Utah Supreme Court Clearly Establishes Partial Forfeiture

This month, in Delta Canal Co. et al v. Frank Vincent Family Farm, the Utah Supreme Court established that partial forfeiture has always been a part of Utah water law.

 

Plaintiffs were a group of irrigation companies in Millard County, referred to collectively as DMADC.  Vincent purchased a farm in 1998, irrigated crops and operated a commercial bird-hunting operation.  The State Engineer’s proposed determination recommended that Vincent’s predecessor be awarded 5,000 af annually to irrigate 1,051.5 acres of land.  Under the Cox Decree, Vincent was awarded 22 cfs from March 1 through October 1 and could store 90% of its allocation in the Sevier Bridge Reservoir from March 1 to October 1.  DMADC filed its compliant in 2008, alleging that Vincent only irrigated 830 acres from 1988 to 1998 and less than 900 after 1998.  Vincent argued he had not irrigated all 1,051 acres because he was unable to because of water shortages that reduced his allocation each season because he could not take water for use on frozen in March and April.  

 

The District Court held that Utah law did not provide for partial forfeiture prior to 2002 and that Vincent was protected from partial forfeiture after 2002 by an exception in Utah Code section 73-1-4(3)(f)(i).  This section protects a water right from forfeiture when the water source does not yield sufficient water to satisfy the water right.  The Court granted defendant’s motion for summary judgment.  The Supreme Court reversed.

 

The Supreme Court concluded that the pre-2002 forfeiture statute “unambibuously” permitted partial forfeiture; that the exception in Utah Code section 73-1-4(3)(f)(I) is a physical-causes exception only; and that abandonment is a common-law cause of action, not statutory.  The Court also clarified how forfeiture should be calculated.  

 

Forfeiture Pre-2002

The Court held that partial forfeiture has always been an available remedy under Utah case law.  When viewed in isolation, the pre-2002 forfeiture statue is ambiguous, but “the Beneficial Use Statue erases all ambiguity from the Forfeiture Statute and requires us to conclude that the pre-2002 Forfeiture Statute permitted partial forfeiture.”  P. 6.  Beneficial use has existed in Utah law, even prior to codification.  Beneficial use has two ongoing requirements: the type of use and the amount of use.  The Court determined that “the only plausible reading of the Forfeiture Statue, when viewed in conjunction with the Beneficial Use Statute, is that a water right may be forfeited either in whole or in part.  Under pre-2002 versions of the Forfeiture Statute, a water right has been partially forfeited if, during the statutory period, the appropriator failed ‘failed to use material amounts of available water’ without securing an extension of time from the state engineer. “  P. 11.  

 

Forfeiture Post-2002; Physical Causes Exception

The Court rejected the District Court’s interpretation of the exception in Utah Code section 73-1-4(3)(f)(i) to mean that no forfeiture of any amount can occur when the source failed to fully satisfy the party’s water right.  The Court interpreted the exemption to be a codification of the physical causes exemption, which protects a water user “insofar as they beneficially use material amounts of available water.”  P.12.  The Court clarified that a party may forfeit water even during a shortage if they fail to beneficially  use material amounts of the available water.  

 

Abandonment

The Court clarified that abandonment was a common-law cause of action, not a statutory claim, as the district court treated it.  Abandonment has no time element, but has an intent requirement.  Partial abandonment is available.  To prevail, a party may show that a water user intentionally relinquished a portion of their water right.  

 

Measurement of Forfeited Water Right

The part of the opinion that will prove most controversial is the Court’s articulation of how to determine the amount of water forfeited.  The court interpreted Vincent’s water right as not being a continuous award, but an award of 5,000 acre-feet at the rate of 22 cfs—a maximum rate of diversion and a total volume allowance.  The court instructed that a forfeiture analysis should focus the volume component of the water right:

 

“If during five consecutive irrigation seasons, an appropriator has failed to use material amount of its volume allowance, a forfeiture has occurred.  The volume component of the water right should be reduced by the unused amount.  The flow component may be reduced in proportion to the volume reduction, at the district court’s discretion . . . . Finally, the number of acres irrigated is not determinative in a forfeiture analysis, though it may be relevant insofar as it indicates whether water usage is beneficial. Farmers may reduce the total acres irrigated to grow a more water-intensive crop, or vice versa, so long as they beneficially use their full entitlement. The number of acres irrigated need not match the number listed on a proposed determination or a final decree from a general adjudication.11 The central question in any forfeiture proceeding is whether the appropriator used all of its water allowance in a reasonable manner and for a beneficial purpose.”        

 

For irrigation water rights, beneficial use (quantified as irrigated acres multiplied by the duty of the area) has historically been the measure of a water right.  If the Court’s analysis focusing on volume stands, this opinion could have huge implications on Utah water law.  This firm represented DMADC in this case and has filed a motion for rehearing to try and clarify this portion of the Court’s opinion.  

