Utah Stream Access Coalition - Motion for Summary Judgment

A quick update on the Provo River stream access lawsuit between Utah Stream Access Coalition and ATC Realty Sixteen Inc.

First, there have been a few changes in the parties to the lawsuit. The State of Utah has agreed to intervene and defend against the Coalition's constitutional challenges to House Bill 141 passed by the Utah Legislature in 2010. In exchange, the Coalition has agreed to dismiss the Utah Division of Wildlife Resources, the Utah Division of Parks and Recreation, and Sheriff Todd Bonner as defendants.

Second, the Coalition has filed a Motion for Summary Judgment (in essence, a motion for the court to rule in the Coalition's favor without going through a trial). In the Motion, the Coalition argues that HB 141:

"Violates the public's constitutional right to use Utah's natural waters for all recreational activities that use the water and to touch the privately-owned beds of such water in ways incidental to those uses."

"Violates Article XX, Sect. 1 of the Utah Constitution" (public lands held in trust for the people)

"Violates Article V of the Utah Constitution" (distribution of powers between the three branches of government)

"Violates the public trust doctrine" (the principle that public resources should be managed by the government for the benefit of the people)

I have a copy of the Motion for Summary Judgment, and I would be happy to email a copy to anyone who is interested. Click here for my email address.

Montana v. Wyoming

The following article was published in the Water & The Law newsletter, which our firm publishes on a quarterly basis. If you would like to receive an email version of the newsletter, please click here to join our mailing list.
 
It is somewhat rare that the U.S. Supreme Court delves into the world of western water law, but it recently did so in a case between the states of Montana and Wyoming. This case is not an appeal of any decision by a lower court, because when one state sues another, the case goes directly to the U.S. Supreme Court for determination. The central issue in the case is whether Wyoming violated the Yellowstone River Compact because Wyoming water users had converted from flood irrigation to sprinkle irrigation, which increased the consumption of water in Wyoming beyond historic (pre-1950) levels.

Wyoming, Montana, and North Dakota entered into the Yellowstone River Compact in 1951, and Congress then ratified the Compact. The Compact provided that beneficial users of water on the Yellowstone River system with priority dates before January 1, 1950 "shall continue to be enjoyed in accordance with . . . the doctrine of appropriation." Montana claimed, among other claims, that more efficient irrigation practices were consuming more water on the Wyoming (upstream) side, which left less water for the pre-1950 Montana water rights. Montana based its claims first on general principles of the prior appropriation doctrine, and second on the Compact's definition of "beneficial use."

The Court concluded that, although "the law of return flows is an unclear area of the appropriation doctrine," the general rule allows a water user to increase his irrigation efficiency even if that harms downstream users. First, the injury that a change in water use cannot injure other water users does not apply to changes in crop type or irrigation method, but applies to changes in points of diversion, or place or purpose of use. Second, most western states allow an appropriator to recapture and reuse water on the same acreage as long as it remains on the property and within the water user's control. Thus, the general rule already allows increased consumption through recapture.

The Court also rejected Montana's second claim that the compact itself strictly limited Wyoming to a maximum amount of depletion. The Court indicated that other compacts like the Colorado River Compact expressly limit depletion amounts, but the Yellowstone River Compact does not. Therefore, the Court concluded that the Compact's definition of beneficial use simple acknowledged a preference for consumptive uses rather than nonconsumptive uses.

Ultimately, this case is not binding on any state court, including Utah courts. The Supreme Court specifically acknowledged that state courts control the doctrine of prior appropriation. Nevertheless, the discussion found in the case is instructive of general principles of western water law.

(Click here to read the full text of the Supreme Court's Opinion)

Water Rights Addendum

Beginning July 1 of this year, a person submitting a deed to a county recorder's office may also submit an attached "Water Rights Addendum" (also commonly referred to as a "Deed Rider"). These Water Rights Addenda were originally approved by House Bill 314, passed by the Utah legislature in 2010, which added Section 57-3-109 to the Utah Code.

There are two different forms. The Water Rights Addendum to Land Deeds allows the seller of real estate to specify what water rights (if any) are being conveyed with the land. The Water Rights Addendum to Water Deeds allows the seller of a water right to include additional specification about the water right (or portion of water right) conveyed.

The Water Rights Addenda will be an invaluable tool in clarifying water rights conveyed as part of a real estate transaction. Oftentimes in real estate transactions, there is little or no thought given to the water rights conveyed. Many of the water rights disputes I deal with could have been prevented if the buyer and seller had thought about and specified the water rights conveyed (or not conveyed). The Addenda will go a long way in reducing disputes associated with appurtenance and unclear ownership of water rights--if the Addenda are used correctly.

