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November 26, 2014

November 25, 2014

First District Court of Appeal Holds State Water Board May Restrict Beneficial Water Use by Senior Water Rights Holders, Relying on Public Trust Doctrine

Most Californians are well aware of the restrictions currently being placed on water use throughout the state. The ongoing drought and dwindling water supplies in California are dramatically affecting those with rights to divert water from the state's watercourses, particularly those whose rights are considered junior. In May of this year, California's State Water Resources Control Board (the "Water Board") issued notices to junior appropriators diverting water from the Sacramento and San Joaquin River watersheds, the Scott River watershed, and parts of the Russian River watershed to immediately cease all diversions in those watersheds because the existing water supply is insufficient to meet the needs of all. The curtailment orders affect only water users operating under permits issued by the Water Board, the so-called post-1914 appropriative rights holders.

Although users with senior rights are not directly impacted by the Water Board's current curtailment notices, on June 20, 2014, the Water Board issued a Notice of Proposed Emergency Rulemaking, under which it claims to have the power to issue curtailment notices as part of the drought emergency to any diverter, including riparians and pre-1914 appropriators. (Read proposed text of regulation.)

The Water Board's proposal has not yet been tested, but a decision has just been issued by a California court of appeal holding that the Board possesses the power to regulate and curtail use even by senior rights holders using water for a recognized beneficial use, when wildlife habitat is threatened. On June 16, 2014, in Light v. State Water Resources Control Board (2014) Daily Journal DAR 7658 ("Light"), the First District Court of Appeal upheld a regulation adopted by the Water Board mandating the protection of juvenile salmon, which will likely require a reduction in water diversion regardless of the priority of the user's right. Reversing the trial court, which had struck down the regulation, the court of appeal upheld the Water Board's authority to weigh competing beneficial uses, in this case preferring the protection of wildlife habitat over the commercial use of water to protect crops against frost. Though the Light case cites longstanding precedent as to the Water Board's general authority, its holdings appear to expand use of the public trust doctrine to permit the Water Board to favor one water use over others in certain circumstances.

Insufficient Water for Competing Beneficial Uses and 23 CCR § 862

To understand the potential implications of the Light case, it is important to understand the legal and factual background leading up to the case. 

Riparian and Appropriative Rights

California's system of surface water rights distinguishes between the rights of "riparian" users, i.e., those who possess water rights by virtue of owning the land adjacent to watercourses, and "appropriators," those who hold the right to divert water for use on non-riparian lands. Appropriators are further divided into pre-1914 and post-1914 water rights holders. The Water Board regulates appropriative water rights acquired after 1914 by permit or license, and the terms of the permit or license strictly circumscribe the nature of the water right. But before 1914, appropriative rights were obtained under common law principles or earlier statutes, and neither riparian rights holders nor pre-1914 appropriators are required to obtain government authorization for their rights to divert. When water supplies are insufficient to satisfy all rights holders, under the "rule of priority" riparian users are generally entitled to satisfy their reasonable needs first, before appropriators can divert water. And appropriators are governed by the "first in time" rule; thus pre-1914 appropriators are senior to and have priority over junior appropriators diverting in accordance with post-1914 Water Board permits.

Insufficient Water for Frost Protection and Salmon

The Light case involves the use of water to protect grape vines from frost damage. Delicate new growth first appearing on plants in the spring may be damaged by frost, and grape plants are particularly susceptible. Frost has the potential to cause substantial crop loss, but a time-tested method of preventing frost damage is to spray the new growth with a uniform, continuous mist of water, which freezes on the plants and insulates against colder air. The diversion of water for frost protection is declared a beneficial use of water in California. Cal. Code Regs., tit. 23, §§ 662.5, 671.

During an unseasonably cold spring in 2008, the National Marine Fisheries Service discovered two episodes of fatal strandings of young salmon in the Russian River and one of its tributaries. The Fisheries Service blamed the strandings in large part on grape growers located along the river system, concluding that a sudden decrease in the volume of water flowing in the streams had been caused by growers diverting large amounts of water at the same time to protect their crops from frost, trapping the salmon in isolated pools.

Following the discovery of the salmon deaths, the Fisheries Service formed a task force and attempted to organize voluntary efforts to reduce the impact of frost protection on the river system. Ultimately, however, the Fisheries Service concluded that the problem could not be managed through voluntary efforts, because the inability to compel compliance of all growers made success unlikely. The Fisheries Service urged the Water Board to undertake regulatory action, and in September 2011, following environmental review and public hearings, the Board adopted a regulation addressing diversion for frost protection, codified as Cal. Code Regs., tit. 23, section 862 ("Section 862").

