Tension over declining water rights has been rising in Nevada’s Diamond Valley almost as fast as the water table has been falling. Some believe a new water-market approach will finally solve the valley’s troubled water supply. But will it work?

The Diamond Valley of central Nevada has been over-appropriated since the 1960s. In 2014, a rancher with the most senior rights holder in the valley initiated legal action to halt pumping for junior irrigators. Alfalfa farmers, who use about two hundred irrigator systems to produce 120,000 tons of hay every year, have responded with furor over the suit—and have even been blamed for illicit cattle killings at the ranch. In 2015, water right wrangling culminated in the state engineer declaring the basin a Critical Management Area, requiring water-rights holders to develop a groundwater management plan or face the mandatory curtailment of pumping.

In response, researchers from Duke University Nicholas School of Environment and Eureka County officials have developed a novel water market scheme in which traditional water rights will be divided up into shares for barter. Researchers said they imported many of their proposed ideas for Diamond Valley from Australia. The plan, which is currently under consideration by the state engineer, proposes moving Diamond Valley away from the traditional prior appropriation model (and its central tenet of seniority) in favor of a system based on tradable water “shares.” Researchers and supporters of this approach—including many local farmers—believe that a water market will ease tension among water users in the valley as well as help replenish an over-appropriated basin. While the plan faces numerous logistical and legal hurdles before implementation, many across the drought-ridden West are nevertheless watching how things progress in the Diamond Valley to see if this type of water market can offer new solutions for an age-old problem.

What is a water market?

Before analyzing the details of the Diamond Valley plan, it is first necessary to discuss the basics of water markets in the West. All prior appropriation states have at least some form of water market—that is that common law or statutory legal framework allows a water right to be sold from one person to another. Most of these transfers are permanent; however, some forms of water markets allow for a more temporary trading. The process for transferring water rights under this system can be expensive, bureaucratic, and risky. Water markets, like the one proposed for Diamond Valley, attempt to improve efficiency and flexibility through commodification, which refers to the “unbundling” of water rights into its component parts: water and property divided into separate interests. Water users can then buy and sell these unbundled water rights as a fungible commodity.

The commodification of water resources is not a new invention, and not all commodification schemes are water markets with a profit motive. Many water commodification systems are already in use in the American West, such as mutual ditch companies, which are non-profit corporations formed to furnish water to shareholders. A mutual ditch company stores and transports irrigation water for use by its shareholders in return for payment of assessments for operating costs.

Another type commodity scheme is a water bank, which is a tool for leasing water for a limited period on a voluntary basis between water rights holders and users. It provides temporary transfers of water entitlements based on how much and when a water user needs more water without a permanent change in water rights. Several states have experimented with the possibilities of a water bank. For example, Colorado implemented one on the Arkansas River in the mid-2000s, however no transactions have occurred.

Other states have experimented with commodification in large-scale water projects. Farmers in California’s Palo Verde Valley have entered into an agreement to lease a portion of their water with the Metropolitan Water District, the water agency that serves Los Angeles, San Diego, and much of the rest of urban Southern California. The model seeks to protect farmers even from their own financial temptation. In addition to an up-front payment of $3160 an acre, the agency pays them eight-hundred dollars an acre for fallowing portions of their farms each year, and has invested six million dollars into the community.

Another example of water marketing is the Colorado-Big Thompson (C-BT) project. The C-BT project provides supplemental water to municipalities and irrigated farms in Northern Colorado through tradable C-BT units. Each unit entitles the owner to a pro-rata portion of the project’s water supply. Transfers of C-BT units are not subject to water court review, and may be accomplished easier than a traditional transfer subject to review by the state water court system, where individual litigation and review may take years. As a result, real estate developers often purchase C-BT units to support new development projects in Northern Colorado.

How will Diamond Valley’s Water Market Work?