Even though the Addenda are not required, any buyer or seller of land or water rights will want to use the Addenda, and all real estate agents, title agents, and others involved in real estate transactions should understand and utilize the Addenda. If you are buying or selling land or water rights, it would be wise for you to insist on a Water Rights Addendum being included with the deed.

As a note, an additional bonus of the Addenda is that they can save you the cost of a Report of Conveyance. Under the statute, each county recorder is to forward recorded Addenda to the Division of Water Rights' title department. If the water right owner on the Division's records is the same person as the grantee in the Addendum, the Division will update title without having to file a Report of Conveyance.

Salt Lake City v. Big Ditch Irrigation Company

Today, the Utah Supreme Court issued its opinion in the case of Salt Lake City v. Big Ditch Irrigation Company. The case centers on a 1905 water exchange agreement (“the Agreement”) between Salt Lake City (“the City”) and Big Ditch Irrigation Company (“Big Ditch”). The Agreement states that Big Ditch “grants, bargains and sells” its right to water from Big Cottonwood Creek, and in return, the City would “perpetually and continuously deliver” water suitable for irrigation to the head of Big Ditch’s canal. Big Ditch and the City have operated under the Agreement for over 100 years. However, the amount of water Big Ditch has received from the City has declined over the years, as residential and commercial development in Big Ditch’s historic service area has reduced the number of irrigated acres.

In 2006, Big Ditch and some of its shareholders filed change applications to modify their use of the exchange water received from the City. The City protested, asserting that Big Ditch and its shareholders did not own the water rights, and were therefore not entitled to file change applications. The City then filed suit against Big Ditch and the shareholders, asserting that (1) under the Agreement, the City holds title to the Big Cottonwood Creek water rights and the exchanged water; (2) that Big Ditch and its shareholders do not have a right to file a change application on the exchanged water; (3) that the City is not in breach of its delivery obligations under the Agreement; and (4) that Big Ditch and its shareholders have the contractual right to receive only the amount of water necessary to satisfy the irrigation needs of Big Ditch shareholders whose lands are served by the Big Ditch system. Big Ditch and the shareholders filed counterclaims against the City, asserting among other things that the City was in violation of the Utah Antitrust Act.

In a series of decisions, the district court ruled in favor of the City. Specifically, the district court (1) denied the individual shareholders’ motion to dismiss the City’s claims against them; (2) held that the City holds title to all of the water under the Agreement; (3) held that Big Ditch did not have the right to file change applications on the exchanged water; (4) held that Big Ditch was barred from demanding the full amount of water to which it was entitled under the Agreement; and (5) dismissed the counterclaim against the City for violation of the Utah Antitrust Act.

The district court’s rulings were appealed to the Utah Supreme Court (“the Court”). The Court reviewed each of the five issues outlined above, ultimately concluding that the district court was correct on some issues, but erred on other issues. The Court’s conclusions on each of the five issues are discussed below.

First, the Court held that the district court erred when it denied the individual shareholders’ motion to dismiss the City’s claims against them. The Court noted that the district court had used the wrong legal standard when reviewing the motion to dismiss. Additionally, the Court noted that the shareholders’ rights were derivative of the corporation (Big Ditch), and that the corporation—and not the individual shareholders—were parties to the Agreement. Accordingly, the Court held the individual shareholder had no privity of contract with or duty to the City. Thus, the Court ruled that the individual shareholders were not properly named as defendants and that the district court should have dismissed all of the City’s claims against the individual shareholders.

Second, the Court affirmed the district court’s ruling that the City holds title to the water under the Agreement. The Court noted that under the Agreement, Big Ditch “grants, bargains and sells” its right to Big Cottonwood Creek water to the City. The Court noted that this was conveyance language that passed title of the water rights from Big Ditch to the City. On the other hand, the City agreed to “perpetually and continuously deliver” water to Big Ditch. The Court noted that this was not conveyance language, and therefore did not transfer title to the exchanged water from the City to Big Ditch. In sum, Big Ditch conveyed its water right to the City in exchange for a contractual commitment by the City to deliver water to Big Ditch. Thus, the Agreement vested in the City title to all of the water rights at issue.