Posted in Water Rights

Utah Water Right Takings

Article I, section 22 of the Utah Constitution states that “private property shall not be taken or damaged for public use without just compensation.”  A taking is “any substantial interference with private property which destroys or materially lessens its value, or by which the owner’s right to its use and enjoyment is in any substantial degree abridged or destroyed.”  Governmental entities may regulate what a property owner can do with their property and may have a significant impact on the utility or value of the property, but compensation is only required when governmental action goes too far and is a taking.  As always, the issue is how far is too far.  A taking will not occur where a government imposes reasonable restraints and regulations necessary to “protect and promote public health, public safety, morals, and general welfare.”  Regulation that inconveniences a property owner is not a taking.

 

The first inquiry in a takings analysis is whether the claimant possesses “a protectable interest in property that is taken or damaged for a public use.”  If the party does not have a protectable interest, there cannot be a taking.  Because water rights are largely determined by state law, courts will look to state law in determining whether a party has a protectable interest in water rights.  

 

In Utah, a water right is a real property interest.  Both the amount of the appropriation and the priority of the appropriation is a property interest.  The place of use, purpose of use and point of diversion are also essential characteristics of a water right.  Perfected water rights (certificated rights, judicially decreed rights, diligence claims, and adjudicated water users claims) are protectable property interests.  Protectable property interests can also include personal, intangible, incorporeal property rights such as contracts and all property rights protected under the Fifth Amendment of the United States Constitution.  This could include water shares or water supply contracts.  

 

However, a water right is not a property interest like real property; it is subject to hydraulic variability, reasonable and beneficial use requirements, and priority.  All the water of the state belongs to the public, and a water right holder has a right to use the water, as permitted and administered by the State Engineer.  A water right holder takes water rights subject to certain constraints and increasing federal and state regulation.  For example, all water rights are constrained by forfeiture and beneficial use requirements and municipalities’ water rights are constrained in that they may not “lease, sell, alien or dispose of any waterworks, water rights, or sources of water supply . . .”    

 

A party can establish a taking to all the water that no longer reaches its lands because of governmental action upstream; the taking will not the water that would never have reached the downstream users because of seepage and evaporation.  Government action depriving the water user of the use of water can be a taking.  

 

There are many water takings cases that illustrate situations that will not constitute a taking—most cases are unsuccessful and only physical takings of water have been successful in Utah.  A water right holder does not have a right to illegally use water; the State Engineer may curtail or cease any illegal diversion without causing a taking.  The State Engineer may adjust the priority date of a water right that has not been certificated—this right is considered inchoate—and the applicant did not timely file proof.  A landowner does not have a protectable interest in prohibiting upstream water diversions to maintain high river flows to maintain a high water table on land abutting river and acting as a barrier to prevent subsoil drainage back into the river.  A taking will not occur where a city requires irrigation company shareholders to dedicate water shares to connect to the city’s secondary water system, but allows non-shareholders to pay money to connect.  A party does not have a protectable interest in a particular level of soil saturation.  A property owner has no protectable property interest in using their property in a manner that is “per se injurious or obnoxious or a menace to society.”  

 

Development exactions, including water dedication requirements, must be roughly equivalent to the impact they cause, meaning the exaction must be related both in nature and extent to the impact of the development.  In Utah, for a taking to occur under a zoning ordinance, the property owner must be deprived of all reasonable use of the property.  “Mere diminution of in property value is insufficient to meet the burden of demonstrating a taking by regulation.”  

 

As illustrated above, most of the water takings cases are decided in favor of the government—against there being a taking.  The most likely situations where a taking of water rights could occur in the future would be if the State Engineer reduced the priority of a perfected right.  A taking could occur if the State Engineer or other state agency curtailed a perfected right to dedicate water to fish flows.  If a groundwater management plan reallocated water rights or reduced water rights in a manner other than on priority, this could also be a taking.  

 

If a taking does occur, damages will be in money, and property cannot be substituted in lieu of money unless the condemnee agrees.  The amount of compensation should be based on the “inherent value of the property” at issue and its highest and best use, not just the use to which the party put the use historically.    

Posted in Water Rights

Meguerditchian v. Smith: Court Provides Guidance Regarding Adequate Water Right Description in Sheriff Sales

Introduction

 

In 2008, the trial court awarded Meguerditchian $55,000 in a breach of contract action.  Meguerditchian filed for a writ of execution, listing private and real property and water rights belonging to Smith.  The trial court approved the writ and instructed the sheriff to sell non-exempt personal property, then real property, if necessary.  The sheriff did not locate personal property and posted a notice of sale for Smith’s interest in (1) a 9.42 acre parcel, (2) an Oaker Hills Plat 4 Parcel, (3) water right 51-224, and (4) “other rights of [Smith] in water rights and/or interests in water wells located in Sanpete County, Utah.”  Smith sought to set aside the motion for summary judgment and quash the sale; the court denied his motion.  

