People v. Davis

People v. Davis, 3 Cal. App. 5th 708 (2016) (holding that the State of California could not convict a criminal defendant of simple larceny for capturing flowing water from a natural stream, because the state did not hold a superior possessory interest in water).

In September 2009, Kenneth Davis’s neighbor told the sheriff that Davis diverted water from a stream to irrigate medical marijuana. The neighbor showed authorities a makeshift well and a 2,500 gallon tank buried nearby on a railroad company’s property. The tank captured water that Davis used to irrigate his fields. In February 2010, the California Department of Fish and Game found that Davis’s irrigation system drew from a stream that was part of the state’s water system. Davis did not receive approval from the landowner or the state to create the diversion. As a result, prosecutors charged Davis with illegally diverting the natural course of a stream, as well as petty theft of water.

At trial, the jury found Davis guilty of both charges and a judge placed him on informal probation conditioned upon a ninety-day jail term. Davis sought review by the Appellate Division of Butte County, which affirmed the lower court’s holding but later certified the case for transfer to the Court of Appeals at the defendant’s request. On appeal, the court only considered whether a court could properly convict a criminal defendant of petty theft of water.

The court first discussed whether any party held complete ownership or a superior interest in the disputed water. To bring a larceny claim, the state must show that a party stole personal property subject to ownership. Larceny claims in California require that the victim has a possessory interest in the stolen property that is superior to the defendant’s. In California, the public holds a collective vested interest in the state’s water. This collective ownership of water is a legal fiction, called the public trust doctrine, in which the state is the public trustee of its resources for use by its people. Consequently, ownership rights are usufructuary and incorporated with the needs of others to use the available water resources. Further, because the state holds water in public trust, it is legally inalienable. The state cannot grant property rights to water. However, water can be owned if it is lawfully captured. If the captured water is then released, it again becomes part of the state’s resource trust. Therefore, in common law, water could not be the subject of larceny because it would not be anybody’s personal property.

The court found that the state had not demonstrated that it, nor any other entity, had ownership of the water that was superior to the defendant’s ownership interest. Therefore, the charge was insufficient to support larceny. The railroad company who owned the land that the tank was placed on did not possess a superior interest because it made no attempt to capture the water and thus had not claimed ownership of the water. The court also rejected the state’s argument that its regulatory powers under the public trust doctrine created a superior possessory interest. The court found that, while Davis may have violated California’s regulatory powers, the state could not bring a larceny charge against him because its regulatory responsibility did not create a possessory interest in the water. Therefore, Davis’s conviction was inappropriate because the state failed to meet the ownership or superior interest requirement of a larceny charge.

The court next addressed the state’s claim that it could establish Davis’s ownership through severance of the water from the property. The court stated that water may be held as personal property once it is severed from the land through capture and storage. However, water that is diverted for irrigation is not considered to have been severed and does not qualify as personal property. The prosecution claimed that a larceny charge could be brought according to precedent regarding the severance of oil. Severance of oil converted it to personal property and subjected it to a valid claim of larceny. However, the court found that Davis used the water from the tank for irrigation, which did not create a severance of the water and did not convert the water into personal property. Therefore, the prosecution’s alternate claim was insufficient to bring a larceny charge.

Accordingly, the court reversed Davis’s conviction for petty theft, with instructions to dismiss the count. It otherwise affirmed the judgment against Davis, and ordered an amended probation order.

Ryan Hull


Image: Marijuana plants grow in a field. Flickr user Digital Aesthetica, Creative Commons.


Agua Caliente Band of Cahuilla Indians v. Coachella Valley Water Dist., 849 F.3d 1262 (9th Cir. 2017) (holding: (i) the United States impliedly reserved a water right when establishing the Agua Caliente Reservation; (ii) the Tribe’s implied federal reserved water right extended to groundwater; and (iii) the Tribe’s state water entitlements to groundwater did not disqualify its implied federal reserved water right).

The Agua Caliente Band of Cahuilla Indians (“Tribe”) inhabited the Coachella Valley prior to California’s Admission to the Union in 1850. Two Presidential Executive Orders issued in 1876 and 1877 established the majority of the Agua Caliente Reservation. Today, the United States holds a series of lands that that are “interspersed in a checkerboard pattern” in trust for the Tribe.

The Coachella Valley contains an arid southwestern dessert. Rainfall averages three to six inches per year and the Whitewater River System, the only source of surface water, produces a fluctuating annual supply between 4,000 and 9,000 acre-feet that primarily occurs in winter months. Currently, the Tribe receives surface water from the Whitewater River System consistent with the Whitewater River Decree, a 1983 California Superior Court adjudication that addressed state-law water rights for river system users. The adjudication resulted in a state court order that allotted water for the Tribe’s benefit, primarily because the United States, as holder of partial Agua Caliente Reservation lands in trust, participated in the adjudication on the Tribe’s behalf. However, the adjudication reserves only a minimal amount of water for the Tribe, providing enough to irrigate nearly 360 acres of the reservation’s approximately 31,369 acres. Additionally, the river system peaks in the winter months, which leaves the allotment filled outside of growing season.

This inconsistent and “virtually nonexistent” surface water supply causes the Tribe to predominantly rely on groundwater for all consumptive use on the reservation during the year. Therefore, almost all regional water is sourced from the Coachella Valley Groundwater River Basin, the aquifer underlying the valley. The Tribe, however, does not pump groundwater on its reservation, but purchases groundwater from the Coachella Valley Water District and the Desert Water Agency (“water agencies”).

