GHOST RIGHTS TO WATER CAN BE SPOOKY--PART 2

In my previous post, I discussed "ghost" water rights held by landowners. These are rights to divert water from streams and lakes that were established prior to governmental regulation and permitting of such diversions.

Ghost-like water rights also can arise under different scenarios. One reported example is the dispute between the states of West Virginia and Maryland over water rights in the Potomac River.* West Virginia has sought to take additional water from the river for a proposed new manufacturing plant in that state. Maryland has objected to such an additional take. In 1933, Maryland began regulating
withdrawals from the river by users out of state. West Virginia has claimed that such control is limited by a 1785 compact negotiated by George Washington and a 2003 U.S. Supreme Court decision which enabled the state of Virginia to have water rights in the river.

Earlier this year, a South Dakota tribe of native Americans living along the Missouri River filed suit against the United States seeking $200 million as compensation for alleged violations of water rights.** The complaint is premised on a 1908 U.S. Supreme Court ruling that the establishment of a land reservation for native Americans includes an implied reservation of water rights for the benefit of the tribe. The claim is alleged that water rights to the river given by the United States to others were not legal.

Fresh water is a scarce but indispensable commodity. Accordingly, what these examples illustrate is that sharing of water sources can be a contentious exercise. If sharing cannot be accomplished by agreement or compact, governmental regulation and ultimately litigation appears to be a necessary and likely consequence.

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*Terlep, "P&G Caught in Water-Rights Feud",
Wall Street Journal, November 26-27,2016,
p. B3

**Tupper, "SD Tribe Wages $200M Water Fight",
Rapid City Journal, November 13, 2016,
p. A1

© Daniel J. Kucera 2016

GHOST RIGHTS TO WATER CAN BE SPOOKY

In 1948, the classic song "Ghost Riders in the Sky" was published. Depicting a haunting cowboy legend, it became popular first in 1949 by the deep voice of Vaughn Monroe, but subsequently recorded by over 50 performers.

Now, it appears that there may be ghost water rights in rivers and lakes on earth. In the 1600s, colonists in America began to use water from rivers to power their mills. In doing so, they also assumed rights to use water for these purposes. The formation of states, and the United States, occurred some 100 years later, and the formal regulation of water rights even later.

A recent news story focuses on a thorny issue: do pre-regulation water rights, sometimes called "ghost water rights", survive subsequent governmental regulation of water rights?* According to the article, two pioneer landowners in the Black Hills of South Dakota obtained water rights in 1896 to divert substantial flow from Rapid Creek. The then stated purpose of the water diversion was "for milling, manufacturing, irrigating, domestic and other useful purposes." These water rights were recorded prior to the the adoption in 1907 of state water use laws providing for regulation and permitting of water rights. According to the article, there were hundreds of water rights recorded prior to state regulation.

The article states that the subject water rights, if exercised, would divert almost one-half of the entire flow of the Creek in a typical year. In 1908, a state engineer surveyed pre-existing water rights and found that they claimed large amounts of water. He wrote "the natural tendency was to make the claim large enough to cover all possible requirements, and in most cases greater than there was any expectation of using...This resulted in many instances in absurd and speculative claims, and the records show numerous cases where each of a number of claims to the water of a stream, filed in accordance with the former statutes, involved a larger quantity of water than had ever flowed in it, even during flood periods."

Now, the state board regulating water rights is considering termination of ghost water rights. However, such termination presents several potential issues. For example, do pre-existing water rights ever expire or can they be terminated? If water rights were never used, do they still exist? Do they run with the land benefited from the water rights? Can water rights be abandoned, and if so, what evidence establishes abandonment? If a water right is used partially, does the unused balance still exist? Can a pre-exisist water right be reduced in scope?

Another issue may be Constitutional. If a state terminates or reduces a pre-existing water right, is this a taking under the Fifth and Fourteenth Amendments, requiring compensation?

Ghost water rights appear to be both daunting and haunting. Allocation of the rights to divert water from rivers and lakes can be a complex and contentious exercise. Indeed, to reference the song, ghost rights in the water can be spooky.

