Eureka Co. v. State Engineer C/W 63258 ( 2015 )

 ORDER OF REVERSAL AND REMAND
These consolidated appeals challenge the district court's
orders denying judicial review of the State Water Engineer's decisions
affecting water rights. Seventh Judicial District Court, Eureka County;
Dan L. Papez, Judge. Under NRS 533.370(2), the State Engineer "shall
reject" an application for a proposed use of water or change of existing
water rights where that "proposed use or change conflicts with existing
rights." The parties ask this court to determine whether this section
allows for the State Engineer to take into account the applicant's ability to
mitigate the drying up of existing rights holders' water sources when
determining if a proposed use or change will conflict with existing rights.
However, even assuming that under NRS 533.370(2) the State Engineer
has authority to grant an application that conflicts with existing rights
based upon a determination that the applicant will be able to mitigate, the
State Engineer's decision to approve the applications and issue the
permits at issue here is not supported by sufficient evidence that
successful mitigation efforts may be undertaken so as to dispel the threat
to the existing rights holders. We thus reverse the district court's decision
denying judicial review of the State Engineer's decisions and remand.
I.
At the heart of this appeal is the Mount Hope Mine, a large
proposed molybdenum mine that General Moly, Inc. seeks to establish in
Eureka County. The mine's contemplated life is 44 years, and will require
an estimated total of 11,300 acre feet of water per year (afa). To provide
the water for the mine, General Moly seeks to pump groundwater by well
from the Kobeh Valley and Diamond Valley groundwater basins, basins
that already source many existing water rights, which will cause a
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drawdown of the water table throughout the two valleys. According to a
water resources monitoring plan created by Eureka Moly, LLC, a
subsidiary of General Moly, the vast majority of this water for the Mount
Hope Mine "will be consumptively used in processing activities of the
[mining] Project (i.e.[,] no water will be returned to the aquifer)."
General Moly created respondent Kobeh Valley Ranch, LLC
(KVR) to hold and control the water rights for the project. Water rights
already appropriated by a predecessor entity associated with the mining
project were transferred to KVR, as were existing applications to
appropriate water that the predecessor had filed in 2005. Throughout
2006 to 2010 KVR also filed numerous applications to change the point of
diversion, the place of use, and the manner of use of other of its existing
water rights. Appellant Eureka County protested KVR's applications on
numerous grounds, including that KVR's groundwater appropriations
would conflict with existing rights under NRS 533.370(2). A number of
holders of senior water rights sourced in Kobeh Valley and Diamond
Valley also protested on those, and other, grounds. The State Engineer
originally held a hearing on the applications, then pending, in 2008, after
which he approved some of KVR's applications over these objections, but
upon review the district court vacated the ruling and remanded the matter
back to the State Engineer for a new hearing.
The State Engineer held another hearing in 2010, in which he
accepted the evidence presented at the first hearing and allowed
additional evidence to be presented regarding specific water usage at the
proposed mining project. The State Engineer ultimately granted all of
KVR's applications in his Ruling Number 6127.
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Pertinent to this appeal, the State Engineer recognized that
certain springs located on the Kobeh Valley floor that are in hydrologic
connection with the underlying water table and that source existing,
senior water rights would be "impacted" by KVR's pumping. However, the
State Engineer found that KVR could fully mitigate any impact, and to
that end required KVR to prepare, with the assistance of Eureka County,
a monitoring, management, and mitigation plan (3M Plan) for approval by
the State Engineer before KVR diverted any water. The State Engineer
then issued KVR the various requested use and change permits requested
by KVR.
Eureka County, as well as appellants Kenneth F. Benson,
Diamond Cattle Company, LLC, and Michel and Margaret Ann
Etcheverry Family, LP, (collectively referred to as Benson-Etcheverry), all
of whom hold existing, senior rights in the valleys, petitioned the district
court for judicial review of Ruling 6127. The district court denied the
petition, finding that substantial evidence supported the State Engineer's
decision that KVR would be able to mitigate any adverse impacts to
existing water rights. The district court further held that NRS 533.370(2)
"does not prevent the State Engineer from granting applications that may
impact existing rights if the existing right can be protected through
mitigation, thus avoiding a conflict with existing rights."
While Ruling 6127 was before the district court, KVR
developed a 3M Plan in coordination with Eureka County. Though the
State Engineer approved the 3M Plan, he retained ultimate authority over
it, stating that the 3M Plan was approved with the "understanding that
components of the Plan are subject to modification based on need, prior
monitoring results, or changes in the approved water rights." Benson-
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Etcheverry petitioned the district court for judicial review of this decision,
but the district court denied that petition as well.