Third, the Court held that the district court erred in its conclusion that because Big Ditch had failed to take the full amount of water to which it was entitled under the Agreement in prior years, Big Ditch was estopped from now demanding the full amount of water. The Court concluded that the legal doctrine of equitable estoppel did not apply because there was no inconsistency in Big Ditch’s conduct of taking less than its entitled amount of water in prior years and then later demanding the full amount of water to which it was contractually entitled. Thus, the Court held that the Agreement as originally drafted remains in force, meaning that Big Ditch may take the full amount of water to which it is entitled and that its use of the water is not limited to irrigation use or to use in Big Ditch’s historic service area.

Fourth, the Court held that the district court erred in its conclusion that because Big Ditch was not the appropriator or owner of the exchanged water, Big Ditch was not entitled to file a change application on the water. The Court distinguished prior cases that focused on ownership of the water right, and noted that “one with an entitlement to use water may file a change application,” as long as their right to use the water is not “subsumed to other competing interests.” The Court concluded that because Big Ditch is contractually entitled to receive the exchanged water from the City in perpetuity, Big Ditch is a “person entitled to the use of water” under Utah Code section 73-3-3, and therefore entitled to file change applications on the exchanged water.

Finally, the Court held that the district court properly dismissed the counterclaim against the City for violation of the Utah Antitrust Act. The Court noted that the Act exempts “the activities of a municipality to the extent authorized or directed by state law.” Because municipalities are expressly permitted to acquire water rights and operate water systems, the Court concluded that the City was exempt from the Antitrust Act.

As a final note, although the Court held that Big Ditch may file change applications based on the exchanged water, the Court specifically stated that it was offering no opinion on whether or not the change applications should be approved by the State Engineer. Each change application will still have to go through the administrative process and be reviewed under the applicable standards. It will be interesting to see how these change applications proceed through the change application process and if they will ultimately be approved.

To read the full opinion, click here.

Jensen v. Jones

This week, the Utah Supreme Court issued its opinion in the case of Jensen v. Jones (formerly known as Hamblin v. Olds and Hamblin v. Clayton). The question answered by the Court was whether the State Engineer can declare forfeiture of a water right as the basis for denying a change application.

The underlying facts of the case are that Ms. Hamblin owned a water right from Spring Creek, a tributary to the Provo River. Ms. Hamblin filed a change application, seeking to move the water right to wells in Highland City. The State Engineer rejected the change application based on his determination that the water right had not been used for over 20 years. Ms. Hamblin filed a petition for judicial review with the district court. The district court upheld the State Engineer's rejection of the change application, concluding that the water right had been automatically lost to forfeiture long before the change application was filed. The district court also held that recent changes to Utah's forfeiture statute--which require court action before a water right is adjudicated forfeited--did not apply retroactively.

The district court's decision was then appealed to the Utah Supreme Court. Ms. Hamblin argued (1) that the State Engineer lacks the authority in the context of a change application to determine that a forfeiture has occurred; and (2) that the water right was not forfeited because there has been no judicial determination of forfeiture. On the other side, the State Engineer argued that the water right had been forfeited automatically many years ago due to nonuse and that the amendments to Utah's forfeiture statute were not retroactive. The Court ultimately agreed with Ms. Hamblin's argument that the State Engineer cannot consider non-adjudicated forfeiture when reviewing a change application, and therefore did not answer the question of whether the amendments to the forfeiture statute apply retroactively.

The Court noted that the State Engineer is an executive officer tasked with administering and supervising the appropriation of water in the state, and that he acts in an administrative capacity only and has no authority to adjudicate water rights. The Court also noted that in the context of evaluating a change application, the State Engineer is limited to applying the criteria contained in Utah Code section 73-3-8, which do not include forfeiture. Further, the Court noted that in previous cases, the State Engineer had conceded that a forfeiture determination was beyond the State Engineer's authority in approving or rejecting a change application. In sum, the Court concluded that the State Engineer exceeded his authority by rejecting Ms. Hamblin's change application on a determination of forfeiture, and therefore reversed the district court's affirmance of the State Engineer's rejection.

It is important to note that the Supreme Court did not determine whether Ms. Hamblin's water right has or has not been forfeited, as it was beyond the scope of the appeal.

To read the full text of the Supreme Court's opinion, click here.

Rules to Remember When Purchasing Water Rights

Below is an article that I recently wrote for Western AgCredit's FenceLines magazine. A PDF copy of the full magazine can be seen by clicking here.

As an attorney whose practice focuses primarily on Utah water law, I often receive phone calls and questions about water rights. The most common questions I receive are about title to water rights: How is a water right properly conveyed? How do I know if the water right I am buying is valid? Is there paperwork I need to fill out with the Utah Division of Water Rights? The purpose of this article is to provide five general rules to remember when purchasing a water right (or land that includes a water right) in Utah.