Over concern for diminishing groundwater resources, the Tribe filed an action for declaratory and injunctive relief against the water agencies in the United States District Court for the Central District of California. The Tribe requested a declaration that it had a “federally reserved right and an aboriginal right to the groundwater underlying the reservation.” The district court later granted the United States’ motion to intervene as a plaintiff to support the Tribe’s allegation that it had a reserved right to groundwater.

The parties divided the litigation into three phases. With respect to Phase I, the only phase relevant for this case, the district court held that “the reserved rights doctrine applied to groundwater and that the United States reserved appurtenant groundwater when it established the Tribe’s reservation.” Subsequently, the district court certified its order for interlocutory appeal and the water agencies petitioned the Ninth Circuit Court of Appeals for permission to hear the appeal. The court, on de novo review, addressed the only issue on appeal: whether the Tribe had a federal reserved right to the groundwater underlying its reservation. In so doing, the court approached its analysis in three steps.

First, the court determined whether the United States impliedly reserved water when establishing the Agua Caliente Reservation. This question is two-pronged: (1) whether water is reserved if a reservation’s primary purpose anticipates water use; and (2) if so, whether the Agua Caliente Reservation’s primary purpose contemplated water use.

The court began its analysis by examining the Winters doctrine, and found that it established that “federal reserved water rights are directly applicable ‘to Indian reservations and other federal enclaves, encompassing water rights in navigable and nonnavigable streams.’” However, the Winters doctrine is limited to certain situations; it reserves water necessary to accomplish the purported means of the reservation and reserves water if it is appurtenant to the withdrawn land. Following that understanding, the court differentiated the parties’ and the district court’s application of the Winters doctrine that specifically addressed whether the Tribe’s reserved right extended to groundwater from the more overarching issue concerning whether the mere existence of a federal reserved right depended on the Agua Caliente Reservation maintaining an implicit right to use water.

The court then evaluated the first prong when addressing the Tribe’s implied reserved right to water. The court invoked United States v. New Mexico and reasoned, “the federal purpose for which land was reserved is the driving force behind the reserved rights doctrine.” Further, that the New Mexico Court patterned a consistent conclusion whenever the reserved water rights doctrine is raised—an insufficient water supply defeats the purposes of the reservation. Therefore, the court adopted New Mexico’s holding that water is reserved when the reservation’s primary purpose foresees water use. The court then evaluated the second prong, whether the Tribe’s primary purpose contemplated water use. To answer this question, the court synthesized the Executive Orders establishing the Agua Caliente Reservation and Supreme Court precedent to conclude that “the primary purpose underlying the establishment of the reservation was to create a home for the Tribe, and water was necessarily implicated in that purpose.” Therefore, the United States impliedly reserved water for the Tribe.

Second, the court addressed whether the Tribe’s implied reserved water right extended to the Agua Caliente Reservation’s underlying groundwater. The court reiterated the Winters doctrine requirements and determined that although the Tribe met the first requirement that the reservation’s purported means necessitated water use, the second requirement that unappropriated water must be appurtenant to the reservation remained. To find a resolution, the court reasoned that appurtenance is not limited to surface water and extrapolated from Supreme Court precedent that the United States can protect groundwater and, along that vein, impliedly reserved water may include appurtenant groundwater. Further, the court considered the Tribe’s reliance on groundwater when reasoning that the minimal surface water availability conditions the Tribe’s survival on groundwater access. From this line of reasoning, the court clarified that the Winters doctrine purported to provide sustainable livelihoods to Tribes inhabiting reservations in arid areas, like the Agua Caliente Reservation, and included access to both appurtenant surface water and groundwater. Therefore, the Tribe’s implied reserved water right included groundwater.

Third, the court addressed whether the above two holdings withstood the water agencies’ arguments that: (1) the Tribe received water pursuant to California’s correlative rights doctrine; (2) the Tribe did not need a federal reserved right to groundwater in light of its allotted surface water from the Whitewater River Decree; and (3) the Tribe never drilled for groundwater on its reservation. The court rejected each in turn. First, federal water rights, such as the implied federal reserved water right, preempt state water rights. Second, New Mexico did not inquire into the current necessity of water, it focused on whether the reservation’s inception purported such a necessity. Third, lacking historical access to groundwater on the reservation did not foreclose the Tribe’s current access to groundwater. Therefore, compounded with the federal primacy of reserved water rights, the Tribe’s implied federal water right to groundwater remained intact.

Accordingly, the court affirmed the district court holding that the United States impliedly reserved appurtenant groundwater when creating the Agua Caliente Reservation.

                                                                                                        Gia Austin

Image: Santa Rosa and San Jacinto Mountains National Monument, California. Flickr User Bureau of Land Management, Creative Commons.

Silver v. Pueblo Del Sol Water Co., 384 P.3d 814 (Ariz. Ct. App. 2016) (holding: (i) that the Arizona Department of Water Resources’ (“ADWR”) interpretation of “legal availability” was valid under the statute defining “adequate water supply”; (ii) that ADWR must consider an unquantified federal reserved water right for the purposes of an Adequate Water Supply Designation (“AWSD”); and (iii) that ADWR was not required to separately consider the impact of pumping on a conservation area and the local surface or groundwater).

