PANEL DISCUSSION: Emerging legal issues in SGMA implementation

Panel discusses water rights and pumping allocations, groundwater recharge as a beneficial use, public trust doctrine and groundwater, and the fee authorities for GSAs

In 2014, California passed the Sustainable Groundwater Management Act (SGMA), which required all groundwater basins designated as high or medium priority to form Groundwater Sustainability Agencies (GSAs) to prepare locally-developed plans to bring the basin into sustainability.  Since the legislation took effect, many agencies and organizations have concerns about how to best meet the requirements of the law.

Whenever a new law is passed, particularly like the SGMA, challenges arise about how to implement the new policy.  At the Groundwater Resources Association’s Western Groundwater Congress, a panel of experts discussed emerging issues as agencies work to develop their plans.

Seated on the panel:

DAVID ALADJEM is an attorney at Downey Brand where he helps clients throughout California manage and resolve water resources management problems, especially those at the intersection of water rights, endangered species, and CEQA/NEPA.  He will be speaking on the state’s first streamlined adjudication in the context of the Las Posas Valley Water Rights Coalition v. the Fox Canyon Groundwater Management Agency.

KATHLEEN (KATIE) MILLER is a research fellow at UC Berkeley’s Wheeler Water Institute, Center for Law, Energy & the Environment.  Her research primarily focuses on innovative methods of groundwater recharge, and the intersection of data and water rights.  She will be speaking about an issue brief she recently put out discussing when groundwater recharge is a beneficial use of surface water.

JEREMY TALCOTT is an attorney at the Pacific Legal Foundation where he focuses on property rights, individual liberty, and separation of powers issues.  He will be talking about whether the public trust doctrine should be expanded to the use of groundwater specifically in the context of the case, the Environmental Law Foundation v. the State Water Resources Control Board.

JENA SHOAF ACOS is an associate at Brownstein Hyatt Farber Shreck‘s Santa Barbara office.  Her practice focuses on water law and public agency law, where for the past several years, she has been working with the Sustainable Groundwater Management Act, helping public agencies navigate and comply with the requirements. She spoke about the SGMA fee authority, both pre- and post-Groundwater Sustainability Plan fees.  She was also the moderator of the panel.

DAVID ALADJEM: Water rights and pumping allocations

Attorney David Aladjem spoke about the Las Posas Valley Water Rights Coalition v. the Fox Canyon Groundwater Management Agency case, which is the first groundwater adjudication to occur since the passage of SGMA.  He began by going over some of the main provisions of the Act.

The following year after the Sustainable Groundwater Management Act was passed in 2014, legislation was passed that streamlined adjudications under SGMA.  The streamlined adjudication statute is in the Code of Civil Procedure, rather than codified in the water code.

He explained that the groundwater adjudications that happened in the 1950s and 1960s were complicated, but usually resolved within 5 or 6 years.  However, recent groundwater adjudications have taken ten to fifteen years.

In many groundwater basins in California, there was a real concern that these adjudications would go on for decades, and in fact, that is the experience that other states have had,” he said.  “So the impetus behind the streamlined adjudication statute was to find a way to shorten that process, because once you start an adjudication until you get to the end of it, nobody knows what their rights are and there is great confusion.  There is a possibility of continued withdrawals from the groundwater basin that would exceed the safe yield, in part because no one knows what the safe yield is.”

Mr. Aladjem then reviewed the substantive provisions of the Sustainable Groundwater Management Act (or SGMA).  The basic purpose of SGMA was to ensure sustainable groundwater management, and that means in the statutory language, avoiding undesirable results.

SGMA has its roots in the 1976 City of Los Angeles versus San Fernando, which adjudicated the San Fernando basin down in Southern California.

The decision laid out that there are certain undesirable results that an adjudication in management of a basin must avoid,” he said.  “That Supreme Court language and the Supreme Court’s concepts come directly now into the statute, as it was intended to make sure that the legislature in enacting SGMA was not changing the law, because there had been a number of settlements of adjudications and other things that have happened since 1976 to 2014 and no one to upset those.”

The first undesirable result is overdraft, and the statute is very clear in saying that overdraft does not mean a decline in groundwater levels during a drought.  “That is normal and is expected,” he said.  “It’s the way in which a basin is supposed to operate is during a drought – you’ll draw it down and then it gets replenished during a time of relative water plenty.”

The second undesirable result is significant and unreasonable reduction in groundwater storage.   Mr. Aladjem noted the qualifiers: ‘significant’ and ‘unreasonable’ meaning something more than de minimis; or in other words, if you’re managing a basin, there may be some drawdowns in groundwater storage that are perfectly reasonable.  “Typically there is an operating range and you want to keep the groundwater level in that range; you have enough storage space that when you have a wet year, you can put water in the basin and if there is a drought, you can draw the basin down without really causing subsidence or other problems.”

The third undesirable result is significant and unreasonable seawater intrusion.  Some seawater intrusion is okay, but not if it is unreasonable – if, for example, it begins to affect drinking water wells, he said.

The fourth is significant and unreasonable degraded water quality;

The fifth is significant and unreasonable land subsidence, particularly in the Central Valley where land subsidence is a real problem in some areas.  “It may be impossible now to stop some of that, but we want to try to avoid it to the extent possible, and if it is going to be inevitable, manage it in such a way that you preserve storage space in the basin,” he said.