1. Research Title to the Water Right
Before purchasing a water right, you should research the true ownership of the water right. In other words, does the seller really have title to the water right that they are trying to sell you? A printout from the Division of Water Rights’ database or a copy of the deed the seller received from a prior owner are not sufficient to establish ownership. Title research must be done in the records at the county recorder’s office and at the Division of Water Rights. If proper title research is not done, you run the risk of paying the seller for something that he/she does not own.

2. Consider Purchasing Water Right Title Insurance
When purchasing land, people almost always buy title insurance. However, people don’t generally think of buying title insurance for water rights. Water right title insurance is now available in Utah, and may be an option to consider if you are spending a lot of money to purchase water rights and/or want some assurance regarding the title to the water rights.

3. Research the Status of the Water Right
You should research the water right’s status and history. In other words, is the water right a valid, recognized water right that will allow you to use it in the manner represented to you? There are a lot of potential issues that a water right may have that can only be discovered by a thorough review of the documentation, maps, decrees, etc. on file with the Division of Water Rights.

4. Have the Water Right Conveyed by DeedThe proper way to convey a water right is by deed. As a buyer, you should request that the deed be a warranty deed rather than a quit-claim deed. If you are purchasing land and the water right, both can be conveyed in the same deed, but the deed should clearly state the water right that is being transferred. I prefer to use language such as: “Together with Water Right No. 33-1452, as identified of record with the Utah Division of Water Rights, including all change applications and other applications pertaining thereto.” You may also use the Water Rights Deed Addendum form, which is available on the Division of Water Rights’ website. The deed must be recorded with the County Recorder’s Office in the county where the water is diverted and the county where the water is used (which are generally the same).

5. File a Report of ConveyanceAfter the deed has been conveyed, you need to update the title with the Utah Division of Water Rights by filing a Report of Conveyance. The Division maintains a database of all water rights and associated information, which includes the name(s) of the owner(s) of each water right. Any notices or correspondence that affect a water right will be sent to the owner of record on the Division’s database. The Division does not, however, actively monitor any transfers of water rights; rather, the Division relies on each water right owner to file a Report of Conveyance to notify the Division when ownership transfers.

Water rights are a valuable asset and a vital resource in most farming operations. Unfortunately, however, people purchasing water rights oftentimes do not spend the time necessary to research and evaluate the water rights prior to the purchase. Following the five steps outlined in this article can go a long way in ensuring that you get what you pay for in your next water rights
purchase.

Utah Stream Access Coalition v. Park

The Utah Stream Access Coalition has filed a second lawsuit seeking access to rivers and streams for recreation. The first lawsuit centered on the Provo River, and was a constitutional challenge to the 2010 stream access law passed by the Utah Legislature. This second lawsuit centers on the Weber River, and was filed in Summit County.

The complaint alleges that the Weber River was navigable when Utah became a state and, therefore, that the bed of the Weber River belongs to the State and not to the landowners adjoining the river. The complaint further alleges that the defendants, who are adjoining landowners, have wrongfully posted 'No Trespassing' signs, erected barbed wire fences across the river, and otherwise attempted to prevent members of the public from accessing the bed of the river. The Coalition is asking the court for a judgment declaring that the bed of the Weber River belongs to the State and for an injunction prohibiting the defendants from denying the public access to the river bed.

Haik v. Sandy City

The Utah Supreme Court recently issued its opinion in the case of Haik v. Sandy City. The case centered on a title dispute to a water right. As the court noted in the first line of the opinion, the case illustrates the importance of promptly recording a deed for a water right.

In 1977, Saunders-Sweeney Inc. and Sandy City entered into an "Agreement of Sale," under which Saunders-Sweeney agreed to sell a water right to the City. The City recorded the Agreement of Sale with the Salt Lake County Recorder. Shortly thereafter, the City received a quitclaim deed for the water right from Saunders-Sweeney, but the City did not record the deed.

In 1978, Saunders-Sweeney conveyed the property to which the water right was appurtenant to Judith Saunders. Several years later, the property was conveyed to Lynn Biddulph. In 1999, Saunders-Sweeney also quitclaimed the water right to Ms. Biddulph. Shortly thereafter, Ms. Biddulph filed a change application on the water right. The City protested the change application, but did not claim ownership of the water right. In 2003, Ms. Biddulph conveyed the water right to LWC LLC. Later that same year, LWC LLC conveyed the water right to Kevin Tolton, who then conveyed the water right to the Haik parties. All of the deeds in this chain of title were properly recorded with the Salt Lake County Recorder.