In 1988, the United States Congress designated roughly thirty-six miles of the San Pedro River basin (“Basin”) as a national conservation area (“Conservation Area”), and simultaneously created a federal reserved water right for the Conservation Area “in a quantity sufficient to fulfill the purpose” of protecting the public lands surrounding the River. The Bureau of Land Management (“BLM”) manages the Conservation Area. Since 1989, the BLM has filed three statements of claim for the Conservation Area covering surface and groundwater.

The General Stream Adjudication for the Gila River System (“Gila Adjudication”), active for approximately 40 years, has exclusive jurisdiction to adjudicate the conflicting claims and water rights for the Basin. BLM federal reserved rights are part of the the Gila Adjudication. The Gila Adjudication will determine whether BLM “has a reserved right to the groundwater ‘where other waters are inadequate to accomplish’” the reservation’s purpose and the minimum amount necessary to achieve that purpose.

Pueblo Del Sol Water Company (Pueblo) is a private water company. Pueblo serves an area five miles from the San Pedro River. In June 2011, Pueblo applied for an AWSD, which would allow it to pump groundwater to a planned community subdivision and other projects. Pueblo’s application included its Certificate of Convenience and Necessity (“CC&N”), a certification provided by the Arizona Corporation Commission to public utilities. Pueblo sent its application to ADWR, the agency that reviews AWSD applications. Ariz. Rev. Stat. § 45—108 requires subdivision developments outside active water management areas to show the existence of an adequate water supply as designated by ADWR. Under ADWR’s regulations, an adequate supply requires continuously legally and physically available water to satisfy the proposed needs for at least one hundred years. BLM objected to the Pueblo’s application, citing failure to properly analyze availability of water under ADWR’s regulations.

ADWR rejected the objection and accepted Pueblo’s application. BLM appealed to the Superior Court of Arizona, which reversed ADWR’s decision. The lower court held that ADWR abused its discretion because ADWR failed to meet its statutory duty to ensure that the water source will be available for at least 100 years. The lower court found that ADWR’s definition of “legal availability” erroneously allowed a decision to be based solely on whether the applicant had a CC&N. ADWR and Pueblo appealed the judgment.

On appeal, the Court of Appeals of Arizona decided three issues: (1) whether ADWR’s interpretation of “legal availability” under the statute defining adequate water supply was valid; (2) whether ADWR should have considered BLM’s unquantified reserved water right in its AWSD determination; (3) and whether ADWR was required to consider the impact of pumping on the Conservation Area and local surface and groundwater.

First, BLM argued that ADWR failed to make a valid determination of legal availability when it accepted Pueblo’s application without initially considering the federal government’s senior, unquantified federal reserved right. The court disagreed with BLM, finding that ADWR’s interpretation of legally available was valid when the statutes and regulations were read together.

Legal availability is a two step determination under ADWR’s interpretation of A.R.S. § 45–108(I)(1). First, ADWR must find that the water company is using the water for a reasonable and beneficial use. Second, ADWR must find that the water company has a legal means of delivering the water. ADWR has determined under R12–15–718(C) that the second step means a private water company has a CC&N.

The court agreed with ADWR that Pueblo’s planned use of the water was reasonable and beneficial because they planned to supply a subdivision with the water, thus satisfying the first step. The court also agreed with ADWR that Pueblo demonstrated a legal means of delivering the water because it had a CC&N, thus satisfying the second step. The court explained that ADWR’s determination that the second step requires the company to have a CC&N should be given great weight because the Director is an expert in the field vested with broad powers to achieve groundwater conservation. The court explained further that the department’s requirement that a water company have a CC&N kept with the consumer protection purposes of the statute because it requires the utility to be sufficiently financially viable to deliver, store, and treat such water.

The court also noted that in addition to determining mere legal availability, the Director of the ADWR has a more involved duty to determine whether adequate water is available. To make this determination, the Director is obligated to consider physical availability, which required the director to consider the water already commited to approximately 200 users. The ALJ determined that the Director considered Pueblo’s proposed water source and the demands from other users, and that Pueblo demonstrated that sufficient water would be available for 100 years.

Second, BLM argued that ADWR should consider its unquantified federal reserved water right, which has priority over Pueblo’s. ADWR countered by arguing that determination of those water rights fell under the exclusive jurisdiction of the Gila Adjudication and could not be adjudicated by ADWR in this proceeding. The court agreed with BLM, finding that ADWR not only had jurisdiction to consider the BLM’s claimed right, but had a duty to do so.

The court interpreted the language of R12–15–716(B), which requires the Director to consider the existing uses of groundwater, to include the consideration of the BLM’s federal reserved right. The court found that requiring ADWR to consider BLM’s right was in keeping with the intent of the groundwater statutes to protect Arizona’s economy and welfare, and to provide a comprehensive framework for the management and regulation of grounrwate, without compromising the preservation of the conservation area.

The court stated ADWR could use its expertise and knowledge to create an educated estimate of BLM’s quantified water right. However, the court distinguished ADWR’s duty to consider BLM’s claim from quantifying it. The court explained that quantification was the exclusive domain of the Gila Adjudication.

