United States v. United States Board of Water Commissioners

          Argued and Submitted August 30, 2017 Pasadena, California

          Appeal from the United States District D.C. No. 3:73-cv-00125-RCJ-WGC Court for the District of Nevada Robert Clive Jones, District Judge, Presiding

          Don Springmeyer (argued) and Christopher Mixson, Wolf Rifkin Shapiro Schulman & Rabkin LLP, Las Vegas, Nevada; Jamie Morin, Mentor Law Group PLLC, Seattle, Washington; for Petitioner-Appellant National Fish and Wildlife Foundation.

          Micheline Noel Nadeau Fairbank (argued) and Bryan L. Stockton, Senior Deputy Attorneys General; Adam Paul Laxalt, Attorney General; Office of the Attorney General, Carson City, Nevada; for Respondent-Appellant State of Nevada.

          Gordon DePaoli (argued) and Dale E. Ferguson, Woodburn and Wedge, Reno, Nevada, for Defendant-Appellant Walker River Irrigation District.

          Simeon Herskovits (argued), Advocates for Community & Environment, El Prado, New Mexico; Sean A. Rowe, Mineral County District Attorney, Hawthorne, Nevada; for Plaintiff-Intervenor-Plaintiff-Appellant Mineral County and Defendant-Appellant Walker Lake Working Group.

          Wes Williams Jr., Law Offices of Wes Williams Jr. P.C., Schurz, Nevada, for Intervenor-Plaintiff-Appellant Walker River Paiute Tribe.

          Karen A. Peterson (argued), Justin M. Townsend, Kyle A. Winter, and Willis M. Wagner, Allison MacKenzie Ltd., Carson City, Nevada, for Participant-Appellee United States Board of Water Commissioners.

          Elizabeth Ann Peterson, David L. Negri, Andrew "Guss" Guarino, Katherine J. Barton, David C. Shilton, and William B. Lazarus, Attorneys; John C. Cruden, Assistant Attorney General; United States Department of Justice, Washington, D.C.; for Amicus Curiae United States of America.

          Jan Zabriskie, Deputy Attorney General; Annadel A. Almendras and Tracy L. Winsor, Supervising Deputy Attorneys General; Robert W. Byrne, Senior Assistant Attorney General; Office of the Attorney General, Sacramento, California; for Amicus Curiae California State Water Resources Control Board.

          Before: A. Wallace Tashima, Raymond C. Fisher, and Jay S. Bybee, Circuit Judges.

         SUMMARY^[*]

         Water Rights

         The panel reversed the district court's judgment and remanded in an action brought by farmers who alleged injury to their water rights arising from state agency approval of modifications to a water rights leasing program in the Walker River Basin.

         The Nevada district court has maintained in rem jurisdiction over the waters of Walker River in accordance with the Walker River Decree of 1936, which governs the water rights in the Walker River Basin. In 2009, Congress established the Walker Basin Restoration Program, which allocated funding to be administered by the National Fish and Wildlife Foundation to acquire water and water rights for the purpose of restoring and maintaining Walker Lake, the terminus of the Walker River. Under the program, the Foundation leases or purchases flow and storage rights from willing sellers, and uses those rights to convey water downstream to feed the Lake.

         The Foundation and the Walker River Irrigation District both submitted applications seeking modifications to their decreed water rights. The Foundation requested changes to the place of use where water was diverted, and changes to the purpose of use from irrigation to wildlife purposes. The Nevada State Engineer approved the Foundation's application, finding that no party would suffer injury from the changes because the Foundation agreed to limit its in-stream water use to the historic consumptive use portion of its decreed water rights, the amount actually used and consumed by agriculture, and to dedicate to the non-consumptive portion to mitigate hydrological system loss.

         The California State Water Control Board approved the separate application of the Irrigation District to temporarily change its decreed water storage rights, finding that the farmers who objected to the proposed changes failed to demonstrate any right to the stored water that would be injured. The district court rejected the state agency rulings, refused to grant the change applications, and remanded to the state agencies after finding that the proposed modifications would injure the water rights of farmers.

         The panel held that (1) it had jurisdiction over the action because the district court's remand order was sufficiently final, (2) state law applied, (3) it would review the district court's decision de novo, and (4) the district court was required to afford the same level of deference to the state agencies as the state courts would.

         The panel held that the district court failed to defer to the findings and conclusions of the state agencies. The panel considered the record before the Nevada State Engineer, and concluded that the Engineer properly found that a transfer to the Foundation limited to the consumption portion would avoid conflict and injury to other existing water rights. The panel held that the findings were supported by substantial evidence and that the Engineer applied the correct legal rule. The panel held that to the extent the district court made its own findings of fact, those findings were clearly erroneous. The panel further held that the California State Water Control Board's finding that the changes proposed by the Irrigation District "would not injure any legal use of the water" was consistent with the Walker River Decree of 1936 and in accord with California law.