Nevada water law, like most western water regimes, is based on the prior appropriation system. In prior appropriation, seniority governs allocation and the oldest water rights are preserved at the expense of the more junior rights in times of shortage. In a stark departure from prior appropriation, the Diamond Valley plan is proposing that all water rights holders in the valley become shareholders in a total allocation of both ground and surface water. The plan calls for implementation of four changes: (1) “unbundling” of present water rights into shares and allocations for management of “long- and short-term interests” and third party impacts; (2) development and implementation of “sharing plans” to sustainable use; (3) appointment of a board comprised of experts, in partnership with the state engineer, to “prepare, plans, and oversee implementation of the new system”; and (4) establishment of registers and metering systems to “finance private investment and increase the speed and transparency of water rights and volumes trades.”

In their proposal for Diamond Valley, researchers explain:

“In an unbundled system, the component of a water right that defines the long-term interest is defined as a share. The water that is available for use within a time period (e.g., year or season) is then defined as a seasonal allocation. A share can be thought of as a perpetual entitlement to a portion of any water that is allocated for use. A seasonal allocation can be thought of as an acre foot of water available in a particular season. In an unbundled system, this acre foot can be used, traded, or, with adjustment for losses, saved for use in a subsequent season. The number of seasonal allocations a person receives is a function of the number of shares he or she holds in that particular water resource. When an allocation is made, it is recorded in a water account, but not recorded on a share certificate.”

To unbundle the existing water rights, the plan calls for a board—appointed by Eureka County officials—to determine the total amount of water available and then make allocations each water year in proportion to the number of shares held before the start of the that irrigation season.

In order to transition to the new system, the plan envisions that the board would initially assign shares on a basis of one share per acre-inch of the original right and then applying a formula—a so-called “seniority coefficient”—to account for seniority so that those giving up more senior water rights would get more shares in return. Valley shareholders can then buy and sell allocations with county water officials tracking usage through water meters. The plan also proposes that the board annually reduce allocations per share for two to three decades until the water table of the aquifer stabilizes.

Proponents of the water market argue that the ability to trade shares will reduce risk of abandonment or waste. Under prior appropriation’s beneficial use doctrine, farmers were forced to use their water or risk legal abandonment and forfeiture of their water right. However, under the market’s scheme, farmers will be able to get money for their surplus water by selling their allocations to others who need more. This would increase efficiency basin-wide as it would take away the need to use extra water for the sake of preventing abandonment.

What legal challenges will Diamond Valley need to overcome?

One significant legal issue in Diamond Valley will be how the water market can address the anti-speculation doctrine. This doctrine, codified under Nevada Revised Statute 533.040,

expressly prohibits a water right from being transferred to parties who do not beneficially use the water. The anti-speculation doctrine seeks to prevent “hoarding” of water by non-users, which could distort supply for farmers and artificially inflate prices. In a traditional prior appropriation system, beneficial use staves off speculation, but in a water market, many worry that ‘water barons’ might stockpile shares to drive up prices, making it unaffordable.

In response, academic proponents of water markets have argued that water rights are usufructuary, and that a water right different from ownership of the water itself. Water’s usufructuary nature makes it a semi-privatized—yet community-based—resource, and not an ordinary commodity. For instance, as compared to oil, wheat, or some other traditional commodity, private interests own the product and private entities buy and sell that product. However, water will still be the property of the public, but profit will now be available through trading that public product. By avoiding full privatization of the resources, water-market proponents argue that speculators will avoid water-right investment because of the risk of government or community regulation, thus preventing unwanted water monopolies.

Another problem has been the “buy and dry” of rural communities over the past few decades where agricultural-to-municipal water transfers have left local farming communities economically strained. In the buy-and-dry scenario, a rapidly growing municipality upstream buys senior water rights from rural farmers downstream, re-diverting it elsewhere. With no water left to farm the land, the fields—and the towns with less of a tax base to rely on—begin to dry up, further depressing the local community. One of the most striking examples of this phenomenon is Crowley County, Colorado. Similarly, in California’s Palos Verdes Valley, farmers have filed a lawsuit alleging that the Metropolitan Water District (“MWD”) is creating a water bank out of their fallowed fields and forcing the traditional farming culture out of the area. The farmers argue the MWD is using monetary pressure to reduce water use on their land, so that saved water can then be shipped to coastal, Southern California cities. In the case of Diamond Valley, what would prevent outside entities from buying up shares and exporting allocations out of the valley? Proponents have argued that, as compared to Crowley and Palos Verdes’ agreements with far off urban areas, shares in this system will be divvied up among all irrigators in the valley. To cope with this, the plan proposes charging “exit fees” for water users who want to permanently transfer water out of the system. Further, the yearly reduction to stable levels may make water right investment, coupled with the expense of transportation and infrastructure development, impracticable to a “high and dry” scenario because outside interests will not be able to rely on fallowing fields as a means of acquiring water.

