The creation of new risk sharing water entitlement regimes: The case of the Truckee-Carson settlement

Ecology Law Quarterly

Volumn 25, Issue 4, 1999, Pages 674-691

  Tarlock, A Dan ^a  

^a CHICAGO KENT COLLEGE OF LAW   (United States)

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EID: 22644449802     PISSN: 00461121     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (66)

1. See WATER POLICY REVIEW ADVISORY COMM'N, WATER IN THE WEST: THE CHALLENGE FOR THE NEXT CENTURY 3-51 (1998) ("The emphasis on the protection of fish and migratory water fowl is one of the most dramatic changes in Federal water policy since 1973 and is leading to a more holistic focus on the restoration and maintenance of healthy aquatic ecosystems.").
2. The case that watershed degradation is a principal, but under-appreciated, cause of ecosystem deterioration is documented by Henry B. Lacey, Dancing in Place: The Clinton Administration and Aquatic Ecosystem Protection in the Pacific Northwest, 36 NAT. RESOURCES J. 779 (1996).
3. The conceptual underpinnings for place-based solutions are emerging as the international norm of sustainable development. See Gabcikovo-Nagymarros Project (Hung. v. Slovk.), 1997 I.C.J. (Sept. 25, 1997) (visited Sept. 25, 1998) 〈http://www.icj-cij.org/idocket/ihs/ihsjudgement/ihsjudcontent.html〉 (opinion and separate opinion of Vice-President Weeramantry) (discussing sustainable development and the marriage of the old idea of river basin planning with the new theory of bioregional landscape management).
4. Moreover, one of the central lessons of current efforts to construct habitat conservation plans to protect endangered species is that we need to manage resources on larger geographic, more ecologically rational, scales. Land use scale is emerging as a central focus of future biodiversity protection. See, e.g., John Turner and Jason Rylander, Land Use: The Forgotten Agenda, in THINKING ECOLOGICALLY: THE NEXT GENERATION OF ENVIRONMENTAL POLICY 60, 66 (Marian R. Chertow and Daniel C. Esty eds., 1997);
5. Eric T. Freyfogle, Ethics, Community, and Private Land, 23 ECOLOGY L.Q. 631, 654-655 (1996).
6. Biodiversity is not a self-defining scientific concept that can easily be translated into simple standards; rather, it is a kaleidoscopic human construct that must be applied to specific landscapes. See DAVID TAKACS, THE IDEA OF BIODIVERSITY: PHILOSOPHIES OF PARADISE 99 (1996).
7. The new emphasis on landscape recognizes that large areas such as regional landscapes and watersheds must be seen not simply as physical maps to be "read," see, e.g., LANDSCAPE IN AMERICA (George F. Thompson ed., 1995), but as modified natural systems to be protected and actively managed. This emphasis requires a delineation of the landscape and the construction of baselines against which resource use patterns can be measured.
8. See Duncan Patten, Restoration as the Order of the 21st Century: An Ecologists Perspective, in RECLAIMING THE NATIVE HOME OF HOPE-COMMUNITY, ECOLOGY AND THE AMERICAN WEST 69 (Robert B. Keiter ed. 1998). The goal is not necessarily to preserve a natural system but to manage the process of change in actual landscapes in order to strike a balance between the maintenance of natural system functions and human use of the system.
9. SEE MARC REISNER & SARAH BATES, OVERTAPPED OASIS: REFORM OR REVOLUTION FOR WESTERN WATER (1990).
10. Adaptive management is continuous resource management "based on trial, monitoring, and feed back." NATIONAL RESEARCH COUNCIL, RESTORATION OF AQUATIC ECOSYSTEMS 357 (1992).
11. For a good summary of this strategy by two of its leading architects, see Thomas J. Graff and David Yardas, Reforming Western Water Policy: Markets and Regulation, 12 NAT. RESOURCES & ENV'T 165 (1998).
12. For an early articulation of this idea based on the Truckee-Carson experience, see Charles F. Wilkinson, A View Towards the Future: Lessons from Tahoe and the Truckee, in NATURAL RESOURCES POLICY AND LAW: TRENDS AND DIRECTIONS 216 (Lawrence J. MacDonnell and Sarah F. Bates eds., 1993).
