7 Apr 2009

Can Water Be Severed from Land?

CB asks:

"The issue of whether rights to pump groundwater can be separated from land ownership in Arizona recently went before our supreme court. I have a brief discussion of the court opinion on my blog if you’re interested, but the gist of the case was a property transaction in an area where a nearby city had expressed interest in purchasing land in order to pump and pipe water to supply their future growth needs. When the property sold in the early 80s the seller, in the deed, reserved all rights to “commercial groundwater” that might be pumped from the property in the future. This is in an area of Arizona, outside of Active Management Areas, where rights to groundwater are governed by the reasonable use doctrine (this part gets kind of complicated and I won’t try to explain it fully here). Essentially landowners have mostly unfettered rights to pump groundwater from their land.

The court ruled, in this case, that because no rights to pump groundwater in the future exist in Arizona (i.e. rights to groundwater are only established by pumping it the surface and putting it to beneficial use) the seller had no property right to reserve, making the reservation invalid. I believe this to be a correct interpretation of the law, but some research I did showed that Texas courts have ruled the other way on this – finding that property owners have rights to groundwater in the ground (under the rule of absolute ownership) that can be conveyed separately from the property.

I would like to find out if California courts have ruled on this in areas where groundwater has not been adjudicated, and if so what they have said.

I would also be curious if anyone has experience with appraising unquantified rights to groundwater sold either with the overlying land or without. This seems like it would involve a lot of guesswork.

This is an area of great interest to me and I would really enjoy hearing some other perspectives on it."

I have no opinion on whether it's right or wrong to sever water from land, since it seems that the property rights can be defined in either way. My impression is that unadjudicated groundwater cannot be sold because the right is not quantified. The same could be said about an "appraisal," since the appraiser won't get very far by guessing...

What do you aguanauts think?

Bottom Line: What's gets measured gets managed, and what's not measured gets mismanaged.

10 comments:

  1. Being from CO, the thought that groundwater in AZ and CA are still unadjudicated is rather like having an undefined dollar ... it is a confidence game in both senses of the word.

    What system are they dealing with ? If it is the prior appropriation system, adjudicating wells and defining their Source as tributary should bring about curtailment of all wells that are not properly augmented to eliminate the damage caused by their depletions to their respective stream systems.

    Wells were not generally permitted prior to 1965 in CO. The adjudication of wells occurred beginning in CO in 1969. It has taken 40 years, but the State Engineer administrator has now been enlightened to curtail all but exempt domestic wells on the South Platte, Arkansas and Rio Grande Rivers unless they are augmented to protect the senior surface water rights dating back to the 1860's. Thousands of high capacity irrigation and municipal wells have been forced to augment or shut-off.

    These river basins are subject to the prior appropriation doctrine. Wells and other diversions that have not been adjudicated are still water rights ! They are unadjudicated water rights and as such are always the first to be curtailed in times of shortage.

    Wells have an additional requirement that they must be permitted to withdraw groundwater even when there is NOT a call.

    Place of USE and points of diversion can only be changed by Court approval because proper notice must be given to all water users. The place of use and type of use can only be changed based on the historic consumptive use of the subject water right and that water right will be investigated fully to insure that it has complied with the provisions of the Court decree such as Source, Point of Diversion, Use or uses, and quantity & timing and appropriation date.

    Change cases are not all that difficult if the historic consumptive use has been properly evaluated for all to investigate.

    I have done hundreds of water right appraisals, but only in CO. Water rights are only worth what the cheapest supply has sold for that can solve the need. This is often Bureau of Reclamation water which can be highly subsidized. Water right owners seldom realize that Bureau projects often destroy rather than enhance the value of their water rights.

    WaterSource waterrdw@yahoo.com

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  2. "Can Water Be Severed from Land?"

    yes, for groundwater rights. (note that the nature of the right changes from overlying to appropriative.) no, for riparian rights.

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  3. Mineral rights are generally separate from rights in the land (real property) in many states. If extracted, typically the "owner" of the mineral rights simply must return the land to substantially similar condition after mining the minerals. You can draw some parallels between groundwater and mineral rights in the context of your example. However, the comparison has its limitations.

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  4. I'm unsure of the rule in California, but in Montana there is an absolute right to separate water rights from the land. A few legislative sessions ago (MT's legislature meets every two years), a bill was passed providing that with the sale of land the seller had to file a Realty Transfer Certificate that stated explicitly whether the water rights passed with the title. It's not entirely clear yet, but the general rule is that the deed must also reflect a severance of the water right.

    In terms of reserving a future right, the MT Supreme Court would probably hold similarly to the AZ court. It's awfully hard to reserve a right that's not in hand at the time of transfer. In water law, it's even harder where you're not putting that right to use at the time of the transfer.

    The MT legislature and Supreme Court have also spoken on the relationship between groundwater and surface water. Where a development takes over a certain amount of groundwater leading to a significant impact on surface water, the developer must mitigate that impact (ie: buy rights from other rights holders). In a legal sense that means that there's a recognized relationship between groundwater and surface water. Although Montana's water markets are relatively unsophisticated, they do exist.