 

At the Sheriff sale Meguerditchian purchased the 9.42 acre parcel for $3,000, the Oaker Hills Plat 4 for $30,000, water right 51-224 for $30,000, and the other water rights for $3,000.  Smith moved to set aside the sale and the court found that the value of the two parcels was $505,000 and the water rights was about $150,000.  The trial court determined that the sale prices for the real property and water rights was “grossly inadequate, shocking the conscience of the Court.”  However, the court found there was nothing misleading, irregular, or unfair about the sale itself.  The trial court denied Smith’s motion to set aside the sale of the real property and granted its motion to set aside the sale of the water rights.  Smith appealed the ruling regarding the sale of real property; Meguerditchian appealed the trial court’s ruling regarding the water rights.  

 

On appeal, Smith argued that the purchase price for the property was so low in this case, that the court should set aside the sheriff sale even without any irregularities in the sale.  While the Court acknowledged that Smith’s argument may be true, it stated that a sheriff sale has never been set aside solely on price in Utah case law.  Therefore, the Court declined to rule on the issue of whether a court could set aside a sheriff’s sale based on inadequate price alone.  

 

Trial Court Did Not Abuse its Discretion in Declining to Set Aside the Sheriff’s Sale in the Absence of Irregularities

 

The trial court possesses a “high degree of discretion” in determining whether to invalidate the sheriff’s sale; the Court would only reverse where it found the trial court’s decision to be unreasonable.   Here, the defendant paid $33,000 for $505,000 worth of property, or 1/15 of the market value.  The Court determined that this discrepancy “while significant, does not present an exceptional discrepancy between the purchase price and the market value.”  The Court therefore affirmed the trial court’s decision to not set aside the sheriff’s sale in the absence of irregularities.

 

Trial Court Did not Abuse its Discretion in Determining There Were No Irregularities in the Sale

 

Where the purchase price is grossly inadequate, even slight circumstances of unfairness in the conduct of the party benefiting from the sale will create a presumption of fraud.  To this end, Smith argued that Meguerditchian failed to provide the sheriff with complete information regarding Smith’s personal property, which property should have been sold before the land and water rights.  The Court disagreed and held that the sale was not misleading or irregular because the Sheriff looked for, but could not locate personal property identified by Meguerditchian and Smith objected to the sale of personal property.  The Court also upheld the trial court’s decision that Meguerditchian was not misleading or unfair and that there were no irregularities in the sale.               

 

The Trial Court Erred in Determining that Water Right 51-224 Was Not Adequately Described

 

The Notice of Sale described two separate water rights.  The first was for “[a]ll rights of [Smith] in water right number 51-224, and all other rights of [Smith] in water coming from and the well producing said water.”  The trial court ruled this was an inadequate description because several water rights had been severed from this water right and renumbered.  The second was for “[o]ther water rights of [Smith] in water rights and/or interests in water wells located in Sanpete County, Utah.”  The trial court also found this description inadequate.  On appeal, the Court disagreed that the segregation and renumbering of parts of water right 51-224 affected the adequacy of the Notice of Sale’s description of the water right.  The Court determined that “because anyone who searched the property records would have been able to immediately determine what interest Smith held in water right 51-224, the description in the notice provided a sufficiently, ‘particular description of the property to be sold’” as required by Utah Rule of Civil Procedure 69B(b)(3).  The Court held that the trial court abused its discretion in setting aside the sale of water right 51-224.  The Court did not discuss the trial court’s setting aside of the sale of Smith’s other water rights, leaving this ruling in place.    

 

Conclusion     

 

The Court held that the trial court did not abuse its discretion in determining there were no irregularities in the Sheriff’s sale and that, in the absence of irregularities, the price alone was not a reasonable basis to invalidate the sale.  The Court held that the trial court abused its discretion in setting aside the sale of water right 51-224 because Smith’s interest in this water rights was easily discoverable.  

 

This case is important for all parties purchasing and selling water rights in a Sheriff’s sale because it provides guidance on how parties should describe water rights to be sold.        

Posted in Water Rights

UTAH SUPREME COURT DEFINES WHEN A MUTUAL WATER COMPANY MAY BE REGULATED BY THE PUBLIC SERVICE COMMISSION

In Bear Hollow Restoration, LLC v. Public Service Commission of Utah, 2012 UT 18, the Utah Supreme

Court addressed whether a mutual water company is a public utility subject to regulation by the Public

Service Commission of Utah (Commission).

Bear Hollow involved Summit Water Distribution Company (Summit) and Bear Hollow, LLC (Bear

Hollow), a Summit shareholder. Bear Hollow owned Class A shares in Summit. Class A shares did not

allow water consumption. A Class A share was for a developer to hold until the land was developed at

which time the share would be conveyed to the homeowner and converted to a Class B share, allowing

water consumption. Class B shares were appurtenant to the land of the homeowner.