In 2004, the Haik parties filed a change application. In preparing a protest of the change application, the City conducted research and discovered the unrecorded deed from 1977. The deed was finally recorded in April 2004. The City then sought to update title with the Division of Water Rights, but the City's request was denied.

The Haik parties filed an action to quiet title to the water right. The district court ruled that the Haik parties were the legal owners of the water right. The City filed an appeal with the Utah Supreme Court.

The Supreme Court began its analysis by noting that Utah is a race-notice jurisdiction, meaning that a subsequent purchaser for value prevails over a previous purchaser if the subsequent purchaser (1) takes title in good faith and (2) records before the previous purchaser. There was no question that the Haik parties recorded their deed before the City, so Court's analysis focused on whether the Haik parties took title in good faith, i.e., whether the Haik parties had actual or constructive notice of the City's prior, unrecorded interest.

The City contended that the 1977 Agreement of Sale imparted constructive record notice of a conveyance of the water right to the City. The Haik parties, on the other hand, argued that the Agreement of Sale did not provide record notice because it was impossible to know whether the sale was actually finalized and whether a deed was delivered to the City.

In the end, the Court sided with the Haik parties. The Court concluded that the Agreement of Sale did not subvert the Haik parties' claim of having purchased the water right in good faith because (1) the Haik parties reasonably believed they had a clear chain of title to the water right; (2) the City failed to record its deed for nearly 27 years after receiving the deed; (3) the Haik parties' predecessors-in-interest had maintained the water right and filed a change application on the water right in 1999; and (4) the City failed to contest ownership when it protested the 1999 change application. Thus, the Supreme Court upheld the district court's judgment that the Haik parties are the legal owners of the water right.

To read the full text of the opinion, click here.

If I Install a More Efficient Irrigation System, Can I Irrigate More Acreage?

The question is often asked: If I put in a more efficient irrigation system, can I increase my irrigated acreage (or sell the "saved" water)? Unfortunately, the answer is generally no. The reason why is somewhat complex, but I've summarized in the following explanation and example.

In Utah, beneficial use is the basis, measure, and limit of a water right. The water right has several characteristics, including diversion and depletion limits.

For this example, assume that your water right permits you to irrigate 10 acres and that the the irrigation duty in your area is 4 acre-feet per acre. The water right, in terms of acre-feet, would be 40 acre-feet. The duty, however, is based on flood irrigation, which is not very efficient. The general rule for flood irrigation is that 50% of the water is depleted (i.e., used) and the other 50% returns to the natural system (as runoff, tailwater, or seepage into the underground aquifer). Assuming you flood irrigate, you would likely divert all 40 acre-feet in order to irrigate the 10 acres, but you would only be depleting 20 acre-feet (with the other 20 acre-feet being returned to the natural system). These are the limits of use for your water right: a diversion limit of 40 acre-feet and a depletion limit of 20 acre-feet.

Now assume you install a very efficient sprinkler system. Because the system is so much more efficient than flood irrigating, you only have to divert 22 acre-feet to irrigate the same 10 acres. It would appear that you "saved" 18 acre-feet, which you could use to irrigate 8 more acres. However, doing so would increase the depletion. When you were flood irrigating, you depleted 20 acre-feet; however, with the new system and expanded acreage, you would be depleting 36 acre-feet.

It is for this reason the Utah State Engineer will not allow “spreading” of water based on more efficient systems. The State Engineer believes that the increased depletion would be an enlargement of your water right and would adversely affect other water users. (Additionally, because your water right is limited to the irrigation of 10 acres, expanding the irrigated acreage to 18 acres would enlarge your water right.)

The current State Engineer, Kent Jones, has talked about this topic several times recently. It seems to be one of his primary concerns. If you go to this web address and click on "Presentation - Kent Jones," you can see a PowerPoint slideshow from one of his recent presentations. Slides 13-20 specifically address this issue.

What Are Hydrographic Survey Maps?

As part of the General Adjudication process, the Utah Division of Water Rights prepares hydrographic survey maps. These maps show all of the water use in a particular area, including the location and acreage of all irrigated land and the location of all streams, wells, springs, and other water sources.

Hydrographic survey maps can be very useful when researching how water was used in the past and when trying to determine appurtenancy and title issues for Reports of Water Right Conveyance.

Most of the hydrographic survey maps are available online by clicking here.