Governor Signs Sustainable Groundwater Management Act Part II: Groundwater Adjudications Meet Groundwater Management

Water Law  

October 13, 2015

On October 9, 2015, Governor Brown completed what is probably one of the most remarkable two years in water legislation in California’s history.  Last year, as is well-known, the Governor shepherded through the Legislature not only the Sustainable Groundwater Management Act (SGMA) but also the $7 billion water bond (Proposition 1), which was approved by the voters last November.  In signing SGMA, the Governor pledged that during the 2014/15 legislative session, he would submit a proposal to streamline groundwater adjudications.  With the signing of AB 1390 (Alejo) and SB 226 (Pavley), the Governor kept his promise.

This article focuses its attention on several questions that will, in our view, determine whether this legislation lives up to the goal of streamlining groundwater adjudications, the court process for determining groundwater rights.  First, what will be the role of the State of California in these adjudications?  Second, to what extent will the parties and the courts be able to use a new civil procedure law to encourage the resolution of groundwater adjudications, particularly with new authority for the Department of Water Resources to review and comment after an adjudication is completed?  Third, how will courts exercise authority under existing Supreme Court case law to subordinate unexercised rights to groundwater?  Fourth, and most important, how will the courts satisfy the new mandate to conduct groundwater adjudications “in a manner that is consistent with the achievement of groundwater sustainability within the timeframes of” SGMA and “minimizes interference with the timely completion an implementation of a groundwater sustainability plan.”

The Role of the State of California in Groundwater Adjudications

Typically, groundwater adjudications are brought among various users of a groundwater basin in civil court.  The new law, however, contains a provision for intervention by the State of California that could substantially increase the role of the Attorney General in groundwater adjudications and (by extension) in the groundwater sustainability plan (GSP) planning process under SGMA.  In our view, this provision is limited in scope.  However, if the State of California chooses to use this provision aggressively, the result will likely be to further complicate groundwater adjudications rather than streamline those adjudications.

New Code of Civil Procedure section 837.5(a) states that the state may intervene in a comprehensive adjudication, while section 837.5(b) states that the prior section does not affect substantive law.  Construing these two sections together, it seems that the State may intervene in a comprehensive groundwater adjudication if it satisfies the normal requirements to justify intervention (i.e., an interest in the litigation that could be affected by a judgment).  In many cases, it will be easy for the State to justify intervention (e.g., where it owns property and for some reason was not named as a party in the adjudication).  In other circumstances, though, where a comprehensive adjudication is based the claim that a GSP did not respect rights to groundwater and where there is no surface water under the State Water Resources Control Board’s jurisdiction, intervention may be much more difficult.  Under these circumstances, which really involve the competing claims of water rights holders, it is difficult to see why the State of California should be able to intervene.  If the State chooses to do so, difficult and complex questions of water rights will likely become more difficult and complex based on the claims being put forward about those rights by the State of California. 

Shifting the Burden for Physical Solutions

One of the most innovative elements of AB 1390, and one that we developed with the help of Stef Morris, counsel for the State Water Contractors, is Code of Civil Procedure section 850.  That section provides that if parties representing at least 50% of all parties and 75% of all water rights can agree on a proposed physical solution/stipulated judgment that is consistent with article X, section 2 of the California Constitution, is consistent with the water right priorities of non-stipulating parties, and treats objecting parties equitably as compared to stipulating parties, then the trial court may impose the proposed physical solution on objecting parties. 

This provision is a direct response to two concerns.  First, some parties might seek to obstruct a settlement in order to place themselves in a better bargaining position.  Second, some parties might seek to use a groundwater adjudication to delay implementation of SGMA. Section 850 takes bargaining power away from holdouts and forces parties attempting to develop a physical solution to do so with an eye to the water rights of all parties, not just those willing to stipulate.  It is the goal that this provision will encourage settlement that truly respects water rights.

The statute as enacted, however, also includes a provision for consultation and review of the proposed physical solution/stipulation by the Department of Water Resources in order to allow certain exceptions to SGMA upon adjudication of a basin.  If the Department (due to the ownership of land, for instance) is already a party to litigation and supports the proposed stipulation, there is no need for this review.  If the Department is a party to the litigation and opposes the proposed stipulation, there is no need to treat the Department differently from any other party.  If, however, the Department is not a party to the litigation, this provision gives the Department the opportunity to derail a settlement that has strong support from the parties directly involved in negotiating the settlement and which the trial court must review to ensure all parties are treated equitably.   Under these circumstances, review by the Department could be a mere formality (in which case it is unnecessary) or it could represent the classic case of a “late hit” where objections by an entity with little stake in the outcome could disrupt years of efforts.  It is to be hoped that the Department will exercise restraint in its review of such settlements; otherwise, this provision – which was intended to coordinate adjudicated basins with the requirements of SGMA – mayoperate to prevent the settlement of complex disputes.

The Long Valley Challenge

In its 1979 decision in In re Waters of Long Valley Creek Stream System, the California Supreme Court opined that the State Water Resources Control Board, in the context of a comprehensive stream adjudication, had the authority under article X, section 2 of the California Constitution to give unexercised riparian rights a lower priority to the use of water than riparians that had been actively using water.  The Supreme Court was careful to note that a court could not extinguish those rights (which would have effected a taking) but that the court could give such rights a lower priority in order to avoid uncertainty and encourage the beneficial uses of the water of the stream system to the greatest extent practicable.