         The panel held that Walker Lake is part of the Walker River Basin. Consequently, the panel held that dedicating water from the Walker River to Walker Lake did not violate the Decree's prohibition on delivering water outside of the basin of the Walker River. The panel reversed the district court's judgment, vacated the district court's opinion and remanded for approval of the change applications.

          OPINION

          BYBEE, CIRCUIT JUDGE.

         Water was plentiful when the first settlers arrived in northwestern Nevada ten thousand years ago. Massive Lake Lahontan spread from the Sierra Nevada to the Carson Sink, the Black Rock Desert, and as far as California and Oregon. "The world, " they said, "was all water."^[1] Lake Lahontan has slowly vanished over the years, and now survives only in the form of a few desert lakes, including the subject of this case, Walker Lake, the terminus of the Walker River.

         Walker Lake has suffered since the 1860s, when the River's waters were first diverted for agriculture, and the Lake's volume has plummeted precipitously in recent years. In response, federal, state, tribal, local, and private organizations and authorities have banded together to save the Lake. The federal program at issue in this case is a voluntary water rights leasing program managed by the National Fish and Wildlife Foundation ("NFWF") to convey water from Walker River downstream to the Lake as part of the federal Walker Basin Restoration Program. Like duck stamps and emissions markets, NFWF's program proposes to employ free market forces to restore a natural balance between the competing demands of agriculture and conservation.

         The Nevada State Engineer and the California State Water Resources Control Board approved change applications for NFWF's program over the objections of farmers ("the Farmers") who claim injury to their water rights. The Farmers brought their complaints to the district court which, as the Decree court, has maintained in rem jurisdiction over the waters of Walker River since 1902 in accordance with the Walker River Decree of 1936. The Decree court rejected the state agency rulings, and found that the program, as proposed, would injure the Farmers' water rights.

         We examine two questions. First, did the Decree court properly reject the state agency rulings-that NFWF's program would not cause any cognizable injury to the Farmer's water rights-based on its de novo review of the Walker River Decree? Second, does the export restriction of the Walker River Decree prohibit delivering water to Walker Lake because it is "outside of" the Walker River Basin? We answer both questions in the negative, reverse the judgment of the Decree court, and remand for approval of the change applications.

         I. FACTS AND PROCEDURAL HISTORY

         A. The River and the Lake

         The Walker River consists of two forks that begin in California and end in Nevada. The West Walker River springs from the Emigrant Wilderness of Stanislaus National Forest, and flows through Topaz Lake and north into Nevada's Smith and Mason Valleys. The East Walker River springs from the Hoover Wilderness, passes through Bridgeport Reservoir and into Nevada east of the Wovoka Wilderness and Bald Mountain, before streaming into Mason Valley. The forks join by Yerington and flow north to Wabuska, before turning southeasterly through the land of the Walker River Paiute Tribe ("the Tribe"). See United States v. Walker River Irrigation Dist., 11 F.Supp 158, 161 (D. Nev. 1935). From there, the River flows through Weber Reservoir and Schurz, and into Walker Lake. See id. at 160-62.

         Walker Lake is about 13 miles long by 5 miles wide, tucked against the east side of the Wassuk Range in Mineral County, Nevada. It is one of the last few puddle remnants of ancient Lake Lahontan.^[2] For centuries, the Lake served an important ecological role as fishery for the native Lahontan Cutthroat Trout-the state fish of Nevada-and as home and resting grounds for hundreds of species, including fish, insects, migratory birds, and wild horses.^[3] Human life at the Lake is quite ancient as well, dating back to the spearheads in Mastodon bones and the petroglyphs carved by the Lake's northern shores.^[4]

         By the early 1860s, miners looked to the mountains of the Walker River Basin, seeking the same silver bonanzas unearthed in the Comstock Lode near Lake Tahoe. Following expanded mining operations, innovators in irrigation technology arrived to make the desert bloom. They succeeded. The Smith and Mason Valleys soon became the picturesque and fertile agricultural region they are today. More than half of the valley farmland is dedicated to alfalfa, Nevada's cash crop.

         As agriculture boomed, water flows to Walker Lake diminished. See DRI Report, supra note 3, at 7. Between 1882 and 2007, the Lake's volume plummeted from nine million to two million acre feet and its salinity rose from 2, 500 mg/L total dissolved solids (TDS) to 16, 000 mg/L TDS.^[5] Just a few years later in 2013, salinity exceeded 20, 000 mg/L TDS.^[6] Lahontan cutthroat trout die in such a saline environment; they and many other Lake residents have vanished. With the death of its aquatic life, migratory birds have begun to abandon the Lake. Even the midges, side swimmers, and damselflies have disappeared from the Lake on a search for a more hospitable habitat.^[7] A scum now lines the Lake's receding shores.