13. See generally David H. Getches, Colorado River Governance: Sharing Federal Authority as an Incentive to Create a New Institution, 68 U. COLO. L. REV. 573 (1997) (recommending a broader, more participatory process in the management of the Colorado River).
14. This movement also illustrates the second major shift in governance theory since the Progressive Era and New Deal models, which were characterized by delegation to experts. The environmental and consumer movements of the 1960s and early 1970s triggered a great number of experiments in enhanced democratic participation. The focus is now shifting to more limited (but better quality) participation by stakeholder representatives. See Jim Rossi, Participation Run Amok: The Costs of Mass Participation for Deliberative Agency Decisionmaking, 92 NW. U. L. REV. 173 (1997).
15. Jody Freeman, Collaborative Governance in the Administrative State, 45 UCLA L. REV. 1, 30-33 (1997).
16. For example, the Endangered Species Act creates regulatory water rights that may require an appropriator to forego using a state-created water right during times when flows are needed for the protection of a listed species. See, e.g., United States v. Glenn-Colusa Irrigation Dist., 788 F. Supp. 1126, 1133 (E.D. Cal. 1992). The ESA was recently upheld against a post-Lopez Commerce Clause challenge. See Nat'l Home Builders v. Interior Dep't, 130 F.3d 1041, (D.C. Cir. 1997) (finding that "the extinction of animals substantially affects interstate commerce" and thus biodiversity maintenance is a legitimate exercise of the Commerce Clause). Id. at 1054.
17. The future role of irrigation in the West is the subject of intense debate. A recent National Academy of Sciences/National Research Council study characterizes irrigated agriculture as both a culture and a business. COMMITTEE ON THE FUTURE OF IRRIGATION IN THE FACE OF COMPETING DEMANDS, NATIONAL RESEARCH COUNCIL, A NEW ERA FOR IRRIGATION (1996). The first characterization is the basis of pleas for continued subsidization and the second is the basis of the case for increasing reliance on free markets to allocate water. The study's basic conclusions are that total irrigation acreage will decline in the future, that irrigation will still account for roughly the same percentage value of agricultural production, and that acreage will shift from the arid west to the humid southeast and lower Mississippi valley, where irrigation is growing. Turf-irrigation golf courses will also continue to grow in economic importance.
18. See Bill Huffman, Golf Near Top in State Revenue Behind Agriculture, THE ARIZ. REPUBLIC, Dec. 23, 1997, at A1.
19. A recent study of the economic value of golf in Arizona illustrates the shifts in the relative value of raw commodity vis a vis the production of services. Golf now produces roughly the same or perhaps more revenue than agriculture. See Huffman, supra note 10, at A1. The most up to date quantitative and qualitative analysis of the post-commodity production era western economy and its dual latte drinking and cowboy culture is WILLIAM E. RIEBSAME & JAMES J. ROBB, ATLAS OF THE NEW WEST: PORTRAIT OF A CHANGING REGION (1997).
20. The district is located in Churchill County, some 50 miles east Reno, and is increasingly a bedroom community for Reno-Sparks. The region's economy is diversified among gaming, tourism, manufacturing, government, retail, mining and agriculture. Most TCID farms are small and about one-half of member household income comes from non-farming sources. See PRATT, supra note *, at 1-22-1-23 (citing MEYER RESOURCES, INC., SOCIO-ECONOMIC EFFECTS OF WATER RIGHTS ACQUISITIONS PROGRAM FOR LAHONTAN VALLEY WETLANDS (1993)). Farming and agricultural services account for only about 10-12 percent of county income; the Fallon Naval Air Station provides 27 percent of the county's Jobs. See id. at 5-27.
21. See, e.g., MARTHA C. KNACK AND OMER C. STEWART, AS LONG AS THE RIVER SHALL RUN: AN ETHNOHISTORY OF PYRAMID LAKE RESERVATION (1984).
22. For a history of the founding of the District by the leading sponsor of the Reclamation Act of 1902, see WILLIAM D. ROWLEY, RECLAIMING THE ARID WEST: THE CAREER OF FRANCIS G. NEWLANDS (1996).
