California’s Other “Dual System”: Coordinated Management of Groundwater and Surface Water

July 1, 2003

49th Annual Rocky Mountain Mineral Law Institute

§ 7C.01 Introduction
§ 7C.02 Interconnection and Integration
§ 7C.03 The Problem of Enforcement
§ 7C.04 Implementing Professor Glennon’s Proposal


§ 7C.01 Introduction

Among water lawyers, California is known for its “dual system” of surface water rights. Not being content with a system of riparian rights, like most states in the eastern United States, nor being content with a system of appropriative rights, like most states in the western United States, California determined early on that it would recognize both types of rights. Similarly, in the case of rights to groundwater, California developed a dual system. Lands overlying an aquifer have correlative rights; lands located away from an aquifer have appropriative rights. The subject of this paper is California’s third “dual system”: the manner in which rights to surface water and groundwater relate—or fail to relate—to each other.

Professor Robert Glennon’s recent book Water Follies argues that one of the chief causes of the overuse of groundwater resources in the United States is the fact that groundwater and surface water are subject to different legal regimes. Professor Glennon states: “[t]he laws regulating groundwater pumping often flout the scientific principles of hydrology.” Professor Glennon makes two distinct claims. First, he concludes that, generally, states treat groundwater as a separate resource from surface water, causing a disjointed, uncoordinated legal regime. Second, he uses the case studies in his book to argue that the separation of these legal regimes results in adverse consequences— most notably the dewatering of surface streams, property damage, and ill effects on the environment. Professor Glennon then proposes that the way to avoid these types of adverse impacts is to integrate the regulation of surface and groundwater resources.

This paper takes issue with both of Professor Glennon’s claims as they apply to California. Section 7C.02 addresses Professor Glennon’s claim that groundwater and surface water are disjointed, uncoordinated legal regimes. Although it certainly would be possible to achieve greater integration of surface and groundwater resources, California law actually coordinates the use of these resources to quite a considerable degree. Section 7C.03 addresses Professor Glennon’s claim that it is the disjuncture of these legal regimes that causes the overuse of groundwater. Based on California’s experience, those problems of overuse seem to result from a lack of enforcement of existing laws, not from the inadequacy of those laws. California has attempted to address this issue and, based on the theoretical literature, seems headed in the right direction. Section 7C.04 considers the potential results of adopting Professor Glennon’s proposal. If California were to take Professor Glennon’s advice, it would face massive practical problems in integrating regulation of surface and groundwater. The net result of such integration, at least in areas of overdraft (and potentially in any area where water demands exceed surface supplies), would be that some water users would be denied water that they could otherwise use, at least in some years. Such an impact would likely result in actions for inverse condemnation; actions that, under the standard originally developed by Justice Holmes in O’Neil v. Northern Colorado Irrigation Co. and most recently articulated by Justice Stewart in Hughes v. Washington, are likely to be successful.

§ 7C.02 Interconnection and Integration

California has a long and reasonably well-developed history of integrating the use of surface water and groundwater despite treating surface water and groundwater through two different legal regimes. Although the case law does not address every possible combination of riparian rights, surface appropriations, overlying rights to groundwater, appropriative rights to groundwater, and rights to appropriate water from “subterranean streams flowing through known and definite channels,” California law is sufficiently well-developed to conclude that California courts are well-aware of the interconnections between surface water and groundwater and have crafted legal doctrines to address the effects of that interconnection.

There are a number of cases that address interference by groundwater users with surface water rights. For instance, it is well-settled that the owner of percolating groundwater may only diminish the flows in a surface stream in order to put that water to reasonable use on lands overlying the groundwater basin. Similarly, the owner of lands overlying a subterranean stream cannot extract water from that stream so as to have an adverse impact on surface water diverters. One decision has gone so far as to virtually ignore the distinction between riparian rights to surface water and correlative rights to groundwater in finding a right to extract groundwater for use on overlying lands despite impacts on downstream riparians and downgradient overlying pumpers.

There are fewer cases addressing the potential interference by surface water use on groundwater extractions. In Miller v. Bay Cities Water Co., the California Supreme Court articulated a broad standard that protects the owner of percolating groundwater from surface appropriations of water on non-riparian lands. Relying on McClintock v. Hudson and Hudson v. Dailey, a federal district court decision has found that riparian and overlying rights are treated as extracting water from one common source and so have joint rights to reasonable shares of the resource.

