Property Rights Triumphant: Barstow v. Mojave Water Agency

October 2000

California Water Law & Policy Reporter

The most important debate in the water community for the past quarter century has been between those who have advocated the modification or restriction of California’s water right priority system in favor of a more “equitable” system and those who have steadfastly promoted the water rights priority system as the best way for California to allocate a scarce resource. Advocates of the “equity” view have seemingly had the courts on their side for almost a quarter-century. Proponents of this view have pointed with pride to a series of cases, beginning with In re Waters of Long Valley Creek Stream System, 25 Cal.3d 339 (1979), wherein the Supreme Court found that the State Water Resources Control Board could curtail unexercised riparian rights; United States v. State Water Resources Control Board, 182 Cal.App. 3d 82 (1986), wherein the Court of Appeal urged the use of a “global perspective” to implement a water quality control plan; In re Water of Hallett Creek Stream System, 44 Cal.3d 448 (1988), wherein the Supreme Court found that the State Water Resources Control Board could recognize unexercised riparian rights on federal lands; and Imperial Irrigation District v. State Water Resources Control Board, 225 Cal.App. 3d 548 (1990), wherein the Court of Appeal, in an unusual postscript to its opinion, stated that water law “is in flux and that its evolution has passed beyond traditional concepts of vested and immutable rights.” (Id. at 573). Proponents of the equity view— not without some justification — concluded from these cases that the old-fashioned notion of water rights as property was dead.

They spoke too soon. In Barstow v. Mojave Water Agency (S071728, decided August 21, 2000), the Supreme Court decided the first case that squarely presented the question of whether water law in California would be guided by “equitable” principles or by the water right priority system that has stood the test of one and a half centuries. In a straightforward, no nonsense opinion, the Supreme Court rejected the view that water should be allocated according to some ill-defined notion of “equity” and instead reaffirmed the water rights priority system. In reaching its conclusion, the Supreme Court was quite mindful of the many problems facing California in the management of its water resources. Rather than wave the wand of “equity” over these problems (hoping that they would disappear), the Supreme Court offered the water community a number of hints about how we can address the very real problems associated with the management of water. In this way, the Supreme Court—in the most profound sense—got it right.

The Decision
As the first groundwater decision by the Supreme Court in a quarter-century (since City of Los Angeles v. City of San Fernando, 14 Cal.3d 199 (1975)), the Barstow decision merits attention by the entire water community. After briefly summarizing basic doctrines of water law pertaining to groundwater, the Supreme Court turned its attention to the main question: whether footnote 61 in the San Fernando decision would permit the intrastate allocation of water by means of an “equitable apportionment.” The Supreme Court begins with the proposition that an “equitable physical solution must preserve water right priorities to the extent that those priorities do not lead to unreasonable use.” (Slip op. at 16). After discussing the City of Pasadena v. City of Alhambra, 33 Cal.2d 908 (1949), where the Supreme Court relied on a mutual prescription theory to allocate water in an overdrafted basin, the Supreme Court summarized footnote 61 and stated that respondents “claim this footnote provides the basis for the trial court’s use of equitable apportionment to allocate water in an overdraft[ed] basin without regard to the owners’ water priorities.” (Slip op. at 21). The Supreme Court rejected this view, stating that it found no conflict between the Pasadena and San Fernando decisions. The Supreme Court stated: [San Fernando] is not precedent for wholly disregarding the priorities of existing water rights in favor of equitable apportionment in this state, where water allocation has been based on an initial consideration of owners’ legal water rights. Case law simply does not support applying an equitable apportionment to water use claims unless all claimants have correlative rights; for example, when the parties establish mutual prescription . . . . As the Court of Appeal aptly observed, we have never endorsed a pure equitable apportionment that completely disregards overlying owners’ existing legal rights. Thus, to the extent footnote 61 in City of San Fernando could be understood to allow a court to completely disregard California landowners’ water priorities, we disapprove it. (Slip op. at 23).

So much for equitable apportionment.

Implications of the Decision

Reasonable and Beneficial Use
One of the most interesting portions of the Barstow decision is its use of the reasonable and beneficial use doctrine of article X, § 2 of the California Constitution. Ever since Joslin v. Main Municipal Water District, 67 Cal.2d 132 (1967) and particularly since People ex rel. State Water Resources Control Board v. Forni, 54 Cal.App.3d 743 (1976), advocates of the “equity” view of California water have urged that courts interpret the waste and unreasonable use doctrine to put water to its highest and best use: generally for domestic, municipal, or industrial purposes. Barstow thus presented the Supreme Court with a golden opportunity to expand the precedents of Joslin and Forni; after all, the chief appellants in Barstow were growing alfalfa in the desert. It would not have been a far stretch for the Supreme Court to have supported the “equity” view by stating that such agriculture is not a reasonable use of water, particularly in an overdrafted basin.

In light of this opportunity, the Supreme Court’s silence on the application of article X, § 2 is deafening. The Supreme Court’s studious ignorance of this issue—particularly when the opinion cites its previous decision in Joslin—strongly suggests that this Supreme Court takes very seriously the difference between a “reasonable” use of water and the “highest” use of water. As long as a proposed use of water is “reasonable,” the Supreme Court will not mandate a “better” use. This view is entirely consistent with the Supreme Court’s holding that property rights in water must be respected in the context of a groundwater adjudication. It also is directly contrary to the views of those who would turn article X, § 2 into a means for statewide management and allocation of water resources.

Groundwater Management
Since the Court of Appeal’s decision two years ago, there have been a number of parties to the stipulated judgment that have interpreted that decision as license for overlying water users to extract unlimited quantities of water, even from an overdrafted basin. Proponents of this view have contended that the Court of Appeal’s decision thus made groundwater management all but impossible. Proponents of this view should be comforted; the Supreme Court put to rest the (misguided) notions about unlimited overlying rights and, at the same time, provided a hint of how it might look at groundwater management in the future.