Finally, BLM argued that Pueblo’s proposed pumping might interfere with the Conservation Area and local surface or groundwater. The court found that ADWR was not required to separately consider the impact of pumping on the Conservation Area and local surface or groundwater. The court did not want to impose an obligation beyond ADWR’s obligation to consider adequate water.

Accordingly, the court vacated the judgment of the superior court, and remanded the action to ADWR with instructions to consider the BLM’s water rights claim in its evaluation of Pueblo’s application.

Trevor C. Lambirth

Image: Snow above the San Pedro River valley. Flickr user Lon&Queta, Creative Commons.

Clark Fork Coal. v. Tubbs

Clark Fork Coal. v. Tubbs, 380 P.3d 771 (Mont. 2016) (holding that the Montana Department of Natural Resources and Conservation’s (“DNRC”) rule that required groundwater developments to be physically connected was inconsistent with the plain language of the statutory “combined appropriation” exception to the exemption of certain groundwater developments from the permit requirement).

Montana uses a comprehensive permit system for water appropriation.  Groundwater appropriations of less than thirty-five gallons per minute and ten acre-feet per year can be exempt from the permit requirement.  The law also contains an exception to this exemption.  Under the Act, groundwater appropriators must acquire a permit if the “combined appropriation” from two or more wells or developed springs that draw from the same source exceeds thirty-five gallons per minute and ten acre-feet per year.  Over time, the DNRC promulgated rules to further define “combined appropriation.”  The first of these rules (“the 1987 rule”) explained that groundwater developments need neither to “be physically connected nor have a common distribution system to be considered a ‘combined appropriation.”  The DNRC replaced this rule in 1993 with a rule (“the 1993 rule”) that instead requires a physical connection to exist between appropriations to count as combined.  Using the Act and the 1993 rule, exempt appropriations of groundwater rose by about 3,000 each year, totaling about 113,000.  These appropriations consume large quantities of water.

In response, the Clark Fork Coalition (the “Coalition”), senior water users affected by this consumption, petitioned the DNRC to declare the 1993 rule inconsistent with the statute.  After the DNRC refused, the Coalition petitioned the First Judicial District Court, Lewis and Clark County to invalidate the 1993 rule as inconsistent with the Act and to reinstate the 1987 rule.  The lower court agreed with the Coalition, reinstated the 1987 rule, and further directed the DNRC to initiate rulemaking to develop a new rule consistent with this ruling.  While the DNRC did not appeal the decision, the Montana Well Drillers Association, the Montana Association of Realtors, and the Montana Building Industry Association (the “Well Drillers”) did.  On appeal, the Montana Supreme Court considered whether the lower court erred when it invalidated the 1993 rule, reinstated the 1987 rule, and directed the DNRC to initiate a new rulemaking.

The Court broke the first question into two parts: whether the rule was inconsistent with the plain language of the statute and whether the legislature’s subsequent amendments adopted the interpretation of the 1993 rule.  The Court explained that, when deciding if a rule is inconsistent with statutory language, it must first ascertain the plain language meaning of the statute.  If a statute does not have a plain language meaning, then it is ambiguous.  Once the Court determines whether there is a plan language meaning, it will determine whether a rule is inconsistent or in conflict with the statute.  If it determines there is an inconsistency or conflict, then the rule is invalid.  The Court explained that an agency’s “subsequent inconsistent rules” do not create ambiguity in a statutory terms.  Then the Court explained that statutory amendments do not change the intent of unchanged language.

Applying these rules, the Court examined the plain language meaning of “combined appropriation” using dictionary definitions and grammar rules.  First, it explained that “appropriation” refers to a quantity of water removed.  Second, the Court explained that because “combined” precedes “appropriation,” “combined appropriation” means a combined quantity of water, not a physically combined groundwater development.  This placement does not allow “combined” to modify anything but “appropriation.”  Because the term refers to quantity, and not method of removal, the Court determined that the 1993 rule “effectively swallow[s] up the underlying exception” because it limits the exception to structurally combined appropriations by enabling groundwater appropriators to pump beyond the statutory limit as long as they did not physically combine their pumping systems.  This contradicts the intent of the legislature because it allows combined appropriations of a greater quantity than authorized by statute.  The Court went on to explain that the legislature’s amendments, which continually lowered the quantity allowed for exempt ground developments but left the combined appropriation language untouched, did not adopt the 1993 rule interpretation of the term because it did not modify the combined appropriation language.  Therefore, the intent of the combined appropriation language remained the same, consistent with the plain meaning of the original words and unchanged by the 1993 rule’s interpretation.  The Court rejected DNRC’s 1993 rule.

The second question, whether the lower court erred by reinstating the 1987 rule, appeared to the Court as a question of first impression.  The Court first looked to federal Administrative Procedure Act (“APA”) case law that replaced an invalidated rule with the previous valid rule.  Then it compared this approach to the similar approach for invalidated statutes and looked through the Montana APA for potential inconsistencies. Finding no inconsistencies, the Court adopted the federal approach to invalidated rules and held that lower court did not err by reinstating the 1987 rule.

Finally, the Court considered the Well Driller’s argument that the lower court could not require the DNRC to initiate rulemaking consistent with the order.  The Court reasoned that, because courts have the authority to “pronounce a judgment and carry it into effect,” the lower court could require rulemaking to be consistent with its order.  However, the Court agreed that the District Court could not compel DNRC to initiate a new rulemaking.  Because it is the DNRC’s responsibility to adopt necessary rules, it is the DNRC’s decision whether or not to keep the reinstated 1987 rule.