Eureka County and the appellant senior right's holders appeal
the district court's order denying judicial review of Ruling 6127. The
appellant senior right's holders also appeal the district court's subsequent
order denying judicial review of the State Engineer's approval of the 3M
Plan.
A.
The State Engineer, who is charged with administering the
water rights in this state, Desert Irrigation, Ltd. v. State, 113 Nev. 1049,
1061, 944 P.2d 835, 843 (1997), is required to approve applications to
appropriate new water rights or to change the place, manner, or use of
existing water rights if the applicant meets certain statutory
requirements. NRS 533.370(1). However:
Except as otherwise provided in subsection 10
[which excepts applications for environmental or
temporary permits], where there is no
unappropriated water in the proposed source of
supply, or where its proposed use or change
conflicts with existing rights or with protectable
interests in existing domestic wells as set forth in
NRS 533.024, or threatens to prove detrimental to
the public interest, the State Engineer shall reject
the application and refuse to issue the requested
permit.
NRS 533.370(2) (emphases added).
The State Engineer and KVR submit that the State Engineer
may conditionally grant proposed use or change applications on the basis
of future successful mitigation, thereby ensuring that the new or changed
appropriation does not conflict with existing rights, in accordance with
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NRS 533.370(2). This court has never addressed whether the statute may
be read in this manner, and we need not do so at this time. Even
assuming that the State Engineer may grant a proposed use or change
application on the basis of the appropriator's ability to successfully
mitigate and bring the existing water rights back to their full beneficial
use, substantial evidence does not support the State Engineer's decision
that this is the case here. Town of Eureka v. Office of State Eng'r of State
of Nev., Div. of Water Res., 108 Nev. 163, 165, 826 P.2d 948, 949 (1992)
("With questions of fact, the reviewing court must limit itself to a
determination of whether substantial evidence in the record supports the
State Engineer's decision.").
B.
The State Engineer in his Ruling 6127 recognized that there
would be extensive" drawdown of the water table in Kobeh Valley near
KVR's main well field area due to KVR's groundwater pumping, which
could "impact" existing "rights on springs and streams in hydrologic
connection with the water table ... includ[ing] valley floor springs." He
also recognized that:
Water rights that could potentially be impacted
are those rights on the valley floor where there is
predicted drawdown of the water table due to
mine pumping. The Applicant recognizes that
certain water rights on springs in Kobeh Valley
are likely to be impacted by the proposed
pumping. These springs produce less than one
gallon per minute and provide water for livestock
purposes.
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(Footnotes omitted)} But the evidence to which the State Engineer cited
demonstrates that more than just an "impact" to these low-flow springs
would occur. For instance, the State Engineer cited to KVR's
hydrogeology expert Terry Katzer's testimony at the 2010 hearing that
KVR's pumping would dry up certain springs and stock watering wells:
Q: Okay. Will the pumping over time cause
impacts to springs in direct stock watering wells
in the floor of Kobeh Valley?
A: I believe it will. And I can't name the springs
because I am not that familiar with them. Mud
Springs, for instance, I know where that is. I've
been there. It will probably dry that up with time.
And other springs that are in close proximity to
the well field.
Q: Stock watering wells?
A: Stock watering wells, yes, probably.
Flow modeling reports by KVR's hydrogeology and groundwater modeling
expert, Dwight Smith, to which the State Engineer also cited, confirmed
this assessment:
Springs located in lower altitudes in the Roberts
Mountains. . . are more likely to be impacted due
to closer proximity to the KVCWF[ Kobeh Valley
Central Well Field], resulting in larger predicted
drawdown at these locations. Discharge at Mud
Spring (Site 721) and Lone Mountain Spring (Site
742), located near the southeast edge of the
KVCWF near proposed well 226, are predicted to
be impacted and will likely cease to flow based on
'Eureka County challenges the "less than a gallon per minute"
finding, but KVR's 2010 flow modeling report indicates that these springs
produced less than a gallon per minute. And, while the inventory KVR
prepared in 2011 shows an estimated less than five gallon flow for Mud
Spring, this is not inconsistent with a less than one gallon flow finding.
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predicted drawdowns of 40 to 50 feet. Both of
these springs discharge less than approximately
one gallon per minute.
Smith also testified that Mud Springs and another spring called Lone
Mountain Spring would cease to flow fairly soon after KVR begins
pumping.
