Eureka Cnty. v. State Engineer , 2015 NV 84 ( 2015 )

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131 Nev., Advance Opinion
IN THE SUPREME COURT OF THE STATE OF NEVADA
EUREKA COUNTY, A POLITICAL No. 61324
SUBDIVISION OF THE STATE OF
NEVADA; KENNETH F. BENSON,
INDIVIDUALLY; DIAMOND CATTLE
COMPANY, LLC, A NEVADA LIMITED !•,.. 11A
LIABILITY COMPANY; AND MICHEL
AND MARGARET ANN ETCHEVERRY OCT 2 9 2015
FAMILY, LP, A NEVADA REGISTERED
FOREIGN LIMITED PARTNERSHIP,
Appellants,
vs.
THE STATE OF NEVADA STATE
ENGINEER; THE STATE OF NEVADA
DIVISION OF WATER RESOURCES;
AND KOBEH VALLEY RANCH, LLC, A
NEVADA LIMITED LIABILITY
COMPANY,
Respondents.
MICHEL AND MARGARET ANN
ETCHEVERRY FAMILY, LP, A
NEVADA REGISTERED FOREIGN
LIMITED PARTNERSHIP; DIAMOND
CATTLE COMPANY, LLC, A NEVADA
LIMITED LIABILITY COMPANY; AND
KENNETH F. BENSON, AN
INDIVIDUAL,
Appellants,
vs.
STATE ENGINEER OF NEVADA,
OFFICE OF THE STATE ENGINEER,
DEPARTMENT OF CONSERVATION
AND NATURAL RESOURCES; AND
KOBEH VALLEY RANCH, LLC, A
NEVADA LIMITED LIABILITY
COMPANY,
Respondents.
Consolidated appeals challenging district court orders denying
judicial review of the State Water Engineer's decisions affecting water
rights. Seventh Judicial District Court, Eureka County; Dan L. Papez,
Judge.
Reversed and remanded.
Allison, MacKenzie, Ltd., and Karen A. Peterson, Jennifer Mahe, and
Dawn Ellerbrock, Carson City; Theodore Beutel, District Attorney, Eureka
County,
for Appellant Eureka County.
Schroeder Law Offices, P.C., and Laura A. Schroeder and Therese A. Ure,
Reno,
for Appellants Kenneth F. Benson; Diamond Cattle Company, LLC; and
Michel and Margaret Ann Etcheverry Family, LP.
Adam Paul Laxalt, Attorney General, and Micheline N. Fairbank, Senior
Deputy Attorney General, Carson City,
for Respondents the State of Nevada Division of Water Resources and the
State Engineer.
Parsons Behle & Latimer and Ross E. de Lipkau and John R. Zimmerman,
Reno; Parsons Behle & Latimer and Francis M. Wikstrom, Salt Lake City,
Utah,
for Respondent Kobeh Valley Ranch, LLC.
Dyer, Lawrence, Flaherty, Donaldson & Prunty and Francis C. Flaherty,
Carson City,
for Amicus Curiae NV Energy, Inc.
Lewis Roca Rothgerber, LLP, and Daniel F. PoIsenberg, Las Vegas;
Taggart & Taggart, Ltd., and Paul G. Taggart, Carson City; Gregory J.
Walch and Dana R. Walsh, Las Vegas,
for Amici Curiae Municipal Water Purveyors.
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BEFORE THE COURT EN BANC.
OPINION'
By the Court, PICKERING, J.:
These consolidated appeals challenge the district court's
orders denying judicial review of the State Water Engineer's decisions
affecting water rights. 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.
1 We originally reversed and remanded in an unpublished order.
Appellants and other interested persons not party to these appeals moved
to publish the order as an opinion. We grant the motions and publish this
opinion in place of our earlier order. See NRAP 36(0.
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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
dra down 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. Between 2006
and 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
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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.
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 use and change permits requested.
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."
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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-
Etcheverry petitioned the district court for judicial review of this decision,
but the district court denied that petition as well.
Eureka County and Benson-Etcheverry appeal the district
court's order denying judicial review of Ruling 6127. Benson-Etcheverry
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 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
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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
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
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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.
(footnotes omitted). 2 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
2 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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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
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 Springs 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, 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 "[t]o be in opposition; be contrary or at
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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, an hydrology expert, 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."
KVR's other expert, 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
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pumping, one of his springs, Nichols 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.
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The State Engineer found Kobeh Valley had 15,000 afa total. KVR's
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
rights holders use water other than from the source that they currently
have rights in might mean the existing rights 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
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this chapter."). KVR did not address before the State Engineer this
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 evidence 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
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protestant and each applicant information required by the State Engineer
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. Id., 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) (internal quotation omitted). The State Engineer thus may
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not defer the determination of what mitigation would encompass 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. 263, 276, 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.
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We therefore reverse and remand these matters to the district
court for proceedings consistent with this opinion. 4 Because we reverse
and remand on this basis, we do not reach the remaining issues raised in
these consolidated appeals.
,J.
We concur:
C.J.
Hardesty
Douglas
Saitta
4From
the record and Ruling 6127, it is unclear which of KVR's
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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