Wilson v. Happy Creek, Inc.
| Decision Date | 12 September 2019 |
| Docket Number | No. 74266,74266 |
| Citation | 448 P.3d 1106 |
| Parties | Tim WILSON, P.E., Nevada State Engineer, Department of Conservation and Natural Resources, Division of Water Resources, Appellant, v. HAPPY CREEK, INC., Respondent. |
| Court | Nevada Supreme Court |
NRS 533.395 authorizes the State Engineer to rescind a water rights permit cancellation hut provides that if the State Engineer does so, "the effective date of the appropriation under the permit is vacated and replaced by the date of the filing of the written petition [for review of the cancellation] with the State Engineer." Based on the State Engineer’s adherence to this mandate, respondent in this case lost more than 50 years of priority in water rights—despite having invested nearly $1 million in improving water-use efficiency and otherwise having met all the substantive criteria for maintaining priority of its water rights—because its agent missed a filing deadline by a few weeks. The respondent’s groundwater rights lie in an over-appropriated basin, so loss of original priority dates threatens complete loss of use of water should curtailment occur. Given these extraordinary circumstances, and pursuant to State Engineer v. American National Insurance Co., 88 Nev. 424, 498 P.2d 1329 (1972), and its progeny, we hold that the district court properly granted respondent equitable relief, restoring its water rights’ original priority dates.
Respondent Happy Creek, Inc. ("Happy Creek") is a ranching and farming company that operates Happy Creek Ranch (the "Ranch") in the Pine Forest groundwater basin in northern Nevada. The Ranch comprises 1399 acres of deeded land that includes 855 irrigated acres, 765 of which are irrigated using the groundwater rights at issue on this appeal. In addition to its deeded acres. Happy Creek holds grazing rights to 95,126 and 6056 acres of public land in the Happy Creek and Hog John Grazing Allotments, respectively. The alfalfa produced on the 765 acres of groundwater-irrigated, deeded land is essential to the economic viability of the Ranch and its cattle operations.
The Ranch’s groundwater irrigation rights, totaling 3063 acre feet annually, were appropriated and certificated in stages and carried original priority dates ranging from 1954 to 1990. Since the first groundwater irrigation appropriation in 1954, Happy Creek and its predecessors-in-interest have diligently put the water to beneficial use. In 1994, Happy Creek hired a water rights professional, John Milton, to manage its water rights and handle its filings with the State Engineer, which Milton did without fail until 2016.
To use its water more efficiently, Happy Creek decided in 2007 to convert from flood irrigation to a center-pivot irrigation system. Milton advised that the conversion would require Happy Creek to file applications with the State Engineer to change the place of use for the Ranch’s certificated groundwater irrigation rights. See NRS 533.325 () (emphasis added). In 2009, at Happy Creek’s request, Milton filed change applications with the State Engineer so the work to convert the Ranch from flood to center-pivot irrigation could proceed. The State Engineer approved the change applications and set an April 29, 2012 deadline for Happy Creek to file proofs of beneficial use (PBUs). The permits retained their original priority I dates but the change in place of use meant Happy Creek could lose its water rights unless it proved beneficial use consistent with the change applications by April 29, 2012.
Happy Creek spent almost $1 million and several years upgrading its water system. The PBUs required meter readings for the 6 wells involved in the project for a minimum of 12 consecutive months. Though the conversion work was complete each year one or more of the totalizing flow meters on the irrigation wells failed, resulting in incomplete data needed for the PBUs. As a result, between 2012 and 2015, Milton filed, and the State Engineer granted, extensions of time (EOTs) for Happy Creek to file its PBUs. See NRS 533.380(3) ; NRS 533.410.
