Water Rights and Takings P. Fritz Holleman, Esg. “Water Rights and Takings: Inherent Limits on the Property Right and Current Developments in the Law” presented by P. Fritz Holleman, Esq. Porzak, Browning & Bushong Boulder, CO Defining the property interest — “do plaintiffs possess a property interest and, ifso, what is the proper scope ofthat interest?” Tiage v. (inited States, 42 Fed. Cl. 249, 250 (1998). I. DIFFERENT SYSTEMS OF SURFACE WATER ALLOCATION. A. Prior Appropriation. Where: Western United States. Nine “pure” prior appropriation states in the Mountain West and Alaska. Basic Rule: Premise of this system of water allocation is that in a time of shortage “first in time is first in right,” i.e. when there is not enough water for everyone, “senior water rights” (those initiated earlier in time) will get their full allotment before “junior water rights” (established later in time) can take any water. Rights protected via a “call” — “A call is placed on a river when a senior appropriator forces upstream juniors to let sufficient water flow to meet the requirements of the senior priority.” 1151 Properties East, inc. v. Simpson, 938 P.2d 168, 171 n. 2 (Cob. 1997). Geographic relationship to water source is immaterial. State law often allows private right of condemnation to convey water from source to place of use. History: Originates in the customs of hardrock miners on the federal public land in California who recognized a better right in those that made earlier uses of water. Later adopted to regulate water allocation among agricultural users in the developing West. Doctrine incorporated into many state constitutions at statehood. Administration: Most states have a state permitting agency, with a right to appeal any administrative decision to state district court. The “Colorado System” uses special water courts. Appeal from Colorado water courts is straight to the Colorado Supreme Court. B. Riparian Doctrine. Where: Eastern United States. Basic Rule: Each landowner bordering a waterway has a right of reasonable use, and may not unreasonably interfere with reasonable uses made by other riparian landowners. In a time of shortage, all users must reduce use proportionately. Rights protected under tort/nuisance concepts. CLE INTERNATIONAL a PAGE H-I. EMINENT DOMAIN Water Rights and Takings P. Fritz Holleman, Esq. Ilistory: Llements of the doctrine are apparent in both the English Common Law and French Civil Law. Administration: Generally subject to state permitting authority. C. Hybrid Systems. Where: California, Oregon, Washington, Hawaii, Midwest. llislory: Started as riparian states, shifted to prior appropriation while still recognizing riparian rights and concepts to varying degrees. Note that legislation limiting riparian rights in effort to switch to prior appropriation led to water rights takings suits in many states. See, e.g., In re Adjudication ofthe Water Rights of the L~pperGuadalupe Segment ofthe Guadalupe River Basin, 642 S.W.2d 438 (Tex. l982); Belle Fourche Irrigation Dist. v. Smiley, 176 N.W.2d 239 (S.D. 1970); los/in v. Mavin Municipal Water District, 429 P.2d 889 (Cal. 1967); Williams v. City of Wichita, 374 P.2d 578 (Kan. 1962); Bau,nann v. Smrha, 145 F. Supp. 617 (D. Kan. 1956); State cx re Emery v. Knapp, 207 P.2d 440 (Kan. 1949); C’al~fornia-Oregon Power Co. v. Beaver Portland C’ement (‘o., 73 F.2d 555 (9th Cir. 1934); In re Hood River, 227 P. 1065 (Or. 1924). D. Federal Overlay. 1. Federal and Indian reserved water rights. Implied reservation of enough water to serve primary purposes of any federal land reservation — recognized to varying degrees on Indian Reservations, national parks, wilderness areas, military bases, etc. Many such claims remain unquantified. See e.g., Winters v. United States, 207 U.S. 564 (1908); Arizona v. California, 373 U.S. 546 (1963); UnitedStates v. New Mexico, 438 U.S. 696 (1978). 2. McCarran Amendment. Waives sovereign immunity and authorizes joinder of the United States in State judicial and administrative adjudication of water rights. 43 U.S.C. § 666. 3. Navigation servitude. Federal power over commerce and navigation may trump state based water rights without payment ofjust compensation. See Trelease, Federal State Relations in Water Law 175, National Water Comm’n Legal Study No.5(1971). E. Contract Water Rights. Contracts for the use of water from projects developed by Federal or State agencies. Individual water users’ rights generally governed by express terms of the contract, but subject to the terms, conditions and implied limits of the underlying state law based water right for the project generally held in the name of the state or federal agency that developed the particular project. There has been substantial dispute and a significant body of case law on whether better title to the underlying state based water right rests with the United States or with the landowners/irrigators making beneficial use of federal project water. See e.g., Kiamath