Stanford Vina Ranch Irrigation Company v. State of California, (2020) WL 3396269
On June 18, 2020, the Third District Court of Appeal affirmed the State Water Resources Control Board’s (“State Water Board” or “Board”) authority to regulate reasonable use of riparian and pre-1914 appropriative surface water rights through curtailment orders enforcing emergency regulations establishing minimum instream flows to protect salmon and steelhead trout during drought.
The new court opinion echoes the First District Court of Appeal’s 2014 opinion upholding the Board’s authority to regulate riparian and pre-1914 surface water rights to maintain minimum instream fish flows in Light v. State Water Resources Control Board, (2014) 226 Cal.App.4th 1463. There, the regulation sought to protect salmon and steelhead by establishing local programs to monitor streams and potentially require curtailments of water diverted to protect grapes from frost. The emergency regulation in this new case took a step beyond Light by directly declaring diversions that would reduce instream flows below specified minimums to be unreasonable under Article X, section 2 of the California Constitution. Article X, section 2 prohibits waste of water and requires all water use to be reasonable.
The plaintiff in the new case, Stanford Vina Ranch Irrigation Company (“Stanford Vina”), operates diversion dams and ditches for agricultural uses on Deer Creek, a tributary of the Sacramento River originating near the summit of Butt Mountain in the Lassen National Forest. Stanford Vina’s shareholders own agricultural land with previously adjudicated riparian rights to the use of roughly 66 percent of Deer Creek’s water. Deer Creek provides spawning and rearing habitat for Chinook salmon and steelhead trout, which are listed as threatened under the federal Endangered Species Act and California Endangered Species Act.
In January 2014, Governor Brown declared a state of emergency due to historic severe and persistent drought conditions. In March 2014, Governor Brown signed into law urgency legislation, which included authority for the State Water Board to adopt emergency regulations to prevent waste and unreasonable use, to promote water conservation, and to require curtailment of diversions when water is not available under the diverter’s priority of right (among other things), in response to the threat or presence of critically dry conditions.
In May 2014, the State Water Board began promulgating regulations implementing in-stream flow requirements for Deer Creek and two other Tehama County creeks providing habitat to listed fish species. In those regulations, the Board declared that any diversion reducing flows beneath drought emergency minimums would be a per se waste and unreasonable use in violation of Article X, section 2. The emergency regulations barred water from being diverted from Deer Creek and other specified streams during the effective period of any State Water Board curtailment order issued pursuant to the regulations. On June 5, 2014, the State Water Board issued the first curtailment order for Deer Creek, which directed all water rights holders to immediately cease or reduce their diversions in order to maintain the drought emergency minimum flows specified by regulation. From June 2014 to October 2015, the Board issued three more curtailment orders for Deer Creek.
Water Users Challenge State Water Board’s Authority to Reduce Diversions by Emergency Regulations and Curtailment Orders
Stanford Vina filed suit in October 2014 (with subsequent amendments resulting from additional curtailment orders), claiming the Board’s emergency regulations and curtailment orders amounted to an unconstitutional taking of Stanford Vina’s vested water rights for fishery enhancement purposes, and claiming the taking was prohibited absent an evidentiary hearing. Stanford Vina also asked the court to order the Board to rescind its emergency regulations and curtailment orders, and to refrain from adopting further orders that use the “reasonable use” doctrine to prohibit one use of water for the benefit of alternative uses of the same water, without providing due process and just compensation. In response, the State Water Board argued it had authority to adopt the challenged emergency regulations and to issue curtailment orders to regulate the unreasonable use of water, and that the regulations and curtailments did not constitute a taking or violate Stanford Vina’s due process rights, because Stanford Vina had no vested right to the unreasonable diversion or use of water.
The trial court concluded the Board possessed quasi-legislative authority to adopt the challenged regulations, without first holding an evidentiary hearing, and that the curtailment orders simply notified affected water right holders that the regulatory provisions were being applied. The trial court further held that “under the unique circumstances present in this case – persistent and extreme drought conditions threatening to dewater high priority streams during critical migration periods for threatened and endangered fish species … the Board rationally determined that allowing diversions to reduce flows below minimum “belly-scraping” amounts necessary for fish migrations and survivability would be unreasonable.”
The trial court entered judgment against Stanford Vina on all causes of action.
