Surat Farms, LLC v. Brule Cty. Bd. of Comm’rs, 901 N.W.2d 365 (S.D. 2017) (holding that: (1) the court would hear downstream landowner’s appeal in spite of his failure to name upstream landowner as interested party; (2) the trial court was required to review the county board of commissioner’s decision de novo because it was a quasi-judicial matter; (3) civil law rule applied to the dispute, under which a lower property owner cannot interfere with the natural flow of surface water to the detriment of an upper property owner; (4) the downstream landowner impermissibly altered the watercourse with a drain system; and (5) upstream flooding harmed upstream landowner’s property).

Surat Farms, LLC (“Surat”) and Albert Delaney (“Delaney”) owned adjacent farmland with a natural stream flowing through both properties. Surat, the lower property owner, installed a drainage system in 2013. Subsequently, Delaney filed a complaint with the Brule County Board of Commissioners (the “Board”) alleging that in 2014, underground water began entering his basement as a result of Surat’s drainage system. The Board held a hearing and found Surat impermissibly “altered the natural flow of the water.” Surat appealed to the Brule County Circuit Court, which conducted a de novo review and affirmed the Board’s decision.

After the trial court affirmed the decision, Surat appealed to the South Dakota supreme court raising two issues. First, Surat asserted the trial court erred in finding its drainage system impermissibly altered the watercourse. Alternatively, Surat contended that if the watercourse was altered, the trial court erred in finding Delaney suffered causally-related damages.

The Court considered Surat’s first argument that the “reasonable use” rule should apply, under which a downstream landowner can legally alter a watercourse and cause some harm as long as the intended use is reasonable. However, the Court agreed with the Board’s argument that the “civil law rule” applied, which states that a lower property owner cannot interfere with a watercourse to the detriment of an upper property owner. The Court explained that South Dakota follows civil law rule for rural surface water drainage. Therefore, Surat’s claim of privilege to construct a drain system that dammed surface water and flooded an upstream property was without merit.

The Court applied a “clearly erroneous” standard to review factual findings. The Court considered a site map, commissioned by Delaney, which reflected a fifteen-inch rise in elevation at the drain location disrupting the natural drainage. The Court also considered a contour map, prepared by Surat’s drain installer, which could be interpreted to show this elevation difference preexisted the drainage system. However, evidence indicated the watercourse only started damming after the drain’s installation. Accordingly, the Court found evidence supported the trial court’s ruling that Surat’s drainage system impermissibly altered the watercourse.

In considering Surat’s second argument that Delaney did not suffer causally-related damages, the Court considered conflicting evidence from both parties regarding whether Delaney’s land was in the conservation reserve program and whether Delaney used the land in question for haying and calving. The Court resolved that, in light of the conflicting evidence as to how the water affected Delaney’s cropland, the trial court’s findings were not clearly erroneous. The Court also pointed out Surat misconstrued the relief, as Delaney was not awarded damages. The Board and trial court only ordered Surat to take appropriate action to correct the natural watercourse.

Accordingly, the Court affirmed the trial court’s award of injunctive relief.

Elaine Nolen

 

A field in Brule County, South Dakota. Flickr user Kevin Armstrong, Creative Commons. 


United States v. Barthelmess Ranch Corporation, 386 Mont. 121 (2016) (holding: (i) the U.S. Bureau of Land Management could perfect stockwatering appropriation claims in its reservoirs irrespective of contentions rooted in historic water use from the same source and (ii) the United States owned reserved water rights for stockwatering in a pothole lake on federal grazing land pursuant to an Executive Order).

The United States Bureau of Land Management (“BLM”) filed six water right claims in Montana. These included five reservoir claims rooted in Montana law, and a reserved water right in Pothole Lake, a natural feature located on a federal land reservation. The BLM claimed to use each water source, all located wholly or partially on federal land, for wildlife and stockgrazing for grazing permittees, the latter being the primary focus in the following discussion.

The BLM’s five reservoir claims relate to the agency’s acquisition of Funnells Reservoir in 1951, and its construction of the Windy Day Reservoir in 1955, Tallow Creek Reservoir in 1936, North Flat Creek Reservoir in 1937, and the Sharon Reservoir in 1961. The sources of contention regarding the BLM’s water right claims, including Pothole Lake, stemmed from the respective holders of property interest in surrounding land (“Objectors”). The Objectors claimed proper ownership of BLM’s water rights, claiming instead their own right that derived from ancestral free grazers who, prior to the reservoir construction, owned and grazed livestock on the appurtenant land.

