03-7018 in the Name of Idaho Power Co. v. Idaho Dep't of Water Res. (In re Licensed Water Right No.)

• Citation: 255 P.3d 1152,151 Idaho 266
• Decision Date: 26 May 2011
• Docket Number: No. 37348.,37348.
• Court: United States State Supreme Court of Idaho
• Parties: In the Matter of Licensed Water Right No. 03–7018 in the Name of Idaho Power Company. IDAHO POWER COMPANY, Petitioner–Respondent, v. IDAHO DEPARTMENT OF WATER RESOURCES, Respondent–Appellant.

151 Idaho 266

255 P.3d 1152

In the Matter of Licensed Water Right No. 03–7018 in the Name of Idaho Power Company.IDAHO POWER COMPANY, Petitioner–Respondent,

v.IDAHO DEPARTMENT OF WATER RESOURCES, Respondent–Appellant.

No. 37348.

Supreme Court of Idaho, Boise, April 2011 Term.

May 26, 2011.

Honorable Lawrence G. Wasden, Attorney General, Boise, for appellant. Garrick L. Baxter argued.

Barker Rosholt & Simpson, LLP, and James C. Tucker, Boise, for respondent. Shelley M. Davis argued.

J. JONES, Justice.

The Idaho Department of Water Resources (Department) appeals an order of the district court requiring the Department to strike a term condition from a hydropower water right license issued to Idaho Power Company. We reverse.

I.Factual and Procedural Background

On December 24, 1975, Idaho Power Company filed an application with the Department for a permit to divert and use 5000 cfs of water for hydropower generation purposes at its Brownlee Dam facility.¹ The Department approved the application on January 29, 1976, and issued permit no. 03–7018. The permit required Idaho Power to submit proof that the project had been completed and the water had been applied to beneficial use by February 1, 1980. The permit also contained a subordination condition stating that, "[t]he rights for the use of the waters under this permit shall be subordinate to and not prevent or interfere with any future upstream diversion and use of the waters of the Snake River and its tributaries for the irrigation of lands or other consumptive beneficial uses in the Snake River watershed." The permit did not include a condition limiting the water right to a term of years.

Idaho Power subsequently applied for, and was granted, an extension of time to provide proof of beneficial use.² On August 7, 1980, Idaho Power submitted proof that the project was complete and the water had been applied to beneficial use. The Department acknowledged it had received Idaho Power's submission of proof of beneficial use by responding with a letter indicating that the Department was required to conduct a field examination prior to issuing a license.

During the time that Idaho Power was applying for, and attempting to obtain, this water right at Brownlee Dam, both Idaho Power and the Department were involved in a controversy surrounding water rights in the Snake River Basin. See Idaho Power Co. v. State, 104 Idaho 575, 580–83, 661 P.2d 741, 746–49 (1983). In part, this controversy was the result of two decades of increased groundwater pumping by other water users upstream of the Swan Falls Dam, which decreased the water flow at the dam.

Clear Springs Foods, Inc. v. Spackman, 150 Idaho 790, 794–95, 252 P.3d 71, 75–76 (2011). As a result, Idaho Power filed a lawsuit against the State and various water users, seeking a determination of the validity of its water rights at the Swam Falls Dam and seeking a ruling that its water rights were not subject to future upstream depletion. Id. One of the other issues in the case brought by Idaho Power involved a subordination clause in the federal license that Idaho Power had obtained for its Hells Canyon Project. Id. The district court held that the subordination clause in the federal license applied to all of Idaho Power's water rights used for hydropower purposes at all of its facilities on the Snake River watershed, including its facilities at Swan Falls. Id. On appeal, this Court reversed the district court's holding in that regard, and remanded the case for further proceedings. Id. Idaho Power responded by filing a second lawsuit against the State of Idaho and approximately 7500 people who claimed water rights in the Snake River Basin. In re Snake River Basin Water System, 115 Idaho 1, 3, 764 P.2d 78, 80 (1988).