A final issue will be how any trade or sale of shares (and the resulting change of use of that water) would protect any existing rights from injury—the no-injury standard will need to be addressed. Nevada requires that the state engineer review water right transfer applications to ensure the transfer will “not conflict with existing rights.” This rule creates enormous disincentives to transfer by driving up the transaction costs of any exchange, typically requiring a fact-specific, time-consuming, and expensive inquiry into return flows, irrigation ratio efficiencies, and consumptive use patterns to predict the impacts of a proposed transfer. However, in the case of Diamond Valley, injury issues would likely not surface under the proposed plan because the trading of shares/allocations around the valley would not affect any other shareholder because they have their own independent allocation of water, especially since most irrigators rely on pumping, not on surface flows. Of course, this assumes that proper enforcement exists and that all shareholders follow the rules.

Conclusion

In addition to the implementation challenges described above, plan proponents also have to get buy-in from the state and local irrigators. The final groundwater plan requires approval by half of the irrigators and the state engineer. And even if approved, the plan could also face challenges in court as well. Nevertheless, the Diamond Valley’s proposed water market represents either an exciting opportunity for innovation or another failed challenge to the hegemony of the prior appropriation doctrine in western states. While a water market includes the possibility of many solutions, its implementation stands as a direct challenge to many century-old standards of water law.

Ryan Hull

Image: View north along Nevada State Route 278 near Eureka Airport in Diamond Valley. Wikimedia user Famartin, Creative Commons.

 

 

Sources

Nev. Rev. Stat. Ann. § 533.040 (West).

Nev. Rev. Stat. Ann. § 533.370 (West.)

Alex Lash, For Biotech Cowboys, It’s No Ride into The Sunset, Xconomy (July 8, 2015), http://www.xconomy.com/national/2015/07/08/in-translation-for-biotech-cowboys-its-no-ride-into-the-sunset/.

Anne Knowles, Putting Stock in Trading Water at Forum, Nev. Appeal, (Aug. 20, 2015) http://www.nevadaappeal.com/news/local/putting-stock-in-trading-water-at-forum/.

Abrahm Lustgarten, A Free-Market Plan to Save the American West From Drought, The Atlantic, March 2016, https://www.theatlantic.com/magazine/archive/2016/03/a-plan-to-save-the-american-west-from-drought/426846/.

Erin McKenzie, Nevada City Tests Blueprint for Buying, Selling Water Rights, Duke U., Nicholas Inst., (August 19, 2016), https://nicholasinstitute.duke.edu/articles/nevada-city-tests-blueprint-buying-selling-water-rights.

Michael C. Young, Unbundling Water Rights: A Blueprint for Development of Robust Water Allocation Systems in the Western United States, Duke U., Nicholas Inst., (Sept., 2016), https://nicholasinstitute.duke.edu/sites/default/files/publications/ni_r_15-01.pdf

Water Info. Program, Ditches & Diversions (2017), https://www.waterinfo.org/colorado-water/ditches-diversions

John Fleck, Palo Verde Irrigation District Sues Metropolitan Water District Over Colorado River Water, Jfleck at Inkstain, (Sept. 21, 2017, 4:44PM), http://www.inkstain.net/fleck/2017/09/palo-verde-irrigation-district-sues-metropolitan-water-district-colorado-river-water/

Mark Squillace, The Water Marketing Solution, Colorado Law Scholarly Commons, (October 2, 2017, 9:35AM), http://scholar.law.colorado.edu/cgi/viewcontent.cgi?article=1753&context=articles

Sandra Zellmer, The Anti-Speculation Doctrine and Its Implications for Collaborative Water Management, 8 Nev. L. J. 994, 1011 (2008) http://scholars.law.unlv.edu/cgi/viewcontent.cgi?article=1127&context=nlj


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.