BLM claimed a reserved water right in Pothole Lake pursuant to two legal frameworks: (1) the Stock Raising Homestead Act enacted in 1916, which permitted the Secretary of the Interior to reserve lands containing “waterholes or other bodies of water needed or used by the public for watering purposes”; and (2) the Public Water Reserve No. 107 (“PWR 107”) enacted pursuant to a 1926 Executive Order, which “reserved all springs and water holes on vacant, unappropriated, and unreserved public land throughout the country.” The Objectors claimed, however, that ancestral free grazers owned and watered stock in the same area.

The BLM moved for summary judgment for all objections and the Montana Water Court consolidated them into this single case. The water court first addressed the validity of the Objectors’ claims to BLM reservoirs. The water court recognized as undisputed that the BLM developed the Windy Day, North Flat Creek, Tallow Creek, and Sharon Reservoirs with a stockwater right priority date coinciding with their respective completion and since consistently used the reservoirs for stockwatering. Then, after addressing the common law elements for valid water appropriation, the water court determined that impounding water into a reservoir is a sufficient diversion and the sole contention rested on whether the BLM applied the water to beneficial use. The Objectors claimed that the BLM itself did not own livestock or use reservoir water and thus under Montana law, BLM could not perfect its stockwatering claims.

However, the water court examined principles from a governing precedent, Bailey v. Tintinger, that “an appropriation of water for the use of others was complete upon the completion of the diversion system [in this case the reservoirs] and making the water available for use by others.” When extending this principle to the present case, the water court determined that Montana law did not require that BLM own and graze livestock to perfect water rights and complete appropriation.

Similarly, the water court found it undisputed that BLM consistently used Funnels Reservoir since acquiring its property interest. Thus under Montana law, BLM also acquired any appurtenant water rights.

Although the Objectors claimed prior use by their ancestral free grazers precluded BLM’s six water right claims, this contention ran counter to the core principle of water rights governed by Montana law that “multiple appropriators can enjoy rights from the same source.” The water court also clarified that the Objectors’ claimed stockwatering by direct uses from water sources, not by reservoir impoundments, and it followed that the Objectors’ claims differed from the subsequent BLM reservoir claims.

The water court next addressed the Objectors’ claim to Pothole Lake and determined that PWR 107 reserved Pothole Lake’s respective land and water.

The Objectors appealed. The Montana Supreme Court (“Court”), under the “clearly erroneous” standard, reviewed two issues on appeal: (1) whether the BLM held stockwatering rights in constructed reservoirs under Montana law and (2) whether the BLM owned reserved water rights for stockwatering in Pothole Lake. The Objectors made multiple contentions and the Court rejected each as invalid when evaluating them pursuant to relevant federal and Montana law.

The first issue raised three primary contentions. First, the Court confirmed that BLM appropriated water. However, Objectors argued that irrespective of a capability to appropriate water, the BLM failed to meet the requirements for perfecting water rights because it did not charge grazers for reservoir use. The Court quickly dismissed this contention when reiterating that Bailey expressly recognized that, “as long as the water is made available for sale, rental, or distribution or disposal to others, it is a valid appropriation.” Additionally, the Court acknowledged that Montana public policy encourages capable individuals and entities to appropriate water and make it available for use by others. Further, the Court recognized that Montana law commits to “recognizing the ability to appropriate water for its ultimate use by a third party.”

Second, the Objectors argued that even if BLM could appropriate water, it did not do so by impounding water in reservoirs because “simply facilitat[ing] use of water already appropriated” by ancestral free grazers did not constitute a valid appropriation. Again, the Court dismissed this contention as unsupported by Montana water law and public policy when noting, “multiple appropriators can claim water rights from the same source, and that the first in time has the best right.” Along that vein, the first user on a water source does not obtain the right to exclude all others from claiming water from the same source. The Court noted, for example, if Objectors held viable stockwatering claims based on ancestral free grazers, then those rights would be senior to those claimed by BLM because each right has its own priority in time.

Third, the Objectors contended that by developing new reservoirs, the BLM “simply modified” prior stockwatering practices by ancestral free grazers rather than creating a new appropriation. The Court acknowledged, however, that although a direct-flow water user can construct reservoirs to stabilize available water without creating new appropriations, the BLM claimed no such direct-flow water rights. BLM only claimed new rights to stored water with mid-twentieth century appropriation dates, which created separate rights with their respective priority dates.

