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5 LEGAL AND INSTITUTIONAL ASPECTS OF DROUGHT MANAGEMENT Edward W. Clyde Attorney Clyde and Pratt Salt Lake City, Utah When water is available at the right place and in ample quantities, almost any system of law will work. When water is not available, no system of law can provide ite However, an efficient system of water law can facilitate optimum use even during a drought. Because the amount of water made available by nature is erratic, cities and municipal-type districts almost everywhere are confronted with periods of drought. In order to provide for adequate water during drought periods, the municipality would need to develop a water-supply system that would be in excess of its needs during normal times and substantially in excess of its needs during wet cycles. If this is not done, then during drought conditions there is inadequate water. The only available alternatives are to develop or secure additional water on a temporary or permanent basis, or to ration the use of the available water. The people on the system cannot be left to sort out the problem. Those on the lower end of the system can drain the water away from those in the higher parts of the system, leaving the latter totally without water. If there is an overdraft on the entire system, pressures drop, and the area is left without fire protection. Rationing can maintain pressures and assure that the limited water is available for the critical uses. Lawn watering, which in the West is the biggest use of water, and other nonessential uses can be either limited or totally prohibited. Streams everywhere in the West reach their flood stage in the early spring before the heavy use period arrives in the cities. The spring runoff normally occurs in May. The peak use develops in the hot days of July and August, by which time the streamflows have receded. -78-

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-79- Thus, heaviest use is at a time when streams are low. Then on a daily basis there are periods of peak use. These start about 4:00 p.m. and end by about 11:00 p.m. There is little use of water between 11:00 p.m. and 6:00 a.m. Direct flow water will thus waste unless there is On long weekends much of the population leaves at aborts the same storage. _ the city. The people all return ~ time. Their lawns are dry, they need to wash their cars and take baths, and so on, and abnormal demands are placed on the system. SYSTEM NEEDS In the semiarid West a city needs a substantial amount of surface storage where winter water and the flood waters that are available can be stored. This storage capacity needs to be adequate not only to take care of heavy use during the hot summer months, but also--this is desirable, if not necessary--to provide enough storage capacity to permit water to be stored and carried over two or three years. With carry-over storage, the water accruing during wet cycles can be carried over to provide some water during dry cycles. The system also needs an aqueduct from the storage reservoir to the area of use with capacity to supply large quantities of water during periods of peak summer use. Generally, it is also necessary for a city to provide a water treatment facility with capacity equal to the capacity of its aqueduct. Then to make it possible to operate these facilities 24 hours a day during periods of peak use, the city needs storage for treated water so that water can be stored when use decreases. The system also needs strategically located distributional (overnight) storage reservoirs that can be filled during the period after 10:00 p.m. to help meet the heavy demands that will develop the following day. For example, in one large district in Salt Lake County, the daily needs in January of the 450,000 people served by the district can be met with a flow of approximately 30 cubic feet per second (cfs). During periods of peak use in August the same district needs to provide a flow of 260 cfs. In all of Salt Lake County we are endeavoring to develop facilities and water supplies adequate to provide peak daily flows of approximately 1,200 cfs. A good well in Salt Lake

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-80- Valley will produce from 3 to 5 cfs and while these wells help in a variety of ways, the facilities described--a large reservoir, a large aqueduct, a large treatment plant, treated water storage, and distributional storage--are needed. The objective of rationing is twofold; first, to cut the total amount of water being consumed; and, second, to spread out the use so that the peak demands are not so high. The power of cities and municipal-type districts to impose rationing is generally established by statute and court decision. ORGANIZATIONS THAT SUPPLY WATER There are various types of organizations that supply water. These include cities and towns, municipal-type . . water c istricts, privately regulated water utilities, and unregulated mutual water companies, which furnish water only to their stockholders. . . The source and extent ot the power these organizations may exercise over one water may differ. Cities and towns have some governmental powers and by ordinance may within their legal authority enact regulations that have the force of law. In Utah, for example, the state legislature has provided: 10-7-12. Scarcity of water--Limitation on use. In the event of scarcity of water the mayor of any city or the president of the board of trustees of any town may, by proclamation, limit the use of water for any purpose other than domestic purposes to such extent as may be required for the public good in the judgment of the board of commissioners or city council of any city or the board of trustees of any town. Water districts are creatures of statute with limited governmental powers. In Utah there are four types of water districts, each operating under different statutory authority. These include water conservancy districts created under the authority of Title 73, Chapter 9; metropolitan water districts, created under Title 73, Chapter 8; local improvement districts, created under Title 17, Chapter 6; and county service areas created under Title 17, Chapter 29. Generally, these statutes do not provide express power to ration