Background

The Colorado River Basin (“the Basin”) spans parts of seven western states: Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming.  The Basin currently provides water to around 40 million people and 4 million acres of irrigated agricultural land, making it one of most important watersheds in the western United States.  Beginning in January of 2010 and lasting for three years, the Department of the Interior funded a supply and demand study of water use in the Basin through the Bureau of Reclamation and its WaterSMART program.  Completed in December 2012, the published full report of the Colorado River Basin Water Supply and Demand Study (“Study”) can be found in the links provided below.

 

The Study

The Study evaluated future imbalances in the watershed over the next 50 years, up to year 2060.  The Study, however, did not result in any decision on how exactly the future imbalances will be addressed.  Performed in four phases, the Study (1) assessed the water supply of the watershed; (2) assessed the demands for water within the basin; (3) analyzed the reliability of the computer models; and (4) developed and evaluated strategies to decrease the imbalance. The Study found the average imbalance between supply and demand for water would be more than 3.2 million acre-feet.  Most of this imbalance is due to an increase in demand from municipal and industrial users because of an estimated doubling of the population within the Basin.  The study estimated that by 2060 the population could be approximately 76.5 million people.

 

It is important to note that any future water supply and demand scenarios predicted within the watershed are highly uncertain because an infinite number of possibilities exist.  While no study will be exact, the Bureau of Reclamation analyzed four different scenarios for both supply and demand.  On the supply side, four scenarios exist: (1) an Observed Resample scenario that looked at water tends over the past 100 years; (2) a Paleo Resampled scenario that looked at water trends over the past 1,250 years; (3) a Paleo Conditioned scenario that looked at water trends over the past 1,250 years but conditioned on the water values observed over the past 100 years; and (4) a Downscaled GCM Projected scenario estimating that the climate will continue to warm substantially over the next few decades.  This last scenario estimated that the natural water flow within the basin will decrease by approximately 9% over the next 50 years.  On the demand side, four scenarios also exist: (1) a Current Projected Growth model; (2) a Slow Growth model; (3) a Rapid Growth model; and (4) an Enhanced Environment Growth model accounting for enhanced environmental stewardship.  All the scenarios were then run in different combinations through the Colorado River Simulation System in RiverWare software, obtaining a range of potential future system conditions.

 

The Study next evaluated more than 150 options and strategies on how to resolve imbalances in the watershed.  The options and strategies can be generally organized into four groups.  The first group included options that increase water supply such as reuse, desalination, and importation.  The second group included options that reduce water demand from both M&L and agricultural conservation.  The third group included options that modify operations such as transfers & exchanges and water banking.  Finally the last group included options that focus on governance and implementation of water such as stakeholder committees, population control, and reallocation.

 

Finally, the Study listed ten general areas of options and strategies seeking to resolve water imbalances that are realistic to implement within the watershed: water conservation and reuse; water banks; watershed management; augmentation; water transfers; tribal water; environmental flows; data and tool development; climate science research; and partnerships.  The Bureau of Reclamation closed public comments on the Colorado River Basin Water Supply and Demand Study on April 19, 2013, and all comments will be summarized and considered in planning activities.

 

Brief Comments on the Study

The best solution laid out in the Study is water conservation.  Because irrigated agriculture is responsible for approximately 70% of watershed water use, conservation is this sphere could result in significant savings.  Effective conservation can also occur in cities by reducing water use in outdoor landscapes because half of all city water use is involved in such endeavors.  With desalination technology rapidly evolving, it could become another very attractive option.  Desalination projects do occur in other countries, but the energy cost and cost of recovery are still very high.