Barstow is quite clear that an overlying right to groundwater, particularly in an overdrafted basin, is not unlimited. The Supreme Court defines an overlying right as: the owner’s right to take water from the ground underneath for use on his land within the basin or watershed; . . . One with overlying rights has rights superior to that of other persons who lack legal priority, but is nonetheless restricted to a reasonable beneficial use. (Slip op. at 13, citation omitted).

The Supreme Court continues, discussing article X, § 2: The constitutional amendment therefore dictates the basic principles defining water rights: that no one can have a protectible interest in the unreasonable use of water, and that holders of water rights must use water reasonably and beneficially. Crucial to our determination here is the fact that the amendment carefully preserves riparian and overlying rights, while abolishing that aspect of the common law doctrine which entitled a riparian, as against an upstream appropriator, to enforce his right to the entire natural flow of a stream even if his use of the water was wasteful or unreasonable. (Slip op. at 15, emphasis added, citation and internal quotation marks omitted).

In this way, the Supreme Court gives full effect to overlying rights while making quite clear that they are limited by the provisions of article X, section 2.

It would be a mistake to conclude from this defense of overlying rights that the Supreme Court is somehow hostile to groundwater management; far from it. In a footnote on the case of Wright v. Goleta Water District, 174 Cal.App.3d 74 (1985), the Supreme Court approved Wright’s hint that, under certain circumstances a court could limit the scope of an unexercised overlying right. The Supreme Court states:If Californians expect to harmonize water shortages with a fair allocation of future use, courts should have some discretion to limit the future groundwater use of an overlying owner who exercised the water right and reduce to a reasonable level the amount the overlying user takes from an overdrafted basin. (Slip. op. at 25).

Read in context, this statement suggests that the Supreme Court is likely to be quite supportive of groundwater management programs, including those that limit overlying rights to reasonable and beneficial uses. Although this is not a blueprint for groundwater management, it certainly suggests that local agencies and courts will have a fair amount of discretion as long as they respect the rights of overlying landowners. (See Slip op. at 27 (a physical solution “cannot simply ignore the priority rights of the parties asserting them.”).

The Bay-Delta
Another interesting implication of the Barstow opinion comes in the context of the Bay- Delta water rights hearing. Footnote 2 of Barstow carefully states that the decision: in no way limits the administrative authority of the State Water Resources Control Board, nor does it affect the state board’s authority over surface waters. (Slip op. at 2). By virtue of this footnote, the Supreme Court implicitly recognizes that the reasoning that it uses in Barstow has direct application to disputes over surface waters. Because such a case was not before the Supreme Court, however, prudence undoubtedly dictated the insertion of this footnote.

Leaving aside the facts of Barstow, however, the Supreme Court’s reasoning has direct relevance to a key dispute in Phase 8 of the Bay-Delta hearings. Phase 8 (which has been stayed until early next year) involves the remaining non-settling parties. One of the alternatives, Flow Alternative 5, is premised on allocating responsibility for meeting the 1995 Water Quality Control Plan standards in proportion to each watershed’s contribution to the unimpaired flows that would enter the Bay-Delta Estuary. Other alternatives, Flow Alternatives 2 and 3, most notably, are premised on the use of the water rights priority system. The strong emphasis in Barstow on affirming private property rights in a groundwater adjudication suggests that the Supreme Court would find that Flow Alternative S is not consistent with California law.

Water Transfers
The final implication of the Barstow decision relates to water transfers. Since the 1976- 77 drought, virtually all serious studies of California’s water resources — from the Governor’s Commission reports to the CALFED Record of Decision—have identified water transfers as a key instrument for California to move water from one use to another. Despite this consistent support in theory, water transfers have stalled in practice.

One chief reason that water transfers have been relatively difficult to accomplish is that third parties have been very successful in identifying the externalities associated with a proposed transfer. Some of these externalities—for instance, the loss of income in farming communities due to reduced purchases of supplies and/or reduced employment—represent legitimate concerns. However, many third parties have been successful in opposing transfers by attempting to undermine the seller’s right to transfer the water in question. Barstow casts doubt on that strategy by emphasizing that property rights must be respected, even if the exercise of those rights is inconsistent with what others believe to be best for the area. This strong defense of water rights should bolsters proponents of water transfers and should result in water transfers being easier to accomplish.

Conclusion and Implications
This time, the judicial process worked. Faced with a trial court decision that had the potential to turn 150 years of California law on its head and — contrary to the Supreme Court’s direct warning in Long Valley, 25 Cal.3d at 355, against creating uncertainty with respect to water rights—would create tremendous uncertainty for water rights throughout California, the Supreme Court has issued a commonsense opinion that affirms the ability to manage water while respecting private property rights. In so doing, the Supreme Court has—with luck—stilled the great controversy in water law of the past quarter-century. It is to be hoped that the water community can now turn its vast creative energies from arguing over whether water rights matter to attempting to develop institutions and practices that manage California’s water resources in light of a well-developed regime of private property rights. California deserves no less.

David R.E. Aladjem is a partner with Downey Brand LLP. He represents individuals, private companies, and public agencies in all areas associated with water resources in California, including water rights and water quality, CEQA/NEPA, and endangered species issues. Mr. Aladjem was counsel of record on the amicus brief filed in Barstow v. Mojave Water Agency by the Northern California Water Association. Mr. Aladjem is a member of the Groundwater Committee of the Association of California Water Agencies and has written and spoken on Barstow v. Mojave Water Agency as it has made its way through the judicial system. The views expressed in this article are solely the views of the author and should not be attributed to Downey Brand LLP or its clients or to the Northern California Water Association or its members.