Bear Hollow’s predecessor-in- interest obtained its Class A shares through a development agreement

that made them appurtenant to certain land. Bear Hollow discovered it had more shares than it needed

to complete the development and attempted to sell its surplus Class A shares. Bear Hollow could not

transfer the shares separate from the land without Summit’s approval. Summit denied Bear Hollow’s

requests to transfer its Class A shares separately from the land. Bear Hollow then petitioned the

Commission to reevaluate Summit’s exempt status and requested that the Commission regulate

Summit. The Commission denied Bear Hollow’s petition. The Commission also denied Bear Hollow’s

request for rehearing and refused to consider Bear Hollow’s amended complaint. Bear Hollow appealed

the Commission’s rulings.

The Court addressed four issues on appeal. This blog addresses only the issue of whether the

Commission properly ruled that Summit was not a public utility subject to regulation by the Commission.

The Court affirmed the Commission’s ruling that Summit was not a public utility subject to regulation by

the Commission.

A “public utility” includes water corporations “where the service is performed for, or the commodity

delivered to, the public generally.” 1 The issue for the Court was whether Summit provides “service to or

delivers its water to the public generally.” 2 The Court relied on the test in Garkane Power Co. v. Public

Service Commission 3 whether an entity provides service to the general public. The Court also pointed

out the policy justification for regulation by the Commission where regulation is necessary to prevent

“monopolistic coercion,” which potentially exists where a profit driven corporation controls essential

public services.

Addressing these concerns the Court reaffirmed the Garkan standard that a cooperative does not serve

the public generally and will be exempt from regulation by the Commission where “(1) there is

‘mutuality of ownership among all users [that] is substituted for the conflicting interests that dominate

the owner vendor-non owner vendee relationship,’ (2) the ‘cooperative serves only its owner-members,’

and (3) the cooperative ‘has the right to select those who become members.’” 4

Mutuality of Ownership Among Owner-Members

1 Bear Hollow Restoration, LLC v. Public Service Commission of Utah [get final citation], p. 7 (emphasis in original).

2 Id.

3 100 P.2d 571 (Utah 1940).

4 Bear Hollow, at 8.

Bear Hollow argued that mutuality did not exist in Summit because a shareholder, SK Resources,

controlled 80 percent of all Summit Class A shares and 51.9 percent of all outstanding Summit shares.

The Court held that mutuality existed because each shareholder had a proportionate interest in Summit

and that they had a common interest, even though not all shareholders had the same amount of voting

power. Because SK resources invested much more money into purchasing Summit shares, it had greater

entitlement to water and voting power than other shareholders. The Court held that there was mutual

ownership among Summit’s shareholders and that it did not serve the public generally.

Service Only to Owners-Members

The Court made clear that a “true cooperative only extends its benefit to a limited class of owner-

members.” 5 The Court upheld the Commission’s determination that Summit only provides service to its

members because the only entities who pay for and are entitled to receive water from Summit are

shareholders, regardless of whether the shareholders own public or rental facilities. Therefore, the

Court concluded that Summit served only its members and did not serve the public generally.

Right to Select Who Becomes Members

The Court held that Summit retained the right to select its members. Bear Hollow argued that Summit

had lost control of who became a member because it could not control to whom an existing shareholder

may sell its land and appurtenant shares. The Court stated that a cooperative is not required to exercise

its right to select its members on a case-by- case basis and that a cooperative’s right to select its

members is not lost just because membership is easy to obtain. “In short, it is irrelevant to the public

utility analysis how a member acquires his status (here by acquiring shares) so long as a member is

bound by rights and duties that are different from those of nonmembers.” 6 The Court determined that

Summit retained the right to select its members because membership was conditioned upon owning

Summit shares and complying with the articles of incorporation and bylaws.

Conclusion

The Court held that because Summit shareholders mutually own Summit, because Summit served only

its members, and because Summit had the right to select its members, Summit did not serve the public

generally and was not subject to regulation by the Commission. The Court affirmed the Commission’s

ruling. This case is significant for Utah water law because it defines when the Commission may regulate

non-profit mutual water companies, which control a significant portion of Utah’s water supply.

Posted in Water Rights

Utah Supreme Court Defines When Water Company Shares Are Appurtenant to Land

Jon Schutz and David Wright

 

In Sanpete America, LLC v. Willardsen, 2011 UT 48 (issued August 16, 2011), the Utah Supreme Court defined when water shares may be appurtenant to land and pass with land conveyances.  

 

Background

Sanpete involved 110 acres of farmland (the “Land”) owned by Willardsen.  In June 1999,  Sanpete Americas and Willardsen executed an option contract for the Land and water rights.  Sanpete America was made up of four individuals, including Robert Clyde and Paul Hamilton.  Mr. Neeley, the escrow agent and Willardsen’s attorney, stated that he did not know anything about water rights and did not guarantee the conveyance of Willardsen’s water rights.  Mr. Hamilton agreed to take care of the legal description of the water rights to be conveyed and of determining what water rights Willardsen owned.  Paul Hamilton investigated the water right and concluded that water right 65-920 (WR920) attached to the land and was sufficient to irrigate 200 acres, for a total of 600 acre-feet (af) of water.  Sanpete America believed the water was worth about $3,000 to $4,000 an af, or $1.8 to $2.4 million.  Sanpete America intended to purchase the Land and WR920 and sell 100 af of water to pay for the $328,350 purchase price of the Land.  In researching WR920, Hamilton discovered a reference to 80 shares of stock in South Fork of Ditch 28 Pumping Company (South Fork).                  