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*Tupper,"'Ghost Claims'Haunt SD Waters,"
Rapid City Journal, September 25, 2016,
page A1

© Daniel J. Kucera 2016

REGULATION AND AN ARCHIMEDES' MOMENT

Shortly before this month's presidential election, a Wall Street Journal article discussed impacts of excessive regulation upon economic growth.* Citing Brexit and G-20 leaders, it stated "Recent developments suggest a new recognition by voters and governments that excessive regulation is responsible for the slow economic growth of the past eight years." The article concluded "There is solid evidence that excessive regulation since the financial crisis has kept the U.S. and other developed economies from growing faster."

Since the dramatic results of the election, media sources have hastened to speculate over actions the new federal administration may take to mitigate or rescind perceived excessive regulation , not only in the financial arena but also particularly in environmental and energy related matters. Rulemaking in such areas obviously can have impacts on manufacturing, job loss and creation, wage growth, etc.

Moreover, aside from economic impacts, recent regulatory developments have extended federal reach to minutia of daily personal living. For example, there now are rules governing who can use what gender of public bathroom, the type of toilet one can have in a home, the kind of faucets and shower heads one can have, the kind of light bulbs to turn on in a bathroom, the amount of water a toilet can flush, etc. One can expect that a federal rule may be proposed governing the type and amount of toilet paper that can be used.

In addition to potential negative impacts on the economy, excessive regulation can distort the federalism structure inherent in the U.S. Constitution. As a reminder, the 10th Amendment states: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved by it to the States respectively, or to the people." So, for example, should any regulation of bathroom usage be a federal or state issue?

Regulation can also become "excessive" when, under the guise of legitimate rule making it has a hidden agenda such as wealth redistribution or other social engineering. Or, it may become abusive when enacted by fiat without due process benefits of notice, opportunity to be heard, and balancing of costs and benefits.

The result of the recent election, to reference Archimedes' discovery, is a "Eureka!" moment. It has created a timely opportunity to review the current regulatory patterns and to modify rules which may be suffocating economic growth on both national and personal levels. One of the drivers of this country's exceptionalism in the past has been the freedom of ingenuity and hard work to rise above the common denominator. Excessive regulation can be a damper and limiting factor which create only negative inertia. Some positive inertia now is in order and welcomed.

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*Wallison, "The Regulatory Tide Recedes",
Wall Street Journal, October 10, 2016,
Page A15

© Daniel J. Kucera 2016

POWER PLAYS

Last week, the U.S. Supreme Court issued a stay of the EPA's new carbon emissions regulation targeting coal-fired power generating plants. There are more than 30 lawsuits challenging the rule, filed on behalf of some 25 states and others. The stay of the enforcement of the rule allows the lawsuits to work their way through the lower courts before the matter, in all probability, winds up back before the Supreme Court.

Such a stay in the Supreme Court is rare. Some pundits in the press have opined that it means the Supreme Court likely will reverse EPA'a carbon emissions rule on the merits. In a broader sense, some have asserted that the stay is a significant blow to the President's environmental agenda.

Perhaps these comments arise from the typical requirements for a court stay, such as a showing of likelihood of success on the merits and denial of a stay would result in the threat of irreparable harm.
However, the grant of a stay is not a ruling on the merits of a case, and there is no assurance that the Supreme Court ultimately will reverse the rule.

In theory, there are two primary grounds that could justify any reversal of the regulation: (1) a finding that EPA exceeded its statutory authority under the Clean Air Act and/or (2) a finding that EPA did not find and consider the costs, including economic impacts, and benefits of the carbon emissions rule. For example, does causing the shift away from coal-fired power plants result in substantial economic impacts on the coal mining industries, utilities, jobs and ratepayers?

In addition to such "traditional" arguments against a rule, there may be more subtle issues at play here. They may arise from the concept of federalism established in the U.S. Constitution.

First, while Congress may have delegated to EPA regulation of air pollution, they may have not delegated authority to enact major national policy decisions such as policy on climate change, what fuels can be used for power generation, and impacts on the coal industry. Policy issues of substantial economic and political significance would be expected to be determined by Congress, not by an administrative agency.

