Public Meeting Concerning Water Right Policies in Ogden Valley

The Utah Division of Water Rights has set a public meeting to discuss water right policies and recent hydrogeologic studies in the Ogden Valley area. The details of the meeting are included below.

Who:	Ogden Valley Water Users
When:	December 17, 2020, 4:00 PM to 6:00 PM
Where:	Online only
Online:	http://www.waterrights.utah.gov/publicmeetings
Purpose:	The purpose of the meeting is to review Utah Geological Survey's (UGS) Special Study 165 "Characterization of the Groundwater System in Ogden Valley, Weber County, UTah, with Emphasis on Groudwater-Surface Water Interaction and the Groundwater Budget" and discuss current water right appropriation policy. Personnel from the Division of Water Rights will be available to take all questions and comments provided by the general public and interested parties.
Agenda:	1. Welcome/Introduction 2. UGS Presentation - Groundwater in Ogden Valley 3. Current Water Right Policy 5. Public Questions/Comments

For more information regarding the meeting, click here.

Proposed Cedar City Valley Groundwater Management Plan

The Utah Division of Water Rights has published notice of its intent to adopt a groundwater management plan for Cedar City Valley in Iron County. The public notice is included below:

PUBLIC NOTICE ADOPTION OF THE CEDAR CITY VALLEY GROUNDWATER MANAGEMENT PLAN
This is notice of the State Engineer's intention to adopt a groundwater management plan for Cedar City Valley in Iron County. The groundwater management plan will be adopted 60 days from the date of this notice.
A copy of the plan is available on the Division's website at www.waterrights.utah.gov or upon request to the following address: Division of Water Rights 1594 West North Temple Suite 220 P.O. Box 146300 Salt Lake City, UT 84114-6300 

To view the public notice, click here.

To review the proposed Groundwater Management Plan and associated documents, click here.

Public Meeting Regarding Water Right Policy for Moab / Spanish Valley

The Utah Division of Water Rights has set a public meeting to discuss water right policies and the ongoing general adjudication process in the Moab / Spanish Valley area. The details of the meeting are included below.

Who:	Moab / Spanish Valley Water Users
When:	November 4, 2020, 4:00 PM to 6:00 PM
Where:	Online only
Online:	http://www.waterrights.utah.gov/publicmeetings
Purpose:	The purpose of the meeting is to discuss current water right appropriation policy; review the United States Geologic Survey, Scientific Investigations Report 2019-5062 "Evaluation of Groundwater Resources in the Spanish Valley Watershed, Grand and San Juan Counties, Utah"; and present an update on the general water rights adjudication. Personnel from the Division of Water Rights will be available to take all questions and comments provided by the general public and interested parties.
Agenda:	1. Welcome/Introduction 2. Current Water Right Appropriation Policy 3. Review of USGS SIR 2019-5062 4. Update on General Water Rights Adjudication 5. Public Questions/Comments

For more information regarding the meeting, click here.

Arave v. Pineview West Water Company

The Utah Supreme Court recently issued its decision in the case of Arave v. Pineview West Water Company. This case focused on issues of interference with well water rights.

The Araves and other plaintiffs had water rights that allowed them to divert water from two wells for their two homes and a bed and breakfast. Most of these water rights were established in the 1960s and 1970s. Pineview West Water Company ("PWCC") had a larger, junior water right that is allowed to be diverted from deeper and stronger wells to supply water to 70 homes and irrigate 20 acres. One of PWCC's wells is located only a few hundred feet from the plaintiffs' wells. When the PWCC well was first test pumped in 2004, it affected one of the plaintiffs' wells almost immediately. Within hours, the well was unable to pump any water and was sucking air, which resulted in silt damage to the two homes. A subsequent test yielded the same results. The plaintiffs' other well also experienced issues, albeit to a lesser degree. To resolve the issue, PWCC connected the plaintiffs to its water system and provided them with water for a flat rate of $20 per month. Several years later, however, PWCC sought to increase the fees to match the fees paid by other PWCC customers. When negotiations broke down, the plaintiffs brought this lawsuit claiming interference with water rights, negligence, and nuisance.