The foregoing cases illustrate that California courts have, for approximately a century, addressed the interconnections between surface water diversions and groundwater pumping. This “dual system” is not neat or orderly and it is subject to uncertainty depending on the hydrologic and geologic conditions of each case. Nonetheless, if effectively implemented, it is well suited to achieving the integration sought by Professor Glennon.

§ 7C.03 The Problem of Enforcement

Perhaps the more difficult question is not whether California provides for a legal system that integrates the use of surface water and groundwater but why, if that is the case, California suffers from groundwater overdraft. After all, one of Professor Glennon’s case studies is from California (Chapter 8: A Game of Inches for Endangered Chinook Salmon) and Water Follies reprints a famous photograph taken by the U.S. Geological Survey of land subsidence in the San Joaquin Valley that was the result of overpumping.

Professor Glennon’s diagnosis generally is that it is the legal disconnection between the regulation of surface water and groundwater that has caused these impacts. In fact, the final chapter of Water Follies identifies the true culprit: the fact that groundwater resources are a “common-pool resource” and so are subject to the “tragedy of the commons.” An examination of the ways that common-pool resources can be managed sheds light on California’s experience.

As a general rule, it has been suggested that there are three different ways to manage a common-pool resource successfully:
creating or empowering a governmental agency to dictate appropriate actions; privatizing the resource; or developing some type of cooperative institution. California has intentionally avoided adopting any form of centralized governmental regulation of groundwater extraction for approximately 90 years. California has also avoided privatization of groundwater resources beyond granting individuals usufructory rights under very specific conditions. By contrast, California has adopted with enthusiasm the approach of seeking to empower local institutions to manage groundwater in a cooperative fashion.

This management can occur as part of a settlement of a basin adjudication or can occur because of the threat of an adjudication or
state regulation.

The most important statewide efforts to foster local cooperative management of groundwater resources are two statutes, generally known as Assembly Bill 3030 and Senate Bill 1938. Assembly Bill 3030, which was adopted in 1992, gave local public agencies with water supply responsibilities the authority to develop groundwater management plans that would address the issues in the local groundwater basin. Assembly Bill 3030 permitted such local agencies to limit extractions as a last resort and allowed for the imposition of fees for such extraction upon the approval of those fees by the electorate. Senate Bill 1938 augments the authority granted in Assembly Bill 3030 by describing in more detail the components of a sufficient groundwater management plan and by limiting state funding for groundwater projects to agencies with sufficient groundwater management plans.

Elinor Ostrom’s theoretical treatment of common-pool resources suggests that California’s efforts in local groundwater management are tending in an appropriate direction. She suggests that successful cooperative efforts share a number of characteristics: (1) clearly defined boundaries, both in area and in participants; (2) rules that are tailored to the local circumstances; (3) local governance; (4) active monitoring for compliance with adopted rules; (5) graduated sanctions for violations of those rules; (6) conflict resolution mechanism within the institution; and (7) support for local institutions by external governments. Assembly Bill 3030 signaled the State of California’s general support for such local institutions and suggested that groundwater management plans incorporate many of the elements identified by Ostrom as necessary for success. Senate Bill 1938, in turn, focused attention on establishing rules and monitoring efforts in order to optimize “local resources while protecting groundwater and surface water resources” while also facilitating “an understanding of the basin or subbasin, thereby allowing local agencies, individually and cooperatively, to meet local, regional, and state water needs through conjunctive management.” For these reasons, California seems to be firmly, if perhaps slowly, addressing the problems associated with enforcing its water rights system.

§ 7C.04 Implementing Professor Glennon’s Proposal

The previous sections of this paper have described the reasons that California does not need to adopt Professor Glennon’s proposal in order to manage its surface and groundwater resources effectively. Assuming, arguendo, that the California Legislature or the California Supreme Court actually did adopt Professor Glennon’s proposal, though, what might be the consequences?