Second, there is the federal-states relationship inherent in the 10th Amendment to the Constitution. Powers not delegated to the United States by the Constitution, or prohibited to the States by it, are reserved to the states, or the people. There has been a long recognition of states' role in regulation of electric utilities, generation and transmission assets and reliability of service. While a federal agency seeks to phase out coal-fired power plants, the result is to shift to states the burden to assure that lights will still be lit when those plants are retired. In a way, the carbon emissions rule is directed to the states as much as to the power plant owners, as it is the states that will have to reorganize their energy economies and regulatory oversight. In that sense, states seem to be called upon to implement a federal administrative agency policy decision.

THE FOURTH MAN

The Mount Rushmore National Monument often is referred to as the "Shrine of Democracy." Four historic faces are carved by Gutzon Borglum in a granite Black Hills mountain.

Three of the "heads" were obvious choices, as they represent defining moments--game changers, if you will--in the history of the United States. Thomas Jefferson and the Declaration of Independence; George Washington and the Revolutionary War; and Abraham Lincoln and the Civil War to save the Union.

For the fourth man, Borglum selected Theodore Roosevelt, a not so obvious choice it would appear. Although Roosevelt had been a president, and even had a stuffed toy bear named after him, it did not seem that he represented a defining moment in history or even a game changer. Yes, he was a naturalist, a Rough Rider, and a rancher in the North Dakota badlands. In 1901, he became vice president under president McKinley. When Mckinley was assinated later that year, Roosevelt became president and was elected for another term in 1904. As president, he became known as a conservationist, setting aside some 280 million acres for national parks, monuments and forests, and as a "trust buster" for aggressive enforcement of antitrust laws.

However, Borglum may have picked Roosevelt for Mount Rushmore for a less visible but more important reason. Roosevelt was the first "modern" president, the first to exercise his executive powers to impose broad regulatory authority. In other words, his defining moment was his expansion of presidential power, particularly in relation to Congress.

For example, he wrote to historian George Trevelyan "I have a definite philosophy about the presidency. I think it should be a very powerful office, and I think the President should be a very strong man who uses without hesitation every power that the position yields."

In his autobiography, Roosevelt wrote: "The most important factor in getting the right spirit in my administration...was my insistence upon the theory that the executive power was limited only by specific restrictions and prohibitions appearing in the Constitution or imposed by Congress under its constitutional powers...Under this interpretation of executive power I did and caused to be done many things not previously done by the President and the heads of the departments. I did not usurp power but I did greatly broaden the use of executive power."

So, Roosevelt may have become the inspiration and model for the future aggressive broadening of executive power of the president, particularly through the use of administrative agencies, beginning with relative F.D.Roosevelt and continuing to this day. Indeed, regulatory agencies controlled by the executive are limited only when courts find that they have exceeded their statuary authority or have acted unreasonably.

Therefore, the fourth man on Mount Rushmore may have influenced and changed the United States as much as the other three men, but in more subtle ways.

THE OTHER CLIMATE CHANGES

We hear much discussion about climate change these days--the purported changes in earth weather patterns. Many assert that such climate change is caused by human activity. Governmental agencies increasingly seek to regulate such activities under the assumption climate change can be controlled. Others assert that such regulation is misplaced because either climate change does not exist or, if it does exist, climate change results from the earth's natural cycles over time.

Regardless, another type of climate change appears to be causing discussion: increasing concern over intrusion by administrative agencies and their regulatory power into details of private lives of the public.

For example, Senator John Thune (R. South Dakota) recently expressed concern about a proposed rule that would enable EPA to garnish wages to pay for fines levied by EPA for violation of its compliance orders.* He said, in part, "The EPA has been busy trying to expand its authority over the lives of Americans by arbitrarily imposing a multitude of new and expensive regulations that are leading to higher costs for middle-class families."

Along similar lines is a recent editorial from the Bismarck Tribune.** It asserts that EPA has compiled detailed maps of not only permanent waterways but also of intermittent streams and wetlands as a means to expand its regulatory power over a wide range of canals, ditches, reservoirs and wetlands. It stated, in part, "Burdening private landowners and the farming and ranching community by extending the EPA's jurisdiction to include seasonal waterways would come at a price. If the EPA is allowed to make a new ruling defining temporary waterways as being within its control, private landowners' rights will be diminished. The EPA's approach is problematic in many ways. The lack of transparency from yet another government agency further erodes public trust. The intent of the maps strongly suggests an underlying motive to expand reach and control--another troubling example of government overreach."