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-81- water but do contain general grants of power authorizing the districts to acquire water systems and adopt rules and regulations for the use of water. These statutes would generally be broad enough to permit rationing. For example, on conservancy districts, S73-9-28, U.C.A. 1953, as amended, provides that the water conservancy district board shall have the power to make and enforce rules and regulations concerning "management, control, delivery, use and distribution of water." S73-8-21 grants to metropolitan water district boards the power to construct and control the waterworks systems necessary for the full exercise of its power, and empowers such districts to enact ordinances, resolutions, and orders necessary for the management and control of the district's affairs. Improvement districts are authorized by S17-6-3.4 to do all things necessary in the conduct of their affairs and the operations of their properties. Public utilities would have no governmental power. A utility's right to ration water would have to be provided for in its articles of incorporation and/or its rules and regulations, all of which would be approved and regulated by the public service commission. Mutual water companies are private water companies that furnish water only to their stockholders, and their power would be reflected in the articles of incorporation and by-laws of each company. CONTRACT PROTECTIONS It is also possible when the customer applies for water to have the customer ~ , enter into an agreement with the entity furnishing water to the effect that the customer will abide by the lawful rules and regulations of the city or municipal-type water district or utility. The contract can provide remedies, including the contractual right to ration in the event of shortage. The right of an individual to receive water from a public system on a nondiscriminatory basis does exist. However, every user can be required to sign an application for water service, and the essential elements of a program to adjust to drought conditions can be made a part of that contract. The entity furnishing water can adopt rules and regulations and the user can be required contractually to agree to abide thereby. Remedies for noncompliance can include an

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-82- injunction, the right to shut off the water for noncompliance, and this, coupled with a turn-on fee high enough to encourage general compliance, can be imposed. The agreement can provide for attorney fees and court costs for collection or enforcement. I have created and during the early years of their existence have represented numerous water ~ ~ ~ districts, mutual water companies, and public-utility~type water companies--none of which have governmental powers. ~ . . ~ ~ These appl~cation-type contracts have been widely and successfully used by the various types of water organizations that I have represented over the past 40 years or so. POWER TO REGULATE A number of Utah cases have dealt with the powers of these entities to regulate the use of water. For example, in Interwest Corporation v. Public Service Commission, 29 Utah 2d 380, 510 P.2d 919 (1973), a developer had sold building lots in a relatively large development that was served by a public utility created and owned by the developer. With each building lot sale a commitment had been made for water. When all of the lots were developed, the total supply of the utility would have been committed. However, initially many of the lots were vacant. A customer on the system wanted to increase substantially the density of condominium housing units to be constructed on land that he had purchased. The utility denied the extra water. The Utah Supreme Court held that the utility had to supply the water on a first-come, first-served basis. A .c:imi I or r~::~1 t" wn.~ reached in North Salt Lake v. St. Joseph Irrigation and Water Co., 118 Utah 600, 223 P.2d 577 (1950). In McMullin v. Public Service Commission of Utah, 7 Utah 2d 157, 320 P.2d 1107 (19583, the court held that a public service water company was not required to furnish service to property owners not reasonably within its service area, particularly where the extension of service would impair the water supply of those already connected to the system. A similar result was reached in Rose v. Plymouth Town, 110 Utah 358, 173 P.2d 285 1946-) . One of the more comprehensive discus signs on the power of a munic ipal-type district to ration water is . . . .

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-83- presented in Swanson v. Marin Municipal Water District, 56 Cal. Appl. 3rd. 512, 128 Cal. Rptr. 485 Cal. Ct. App. 1976~. There a municipal water district had by ordinance amended its rules and regulations to provide that no new water service would be granted or installed except under certain limited circumstances. The ordinance was based upon an objective finding that a threatened water shortage existed and that the ordinary demands and requirements of the water customers could not be satisfied. The new ordinance prohibited the granting of new water service where pipeline extensions would be required, but allowed new service to any person who had an existing water main fronting his property and who had applied for water service within 120 days after the enactment of the ordinance. The trial court concluded that the district was without statutory authority to prohibit water connections or extensions to inhabitants of the water district, merely because of a dry cycle. The appellate court held otherwise, and in so holding said: a water district is empowered to anticipate a future water shortage and to impose appropriate regulations and restrictions where, lacking such control, its water supply will become depleted and it will be unable to meet the needs of its consumers. The court held that the district could impose a moratorium and was authorized to impose restrictions upon the use of the district's water in any emergency caused by a threatened or existing water shortage. The court held that the district could prohibit the use of water for specific uses that it found to be nonessential and could also deny applications for new service while the shortage continued. Sabine Offshore Service, Inc. v. The City of Port Arthur, 595 S.W.2d 840 (Texas 1979) corrected on denial of rehearing (1980). involved a water user seeking to force city officials to vacate their water rationing plan. The water rationing plan permitted Sabine, the largest user of water in the area, to use water on alternate days only. Procedure problems and the adoption of a new water rationing plan resulted in the case being remanded to the trial court for a new trial. The curtailment program must be nondiscriminatory and cannot be arbitrary or capricious. Also, there must be