         B. The Decree and River Administration

         The action before us was filed in 1924, but traces its history even further back, to 1902, when two cattle kings realized that the Walker River Basin wasn't big enough for the two of them. Miller & Lux, the sprawling ranching enterprise owned by Henry Miller, the "Cattle King of California, " filed a quiet title action in Nevada district court against 150 defendants, including arch-rival Rickey Land & Cattle Co. owned by Thomas Rickey, the "Cattle King of the West." Miller & Lux sought a declaration of appropriative water rights to a flow of 943.29 cubic-feet per second (cfs) of the Walker River for use on its Nevada lands. Miller & Lux v. Rickey, 127 F. 573, 575-76 (C.C.D. Nev. 1902). Rickey in turn sued Miller in California state court, seeking his own appropriative rights to a flow of 2, 079 cfs for use on his California lands. For years the parties disputed the Nevada district court's jurisdiction over California water rights, pleading deficiencies, and application of the now-extinct local action doctrine.

         The Nevada district court granted an antisuit injunction in Miller's favor, and we affirmed. Rickey Land & Cattle Co. v. Miller & Lux, 152 F. 11, 22 (9th Cir. 1907). Because any given usufructory right to a flow has an inherent connection to all other such rights in the same stream, appropriative rights are conclusively established only by reference to all other competing rights. We held that this naturally requires exclusive jurisdiction over the entire res of the Walker River. Id. at 14-19. The Supreme Court agreed. Rickey Land & Cattle Co. v. Miller & Lux, 218 U.S. 258 (1910) (Holmes, J.). After a decade of factfinding and hearings, the district court issued a final decree settling the rights to the River. Pac. Livestock Co. v. Thomas Rickey, In Equity No. 731, Final Decree (D. Nev. 1919) ("the Rickey Decree"). Under the Rickey Decree, the district court retained ancillary jurisdiction to resolve future disputes over rights to Walker River.

         The Walker River Irrigation District ("WRID") was established in 1919. It built two reservoirs in 1919 and 1921: Topaz on the West Walker River, and Bridgeport on the East Walker River.^[8] In 1924 the United States filed an action-In Equity No. C-125-to quiet title to water rights to the Walker River as trustee for the Tribe. After another decade of service of process, the appointment of two Special Masters, factfinding, and hearings, the court issued a final Decree on April 14, 1936, amended in 1940 in ways not relevant here.

         Article I of the Decree recognizes the implied reserved rights of the United States as trustee to the Tribe. See Winters v. United States, 207 U.S. 564, 576-78 (1908). Article II recognizes in their entirety the rights established in the 1919 Rickey Decree. Articles III-VII and IX provide for the flow and storage rights of new private parties. Article VIII recognizes WRID's storage rights in the Topaz and Bridgeport reservoirs with respective priority dates of 1919 and 1921, and the attendant authority to distribute the water stored there. Article X permits rightsholders to change the manner, means, place or purpose of use, or the point of diversion in the manner provided by law "so far as they may do so without injury to the rights of other parties hereto, as the same are fixed hereby." Articles XI-XII provide that no party may relitigate a claim to water rights in the Walker River Basin, in the Nevada District Court or any other court, that was litigated in the original case as of April 14, 1936. Article XIII permits rightsholders to rotate their use of water, i.e., collectively or individually rotate water usage for improved efficiency, so long as no other rights are thereby injured. Article XIV establishes the district court's continued jurisdiction "for the purpose of changing the duty of water or for correcting or modifying this decree; also for regulatory purposes, including a change of the place of use of any water user, " but stipulates that "no water shall be sold or delivered outside of the basin of the Walker River . . . ." Article XV permits the Decree court to designate a water master, which it did in 1937 by creating the U.S. Board of Water Commissioners ("the Water Commissioners")-a six-member board overseen by a Water Master who apportions and distributes the River's waters. Finally, Article XVI sets the irrigation season, which is today set at March 1 to October 31. By establishing its continued jurisdiction over the action and the river, the district court became the "Decree court."

         C. The Walker Basin Restoration Program

         In 2002, Congress began to allocate funds for desert terminal lake conservation. In 2009, it established the Walker Basin Restoration Program "for the primary purpose of restoring and maintaining Walker Lake." Pub. L. No. 111- 85, §§ 207-08, 123 Stat. 2845, 2858-60 (2009); 16 U.S.C. § 3839bb-6. The Program is designed as a voluntary water rights acquisition, trading, and leasing scheme to be jointly administered by NFWF and WRID. Under the program, NFWF leases or purchases flow and storage rights from willing sellers, and uses those rights to convey water downstream to feed the Lake. NFWF negotiated the program details with the Tribe and WRID. WRID thereafter adopted a regulation permitting rightsholders along the River to participate in the program by leasing their claims for in-stream use.