The sixth is depletions of surface water that have significant and unreasonable impacts on groundwater.  “There is a long history – over 100 years – of California case law that if you have a groundwater well that is depleting stream flow, that is a problem,” Mr. Aladjem said.  “So the courts have recognized and SGMA now recognizes the interconnectedness of surface water and groundwater.  And if you’re doing that in such a way as to damage the ability to have sustainability, that’s an undesirable result, and that it forbidden under SGMA.”

The statute calls for a Groundwater Sustainability Agency (GSA) to be established to manage the basin and to develop a Groundwater Sustainability Plan (GSP).  The Department of Water Resources has issued regulations for GSPs.  Mr. Aladjem said that in his opinion, the regulations a little overly prescriptive, but they are fairly clear.  “Given the diversity of groundwater basins in the state, I think they did a really good job of trying to say, ‘here is what a good groundwater sustainability plan is going to look like, here’s what you need to do.’  Having clarity is really going to be important as we begin to get groundwater sustainability plans being sent to the Department for approval – or at least non-rejection.”

Each GSA has broad authority to develop and implement a GSP, but the GSA needs to consider the interests of all beneficial uses and users of groundwater.  “In other words, the GSA is supposed to act on behalf of everybody, he said.  “They are supposed to take all the interests into consideration and develop a plan that is going to hopefully have the consensus of all water users or at least that’s the goal.”

The Groundwater Sustainability Plan must also be consistent with all California water rights, something Mr. Aladjem acknowledged is going to be difficult.  “When the groups were putting together SGMA, one of the threshold questions that everybody came to agreement very easily on was SGMA needs to be consistent with water rights, because everyone recognized, particularly again in the Central Valley, that if you have a GSP which then begins to modify, change, interfere, or infringe upon water rights, we’re going to have the grandest biggest lawsuits and it’s going to be a mess,” he said.  “So the statute specifically says to the GSA, the GSP must be consistent with water rights.  The GSP may not change water rights, interfere with water rights, etc.  Now what that means in a particular basin is to be determined, but that’s the statute.”

The statute for a streamlined adjudication states that it applies to actions that would comprehensively determine rights to extract groundwater in a basin, whether based upon appropriation, overlying right, or other basis of right.  The court can, under this statute, determine all groundwater rights in the basin.  Quoting from the language of the statue: “The court’s final judgment in a comprehensive adjudication for the groundwater rights for each party may declare the priority, amount, purpose of use, extraction location, place of use of the water, and use of storage space in the basin, together with appropriate injunctive relief, subject to terms adopted by the court to implement a physical solution in the comprehensive adjudication.”

Mr. Aladjem said that it’s important to note that the adjudication is comprehensive – which means that the adjudication is going to define and determine all aspects of groundwater rights in the basin; it’s also important to note that the language includes a reference to a physical solution.  He explained that there is a long standing doctrine in California water law known as the physical solution doctrine which comes from a case involving East Bay MUD and City of Lodi in the 1930s that says that the courts have the equitable power and an obligation to try to fashion physical solutions, or ways to make sure that everybody gets pretty much what they need, but that the junior appropriator is the one who bears the burden of paying for the improvements, he said.  That is longstanding California law that is now incorporated into the groundwater comprehensive adjudication.

The case, Las Posas Valley Water Rights Coalition v. the Fox Canyon Groundwater Management Agency, was filed in March of 2018.  There are basically a number of different causes of action, one is a comprehensive adjudication and associated with that, quiet title (An action to quiet title is a lawsuit brought in a court having jurisdiction over property disputes, in order to establish a party’s title to real property, or personal property having a title, of against anyone and everyone, and thus “quiet” any challenges or claims to the title).  Another cause of action is that the GSP must reflect the water rights of overlyers; Fox Canyon Groundwater Management Agency adopted emergency ordinance E which limited pumping and imposed a surcharge if very limited amounts of pumping were exceeded; which is an inverse condemnation of a portion of the plaintiff’s water rights, he said.

Fox Canyon is the main defendant, but the claim filed with the court identifies about 3000 as yet unidentified pumpers who will be identified and served over time.  “Everybody, whether you’re pumping an acre-foot or 100 acre-feet or 1000 acre-feet out of this basin, will be a party to this litigation; that’s what makes it comprehensive,” Mr. Adlajem said.

Fox Canyon contends that this is not a comprehensive adjudication, which is important because if it is a comprehensive adjudication, the case must be heard in a different county than the county where the basin is located, he said.  The matter was before the Ventura County Superior Court judge in July who ruled that the way the statute is written, the entire bench in Ventura County is disqualified, and so the case has been moved to Santa Barbara County.

The Fox Canyon Groundwater Management Agency demurred on the first amended complaint; Mr. Aladjem explained that a ‘demur’ is a legal way to say ‘so what’.  “What it says is even if everything Las Posas Valley Water Rights Coalition says is correct, you still don’t have a cause of action,” he said.  “Fox Canyon has demurred, that’s a normal part of litigation.  We’re going to file our opposition brief on Tuesday; we’re just going back and forth, this is just normal litigation right now.”