23. The Tribe subsequently sought to reopen the 1944 Orr Ditch Decree because the federal government did not adequately represent its interests, which conflicted with the implementation of the Reclamation Act of 1902. But the Supreme Court held that the water rights had vested in the project beneficiaries and thus the federal government and the Tribe were estopped from reopening the decree. See Nevada v. United States, 463 U.S. 110, 143 (1983).
24. The Department of Interior had started developing more efficient operating criteria in 1966, and in 1973 a federal district court held that the Department had a trust duty to implement the OCAP. See Pyramid Lake Paiute Tribe of Indians v. Morton, 354 F. Supp. 252, 257 (D.D.C. 1973). That duty was reaffirmed in Pyramid Lake Tribe of Indians v. Hodel, 878 F.2d 1215 9th Cir. 1989). TCID's efficiency has increased from about 40% in 1964, when the Department of Interior began investigating Newlands' operations, to 68.4% in 1992, and annual diversions have fallen from 370,000 to 320,000 acre feet. See PRATT, supra note *, at 91.
25. Carson-Truckee Water Conservancy Dist. v. Clark, 741 F.2d 257 (9th Cir. 1984). CALIFORNIA DEP'T OF WATER RESOURCES, TRUCKEE RIVER ATLAS (1991) is avaluable source of the geography, hydrology, and history of the river and its use.
26. The area is generally known as the Carson Sink. See CALIFORNIA DEP'T OF WATER RESOURCES, CARSON RIVER ATLAS 33 (1991).
27. Irrigation created much more variable flows and the roughly 150,000 wetland acres sustained by the Carson River in 1900 decreased by 82% during the twentieth century. The major remnant wetlands of the Carson Sink, such as the Stillwater National Wildlife Refuge, remain among the most productive wildlife habitats in North America; because they serve as a vital stop over on the Pacific Flyway, they are a Western Hemisphere Shorebird Reserve. See CALIFORNIA DEP'T OF WATER RESOURCES, CARSON RIVER ATLAS, supra note 17, at 98-99.
28. See The Truckee-Corson Basins in Nevada: Indian Tribes and Wildlife Concerns Shape a Reallocation Strategy, in COMM. ON WESTERN WATER MANAGEMENT, WATER TRANSFERS IN THE WEST, supra note *, at 119.
29. See U.S. FISH AND WILDLIFE SERVICE, FINAL ENVIRONMENTAL IMPACT STATEMENT, WATER RIGHTS ACQUISITION FOR LAHONTAN VALLEY WETLANDS, CHURCHILL COUNTY, NEVADA, Vol 1. (1996).
30. See, e.g., PRATT, supra note *, at 119. This report is the most complete and up to date analysis of the basin and the settlement process.
31. The analogy has its limits, but there is much to be learned from contemporary explanations of why some traditional cultures reject western modernity in the name of nationalism and others seek to adapt to modernity within the framework of traditional culture. See Charles Taylor, Nationalism and Modernity, in THE MORALITY OF NATIONALISM 31 (Robert McKim & Jeff McMahon eds., 1997).
32. The Truckee-Carson Basin has been a pioneer in the use of water markets to accommodate both urban and environmental uses. Supported by state and federal funds, TCID water rights are purchased and reallocated to support the Stillwater Wildlife Refuge. The guiding policy objective for the program is to restore and maintain 25,000 acres of primary wetland habitat; roughly 125,000 acre-feet of water rights may ultimately need to be acquired to accomplish this objective. See U.S. FISH AND WILDLIFE SERVICE, supra note 20, at 1-5-1-7.
33. The Tribe's success shows the necessity of litigation, or the threat of litigation, to jump start stakeholder involvement through a power shift from dominant to marginal players. The beneficiaries of the power shift must maintain a credible threat that the courts will produce a result worse than the likely compromise reached by the parties. The Tribe continues to use both federal and state law to keep pressure on the TCID and has won more cases than it has lost. For example, the Tribe lost in United States v. Alpine Land & Reservoir Co., 697 F.2d 851 (9th Cir. 1983) (upholding water duties fixed by decree), but won in Truckee-Carson Irrigation Dist. v. Secretary of the Dep't of Interior, 742 F.2d 527 (9th Cir. 1984) (finding that irrigation district was not deprived of rights when Secretary of the Interior terminated its contract for violating operating criteria), and United States v. Alpine Land & Reservoir Co., 983 F.2d 1487 (9th Cir. 1992) (finding that Nevada water rights are based on amount actually applied to beneficial use).
