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Arizona Supreme Court Clarifies Water Transfer Rules

The Arizona Supreme Court has issued an important decision regarding water transfers and who may participate as an “interested party” in administrative proceedings before the Arizona Department of Water Resources (ADWR). The decision was issued on November 12, 2015 in the case of Arizona Department of Water Resources v. McClennen, No. CV-15-0223-SA, which is a dispute between Freeport Minerals Corporation and officials within Mohave County over water on Planet Ranch. That ranch has been the subject of multiple water transfer proposals since the 1980s, and for a time was owned by the City of Scottsdale for that purpose, before it was sold to Freeport in 2008.

In 2010, Freeport filed applications with ADWR to transfer surface water rights that had historically been used on Planet Ranch in Mohave County for use at the Bagdad Mining Complex in Yavapai County, which is adjacent to Mohave County on the east. A portion of the water rights would also be used within Mohave County to support the Lower Colorado River Multi-Species Conservation Program. Mohave County filed objections with ADWR, alleging that the transfer might negatively affect residents of the County and would be against the public interest.

ADWR rejected the County’s objections, concluding that Mohave County had no standing to participate in the proceeding since it did not hold any water rights or other interest that is protected under the water transfers statute, found in Arizona Revised Statutes § 45-172. The County appealed that ruling, which led to last week’s decision by the Supreme Court.

The court held that § 45-172 allows ADWR to consider a limited set of factors when determining whether to approve a transfer of surface water rights. The statute requires that the water rights proposed for transfer “shall have been lawfully perfected … and shall not have thereafter been forfeited or abandoned,” and “vested or existing rights to the use of water shall not be affected, infringed upon, nor interfered with” by the transfer. Mohave County did not allege any violation of those standards by the proposed transfer from Planet Ranch, and did not hold any vested water rights itself. Therefore, the court held that the County had not raised any arguments that needed to be considered by ADWR, and the agency did not need to allow the County to participate in the proceeding.

Mohave County argued that a water transfer should be subject to a discretionary public interest test, like that imposed on new appropriations of water. Arizona Revised Statutes § 45-153 allows ADWR to reject a proposed appropriation if the use would be “against the interests and welfare of the public.” The Supreme Court held, however, that the public interest test only applies to new appropriations of water and not to water transfers, since that language appears nowhere in § 45-172. That is consistent with the concept that water rights, once formed, are property rights that can be used or transferred by the owner without ongoing oversight from ADWR, as long as the use does not infringe on the rights of other water users.

The Supreme Court used the factors to be considered by ADWR as the basis for interpreting who may be an “interested person” that can file objections against a water transfer. The term is not defined in the statute, so the court looked to the purpose of objections. The court held that in this context, the phrase “interested person” should mean a person who has an interest protected by § 45-172, i.e., an owner of a vested water right that could be affected by the transfer. Since the County did not fall within that definition, the court ruled that the County had no standing to file an objection, and ADWR was correct in rejecting its participation.

In essence, Mojave County objected to the Planet Ranch water transfer based on the general interest of its citizens, rather than any special interest in the water rights at issue. Water in Arizona is owned and allocated by the state through ADWR, and the Supreme Court denied the attempt by Mohave County to insert itself into that process without a demonstrable interest in water rights. The decision is favorable for water rights holders, since it rejected the argument that ADWR should apply a public interest test to all water transfers. Instead, the Supreme Court affirmed that once an initial appropriation has been made, the resulting water rights constitute legal entitlements that can be freely used and transferred by the owner, in the absence of concrete harm to other water users.

Of course, whether opposing the water transfer would actually be in the interest of Mojave County citizens is debatable, but the political process resulted in County elected officials determining that they should object to the transfer. The Supreme Court’s decision represents a victory of water law over politics, at least temporarily in this matter. Water management often comes down to popular opinions and politics in its most base form, so it is refreshing to see a court applying the law objectively, rather than trying to divine the political currents.

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Dark Clouds Over California: The Sustainable Groundwater Management Act of 2014

I am excited to release a new white paper regarding the California Sustainable Groundwater Management Act of 2014, entitled Dark Clouds Over California. Please download the white paper and share with your colleagues. For your convenience, the executive summary is published below. Additionally, the Act is spread across three legislative bills, some of which modify each other, making them difficult to read. A compiled version of the Act is available here. Other provisions of the three bills that are not contained within the main body of the Act may be found here.

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The California Water Market 2014

There has been no shortage of news articles on the California drought this year. Many have helped inform the public about critical issues related to the conservation and development of water resources in the state, and about changes or potential changes in the laws and regulations concerning urban water use and groundwater. There have also been a number that focus on the existence of and increased activity in a market for water rights and supplies, including this article from today in Bloomberg.

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The California Water Action Plan of 2014

On January 27, 2014, Governor Brown released a California Water Action Plan (CWAP) to address the ongoing drought and long-term challenges such as environmental protection, population growth and climate change. While the document was released several months ago, the implementation actions are only now starting to be clarified, especially regarding groundwater. This post reviews that document and evaluates the various actions identified in the CWAP from the perspective of a legal practitioner.

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Arizona’s Strategic Vision for Water Supply Sustainability

AZ Report CoverThe Arizona Department of Water Resources (ADWR) has published a new report entitled Arizona’s Next Century: A Strategic Vision for Water Supply Sustainability (2014). This ambitious report examines the historical and future management of water supplies and demands in Arizona and 22 planning areas within the state. It concludes that Arizona faces a water supply deficit of approximately 900,000 acre-feet in the next 25 to 50 years, which is a significant gap to close.