The federal Bureau of Land Management (BLM) claims
unadjudicated reserved rights sourced from Lone Mountain Springs. And
respondent Etcheverry Family, LP, holds permitted existing rights in Mud
Springs, rights consisting of 10.86 afa to use for stock watering purposes.
Therefore, contrary to the State Engineer's, KVR's, and amici's
assertions, 2 KVR's pumping would not merely impact existing water
rights; the very evidence upon which the State Engineer relied
demonstrates that KVR's appropriation would cause the complete
depletion of the source of existing water rights. The Legislature did not
define exactly what it meant by the phrase "conflicts with" as used in NRS
533.370(2), but if an appropriation that would completely deplete the
source of existing water rights does not "conflict with" those existing
rights, then it is unclear what appropriation ever could. Furthermore,
dictionary definitions from around the time a statute is enacted can aid
this court in deciphering that statute's meaning, Douglas v. State, 130
Nev., Adv. Op. 31, 327 P.3d 492, 494 (2014), and contemporaneous
reference material with the Legislature's adoption of the "conflicts with"
aspect of NRS 533.370(2), defines "conflict," in verb form, as "No be in
2 This
court authorized two amicus briefs, one filed on behalf of
several municipal water purveyors and one filed on behalf of Nevada
Energy.
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opposition; be contrary or at variance." See 2 THE CENTURY
DICTIONARY AND CYCLOPEDIA, WITH A NEW ATLAS OF THE WORLD, at
1186 (rev. enl. ed. 1911); 1913 Nev. Stat., ch. 140, § 63. To the extent that
KVR's proposed appropriations would deplete the water available to
satisfy existing rights at issue, they are undeniably "in opposition" thereto,
and thus "conflict with" the existing rights under NRS 533.370(2). 3
C.
Considered separate and apart from any potential mitigation
techniques, the appropriations in question are in conflict with existing
water rights in the valleys. But the State Engineer found KVR could
implement mitigation techniques that would ameliorate the depletion of
Mud Springs: "The State Engineer finds that this flow loss can be
adequately and fully mitigated by the Applicant should predicted impacts
occur." Furthermore, because "the only way to fully ensure that existing
water rights are protected is by closely monitoring hydrologic conditions
while groundwater pumping occurs," the State Engineer found that "a
monitoring, management and mitigation plan prepared with input from
Eureka County must be approved by the State Engineer prior to pumping
groundwater for the project." The State Engineer thus concluded that:
"Based upon substantial evidence and testimony, and the monitoring,
management and mitigation plan requirement, the State Engineer
3 The State Engineer's ruling states that though the BLM originally
protested KVR's appropriations, it withdrew its protests "after reaching a
stipulation on monitoring, management and mitigation" with KVR. It
seems the State Engineer assumed this was sufficient to dispense with the
conflict under NRS 533.370(2), but this is a less than clear conclusion. In
any event, Etcheverry Family, LP, has not withdrawn its protest of KVR's
applications.
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concludes that the approval of the applications will not conflict with
existing water rights . . . ."
Nowhere in the ruling, however, does the State Engineer
articulate what mitigation will encompass, even in the most general sense.
And evidence of what that mitigation would entail and whether it would
indeed fully restore the senior water rights at issue is lacking: there was
no mitigation plan in the record before the district court or in existence
when KVR's applications were granted. Indeed, KVR's representative
Patrick Rogers acknowledged that he didn't "know what we [General
Moly] would propose in a mitigation plan. A mitigation plan hasn't been
developed yet. It would be speculative to say what we would or would not
propose."
The State Engineer and KVR point to KVR's experts'
testimony as evidence that mitigation could occur and would be successful.
But Katzer testified only that there were a variety of [mitigation]
techniques. You could increase the well if it's being fed by a well or you
could run a pipeline to it from part of the distribution system." Smith
similarly testified that if predicted water table drawdown were to occur
due to KVR's pumping, "certainly there can be mitigation measures taken,
many of which could include shifting[] pumping around the well field as an
easy example." While KVR's experts testified as to the existence of a few
possible mitigation techniques, they did not specify what techniques would
work, much less techniques that could be implemented to mitigate the
conflict with the existing rights in this particular case. And concerns over
precisely how KVR, or its parent company Eureka Moly, would mitigate
these conflicts are not without cause: Martin Etcheverry testified that
after KVR did some experimental pumping, one of his springs, Nichols
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Springs, was noticeably lower than before the pumping and that it had not
yet returned to its pre-pumping levels. And according to Eureka County's
natural resource manager, the Nichols Springs lowering was brought to
Eureka Moly's attention multiple times, including at a meeting at the
BLM's Battle Mountain office, but that neither KVR nor Eureka Moly had
done anything to address the lowering of that spring.
