Middle Niobrara Natural Res. Dist. v. Dep't of Natural Res.

• Decision Date: 03 June 2011
• Docket Number: No. S–09–1311.,S–09–1311.
• Citation: Middle Niobrara Natural Res. Dist. v. Dep't of Natural Res., 281 Neb. 634, 799 N.W.2d 305 (Neb. 2011)
• Parties: MIDDLE NIOBRARA NATURAL RESOURCES DISTRICT et al., appellants,andMichael Jacobson, appellee and cross-appellant,v.DEPARTMENT OF NATURAL RESOURCES, appellee and cross-appellee.
• Court: Nebraska Supreme Court

281 Neb. 634

799 N.W.2d 305

MIDDLE NIOBRARA NATURAL RESOURCES DISTRICT et al., appellants,andMichael Jacobson, appellee and cross-appellant,

v.DEPARTMENT OF NATURAL RESOURCES, appellee and cross-appellee.

No. S–09–1311.

Supreme Court of Nebraska.

June 3, 2011.

Syllabus by the Court

1. Administrative Law: Appeal and Error. In an appeal from a Department of Natural Resources order, an appellate court reviews whether the director's factual determinations are supported by competent and relevant evidence and are not arbitrary, capricious, or unreasonable. The department's decision must also conform to the governing law.

2. Administrative Law. Agency action is arbitrary and capricious if it is taken in disregard of the facts or circumstances of the case, without some basis which would lead a reasonable and honest person to the same conclusion.

3. Administrative Law. Agency action taken in disregard of the agency's own substantive rules is arbitrary and capricious.

4. Administrative Law: Appeal and Error. An appellate court independently reviews questions of law decided by the director of the Department of Natural Resources.

5. Jurisdiction: Judgments. A jurisdictional issue that does not involve a factual dispute presents a question of law.

6. Statutes. The meaning and interpretation of a statute present a question of law.

7. Judgments. Whether a decision conforms to law is by definition a question of law.

8. Standing: Jurisdiction. Standing is fundamental to a court's exercising jurisdiction, so a litigant or court can raise the question of standing at any time during the proceeding.

9. Administrative Law: Waters: Standing: Proof. Generally, to be an “interested person” under Neb.Rev.Stat. § 46–713(2) (Cum.Supp.2008), a litigant challenging a fully appropriated determination by the Department of Natural Resources must be asserting its own rights and interests, not those of a third party, and must demonstrate an injury in fact sufficient to confer common-law standing.

10. Political Subdivisions: Public Officers and Employees: Standing: Constitutional Law: Statutes. Unless an exception applies, state officials and political subdivisions generally do not have standing to challenge the constitutionality of statutes directing their duties.

11. Political Subdivisions: Standing. Political subdivisions have standing to challenge state action that adversely affects them or requires them to expend public funds.

12. Administrative Law: Waters. Because the director of the Department of Natural Resources cannot resolve a challenge to a call before the department issues its annual evaluations, the department cannot premise its annual evaluations upon a senior appropriator's call.

13. Administrative Law. Agency regulations properly adopted and filed with the Secretary of State of Nebraska have the effect of statutory law.

Donald G. Blankenau and Thomas R. Wilmoth, of Blankenau Wilmoth, L.L.P., for appellants.Jon Bruning, Attorney General, Marcus A. Powers, and Justin D. Lavene, for appellee Department of Natural Resources.Michael Jacobson, pro se.HEAVICAN, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER–LERMAN, JJ.CONNOLLY, J.

I. SUMMARY

Under the Nebraska Ground Water Management and Protection Act (the Act), ¹ the Department of Natural Resources (Department) designated the portion of the Lower Niobrara River Basin upstream of the Spencer hydropower facility fully appropriated. The appellants are four natural resources districts (NRDs) that regulate ground water in the fully appropriated boundary. They appeal the Department director's 2009 order finding that in 2008, the basin was fully appropriated. Michael Jacobson cross-appeals. He owns and farms land in the basin.

A “fully appropriated” designation requires the NRDs to undertake significant and costly land management practices to sustain a balance between water uses and water supplies.² The overarching issue is whether the Department's 2008 order designating the basin fully appropriated was an arbitrary and capricious action. We conclude that it was and reverse and vacate.

II. BACKGROUND

1. Nebraska Public Power District's Appropriation Rights

Nebraska Public Power District (NPPD) holds three surface water appropriations in the Niobrara totaling 2,035 cubic feet per second. The State approved these appropriation rights in 1896, 1923, and 1942. NPPD uses its appropriations for producing electricity at the Spencer hydropower facility.