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  5. JD

    Interesting to note that with deeds, the rules in CO are the exact opposite... if the deed is silent with regard to mineral rights, they are assumed to have been transferred...if silent with regard to water rights, they are assumed to have NOT been transferred.

    Watersource waterrdw@yahoo.com

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  6. Francis -
    Can you clarify your comment RE: nature of the right changes from overlying to appropriative? Most (all?) states that apply prior appropriation to GW have only one type of water right - for all water. And those rights would be quantified. I'm interested in instances where rights are not quantified - rule of capture or reasonable use jurisdictions - and whether they are severable in those places.

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  7. The right to pump groundwater for use on overlying land is a form of property right associated with the ownership of that real property. As such, it can be leased, sold or otherwise severed from the remaining estate.

    What does the buyer get? Primarily he acquires the right to prevent the landowner from exercising his overlying right. (The right to prevent someone from doing an otherwise lawful activity is sometimes known as an "estoppel".)

    As the groundwater basin now has a "surplus" associated with the inability of that one landowner to exercise his overlying right, the water is available for appropriation. As the sale of the groundwater right is usually done in connection with an agreement by the purchaser to serve the land servered from its groundwater right, the purchaser can assert, as against the world, that it is appropriating the surplus for the purpose of serving the severed parcel.

    Whether there was a surplus available for appropriation is a question for another day.

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  8. Relative water rights
    Overlying groundwater rights are superior to appropriative groundwater rights; however, overlying rights are “still restricted to a reasonable beneficial use.” In addition, a court may “not define or otherwise limit an overlying owner's future unexercised groundwater rights.” Overlying use is paramount and the appropriator must yield in the event of a shortage, unless the appropriator has gained prescriptive rights. However, “when there is a surplus, the holder of prior rights may not enjoin its appropriation."

    The AZ landowner (had he been in Cali.) likely could have reserved those groundwater rights but could only exercise them in years of surplus. Left to be determined is what it means to have surplus. Surely, the Central Valley or any other area with subsidence will not have surplus groundwater any time soon.

    Groundwater rights between overlying owners are are correlative, similar to the rights between riparians. Like riparians, “each may use only his reasonable share when water is insufficient to meet the needs of all.” In contrast, groundwater rights between appropriators follows the principle of first in time, first in right, similar to the surface water rights.

    It is unclear whether prescriptive rights have any priority over the overlying groundwater rights. The California Supreme court has held that “the five-year period for establishing prescriptive rights to nonsurplus water may be interrupted by the overlying owners' pumping of their nonsurplus water.” If so, even if the aquifer were in overdraft, the rights of the overlying owners continue to have priority over the prescriptive user if they continue to draw water and the statute of limitations for the prescriptive right does not begin.

    State Statutes
    In addition to California common law, the legislature has effectively given counties that overlay an aquifer veto rights. State law provides that a county can prohibit groundwater transfers beyond the groundwater basin/aquifer/county. The law is based on old common law created by the California Supreme Court in 1933. “[C]onservation of subterranean waters” is a legitimate exercise of the police powers. In re Maas, 219 Cal. 422 (1933).



    FWIW: As noted in your post, Texas is backwards. It sets no limits on groundwater pumping, even if it hurts someone else or their property.

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  9. California common law does allow for some exports of groundwater off of a parcel of land to another watershed or basin. As can be expected, there are limits. As it commonly does, California marches to its own drum beat, following relative water rights with regard to groundwater. In sum, water may be exported out of a particular county when the groundwater aquifer has surplus water and when the appropriator has senior rights relative to other water users. Had the land been in California, the AZ landowner could have reserved water rights to the groundwater but those rights would be severely limited, as noted below.

    There are two things to do when considering common law groundwater rights in California. First, we classify the rights at issue. And second, we compare the relative water rights at issue.

    The big case is City of Barstow v. Mojave Water Agency, 23 Cal.4th 1224, 1240 (2000). (California Supreme Court)

    Classification
    California courts typically classify groundwater rights as overlying, appropriative, or prescriptive. An overlying groundwater right provides the landowner with a right to take water from the ground for use on their own land within the basin or watershed. The right is tied to the land (appurtenant), similar to riparian water rights. An appropriative groundwater right allows the rightful appropriation of excess or surplus ground water from “privately owned land for non-overlying use, such as devotion to public use or exportation beyond the basin or watershed.” Surplus ground water “is any water not needed for the reasonable beneficial use of those having prior rights and may rightly be appropriated." A prescriptive groundwater right develops from a wrongful appropriation of non-surplus groundwater, similar to adverse possession of property. That appropriation must be actual, open, and notorious, hostile, adverse to the original owner (priority water users), continuous and uninterrupted for the statutory period of five years, and under claim of right.

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  10. @DFB -- wow. Really excellent. Thanks!

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