Appellate Court Affirms State Water Board’s Authority and Rejects Stanford Vina’s Takings and Due Process Arguments
In affirming the trial court’s decision, the Third District Court of Appeal held the Board possesses broad authority to regulate the unreasonable use of water. The court held that authority includes adoption of a regulation establishing minimum flow requirements to protect the migration of threatened fish species during drought conditions, and to declare unreasonable diversions of water would cause instream flows to fall below levels needed by those fish. Because different standards of review apply to the Board’s quasi-legislative rulemaking power and its quasi-adjudicative enforcement actions, the appellate court first considered the validity of the regulations and then considered the validity of the curtailment orders that implemented the regulations.
Validity of Challenged Regulations
The Court of Appeal determined the challenged regulations fell within the State Water Board’s “regulatory authority as they furthered the Board’s constitutional and statutory mandate to prevent waste, unreasonable use, unreasonable method of use, or unreasonable method of diversion of water in this state.” Citing Light, the court rejected Stanford Vina’s argument that the Board exceeded its authority by regulating riparian and pre-1914 water rights, explaining “the board is charged with acting to prevent unreasonable and wasteful uses of water, regardless of the claim of right under which the water is diverted.” (Stanford Vina at p. 13.) Among other statutory provisions granting the Board authority, the court cited Water Code section 275, which authorizes the Board to “take all appropriate proceedings or actions before executive, legislative, or judicial agencies to prevent waste, unreasonable use, unreasonable method of use, or unreasonable method of diversion of water,” Water Code section 1058, which authorizes the Board to “make such reasonable rules and regulations as it may from time to time deem advisable in carrying out its powers and duties,” and Water Code section 1058.5, which authorizes the Board to adopt emergency regulations to prevent “unreasonable use, unreasonable method of use, or unreasonable method of diversions” during severe drought conditions.
The court rejected Stanford Vina’s claim that due process and Article X, section 2 required the Board to hold an evidentiary hearing before making a reasonableness determination. According to the court, due process did not require the Board to hold an evidentiary hearing to exercise its legislative authority to adopt a regulation defining reasonable use. The court held an evidentiary hearing was required to adopt such a regulation.
Applying the deferential standard for judicial review of legislative actions, the court found the emergency regulations were within the Board’s authority, were reasonably necessary, and that the Board’s determinations were not arbitrary and capricious or entirely lacking in evidentiary support.
Validity of Challenged Curtailment Orders
After determining the Board’s emergency regulations were valid, the court held the Board properly implemented those regulations by issuing the challenged curtailment orders. Stanford Vina argued it held a vested right to Deer Creek’s water based on its landowners’ senior riparian and pre-1914 water rights to Deer Creek flows, so the court should review the orders under an independent judgment standard.
The court disagreed and applied the substantial evidence standard of review. It reasoned that under Article X, section 2, exercise of water rights extends only to as much of the flow as may be required for the reasonable use of that water. Because the Board’s emergency regulations defined unreasonable use as any diversion of water that threatened to drop Deer Creek’s flow below the emergency minimum, the court held that Stanford Vina possessed no vested right to divert water from Deer Creek in violation of the emergency regulation.
According to the court, Stanford Vina did not dispute that its unregulated diversions would have caused Deer Creek’s flows to drop below the minimum levels specified by regulation. The court held that substantial evidence supports the Board’s application of the regulations to the facts existing in Deer Creek at the time the curtailment orders were issued, finding no fault with the Board’s application of the regulations.
The court rejected Stanford Vina’s argument the curtailment orders were a taking of private property without just compensation, because it found that Stanford Vina possessed no vested right to divert water from Deer Creek in contravention of the emergency regulations. The court also dismissed Stanford Vina’s arguments that the regulations and curtailment orders impermissibly interfered with a prior judicial decree declaring its water rights, because rights declared by a judicial decree are subject to the rule of reasonableness. Finally, the court rejected Stanford Vina’s argument that the orders violated the rule of priority. The court observed that Stanford Vina did not identify any junior rights holders who were excluded from curtailment and that, in any event, the rule is not absolute.
Conclusion
This case is another example of courts upholding State Water Board authority to regulate riparian and pre-1914 surface water rights to ensure reasonable use during drought – this time when the water rights were previously decreed by a court in a stream adjudication. The new appellate opinion upholds the Board’s two-step drought emergency response process (first, adopting an emergency regulation defining reasonable use and, second, issuing an enforcement order applying the regulation to specific water users). This appellate opinion affirms State Board authority during the unique circumstances of an extraordinary multi-year drought, leaving unanswered whether a similar approach would work during less unusual circumstances. (See Tulare Irrigation District v. Lindsay-Strathmore Irrigation District (1935) 3 Cal.2d 489, 530 [striking down as unconstitutional legislation declaring certain riparian rights per se unreasonable].)
The opinion is available here: https://www.courts.ca.gov/opinions/documents/C085762.PDF.
Questions
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