Sources:


Las Vegas is deceptive, when one visits the area water is visible everywhere—in fountains, swimming pools, and on golf courses.  Las Vegas literally means “the meadows” in Spanish, and was named for the artesian springs that created an oasis in the middle of the desert.  Now, however, due to the over-consumption of the artesian springs, Las Vegas is an artificial oasis created by technology and engineers for tourists.  These technologies bring water to a place where no water exists.  Since Las Vegas only receives about four inches of rain a year, the city obtains most of its water from the Colorado River; yet that water is rapidly dwindling and some predict by the year 2060, the river will be short by 3.2 million acre-feet a year.  The water has fallen so much in Lake Mead that the Southern Nevada Water Authority (“SNWA”) is currently inserting another pipe into Lake Mead due to its falling water levels.  The reality of the Colorado River being overdrawn has forced SNWA to begin to look elsewhere for its water.

The SNWA has attempted to come up with alternative solutions for Las Vegas and the surrounding areas to conserve water and become sustainable.  These solutions include the groundwater project (which involves taking water from four rural valleys in eastern Nevada’s White Pine and Lincoln counties), turf removal plans, and recycling water.

Groundwater Project

Currently, Las Vegas obtains about 10 percent of its water supply from groundwater, and the rest comes from the Colorado River.  In order to obtain the groundwater from four rural valleys in eastern Nevada, in 1989, the Las Vegas Water District first submitted the groundwater plan to the State Engineer.  The SNWA was formed in 1991 and it continued to pursue groundwater in eastern Nevada.  In 2012, the State Engineer granted SNWA the water rights in Spring, Cave, Delamar, and Dry Lake valleys.  SNWA submitted a proposal to the Bureau of Land Management (“BLM”) in order to build a pipeline to transport the water to Las Vegas and the surrounding areas.  The BLM has given the SNWA permission to build 263 miles of pipeline to divert the water from the valleys to Southern Nevada, and in May 2013, BLM granted rights-of-way across federal land for the Groundwater Development Project.  The SNWA hopes that this project will reduce Nevada’s reliance on the Colorado River.

Although the groundwater project could help the Las Vegas area with their water troubles in the future, there is much opposition to it.  First, many in agriculture do not want to sacrifice their water and land for Las Vegas’ groundwater project.  The SNWA would be pumping the water out of rural Nevada and diverting the water from farms to the city.  While the SNWA has already bought much of the agricultural land that would be affected by the project for inflated prices, many farmers refuse to sell their land.  As the farmers sell their land and move out of the eastern counties, many small businesses who rely on their patronage will also go out of business and be forced to move.

Opposition also comes from environmentalists who are worried that if the SNWA begins to withdraw water, there will be less water for native desert plants.  According to environmentalists, if the water table is drawn down too far, the plants will begin to die, which could result in a dust bowl.  Finally, many species of wildlife will also be adversely affected if the water is diverted from eastern Nevada to Las Vegas because their habitats will be permanently altered due to lowering water levels.

Turf Removal and Water Recycling

Contrary to what many people believe, it is the residents of Las Vegas who waste the most water and not the resorts.  The resorts use only about three percent of diverted water from the Colorado River.  The remainder of the water is used by residents to water their lawns.  In order to combat and lessen the outdoor use of water, Las Vegas and surrounding areas have used “cash for turf removal” as a way to conserve water in Nevada.  The turf-removal program is very important because the water can evaporate easily in the hot desert and it cannot be collected and recycled for later use.  The turf-removal program encourages residents of Las Vegas to remove their lawns and replace them with plants that are native to the desert, which require less water than the grass that is normally planted outside of homes.  The replacement of lawn for native desert plants is called xeriscaping.  Las Vegas has also been trying to conserve water by capturing water that has been used by residences and resorts and recycling it. This water can be used to irrigate golf courses or it could be treated and sent back into the Colorado River.

Conclusion

Las Vegas has a major influence on the way that Nevada treats its water.  The culture of over-consumption provides most of the economic support for Nevada and Las Vegas provides most of the jobs for Nevada.  Although Las Vegas is trying to reduce its reliance on the Colorado River, it is doing it at a cost to rural areas and farmers and ranchers.  However, taking water from other areas of the United States is not enough to make Las Vegas a sustainable city and the SNWA must find other solutions in order to fulfill the city’s need for water.