Last Friday, Fox Canyon filed a motion to stay the comprehensive adjudication, and the idea was, let us finish the groundwater sustainability plan and then you can have this litigation go forward on a comprehensive adjudication,” he continued.  “My simple response is, that’s the cart before the horse, and in fact, we need to do it the other way around, but we’re going to have that out in the court.”

Mr. Aladjem then concluded his comments with why this case is important as a statewide matter.  “First of all, I think it’s an interesting question technically.  The basin’s complicated, and the threshold question in every single adjudication is, is the basin in overdraft?  I think there are going to be a bunch of interesting technical questions about that,” he said, noting that back in the 1990s-2000s, Metropolitan tried to store water in the basin, and when they went to extract the water, it wasn’t there.  “Metropolitan was not happy.  They spent millions of dollars and the water was not there, so there is an interesting question about aquifer storage and recovery in the basin, and how it works, both technically and legally.”

In terms of the legal questions, Mr. Aladjem read directly from one of Fox Canyon’s pleadings to the court: ‘Fox Canyon’s 35 year history of exercising it’s unique statutory authority to regulate groundwater extractions in the basin has eliminated or minimized the relevance of common law water rights as a basis to challenge Fox Canyon’s authority.’  “In other words, water rights, who cares,” Mr. Aladjem said.  “That’s actually the central issue in this litigation, and we’ll have to see whether that’s a correct statement of the law.  As you can imagine, I think it’s not, Fox Canyon believes it is, and that’s why you have lawsuits.

Question:  Going back to the streamlined adjudication or GSP, which one first, under SGMA, doesn’t a basin have to comply with SGMA while the litigation is occurring?

That’s a very good question,” Mr. Aladjem said.  “Does the basin have to comply with SGMA while the adjudication is pending?  What we have here is a medium priority basin, so the GSP needs to be done by 2022.  I don’t see any reason why we can’t get this thing resolved in that time.”

Question: What is the outcome you want from this litigation?

What we think should happen is there should be a Groundwater Sustainability Plan that fully recognizes my clients’ water rights,” he said.  “Once you have a plan that manages with water rights, I think everyone wants to make sure the basin is sustainable.  But we want to make sure that our water rights, which are valuable and part of the property that we have, that those are respected.  Nothing more.”

Question:  What is the difference between honoring the water rights and the ability to exercise those water rights?

I would reject that there’s a distinction here; if you’re honoring the water right and you’re saying, you can’t exercise it, I wouldn’t agree with that as at that point you’ve infringed upon the right,” said Mr. Aladjem.  “The basic overlying right is a proportional share of the sustainable yield of the basin, so let’s suppose for landowner X, it’s 10 acre-feet per year, and you say in the GSP, we honor your right to 10-acre feet, but you can only pump 2, that’s in my mind, Orwellian double speak.”

Question:  What if the sustainable yield changes?

As part of a GSP, the GSA is supposed to determine the sustainable yield,” Mr. Aladjem said.  “In a groundwater comprehensive adjudication, the sustainable yield will be determined by the court.  Under the GSP, SGMA says, the GSA will review this every five years.  Under a court adjudication, court has continuing jurisdiction to review the decree and make any determination that the court thinks is necessary.  So let’s suppose that you have in 2025 a decree that says, x,y, or z for whatever basin it might be.  And then, in 2040, we look around and we say, the sustainable yield has changed, either up or down, then typically there is a motion by a party to the court that says, judge, we think the sustainable yield has changed because of these reasons …  If everybody agrees, ok fine.  If people disagree, then there’s a hearing, and courts are very good at getting at technical disputes and figuring out who is right and who is wrong, that’s what they do every day.  There are the two different processes to modify sustainable yield depending on if you have a GSP standing by itself or if you have a court decree.”

FOR MORE INFORMATION …

KATHLEEN (KATIE) MILLER:  Groundwater recharge as a beneficial use

Katie Miller is a research fellow at the UC Berkeley’s Wheeler Water Institute, Center for Law, Energy & the Environment, and her presentation dealt with the broad fundamental question with water rights in relation to groundwater recharge, which is, does groundwater recharge currently qualify or if not, should it qualify as a beneficial use of surface water in California?

Ms. Miller said that this is important because under SGMA, there are only so many ways that basins are going to be able to achieve sustainable yield: either decreasing or limiting groundwater use, increasing the groundwater supply somehow, or a combination of the both.  Groundwater recharge projects could potentially play an important role because if more groundwater can be recharged, pumping might not have to be limited as much.

I think we’re likely to see a lot more groundwater recharge projects in the future, not only in California, but other states where they are looking at making their groundwater supplies sustainable for the long-term future,” she said.  “There are only so many places that water can come from.  If you want to recharge your groundwater, what are you recharging it with?  Maybe it’s recycled water, low impact development, or rainwater harvesting but in all likelihood, you’re probably looking at using surface water and diverting it from some source, whether that be a river or a lake or a stream.”

When a party applies for a water permit to divert surface water in California, three things must be demonstrated:  the proposed use for that water has to be reasonable and beneficial, water has to actually be available for that use, and the use has to be in the public interest.  Ms. Miller said she would be focusing on the beneficial use aspect, and lay aside the reasonableness factor as that’s another issue, and it’s generally wrapped up with beneficial use in some form.