Accordingly, the Court partially affirmed the lower court’s decision invalidating the 1993 rule.

Justice Jim Rice, dissenting.

Justice Rice dissented.  He did not find the plain language of the statute “clear on its face.” He found it strange that the Court’s ruling implied that the “DNRC inexplicably misinterpreted and misapplied a clear statute for the past 23 years.”  Rather, he thought the Court found the significant increase in exempt appropriations startling and acted as a legislative body to correct a perceived policy failing.

             N. Rioux Jordan

Image: The Clark Fork River, which runs through Montana. Flickr User Micah Sheldon, Creative Commons.

State Eng’r of New Mexico v. Diamond K Bar Ranch, LLC, 385 P.3d 626 (N.M. 2016) (holding: (i) waters diverted from an out-of-state river into New Mexico by ditch remained unappropriated waters of New Mexico subject to the regulatory authority of the New Mexico State Engineer; and (ii) the landowners’ use of water in excess of existing permitted water rights was an illegal use of surface water).

The Animas River flows south from Colorado into New Mexico.  The Ralston Ditch, located in southern Colorado, diverts water from the Animas River into New Mexico.  The Echo Ditch Decree (“Decree”) established the rights of Petitioner, Diamond K Bar Ranch, LLC (“Diamond”) to water diverted by the Ralston Ditch.  The State Engineer of New Mexico (“State Engineer”) brought suit against Diamond for using river waters in excess of the permitted quantity under the Decree.

Diamond claimed it was entitled to appropriate more water than provided in the Decree and filed a motion to dismiss alleging (1) that the State Engineer lacked the regulatory and constitutional authority to enjoin them from the use of river waters when the water was transported by a ditch from Colorado into New Mexico and (2) that the Ralston Ditch was exempt from permitting requirements because it was a “community ditch.”  A district court denied Diamond’s motion to dismiss but certified its ruling for interlocutory appeal.  The appellate court quashed Diamond’s interlocutory appeal and the New Mexico Supreme Court granted Diamond’s petition for writ of certiorari.

The Court first considered Diamond’s argument that the Ralston Ditch was not a “natural watercourse” that flowed into New Mexico and thus not subject to the State Engineer’s authority because the water became private at the point of diversion.  The Constitution of the State of New Mexico broadly granted the State Engineer the authority to regulate the unpermitted appropriation of water of “every natural stream” within the state of New Mexico.  Diamond primarily relied on Turley v. Furman, in which the court found that the New Mexico State Engineer did not have the jurisdictional authority to grant a permit for the construction of a new diversion in Colorado.  Distinguishing Turley v. Furman, the Court noted that the State Engineer made no attempt to exercise authority over the appropriation of out of state waters or the construction of a new out of state ditch, but instead regulated the appropriation of New Mexico surface waters for use on lands in New Mexico.

The Court also recognized that New Mexico allows only a usufructuary right to water and that a person cannot have a private ownership in the corpus of the water.  Accordingly, the Ralston Ditch alone could not create a water right.  The Court rejected Diamond’s argument that waters diverted into New Mexico by ditch conveyance was “by artificial means” and thus rendered its use private because the water never flowed “in a natural stream” within the state of New Mexico.  The Court held that the waters diverted from the Animas River into the Ralston Ditch remained natural, unappropriated waters, subject to the regulation of the State Engineer.

The Court next addressed Diamond’s argument that it was not required to obtain a permit to divert water from the Ralston Ditch waters because it was an existing community ditch.  Community ditches are early New Mexico diversion that do not require a diversion permit pursuant to N.M.S.A. Section 72-5-2.  The Court recognized that the Ralston Ditch was a community ditch constructed in the 1880s and that Diamond’s pre-1907 water rights did not require a permit for the under N.M.S.A. Section 72-5-2.  However, citing several New Mexico statutes, the Court recognized that the exemption applied only to the place of diversion and not to the quantity of water appropriated, and that community ditch users remained subject to the regulation by the State Engineer.  The State Engineer alleged that Diamond had used an amount of water that exceeded its permitted right and that Diamond had used the water to irrigate lands not appurtenant to such rights.  The State Engineer also had authority to regulate Diamond’s water consumption because the Decree stated that “the State Engineer must approve any change” in water use, regardless of whether the ditch is a community ditch.  The Court acknowledged that the Ralston Ditch to the Decree.  The Court held that although Diamond had a vested water right as a community ditch user, they were still subject to regulation by the State Engineer.

Accordingly, the Court affirmed the district court’s denial of Diamond’s motion to dismiss and remanded the case for trial.

Reggie Norris

Image: A New Mexico ditch. Flickr User Mike Tungate, Creative Commons.

Kelly v. Teton Prairie LLC, 376 P.3d 143 (Mont. 2016) (holding: (i) the district court properly applied the prior appropriation doctrine against a junior rights holder who failed to adhere to a call for water; (ii) the junior water right holder failed to meet its burden in establishing the futile call doctrine as an affirmative defense; and (iii) the district court had proper jurisdiction and authority to grant injunctive relief to the senior water right holder).