 

Sanpete  and Willardsen executed a Land Purchase Agreement for 109.45 acres, WR920 for a flow of 1.1783 cfs and irrigation of 200 acres, a culinary water well, an irrigation pond, and all other water that was part of the property.   Willardsen executed a warranty deed on August 7, 1999, but did not immediately deliver it to Sanpete because it lacked a description of water right 65-918 (WR918) for a smaller culinary well on the Land.  Hamilton provided Neeley’s office with a description of WR918, but instead of adding the description of WR918, Neeley’s office replaced the description of WR920 with the description of WR918 .  Neeley’s office recorded the warranty deed with only a description of WR918.  The warranty deed included a transfer of all appurtenant water.  Later, Neeley’s office prepared a deed titled a Warranty Deed, but the language of the deed quitclaimed Willardsen’s interest in WR920 to Sanpete .  Neeley sent of copy of this deed to the Division of Water Rights to update its ownership records.  

 

The Division responded by saying  WR920 was owned by South Fork,  which had issued shares to various individuals.  The Division did recognize Sanpete  as the owner of sufficient water to irrigate 68.46 acres.  South Fork had issued 144 shares.  Willardsen’s predecessor in interest owned 80 shares, which he transferred to Willardsen along with the Land by deed.  The only other shareholder was Ms. Graser, who held 37 shares.  South Fork had  functioned as a corporation for decades.           

 

Sanpete borrowed the funds to pay Willardsen and sold portions of the land and WR920 to service that loan.  

 

Sanpete  sued Graser, Willardsen, and Neeley.  It sought to quiet title against  Graser.  It sued Willardsen for misrepresentations, breach of the Land Purchase Agreement, and unjust enrichment.  It sued Neeley for breach of the escrow contract, professional negligence, and breach of fiduciary duties as escrow agent for not following the  escrow instructions.  Sanpete reached a stipulated settlement with  Graser.  This blog post will address only the claims against  Willardsen.       

 

Trial Court Decisions

Judge Mower of the trial court dismissed  Sanpete’s claims.  He  ruled that WR920 did not pass by appurtenance.  He found that  Hamilton had undertaken the responsibility to describe the water rights and Willardsen had relied on Hamilton’s efforts.  Judge Mower did rule that Willardsen breached the Land Purchase Agreement by not conveying WR920 by warranty deed, but determined that this did not harm  Sanpete.    

 

All the parties filed  motions to amend Judge Mower’s findings and conclusions of law.  Judge Mower retired and Judge Bagley assumed the case.  Judge Bagley granted Willardsen and Neeley’s motion and denied  Sanpete’s motion.  Judge Bagley determined, among other things, that WR920 was appurtenant to the Land, WR920 was conveyed by appurtenance in the August 7, 1999 warranty deed, Willardsen conveyed clear title on August 7, 1999, Willardsen did not breach the Land Purchase Contract, and Sanpete  was not entitled to damages or attorney fees.      

 

Utah Supreme Court Decision

 

The Supreme Court focused on two issues regarding WR920: (1) whether Willardsen conveyed his portion of WR920 under the warranty deed and, if so, (2) whether Willardsen breached his covenant of warranty by not defending Sanpete ’s title to WR920 in its suit against Ms. Graser.  The Court held that  Willardsen conveyed his portion of WR920 under the warranty deed and that he did not breach his covenant of warranty.  In short, it determined that Sanpete  received all of Willardsen’s water rights for the Land and was not harmed, even if it was less water than what  it had mistakenly calculated.  The Court   affirmed on all issues.   

 

The Court held that WR920 was appurtenant to the Land.  The Court  relied on Utah Code section 73-3-11, which states that a right to use water based on shares is not appurtenant to land.  It also stated that this statute creates a rebuttable presumption that a water right represented by shares of stock does not automatically pass to a grantee as an appurtenance.  This presumption may be rebutted with clear and convincing evidence that the water right is appurtenant and that the grantor intended the water right to transfer with the land, even though it is not mentioned in the deed.  Therefore, the issue for the Court was whether WR920 was appurtenant to the Land and whether Willardsen intended that WR920 be conveyed by the warranty deed.  