Following a four-day trial, the district court ruled in favor of the plaintiffs on their interference and negligence claims. The court concluded that when PWCC's well was operating, it deprived the plaintiffs' first well of "virtually all water" and obstructed the second well's ability to produce water. The court also concluded that PWCC had been negligent in locating, drilling, and using its well in such close proximity to the plaintiffs' wells. The court ordered PWCC to stop pumping its well unless it could demonstrate that it could do so without interfering with the plaintiffs' two wells or, in the alternative, to provide replacement water to the plaintiffs at no cost to the plaintiffs. The court also awarded PWCC to pay approximately $50,000 in compensatory damages to the plaintiffs. PWCC appealed the decision to the Utah Supreme Court.

The Court began by laying out the elements of an interference claim. To prevail on an interference claim, a plaintiff must establish that
(1) they have an enforceable water right;
(2) their water right is senior to the defendant's water rights;
(3) their methods and means of diversion are reasonable;
(4) despite their reasonable efforts, they are unable to obtain the quantity or quality of water to which they are entitled; and
(5) the defendant's conduct obstructed or hindered their ability to obtain that water.

The Court determined that the district court had made insufficient findings regarding the third and fourth elements. With respect to the third element, the district court had not made findings about whether the plaintiffs could have lowered their pumps or modified their wells to reach the available water. With respect to the fourth element, the plaintiffs had not offered evidence about how much water they used or how much of their allowed water they were not able to obtain (due in part to the fact that the plaintiffs did not have a meter on their wells). 

Thus, the Court reversed the district court's ruling that PWCC's well had interfered with the plaintiffs' two wells. Because the district court's negligence determination was related to its interference determination, the Court remanded the negligence claim back to the district court for further factfinding and analysis. The Court also vacated a portion of the compensatory damage award and remanded to the district court to revisit the calculation of compensatory damages based on the reversal of the interference determination.

To read the full opinion, click here.

Constitutional Amendment D

The November 2020 ballot in Utah will include Constitutional Amendment D, which asks the following question to voters:

Shall the Utah Constitution be amended to:

• rewrite a provision relating to municipal water rights and sources of water supply;
• allow a municipality to define the boundary of the municipality’s water service area and to set the terms of water service for that area;
• state that a municipality is not prevented from:
  • supplying water to water users outside the municipality’s boundary; or
  • entering into a contract to supply water outside the municipality’s water service area if the water is more than what is needed for the municipality’s water service area; and
• modify the basis upon which a municipality is allowed to exchange water rights or sources of water supply?

The constitutional amendment stems from legislative changes in 2019 and 2020 regarding municipalities providing water service outside of their municipal boundaries. The amendment clarifies that a municipality can provide water service outside of its boundaries by defining a "water service area," which may extend beyond the municipal boundaries. The amendment also explicitly allows "surplus water agreements," which have been long been used by municipalities under statutory authority to provide water outside of municipal boundaries. Municipalities will still be prohibited from selling, leasing, or disposing of its water rights and water sources, but can still exchange water rights or water sources, provided that the exchanged water rights or water sources will equally enable the municipality to meet the water needs of its designated water service area.

For more information on Constitutional Amendment D, click here or read pages 49-51 of Utah's official voter information pamphlet (available here).

Rocky Ford Irr. Co. v Kents Lake Reservoir Co. (amended)

In July 2019, the Utah Supreme Court issued a decision in the case of Rocky Ford Irrigation Company v. Kents Lake Reservoir Company. Following that decision, both parties filed Petitions for Rehearing, which the Court granted. After additional briefing from the parties (and the Utah State Engineer) and additional oral arguments, the Court withdrew its prior decision and issued a new decision. This case focuses on the issues of water efficiency savings, impairment of others' water rights, and obligations to measure water diversions.

Rocky Ford and Kents Lake are two irrigation companies on the Beaver River system. Both irrigation companies have various direct flow water rights and storage water rights with varying priority dates. In 1931, the Fifth District Court issued the Beaver River Decree, which divided the Beaver River system into an upper portion and a lower portion. Upper water users were allowed to divert water prior to lower water users, despite later priority dates, in part because the lower water users benefitted from return flows from the upper water users' flood irrigation. The Decree also required that all points of diversion be equipped with measuring devices.