A recent editorial commentary in Barrons discussed concern over the regulatory fallout from the Affordable Care Act ("Obamacare").*** It pointed out that today regulations promulgated by administrative agencies and subsequent court decisions are more overreaching than the actual legislation enacted by COngress. It said, "We really can't know what a bill will mean until long after passage, when the courts tell us what the regulations mean." The commentary added:"Although the doctrine of enumerated powers was paramount for more than a century and a half, few Americans now living can imagine the restraints on federal power that held sway as late as the 1920s. Nowadays, the ninth and 10th amendments are "dead letters" in a country that does not even remember what a dead letter office was....What we now know is that we have lost our constitutional government of laws enacted by our elected representatives. Now we are governed by rules and judges."

When governmental agencies dictate what students can eat for lunch and what kinds of toilets and light bulbs people can have in their homes, one can understand a growing climate change of concern over what may seem to be unfettered regulatory expansion over private activity. From a constitutional standpoint, perhaps we have moved from a government of enumerated powers to one of enumerated prohibitions--if the constitution does not say government cannot do something, then it has the power to do it. That is climate change in and of itself.

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* Rapid City Journal, July 21, 2014, p.B4

** Reprinted Rapid City Journal
September 5, 2014, p.B3

*** July 28, 2014, p.39

GOVERNMENT MUST GIVE IN ORDER TO TAKE

The Fifth Amendment to the U.S. Constitution states, in part, "nor shall private property be taken for public use without just compensation."

In June, the U.S. Supreme COurt issued a decision that has received little media attention but has importance for land use and environmental regulation.*

An owner of some Florida land sought a permit from a local water management district to develop a portion of the owner's land. State law requires permit applicants seeking to build on wetlands to offset any resulting environmental damage. The developer proposed to mitigate the effects of his project by giving the district a conservation easement over the rest of his land. The district rejected the developer's offer and said it would grant a permit only if he substantially reduced the size of his project and granted a conservation easement over the much larger balance of his land or if he paid for improvements to wetlands owned by the district elsewhere.

The landowner rejected the district's demands, and the district denied the permit. The landowner sued in state court for damages on the ground that the district's action was a taking of property without just compensation. The Florida Supreme Court denied the claim.

The U.S. SUpreme Court reversed the Florida decision. The Court applied the "unconstitutional conditions doctrine", as expressed in its prior Nollan** and Dolan*** decisions. Those cases establish that government may not condition the grant of a land use permit on the landowner's giving up a portion of the owner's property unless there is a nexus and rough proportionality between the condition demanded and the effects of the proposed land use.

At issue in the current case was whether the unconstitutional conditions doctrine applied when the requested permit was denied. The Court held that it does apply. The Court stated that the Nollan and Dolan decisions "provide important protection against the misuse of the power of land-use regulation."

Writing for the majority, Justice Alito said: "We have said in a variety of contexts that 'the government may not deny a benefit to a person because he exercises a constitutional right.'". He added that the unconstitutional conditions doctrine "protects the Fifth Amendment right to just compensation for property the government takes when owners apply for land-use permits." The Court further stated that under the doctrine, "the government may choose whether and how a permit applicant is required to mitigate the impacts of a proposed developments, but it may not leverage its legitimate interest in mitigation to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts. The Court also held that the doctrine applied regardless whether a permit is granted with conditions or is denied because the applicant rejects the conditions.

While this case involved wetlands mitigation, the key factual issues of "nexus" and "rough proportionality" could become relevant in other development permitting scenarios, such as government demand for contributions of money, road improvements, water and waste water facilities, and the like.