 

The Court articulated a test for determining when shares are appurtenant to land: (1) whether the use of the water right on the land greatly increased the land’s value; (2) the length of use upon the land, particularly, the length of use beyond the grantor’s ownership; and (3) the extent of use upon the land.  The Court determined that WR920 met each of these criteria and was appurtenant to the Land because (1) the water right had been used on the Land for decades: the well for WR920 was drilled in 1934, and Willardsen acquired the water right in 1967 and used it continually since that time; (2) WR920 was used on all of Willardsen’s 109 acres; and (3) it was implicit that the value of the Land was very little without WR920.  The Court determined that Willardsen intended to transfer WR920 Sanpete  because both parties conceded this point.  Also, the documents at issue, the warranty deed and quit claim deed, show the parties’ intention that WR920 be transferred to Sanpete .  Combining its determination that WR920 was appurtenant to the Land and that Willardsen intended to transfer WR920 to Sanpete , the Court held there was clear and convincing evidence to rebut the presumption that WR920 was not appurtenant to the Land.    

 

The Court found that the exceptions to the conveyance of water rights by appurtenance found at Utah Code section 73-1-11 were not applicable.  The Court also found that Willardsen did not breach the covenant of warranty.  

 

Conclusion  

Sanpete is significant because it establishes that one may rebut the presumption that a water right represented by shares of stock does not automatically pass to a grantee as an appurtenance.  The presumption is rebutted with clear and convincing evidence that the water right is appurtenant and the grantor intended the water right to transfer with the land.  Sanpete also sets forth the criteria for determining when a water right represented by shares is appurtenant to land.  

 

Posted in Water Rights

United States Supreme Court Hears Arguments on Interstate Water Case – Flooding to Sprinkler Irrigation Issues

Last week, the United States Supreme Court heard arguments from the States of Montana and Wyoming regarding their interests in the Powder and Tongue rivers, which flow from Wyoming into Montana, and are tributaries to the Yellowstone River.  The Court has original jurisdiction to hear interstate disputes.  

 

Montana brought the case and alleges that Wyoming is using more water than it is entitled to under a 1951 Compact between Montana, Wyoming and North Dakota.  One of the primary issues is whether Wyoming may use modern irrigation techniques, diverting the same quantity of water, but reducing the amount of return flows.  

 

The Court appointed a special master in the case: Barton Thompson of Stanford Law School.  Thompson issued a report in February 2010, available here.  The United States is not a party to the suit, but filed an amicus brief supporting Wyoming.  

 

The most novel claim for Western law, including Utah Water Law, is Montana’s claim that Wyoming, by switching to more efficient irrigation, is consuming more water than it would under flood irrigation to Montana’s detriment because less water is running back into the river after irrigation.  Wyoming was engaged in the same uses on the same acreage, diverting the same amount of water; the only change at issue was the amount of water consumed because of more efficient sprinkler systems.  After a lengthy discussion of consumption versus diversion of water, Thompson’s report concluded that the Compact itself “establishes only the amount of water that can be diverted, not consumed.”  However, the Compact states that each party’s diversion must be “in accordance with the laws governing the acquisition and use of water under the doctrine of appropriation.”  Therefore, Thompson also addressed the issue of whether prior appropriation law addresses whether “(1) an agricultural appropriator, (2) [may] increase his or her consumption of water, (3) on the same irrigated acreage to which the appropriative right attaches, (4) to the detriment of downstream appropriators, (5) in the same water system from which the water was originally withdrawn?”  Though he states that no western court has addressed this issue squarely, he concluded that the Compact should not be read to prohibit increased consumption in Wyoming because of irrigation efficiency, even where it harms Montana water users.   

 

Montana also claimed that Wyoming was violating the Compact through “(1) irrigation of new acreage, (2) storage of water in new or expanded reservoirs, and (3) groundwater withdrawals.”  Thompson’s report concluded that the Compact protected pre-1950 water rights in Montana from new diversions in Wyoming after 1950 and from new acreages in Wyoming if it harms pre-1950 Montana uses.  The report concluded that appropriations for storage, new acreage, or supplemental water supplies must come from “unused and unappropriated water” and must protect pre-1950 water rights in Montana.  “Montana, however, cannot demand that Wyoming release water from its reservoirs to meet the needs of pre-1950 appropriators in Montana if the water was stored at a time when the needs of the pre-1950 appropriators were fully met.”   Lastly, Thompson’s report determined that some groundwater extractions could violate the Compact if the pumping began after January 1, 1950 and is hydrologically connected to the Yellowstone River or its tributaries.  However, he concluded that this issue need not be resolved in this case.

 

In the end, Thompson recommends that the U.S. Supreme Court deny Wyoming’s motion to dismiss.  

Posted in Water Rights

Utah Stream Access Coalition Files Suit Challenging Public Waters Access Act

On November 12, the Utah Stream Access Coalition filed suit in Wasatch County challenging the Public Water Access Act.  The Utah legislature passed this act in 2010.  

 

The suit names Victory Ranch, Silver Creek-Robert Larsen Investors, Wasatch County Sheriff Todd Bonner, and the Utah Division of Wildlife Resources as defendants.      