The first, and perhaps most predictable, consequence would be confusion. Integrating the various rights to surface waters (riparian, pre-1914 appropriative, and post-1914 appropriative) with the various rights to groundwater (correlative and appropriative) and with the potential of pueblo rights and prescriptive rights creates the likelihood of significant confusion as water users seek to identify and defend rights under this new regime. Although this confusion would probably extend for some time and would effectively result in general stream adjudications on California’s major river systems, rights to surface and groundwater could, in theory, be integrated in precisely the same way as California integrates riparian and appropriative rights to surface water: on the basis of priority. In California, riparian rights relate back to the date of patent. This priority date allows the integration of California’s dual system of appropriative and riparian rights. Similarly, California could administer Professor Glennon’s proposal by assigning priority dates to correlative rights based upon the dates on which those lands were patented and thereby integrate groundwater rights with surface water rights.

The second, and perhaps more intractable, problem is inherent in the integration of surface and groundwater. Under the current system, junior surface water appropriators are denied water during dry years. Similarly, in cases of overdraft, groundwater appropriators are denied water. Under an integrated system, though, the allocation of water could shift. For instance, the holder of a correlative right to groundwater in an area with overappropriated streams could be denied water because senior appropriators might be allowed to extract groundwater in lieu of surface water. Conversely, a relatively senior surface water right could be denied water in an area with severe overdraft of groundwater if the integration allows groundwater users access to surface water resources. In either of these situations, or any other set of circumstances that results in a change in water availability, it is likely that an aggrieved party would sue alleging inverse condemnation.

Professor Barton Thompson has recently summarized the many characteristics of a water right that make a claim of inverse condemnation more complicated than the typical “regulatory taking” case. Those characteristics may include, but are not limited to: (1) the nature of water rights as usufructory, not possessory; (2) the often vague contours of a water right resulting from legal standards such as “reasonable and beneficial use” and the public trust doctrine; (3) the inherent uncertainties of hydrology, quality, and priority; (4) the unique importance of water rights in the West; and (5) the fact that, for many western states, the “public” is the ultimate owner of all water. Despite these complexities, the Court of Claims has recently found that a reduction in water deliveries not contemplated in a contractual water right can give rise to a physical, not even a regulatory, taking. The reduction in water availability resulting from a shift to Professor Glennon’s legal regime, therefore, could quite plausibly constitute a taking.

Even if a potential plaintiff were unsuccessful in asserting a physical or a regulatory taking, it seems likely that such a plaintiff could be successful in asserting a taking of property based on a “sudden change” in state law. The genesis of this obscure branch of takings jurisprudence lies in a water law opinion by none other than Justice Holmes. In O’Neil v. Northern Colorado Irrigation Co., the U.S. Supreme Court considered a statutory scheme intended to adjudicate water right quantities, priorities, and other questions of right within a specified period, wherein the plaintiff alleged that a judicial decree under the statute that infringed upon his claim of rights constituted a compensable taking. The Supreme Court rejected this claim, finding that the limitations period had run and that the claim of surprise did not give rise to a taking, even “when it is too late for [the plaintiff] to act on the construction [of the statute] and save his rights.” Justice Holmes continued, however, by adding an interesting proviso: “[t]here was no different construction of the statute by the court before the limitation had run, that might have lulled him to repose.” This language clearly implied that the sudden reversal of an existing legal standard could, in the appropriate case, give rise to a taking.

More recently, the concept that a taking could result from a sudden change in law was developed by Justice Stewart in Hughes v. Washington. In that case, the U.S. Supreme Court considered a dispute relating to whether federal or state law controls the ownership of lands accreting to coastal properties and found that federal law controlled. Justice Stewart concurred with the result and the Court’s reasoning but found it necessary to address the question of whether the state court decision establishing new state law deserved deference, writing: To the extent that the decision of the Supreme Court of Washington on that issue arguably conforms to reasonable expectations, we must of course accept it as conclusive. But to the extent that it constitutes a sudden change in state law, unpredictable in terms of the relevant precedents, no such deference would be appropriate. For a State cannot be permitted to defeat the constitutional prohibition against taking property without due process of law by the simple device of asserting retroactively that the property it has taken never existed at all.

This concurrence has clear implications for Professor Glennon’s proposal. Because the proposal departs from almost a century and a half of settled California law generally treating groundwater and surface water through distinct legal regimes, such a change could quite plausibly be treated by the federal courts as a taking.