The Department's 2008 fully appropriated designation was triggered by a “call” for diversion rights by NPPD. A call by a senior appropriator, meaning an appropriator with an earlier-in-time right to use the water,³ is a request that the Department close the rights to divert water belonging to junior appropriators upstream of the senior appropriator. Closures require junior appropriators to stop diverting water from a river or stream for the benefit of a senior appropriator.⁴ This action increases the streamflow to satisfy the senior appropriator's right to divert water.

2. The Basin

The Lower Niobrara River Basin follows the Niobrara from Mirage Flats Diversion Dam in northwest Nebraska to the confluence of the Niobrara and Missouri Rivers in northeast Nebraska. It encompasses about 8,900 square miles. Spencer Dam is near Spencer in northeast Nebraska, close to the eastern edge of the river basin. The Department's fully appropriated designation for the portion of the river basin upstream of Spencer Dam includes most of the river basin.

3. The Act's Requirements and the Department's Regulations

Beginning in 2006, unless the Department has already determined that a river basin is fully appropriated or overappropriated, the Act requires the Department to complete, by January 1 of each year, an evaluation of the State's river basins. The Department must evaluate “the expected long-term availability of hydrologically connected water supplies for both existing and new surface water uses and existing and new ground water uses in each of the state's river basins.” ⁵ Simplified, the Department can designate a river basin or one of its subparts as fully appropriated if its evaluation shows that current uses of hydrologically connected water will cause a river or stream to be insufficient to satisfy, over the long term, three specified purposes.⁶

Section 46–713(3) is stated in the alternative. It permits the Department to determine that a river basin or subpart is fully appropriated if any of three specified circumstances exist. One circumstance is present when the surface water is insufficient to sustain existing natural flow, storage, or instream appropriations.⁷ The Department's reports show that it assumes that a basin's ground water and surface water are interconnected: i.e., insufficient streamflow to sustain surface water appropriations means that there is insufficient streamflow to sustain ground water wells built in aquifers dependent upon recharge from the river. So in determining whether a river basin is fully appropriated, the Department focuses only on whether a river's surface water is sufficient to sustain existing appropriations.

The Act requires the Department, in preparing its annual report, to “rely on the best scientific data, information, and methodologies readily available to ensure that the conclusions and results contained in the report are reliable.” ⁸ Also, the Act requires the Department to “provide [in the report] sufficient documentation to allow these data, information, methodologies, and conclusions to be independently replicated and assessed.” ⁹

But the Act does not set a standard for determining whether the surface water or streamflow of a river or stream is insufficient. The Department's regulations set the standard. The regulations and reports show that in setting the standard, the Department focuses solely on whether the surface water is insufficient to sustain existing surface water appropriations over the long term. The standard for determining the insufficiency of surface water is whether a surface water appropriator with the most junior right to divert water could divert sufficient water to meet the Department's specified irrigation requirements. And the irrigation requirements are set percentages of the Department's determination of the water needed to fully irrigate a 70–acre corn crop during two different periods in the upcoming year.¹⁰ Summed up, if the most junior appropriator could not divert the amount required under the set percentages for either irrigation period, then the surface water, and thus the river basin, is fully appropriated. The NRDs dispute the Department's 2008 methodology for this calculation.

The Act also does not define hydrologically connected water supplies. To determine the boundary of the fully appropriated land area in the basin with ground water that is hydrologically connected to the river's surface water, the Department applies an analytical formula. The NRDs also challenge this methodology.

4. The Department's Actions From 2006 to 2008

In its 2006 and 2007 reports, the Department determined that the Lower Niobrara River Basin was not fully appropriated. In March 2007, NPPD “placed a call” with the Department, asking the Department to administer the Niobrara to satisfy its appropriation rights.¹¹ Before 2007, NPPD had not placed a call for water in 50 years.

In May 2007, the Department issued closing notices. The closing notices directed about 400 junior appropriators to stop diverting water for the benefit of NPPD's hydropower facility.¹² Two junior appropriators immediately petitioned for an administrative hearing to challenge the validity of NPPD's appropriations.¹³ Soon after issuing the closing notices, the Department temporarily lifted them to allow time for the junior appropriators to enter into subordination agreements with NPPD. The Department reinstated the closings on August 1. Later, in county court, the two junior appropriators...