Regulating Existing Water Rights – How Far Can State Government Go?

Overview

Water is an important natural resource to agriculture.  In some parts of the country it is more plentiful than it is in other areas.  That relative scarcity has led the legal system to develop, over time, different approaches for the allocation of water rights.  Particularly in the western two-thirds of the U.S. where water is most scarce, water rights are regulated by at the state level.

The state regulation of water rights can have a significant impact on agricultural activities and land values.  But, just how far can a state go in regulating such rights?  How solid is the water right of a farmer or rancher?  It’s a big issue that is looming large in Kansas at the present time.

The state regulation of water rights – it’s the topic of today’s post.

The Prior Appropriation System

Most of the United States west of the 100th Meridian (a longitude line connecting the North and South Poles that runs through Cozad, Nebraska, Dodge City, Kansas that also forms the eastern border of the Texas panhandle with Oklahoma) utilizes the prior appropriation system for purposes of allocating water.  See, e.g., In re Water Rights of Deschutes River and Tributaries, 134 Ore. 623, 286 P. 1049 (1930).  

The prior appropriation system is based on a recognition that water is relatively scarce, and establishes rights to water based on when water is first put to a beneficial use.  The doctrine grants to the individual first placing available water to a beneficial use, the right to continue to use the water against subsequent claimants.  Thus, the doctrine is referred to as a “first in time, first in right” system of water allocation. The oldest water right on a stream is supplied with the available water to the point at which its state-granted right is met, and then the next oldest right is supplied with the available water and so on until the available supply is exhausted.  In order for a particular landowner to determine whether such person has a prior right as against another person, it is necessary to trace back to the date at which a landowner's predecessor in interest first put water to a beneficial use.  The senior appropriator, in the event of dry conditions, has the right to use as much water as desired up to the established right of the claimant to the exclusion of all junior appropriators. 

The right to divert and make consumptive use of water from a watercourse under the prior appropriation system is typically acquired by making a claim, under applicable procedure, and by diverting the water to beneficial use.  The “beneficial use” concept is basic; a non-useful appropriation is of no effect.  What constitutes a beneficial use depends upon the facts of each particular case.  A prior appropriation water right is typically administered by a state agency that certifies via the issuance of a permit that a water right has been acquired dating from a particular time and tying it to a particular diversion point. 

As applied to groundwater, the prior appropriation doctrine holds that the person who first puts groundwater to a beneficial use has a priority right over other persons subsequently desiring the same water.  This doctrine is applied in many western states that also follow the prior appropriation doctrine with respect to surface water. 

A prior appropriation water right is typically administered by a state agency that certifies via the issuance of a permit that a water right has been acquired dating from a particular time and tying it to a particular diversion point.  Accordingly, such a state administrative process basically confirms the application of the prior appropriation system.  But, can a state do more than simply validate a prior appropriation right and establish a regulatory framework for protecting those rights?  Can a state modify the regulatory system in a manner that diminishes existing water rights without triggering liability to the existing right holders or owing them compensation?  This last point is being tested in Kansas, a state that utilizes the prior appropriation doctrine, at the present time.

Kansas Case

A case in western Kansas is presently testing the limits of how far a state regulatory agency can go in regulating existing water rights.  Just recently the local county trial court issued its opinion in Friesen v. Barfield, No. 2018 CV 10 (Gove County, KS Dist. Ct. Oct. 15, 2019).  The case involved the application of a Kansas law that took effect in 2012, that modified existing water rights.

Under the facts of the case, Kansas Ground Water Management District (GMD) 4 was the first GMD to implement a Local Enhanced Management Area (LEMA) that Kansas law authorized beginning in 2012. A LEMA allows GMD’s to voluntarily implement water conservation practices. After great success with the first LEMA, GMD 4 proposed a district-wide LEMA. The GMD held many public meetings over 2015 and 2016. The GMD Board approved the final LEMA plan and submitted it to the Chief Engineer, Division of Water Resources (CE). The CE approved the LEMA Plan on June 27, 2017, and an official public notice and comment period was opened. After the required two public hearings, the CE found that the LEMA plan was satisfactorily addressed the water conservation issues within GMD 4, and approved the plan. On April 13, 2018, the CE issued the Order of Designation creating the GMD District-Wide LEMA.

The plaintiffs, irrigators and voting members of the GMD, sued to stop the implementation of the LEMA on the basis that it violated vested water rights, was arbitrary and capricious, and unconstitutional. The local trial court disagreed and upheld the district-wide LEMA. The plaintiffs claimed that the water conservation restrictions contained in the proposal were a “collateral attack” on perfected water rights that the CE could not alter. The trial court disagreed, concluding that the groundwater permits did not guarantee any set amount of water. In addition, the trial court noted that the district-wide LEMA was not a permanent reduction in water appropriation but contemplated revisiting the matter in the future. Thus, the trial court concluded that so long as the LEMA is in place and the reduction in pumping is within state law limits, the CE had the discretion to approve the district-wide LEMA.

The plaintiffs also claimed that state law did not provide a definitive guide to the CE and did not protect against arbitrary action, unfairness, or favoritism. The trial court disagreed, noting that state law establishes six prerequisites for a LEMA, five of which must occur within the LEMA area - including decline of the water source. In addition, the trial court noted that the LEMA was additionally reviewable by the state Ag Secretary and subject to judicial review. The trial court also noted that the GMD is elected in a democratic process.

On the plaintiffs’ constitutional equal protection claim, the trial court determined that the LEMA, while sorting irrigators into different classes, did not violate equal protection because such sorting was rationally related to the LEMA's purposes of conserving water resources. On the plaintiffs' claim that the state law governing a LEMA cannot adversely affect vested water rights, the trial court found it relevant that the LEMA was not permanent and concluded that further reductions in water permits are not a taking because all economic benefits of the water have been eliminated. The plaintiffs claimed that the appeal process for the LEMA was inadequate because it did not provide for review by an independent unbiased tribunal. The trial court disagreed, noting that state law provides for judicial review. Also, the trial court determined that the recordkeeping requirements of irrigators was not unconstitutionally vague. The LEMA allows irrigators two ways to record water usage, inspect and record meter readings on a bi-weekly basis or "install or maintain an alternative method of recording," other than the meter that is sufficient to be used to determine operating time in the event of a meter failure."

On the claim that the CE did not follow proper procedure when implementing the LEMA plan, the trial court determined that state law did not require the CE to include findings of fact or law in notice letters. In addition, the final orders did not need to consider constitutional concerns as those are properly reserved for a court. Likewise, the trial court held that the CE did not unlawfully delegate oversight of the LEMA hearing, and that the creation of the district-wide LEMA was not done in a manner that was arbitrary and capricious. 

Conclusion

The Kansas case is the opening round in what will likely be lengthy litigation on the issue of how far a state can go in regulating existing, vested water rights.  As the litigation proceeds, the state might do well to remember that for an alleged regulatory taking of private property rights by the state, disaffected parties no longer need to endure state court litigation on the taking issue before seeking compensation in the federal court system.  Knick v. Township of Scott, 139 S. Ct. 2162 (2019).