The general definition of beneficial use is it’s a use of water that is for a useful purpose, which is a bit circular.  “A definition that I really like that comes out of New Mexico case that also deals with prior appropriation is that it’s an actual use for some purpose that is socially accepted as beneficial,” she said.  “It’s a use that the broader community views as a good use of water and not just one individual …  everyone has to agree that this is a good way to use the water resources and it’s a worthy cause.”

California, like many other states, goes a step further and actually defines what is a beneficial use in statute and regulation; those uses include domestic use, irrigation, power, frost protection, municipal, mining, industrial, fish and wildlife preservation and enhancement, aquaculture, recreation, water quality improvements, stock watering, and heat control, she said.  In addition, the State Water Board can approve beneficial uses on an application by application basis, so if you have a proposed use that doesn’t quite fit in any of those beneficial uses, you could still apply and ask the State Water Board to consider it a beneficial use, she noted.

But there’s a real gap there,” she said.  “I didn’t mention anything about groundwater recharge.  It’s not clearly laid out in statute or regulation as being a beneficial use.  So, there kind of appears to be a gap in the statute and the regulations.”

Groundwater recharge can be broken down into two different categories:

Groundwater recharge for a later extractive use, which is the storage of water underground with the intention of actively pumping that water back out for a later reuse.  A defining characteristic of that use discussed in the issue brief is that the entity depositing that water has the right and the intent to pump that water back out later.

Groundwater recharge for non-extractive use, so the recharge is not for later extraction but in order to maintain or improve local regional conditions for a broader basin-wide benefit.  The water is intended to be left in the aquifer system with no right for subsequent extraction.

Extractive beneficial uses generally have the place of use defined as where that water is going to be used, once it is pumped back out.  The water is essentially considered stored surface water, and though incidental benefits might accrue to the basin while the water is sitting there in storage, most of the benefits are going to accrue to the water rights holder who gets to pump the water back out and use it.  Examples of this would be storage for irrigation or municipal supply.

In the case of non-extractive uses, the place of use would be the aquifer system in general.  The water is considered part of the aquifer system, and the benefits again would accrue to the whole system, not to a specific water rights holder.  Examples of this would be recharge activities for seawater barriers, improving water quality, and preventing or combating land subsidence; examples more in the gray area are possibly groundwater dependent ecosystems or preserving groundwater levels for community domestic wells, she said.

The governing law for extractive uses in water code section 1242 is on point, said Ms. Miller.  “It basically says that the storage of water underground constitutes a beneficial use of water, if the water is so stored is thereafter applied to the beneficial purpose for which the appropriation for storage was made,” she said.  “So you don’t say, my beneficial use is storage; you say, my beneficial use is storage for later use as irrigation.  With this category is its fairly straightforward to define your end beneficial use.  You just say to the water board, it’s for irrigation and they say, irrigation is beneficial use, we recognize that in statute and regulation.”

However, for non-extractive uses, the law isn’t as clear.  “Water code section 1242 might apply – it all depends on how you read the word storage in the statute,” she said.  “The first interpretation is that storage in water code section 1242 is only referring to storage and extraction, but there’s an alternative reading of the statute that essentially says storage could also be read as meaning leaving water in the ground for theses non-extractive beneficial uses.  But again, without anything explicit in the statute or regulations, that’s difficult to say for sure … there’s two ways to go about it, it all depends on how you want to define storage.”

Ms. Miller noted that a page at the State Water Board’s website that says that a beneficial use may also include remaining in place, such as protecting water quality or preventing land subsidence, but without anything in statute or regulation, that’s really hard to say for sure.  “Currently, these types of uses would be covered by a case by case determination, that the Board can always determine that yes, this is to prevent land subsidence and in this particular case, we think it’s a beneficial use,” she said.  “But where the law has this uncertainty with non-extractive uses, the public just cannot be sure whether or not it’s going to be considered a beneficial use and that’s potentially a perceived barrier for someone who wants to undertake a groundwater project.”

The issue brief discusses that in situ or non-extractive uses are likely all potentially beneficial uses, but it would be useful to have some clarification in the law just to be sure.  “We suggested the state write guidance or other regulations that help define non-extractive beneficial uses of water,” said Ms. Miller.  “The state should create standards which are clearly articulated for the benefits expected from any recharge permit and ask the applicants to show how they plan to demonstrate that those beneficial uses are actually occurring.  The state should also create water rights applications and change petition forms that are tailored to groundwater recharge projects so everybody is on the same page about what you need to do to apply for a surface water permit to recharge in any of these cases.”

In conclusion, yes groundwater recharge is likely a beneficial use in most circumstances, and definitely if you’re talking about storage and later extractive purpose, water code section 1242 applies,” Ms. Miller said.  “It’s likely true for non-extractive purposes as well, but there is going to need to be some clarification.”

FOR MORE INFORMATION …

JEREMY TALCOTT: Public trust and groundwater

Jeremy Talcott, an attorney with Pacific Legal Foundation, then discussed whether or not the public trust doctrine should be extended to groundwater, focusing on a recent court decision in the Environmental Law Foundation v. the State Water Resources Control Board.