In 1984, an agreement was entered into between Idaho Power, the State of Idaho, the governor, and the attorney general, in an effort to resolve the controversy associated with the company's water rights at the Swan Falls Dam (the Swan Falls Agreement). Id. As a part of the Swan Falls Agreement, the parties agreed to support legislation for the commencement of an adjudication of water rights in the Snake River Basin. Id. One key piece of legislation that was drafted and passed pursuant to the Swan Falls Agreement was I.C. § 42–203B, which went into effect on July 1, 1985. 1985 Idaho Sess. Laws ch. 17, § 2, pp. 25–26. Idaho Code § 42–203B gave the Department the specific authority to subordinate hydropower water rights in a permit or license to the water rights of subsequent upstream depletionary users, and also authorized the Department to limit a permit or license involving hydropower rights to a term of years. According to I.C. § 42–203B(6),

The director shall have the authority to subordinate the rights granted in a permit or license for power purposes to subsequent upstream beneficial depletionary uses. A subordinated water right for power use does not give rise to any claim against, or right to interfere with, the holder of subsequent upstream rights established pursuant to state law. The director shall also have the authority to limit a permit or license for power purposes to a specific term.

Subsection (6) of this section shall not apply to licenses which have already been issued as of the effective date [July 1, 1985] of this act.

I.C. § 42–203B(6) (emphasis added).

I.C. § 42–203B(7) goes on to state,

The director in the exercise of the authority to limit a permit or license for power purposes to a specific term of years shall designate the number of years through which the term of the license shall extend and for purposes of determining such date shall consider among other factors:

(a) The term of any power purchase contract which is, or reasonably may become, applicable to, such permit or license;

(b) The policy of the Idaho public utilities commission (IPUC) regarding the term of power purchase contracts as administered by the IPUC under and pursuant to the authority of the public utility regulatory policy act of 1978 (PURPA);

(c) The term of any federal energy regulatory commission (FERC) license granted, or which reasonably may be granted, with respect to any particular permit or license for power purpose;

(d) Existing downstream water uses established pursuant to state law.

The term of years shall be determined at the time of issuance of the permit, or as soon thereafter as practicable if adequate information is not then available. The term of years shall commence upon application of water to beneficial use. The term of years, once established, shall not thereafter be modified except in accordance with due process of law.

I.C. § 42–203B(7) (emphasis added).

After the enactment of I.C. § 42–203B, the Department conducted a beneficial use examination with respect to the permit. On September 8, 1985, the Department submitted a beneficial use field report confirming that the project had been completed and recommending licensure. On November 16, 2007, the Department issued a preliminary order approving a license for water right no. 03–7018. The license contained the following term condition:

The diversion and use of water for hydropower purposes under this license is subject to review by the Director after the date of expiration of the Federal Energy Regulatory Commission license for Brownlee Dam.³ Upon appropriate findings relative to the interest of the public, the Director may cancel all or any part of the use authorized herein and may revise, delete or add conditions under which the right may be exercised.

This term condition was not included in the original permit.

Idaho Power subsequently filed a protest and petition for hearing, objecting to the inclusion of the term condition in the license. Idaho Power argued that because the condition was not included in the water right permit, the term condition was unlawful. Thereafter, the Department provided Idaho Power with a position statement, indicating that,

[e]ffective July 1, 1985, Idaho Code §§ 42–203B (6) and (7) authorize the Department to limit a permit or license for power purposes to a specific term. Consistent with I.C. §§ 42–203B (6) and (7), it is the Department's standard practice to put term review conditions on all permits and licenses for the use of water to generate power.⁴

Idaho Power later withdrew its protest and petition for hearing, and the Department issued an order designating license no. 03–7018 a final order. In its order, the Department articulated the legal basis for including the term condition in the license. Specifically, the Department determined that the plain language of I.C. § 42–203B gives the Department the authority to insert a term condition in a permit or a license. The Department also concluded that Idaho Power did not have a vested water right prior to obtaining the license because a permit is merely an inchoate right that only ripens into a vested right upon obtaining a license and, therefore, including a term condition in the license did not interfere with a vested right.

Idaho Power sought judicial review of the Department's final order by the district court,⁵ arguing that (1) the Department did not have the statutory authority under I.C. § 42–203B to include a term condition in the license; (2) Idaho Power was stripped of its vested water rights by the Department's act of applying the statute retroactively; (3) the term condition, as written, is unconstitutional because it grants the Department broad and virtually unlimited discretion in the exercise of its duties without due process of law; and (4) thE department should be estopped from adding the term condition to the license because Idaho Power made substantial investments and changed its position in reliance on the terms of the original permit. The district court determined that the Department exceeded its statutory authority by including the term condition in the license and ordered the Department to strike the term condition and issue a license consistent with the terms of...