 

The case seeks the following relief:

 

  1. Judgment declaring that Utah’s public waters are owned by the people of Utah for their benefit; that the public has an easement, right-of-way and servitude to use Utah’s public waters for recreation and other lawful purposes; and that private landowners may not prevent Coalition members or the public from accessing public waters;
  2.  Judgment declaring that the Act is unconstitutional;
  3.  An injunction barring defendants from preventing public access to public waters;
  4.  An injunction barring the Division of Wildlife Resources and the County Sheriff from penalizing the public for accessing public waters.  

 

Posted in Water Rights

Present Perfected Rights on the Colorado River

Water rights of the Colorado River are governed by the “Law of the River.”  The Law of the River is made up of interstate compacts, a series of federal laws, and with several United States Supreme Court cases.  The documents making up the Law of the River can be found here. [http://www.usbr.gov/uc/rm/crsp/lor.html]  One component of the Law of the River deals with “present perfected rights” (PPRs).  This blog post addresses PPRs.

 

As a general matter, PPRs are the most senior rights on the Colorado River.  (Rethinking the Future of the Colorado River, Draft Interim Report of the Colorado River Governance Initiative, 46,  December, 2010.(rethinking))  PPRs are water rights originating under state law and state law must be consulted in determining the exact nature of the PPRs.  (Bryant v. Yellen (1980) 447 U.S. 352, 370-371.)  However, even though the source of PPRs is state law “the question of whether rights provided by state law amount to present perfected rights . . . is obviously a federal one.”  (Id. at 317, fn 22.)  

 

The term “present perfected rights” first appeared in the Law of the River in Article VIII of the Colorado River Compact executed on November 24, 1922.  Article VIII states:

 

Present and perfected rights to the beneficial use of water of the Colorado River system are unimpaired by this compact.  Whenever storage capacity of 5,000,000 acre-feet shall have been provided on the main Colorado River within or for the benefit of the Lower Basin, then claims of such rights, if any, by appropriators or users of water in the Lower Basin against appropriators or users of water in the Upper Basin shall attach to and be satisfied from water that may be stored not in conflict with Article III.

 

The term is in section VI of the Boulder Canyon Project Act of December 21, 1928, 43 U.S.C. § 617e, stating:

 

That the dam and reservoir provided for by Section 1 hereof shall be used: First, for river regulation, improvement of navigation, and flood control; second, for irrigation and domestic uses and satisfaction of present perfected rights in pursuance of Article VIII of said Colorado River Compact; and third, for power . . .

 

Later, the Report of the Special Master in Arizona v. California (1963) 375 U.S. 546, dated December 5, 1960, states that neither the Compact nor the Boulder Canyon Project Act defined PPRs, but that “it seemed clear that the term was not used in either of these enactments to refer to notices of appropriation which had not yet become the foundation of a going economy—mere paper filings . . .”  Finally, the Supreme Court, in Arizona v. California (1964) 376 U.S. 340, 341 defined PPRs in Article I(G)-(H):

 

(G) ‘Perfected right’ means a water right acquired in accordance with State law, which right has been exercised by actual division or a specific quantity of water that has been applied to a defined area of land or to definite municipal or industrial works, and in addition shall include water rights created by reservation of mainstream water for the use of Federal establishments under Federal law whether or not the water has been applied to beneficial use;

(H) ‘Present perfected rights’ means perfected rights as here defined, existing as of June 25, 1929, the effective date of the Boulder Canyon Act.    

 

(See also Arizona v. California, 547 U.S. 150, 154 (2006) and Mohave Valley Irr. and Drainage Dist. v. Norton, 244 F.3d 1164, 1165 (9th Cir. 2001).)  The Upper Colorado Basin Compact states that rights in the upper basin must have been perfected prior to November 24, 1922, when the Colorado River Compact was signed.  (Upper Colorado Basin Compact, Art. IV(c).)  This creates some ambiguity whether November 25, 1922 or June 25, 1929 is the priority date for PPRs and whether the 1929 date established by Arizona v. California applies to states that were not involved in the litigation.  (Rethinking the Future of the Colorado River, Draft Interim Report of the Colorado River Governance Initiative, 47, December, 2010.)      

 

PPRs can also refer to land that the federal government withdraws from the public domain, which land contains a reservation of unappropriated appurtenant water necessary to accomplish the purpose of the reservation.  (High Counrty Citizens’ Alliance v. Norton, 448 F.Supp.2d 1235, 1239 (D.CO 2006), citing Cappaert v. United States, 426 U.S. 128, 138 and Winters v. United States, 207 U.S. 564 (1908).)  This federal reserved right “is a ‘present perfected right’ and is entitled to priority.”  (Id. citing Arizona v. California, 460 U.S. 605, 610 (1983).)