The lawsuit was filed several years ago in Siskiyou County; by the time the case wound down to a final decision in Superior Court, the Environmental Law Foundation was seeking a declaration of whether or not groundwater extraction near the Scott River which was hydrologically connected to the Scott River was subject to the public trust doctrine.  There was a related question then that if groundwater extractions are subject to the public trust doctrine, does that then put a duty on the County to consider any impacts on public trust resources or uses when they are issuing permits for wells or groundwater extraction?  And then does the Water Board also have the authority or the obligation to consider those public trust resources and then regulate the use of groundwater when it’s hydrologically connected to a navigable waterway?  While the lawsuit was making its way through the courts, the Sustainable Groundwater Management Act was passed, which then added the question, does SGMA override this common law doctrine?

Mr. Talcott noted that in nearly all public trust cases, proponents talk about the historical roots of the doctrine and that the state as a sovereign owns the navigable waterways and submerged lands beneath navigable waterways, and they hold it as a trustee of the public trust for the benefit of all people.  They most always reference the Institutes of Justinian or ancient Roman law which says that things common to mankind by the law of nature are the air, the running water, the sea, and consequently the shores of the sea.  The first reference of the doctrine here in America was from the Supreme Court in the mid-1800s distilled this into the doctrine by saying that the states at the time they were admitted to the Union hold the dominion and property of navigable waters and the lands underneath them which previously would have been held by the king in a public trust are now held by the states admitted to the union as sovereign.

The big change to the doctrine came in the 1970s when a very influential law review article written by Professor Sax discussed the expansion of the doctrine to things like environmental protection.

Traditionally, the doctrine had been very limited, only talking about navigable waterways as a public trust resource, and then the public trust use would be uses that are common amongst all people, such as navigation, commerce, fishing, bathing, and even recreation,” Mr. Talcott said.  “Now in California and other jurisdictions, after environmental litigation, there is an expansion of that doctrine to the growing public recognition that one important aspect of the trust is environmental preservation – preservation of those lands in their natural state, so moving past just a common public use, but also preservation.”

How accurate is the history of the public trust doctrine?  He noted that there are quite a few articles written about the history and there’s a good question as to whether or not the roots that are supposedly so ancient are in fact true.  “There was still a recognition [in the Justinian digests] that even though technically no one could have owned the sea, a person who had the technical ability to reduce a portion of that region to themselves and create their own island would in fact have private ownership,” he said.  “Within the institutes, what pleases the Emperor has the force of law, so whatever the doctrine might have been in Rome, it probably wasn’t any sort of the limitation on the power of the Emperor.  He could certainly do whatever he wanted; he wasn’t holding the sea in trust for all of the subjects of Rome.”

It’s unlikely that the public trust in England as a doctrine looked anything like what it looks like here in America because historically, much of England’s navigable waterways and submerged lands were in fact alienated by the King and given fee title to private ownership so in fact, it would have been very common in England for navigable waterways to instead be private land, Mr. Talcott said.

The closest thing is the prima fascia rule where the King has to make an express grant of this land for it to be in private ownership, otherwise it was presumed to belong with the King,” he said.  “The way that really functions is if you can’t prove you own title, it reverts back to the crown.  So rather than being for the benefit of all people, it was really for the enrichment of the crown at that time.

He acknowledged that there are a lot of great law review articles and sources that delve in depth into the history of the public trust doctrine in Rome and in England and how it developed in America.  “The point of that is not to use it to discard the doctrine in America but instead to just point out that judges in America hide behind the supposed ancient history and perhaps they should be a little more up front about the fact that this really a court-created doctrine in America,” he said.

Returning to the case, it was a Superior Court decision that adjudicated it, and it was affirmed by the Court of Appeal.  Siskiyou County did appeal to the Supreme Court.

The court ruled that the County must consider impacts to public trust uses when issuing well permits for groundwater that is hydrologically connected to the Scott River.  Now the Court, both in the original opinion and the Court of Appeal, did not go so far as to extend the public trust doctrine directly to groundwater, he said.

Historically, it has always applied to navigable waterways, but the court did say that because groundwater is hydrologically connected to these navigable waterways, if you’re pumping groundwater out and that’s reducing the level of a navigable waterway and then harming then a public trust use on that waterway, then it makes sense that we extend the doctrine at least to that use,” he said.

He also noted that there was a Scott River decree in 1980 that adjudicated use of water and groundwater along the Scott River, but he said that this opinion only applies to groundwater well permits that are being sought outside of the previously adjudicated Scott River decree areas.

The Court also held that the Water Board has authority to regulate under this common law public trust doctrine.  “One question of the public trust doctrine is, if the state is the sovereign and the state is holding it in trust, who then is the person or agency tasked with considering the trust and adjudicating that?  And the court said, either way, the Water Board has the authority to regulate and then the obligation to consider public trust uses and resources when they do regulate the use of groundwater.  SGMA does not alter those obligations or authority, so despite the fact that there is now a very comprehensive piece of groundwater management legislation, there is still room within that co-extensive for the board and county to consider these public trust obligations.”

Mr. Talcott outlined a number of consequences:

Decreased groundwater use:  It’s going to make it more difficult for people who have not yet applied for a permit to seek a permit because there are now additional considerations on whether or not they might get a permit or not.  He noted that currently in many places such as Siskiyou County, the actual application for a permit at the county level is somewhat pro forma; there’s not really a mechanism right now for them to make these types of considerations on any one given well permit application.

Increased litigation:  Courts are allowed to look at decisions made by the legislation and potentially overturn it, so this will give people an opportunity to file a lawsuit, saying that when the County issued a permit, they believe the County did not adequately consider public trust uses, so they then file a lawsuit.

