Phelps Dodge v. Az Dept. of Water Resources

• Decision Date: 30 August 2005
• Docket Number: No. 1 CA-CV04-0491.,1 CA-CV04-0491.
• Citation: 211 Ariz. 146,118 P.3d 1110
• Parties: PHELPS DODGE CORPORATION, Plaintiff/Appellant, v. ARIZONA DEPARTMENT OF WATER RESOURCES; USDA Forest Service, Tonto National Forest; Salt River Valley Water Users' Association and Salt River Project Agricultural Improvement and Power District, Defendants/Appellees.
• Court: Arizona Supreme Court

Page 1110

118 P.3d 1110

211 Ariz. 146

PHELPS DODGE CORPORATION, Plaintiff/Appellant, v. ARIZONA DEPARTMENT OF WATER RESOURCES; USDA Forest Service, Tonto National Forest; Salt River Valley Water Users' Association and Salt River Project Agricultural Improvement and Power District, Defendants/Appellees.

No. 1 CA-CV04-0491.

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

August 30, 2005.

Ryley Carlock & Applewhite, P.A. by Cynthia M. Chandley, John C. Lemaster, Sean T. Hood, Phoenix, Attorneys for Plaintiff/Appellant.

Arizona Department of Water Resources by W. Patrick Schiffer, Chief Counsel Janet L. Ronald, Deputy Counsel, Phoenix, Attorneys for Appellee Arizona Department of Water Resources.

Paul K. Charlton, United States Attorney by Sue A. Klein, Assistant United States Attorney, Phoenix, United States Department of Justice Environment and Natural Resources Division By Katherine J. Barton, Pro Hac Vice, Washington, DC, and U.S. Department of Agriculture by Randall J. Bramer, Office of General Counsel, Golden, CO, Attorneys for Defendant/Appellee USDA Forest Service.

Salmon, Lewis & Weldon, P.L.C. by John B. Weldon, Jr., Mark A. McGinnis, Rebecca C. Goldberg, Phoenix, Attorneys for Defendants/Appellees Salt River Project.

Terry Goddard, Attorney General by James F. Odenkirk, Assistant Attorney General, Joy Hernbrode, Assistant Attorney General, Phoenix, Attorneys for Amicus Curiae Arizona Game and Fish Commission.

OPINION

KESSLER, Presiding Judge.

¶ 1 This appeal arises out of a challenge to an application for an appropriative water right to instream flows filed with the Arizona Department of Water Resources ("ADWR"). We are called upon to decide whether Arizona law allows the ADWR to issue permits for instream water rights, and whether the ADWR violated the Arizona Administrative Procedure Act (the "APA") by using the Guide to Filing Applications for Instream Flow Water Rights in Arizona (December 1991) ("1991 Instream Flow Guide"). We hold that the ADWR has the authority to issue permits for instream water rights and that Phelps Dodge Corporation ("Phelps Dodge") did not preserve its claim that ADWR violated the APA by applying the 1991 Instream Flow Guide.

FACTS AND PROCEDURAL BACKGROUND

¶ 2 The United States Forest Service (the "Forest Service") applied to the ADWR for a permit to appropriate the waters of Cherry Creek, a tributary of the Salt River located in the Tonto National Forest. The permit would grant the Forest Service the right to certain instream flows for fish, wildlife and recreation purposes. The ADWR thereafter issued a notice to interested parties concerning their right to file protests to the Forest Service's application (the "Application").

¶ 3 The Salt River Project Agricultural Improvement and Power District ("SRP") protested on behalf of the Salt River Valley Water Users' Association, stating that SRP had previously appropriated all normal flow and flood waters of the Salt River, the Verde River, and their tributaries, including Cherry Creek. According to SRP, the Application conflicted with its vested rights. Other parties, including Phelps Dodge, also filed protests. The ADWR referred the protests to the Office of Administrative Hearings, which in turn bifurcated the issues. The first phase, addressing whether the ADWR has authority to issue permits for instream water rights, is the subject of this appeal.

¶ 4 The Administrative Law Judge ("ALJ") conducted a hearing on the first phase issues, and concluded:

[T]he Arizona Legislature has granted the Department the authority to issue permits to appropriate water for instream flows. Furthermore, the Administrative Law Judge concludes that Arizona's prior appropriation system does not require an actual physical diversion of water where no diversion is necessary to put the water to beneficial use.

The ADWR director subsequently adopted the ALJ's findings of fact and conclusions of law.

¶ 5 Phelps Dodge unsuccessfully appealed the decision to the superior court, which held that the "statutory framework appears to grant the ADWR the authority to issue permits to appropriate water for instream flows." The court also rejected Phelps Dodge's argument that any authority the ADWR had to issue permits for instream water rights was negated by its failure to adopt the 1991 Instream Flow Guide as a rule. Phelps Dodge timely filed this appeal. This Court has jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101(B) (2003).

