Silver v. Pueblo Del Sol Water Co.

Decision Date09 August 2018
Docket NumberNo. CV-16-0294-PR,CV-16-0294-PR
Parties Robin SILVER, M.D.; United States of America, U.S. Department of the Interior, Bureau of Land Management; and Patricia Gerrodette, Plaintiffs/Appellees, v. PUEBLO DEL SOL WATER COMPANY, an Arizona corporation; Thomas Buschatzke, in his official capacity as Director of the Arizona Department of Water Resources; Arizona Department of Water Resources, an agency of the State of Arizona, Defendants/Appellants.
CourtArizona Supreme Court

Timothy M. Hogan, Arizona Center for Law in the Public Interest, Phoenix; and Heidi J. McIntosh (argued), Earthjustice, Denver, CO, Attorneys for Robin Silver, M.D.

F. Patrick Barry, Katherine W. Hazard (argued), United States Department of Justice, Washington, DC, Attorneys for United States of America, U.S. Department of the Interior, Bureau of Land Management

Daniel J. Adelman, Arizona Center for Law in the Public Interest, Phoenix; and Joy E. Herr-Cardillo, University of Arizona, James E. Rogers College of Law, Tucson, Attorneys for Patricia Gerrodette

William P. Sullivan (argued), Law Offices of William P. Sullivan P.L.L.C., Phoenix, Attorneys for Pueblo Del Sol Water Company

Kenneth C. Slowinski, Nicole D. Klobas, Janet L. Miller (argued), Arizona Department of Water Resources, Phoenix, Attorneys for Thomas Buschatzke and Arizona Department of Water Resources

Jesse Richardson, Jr., Law Offices of Jesse J. Richardson, Jr., Morgantown, WV; and L. William Staudenmaier, Snell & Wilmer L.L.P., Phoenix, Attorneys for Amicus Curiae Water Systems Council

JUSTICE LOPEZ authored the opinion of the Court, in which VICE CHIEF JUSTICE BRUTINEL, and JUSTICES TIMMER and GOULD joined. CHIEF JUSTICE BALES and JUSTICE BOLICK authored separate opinions concurring in part and dissenting in part, in which JUSTICE PELANDER joined. JUSTICE PELANDER issued an opinion concurring in the partially dissenting opinions of CHIEF JUSTICE BALES and JUSTICE BOLICK.

JUSTICE LOPEZ, opinion of the Court:

¶ 1 The issue in this case is whether the Arizona Department of Water Resources ("ADWR") is required to consider unquantified federal reserved water rights when it determines whether a developer has an adequate water supply for purposes of A.R.S. § 45-108. We hold that the statute does not require ADWR to do so.


¶ 2 This case arises out of a 2013 adequate water supply designation by ADWR approving Pueblo Del Sol Water Company’s ("Pueblo") application to supply water to a proposed development in Cochise County. Pueblo was formed in 1972 and received a Certificate of Convenience and Necessity ("CC&N") from the Arizona Corporation Commission ("Commission") that year. Pueblo’s service area covers approximately 4800 acres of land in Cochise County. Castle & Cooke, Inc., which owns Pueblo, seeks to build a mixed-use development called "Tribute," which would include about 7000 commercial and residential units near Sierra Vista. The proposed development site is located approximately five miles from the San Pedro River and is outside a statutory active management area ("AMA"). See A.R.S. § 45-411(A) (identifying Arizona’s AMAs).

¶ 3 In 1988, Congress established the San Pedro Riparian National Conservation Area ("SPRNCA") and delegated management of SPRNCA to the Secretary of the Interior. See 16 U.S.C. § 460xx-1(a). The Bureau of Land Management ("BLM") manages national conservation areas, including SPRNCA, on behalf of the U.S. Department of the Interior. Congress also created an accompanying federal reserved water right to fulfill SPRNCA’s conservation purpose and ordered the Secretary of the Interior to "file a claim for the quantification of such rights in an appropriate stream adjudication." Id. § 460xx-1(d). The right has a priority date of November 18, 1988, for purposes of establishing the federal government’s priority in the seniority system that governs competing appropriation rights. Id. In addition to its federal reserved water right, SPRNCA has a 1985 state certificate-based surface water right and other pending state-based applications. SPRNCA’s federal reserved water right will eventually be quantified in the Gila River General Stream Adjudication (the "Gila Adjudication") but remains unquantified after nearly thirty years of litigation.

¶ 4 Pueblo, which plans to provide the vast majority of Tribute’s water services, calculated that it would need to increase its annual groundwater pumping from about 1430 acre-feet to 4870 acre-feet to meet Tribute’s needs. When Pueblo applied to ADWR for an adequate water supply designation, BLM, Robin Silver, and Patricia Gerrodette (collectively, "Plaintiffs") objected pursuant to A.R.S. § 45-108.01(B). ADWR then issued a draft decision and order finding that Pueblo’s application satisfied the "adequate water supply" requirements under A.R.S. § 45-108(I) by showing that water would be "continuously, legally and physically available" to satisfy Tribute’s water needs "for at least one hundred years" and that Pueblo possesses "financial capability" to construct necessary water facilities. Plaintiffs appealed, arguing, among other things, that the increase in Pueblo’s groundwater pumping would affect the flow of the San Pedro River and would therefore conflict with BLM’s federal reserved water right.