Diminishment of private property rights: For overlying landowners who have always had a right to make reasonable use of underlying groundwater, this could potentially destroy that right, he said.  If they go to court, they seek a well water permit, they are denied that permit on the basis of harm to the public trust, and then they now no longer have the use of that and that counts as a destruction of a property right, an expectation that the person who bought that property had.

Increase development costs

Compensation for takings: The biggest consideration for governments then is, what happens when a property right gets destroyed?  “Under the fifth amendment of the constitution, when private property is taken for public use, you are entitled to just compensation,” said Mr. Talcott.  “And here, overlying landowners have what is a recognized property right to make reasonable use of underlying groundwater.  If we are saying, you cannot use it because of the public trust, that’s quintessentially saying, we need to make public use of this water so you can’t, so are these landowners are then going to be entitled to just compensation?

From a property rights perspective, Mr. Talcott said it is a huge expansion or fundamental shift in background principles of property law.  “People have had these long-held expectations within property law that part of the package of rights that they get when they buy a property is in fact that right to make use of underlying groundwater and if that is taken away, that represents a huge shift,” he said.

The slide is a quote from a Supreme Court case that addresses a limitation that removes a long-held right.

It’s very difficult to just call that all of a sudden, a new background principle of property law because of course, background principles are supposed to be long-held and something that you would have had at the time you took title to the property, so it’s a big shift on that,” he said.  “Under the Supreme Court precedent, the things we’ve considered long-held background principles are things like the law of nuisance, which is you have the right to use your property insofar it is not harming other landowners, and once you’re making a nuisance, harming other landowners or individuals, well, you never had the right to do that.”

One of the biggest questions raised is, what is the limiting principle on the public trust doctrine?  “If you’re familiar with the Mono Lake decision here in California, that decision also involved diversion of waterways that themselves were not navigable but they were tributaries to Mono Lake which is navigable, and that was held to be a violation to the extent that it would have increased salinity and harmed environmental resources within Mono Lake,” said Mr. Talcott.

He then read a sentence from the opinion:  ‘ … thus the pivotal fact is not whether water is diverted or extracted or the fact that it is water itself adversely impacting the water within the public trust; rather the determinative fact is the impact of the activity on the public trust resource.’  “Looking at this opinion, it’s not extending it to groundwater, it is not even limiting it to water – it’s just saying human activity which impacts navigable waterways raises public trust concerns, so that is extremely broad.”

There’s also the question of whether the courts are the appropriate branch to decide very complicated questions of public policy.  “We’ve just had SGMA which was a long process to pass which involved a lot of competing considerations passed by the legislature,” he said.  “Is it right to essentially give courts a veto power on decisions that are made under SGMA through the public trust doctrine? Then will property owners be compensated if they are on the losing end with their water rights based on public trust considerations?

Mr. Talcott pointed out that there are numerous human activities that can impact navigable waterways, such as grading, paving, adding or removing plants – all of those can both increase or decrease runoff directly into navigable waterways, and they can increase or decrease the process of natural infiltration or recharge of groundwater aquifers, he said.  “It’s going to be very difficult as we get further away from the direct navigable waterway to then determine which of those competing impacts take precedent or control.”

When you consider this potential for individual adjudication, there is certainly the possibility for inconsistent results that will come out of that,” he added.  “Imagine two people attempting to get well permits from the same aquifer, one who in court has the resources to throw in the battle of experts, all of this information and establish in fact, no I’m not going to harm public trust uses, while another well water permit seeker who lacks those same resources goes to court and says, I can’t establish that I won’t harm the public trust, so no permit for him.  So we see that there might be some inconsistent results and inequities that automatically will stem out of that.

Mr. Talcott also noted that in California, there is a non-delegation doctrine for the legislature which states that fundamental questions of public policy should be determined by the legislature.  “Even though generally that’s discussed with regards to handing over too much authority to agencies, there’s a related doctrine that courts themselves shouldn’t be making those types of fundamental policy.”

Normally, when there is a regulatory taking and the requirement for just compensation, it’s usually a legislative or agency action that has diminished property rights.

There is this doctrine out there on judicial takings,” he said.  “It’s certainly not settled law but it is out there at the Supreme Court level, and it just says that there’s really no difference to the landowner if it’s the government or the court taking away your rights.  The end result for the person is the same, so if the fifth amendment means taking away private property rights entitles you to just compensation, even if it’s the courts that have done it, there needs to be some sort of mechanism to compensate.”

Mr. Talcott drafted a brief that was filed on behalf of Pacific Legal Foundation and the California Farm Bureau Federation in the Court of Appeal; the court chose to pass on that question.  “They said that it’s just not ripe.  At this point, we’re ready to make a determination that yes, groundwater extraction is going to be subject to public trust uses, but until you actually bring us some denied permits, we’re not going to even approach the question on whether or not there’s a taking of private property rights. So at this point is still a very open question.  … It certainly means that there will be future litigation.

As far as property rights, any removal of property rights could potentially have litigation regarding compensation,” he said.  “It’s more difficult if you’re not losing all of your property.  Losing all of you water rights is a more significant loss than losing a portion of your water rights or a portion of your property with regards to when it triggers a requirement for compensation.”