Once resolving the contentions, the court then emphasized its unwillingness to depart from the “bedrock principles” of Montana water law that multiple appropriators can perfect claims from the same water source and thus the water use by ancestral free grazers did not preclude the BLM from claiming water rights to the same source. Further, Montana public policy encourages the benefits arising from allowing appropriations that make water available to third party users.

The second issue led the Court to determine the broad language of PWR 107 reserving “every spring or waterhole, located on unsurveyed public land” encompassed Pothole Lake. Therefore, the BLM maintained a reserved stockwatering right on federal land and the Objectors raised no valid contentions to undermine this established right.

Accordingly, the court affirmed the water court holding that the BLM maintained valid appropriations in its reservoirs under Montana law and the BLM owned reserved water rights for stockwatering in Pothole Lake pursuant to PWR 107.

Justice Laurie McKinnon, dissenting.

Justice McKinnon disagreed with the majority’s application of Bailey to conclude that the BLM put water to beneficial use and completed an appropriation. Instead, the dissent argued that the majority expanded Bailey’s narrow exception that applied to public service corporations. The Bailey court determined that to require a corporation to perfect a water right upon showing of an actual beneficial use would be impractical because corporations could not perfect a water right until a third party put water to a beneficial use. Here, the dissent argued the majority misinterpreted that exception to include “anyone” who “distributes” water could perfect a water right. In so doing, the dissent raised foundational legal principles to conclude that beneficial use “ is one that inures to the benefit of the appropriator.” Along that vein, the dissent contended that the ancestral free grazers inured to their benefit when their cattle grazed and drank water, and thus completed a valid appropriation. Conversely, the dissent further argued the BLM did not perfect a water right because it “never owned the livestock that appropriated the water or grazed federal lands” and thus, irrespective of reservoir construction, the BLM did not appropriate water under Montana law.

Gia Austin

Image: Cattle graze on a pasture near Browning Montana. Flickr user Mark Stevens, Creative Commons.

 


University Of Denver Water Law Review Annual Symposium 2017: At The Confluence: The Past, Present, and Future of Water Law

        Denver, Colorado                         April 7, 2017

Ethical and Professional Standard for Lawyers & Engineering Experts in Water Court Litigation and Dispute Resolution

 

The final panel at the 2017 University of Denver Water Law Review Annual Symposium consisted of Stephen Leonhardt, a Partner at Burns, Figa & Will, PC, Kevin Rein, Deputy State Engineer of the Colorado Division of Water Resources, Ema Schultz, Assistant Attorney General with the Colorado Department of Law, and Janet Williams, Chairman at Leonard Rice Engineers, Inc.

Stephen Leonhardt opened the panel by giving a roadmap of the many rules governing lawyers in water court proceedings that include the Colorado Rules of Professional Conduct, Colorado Rules of Civil Procedure, Water Court Rules, Federal Rules of Evidence, and Colorado Rules of Evidence. Mr. Leonhardt noted the role lawyers play as zealous advocates, but said that lawyers must also follow the rules of professional conduct, act with candor, adhere to confidentiality requirements, and satisfy certain disclosure responsibilities. Mr. Leonhardt mentioned that the rules pertaining to disclosure have changed, and that the Federal Rules of Civil Procedure were amended in 2010 to narrow the disclosure requirements; the current rule requires disclosure of the facts or data considered by the witness in forming the expert’s opinion. Mr. Leonhardt then explained that the Colorado Rules of Civil Procedure were amended similarly. Under the current rules, draft expert reports are generally protected from disclosure or discovery, except for those identifying facts, data, or assumptions that the expert considered in forming their opinion. Mr. Leonhardt further stated that under Water Court Rules the duty of the expert witness is to the court and to assist the trier of fact and not to the attorney.

Next, Janet Williams addressed the ethical obligations and principles for engineers serving as experts. Ms. Williams noted that engineers owe a duty of honesty and impartiality to the public, their employers, and clients. Further, Ms. Williams stated that an engineer’s role as an expert witness is to provide objective, unbiased, independent judgment to help the water judge determine the facts in dispute. Ms. Williams discussed several factors that help an engineer maintain objectivity. These factors included the importance credibility plays in the industry, the objection process in which opposing counsel reviews the expert report for bias, and the peer review that occurs in expert meetings.

