New Groundwater Decision Hands Water Agencies a “Win” But Leaves Unanswered Questions

It’s inevitable. With chronic water shortages in California, rights in groundwater are thrust to the limelight. In a past newsletter article, we reported about California’s new groundwater legislation[1]. And a trial court in Sacramento County has ruled that the “Public Trust” doctrine can apply to groundwater[2], a ruling that seems destined for the appellate courts.

Last Friday, June 24, 2016, a California Court of Appeal issued a new decision about a separate groundwater issue, supposedly resolving the rights of agencies that have been drawing groundwater from an aquifer relative to the rights of the landowners who own the surface land. In a nutshell, the Court of Appeal affirmed the landowners’ traditional rights in the groundwater, but ruled that the agencies have “prescriptive” rights to continue drawing groundwater in accordance with prior extractions regardless of supply in times of shortages.

The decision is entitled City of Santa Maria v. Adam, 2016 Cal.App.LEXIS 508. The plaintiffs were a group of water agencies who brought the lawsuit against private landowners to determine the respective rights in the groundwater within the Santa Maria Valley Groundwater Basin. Many of the landowners settled with the agencies, resulting in a “Stipulation” that defined the groundwater rights of the settling parties and created a program for the management of the groundwater. The lawsuit proceeded against the non-settling landowners.

Trial resulted in a judgment that the Court of Appeal reversed and sent back to the trial court for entry of a new judgment in accordance with its decision. That prior decision was reported as City of Santa Maria v. Adam (2012) 211 Cal.App.4th 266.

The new decision is the Court of Appeal’s review of the revised judgment that the trial court issued. This time, the Court of Appeal affirmed the judgment.

There generally are three types of rights in groundwater. “Overlying” rights are the landowners’ rights to use the groundwater under their property. “Appropriative” rights are the rights of third parties to extract surplus groundwater. “Prescriptive” rights arise when an extractor continues to draw groundwater during times of overdraft, and the extraction has ripened into rights in the water based on historical circumstances.

In the new Adams decision, the implications of the Court of Appeal’s decision included the following:

The Court of Appeal confirmed the landowners’ overlying rights in their groundwater (“quieted” their title in the water).
The Court of Appeal ruled that the water agencies nevertheless have prescriptive rights that give them the right to extract groundwater in the amounts they historically had been drawing from the basin aquifer. In times of overdraft or shortage, those prescriptive rights will take precedence over the landowners’ overlying rights in the groundwater.
The agencies’ total prescriptive rights were quantified and perfected against the basin as a whole.
The Court of Appeal ruled that only a proportionate share of the prescriptive rights could be exercised against the properties of the plaintiff landowners, but the Court also found it was unnecessary to specifically quantify the proportionate prescriptive rights.

The appeal and new decision did not affect some of the rulings in the prior judgment, including: (1) The plaintiff landowners are subject to the management program under the Stipulation even though they were not parties to the Stipulation; (2) The water agencies are entitled to credits for the “returns flows” they created; and (3) The plaintiff landowners have no rights in “salvaged water” – water that percolates into the aquifers from reservoirs.

As we wrote above, prescriptive rights in groundwater arise when there is an overdraft, basically allowing appropriative users (such as the agencies here) to continue drawing water even when there is no surplus. Significantly, the judgment awarding the agencies prescriptive rights diverged from the Stipulation, in which the agencies and the settling landowners agreed that the agencies do not have prescriptive rights in the water under the settling owners’ land.

In the decision, the Court of Appeal effectively acknowledged that it ducked a huge question: What happens in times of shortage, when the agencies have prescriptive rights only in the proportionate shares of the water under the plaintiff landowners’ property, but the proportionate shares have not been established? Groundwater does not exist in nice, neat containers under the surface. In times of shortage, the agencies will continue to draw water from the entire aquifer, not just the proportionate share under the plaintiff landowners’ properties. What are the limits, if any, on the agencies’ right to groundwater under these circumstances? And how do landowners establish and preserve their rights in underlying groundwater as against prescriptive claims? Expect more lawsuits to resolve these unresolved questions.

In any event, an outcome of the lawsuit and appeals is the adverse consequences for the non-settling plaintiffs, who fared worse than the settling landowners. The decision, assuming the Supreme Court does not review and reverse it, may be a cautionary tale for similarly situated landowners.

[1] California Enacts Historic Groundwater Legislation In The Midst Of A Historic Drought, Peter Prows, December 5, 2014 (https://briscoelaw.net/12-4-2014/)

[2] Environmental Law Foundation v. State Water Resources Control Board, Sacramento County Superior Court No. 34-2010-80000583.

Richard Wallace
Briscoe Ivester & Bazel LLP
155 Sansome Street, 7th Floor
San Francisco, CA 94104
Telephone: (415) 402-2700
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