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* Koontz v. St. Johns River Water Management Dist., 570 U,S,___(2013)

** Nollan v. California Coastal Comm'n, 483 U.S. 825 (1087)

*** Dolan v. City of Tigard, 512 U.S. 374 (1994)

REDISTRIBUTION OF SOURCE WATERS: SOCIAL ENGINEERING OF WATER

On December 12, 2012 a report called the Colorado River Basin Water Supply and Demand Study was released by the U.S. Bureau of Reclamation and seven western states--Arizona, California, Colorado, New Mexico, Nevada, Utah and Wyoming. The study is intended to examine how more water could be provided to these western states, which have growing populations and limited water resources.

One of the options discussed in the study is the importation of water from other parts of the United States. For example, to provide more water to the Colorado River basin, it is proposed that a pipeline or pipelines, some 700 miles long, be constructed to import water from the Missouri River. The report estimates that the capital cost would be $8.6 billion and it would take 30 years to complete. An alternative is given to take water from the Mississippi River.

The study also discusses the possible importation to the Green River from the Bear, Snake and Yellowstone Rivers in Wyoming. In addition, the report reviews importation to Southern California from the Columbia River, icebergs hauled by tugboats from Alaska, and tankers hauling water from Alaskan rivers. (See usbr.gov)

The study does recognize that importation of source water is not without permitting, legal and policy issues. Moving water from one basin across the country to another basin, of course, likely will raise concerns--particularly in the case of the Missouri River, which is a major tributary of the Mississippi. The Missouri provides a source of drinking water, irrigation water and hydro-power in six states. With the current drought conditions in several midwestern states, there already is concern about the continued viability of these water uses as well as navigation on the Mississippi.

Discussion of such importation options raises broader questions, as well. Could the federal government propose importation pipelines from the Great Lakes, such as Lake Michigan, already the source of drinking water for millions? Or, could some agency develop a well farm in the midwest or east mining water from one of the major aquifers and piping the water to a western basin?

Moving water resources from one basin to another-the redistribution of water assets-would seem to have obvious consequences for the rivers, lakes and aquifers from which water would be taken. All of these sources themselves have limitations. And they have dedicated present uses in their areas. To deplete a basin or source already committed to uses for the benefit of another basin and its uses would seem problematic. Thus, the study also discusses such alternatives as water conservation, reuse, etc.

Perhaps one very important conclusion coming out of this study is that every person in this country has the important responsibility of protecting our limited and essential water resources, no matter where that person resides and where that resource may be.

POP QUIZ: HOW WELL DO YOU KNOW THE CONSTITUTION?

I save everything, it seems! Recently, I unearthed a copy of the final exam I gave my law school class in Constitutional Law in May, 1975. One of the questions still seems timely 35 years later. I reproduce it below. How would you answer the question? Hint: identify the issues and the arguments on both sides of the issues.

A Presidential commission on natural resources conducted a study which concluded that the nation's available water supply is limited, and unless water conservation is practiced, will be exhausted as early as within 15 years in some parts of the country. The commission noted that sources of water supply vary across the country and include wells, lakes, rivers, surface water retention ponds, and oceans. It found that although some water suppliers attempted to impose water conservation, generally such efforts were not successful and there was no consistency through the country. The commission recognized, however, that to be effective, conservation has to be observed by the ultimate user of the water.

Reacting to the commission's report, Congress passed, and the President signed, the Water Conservation Act. The Act established a federal Water Conservation Board (WCB) to develop for all water suppliers uniform national rates and rules for water service which would impose water conservation. Subsequently, the WCB promulgated graduated rates which increase as usage increases. For example, for the first 1,000 gallons of water used per month, the rate was $2, and for the next 1,000 gallons, the rate was $3. The WCB also developed rules to conserve water, such as a ban on sprinkling, car washing, and non-recycling swimming pools. If any water supplier failed to adopt or enforce the rates and rules developed by the WCB, the Act imposed a 20 per cent tax on the gross earnings of the supplier.

The Village of Leaky Pipe owns and operates its own municipal water supply system to provide water service to its residents. It obtains the water from large wells. The Village refused to adopt the WCB rates and rules, and the federal government assessed the 20 per cent tax. The Village sued to enjoin collection of the tax, but was unsuccessful in the lower courts. The United States Supreme Court agrees to hear the appeal. What ruling and why?