In the 1930s and 1940s, Kents Lake filed two applications (a change application and an application to appropriate) with the State Engineer to construct Three Miles Reservoir in the upper portion of the Beaver River system. Rocky Ford protested the applications, but the State Engineer ultimately approved the applications. In 1953, Rocky Ford and Kents Lake entered into an agreement in which Rocky Ford agreed not to protest future change applications associated with Three Mile Reservoir, and Kents Lake agreed not to oppose Rocky Ford's expansion of its reservoir located in the lower portion of the Beaver River system. Kents Lake later filed a change application, and Rocky Ford did not protest it. Kents Lake later certificated this change application with the State Engineer.

Beginning in the 1970s, Beaver River water users began converting from flood irrigation to sprinkler irrigation. Rocky Ford alleged that it was being harmed due to the reduced return flows from upper water users and due to Kents Lake storing the "saved" water from the efficiency gains in its reservoir. In 2010, Rocky Ford filed a lawsuit against Kents Lake seeking damages, declaratory relief, injunctive relief, and rescission of the 1953 Agreement, based on allegations of water right interference, conversion of water rights, and negligence. Rocky Ford asserted that its water rights had been injured by the actions of Kents Lake, including the storage change application and the failure to measure water diversions. In one decision, the district court concluded that Rocky Ford had effectively waived some of its claims based on prior rights due to the 1953 Agreement. Following this decision, Rocky Ford stipulated to dismiss its damage claims. The remaining claims went forward to trial, and the district court ruled in favor of Kents Lake. The district court also awarded attorney fees to Kents Lake. Rocky Ford then appealed the case to the Utah Supreme Court. The Utah Supreme Court focused its decision on answering five questions, which are discussed below.

1. Did the district court err in denying Rocky Ford's motion for summary judgment?

The Court determined that there was a legitimate dispute about which of Rocky Ford's water rights were subject to the 1953 Agreement, and that the district court therefore erred in granting summary judgment on its interpretation of the 1953 Agreement.

The Court confirmed the principle that a "change maintains its original priority only so long as it does not harm preexisting rights." Thus, the Court determined that Kents Lake's changed storage rights maintained their original priority date of 1890 only if Kents Lake's changed water storage did not injure Rocky Ford's preexisting water rights.

The Court then explored the issue of impairment vs. interference. This was a central issue of dispute in the case. Rocky Ford asserted that impairment and interference meant the same thing, whereas Kents Lake asserted that the two terms have different meanings and contexts. The Court agreed with Kents Lake, and clarified the distinction between the two terms (while also noting that some of the Court's prior decisions were causes for the confusion due to the Court using the two terms interchangeably). The Court clarified that impairment claims are statutory claims made with the State Engineer during the application approval process. If a water user thinks their prior rights will be injured by a new application, the water user asserts impairment by filing a protest in the application proceedings (and, if necessary, by seeking judicial review of the State Engineer's decision). The standard of review is that the State Engineer should approve the application if there is "reason to believe" that the application will not impair existing water rights. Interference claims, on the other hand, are common law claims that are brought after an application has been approved and actual injury has been inflicted on prior rights. When interference claims are brought to a court, the opponent of the change must show, by a preponderance of the evidence, that the change has interfered with its water rights. The Court also clarified that a water user may bring an interference claim even if they did not file a protest and assert impairment during the application process. The Court concluded that Rocky Ford had waived its impairment claim when it failed to protest Kents Lake's change application, and that Rocky Ford had waived its interference claim when it dismissed its damage claim prior to trial.

2. Did the district court err in refusing to declare that Kents Lake could not store its efficiency gains?

The district court had concluded that Rocky Ford had failed to establish that any injury to its water rights was caused by Kents Lake's storage changes, rather than by intervening causes -- such as the impact of groundwater pumping or the conversion to sprinkler irrigation by water users other than Kents Lake. Based on the record of the district court, the Court affirmed the district court's decision.

3. Did the district court err in refusing to declare that Kents Lake must measure its water usage?

The Court next examined Kents Lake's obligations to measure its water diversions. Kents Lake asserted--and the district court had agreed--that even though Kents Lake did not measure all of its diversions, it was compliant because it did all measuring required by the State Engineer. But the Court noted that both Utah law (Utah Code section 73-5-4) and the Beaver River Decree require Kents Lake to measure all of its diversions. Thus, the Court reversed the district court on this point.

