AZ. WATER CO. v. DEPT. OF WATER RESOURCES

• Decision Date: 12 August 2003
• Docket Number: No. 1 CA-CV 02-0276.,1 CA-CV 02-0276.
• Citation: 73 P.3d 1267,205 Ariz. 532
• Parties: ARIZONA WATER COMPANY, an Arizona corporation, Plaintiff-Appellee, Cross Appellant, v. ARIZONA DEPARTMENT OF WATER RESOURCES; N.W. Plummer, in his capacity as Director of the Arizona Department of Water Resources, Defendants-Appellants, Cross Appellees, Arizona Corporation Commission, Intervenor-Appellee.
• Court: Arizona Court of Appeals

73 P.3d 1267

205 Ariz. 532

ARIZONA WATER COMPANY, an Arizona corporation, Plaintiff-Appellee, Cross Appellant, v. ARIZONA DEPARTMENT OF WATER RESOURCES; N.W. Plummer, in his capacity as Director of the Arizona Department of Water Resources, Defendants-Appellants, Cross Appellees, Arizona Corporation Commission, Intervenor-Appellee.

No. -0276.

Court of Appeals of Arizona, Division 1, Department B.

August 12, 2003.

Arizona Department of Water Resources by W. Patrick Schiffer, Kenneth C. Slowinski, Wilbert J. Taebel, Phoenix, Attorneys for Appellants-Cross Appellees.

Fennemore Craig by Timothy Berg, Norman D. James, Thomas R. Wilmoth, Phoenix, Attorneys for Appellee-Cross Appellant.

Robert W. Geake, Phoenix Co-Counsel for Appellee-Cross Appellant.

Arizona Corporation Commission by Janet F. Wagner, Phoenix, Attorney for Intervenor-Appellee.

Ryley Carlock & Applewhite, P.A. by Michael J. Brophy, L. William Staudenmaier, Phoenix, Attorneys for Amicus Curiae.

OPINION

SULT, Presiding Judge.

¶ 1 This action for judicial review arises from a decision of the Director of the Arizona Department of Water Resources approving the conservation measures contained in the Department's second management plan, a plan promulgated by the Department in accordance with its mandate in Arizona's Groundwater Code to manage the extraction, distribution, and use of groundwater. See generally Arizona Revised Statutes ("A.R.S.") §§ 45-401 to 45-724 (2003). According to appellants, the Department and its Director, the plan did not need to include conservation measures specifically applicable to "end users" of groundwater, a term that the parties use to describe the customers of municipal and private water providers.

¶ 2 Appellee Arizona Water Company held a different opinion of the Department's statutory mandate and petitioned the superior court to review the Director's decision. The superior court agreed with Arizona Water that the relevant Code provisions should be interpreted to require the Department to include end users in the management plan's conservation scheme. Because the plan did not do so, the court vacated the plan, remanded the matter to the Department to draft an amended plan, and awarded Arizona Water its attorneys' fees.

¶ 3 The Director and the Department appealed the decision to this court. We agree with the superior court that the legislature intended that the Department include in its management plans conservation measures applicable to end users. However, we do not find a sufficient basis in the record to sustain the award of attorneys' fees and remand that issue for further proceedings.

BACKGROUND

¶ 4 In 1980, the Arizona Legislature determined that the state's groundwater supply was at such risk that state-imposed measures aimed at its preservation were necessary. A.R.S. § 45-401(A). To that end, the legislature enacted Arizona's Groundwater Code which declared it to be the policy of the state "to conserve, protect and allocate the use of groundwater resources of the state and to provide a framework for the comprehensive management and regulation of the withdrawal, transportation, use, conservation and conveyance of rights to use the groundwater in this state." A.R.S. § 45-401(B). The Department and its Director were assigned the principal task of implementing the comprehensive regulatory scheme set out in the Code. A.R.S. §§ 45-103(B), 45-105(B)(2).

¶ 5 Certain areas of the state were designated as active management areas, meaning that extractors, transporters, and users of groundwater were subject to special regulations. See A.R.S. § 45-402(2). These regulations, called management plans, were to include measures designed, in the case of the Tucson, Phoenix and Prescott active management areas, to decrease the mining of groundwater and achieve safe yield by the year 2025. A.R.S. § 45-562(A). Specifically, the plans were to include "a continuing mandatory conservation program for all persons withdrawing, distributing or receiving groundwater designed to achieve reductions in withdrawals of groundwater." A.R.S. § 45-563(A).