34. See PRATT, supra note *, at 78-79.
35. The Bureau of Reclamation has formally changed its mission from development, see, e.g., MARC REISNER, CADILLAC DESERT: THE AMERICAN WEST AND ITS DISAPPEARING WATER (1986), to resource management.
36. See BUREAU OF RECLAMATION, RECLAMATION'S STRATEGIC PLAN: A LONG TERM FRAMEWORK FOR WATER RESOURCES MANAGEMENT, DEVELOPMENT AND PROTECTION (1992).
37. See generally A. Dan Tarlock, Biodiversity Federalism, 54 MD. L. REV. 1315 (1995);
38. A. Dan Tarlock, Federalism Without Preemption: A Case Study in Bioregionalism, 27 PACIFIC L. J. 1629 (1996).
39. The initial draft of Water in the West, supra note *, contained the phrase "respect for state law" rather than deference to reflect both the preemptive effect of federal environmental regulation and the need to integrate state water law where it does not frustrate federal objectives. After strong protests from the traditional western water establishment, however, the Commission changed the phrase to "appropriate legal deference" in the pending final version. The different phrasing appears to be one of style not substance. As the former Commissioner of Reclamation, Daniel P. Beard, told the Commission, "[t]he premise of federal water resources policy is that we should defer to state law and procedures. That's the policy. The reality is much different .... The reality is that the federal government has passed numerous laws that directly impact state laws and procedures." Daniel P. Beard, Remarks to the Western Water Policy Review Advisory Commission (Feb. 18, 1997).
40. See, e.g., Elizabeth A. Reike, The Bay Delta Accord: A Stride Toward Sustainability, 67 U. Colo. L. Rev. 341 (1996);
41. Jon Welner, Natural Communities Conservation Planning: An Ecosystem Approach to Protecting Endangered Species, 47 STAN. L. REV. 319, 346 (1995).
42. See Falon Paiute Shoshone Indian Tribes Water Rights Settlement Act of 1990, Pub. L. No. 101-618, 104 Stat. 3289 (1990). Senator Harry Reid was the prime architect of the legislation. For an analysis of the legislation, see E. Leif Reid, Note, Ripples From the Truckee: The Case for Congressional Apportionment of Disputed Interstate Water Rights, 14 STAN. ENVTL. L.J. 145 (1995).
43. See John Kramer, Lake Tahoe, the Truckee River, and Pyramid Lake: the Past, Present, and Future of Interstate Water Issues, 19 PACIFIC L. J. 1339 (1988), (discussing the history of this dispute).
44. A preliminary settlement agreement was reached in 1989 between the Pyramid Lake Paiute Tribe and Sierra Pacific, but not TCID. This agreement was incorporated by reference in the 1990 legislation and must be incorporated into the Truckee River Operating Agreement. The Preliminary Settlement Agreement is reprinted in CALIFORNIA DEP'T OF WATER RESOURCES, TRUCKEE RIVER ATLAS, supra note 17, at 119-126.
45. The basic allocation agreement dates from 1908 and set the "Floriston Rates" for Truckee River between its source (Lake Tahoe) and its terminus (Pyramid Lake). The 1908 agreement among the Truckee River General Electric Company (predecessor to Sierra Pacific), the Floriston Land and Power Company, and the Floriston Pulp and Paper Company required that "there shall be maintained a flow of water in the said Truckee River at Floriston [California] of not less than 500 cubic feet per second from the First day of March to the 30th day of September inclusive, in each year, and of not less than 400 cubic feet per second from the 1st day of October to the last day of February, inclusive, in each year." See TRUCKEE RIVER ATLAS, supra note 17, at 49-50. The Floriston Rates were subsequently incorporated into the 1915 Truckee River General Electric Decree. See id. at 52. The Truckee River Agreement, finalized in 1935, represents the current basis for the operation of the Truckee River.