The Teton River (“River”) flows through Teton and Chouteau Counties in Montana.  The River primarily relies on melting snowpack to maintain its late season flow and has a long history of water right disputes stemming from farming and ranching operations.  Steven Kelly (“Kelly”) was a senior appropriator who held water rights for stockwater purposes and domestic use.  Teton Prairie LLC (“Teton”) was a junior appropriator, located upstream from Kelly, and held water rights for irrigation.  In August 2013, Kelly observed that he was not receiving the full extent of his water rights.  Kelly’s attorney sent a round of call letters to junior appropriators, including Teton, instructing them to cease diversion of water from the river.  Despite the call, Teton continued to divert water.  Kelly filed suit, seeking injunctive relief in its claims of wrongful interference with a water right and wrongful diversion of water by a junior water right holder.    A Montana district court granted Kelly’s motion for summary judgment and enjoined Teton from making out-of-order diversions after the receipt of call letters from senior appropriators, such as Kelly.  Teton appealed to the Supreme Court of Montana.

The Court first considered whether Teton violated the prior appropriation doctrine.  The Court explained that the Montana Water Use Act explicitly recognized the prior appropriation doctrine.  Under the Prior Appropriation Doctrine, the first to take possession of water on the public domain and put it to beneficial use becomes the “first in right.”  The Court noted that the senior appropriator is entitled receive his full appropriation and junior appropriators must take notice of the senior’s call and stop diversions until the senior’s appropriation right was fully maximized.  The Court rejected Teton’s argument that Kelly’s call was invalid because Kelly had made calls to “selective” junior appropriators, instead of making the call based on the strict order of reverse priority.  The Court noted that when a senior water right holder’s interest is injured, any and all junior water right holders are equally answerable for the injury.  The Court concluded that senior appropriators need not follow a strict order of calls, as such a requirement would conflict with the purpose of the doctrine.  The Court upheld the district court’s finding that Teton had violated the prior appropriation doctrine by improperly ignoring a call for water by Kelly.

The Court next addressed the futile call doctrine, which is an affirmative defense for a junior right holder who elects not to honor a senior appropriator’s call.  Montana has never explicitly adopted the doctrine.  The futile call doctrine excuses a junior right holder from a call when the outcome would result in no beneficial use by the senior right holder.  The burden is on the junior right holder to show that no usable water would reach the senior appropriator’s point of diversion because of carriage loss.  The Court rejected Teton’s application of the doctrine, noting expert testimony, which revealed that usable water could have traveled to Kelly’s point of diversion had Teton ceased its diversion.

Finally, the Court addressed whether the district court’s grant of injunction was proper.  The Court noted that the district court had the jurisdiction, authority, and sound discretion to grant an injunction in water right disputes.  The Court rejected Teton’s argument that the injunction’s scope was too broad, reasoning that the district court order only required Teton to refrain from activity that would violate the prior appropriation doctrine and Montana law. Finding no instance of manifest abuse by the district court, the Court affirmed the grant of injunctive relief to Kelly.

Accordingly, the Court affirmed the judgment of the district court.

Reggie Norris

Image: A farm in Bozeman, Montana. Flickr User Tim Evanson, Creative Commons.

County of Boulder v. Boulder & Weld Cnty. Ditch Co., 367 P.3d 1179 (Colo. 2016) (holding that the water court correctly denied the County of Boulder’s change of use application because it failed to meet its burden of proving an accurate historical consumptive use analysis).

Beginning in the early 1990s, the County of Boulder (the “County”) entered into a series of transactions to acquire the Bailey Farm, a 290–acre property historically used for irrigated agriculture and gravel mining.  The County aimed to develop the Bailey Farm into an open-space park featuring two ponds made from gravel pits filled with groundwater.  The ponds would expose groundwater and increase evaporation, requiring the County replace lost water through an augmentation plan under Colo. Rev. Stat. § 37-90-137.  To meet this requirement, the County filed an application in the District Court for Water Division No. 1 for underground water rights, approval of a plan for augmentation, a change of water rights, and an appropriative right of substitution and exchange.  Each component was interdependently linked.  The application hinged on approval of the change in water rights.  The County sought to change fifty inches of its Martha M. Matthews Ditch surface water right (“MM water right”), used historically to irrigate the Bailey Farm (the “Bailey Farm Inches”), into  an augmentation plan.  Boulder and Weld County Ditch Company (“BW Ditch”) opposed the County’s application, claiming injury from the proposed change.

At trial, the County submitted two historical consumptive use (“HCU”) analyses examining the Bailey Farm Inches to prove BW Ditch would not suffer injury.  Both analyses included a prorated estimate that assumed previous users delivered the Bailey Farm Inches entire to 101 acres of the Bailey Farm.  The County’s first analysis assumed full delivery of all fifty Bailey Farm Inches to Bailey Farm from 1950 to 2000; however, BW Ditch records later revealed the HCU analysis overestimated actual consumption by thirty-seven percent from 1973 to 2000.  As a result, the County supplemented the original HCU analysis with BW Ditch’s correct numbers from 1973 to 2000 and the same estimated numbers for 1950 to 1972.  The court cited three fatal deficiencies in the County’s HCU analysis.