FOR FURTHER READING …

JENA SHOAF ACOS: Funding authorities for Groundwater Sustainability Agencies

Jena Shoaf Acos then discussed the funding authorities granted to Groundwater Sustainability Agencies (GSAs) under SGMA for development and implementation of Groundwater Sustainability Plans (GSPs).

SGMA divides a GSA’s fee authority into pre- and post-GSP adoption authority.  Prior to adoption of the GSP, a GSA’s fee authority to adopt and impose fees is authorized by section 10730 of the water code.  After the GSP is adopted, the GSA’s authority is governed by water code section 10730.2.

The main difference between these two sections is that post-GSP fees are required to comply with the requirements of Prop 218, except for the voter approval requirement,” said Ms. Acos.  “As we talk about this SGMA fee authority, it’s also important to remember that a GSA retains any of its separate authority so if it is a county, it has all of its normal county authorities.

Pre-GSP fee authority

The pre-GSP fee authority is titled the regulatory fees authority.  SGMA authorizes a GSA to impose the pre-GSP fees for things such as permit fees, fees on groundwater extraction, or other regulated activities.  The pre-GSP fees can be used for a wide variety of costs in developing and implementing what is referred to in the legislation as a groundwater sustainability program.  That includes the preparation, adoption, and amendment of a groundwater sustainability plan, investigations, inspections, compliance assistance, enforcement, and program administration; it also includes building up a prudent reserve, which is very important with a local government agency, as there needs to be enough funds to continue to operate the agency and continue to manage the basin, Ms. Acos said.  She noted that  Pre-GSP fees cannot be used to fund capital improvement projects or recharge projects; these projects must be funded through the post-GSP adoption process.

Within this pre-GSP fee authority, there’s an exception that pre-GSP fees cannot be imposed on de minimus extractors unless those de minimus extractors are regulated ‘pursuant to this part.’  De minimus extractors are defined as a person that extracts 2 acre-feet or less per year for domestic purposes.

Ms. Acos noted that within SGMA, chapter 5 sets forth a GSA’s powers and authorities, but the first section of Chapter 5 preconditions a GSA’s exercise of any of powers described in that chapter on the GSA first adopting and submitting a GSP.

When we read these two sections together, this tell us that a GSA cannot use Water Code section 10730, the pre-GSP fee authority, to impose fees to de minumus users until after it adopts and submits a GSP,” she said.  “So if it were to adopt a GSP and continuing imposing fees under this section, it arguably could then impose those fees on de minimus users.  Going back to the definition of a de minimus user (extracting 2 AF or less), how is a GSA supposed to know who de minimus users are if they can’t require them to put measuring devices on their wells? That’s a really big question, so at this point, our advice has been that you have to use best estimates, and there’s a variety of ways to do that.  But it’s just one area where SGMA is a little confusing, and there’s quite a bit of ambiguity still.”

The pre-GSP fee section does not identify compliance with a specific substantive requirement,” she explained.  “The California Constitution imposes approval requirements on a wide variety of fees and charges imposed by government agencies, so to determine what type of substantive requirements are to be followed, the specific fee or charge that an agency is considering imposing should be analyzed under both Prop 26 and Prop 218.  This pre-GSP fee authority is in contrast to the post-GSP fee authority which specifically calls out and requires compliance with Prop 218.

Prop 26 regulates and defines both general and specific taxes, and requires voter approval; Prop 218 applies to assessments and property-related fees.

For pre-GSP fees, Ms. Acos focused on Prop 26, which in her opinion provides the proper analysis for pre-GSP fees.  Prop 26 defines a tax and requires certain approval requirements unless the specific fee or charge falls into one of the provision’s seven enumerated exemptions; she presented a slide with the four exemptions highlighted that could be applicable to the pre-GSP fees.

The first two exemptions about the specific benefit and the specific services sound promising, but with the benefit or service being groundwater management, it’s unlikely that either of these exemptions would apply because SGMA prohibits a GSA from imposing these pre-GSP fees on de minimus users, she said.  “This inability to charge a de minimus user who does pump groundwater and thus arguable receives a benefit or a service from the government agency, that would violate the requirement right here that the specific benefit or the specific service is not provided to those not charged, and so you see we have a problem with the prohibition on charging de minimus users with those exemptions.”

Under the Prop 218 property-related fees exemption, if it fell into this exemption, the fee or charge would not have to comply with Prop 26; but it would have to comply with the approval requirements of Prop 218, and that doesn’t really help us get out of this world of going through a majority protest process or a voter-approval process.

The third exemption, the regulatory costs exemption or the regulatory fee exemption, Ms. Acos said, is what she thinks is the correct analysis for looking at pre-GSP fees for the following reasons:

First, unlike in the water code section authorizing post-GSP fees, SGMA is silent about compliance with specific substantive constitutional approval requirements.

Second, there’s also a good argument that pre-GSP fees fall into this regulatory cost exemption because in water code section 10730, the section is actually titled, ‘Regulatory Fees Authority,’ so this indicates that the SGMA legislature actually intended these pre-GSP fees to fall into this exemption for a tax.

Third, unlike the fees or charges for a specific benefit or a specific service, the regulatory fees do not become a tax just because the fee is disproportionate to the service or benefit rendered to an individual taxpayer, so therefore it’s immaterial that a GSA cannot impose these pre-GSP fees on de minimus users within the basin.