The State Engineer and KVR alternatively assert the existing
rights holders conceded that mitigation could be accomplished. But the
existing rights holders, including Martin Etcheverry, merely recognized in
their 2010 hearing testimony that they would be satisfied if KVR could
completely and successfully mitigate the interference with their rights.
The State Engineer implies on appeal that KVR's mitigation
could encompass providing substitute water to the senior rights holders by
arguing that said holders are entitled only to the beneficial use of the
amount of their water rights, and have no right to the historical source of
their water rights. See Desert Irrigation, Ltd. v. State, 113 Nev. 1049,
1059, 944 P.2d 835, 842 (1997) ("[E]ven those holding certificated, vested,
or perfected water rights do not own or acquire title to water. They merely
enjoy the right to beneficial use."). But to the extent KVR's mitigation
would involve substitute water sources—which is not reflected in the State
Engineer's decision or the evidence that was presented to him—there was
no evidence before the State Engineer that KVR applied for or committed
certain of its already obtained water rights to mitigation or where the
substituted water would otherwise come from. And, using the State
Engineer's numbers regarding the amount of water in the basin, there
may not be any water left to use for mitigation after KVR's appropriation.
The State Engineer found Kobeh Valley had 15,000 afa total. KVR's
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appropriation is 11,300 afa, and the other committed rights had 1,100 afa,
which left 2,600 afa for future appropriation. However, there is 5,530 afa
in nonadjudicated claims to vested or reserved rights on file in the State
Engineer's office.
This is setting aside the further, specious assumption that
water from a different source would be a sufficient replacement. Take, for
example, the testimony given by an existing rights holder before the State
Engineer that he had seen problems before with piping in water for
animals because the pipes can freeze and interfere with the flow in the
extreme winter cold. Given these, seemingly supported, concerns over
such potential problems, it is therefore unclear that substitution water, if
available, would be sufficient. See, e.g., Weibert v. Rothe Bros., Inc., 618
P.2d 1367, 1373 (Colo. 1980) ("In order to determine the adequacy of the
[augmentation] plan to accomplish its intended purpose, it is necessary to
consider the adequacy of the replacement water rights."); see also Rocky
Ford Irrigation Co. v. Kents Lake Reservoir Co., 135 P.2d 108, 114 (Utah
1943) (examining whether the exchange of water deteriorates water
quality or quantity to such a degree as to "materially impair[ ] the use.").
Added to this, a surface water rights holder may be found to
have abandoned its right if it no longer delivers the water or maintains
the source of diversion. NRS 533.060(4)(a)-(d). Requiring that existing
right holders use water other than from the source that they currently
have rights in might mean the existing right holder would need to obtain a
new permit to appropriate that new water. See NRS 533.060(5) ("Any
such right to appropriate any of the water must be initiated by applying to
the State Engineer for a permit to appropriate the water as provided in
this chapter."). KVR did not address before the State Engineer this
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potential obstacle to providing water from an alternate source to mitigate,
and neither did the State Engineer's ruling.
Finally, KVR asserts that the State Engineer's determination
that "it is readily feasible to avoid conflicts when mitigating impacts to
water sources that produce relatively minor amounts of water" merely
reflects the State Engineer's "experience and common sense." But this is
precisely the problem with the State Engineer's ruling: though the State
Engineer certainly may use his experience to inform his decision making,
his decisions must be supported by substantial evidence in the record
before him, which is not the case here. Town of Eureka, 108 Nev. at 165,
826 P.2d at 949.
D.
Essentially, and with all other arguments aside, the State
Engineer and KVR's position is that the State Engineer may leave for a
later day, namely the day the 3M Plan is put before him, the
determination of exactly what KVR's mitigation would entail. But the
State Engineer's decision to grant an application, which requires a
determination that the proposed use or change would not conflict with
existing rights, NRS 533.370(2), must be made upon presently known
substantial evidence, rather than information to be determined in the
future, for important reasons.
First, those who protest an application to appropriate or
change existing water rights must have a full opportunity to be heard, a
right that includes the ability to challenge the evidenceS upon which the
State Engineer's decision may be based. Revert v. Ray, 95 Nev. 782, 787,
603 P.2d 262, 264 (1979); see also NRS 533.365(5) ("Each applicant and
each protestant shall. . . provide to the State Engineer and to each
protestant and each applicant information required by the State Engineer
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relating to the application or protest."). Cf. Bowman Transp., Inc. v.
Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 288 n.4 (1974) ("[T]he Due
Process Clause forbids an agency to use evidence in a way that forecloses
an opportunity to offer a contrary presentation."). This necessarily means
that the opportunity to challenge the• evidence must be given before the
State Engineer grants proposed use or change applications. Those who
protest an application's grant cannot be forced to wait and challenge a
future 3M Plan because, as Benson-Etcheverry note: "The appeal as to
Ruling No. 6127 can result in vacating the Ruling, among other remedies.
However, appeal of the 3M Plan can only result in vacating the Plan." In
other words, challenging the sufficiency of a later developed mitigation
plan cannot undo a decision to grant applications for a proposed use or
change that may have been erroneous. And allowing the State Engineer
to grant applications conditioned upon development of a future 3M Plan
when the resulting appropriations would otherwise conflict with existing
rights, could potentially violate protestants' rights to a full and fair
hearing on the matter, a rule rooted in due process. Revert, 95 Nev. at
787, 603 P.2d at 264.
Furthermore, the State Engineer's decision to grant an
application must be sufficiently explained and supported to allow for
judicial review. Revert, 95 Nev. at 787, 603 P.2d at 265; see also Port of
Jacksonville Mar. Ad Hoc Comm., Inc. v. U.S. Coast Guard, 788 F.2d 705,
708 (11th Cir. 1986) (even under deferential substantial evidence review,
courts must not merely "rubber stamp" agency action: they must
determine that the 'agency articulated a rational connection between the
facts presented" and the decision) (citation omitted). The State Engineer
thus may not defer the determination of what mitigation would encompass
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to a later date: even if he may grant applications where the resulting
appropriations would conflict with existing rights based upon the finding
that the applicant would be able to successfully mitigate that deleterious
effect, an assumption we do not adopt today, the finding must be based
upon evidence in the record to support that mitigation would be successful
and adequate to fully protect those existing rights. See City of Reno v.
Citizens for Cold Springs, 126 Nev., Adv. Op. 27, 236 P.3d 10, 18-19 (2010)
(law requiring local governments to make a finding about plans for
adequate services and infrastructure prior to amending a master plan to
allow further development "require[d] something more than the deferral of
the issue or broad, evasive conclusions about how officials can build or
expand utilities if necessary").
In sum, substantial evidence does not support the State
Engineer's finding that KVR would be able to "adequately and fully"
mitigate the fact that its groundwater appropriations will cause Kobeh
Valley springs that sources existing rights to cease to flow. The State
Engineer's decision to grant KVR's applications, when the result of the
appropriations would conflict with existing rights, and based upon
unsupported findings that mitigation would be sufficient to rectify the
conflict, violates the Legislature's directive that the State Engineer must
deny use or change applications when the use or change would conflict
with existing rights. NRS 533.370(2). As appellants have met their
burden to show the State Engineer's decision was incorrect, NRS
533.450(10), the State Engineer's decision to grant KVR's applications
cannot stand. Therefore, we
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REVERSE AND REMAND this matter to the district court for
proceedings consistent with this order. 4 Because we reverse and remand
on this basis, we do not reach the remaining issues raised in these
consolidated appeals.
, CA.
Hardesty
Qia°4C6sa
Parraguirre r
J.
J.
Cherry
Sa
J.
Gibbons
° J.
Pickering \
From the record and Ruling 6127, it is unclear which of KVR's
4
applications for proposed use or change in Kobeh Valley, if it can be
pinpointed, is the appropriation that will cause the springs to dry up.
Therefore, we must overturn the entire decision.
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cc: Seventh Judicial District Court Dept. 2
William E. Nork, Settlement Judge
Allison, MacKenzie, Ltd.
Schroeder Law Offices, P.C.
Eureka County District Attorney
Attorney General/Carson City
Parsons Behle & Latimer/Salt Lake City
Parsons Behle & Latimer/Reno
Las Vegas City Attorney
Brownstein Hyatt Farber Schreck, LLP/Las Vegas
Dana R. Walsh
Lewis Roca Rothgerber LLP/Las Vegas
McDonald Carano Wilson LLP/Reno
Dyer, Lawrence, Penrose, Flaherty, Donaldson & Prunty
Gregory J. Walch
Carson City District Attorney
Henderson City Attorney
Rowe Hales Yturbide, LLP
Taggart & Taggart, Ltd.
Eureka County Clerk
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