WESTERN GROUNDWATER CONGRESS: SGMA Isn’t Working – When It’s Time to Adjudicate.  Wait, When is it Time?

Nick Jacobs is a shareholder with Somach Simmons & Dunn. who has been practicing law for about 20 years and has handled groundwater adjudications from start to finish.  Aaron Ferguson, also with Somach Simmons & Dunn, has been helping clients throughout California solve complex water rights problems for over 9 years.

At the Groundwater Resources Association’s Western Groundwater Congress held in September of 2020, they gave the following presentation intended as a practical discussion of the key issues to consider if the Sustainable Groundwater Management Act process isn’t working and a stakeholder or water district is considering a groundwater adjudication.  Their presentation is intended for non-attorneys and focuses on laying out the key strategic issues and decisions associated with evaluating whether the SGMA process is working or if it is time to consider initiating a groundwater adjudication.

The decision to adjudicate should be well thought through,” advised Nick Jacobs.  “Groundwater adjudications are time-consuming – they will take years to resolve.  They are very expensive.  It is important, therefore, that you consider the key issues and get sound legal advice from water attorneys and top-notch hydrogeologists.”

There are four key issues to focus on when determining whether the SGMA process has run its course and it is time to adjudicate:

 1) What is the annual sustainable yield, as determined in the Groundwater Sustainability Plan (“GSP”), and is it accurately and reasonably determined?

2) Does the GSP honor my (or my district’s) water rights?

3) To what extent will the GSP-determined sustainable yield impact my (or my district’s) ability to pump necessary supplies of groundwater?

4) Will the Groundwater Sustainability Agency (“GSA”) offer supplemental water supplies, and at what cost?

They then discussed each of the questions in turn.

Question 1.  What is the sustainable yield, and is it accurately and reasonably determined?

Nick Jacobs pointed out that when thinking about all of these issues, it’s important to consider whether there are factual and/or legal arguments that could convince a judge in an adjudication to reach a different conclusion than what the Groundwater Sustainability Agency (GSA) included in the Groundwater Sustainability Plan.  This analysis should be done prior to making the decision about whether to adjudicate.

Be wary of any lawyer who tells you to file the adjudication before you have a thorough understanding of these key issues and whether the GSP got them wrong,” said Mr. Jacobs.

The statute defines sustainable yield as “the maximum quantity of water, calculated over a base period representative of long-term conditions in the basin and including any temporary surplus, that can be withdrawn annually from a groundwater supply without causing an undesirable result.”

“Undesirable results” are defined by SGMA as:

(1) Chronic lowering of groundwater levels indicating a significant and unreasonable depletion of supply if continued over the planning and implementation horizon.

(2) Significant and unreasonable reduction of groundwater storage.

(3) Significant and unreasonable seawater intrusion.

(4) Significant and unreasonable degraded water quality, including the migration of contaminants.

(5) Significant and unreasonable land subsidence

(6) Depletions of interconnected surface water that has significant and unreasonable adverse impacts on beneficial uses of the surface water.

Mr. Ferguson emphasized that understanding the sustainable yield quantity and how it will be applied to your situation is crucial.  “The sustainable yield quantity is determined differently in various GSPs, and some don’t state a quantity at all,” he said.  “Most determine sustainable yield by developing a water budget using a model or suite of models.  Models may be used to evaluate land surface and surface water processes, soil water balance, and groundwater inflow/outflow.  A water budget not only provides a basis for estimating the maximum quantity of water that can be withdrawn without causing undesirable results but also for setting thresholds intended as triggers for guiding management actions to ensure sustainability is achieved by the statutory deadline.

You should consult a hydrogeologist to help understand how your GSP determined the sustainable yield, how it applies to you or your district, and whether it rests on reasonable facts and conclusions,” said Mr. Jacobs.  “This analysis will cost money, but it is necessary to allow evaluation of whether to take the significant step of filing an adjudication.  As well, information developed regarding your basin’s sustainable yield will be useful in an adjudication, if necessary.”