Irrigation District v. United States, 67 Fed.Ct. 504 (2005)(discussing and distinguishing competing lines of cases on the basis of the differences in contract language and state law). CLE INTERNATIONAL a PAGE H-2 a EMINENT DOMAIN Water Rights and Takings P. Fritz Holleman, Esq. F. Groundwater. Unique animal. Sometimes subject to same rules as surface use, often the subject of particular statutes allocating use depending on such things as overlying land ownership and aquifer characteristics. Colorado was a leader in “conjunctive management” - - recognizing hydrologic interconnection of ground and surface water. Other states still wrestling with how to integrate groundwater and surface use. II. PHYSICAL DIFFERENCES MAKE THE PROPERTY MORE DIFFICULT TO DEFINE. Takings law is complicated enough when applied in the land context — it becomes even more difficult when applied to a property interest in water. See, e.g., Tim/are Lake Basin Water Storage District v. United States, 49 Fed. Cl, 313, 319 (2001)(takings analysis applied to water rights presents “an admittedly unusual situation”). A. Hydrologic Variability. Variable hydrograph during the course of every year. Significant difference between wet, dry and average years. Many streams in the arid Western United States are overappropriated, and in the late summer and fall, junior rights are often shut down. In a dry year, many junior rights may never be in priority. • In Central Colorado Water Conservancy District v. Simpson, 877 P.2d 335 (Cob. 1994), the Colorado Supreme Court denied a taking claim at least in part because the alleged injury to junior rights caused by new legislation was too uncertain in light of the variable flows on the South Platte River. The “intermittent” nature of any potential injury to junior rights from the legislation did “not constitute a substantial diminution of the economic value of the affected rights.” Id. at 347. B. Shared, Flowing Resource. Use and reuse are the rule. Each physical molecule of water in the South Platte is used up to seven times before the water reaches the Nebraska line. Most rights satisfied to some degree by return flows from various upstream uses. Return flow rates vary depending on the type of use and can be as high as 97% for winter time municipal use (i.e., 3% consumption for in-house uses) and as low as 20% for some highly consumptive agricultural uses (i.e., 80% consumption). A key component of the value of any water right is its historic consumptive use. C. Imprecise Measuring and Accounting. “Many of the early Colorado decrees awarded rates of flow in excess of the amounts necessary for the petitioner’s beneficial use, and some even went so far as to grant more water than a particular ditch would carry.” Farmers, 975 P.2d at 198 (Cob. 1999). This is judicial recognition of the well known fact that there are many “paper water rights” in the West —judicial decrees and agency permits describing much more water than has been or even can be used forthe purported purposes. III. ATTRIBUTES AND INHERENT LIMITS OF A WATER RIGHT IN A PRIOR APPROPRIATION STATE. Application of the Lucas background principles. The Government can avoid paying compensation if regulation imposes limitations that “inhere in the title itself, in the restrictions that background principles of the State law of property and nuisance already place upon land ownership.” Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1029 (1992). In other words, “[w]here the State seeks to sustain regulation that deprives land of all economically beneficial use, . it may resist compensation only ifthe logically antecedent inquiry into the nature of the owner’s estate shows that the proscribed use interests CLE INTERNATIONAL a PAGE H-3 a EMINENT DOMAIN Water Rights and Takings P. Fritz Holleman, Esg. were not part of his title to begin with.” Id. at 1027. l~heproperty interest in water in a prior appropriation state is subject to many significant “inherent limits” that must be considered in any takings analysis. Depending on the jurisdiction, the attributes of a water right set forth below may or may not be a “background principle” of state water law potentially asserted by the Government to diminish or defeat any claim for a taking. A. Definition ofa Water Right Justice Hobbs in Santa Fe Trail Ranches Property Owners Association V. Simpson, 990 P.2d 46, 53 (Cob. 1999): The property right we recognize as a Colorado water right is a right to use beneficially a specified amount of water, from the available supply of surface water or tributary groundwater, that can be captured, possessed, and controlled in priority under a decree, to the exclusion of all others not then in priority under a decreed water right. B. Creation of Water Right: Three general requirements for creating a vested property right in a prior appropriation state: (I) intent to make an appropriation; (2) diversion or control of the water claimed; and (3) appropriation of the water to beneficial use.