First, the County inaccurately calculated actual use of the Bailey Farm Inches.  BW Ditch claimed the County overstated the number of acres the Bailey Farm Inches historically irrigated, which would unlawfully enlarge the Bailey Farm Inches water right and injure down-stream users.  Second, the County failed to prove the Bailey Farm Inches irrigated the seventy–acre parcel of land that the County purported.  Specifically, the County assumed without support that the Bailey Farm Inches irrigated the entire Bailey Farm and based the HCU analysis on these figures.  Finally, the County ignored the historical consumption of other water rights by conducting a parcel-specific analysis, rather than ditch-wide analysis.  The water court rejected the County’s findings as inaccurate and insufficient to meet the County’s burden of proving HCU, and consequently dismissed the entire application because the County could not demonstrate an absence of injury to others or that the proposed change in water rights would not fully compensate for the anticipated loss.  The County appealed the court’s determination.

On appeal, the Colorado Supreme Court affirmed the water court’s holding.  The Court divided its analysis into two stages.  First, the Court discussed applicable principles of Colorado water law.  Second, the Court discussed whether the County provided an accurate HCU analysis.

In its discussion of legal principles, the Court explained why an accurate HCU analysis is necessary for persons exposing groundwater through gravel pits.  It first explained the interaction between surface and ground water rights, and the Water Right Determination and Administration Act of 1969, which integrated the prior appropriation of surface with ground water while maximizing beneficial use of water.  Integrating surface rights with groundwater often requires augmentation plans.  Augmentation plans allow users out-of-priority groundwater diversions, so long as he or she adequately replenishes the diversion from existing water rights to protect senior water rights.  Water districts only approve augmentation plans that do not injure other users.  A careful accounting of actual water use may help demonstrate lack of injury and prevent the unlawful expansion of water rights.

Next, the Court examined long-established principles regarding changes of water rights and HCU analyses.  The Court noted that the amount of water changed must reflect the actual amount of water used and exist within the water’s contemplated use at the time of appropriation. This limitation comes from the principle that water rights derive from both appropriation and beneficial use.  Once diverted, the water’s beneficial use becomes the basis, measure, and limit of the water right. The Court also explained that modification of use itself cannot injure other water users.  Courts often intertwine these principles, as an expansion of a water right’s previous use often reduces the amount of water in return flow.  Thus, established principles allow water rights holders to change only as much water as they historically consumed in the manner contemplated by those rights.

The Court then analyzed whether the County upheld its burden in proving a reliable HCU.  The Court first found the County did not accurately report historical consumption of Bailey Farm Inches.  As the applicant, the County had to prove that previous users of the Bailey Farm Inches actually used the water as calculated in the HCU analysis. Despite this change, the Court found the inaccurate estimate cast serious doubt on the validity of the remaining figures and, thus, the entire report.  The County failed to provide a convincing explanation for their inaccurate HCU.  Thus, the Court affirmed the water court’s decision that the County failed to carry its burden of accurately quantifying the amount of Bailey Farm Inches actually used on the Bailey Farm.

The Court also held that County did not show the Bailey Farm Inches historically irrigated the entire Bailey Farm.  Covering a total of 101 acres, the Bailey Farm existed as two main parcels: a thirty-one-acre parcel and a seventy-acre parcel.  To carry its burden, the County had to prove that the 101 acres of the Bailey Farm claimed was within the lawful place of use and historically irrigated with Bailey Farm Inches.  The County failed to offer definitive proof that the larger portion of the Bailey Farm in fact received Bailey Farm Inches for irrigation.  Specifically, the Court pointed to the lack of evidence on the record demonstrating the seventy-acre parcel received any of the Bailey Farm Inches.  Without actual evidence showing past users irrigated the seventy-acre parcel with Bailey Farm Inches, the Court could not accept the analysis.  Moreover, the Court also explained that even if the seventy-acre parcel fell within the lawful place of use, the County would still have to prove that the MM water right was actually used on that land over time.  At first, different entities appropriated the Bailey Farm Inches to use in different properties.  Over time, the owners consolidated the properties. Because of the convoluted past, the water court required an accurate accounting of actual past use.  Absent actual proof of historical use, the water court declined to rely on the County’s HCU.  In committing these two errors, the County failed to prove the HCU and, thus, failed to prove a lack of injury to other water users.

The Court also rejected the County’s request for an appropriative right of substitution and exchange.  The Court found the County could not supplement its augmentation plan through a water lease with the City of Lafayette because the lease alone could not satisfy the County’s replacement obligations.

Accordingly, the Court affirmed the ruling of the water court and denied the County’s change of use application.

 Connor Pace

Image: A Western irrigation ditch. Flickr User Shaun Fischer, Creative Commons.

Curry v. Pondera Cty. Canal & Reservoir Co., 370 P.3d 440 (Mont. 2016) (holding that: (i) the Water Court did not err in concluding that the number of shares issued by water company determined the company’s rights; (ii) water supply company’s rights corresponded to size of service area as opposed to a historical place of use; and (iii) the Water Court erred in determining water supply company put storage rights to beneficial use prior to 1973).

The Curry Cattle Company (“Curry”) is a private landowner in Montana and owns shares to irrigation rights in the Birch Creek Flats (“Flats”). Curry obtained these rights in 1988, some of which are the oldest rights in the Marias River Basin. Pondera County Canal & Reservoir Co. (“Pondera”) provides land owners in Pondera County with water shares for beneficial use. Pondera possesses water rights to divert from Birch Creek, as well as a complete distribution system to serve the area.