46. The rates were established at the turn of the century to support hydroelectric facilities along the river. Today, Sierra Pacific Power Company has four small 100-year old plants with a combined capacity of 10.1 megawatts. See CALIFORNIA DEP'T OF WATER RESOURCES, TRUCKEE RIVER ATLAS, supra note 17, at 81. The 1944 Orr Ditch Decree incorporated the Truckee River Agreement and adjudicated numerous Individual water rights. See United States v. Adams, No. A3 (D. Nev. Sept. 8, 1944 1944).
47. Professor Dunning defines a physical solution as "a way to accommodate change without significantly damaging a senior . . . ," which may arise from an appropriate judicial or administrative order to "compel a senior right holder to accept a substituted source of water or modification of his means of diversion, distribution, or use of water at a junior right holder's expense in order to benefit the junior and to achieve better overall utilization of the resource." Harrison C. Dunning, The "Physical Solution" in Western Water Law, 57 U. COLO. L. REV. 445, 448 (1986).
48. The physical solution was a judicial response to the 1928 Amendment to the California Constitution, CA CONST. art. X, § 2, which substituted the reasonable use for the natural flow of riparian rights. Courts have interpreted the amendment to allow appropriators to satisfy riparian rights by substitute supplies when riparians claimed large flows to satisfy uses that could be satisfied by relatively inexpensive and less "wasteful" alternatives. See Clifford W. Schultz & Gregory S. Webber, Changing Judicial Attitudes Towards California Water Resources: From Vested Rights to Utilitarian Reallocations, 19 PACIFIC L. J. 1031, 1061-86 (1988).
49. See generally MICHAEL COLLIER ET AL., DAMS AND RIVERS: PRIMER ON THE DOWNSTREAM EFFECTS OF DAMS 3 (U.S.Geological Survey Circular 1126, 1996).
50. Water exchanges substitute one source of water for another to meet prior rights, for example, to allow a junior to change the point of diversion and use. An appropriator has no unqualified right to refuse a substitute. See Wilder Irrigation District v. Jorgensen, 64 Idaho 538 (1943). Nevertheless, the exchanged water must, of course, be legally available to the exchanger. See City of Thornton v. Bijou Irrigation Co., 926 P.2d 1, 52-62 (Colo. 1996).
51. This agreement allows Sierra Pacific to recapture, with the consent of the Pyramid Lake Paiute Tribe, a part of Stampede Reservoir, which it lost under the Endangered Species Act. See The Newlands Project, Nevada, Oversight Hearing on Public Law 101-618, The Fallon Paiute Shoshone Water Rights Settlement Act of 1990 and The Truckee-Carson-Pyramid Lake Water Rights Settlement Act Before the Subcomm. on Water and Power of the Senate Comm. on Energy and Natural Resources, 103rd Cong. 18 (1994) (prepared statement of Elizabeth Ann Reike, Assistant Secretary, Water and Science, U.S. Dep't of the Interior). Since the mid-1980s. Stampede Reservoir, where much of the new storage capacity for Sierra Pacific was to be located, has been exclusively managed to benefit the Pyramid Lake fishery.
52. This agreement also increased Sierra Pacific's storage capacity in Stampede Reservoir to 39,000 acre-feet. See id.
53. See id.
54. The seminal prior appropriation case, Coffin v. Left Hand Ditch Co., 6 Colo. 443, 449-50 (1882), justified the doctrine because it protected investment in the necessary water diversion works. See generally ROBERT G. DUNBAR, FORGING NEW RIGHTS IN WESTERN WATERS (1989).
55. See, for example, Justice Hobbs' articulate opinion in Williams v. Midway Ranches, 938 P.2d 515, 521 (Colo. 1997).
56. This analysis borrows from some of premises of Green Property theory such as the need to recognize that entitlements are part of a larger landscape, the role of public participation in defining the expectations of property right holders, see Terry W. Frazier, The Green Alternative to Classical Liberal Property Theory, 20 Vermont L. Rev. 299, 357-363 (1995), and the insight that property rights are redefined as societies change. See Imperial Irrigation Dist. v. State Water Resources Control Bd., 225 Cal. App. 3d 548, 573 (1990); Joseph L. Sax, Property Rights and the Economy of Nature: Understanding Lucas v. South Carolina Coastal Council, 45 STAN. L. REV. 1443, 1447-48 (1993). Nevertheless, I ultimately make a more traditional argument that the voluntary or involuntary adjustment of the risks inherent in water rights to modify (but not eliminate) historic water delivery patterns is a limitation inherent in a water right title and thus constitutional under the restrictive test of Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).