         NFWF purchased a number of claims with priority dates from 1874 to 1906, which cumulatively provide for 7.745 cfs.^[9] In an effort to avoid injury to other rightsholders, NFWF entered into stipulations with WRID, Lyon County, the Tribe, the U.S. Department of the Interior Bureau of Indian Affairs, and several private rightsholders. Per these stipulations, NFWF agreed that program water would be limited to the consumptive use portion of its decreed claims: 4.122 cfs out of 7.745 cfs.

         The consumptive use portion of a water right reflects the amount of water that is actually used and consumed by agriculture. When an upstream user appropriates water for irrigation, some portion of the water-the non-consumptive use portion-is not consumed by the crop and returns as runoff to the river, and for another rightsholder's use downstream. For example, if Farmer A calls for a constant flow of 10 cfs, some variable non-consumptive portion returns to the river, say 4 cfs; the difference (6 cfs) is Farmer A's consumptive use portion. The 4 cfs that returns to the river is then available for Farmer B's use. Effectively, Farmer A has the right to call for 10 cfs, but is consuming only 6 cfs. The consumptive and non-consumptive use portions of any given water right will vary depending on crop type, volume of irrigation water, and environmental factors. In this example, if Farmer A seeks to change the claim's use by removing the entirety of the 10 cfs from the river, Farmer B's right is injured through deprivation of the non-consumptive 4 cfs runoff. Determining whether a change to Farmer A's use will injure Farmer B's right thus requires determining how the change will affect the disposition of the non-consumptive portion of Farmer A's water right.

         Here, NFWF acquired the rights to call for 7.745 cfs. NFWF's hydrologists calculated a historic consumptive use portion at a flow rate of 4.122 cfs. The difference, 3.623 cfs, is the river runoff that was historically available to downstream rightsholders. So as not to injure these downstream claims, NFWF stipulated that it would call for program water only in the flow amount of 4.122 cfs over the course of the irrigation season, that is, approximately 53 percent of its total appropriative rights to 7.745 cfs. NFWF further stipulated that the non-consumptive use portion of its claims-a flow of 3.623 cfs-would be administered by the Water Commissioners "in [their] discretion . . . to avoid conflict with and injury to existing water rights . . . and to mitigate hydrologic system losses."

         D. State Agency Rulings

         Under Article X of the Decree, as well as the 1953 Rules and Regulations and the 1996 Administrative Rules and Regulations, both of which were approved by the Decree court, change applications-meaning any proposed changes in purpose or place of use-must first be presented to the state agencies for their approval.^[10] Applicants with Nevada water rights submit applications with the Nevada State Engineer, and applicants with California water rights submit applications to the California State Water Resources Control Board ("the California Control Board").^[11]

         1. The Nevada Ruling

         In 2011, NFWF applied with the Nevada State Engineer for approval of two changes to its claims to a cumulative 7.745 cfs. First, NFWF requested changing the place of use to "within the Walker River from the Weir Diversion Structure through the USGS Wabuska Gauge, then through Weber Reservoir into and including Walker Lake." The previous rightsholders had diverted the flow from the Weir Diversion Structure into the West Hyland Ditch, downstream from Yerington. Second, NFWF requested changing the purpose of use from irrigation to wildlife purposes. See Nev. Rev. Stat. § 533.023. Effectively, NFWF sought approval not to remove the water obtained through exercise of its water rights, so that water acquired from prior rightsholders may flow, as it naturally would, into Walker Lake. Appropriative rights in Nevada may be applied for a beneficial use in-stream, regardless of whether the water flows to areas not owned by the rightsholder. Nev. Rev. Stat. § 533.040(2); State Bd. of Agric. v. Morros, 104 Nev. 706, 766 (1988).

         The Water Commissioners and a group of private parties ("the Farmers") objected to both change applications. The objecting Farmers hold so-called New Land Stored Water Rights. That is, they operate farms on acres lacking associated decreed claims, and instead have contractual arrangements with WRID. They pay assessments to WRID, which provides them with surplus reservoir water from Topaz and Bridgeport. In other words, these are nondecreed rights to reservoir water, not appropriative flow or storage rights.

         The Water Commissioners and Farmers pressed two arguments. First, they argued that the changes would impermissibly injure their New Land Stored Water Rights. NFWF expects to call continuously for water during the irrigation season when in priority, whereas the farmers who previously owned the claims would on certain days occasionally not call for water, such as on harvesting days, which permitted the flow claims to be redirected by the Water Master for reservoir storage. As such, the Farmers argued that a continuous call would impermissibly injure their rights, because it would ultimately decrease the amount of reservoir water later available to meet their irrigation needs. Second, they argued that Walker Lake lies ...