¶ 5 The administrative law judge ("ALJ") agreed with ADWR, concluding that Pueblo met its burden of demonstrating that water would be continuously, legally, and physically available. ADWR then issued an order affirming the ALJ’s decision. Plaintiffs filed complaints for judicial review, which the superior court consolidated, but did not challenge the ALJ and ADWR’s finding that Pueblo met the physical availability requirement.

¶ 6 The superior court vacated ADWR’s decision, ruling that the agency erred in concluding that Pueblo’s water supply is "legally available." The court reasoned that ADWR was required to consider potential and existing legal claims that may affect the availability of the water supply, including BLM’s unquantified federal water right. The court also awarded Silver and Gerrodette attorney fees under A.R.S. § 12-348 and the private attorney general doctrine.

¶ 7 The court of appeals vacated the superior court’s decision and remanded the matter to ADWR. Silver v. Pueblo Del Sol Water Co. , 241 Ariz. 131, 134 ¶¶ 4–5, 384 P.3d 814, 817 (App. 2016). The court held that the superior court erred in requiring ADWR to consider BLM’s unquantified water right under ADWR’s legal availability regulation, Arizona Administrative Code R12-15-718, and found that regulation consistent with A.R.S. § 45-108(I). Id. at 141–42 ¶¶ 36–37, 384 P.3d at 824–25. However, the court also concluded that, pursuant to ADWR’s physical availability regulation, A.A.C. R12-15-716, ADWR "must use its knowledge and expertise" and apply its "educated eye as to what the Gila Adjudication may eventually determine to be BLM’s water right" to consider the impact of BLM’s unquantified water right on Pueblo’s water supply. Id. at 143–44 ¶ 42, 384 P.3d at 826–27.

¶ 8 All parties filed petitions for review in this Court. We granted review because whether ADWR is required to consider unquantified federal reserved water rights when determining the adequacy of developers’ water supplies presents an issue of statewide importance. We have jurisdiction under article 6, section 5(3) of the Arizona Constitution and A.R.S. § 12-120.24.


¶ 9 We review issues of statutory interpretation de novo, Ariz. Water Co. v. Ariz. Dep’t of Water Res. , 208 Ariz. 147, 151 ¶ 16, 91 P.3d 990, 994 (2004), but will defer to an agency’s factual findings unless they are "arbitrary, capricious, or ... an abuse of discretion," J.W. Hancock Enters., Inc. v. Registrar of Contractors , 126 Ariz. 511, 513, 617 P.2d 19, 21 (1980).


¶ 10 "Arizona law distinguishes groundwater from surface water, even though such waters may be hydrologically connected." Davis v. Agua Sierra Res., L.L.C. , 220 Ariz. 108, 110 ¶ 10, 203 P.3d 506, 508 (2009). The doctrine of prior appropriation governs surface water, including its subflow. Id. at 110 ¶ 10, 112 ¶ 19, 203 P.3d at 508, 510. Prior appropriation is "a seniority system determined by the date on which the user initially puts water to a beneficial use." In re Gen. Adjudication of All Rights to Use Water in Gila River Sys. & Source (Gila V ), 201 Ariz. 307, 310 ¶ 4, 35 P.3d 68, 71 (2001). Senior rights-holders are entitled to use their entire water allotments before junior rights-holders receive any water. Id.

¶ 11 Groundwater, by contrast, is not subject to prior appropriation, but is instead "governed by the traditional common law notion that water percolating generally through the soil belongs to the overlying landowner, as limited by the doctrine of reasonable use." In re Gen. Adjudication of All Rights to Use Water in Gila River Sys. & Source (Gila II ), 175 Ariz. 382, 386, 857 P.2d 1236, 1240 (1993). "The doctrine of reasonable use permits an overlying landowner to capture as much groundwater as can reasonably be used upon the overlying land and relieves the landowner from liability for a resulting diminution of another landowner’s water supply." In re Gen. Adjudication of All Rights to Use Water in Gila River Sys. & Source (Gila III ), 195 Ariz. 411, 415 ¶ 7 n.3, 989 P.2d 739, 743 n.3 (1999) (citing Bristor v. Cheatham , 75 Ariz. 227, 237–38, 255 P.2d 173, 183–84 (1953) ). Our legislature has codified the right of overlying landowners to "[w]ithdraw and use groundwater for reasonable and beneficial use" in areas outside AMAs. A.R.S. § 45-453(1). AMAs are subject to the more stringent "assured water supply" regulations, see A.R.S. § 45-576, whereas non-AMA areas are subject to "adequate water supply" requirements, see § 45-108(A), (I).

¶ 12 Although surface water and groundwater are governed by different legal regimes in Arizona, both are...

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