I have to preface this with this is unsettled law still, so please do not take everything I am saying as truth or the correct answer,” said Ms. Acos.  “We’re all doing our best to interpret a statute that has not been interpreted yet by the courts.  And there’s also plenty of conflicting case law out there.”

Ms. Acos also reminded that any charge or fee that does not satisfy any of these exemptions or falls into any of these exemptions would be subject to the 2/3rds majority voter approval requirement for special taxes, so it’s not in the world of general taxes because groundwater management would be considered a special tax.

The procedural requirements for pre-GSP fees are governed by the water code.  Similar to the Brown Act requirements, SGMA requires that a GSA hold a public meeting and give members of the public an opportunity to make oral or written comments prior to imposing any fee.  The notice for the meeting must be provided in three different ways and include the time and place of meeting, the general description of the subject matter, and then a statement that the data upon which the decision is based is available to the public; this data has to be made available to the public at least 20 days prior to the meeting.

This is one of the reasons that we recommend to clients to engage a fee consultant to help prepare the report and also to provide a third party independent stamp of approval on what fee is proposed to be imposed on all of the water users within the basin,” she said.

Following this notice and public hearing, the GSA can impose or later increase a fee by adopting an ordinance or resolution.  A fee can only be adopted by ordinance or resolution; it has to follow that official action or that formal action.

Ms. Acos said they had surveyed what GSAs are doing around the state.  She noted that they found that only a handful of GSAs have adopted pre-GSP fees, and the ones who have adopted fees have taken different approaches.

The Indian Wells Valley Groundwater Authority has adopted a groundwater extraction fee which is $3.00 per .1 acre-feet (or $30.00 an acre-foot) to be collected monthly; other GSAs are looking at annual collection.  “It appears that the Indian Wells Valley Groundwater Authority just followed water code section 10730;  they didn’t go through either the Prop 26 or Prop 218 analysis,” Ms. Acos noted.

The Kings River East GSA followed Prop 26 and found that the fee was exempt as a regulatory cost, so they adopted a $1.45 per acre-foot groundwater extraction fee to be collected annually.  They are also requiring member agencies who do not have a significant impact on groundwater to pay a flat $3250 fee which helps to offset the amount that is charged to private pumpers.

The McMillian Area Groundwater Sustainability Agency followed a Prop 218 analysis.  They adopted a $19 per acre-foot fee excluding parcels of 2 acres or less, which was an attempt to not charge de minimus users; they went through a majority protest process because they categorized the groundwater extraction fee as property related fees or water service charges which don’t have to go through the voter approval requirement.

The North Fork Kings Groundwater Sustainability Agency and the Groundwater Sustainability Agency followed a Prop 218 assessment process to adopt a $10 an acre and a $9.80 an acre on each acre within the GSA.  The assessment process is different than the groundwater fee extraction process and requires even additional substantive hurdles such as getting a engineer’s report; they did go through a weighted voting process and both of those passed.

Post-GSP fee authority

The post-GSP fee authority is governed by water code 10730.2 which authorizes a GSA to impose fees on the extraction of groundwater from the basin.  “Here it is interesting to note that the legislation specifically identifies and calls out groundwater extractions as the only activity that a GSA can impose post-GSP fee on, and this is in contrast to SGMA’s broader pre-GSP fee authority, which also authorizes a GSA to impose fees on other regulated activities.”

The question is what is other regulated activity?  Honestly I don’t know at this point,” she added.  “I think that’s something that is going to be probably determined through the courts.

Post GSP fees can be used to fund the costs of groundwater management, such as the administration, operation and maintenance, including a prudent reserve.  She noted that this overlaps with the pre-GSP authority.  It also includes the acquisition of lands or other properties, facilities, and services, supply, production, treatment, or distribution of water; it can also fund other activities necessary or convenient to implement the plan.

For post-GSP fees, SGMA specifies the types of fees can be imposed and limits those types to different variations of groundwater extraction fees.  “Here it’s important that it does not appear to allow a GSA to impose these land-based or parcel-based fees or assessments,” said Ms. Acos.  “As we know from the specific text of the statute that you’re not going to be following the Prop 218 assessment process in post-GSP fees; you’re going to be following the Prop 218 groundwater extraction fee requirements because that’s what is spelled out.”

The specific language in water code section 10730.2 specifically requires compliance with subdivisions A and B of Proposition 218.  “This is important because A and B deal with the voter approval process and it does not require compliance with subsection C of Prop 218,” she said.  “A and B deal with the majority protest process whereas subsection C deals with the voter approval process, so our interpretation is that for these post GSP fees, you don’t have to go through this voter approval process, you just have to do the majority protest and that is legal, at least in our opinion.  That’s because it appears that the SGMA legislature made a determination that these groundwater extraction fees were supposed to be analogized to fees and charges for sewer or water or refuse collection, which are exempted from this voter approval process.”

Ms. Acos noted that there are a number of substantive requirements that are spelled out in Prop 218.  Prop 218 has certain procedural requirements in terms of how to notify all of the landowners or the water users of the fee that they will be charged, the amount they will be charged, the reason that they’ll be charged, and where the public hearing is.  They have to consider all those protests and have a time for landowners and water users to come in and make that protest.

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