DISCUSSION

¶ 6 Phelps Dodge argues the ALJ and the superior court erred in holding the ADWR may issue a permit for instream water rights to the Forest Service because the ADWR has no explicit statutory authority to issue such permits. It also contends the ADWR may not rely upon the 1991 Instream Flow Guide without first promulgating it as a rule. We address each argument in turn.

I. Instream Water Rights

¶ 7 According to Phelps Dodge, since Arizona follows a prior appropriation system of water rights, a physical diversion is an essential element of an appropriation. Since an instream water right by definition does not involve a physical diversion, Phelps Dodge reasons, it cannot be a valid appropriation of water necessary to effect a water right. Accordingly, Phelps Dodge contends the ADWR is without authority under Arizona law to issue instream water rights.

¶ 8 In response, the ADWR argues that the statute confers authority to issue instream water permits. We affirm the superior court's ruling because Arizona's historic prior appropriation scheme, the current water use statute, and the ADWR's interpretation of Arizona water law do not affirmatively require a diversion to establish an instream or in situ water right.

¶ 9 We review questions of statutory interpretation de novo. Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., 177 Ariz. 526, 529, 869 P.2d 500, 503 (1994). When interpreting statutes, we strive to "discern and give effect to legislative intent." People's Choice TV Corp. v. City of Tucson, 202 Ariz. 401, 403, ¶ 7, 46 P.3d 412, 414 (2002). A statute's meaning is conclusive if it is unambiguous considering the statute's language as a whole. US West Communications v. City of Tucson, 198 Ariz. 515, 520, ¶ 12, 11 P.3d 1054, 1059 (App.2000). "If ambiguity exists, however, we determine legislative intent by looking first to the text and context of the statute and then considering its historical background, effects and consequences, and its spirit and purpose." Kent K. v. Bobby M., 210 Ariz. 279, 283, ¶ 14, 110 P.3d 1013, 1017 (2005).

¶ 10 General water usage rights are governed by Title 45, Chapter 1 of the Arizona Revised Statutes. Under the statutory scheme, "beneficial use shall be the basis, measure and limit to the use of water." A.R.S. § 45-141(B) (2003). Beneficial uses include "recreation, [and] wildlife, including fish...." A.R.S. § 45-151(A) (2003). In addition, the surface waters of lakes, ponds, or streams, are subject to appropriation and beneficial use.¹ A.R.S. § 45-141(A). The sections defining an acceptable appropriation and beneficial use do not explicitly refer to either instream flow rights or a diversion requirement.

¶ 11 A party must apply to the ADWR director for a permit to make an appropriation and acquire the right to a beneficial use of water. A.R.S. § 42-152(A) (2003). An application must state the applicant's name and address, the water supply from which the right is sought, the nature and amount of the proposed use, the point of diversion and a description of the works by which the water will be put to use, and the time frame for construction of such works. Id. In addition, an application for fish, wildlife, and recreational permits must list "the location and the character of the area to be used and the specific purposes for which such area will be used." A.R.S. § 45-152(B)(6). The ADWR director must approve proper applications for "the appropriation of water for a beneficial use" unless the proposed use "conflicts with vested rights, is a menace to public safety, or is against the interests and welfare of the public...." A.R.S. § 42-153(A) (2003).

¶ 12 The portion of the water use statute controlling applications for water use permits does not affirmatively require physical diversion to effect a beneficial use. Although an applicant may list a point of diversion and the time frame for completing works necessary to effectuate the proposed use under the statute, the logical reading of these requirements is that they must be provided only if relevant to the proposed use. Moreover, the subsection of the statute that requires applicants for wildlife, fish, and recreation permits to list the character of the area to be used does not mention a point of diversion. Had the Legislature intended to require a diversion for a successful application for such a water use permit, it could have done so in this subsection. Since the requirements for such a water rights application do not mandate a physical diversion, there is no statutory support for finding a diversion requirement, especially considering the statutory definition of beneficial use does not refer to such a requirement, A.R.S. § 45-151(A). See State v. Morros, 104 Nev. 709, 766 P.2d 263, 266 (1988) (refusing to find a diversion requirement in application criteria when no such requirement exists in the statutory definition of beneficial use).

¶ 13 Given the ambiguity of the statutory requirements with regards to instream flow rights and a diversion requirement, we look next to the historical context of the statute. Kent K., 210 Ariz. at 283, ¶ 14, 110 P.3d at 1017. In response to water scarcity and pre-existing cultural norms regarding water usage, Arizona has historically operated under a prior appropriation scheme of water use law. See Clough v. Wing, 2 Ariz. 371, 379-81, 17 P. 453, 455-56 (Terr.1888); Norman K. Johnson & Charles T. DuMars, A Survey of the Evolution of Western Water Law...