The Water Board Mandates Restrictions on Diversions for Frost Protection

In Section 862, the Water Board declared that the diversion of water in the Russian River watershed for frost protection uses between March 15 and May 15 is an unreasonable use of water under Article X, section 2 of the California Constitution and Water Code section 100, unless the diverter complies with a Board-approved Water Demand Management Plan ("WDMP"). The stated purpose of the WDMP, and Section 862, is "to prevent cumulative diversions for frost protection from causing a reduction in stream stage that causes stranding mortality." 23 CCR 862(b). The WDMP will not be prepared or administered by water boards, but instead by "an individual or governing body capable of ensuring that the requirements of the program are met," likely self-organized groups of agricultural diverters. The WDMP must include five provisions—(1) an inventory of frost diversion systems subject to the WDMP; (2) a stream stage monitoring program; (3) an assessment of the potential risk of stranding mortality due to frost diversions; (4) a plan of corrective actions that will prevent stranding mortality and a timeline for implementation; and (5) annual reporting of data, activities and results. The corrective action plan, the centerpiece of the regulation, may include requiring:

[A]lternative methods for frost protection, best management practices, better coordination of diversions, construction of offstream storage facilities, real-time stream gage and diversion monitoring, or other alternative methods of diversion.

Diverters must implement corrective actions in accordance with the corrective action plan or cease diverting water for frost protection. 

Section 862 and the WDMP corrective action plan apply to "any diversion of water from the Russian river stream system, including the pumping of hydraulically connected groundwater, for purposes of frost protection," and thus apply equally to riparian, pre-1914 appropriative, and post-1914 appropriative rights holders. Although Section 862 directs the governing body to "consider the relative water right priorities of the diverters," the regulation includes no explicit prioritization among diverters or protection for senior right holders, instead leaving such protections to the governing body—essentially an ad hoc committee of neighboring growers tasked with weighing each diverter's, and their own, respective water rights.

The Water Board May Prefer Salmon Under the Public Trust Doctrine

In Light, the owners of a 23-acre riparian vineyard sued the Water Board in Mendocino County Superior Court, claiming that Section 862 violated their right to priority in their use of water. Plaintiffs contended that the Water Board lacked the authority to enact regulations governing the unreasonable use of water and to limit use by riparians and pre-1914 appropriators without a case-by-case analysis and specific findings to support unreasonableness, and that only the courts could declare a particular beneficial water use unreasonable. The trial court agreed and invalidated Section 862, finding that the Board's action in adopting the regulation was unlawful because (1) the Board exceeded its authority in adopting a regulation limiting water use by riparian users; (2) the regulation violated the rule of priority governing water distribution when supplies were insufficient; (3) the regulation improperly delegated regulatory authority to the WDMP's governing body, and (4) the regulation was not necessary. The Water Board appealed. The First District Court of Appeal reversed the trial court on all grounds, upholding the Water Board's authority to weigh the competing uses of wildlife habitat protection against the commercial use of water by riparian and pre-1914 appropriators to protect crops against frost.

In its ruling, the court acknowledged that the Water Board could not regulate riparian and pre-1914 appropriative rights holders directly through permits or licenses. Instead, it found that the Board had the power to impose conditions on riparian and pre-1914 appropriators by declaring the beneficial use of water for frost protection unreasonable. The court relied on two separate legal doctrines, the "rule of reasonableness" and the public trust doctrine, to conclude that regulation of riparian and pre-1914 water rights holders through Section 862 was permissible. 

The Rule of Reasonableness

The rule of reasonableness stems from the California Constitution, Article X, section 2, which prohibits waste and unreasonable use of water, regardless of the source or priority of the water right. In pertinent part, Article X, section 2 provides:

The right to water or to the use or flow of water in or from any natural stream or water course in this State is and shall be limited to such water as shall be reasonably required for the beneficial use to be served, and such right does not and shall not extend to the waste or unreasonable use or unreasonable method of use or unreasonable method of diversion of water. Riparian rights in a stream or water course attach to, but to no more than so much of the flow thereof as may be required or used consistently with this section, for the purposes for which such lands are, or may be made adaptable, in view of such reasonable and beneficial uses; provided, however, that nothing herein contained shall be construed as depriving any riparian owner of the reasonable use of water of the stream to which the owner's land is riparian under reasonable methods of diversion and use, or as depriving any appropriator of water to which the appropriator is lawfully entitled.

The court in Light concluded that under Article X, section 2 and the authority granted to the Water Board under the California Water Code, the Water Board possessed the regulatory authority to enact general rules governing the reasonable use of water, applicable to riparian rights, pre-1914, and post-1914 appropriative rights.