How does “significant and unreasonable” factor into the establishment of sustainable yield?  Mr. Ferguson noted that SGMA provides a fair amount of discretion to GSAs in establishing sustainable yield.

This discretion could be relevant in litigation against the GSA regarding its GSP or actions taken by the GSA based on its plan, such as pumping reductions,” said Mr. Ferguson.  “It may also be relevant in the context of an adjudication, where, under the “streamlined adjudication” statutes adopted in 2015, judgments issued in an adjudication must be consistent with SGMA and a GSA’s ability to achieve sustainable groundwater management, including any proposed physical solution.”  (WC 10737.8; CCP 849(b).)

Question 2: Does the GSP honor my water rights?

In evaluating whether to adjudicate, you need to understand your water rights and then determine whether the GSP honors those rights, said Mr. Ferguson.  “You should consult a water rights attorney to get a formal opinion regarding your water rights.  Again, like the sustainable yield analysis from an expert hydrogeologist, this attorney work can also be used in an adjudication.”

Mr. Jacobs then reviewed some basics about water rights:

    • The primary groundwater rights are overlying and appropriative; overlying rights are senior in priority.
    • Groundwater pumped for municipal service is generally characterized as appropriative.
    • Prescriptive rights arise from historic pumping in an overdrafted basin.  Prescriptive rights can also have a senior priority, but SGMA states that no new prescriptive rights can ripen after January 1, 2015.  This statutory provision will likely be tested and clarified in judicial proceedings.
    • The basin may also contain supplies that would not otherwise be present in the basin but for a specific action by a party that results in the water accruing to the basin.  The party whose actions make such water supplies present in the basin holds the right to that water.  Examples include water “imported” from outside the watershed or water which is captured that would have otherwise been lost to the basin, and which is recharged to the basin.

A key question is whether the GSP identifies and differentiates groundwater rights consistent with the groundwater right priority rules and if so, are the junior pumpers responsible for paying the costs associated with developing supplemental water supplies, or having their pumping quantities reduced before the senior pumpers?

If you have senior water rights, such as overlying rights, and the GSP appears to make no distinction between junior and senior right holders, this should be a cause of concern,” said Mr. Ferguson.

Mr. Jacobs noted that prescriptive rights are a particularly thorny issue.  Prescriptive rights may arise when a junior pumper is pumping in an overdrafted basin, or when a senior pumper is using more than its correlative share of the overdrafted basin’s sustainable yield.  “The establishment of prescriptive rights is determined on a case-by-case basis, and so without an adjudication and determination of those rights, it may be difficult for a GSA to assess or recognize these rights.  Prescriptive groundwater rights have played a major role in certain groundwater adjudications, however, so if you or your district has a good argument for prescriptive rights and those rights are not being honored in the GSP, you might consider adjudication.”

Mr. Ferguson added that if you own overlying land, but have not pumped groundwater, you may hold valid unexercised overlying rights, if they have not been lost to prescription.  Even if not lost to prescription, they are, however, subject to risk of subordination in an adjudication, meaning that they lose their priority status as overlying rights.  He also noted that the California Supreme Court has approved the State Water Resources Control Board’s subordination of unexercised riparian rights to surface water.

While the courts have not applied the principle of subordination in the groundwater context to unexercised overlying rights, the streamlined adjudication statutes allow the court to consider applying the principles established by the California Supreme Court,” he said.  “Thus, it is important to understand how your GSA treats unexercised overlying rights in the GSP and carefully weigh whether you may run the risk of a court subordinating your unexercised overlying right in an adjudication.”

Question 3: To what extent will the GSP-determined sustainable yield, or a GSA action based on that sustainable yield, impact my (or my district’s) ability to pump necessary quantities of groundwater?

They then listed the questions that should be considered:

1: Does the GSP state or suggest that the GSA will attempt to impose pumping restrictions (or charge for pumping in excess of certain quantities)?