   

PPRs are important because Article II(B)(3) of the 1964 Supreme Court Decree states that in any year where there is less than 7.5 million acre-feet available for use in California, Nevada, and Arizona, the Secretary of the Interior must first supply water to PPRs, in order of priority, regardless of state lines.  (Id. at 342-43; see also Mohave Valley Irr. and Drainage Dist., 244 F.3d at 1165.)  Later, section 301(b) of the Colorado River Basin Project Act modified Article II(B)(3), stating that Article II(B)(3) must be administered to give PPRs, users with existing contracts, and Federal reservations priority before the Central Arizona Project.  (Public Law 90-357 (September 30, 1968) 82 Stat. 885, codified at 43 U.S.C. § 1521(b).)  There is some debate whether a party possessing a PPR may divert water without a contract with the U.S. Bureau of Reclamation.  (See Robert Glennon and Michael J. Pearce, Transferring Mainstem Colorado River Water Rights: The Arizona Experience (Summer 2007) 49 Ariz. L. Rev 235, 247; see also Section 5 of the Boulder Canyon Project Act, at 43 U.S.C. § 617d.)    In short, PPRs are a high priority water right on the Colorado River.  

 

The United States Supreme Court has determined the PPRs in the Colorado River Lower Basin states.  In Article VI of its 1964 Decree, the Supreme Court set forth the manner in which the PPRs would be determined, stating that within two years Arizona, Nevada, and California would each present to the Court a list of the PPRs in their state.  (Arizona v. California, 376 U.S., at 351-52.)  Each state and water user had to prove that they possessed PPRs.  Many of the parties asserting PPRs did not have proof of the extent of their diversions prior to 1929.  Furthermore, there were many unresolved issues regarding how PPRs were calculated, such as whether the PPRs should be asserted as a single diversion amount in acre-feet or in terms or irrigable acreage and whether districts such as Imperial Irrigation District, had to prove use for individual parcels or the amount used district-wide.  Eventually, the parties each filed their lists of PPRs with the Supreme Court and motioned in the Supreme Court for a determination of the PPRs within their states.  On January 9, 1979, the Supreme Court granted the States’ motion for a supplemental decree on the PPR issue left open by Article VI of the Court’s 1964 Decree.  (Arizona v. California, 439 U.S. 419 (1979); see also Arizona v. California 547 U.S. 150, 166-181.)  The Court determined the PPRs in California (3,019,573 acre-feet), Nevada (13,304 acre-feet), and Arizona (1,077,971acre-feet). (Id.)        

 

Another case elaborates on PPRs in the Imperial Irrigation District.  (Yellen v. Hickel, 352 F.Supp. 1300 (1972).)  In Yellen, the plaintiffs filed their suit to enforce section 5 of the Reclamation Law of 1902.  Section 5 bars the Bureau of Reclamation from selling water for use on land that exceeds 160-acres owned by one party, and requiring that the owner of the land reside on the property.  (43 U.S.C. § 431.)  The defendants argued, inter alia, that the Boulder Canyon Project Act governed Colorado River water use and that it recognized and gave priority to PPRs.  Defendants argued that because they possessed PPRs they could not be denied Colorado River water because of the acreage and residency requirements of the Reclamation Law.  In the end, the Court held that it did not have the jurisdiction to determine whether the plaintiffs possessed PPRs, but that if it did have jurisdiction, it would have determined that the defendants did not possess PPRs.  (Yellen, at 1319.)  The Court stated that the defendants did not present evidence of PPRs as of 1929.  The defendants had filed water rights claims to divert water from the Colorado River in 1900, but by 1903, their intakes were clogged with silt and they ceased their diversions pursuant to the rights filed.  Therefore, defendants could not establish perfected water rights as of 1929.  Pursuant to Yellen, any individual asserting a PPR should be prepared to demonstrate the use and establishment of their PPR prior to 1929.           

The PPRs in the upper basin have not been defined by the Supreme Court.  These states are in the process of determining their PPRs internally.  (Rethinking the Future of the Colorado River, Draft Interim Report of the Colorado River Governance Initiative, 47, December, 2010.)  The PPRs for the upper basin were calculated during the Colorado River Compact negotiations around 1920 and provide the best estimate, or at least a starting point, for determining PPRs in the Upper Basin.  The Bureau of Reclamation and the Committee on Water Requirements, a subcommittee of the Colorado River Negotiations, each calculated a separate estimate of PPRs:     

 

State Water Consumption (AF)(for irrigation), circa 1920
Table A, Bureau of Reclamation Table C, Committee on Water Requirements
Colorado 1,100,000 1,105,000
New Mexico 68,000 99,750
Utah 538,500 376,000
Wyoming 550,500 600,000
Upper Basin Total 2,267,000 2,180,750

 

(Rethinking the Future of the Colorado River, Draft Interim Report of the Colorado River Governance Initiative, 48, December, 2010.)  

 

In conclusion, though there is some ambiguity, PPRs are fairly defined under the Law of the River and generally present a high priority to Colorado River water if a party can meet the burden of establishing PPRs.    

Posted in Water Rights