In a long-awaited decision today, the Arizona Supreme Court resolved an issue that the State of Arizona has been litigating for nearly 10 years: whether the State of Arizona has federal reserved water rights on state trust lands. In a unanimous decision, the Arizona Supreme Court, en banc, held that the State of Arizona does not possess a federal reserved water right for state trust land. See In Re General Adjudication, Case No. WC-11-0001-IR (September 12, 2012). The full opinion can be found here. The effect of this decision is that the State will have to rely on state law-based water rights for state trust lands.
In 2002, the State of Arizona, on behalf of the Arizona State Land Department, filed a motion for summary judgment in the pending general stream adjudication for the Little Colorado River asserting implied federal reserved water rights for all state trust land. The State filed a similar motion in the pending general stream adjudication for the Gila River in 2004. General stream adjudications are judicial proceedings to determine the extent and priority of surface water rights in entire river systems. Claimants in the adjudications make water rights claims based on the state law of prior appropriation or based on federal law. Under the state law of prior appropriation, the first to divert and use water has a priority and a right to continue to use water against subsequent water users, and state law-based water rights can be lost to non-use. In contrast to state law-based rights, federal water rights have a priority as of the date the federal reservation is established and cannot be lost through non-use. Priority dates are critical to water users in Arizona because rivers are over-allocated and there is simply not enough water to satisfy the demand.
In seeking federal reserved water rights for state trust lands, the State claimed that the United States Congress implied federal reserved water rights for state trust lands in the Arizona-New Mexico Enabling Act of 1910 and the various territorial land grants that designated approximately 10 million acres in Arizona as state trust lands. The State’s claims for federal reserved water rights are based on the language in the land grants and the Enabling Act and the restrictions placed on the use of the trust lands. The State’s claim of federal reserved water rights in the Gila and Little Colorado River systems total nearly 8 million acre-feet of water, which exceeds the total quantity of water used in Arizona each year. Many respondents opposed the motions, including municipalities, tribes, corporations and irrigation districts.
In 2005, the superior court referred the matter to a special master to make a recommendation to the court. Over the next several years, the special master oversaw discovery, took evidence and heard oral argument on the motions. In September 2007, the special master wrote a detailed report and recommendation, which found that the State did not have federal reserved water rights for state trust lands. The special master found that implied reserved water rights do not exist for the state trust lands because the lands were neither withdrawn from the public domain nor reserved for a federal purpose, as required by the reservation of water rights doctrine. In 2010, the superior court approved and adopted the special master’s report, with a slight modification, confirming that the State does not have a federal reserved water right for state trust lands. The State appealed the superior court’s ruling.
In today’s decision, the Arizona Supreme Court affirmed the judgment of the superior court. The Supreme Court found that Congress did not withdraw the state trust lands from the public domain or reserve them for a federal purpose. The Supreme Court held that the state trust lands were not withdrawn from the public domain due in part to the process by which the State acquired title to those lands; the land grants occurred before the parcels were identified and selected for trust protection. The Supreme Court also held that the purposes of the state trust lands were to support state and not federal interests. Thus, the lands could not be reserved for a federal purpose.
Even if the state trust lands had been withdrawn and reserved for a federal purpose, the Supreme Court held that there is no evidence that Congress intended to reserve water rights for the state trust lands. Rejecting the State’s argument that Congress intended to reserve water rights because of the aridity of the region and the need for water to make the land productive, the Supreme Court explained that Congress intended to ensure that “the region’s scarce water supply was obtainable by settlers rather than reserved” to allow the New Mexico Territory to increase in population and achieve statehood.
This decision resolves a key issue in the general stream adjudications. While the adjudication courts will continue to determine the extent and priority of other surface water rights in the Gila River and Little Colorado River systems, this decision will provide certainty in the adjudications with regard to the determination of water rights for state trust lands.