Ema Schultz then spoke and addressed the duty of the Attorney General in water court litigation from her perspective. As the exclusive legal representative of the State, Ms. Schultz noted that the Attorney General has the duty to set consistent legal policy and to consider the larger interests of the State and its citizens when determining the course of litigation. As Assistant Attorney General, Ms. Schultz stated that her role is to advocate for her clients, coordinate the litigation process, and provide legal advice for water administrators.

Kevin Rein, the Deputy State Engineer of the Colorado Division of Water Resources (“DWR”), concluded the panel by discussing the role the DWR plays in the court. Mr. Rein discussed the DWR’s role as the administrator of water rights, and their statutory responsibility to oversee water compacts and to use their technical and legal expertise to assist the court to ensure that the court’s decrees comply with those compacts. Mr. Rein stated that the DWR prioritizes being objective, comprehensive, and transparent when it consults with the water court.

At the end of the panel an audience member asked the question of whether the DWR or the Attorney General had any ethical obligations to fully inform the water court whether the position they take in a particular case is consistent with their past administrative actions. Kevin Rein discussed his hope that the actions of DWR in the field and the DWR’s positions taken in the court would be consistent, especially as it applies to similar structures or similar water rights. Mr. Rien could not think of a situation where this had occurred, but stated that in a situation where this were true, the DWR would want to disclose this to the water court. Ema Schultz added that this was largely because the goal of the engineers in the case is to be able to administer the decree on the ground. Stephen Leonhardt expanded on this topic by noting that he had seen a few times over the years where administration had recently changed. Mr. Leonhardt asked the other panelists their thoughts on the disclosure of past administrative practices up until the recent change. Mr. Rein explained that as the DWR’s understanding of what is happening evolves and is refined over time, and when DWR looks at facts and issues surrounding administration through that finer lens, there might be the need to do something different from what a past administration have done.

 

Reggie Norris


Public Interest Environmental Law Conference 2017: One Cause, One Voice

Eugene, Oregon        March 2–5, 2017

Protecting and Restoring Free Flowing Rivers

 

Presented by: Douglas W. Wolf, Center for Biological Diversity; Drevet Hunt, Lawyers for Clean Water; and Konrad Fisher, Klamath Riverkeeper.

This panel explored a series of legal tools available for attorneys to protect and restore instream flows.

To begin, Douglas Wolf discussed legal tools that the Center for Biological Diversity (the “Center”) and other organizations use to fight harmful seasonal flow diversions on the Gila River. Specifically, Wolf explained how the Center uses critical habitat of the endangered fish to protect Instream flow using the Endangered Species Act (“ESA”). The Gila River begins in an arid watershed in New Mexico. Heavy spring flows from snowmelt safeguard the river’s water quality. However, under a series of settlements and agreements, water users are allowed to store the heavy spring snowmelt from the Gila River and divert it for irrigation and other purposes. In addition to harming the Gila River’s water quality, diverting spring snowmelt harms the loach minnow, a tiny fish listed as a threatened species. To avoid being flushed down the river during heavy snowmelt, the loach minnow spends most of its time near the Gila River’s banks where the flow is less intense. But snowmelt diversions pose a risk to this habitat because the water gets diverted from these same edges of the river.

Wolf explained how the Center used the risk to the loach minnow’s critical habitat to help protect the Gila River’s instream flows. In 2009, the Center won a lawsuit against the United States Fish and Wildlife Service arguing that the previous designation of five hundred river miles of critical habitat for the loach minnow was insufficient. In 2012, The Fish and Wildlife Service not only designated 710 miles of critical habitat, but also listed the loach minnow as an endangered species. Saving the loach minnow’s critical habitat and adding it to the endangered species list helped protect instream flows in the Gila River.

The next panelist, Drevet Hunt, discussed three examples of litigation tactics used to restore instream flows: the ESA, California’s constitution, and the state’s fish and game code. First, Hunt discussed how petitioners sued under Section 9 of the ESA to increase instream flows on the Shasta River below the Dwinnell Dam in California. They argued the dam blocked historic runs of the endangered coho salmon and constituted an unpermitted taking. In 2013, petitioners settled with the dam’s operators, who agreed to obtain an incidental take permit and create a long-term flow and habitat restoration plan to encourage coho salmon populations.