In the context of groundwater adjudications, the Long Valley doctrine has come under scrutiny in the ongoing Antelope Valley adjudication.  In that case, there are thousands of parties who own property that overlies the groundwater basin who have never pumped one drop of water from the aquifer.  Instead, they have relied on one or more water agencies to secure their water supplies or it has simply been premature (in terms of development) for them to need a water supply.  One of the key issues in the case is whether, and to what extent, such parties will have their water rights assigned a lesser priority because of non-use.  While the case is still being litigated, it is safe to say that any trial court order assigning unexercised overlying rights a lower priority to the groundwater in the Antelope Valley will be appealed.  That case will represent the first time that a California appellate court tries to put the principle articulated by the Supreme Court in Long Valley into practice.

Even if the contours of the Long Valley decision were clear, it is not at all clear how a trial judge should apply those principles in a groundwater adjudication.  In a comprehensive adjudication of a large groundwater basin, many property owners may not have used their overlying rights to groundwater because they have relied on surface water.  It would be perverse to penalize these landowners for good conjunctive management of surface and groundwater (and for making the significant investments usually associated with obtaining surface water) by benefitting the groundwater pumpers whose overextraction of groundwater triggered the need for an adjudication by giving such unexercised groundwater rights a lesser priority.  But, that is precisely what is authorized by the Supreme Court’s discussion in Long Valley

The new law expressly authorizes a court conducting a comprehensive adjudication to consider applying the principles in Long Valley when determining and establishing the priority of unexercised rights.  Thus, it seems that a trial judge might believe that s/he is authorized to – in the interests of sound groundwater management – to limit the rights of overlying property owners with surface water rights.  This is the only provision in the legislation that authorizes a change in the substance of California water law and would likely come at the cost of years of costly litigation that would frustrate the goals of the new legislation. 

Coordinating a Comprehensive Adjudication with a Groundwater Sustainability Plan

The most important – and most controversial – element of the legislation is how it relates to SGMA.  At the start of the legislative process, there were three distinct views among the lawyers involved in drafting the legislation. 

Some lawyers believed that as long as a groundwater sustainability agency (GSA) was meeting the requirements in SGMA in developing a GSP (i.e., completing a GSP by 2020 or 2022), then parties should be barred from filing a groundwater adjudication on the grounds that such a challenge was not yet ripe.  That position posed significant constitutional challenges because it would have effectively stripped the holders of rights to groundwater of an existing right to have the courts determine or protect their property rights. 

Conversely, there was another group of lawyers who believed that, once a party filed a complaint commencing a groundwater adjudication, the process should be conducted entirely in the courts, for the judiciary is the only entity capable of determining water rights.  This position would have allowed parties to file groundwater adjudications and entirely circumvent the elaborate planning process contemplated by SGMA.  From the perspective of the Brown Administration, this would have nullified SGMA within a year of its enactment, and so that position was also a non-starter.

The third group of lawyers believed that there needed to be some way to ensure that GSAs were able to spend the time and effort needed to develop GSPs while also ensuring that those GSPs did not violate the water rights of the parties to a groundwater adjudication.  There was a great deal of discussion about how to frame this balancing of competing interests, how much discretion to give to the trial judge and how much deference to give to the GSA as it developed the GSP. 

In the end, the Legislature opted for general language that expresses the goal of harmonizing groundwater adjudications with SGMA without providing much clear direction to a trial judge confronted with a groundwater adjudication.  AB 1390 states that a court is to conduct a groundwater adjudication “in a manner that promotes efficiency, reduces unnecessary delays, and provides due process.”  In addition, the court is to conduct the adjudication action in a manner “that is consistent with the achievement of groundwater sustainability within the timeframes” of SGMA.  AB 1390 further provides that the court may stay a comprehensive adjudication in order to facilitate adoption of a GSP.  SB 226 states that, in an adjudication action for a basin required to have a GSP, the court “shall manage the proceedings in a manner that minimizes interference with the timely completion and implementation of a groundwater sustainability plan, . . .”   It also provides that the court shall not approve a judgment unless it finds that the judgment will not substantially impair the ability of a GSA, the State Water Resources Control Board or DWR to comply with SGMA and to achieve sustainable groundwater management.   The two bills thus contemplate that the adjudication process and the groundwater management planning process under SGMA will proceed on parallel tracks and that the trial judge will play the critical role of ensuring that the two trains do not collide.  

While the goal of harmonizing the adjudication process with SGMA is laudable and important, it is likely that the court adjudication process will, at times, clash with the SGMA management process.  For example, where a GSP includes provisions for the curtailment of groundwater pumping in an overdrafted basin but there has been no comprehensive determination of the relative water right priorities of the various pumpers in the basin, the GSP may be vulnerable to attack on the ground that it alters groundwater rights in contravention of the requirements of SGMA.  In such a case the groundwater curtailment provisions of the GSP may have to be stayed pending a court determination of the relative water right priorities of the various basin pumpers.   

At the end of the day, trial judges will implement the statute the same way that good trial judges oversee any complicated case:  looking to the parties to help manage the case, retaining experts and/or special masters who can advise the court, and relying on the trial judge’s own common sense (together with lots of education from the parties).  With those ingredients, good trial judges will be able to encourage settlements (where possible) and decide difficult or controversial issues (where needed).  But, no one – least of all trial judges – should underestimate the magnitude or the difficulty of the task that has been set before the judiciary.

Summary and Conclusion

AB 1390 and SB 226 are intended to streamline the groundwater adjudication process, which presently can often take between ten and fifteen years.  Many of the procedural reforms in the legislation will help streamline the existing process.  This article has, however, focused on the provisions of the bills that are likely to trigger greatest confusion and controversy and hence the most litigation.  These are the provisions that could – if implemented in a common-sense fashion – provide substantial assistance to the goal of streamlining the groundwater adjudication process.  On the other hand, if these provisions are implemented poorly or without an eye towards the resolution of disputes, we may look back on these bills in 10 years and conclude that they have not streamlined groundwater adjudications but have instead been an avenue to make those adjudications even more cumbersome, lengthy and expensive than before.