The rule of reasonableness, however, did not address the question of priority. When water supplies are insufficient to satisfy all beneficial uses, water rights users must curtail their use, and the rule of priority dictates that riparian users are satisfied first, and among appropriators, senior appropriators (those who acquired their rights first in time) have priority over those more junior. The vineyards argued that the Water Board lacked the power to adopt a definition prohibiting a beneficial use by a senior user (especially one using no more than the minimal amount of water necessary to support that use) in order to protect another beneficial use to which the Water Board ascribes a higher priority. The court acknowledged that if the only uses at issue were those governed by common law and statutory water rights, the vineyards might be correct. But here, the case involved more than traditional water rights. In-stream uses, such as the protection of fish, were not governed by rules of priority and instead the court looked to the public trust doctrine to uphold the regulation and place limits on riparian users and senior appropriators. 

The Public Trust Doctrine

As announced by the California Supreme Court in 1983 in National Audubon Society v. Superior Court (1983) 33 Cal.3d 419, the public trust doctrine, originally protecting navigable waterways for the purposes of navigation, commerce and fishing, also extends geographically to non-navigable streams, and for the purpose of protecting wildlife habitats. Light, at *21. The Light court noted that, under National Audubon, the Water Board, in issuing appropriative water use permits, must "take the public trust into account in the planning and allocation of water resources, and . . . protect public trust uses whenever feasible." Light at *22.

Although the public trust doctrine had been acknowledged in subsequent cases, no appellate court had ever relied on it to regulate a riparian or senior appropriator's beneficial use. In Light, however, the court held that under the public trust doctrine, Section 862, preferring in-stream beneficial uses over the beneficial use of protecting grapevines from frost, does not violate the rule of priority. Even though Section 862 includes no provision to protect priority rights as between individual users (other than stating that the WDMP's governing body must "consider the relative water right priorities of the diverters"), the court concluded that any concerns about the decentralized system of WDMPs creating a risk of priority rule violations were premature, because the specific provisions to be imposed on Russian River water users under the WDMP had not yet been adopted. Light at *41-42. Thus, the court expressly limited its opinion to Section 862's "potential for allocating water between the beneficial public trust use of maintaining stream levels to avoid salmonid deaths and the beneficial use of diversion for frost protection by water rights holders," noting additionally that "[a] solution to a dispute over water rights "must preserve water right priorities to the extent those priorities do not lead to unreasonable use." Light at *41. As a result, the court's public trust doctrine holding may be limited to the facts in this case. 

Implications of Light

The California Constitution limits water use to the amount reasonably required to support a beneficial use. Nevertheless, even though riparian vineyards may have been using the smallest amount of water required to protect their crops from frost, the Water Board still maintained that the use was unreasonable because of the harm to fish habitat. Courts in the past have recognized that what is a reasonable use at one time may, because of changed conditions, become unreasonable at a later time but, except for a few outliers declaring as self-evident a use to be unreasonable (e.g., flooding land to kill gophers and squirrels; using floodwaters to deposit sand and gravel), the courts have not generally ruled on the reasonableness of a specific water use, particularly one declared beneficial by regulation. Now, however, those in favor of increased regulation may view the Lightdecision as encouraging broader jurisdiction of the Water Board over water use, and the Board's recently announced intention to issue curtailment notices to riparian and pre-1914 appropriators may be an indication that it intends to pursue this path.

The time period for parties to petition for review of Light by the California Supreme Court has not yet passed, and it is therefore uncertain whether the decision will ultimately stand. Moreover, even if Supreme Court review is not granted, other appellate districts have yet to address the issues raised in Light, and could very well reach different results and/or limit Light to its particular facts. Nevertheless, for those dependent on the availability of water, the results in the Light case, and potential application of such case law by those who want to argue for expanded governmental authority over water use, should be watched closely.

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About this Author

Mark Hattam, Commercial, Corporate, Attorney, Allen Matkins Law firm
Partner

Mark J. Hattam is a partner in the firm's San Diego office. His practice consists of litigation in state and federal courts regarding commercial, real property, corporate, insurance, environmental, and water rights disputes. Additionally, he is experienced in appellate litigation, alternative dispute resolution such as arbitration and mediation, and administrative hearings. He has represented major institutional and public clients in significant civil litigation nationwide. Examples include disputes between California water agencies regarding the Colorado River and CEQA compliance;...

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Kathryn D. Horning, Environmental Attorney, Allen Matkins Law Firm
Senior Counsel

Kathryn D. Horning is senior counsel in Allen Matkins' Litigation, Land Use and Environmental and Natural Resources Departments, practicing out of the firm's San Diego office. Her practice focuses on environmental contamination, land use and development disputes, water rights disputes, and complex business litigation and appeals on behalf of public agencies, corporations, developers and individuals.

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