4. Did the district court err in refusing to rescind the 1953 Agreement?

Rocky Ford had asserted that the 1953 Agreement should be rescinded because Kents Lake had breached material provisions of the agreement. The Court determined that the alleged breaches were not material terms to the agreement, and therefore concluded that the district court had correctly refused to rescind the 1953 Agreement.

5. Did the district court err in awarding attorney fees to Kents Lake?

The Court finished its opinion by determining that the district court had not provided sufficient detail to support its conclusion to award attorney fees against Rocky Ford based on bad faith. Accordingly, the Court reversed this determination.


To read the full opinion, click here.

Black Diamond Financial LLC v. Big Cottonwood Pine Tree Water Co.

The Utah Court of Appeals recently issued its decision in the case of Black Diamond Financial LLC v. Big Cottonwood Pine Tree Water Company. The case focused on a water company's liability for a share transfer that was in violation of its Bylaws.

Big Cottonwood Pine Tree Water Company serves water to a cabin subdivision in Big Cottonwood Canyon in Salt Lake County. The Company's Bylaws provide that each lot owner was a member of the Company and was entitled to one Company water share that was only transferable with the lot. The Bylaws provided that the shares could not be transferred to other lots and could not be transferred separate from the lot. But as a matter of practice, the Company did not ensure that share transfers were performed according to these Bylaws.

Steven Rollins owned Lot 25 in the subdivision and owned one share that was associated with his lot. He was in a relationship with Vicki Kincaid, who loaned him money to remodel the property. When Rollins was unable to repay Kincaid, he agreed to transfer his water share to Kincaid as repayment. Both parties were unaware that the Bylaws prohibited the share transfer separate from the lot. Kincaid took the endorsed share to the Company, who issued a new share certificate to Kincaid. Later, Rollins' lender foreclosed on the lot. The lender found out that the lot had no water service because Kincaid owned the water share. Black Diamond Financial LLC purchased the lot from the lender at a discounted price due to the lack of water service. Black Diamond thought it would be able to resolve the water service issue, but was unable to reach an agreeable price to purchase the share from Kincaid or find water service in some other way. Black Diamond then filed suit against Kincaid and the Company.

Kincaid moved for summary judgment and asserted that she was a protected purchaser of the share under the Utah Uniform Commercial Code. Black Diamond and the Company also filed motions for summary judgment on breach of contract issues. The district court concluded that Kincaid was a protected purchaser, and was therefore entitled to retain the share. The district court also concluded that the Company was in breach due to its failure to follow the share transfer provision in its Bylaws. (Utah courts have long held that the Articles and Bylaws of a water company form a contract or agreement between the company and its shareholders.) But the district court determined that Black Diamond was not damaged by the breach because Black Diamond purchased the lot at a discounted price because of the water share issue. The district court required the Company to pay $1.00 in nominal damages to Black Diamond. Black Diamond then appealed to the Utah Court of Appeals.

The Court of Appeals first analyzed if Kincaid was a protected purchaser of the water share under the UCC. The Court reviewed the elements of a protected purchaser in Utah Code section 70A-8-3, and concluded that Kincaid met all of these elements. The Court therefore upheld the determination that Kincaid was entitled to retain ownership of the share.

The Court next examined Black Diamond's assertion that it was entitled to more than just nominal damages. The Court determined that even though the Company had breached its obligations under the Bylaws, Black Diamond was not injured by the breach because Black Diamond had purchased the lot at a discounted price due to the fact (and with full knowledge) that the lot lacked water service due to Kincaid's ownership of the water share. The Court noted that Black Diamond would receive a windfall if it was able to purchase the property at a discount and get damages based on property devaluation due to the lack of a water share. Based on these determinations, the Court of Appeals upheld the district court's decision.