On May 19, 2016, the State Engineer mailed Happy Creek notice that it needed to file the PBUs (or EOTs) within 30 days to avoid cancellation of its groundwater permits. Happy Creek received the notice on May 23, 2016, and emailed it that same day to Milton, but Milton missed the June 18, 2016 deadline. (When questioned later, Milton explained that he either temporarily lost the email when he changed his computer's operating system or confused the conversion project’s groundwater irrigation permits with other Ranch permits he was processing for Happy Creek at the time.) Regardless, on July 8, 2016, Milton realized his error, and on July 11, 2016, before receiving anything further from the State Engineer, Milton filed a petition on Happy Creek's behalf under NRS 533.395(2) asking the State Engineer to review the then-impending permit cancellations. But as mandated by NRS 533.410, the State Engineer cancelled Happy Creek’s groundwater permits on July 19, 2016.
The State Engineer held a hearing on Happy Creek’s petition to review the cancellations on October 12, 2016, which Milton and a Happy Creek representative attended. The hearing was recorded but not transcribed. Happy Creek represents, and the State Engineer does not deny, that Happy Creek's representative asked the hearing officer both to rescind the cancellations and restore the water rights’ original priority dates, but the hearing officer explained that NRS 533.395(3) did not give him the authority to restore the original priority dates. Following the hearing, the State Engineer rescinded the cancellations contingent on Happy Creek filing PBUs or EOTs within 30 days, which it did. On November 1, 2016. the State Engineer reinstated the permits. But as mandated by NRS 533.395(3), the State Engineer changed the permits’ priority dates to July 11, 2016.
Happy Creek timely filed in district court a notice of appeal and a petition for judicial review. In its petition, Happy Creek asked for equitable relief in the form of an order restoring its groundwater rights original senior priority dates. The district court granted Happy Creek’s request for equitable relief, holding that even though NRS 533.395(3) constrained the State Engineer to change the priority dates to July 11, 2016. equity demanded that the permits retain their senior priority dates. In support of its decision, the district court found that Happy Creek spent several years and nearly $1 million upgrading its irrigation system; that Happy Creek continuously put the water to beneficial use; that Happy Creek attempted in good faith to protect its water rights; that the Pine Forest groundwater basin is overappropriated and subject to priority-based curtailment in the future; and that the value of the Ranch depends on the priority of Happy Creek’s groundwater irrigation rights. In the district court’s words, the "punishment" of losing senior priority dates "does not fit the crime" of the human filing-date error that occurred.
The State Engineer appeals. On appeal, the State Engineer challenges the authority of the district court to grant equitable relief by restoring Happy Creek’s original senior priority dates.
Enacted in 1913, NRS 533.025 declares: "The water of all sources of water supply within the boundaries of the State whether above or beneath the surface of the ground, belongs to the public." The elevated importance of water in society "leads to the conclusion that it should be distributed fairly and in the broad interests of the public." David H. Getches, Colorado River Governance: Sharing Federal Authority as an Incentive to Create a New Institution , 68 U. Colo. L. Rev. 573. 590 (1997): Sarah F. Bates et al., Searching Out the Headwaters: Change and Rediscovery in Western Water Policy 182 (1993) [hereinafter Headwaters ] ("The principle of equity arises out of the shared, public nature of water."); see also Kansas v. Colorado , 206 U.S. 46, 104, 27 S.Ct. 655, 51 L.Ed. 956 (1907) (). Thus, it was a "balancing of competing interests and equitable principles that shaped the foundations of Nevada water law." Sylvia Harrison, The Historical Development of Nevada Water Law, 5 U. Denv. Water L. Rev. 148. 154 (2001). And, despite that Nevada often follows its arid Western sister states in codifying and modifying the law of prior appropriation, "consideration of equity or fairness in access and distribution is one of the cardinal principles underlying every enduring water management system." Stephen P. Mumme, From Equitable Utilization to Sustainable Development : Advancing Equity in U.S.-Mexico Border Water Management, Water, Place, and Equity, at 117 (); see also Anthony Dan Tarlock & Jason Anthony Robison, Law of Water Rights and Resources § 1:1 (2018) ().
Consistent with this history, these policies, and the importance of water to Nevada’s citizens, long-standing precedent establishes that both this court and the district courts have the authority, "when warranted," to grant equitable relief in water law cases beyond the relief, if any, that the water...
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