Sources:

 


Ctr. for Biological Diversity v. U.S. Fish & Wildlife Serv., WL 4497680 (D.Nev. 2012) (holding that action brought by the Center for Biological Diversity challenging the Fish and Wildlife Service’s involvement in a Memorandum of Agreement failed because: (i) the Center for Biological Diversity lacked standing to assert claim under the Property Clause and the Endangered Species Act; (ii) Fish and Wildlife Service was not required to perform an environmental statement or environmental assessment because the Memorandum of Agreement did not constitute a major federal action; (iii) the National Wildlife Refuge System Improvement Act did not apply to Fish and Wildlife Service’s decision to sign the Memorandum of Agreement because the groundwater pumping project occurred outside the National Wildlife Refuge’s boundaries).

In March 2002, the State Engineer of Nevada issued Order No. 1169 (“Order”).  The order accepted applications for new groundwater rights in various groundwater basins, as well as ordered a study of the effect of pumpage on pre-existing water rights.  The study was ordered to last a minimum of five years, during which at least fifty percent of the currently approved water rights in the Coyote Springs Valley groundwater basin were going to be pumped for at least two successive years.

The Fish and Wildlife Service (“FWS”), Southern Nevada Water Authority (“SNWA”), Coyote Springs Investment LLC (“CSI”), Moapa Valley Water District (“MVWD”), and the Moapa Band of Paiute Indians (“Tribe”) entered into the Memorandum of Agreement (“MOA”) in April of 2006.  The MOA guaranteed that proper conservation measures were established prior to any potential effects resulting from the required groundwater pumping pursuant to the State Engineer of Nevada’s 2002 Order.  These conservation measures included: the creation of a recovery implementation program, habitat restoration and recovery procedures, protection of in-stream flows, and the formation of a hydrologic review team to guarantee precise monitoring and data collection.

In anticipation of entering into the MOA with the SNWA, CSI, MVWD, and the Tribe, the FWS issued the Programmatic Biological Opinion (“BiOp”).  The BiOp evaluated the execution of the MOA.  Ultimately, the FWS concluded that the proposed signing of the MOA, in and of itself, would not result in the pumping of any groundwater.  Therefore, the FWS’s becoming a signatory to the MOA was not likely to jeopardize the existence of the Moapa dace (a federally listed endangered species that the FWS had previously assigned the highest recovery priority possible).

The Center for Biological Diversity (“Center”) brought an action against FWS in August of 2010.  The Center alleged that FWS’s decision to sign the MOA violated: (1) the Property Clause of the United States Constitution, (2) the National Environmental Policy Act (“NEPA”), (3) the Endangered Species Act (“ESA”), and (4) the National Wildlife Refuge System Improvement Act.

First, the district court of Nevada found that the Center lacked standing to assert a claim under the Property Clause.  The district court agreed that the Center had not shown the requisite elements of causation and redressability and, therefore did not meet its challenge of the MOA.  Additionally, the district court reasoned that the MOA itself did not authorize any pumping, but rather was primarily concerned with establishing conservation measures to assist, not harm, the endangered Moapa dace.  Any harm to the fish was a result of the State Engineer of Nevada’s order, which authorized the groundwater pumping, not the MOA.

Second, the district court held FWS’s decision to sign the MOA without first completing an environmental assessment (“EA”) or environmental impact statement (“EIS”) did not violate NEPA.  NEPA requires an EIS for every major Federal action significantly affecting the quality of the human environment.  In order to determine whether an EIS is necessary, an agency may first prepare an EA.  An EIS is not mandatory when a proposed federal action would not change the status quo. When an agency decides that a project does not require an EIS without first conducting an EA, courts review the decision under the reasonableness standard.  Ultimately, the court found that FWS’s decision not to complete an EA or EIS, before entering into the MOA, was not an unreasonable course of action because the MOA did not constitute a major federal action.

Third, the district court found that the Center lacked standing to assert a claim against the FWS for its failure to undertake action against the State Engineer of Nevada for authorizing the groundwater pumping.  Section 7 of the ESA demands that federal agencies confer with the FWS to insure that any action carried out by such agency is unlikely to threaten the existence of any endangered or threatened species.  Ultimately, the court reasoned that the FWS’s action of entering into the MOA did not jeopardize the Moapa dace because the MOA involved conservation measures that would have a positive effect on the population of the Moapa dace, not a negative one.