2: If there will be pumping restrictions or charges, does the GSP apply the same rules to every pumper or are distinctions made based on seniority of water rights?  In this regard, the California Supreme Court has made clear that, in an adjudication, courts must follow the water law seniority rules.

3: What is the anticipated, practical effect on my ability to exercise my water rights?

4: How much less water will I be able to pump than my water rights would otherwise allow?

5: If my district operates a groundwater recharge and recovery project, does the GSP accurately and fairly protect our rights to those developed waters?

Question 4:  Will the GSA offer supplemental water supplies, and at what cost?

GSAs all over California are working to develop supplemental water supplies in the form of groundwater banking and projects to import surface water.  Mr. Ferguson said that if it appears your GSP sets a sustainable yield that will either impose pumping restrictions or require the purchase of supplemental water, you need to understand two primary issues: (1) the quantity of supplemental supplies you will be required to purchase; and (2) the estimated cost of these supplemental supplies.

The answer to the first question is important because, for instance, you may find that the GSA is requiring purchases of supplemental water by senior groundwater rights holders even though those senior demands do not exceed the sustainable yield as this would run counter to the groundwater priority rules that would apply in an adjudication,” he said.  “The answer to the second is important when weighing the costs and benefits of purchasing supplemental supplies versus participating in an adjudication.  Adjudications are expensive.  If you or your district will not need to buy supplemental supplies, or if the costs appear reasonable, adjudication may not make sense.”‘

In conclusion …

After analyzing these four key factors, you will have a better idea of whether to consider filing a groundwater adjudication,” said Mr. Jacobs.  “Generally, an adjudication is intended to result in a conclusive determination of relative rights to groundwater and assignment of responsibility for implementing projects to ensure basin sustainable yield (this is referred to as the “physical solution”).  While the court certainly has jurisdiction to declare the priority, amount and purposes of use, it is worth mentioning again that the streamlined adjudication statutes introduce some level of uncertainty as to how strictly courts will adhere to the rule of priority in the face of the statutory mandate to issue judgments that respect the SGMA process.  Importantly, an adjudication provides a framework for implementation of actions under continuing court supervision.  Often some of the most consequential work and decisions affecting a groundwater basin occurs after the initial judgment.  In particular, new realities may emerge in the search for supplemental supplies and the associated cost.”

Mr. Ferguson noted that while this presentation has focused primarily on groundwater adjudications for resolving potential impacts to water rights imposed by a GSA, groundwater rights holders can also directly litigate a GSA’s determinations.  SGMA mandates that such litigation proceed pursuant to a standard of review that is deferential to the GSA.  (WC 10726.6(e).)  “Nevertheless, this sort of direct action may provide an adequate remedy much more quickly and at less cost than a groundwater adjudication. So, it is important to consider whether such a lawsuit can provide you with an adequate remedy,” he said.

We are not advocating for more groundwater adjudications,” said Mr. Jacobs.  “They should be considered a last resort and, in the context of SGMA, only filed where it is apparent that your water rights are not being respected.  You should seek objective advice from your hydrogeologist/hydrologist and water attorney regarding whether there are clear errors in the GSP or in how the GSA intends to achieve sustainability.  With an objective assessment of the GSP and future groundwater regulation, an adjudication may be warranted in situations where a GSP does not honor your water rights, and it is apparent that the GSA will attempt to impose pumping restrictions and/or excessive charges for supplemental supplies.”

Important takeaways

It’s certainly important that you carefully evaluate your options both under the GSP in your basin and your potential options in court,” said Mr. Ferguson.  “You should have experts helping you, both on the technical side – hydrogeologists and hydrologists, and then on the legal side, you’re going to want your water rights attorney there helping you evaluate these options.”

I think for me, the biggest unknown is this whole process is how the GSAs are going to deal with prescriptive rights,” said Mr. Jacobs.  “We touched on that in the presentation.  If they are not able to deal with prescriptive rights in the GSP or how it is implemented, you may see more adjudications.”

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