and-desist order, erroneously found his land to not be irrigated acres, and misunderstood his arbitrary and capricious argument, among other procedural complaints.

Lingenfelter argued to the Court that under the APA, the district court should have viewed the evidence in favor of the plaintiff and estopped the District’s cease-and-desist order.   To this point, Lingenfelter stated that if the district court had viewed the evidence in his favor then it would have understood his meeting with a District staff member as a confirmation that he could irrigate the Dunaway Farm with water from the Rehfeld Farm.

The Court disagreed and stated that because this was an administrative appeal, rather than a complaint to a district court, that the APA did not require the district court to view evidence in favor of the plaintiff. The Court also found that because Lingenfelter’s belief that he could irrigate the Dunaway Farm using water from Rehfeld Farm was contradicted, the district court properly abstained from finding in his favor under Nebraska case law.

The Court also upheld the District’s decision not to apply one of the two irrigation classifications, Historically Irrigated Acres and New Groundwater Irrigated Acres, to Lingenfelter’s land. The Court concluded that because the District chose to not apply one of the designations to the land, it was likely forcing irrigators to seek certification so that it could ensure the water would be used properly. Furthermore, Lingenfelter never offered any evidence that his land had been irrigated between 1999 and 2008. Therefore, the District’s decision was consistent with rules that prohibited New Groundwater Irrigated Acres and prevented any land that was not certified or Historically Irrigated from being irrigated.

The Court also addressed Lingenfelter’s request under the APA for a declaratory judgment that Rule 14 was arbitrary and capricious, and therefore unconstitutional. The Court first noted that causes of action under the APA’s declaratory judgment provision only apply to agencies. The APA’s declaratory judgment provision was inapplicable here because NRDs were not agencies, but rather statutorily created as political subdivisions. Therefore, Lingenfelter could not use the APA to request a declaratory judgment against the District.

Instead of opining on constitutional issues through Lingenfelter’s declaratory judgment, the Court reviewed the district court’s summary judgment on constitutional issues in favor of the District. The Court first reviewed Lingenfelter’s argument that Rule 14 violated his substantive due process rights.

Under the Nebraska Constitution, substantive due process inquiries require a determination of “whether a right in which the plaintiff has a legitimate property interest” was unconstitutionally taken from the plaintiff. A property interest is unconstitutionally taken if the government acted in a way that has no substantial relation to the general welfare. Lingenfelter argued that using water to irrigate the Dunaway Farm was a legitimate property interest and that Rule 14 arbitrarily and capriciously took that interest away. The Court rejected this argument, finding that Rule 14 was reasonably related to ensuring adequate groundwater supplies in Nebraska.

Lingenfelter’s next constitutional argument stated that violated his right to equal protection because it “divides landowners ‘into winners and losers based upon an arbitrary calendar date.’” Nebraska’s equal protection provision is identical to the United States Constitution’s provision. The Court approached this claim under a rational basis test because no suspect class was involved. The Court found Rule 14 was rational because it was driven by a policy that established a baseline of acres historically irrigated in order to conserve groundwater. Accordingly, the Court rejected both of Lingenfelter’s constitutional arguments.

Finally, the Court rejected Lingenfelter’s last three arguments that the District’s authority to make rules was “fundamentally unfair,” that there was insufficient evidence to determine whether Rule 14 was rationally related to the availability of groundwater, and that the district court misunderstood his arguments against the District’s adoption of Rule 14. The Court rejected the first argument because NRDs are statutorily authorized to make such rules. It rejected the second argument because it Act specifically refers to preventing droughts and because the Court properly reviewed the question de novo. The Court rejected the third argument because Lingenfelter did not explain how this error prejudiced the result.

Accordingly, the Court affirmed the district court’s decision and allowed the District to issue its cease-and-desist order without resistance.

Travis Parker

Image: A field in Nebraska. Flickr user Richard Hurd, Creative Commons.