¶ 6 The management plans for each active management area were to cover successive ten-year periods, and the first plan for the Phoenix area was for the period 1980-1990. A.R.S. § 45-564(A). By statute, the first plan was required to include "[a] conservation program for all non-irrigation uses of groundwater." A.R.S. § 45-564(A)(2). The users of water supplied by municipal providers, which category includes private water companies like Arizona Water, were subject to "reasonable reductions in per capita use and such other conservation measures as may be appropriate for individual users." Id. Arizona Water did not challenge the first management plan.

¶ 7 In December 1989, pursuant to the statute governing plans for the second management period, the Director adopted a 1990-2000 plan for the Phoenix active management area. A.R.S. § 45-565. The second plan built on the goals for reduction in groundwater use outlined in the first plan and provided that cumulative to the reductions achieved during the first management period, the second plan should require "additional reasonable reductions in per capita use to those required in the first management period and use of such other conservation measures as may be appropriate for individual users." A.R.S. § 45-565(A)(2).

¶ 8 To accomplish this directive, the Department in its second plan continued its primary program for achieving reductions in groundwater usage. This program is called the "Total Gallons Per Capita Per Day" program, which the parties refer to by its acronym GPCD, and the Department established a GPCD program for each active management area. Each water system in a management area was assigned a GPCD rate, with that number representing the total gallons per day that a provider could deliver to each customer, with an additional goal of reduction in that rate as the ten-year period progressed. The actual implementation of the program is complex, and the details are not necessary for our decision. It is sufficient to note that in the second management plan, as well as in the third management plan now in effect, the entire onus of achieving reductions in groundwater usage is placed on the providers. The customers of the provider, the "end users," are not assigned any responsibility to engage in any conservation measures. Rather, the plan assumes that in order to meet the requirements under the plan, each provider will implement and enforce conservation measures upon its customers.¹

¶ 9 In January 1990, Arizona Water filed an action in superior court for judicial review of the Director's action in approving second management plans for several of Arizona Water's water utility companies. The gist of the complaint was that the plans were not in compliance with the Groundwater Code because they did not include conservation measures to be imposed directly on end users. The proceeding was stayed pending the Director's administrative review of the plans, and throughout the next several years, Arizona Water and the Department settled their differences regarding all of these companies except Arizona Water's Apache Junction water utility.

¶ 10 The Director ultimately issued a decision substantially affirming the management plan's conservation measures, and Arizona Water filed a second complaint for judicial review in May 1999. The superior court consolidated this complaint with the earlier one and determined that it would be appropriate to involve the Arizona Corporation Commission in the proceedings because of its authority over public utilities. At the court's instance, the Commission intervened and filed a brief asserting that although the Department had no authority to tell a water utility whom to serve or whom to terminate, the Commission saw no irreconcilable conflicts as it often successfully worked with sister state agencies when overlapping regulatory issues arose.

¶ 11 Following further proceedings, the court on February 8, 2002 entered judgment: 1) vacating the portion of the second management plan as applied to Arizona Water's Apache Junction system because the plan failed to address water utilization by end users; 2) remanding the matter to the Department to address the deficiencies in the plan; and 3) awarding Arizona Water $137,900 in attorneys' fees.

¶ 12 The Department timely appealed to this court. Arizona Water timely cross-appealed, challenging as insufficient the trial court's award of attorneys' fees.

ISSUES

¶ 13 The central issue in this appeal is whether the legislature intended that in implementing the Groundwater Code's conservation mandate the Department should include in its management plans conservation measures to be employed by end users of groundwater. Assuming the superior court was correct on this point, the next issue is whether it properly awarded Arizona Water attorneys' fees under A.R.S. § 12-348(A)(2)(Supp.2002). The last issue is one presented to the superior court but not decided by it; namely, whether the Department is authorized to include Central Arizona Project water used by a provider in determining that provider's compliance with its total GPCD requirements. Although not required to address this issue, we elect to do so within our discretion because the parties have fully briefed it on appeal and a decision thereon will provide guidance in the future and preclude further litigation on the point. See Jett v. City of Tucson, 180 Ariz. 115, 123-24, 882 P.2d 426, 434-35 (1994)

.

ANALYSIS

Conservation Measures for End Users

¶ 14 We have already alluded to several of the statutes in the Groundwater Code wherein the legislature has indicated what it expects to accomplish via the Code and how it intends this to happen. A more detailed examination of these statutes is appropriate in order to determine if the legislature has directed the Department to include in its management plans conservation...