Next, the district court concluded that FWS’s decision to sign the MOA did not violate the National Wildlife Refuge System Improvement Act (“Act”).  The Center argued that by agreeing in the MOA not to assert injury to its water right until flow fell to 2.7 CFS, the FWS allowed a percentage of the Refuge water right and spring complex to be used in association with the groundwater pumping pronounced in the MOA.  Ultimately, the district court found that FWS’s signing of the MOA did not violate the Act because the groundwater pumping project occurred outside the boundaries of the national wildlife refuge and, therefore the Act was inapplicable.

Ultimately, the district court granted summary judgment in favor of FWS and argued that the Center’s action failed because it challenged an agreement (the MOA), designed to aid, not harm the endangered Moapa dace.  In addition, the district court concluded that the MOA was not the authority permitting the pumping of water from the Coyote Spring Valley basin and, therefore the Center’s action lacked merit.


In re Nevada State Eng’r Ruling No. 5823, 277 P.3d 449 (Nev. 2012) (holding that jurisdiction over the appeal of a decision by a state water engineer is not limited to the county where the applicant’s water rights lie, but rather could be heard by a court in the county where a party was affected by the decision).

State Engineer Ruling 5823 allocated groundwater rights in the Dayton Valley Hydrographic Basin (“Basin”) located in Lyon County.  Churchill County and the Pyramid Lake Paiute Tribe (“Appellants”) believed that the Basin was already over-appropriated and the new allocations would negatively affect their interests.  They filed appeals in the Third Judicial District Court in Churchill County (“District Court”), invoking Nev. Rev. Stat. § 533.450(1) which provides judicial review “in the nature of an appeal” to anyone who is affected by a decision of the State Water Engineer.

The statute also provides that an appeal “must be initiated in the proper court of the county in which the matters affected or a portion thereof are situated.”  The State Engineer demanded the venue change from Churchill to Lyon County asserting improper venue, but Appellants believed that Nev. Rev. Stat. § 533.405(1) allowed for more than one possible forum and that either court was proper.

The Pyramid Lake Paiute Tribe filed a separate appeal in federal court, United States v. Alpine Land & Reservoir Co., Case Subfile No. 3:73 cv 00203 LDG (D.Nev. 2008), making similar arguments to those in their District Court appeal.  The federal court case, which was decided before the District Court case began, ruled against the Pyramid Lake Paiute Tribe and dismissed their appeal.

The District Court then heard this case.  It held that it is the location of the water rights of the applicant that determines which court has jurisdiction to hear an appeal from a State Engineer’s decision.  Therefore, it lacked subject matter jurisdiction, and could not change the venue.

After Appellants filed this appeal, the Ninth Circuit Court of Appeals vacated Alpine, based on United States v. Orr Water Ditch Co., 600 F.3d 1152 (9th Cir. 2010) (“Orr Water Ditch”) which rejected the proposition that the location of the applicant’s water rights determines jurisdiction under Nev. Rev. Stat. § 533.450(1).  Then, the Supreme Court of Nevada (“Court”) reviewed this case de novo to determine whether the District Court had subject matter jurisdiction in light of the Ninth Circuit’s decision to vacate Alpine.

The Court analyzed the language of Nev. Rev. Stat. § 533.450(1), in particular the phrase “matters affected or a portion thereof.”  It held that the phrase signifies multiple potential forums and that if “a portion” of the “matters affected” are located in a certain county then it is a proper forum for all of the “matters affected.”  The Court further held that Respondents view that “matters affected” only refers to their interests, not those of the Appellants, is unreasonable.

The Court followed the Orr Water Ditch decision and stated that potential problems could occur if only the court of the county where the applicant’s water rights lie had jurisdiction.  The Court noted that the District Court’s decision was at odds with Orr Water Ditch, which, while not mandatory precedent, was persuasive.  The Court then concluded that subject matter jurisdiction was not limited to the location of an applicant’s water rights and the District Court erred in dismissing Appellant’s appeals for lack of subject matter jurisdiction.

Accordingly, the Court vacated and remanded the judgment of the District Court.