This case originates from a dispute between the parties regarding waters in the Birch Creek. Pondera’s predecessors in interest secured some of the water rights in question through the Carey Land Act (“Act”), a federal law meant to encourage relocation the American West. In response, Montana set up the Montana Carey Land Board (“MCLB”), which sought to meet the requirements laid out in the Act. The Act functioned by setting up operating companies comprised of shareholders who had rights to water as determined by acres of land owned. Under the Act, the operating company maintains ownership of the water rights for a service area. In this case, the service area is accompanied by 72,000 water shares. Land owners in the service area may acquire these water shares. Pondera’s predecessors operated under the Act and began appropriating water for irrigation and sale in the late 1800s, eventually organizing as the Pondera Canal Company. The Company officially registered as an operating company under the requirements of the Carey Act in 1927. As currently aligned, individual stockholders own the Pondera Company, which distributes water as such on a per-share basis.

Disagreement over the priority of the Curry’s rights under this scheme existed for some time before this case. In 2004, Pondera communicated to Curry that its water share was less than previously believed. Curry rejected this assertion and continued to put more water to beneficial use than Pondera believed it was entitled. In 2005 Pondera locked Curry’s head gate, leading Curry to file a complaint alleging Pondera interfered with their water rights.

The Water Court initially ordered a preliminary injunction against Pondera to unlock the head gate. In 2008, the Water Court held an a six-day hearing to determine the correct quantity under the water right. The water master held in favor of Curry, finding the beneficial historic use of its water right established its water quantity. In 2014, the Water Court issued an order amending and partially adopting the master’s report. The Water Court determined that the rights in question instead correspond to the number of shares MCLB authorized for the project. Curry appealed this order to the Montana Supreme Court (“Court”).

The Court reviewed de novo five distinct issues resulting from the order of the Water Court. The Court also reviewed whether Water Court conducted its review of the master’s findings properly under a clear error standard.

The Court first reviewed the Water Court’s determination that a stockholder’s actual historic use limits the water rights of an entity organized under the Carey Land Act. Before the Court, Curry argued that beneficial use is the touchstone of water law in Montana, and therefore the Water Court improperly placed Pondera’s rights above all others by allowing it to retain ownership over water that was not put towards beneficial use. In opposition, Pondera argued that its beneficial use was not shown through actual irrigation, but by putting water into sale and service for shareholders. The Court reviewed the history of Montana water law and relied on a 1912 Montana Supreme Court case, Bailey v. Titinger, which held that either system capacity or company need would determine the extent of rights, to clarify the doctrine of beneficial use. The Court noted Montana public policy encourages public service corporations in the endeavor of irrigation. Therefore, the Court held that the Water Court did not err in determining that water rights paralleled the actual shares issued, and that sale of water unquestionably constituted a beneficial use.

The Court next confronted the issue of the Water Court’s grant of a service area to Pondera rather than a place of use based on historically irrigated land. Curry contended that the Water Court misinterpreted Bailey in entitling Pondera to a service area larger than the historical place of use. Pondera argued that the service area was the appropriate boundary for determining place of use. The Court began by discussing the concept of appurtenance of water to the land as a general rule in Montana law. The Court then explained that due to the movement of water inherent in the scheme of the Carey Act, a strict requirement of appurtenance was not applicable in this case. The Court noted that under the Act, the individual stock certificate’s appurtenant land did not define the overall place of use. Relying on Bailey, the Court affirmed the Water Court by holding that the idea of a service area is the proper method of satisfying the Carey Act’s place of use requirement. The Court declined to determine the exact size of the service area at this stage of litigation.

The Court also considered whether there was any evidence of water use by irrigators on the Birch Creek Flats prior to 1973. The water master found some evidence of historic use on the Flats, including some releases from storage facilities that eventually flowed into canals utilized by non-Pondera water users, but determined that these releases did not amount to Pondera use warranting inclusion of the Flats within the service area boundary. However, the Water Court found that there was evidence of Pondera water being used on the Flats prior to 1973, and concluded that the Flats should be considered as falling within the boundaries of the Pondera service area. The Court evaluated the use of water in the Flats based on Pondera’s actions, and disagreed with the Water Court’s conclusion that Pondera put the water to beneficial use on the Flats prior to 1973. The Court reversed this portion of the decision and remanded for further consideration.

The Court next examined whether the Water Court erred by substituting its judgment for that of the master regarding the “Gray Right.” Curry argued that the judgment of the Water Court was erroneous regarding the flow rate of the Gray Right. Pondera in turn argued that the Master’s report contained contradictory findings and therefore the Water Court’s judgment was not erroneous. The Court held that the Water Court applied the appropriate standard of review to the Master’s findings, and the Water Court’s determination of the flow rate for the Gray Right was not clearly erroneous.

Finally, the Court considered whether the Water Court’s tabulation of the parties’ respective claims to water rights should have included volume measurements when it did not. Pondera contended that the tabulations should have included volume. The Court held that while such measurements would undoubtedly be helpful, this was a matter of discretion for the Water Court.

Accordingly, the Court partially affirmed the Water Court by finding Pondera’s water rights corresponded to actual shares allotted under the Carey Act and extended to its entire service area, and reversed and remanded the determination with respect to the acreage determination.

Brian Hinkle

Image: Swift Dam on Birch Creek in Pondera County, Montana. Flickr User Sam Beebe, Creative Commons.