Eureka Cnty. v. State Eng’r of Nev.

Eureka Cnty. v. State Eng’r of Nev., 359 P.3d 1114 (Nev. 2015) (holding that the State Water Engineer provided insufficient evidence to support his finding that the applicant could mitigate the impact of appropriation on existing water rights).

In 2005, General Moly, Inc. (“General Moly”) began to apply for water rights in anticipation of the molybdenum mine that it sought to construct in Eureka County (“Eureka”). The following year, General Moly created a subsidiary, Kobeh Valley Ranch, LLC (“KVR”), to take charge of the proposed mine’s water rights. KVR submitted multiple applications for water rights between 2006 and 2010.

Eureka and several senior water rights holders in the area objected to KVR’s applications because, inter alia, they conflicted with existing rights. The Nevada State Engineer (“Engineer”) held several hearings on the matter and ultimately found that, although KVR’s applications would impact existing rights, KVR could fully mitigate the impact. Thus, the Engineer granted all of KVR’s applications and required that KVR develop a mitigation plan (“3M Plan”) to alleviate any impact.

Eureka, as well as Kenneth F. Benson, Diamond Cattle Company, LLC, and Michel and Margaret Ann Etcheverry Family, LP (“Benson-Etcheverry”), petitioned the Seventh Judicial District Court, Eureka County (“district court”) for judicial review of Engineer’s ruling. The district court did not grant the petition because it found that the Engineer’s ruling had substantial evidence and that conflict avoidance through mitigation comported with the requirements of the Nevada statute. Eureka and Benson-Etcheverry appealed the district court’s denial of judicial review to the Nevada Supreme Court (“Court”) and asked the Court to determine whether the Engineer may consider mitigation abilities when assessing the conflicts between a proposed water right application and existing rights.

The Court first addressed whether the Engineer complied with the controlling state statute, Nevada Revised Statute § 533.370. The statute requires that “where [a] proposed use or change conflicts with existing rights . . . the State Engineer shall reject the application and refuse to issue the requested permit.” The Court declined to decide if the statute allowed the Engineer to grant applications on the condition of future mitigation. Instead, the Court focused on whether Engineer’s ruling had substantial evidence.

The Court analyzed the record and found that although the Engineer labeled existing water right holders as “likely to be impacted,” expert testimony portrayed this labeling as a significant understatement. Specifically, two experts for KVR admitted that the proposed pumping would cause flows to cease and stock watering wells to dry up. Because the requested appropriations could “completely deplete” the water sources underlying existing rights, the Court ruled that KVR’s applications fit undeniably within the statutory requirement of a “conflict.”

Next, the Court considered the Engineer’s evidentiary support for his reliance upon the 3M Plan to resolve the water rights conflicts. The Court limited its analysis to a determination of whether substantial evidence supported the Engineer’s decisions. The Engineer found that “flow loss can be adequately and fully mitigated by [KVR] should predicted impacts occur[,]” but neither the Engineer nor KVR articulated which techniques would comprise this mitigation plan or what evidence suggested that mitigation would truly restore senior water rights. The Court found that rather than requiring KVR to propose a mitigation plan before he granted appropriation rights, the Engineer required KVR to submit such a plan after he granted all of its change and use permits. The Court warned that granting water rights before submission of a mitigation plan could interfere with the due process rights of those who wish to protest an application because the challenge could only result in vacating the mitigation proposal. The Court did not adopt Engineer’s and KVR’s assumption that an effective 3M Plan could circumvent the statute’s “conflict” stricture. Instead, the Court ruled that Engineer provided insufficient evidence to support his theory of mitigation and thereby violated the requirements of the state statute by granting KVR its applications in spite of imminent impact.

Accordingly, the Court reversed the order of the district court and remanded the case.

 

The featured image is of an open pit mine in southern Arizona.  This photo is from the public domain.