It is important to note that the Court clarified that the result could have been very different if Black Diamond had acquired the lot without knowledge of the share issue. In such a circumstance, the Company would have been required to pay damages to Black Diamond due to the Company's failure to follow the share transfer provisions contained in its Bylaws. Water companies should, therefore, take heed to follow the share transfer provisions in its Articles and Bylaws (or, alternatively, amend its Articles and Bylaws to conform the share transfer provisions to match the Company's actual share transfer practices). Failure to do so could result in significant liability and monetary damage claims for the Company.

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

Change Application Tracker

Each year, hundreds of change applications are filed with the Utah Division of Water Rights. It generally takes a couple of months for a change application to go through the approval process -- and it can take even longer if protests are filed or if the Division elects to hold a hearing on the change application. Previously, the Division gave very little information about where a change application was at in the approval process. An applicant didn't know if their change application was in the final stages of review and only a few days away from a decision being issued, or if the Division was holding the change application due to some issue discovered during the review process.

Yesterday, the Division unveiled its new Change Application Tracker Tool, which provides a complete list of all unapproved change applications and includes information about where each change application is at in the approval process. The tool also provides information about whether a hearing has been requested or held; a "percent complete" column to give an indication of how far along in the process the change application is; and a comments section regarding issues that the Division has identified, additional information that the Division has requested from the applicant, and other notes about the change application.

This tool provides greater transparency in the process and will be a huge benefit to all water right owners that have pending change applications.

To access the Change Application Tracker Tool, click here.

Salt Lake City v. Haik

The Utah Supreme Court recently issued its decision in the case of Salt Lake City v. Haik. This case is another chapter in a long-running dispute regarding access to water service in Albion Basin in Little Cottonwood Canyon.

For years, Mark Haik and the Pearl Raty Trust, and others have sought to get water service from Salt Lake City so they can develop their lots in the Albion Basin. In 2014, Salt Lake City brought a water right quiet title action against Mr. Haik, the Raty Trust, who responded with various counterclaims. One counterclaim asserted that Salt Lake City was required to provide water service to the lots under Article XI, Section 6 of the Utah Constitution. Mr. Haik's counterclaim was dismissed based on res judicata because he had already litigated (and lost) the same claim in federal court, but the Raty Trust was allowed to pursue her counterclaim. The Raty Trust asserted that although the Albion Basin is not within Salt Lake City's municipal boundaries, it is within the City's approved water service area, and that the City was, therefore, obligated to serve water to the Trust's lot. The district court disagreed and dismissed the counterclaim. The case was appealed to the Utah Court of Appeals, who affirmed the district court. The Trust then appealed to the Utah Supreme Court.

The Utah Supreme Court began its analysis by reviewing the language of Article XI, Section 6, which provides that all of the "waterworks, water rights and sources of water supply now owned or hereafter to be acquired by any municipal corporation, shall be preserved, maintained and operated by it for supplying its inhabitants with water at reasonable charges." The Trust asserted that because its property was within the City's water service area, the Trust was an "inhabitant" of the City and that the City was, therefore, constitutionally required to provide water service to the Trust's property. The Court disagreed, and determined that the Trust did not meet the plain-language definition of an "inhabitant" of Salt Lake City. Further, the Court held that it was not persuaded that those who ratified the Utah Constitution understood the word "inhabitant" to encompass any person who owned property within a city's approved water service area. The Court therefore affirmed the dismissal of the Trust's counterclaim.

To read the full opinion, click here.

Personnel Changes at Utah Division of Water Rights

In November 2019, Kent Jones retired as the State Engineer. Teresa Wilhelmsen, who was previously serving as Assistant State Engineer for Applications and Records, was appointed the new State Engineer in March 2020. Boyd Clayton, who has served as Deputy State Engineer, is retiring in a few weeks. These changes have necessitated several more personnel changes within the Division of Water Rights.

• James Greer, who previously served as the Assistant State Engineer for Technical Services, has been appointed as the Deputy State Engineer.
• Blake Bingham, who previously served as the Assistant State Engineer for Adjudication, has been appointed as the Assistant State Engineer for Applications and Records.
• Michael Drake, who previously served as the Regional Engineer for the Weber River/Western Region, has been appointed as the Assistant State Engineer for Adjudication.
• Jim Reese, who previously worked in Technical Services, has been appointed as the Assistant State Engineer for Technical Services.

The Division has not yet selected a new Regional Engineer for the Weber River/Wester Region.