Hunt next discussed how California attorneys use the state’s constitution to protect instream flows. In 2014, Lawyers for Clean Water used a section of the constitution that forbids waste and the unreasonable diversion and use of water to sue the State Water Resources Control State Board over the City of Buenaventura’s over-pumping of the Ventura River. Buenaventura’s over-pumping affected eleven endangered species and reduced local steelhead populations by ninety-six percent. This litigation is still pending, but the state has made some efforts in working to enhance Ventura River flows.

Third, Hunt explored how petitioners successfully used Section 5937 of California’s Fish and Game Code against dam operators to restore instream flows. This section of the code mandates that owners of dams “allow sufficient water at all times to pass . . . over, around or through the dam, to keep in good condition any fish that may be planted or exist below the dam.” In one example, a federal court even enforced this law against a federal dam operator, the United States Bureau of Reclamation.

Last, Konrad Fisher discussed the impacts of diversions on the Klamath River. Fisher began by discussing some fundamental changes he would like to see in how the public approaches water quantity issues. Fisher acknowledged that rivers provide food and recreation, create jobs, improve ecosystems, and play integral roles in human culture and religion. One way to protect those values, Fisher suggested, is to frame water diversions through percentages rather than total quantities. He argued the public would be more understanding of water quantity issues if, for example, water settlements apportioned seventeen percent of flows for fish. Fisher encouraged a cultural shift and a movement towards voluntary instream flow restoration as the only way to properly approach a long-term sustainable water use model.

Matthew Kilby

Image: Section of the Middle Gila River in Arizona. Flickr user Desert LCC, creative commons.


Public Interest Environmental Law Conference 2017: One Cause, One Voice

Eugene, Oregon         March 2–5, 2017

Western Water and Livestock Production: A Destructive Past and Unsustainable Future

 

Presented by: Josh Osher, Western Watersheds Project; George Wuerthner, Public Lands Media; Julia DeGraw, Food & Water Watch.

This panel discussed the destructive impacts of large-scale cattle operations on landscapes and ecosystems. The panel focused on cattle grazing and industrial farming as some of the lead causes of environmental destruction in the American West.

Josh Osher spoke about the widespread damages caused by cattle grazing. Not only does cattle grazing affect more than two hundred million acres of land in the American West, but it has also contributed to the damage of eighty percent of streams and riparian areas in the region, which he described as “corridors for plant and animal species.” One way cattle destroy riparian areas is through “step-down,” which occurs when cattle walk over streams and incise stream or riverbanks. When cattle destroy banks, water channels become flat, which degrades instream flows and alters stream morphology. This, along with a reduction in water quality, can fundamentally change landscapes and eliminate local plant and animal species. Osher contended that the only way to prevent further degradation of western ecosystems through cattle grazing is to remove the cattle from the land. Once cattle are removed, he argued, lands have shown a surprising resilience and ability to rebound from substantial degradation.

George Wuerthner discussed how legislators and government agencies have failed to combat the cattle industry. Wuerthner highlighted this failure by exploring the Clean Water Act’s exception that allows industrial agricultural producers to operate without obtaining discharge permits, despite the fact that a single cow can produce up to one hundred pounds of feces in one day. He noted that cattle in Montana produce waste equivalent to a human population of 100 million. In addition to allowing the cattle industry to thrive without necessary environmental regulations, Wuerthner also discussed the disproportionate access the industry has to water. In Nevada for example, the cattle industry only provides some 25,000 jobs but it may take up to eighty-five percent of the state’s water. Wuerthner concluded his segment by imploring the attendees to fight this inequity by eating more fruits and vegetables.

Last, Julia DeGraw presented on how important it is for society to shift how we use water. To highlight this importance, DeGraw explored two mega-dairy farms, one in operation and the other slated for future operation, near Boardman, Oregon. The groundwater underneath Boardman has long been in decline, yet the combined dairy farms could withdraw an estimated 1.4 million gallons of water a day to support 100,000 cattle. This would not only severely affect local hydrologic conditions, but would also reduce local air and water quality. The cost of beef does not internalize its environmental destruction. To solve this conundrum, DeGraw, like Wuerthner, called on attendees to change their diet to help dismantle the industrial cattle industry.

Matthew Kilby

Image: Cattle at a watering hole near Conejos, Colorado. Flickr User Russ, Creative Commons.


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.