57. For a creative application of this argument to wetland regulation, see Fred P. Bosselman, Limitations Inherent in the Title to Wetlands At Common Law, 15 STAN. ENVTL. L. J. 247 (1996).
58. See Richard A. Epstein, A Clear View of The Cathedral: The Dominance of Property Rules, 106 YALE L. J. 2091, 2096-97 (1996).
59. For example, at a time when the public use doctrine limited the exercise of the power of eminent domain to property which would be used by the public, the Supreme Court upheld a Utah statute which allowed appropriators of water to condemn ditch rights of way across private lands because of "some peculiar condition of the soil or climate, or other peculiarity of the state . . . ." Clark v. Nash, 198 U.S. 361, 368 (1905).
60. The California Supreme Court has recently sanctioned a new risk-based law of flood control liability. See Bunch v. Coachella Valley Water Dist., 63 Cal.Rptr.2d 89 (1997). The court held that a public entity that constructs flood control works that divert water from a natural watercourse, which has historically flooded adjacent lands, is only liable when the flood control works fail in a major rain event if the public entity acted unreasonably in designing, constructing, and operating the project. "[T]he only way to determine whether a damaged [private] landowner has . . . been forced to contribute a compensable 'disproportionate' share of the public undertaking is to determine whether the system, as designed, constructed, operated, [and maintained], exposed him to an 'unreasonable' risk of harm, either individually or in relation to other landowners." Id. at 100-01.
61. This analysis echoes and recasts the Progressive Era concern that the monopolizatlon of water rights would prevent the more widespread distribution of access to water to the detriment society's interest in the conservation of resources. For example. Samuel Wiel floated the idea that unreasonable assertions of priority would not be recognized. See SAMUEL WIEL, WATER RIGHTS IN THE WESTERN STATES 329-340 (3d ed. 1911).
62. The United States Department of Interior's "No Surprises" policy shifts the major risk of unanticipated conservation measures necessary to maintain the integrity of habitat conservation plans from the developer to the government. This is an example of defining the core entitlement-developer ability to adapt to changed conditions and implementing a mutually advantageous risk sharing arrangement. See Fred Bosselman, The Statutory and Constitutional Mandate for a No Surprises Policy, 24 ECOLOGY L.Q. 707 (1997).
63. Senior rights holders always bear the risk that priorities will not be enforced as decreed. The classic prior appropriation risk allocation scheme is illustrated by Application of Hines Highlands Partnership, 929 P.2d 718, 723 (Colo. 1996). There, public interest intervenors sought to require a water judge to impose a public interest limitation on a ski resort's conditional water rights because the future exercise of these rights would diminish the amount of water available to support senior public instream flow rights. Id. at 722. The court rejected this argument based on the presumption that the state engineer will discharge his or her duties and enforce the priorities. Id. at 725-26. Thus, "a public interest objection is not a valid objection to a decree for new conditional water rights because such an argument conflicts with the doctrine of prior appropriation." Id. at 725.
64. This characterization borrows from two intellectual constructs. Modern law and economics theory distinguishes between entitlements protected by property rules (injunctive relief) and those protected by only liability rules (damages). The seminal article is Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral 85 HARV. L. REV. 1089 (1972).
65. Public utility law distinguishes between firm and interruptible service. In general, property rules are recognized when a proposed allocation is presumed efficient and the transaction costs of a reallocation are low; damages are preferred when transaction costs are high. See RICHARD POSNER, ECONOMIC ANALYSIS OF LAW § 3.9 (4th ed. 1992). This analysis makes the crucial assumptions that a property owner's expectations remain constant over time and that we must protect the right in a consistent manner. It also pays insufficient attention to the possibility of mutual dynamic mitigation.
66. In fact, more generally, all or nothing legal solutions are breaking down throughout the law and we can devise solutions that take advantage of the positive benefits of both property and liability rules. Property rules enable parties to create stable future resource use regimes, see Carol M. Rose, The Shadow of the Cathedral 106 Yale L. J. 2175, 2193-2197 (1996), but liability rules can provide efficiency gains that property rules sometimes block.