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-84- a statutory "underpinnings" granting the power to curtail use. As noted, cities and towns have limited law-making power. Water districts, although generally creatures of statute, have limited governmental powers. Then, as noted, private water companies and mutual water companies have essentially no governmental powers, but they can adopt nondiscriminatory rules, regulations, and rates for the use of water. Where there is the necessary statutory authority, or contractual arrangements, rationing on a nondiscriminatory basis may be imposed. Rationing may include a refusal to make new connections and may also include rationing to existing customers. THE NEED FOR MANAGEMENT OF DROUGHT CONDITIONS The problem of drought in the United States was addressed by J. L. Sax, Water Law-Planning and Policy (1968 Bobbs-Merrill Co. New York, New York), starting on page 22. He notes that the problem is not so much a problem of shortage as it is a problem of mismanagement. . . . This was dramatically emphasized by the Northeast water crisis during the summer of 1965. Drinking water was not served in New York City restaurants while millions of gallons were lost each week in leaky pipes, water ran through air conditioning units (without recycling) into sewers, the cost of wasted water through apartment faucets was zero because of unmetered deliveries at a flat rate, and the Hudson, a mighty river, ran by the city unusable because of pollution. In Water and Water Rights (R. E. Clark, ea., Allen Smith Co., Indianapolis, Indiana, 1967), volume 7, page 184, the author, Clifton Davis, also makes reference to the City of New York. He cites People on Complaint of Begley v. Morgan, 102 N.Y.S.2d 267 (1951) and states: In another New York City case, defendant was convicted of violation of a municipal law prohibiting willful or malicious waste of water on testimony by a city investigator that on two occasions while he was on defendant's premises, he saw water pouring from a hose into a trench and then down a drain for periods of approximately

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-85- fifteen minutes each. Defendant was sentenced to fifteen days or a fine of $15. Metering, so that the customer is charged proportionately to the quantity used, provides a direct economic incentive to conservation, and it, rather than criminal sanctions, is probably the most effective and most widely used method of controlling waste. In an article written before the drought of the mid-sixties ["New York Drowns Another Valley," Harpers Magazine, p. 76, Aug. 1963] Noel Perrin discusses New York City's perennial water shortage and the political problems involved in efforts to introduce universal metering. The reasons behind the city's reluctance to meter are identified as primarily political rather than economic, but Perrin concludes that New York's solution still lies in metering as a method of regulating water usage. Another method of restricting customer usage is suggested by the Missouri holding [Filger v. Public , 346 S.W.2d 567, (Mo. App. 1961) ~ pplier can limit the size of the pipe that is used to tap the supply. . . . Included in Appendix B is a rationing program actually adopted and put into operation by the Salt Lake County Water Conservancy District, which is a well-managed organization in Salt Lake County, Utah, furnishing water to 450,000 people. Drought conditions currently exist generally in the Northern Great Plains and in the Northeast. Crop losses in one Wisconsin County alone are put at $23 million. Mandatory conservation is in effect in New York City, 218 northern New Jersey communities, and 25 communities in eastern Massachusetts. New York requires that temperatures go above 78F before air-conditioning can be used, and buildings cooled with city water can be fined up to $500 for violation. There are also fines for leaks, washing cars and streets, watering lawns, turning on fountains using public water, illegal use of fire hydrants, and filling of private swimming pools. New Jersey imposed a limit of 50 gallons per capita per day for residential users and coupled this with an outright ban on lawn watering, hosing streets, and noncommercial car washing. Another tool that has been constructively used to reduce the quantity of water consumed is pricing. If

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-86- the system can provide 6,000 gallons of water per home per month, and thus meet the basic needs, any use above the 6,000 gallons can be discouraged by a reasonable surcharge. I had a situation where a coal mining company (with its own company town) rented employee housing and included water at no extra charge. The company developed some wells, acquired rights in an adjacent stream, constructed a small reservoir and a treatment plant, and so on. This system was not providing enough water for the town during years that were dryer than normal. The next source of available water involved a 1,800-foot pump lift and a fairly expensive reservoir and pipeline. I was retained to acquire the water rights in the adjacent stream and to file applications so that the water so acquired could be removed from that drainage area where it had been used for irrigation and permit its use for municipal and industrial purposes in the adjoining watershed. When I learned that the homes were all unmetered and water was free, I made the suggestion that instead of building the expensive reservoir, pipelines, and so on, they put individual meters on every home and price the water so that the basic water needs would be met at a relatively low monthly cost, but with a surcharge imposed for use above this basic minimum. That recommendation was followed, and it has never been necessary to build the reservoir and the rest to take water from the adjacent stream. The ability to measure and charge for the water used, coupled with a price structure that discouraged unneeded use, solved the problem. Now even in dry years the original system fully meets the needs. (See Sax's Water Law Planning and Policy, page 157, noting such a surcharge. See also The Water Work. RnArd O f the n.i to of Birmingham v. Barnes, 448 So.2d 296 (Alabama 1983), rehem den. (1984) where the court Permitted the Citv water worms Board to maintain a three-zone rate schedule.) In Stepping Stones Associates v. The City of White Plains, 100 A.D.2d 619, 473 N.Y.S.2d 578 (N.Y. App. Div. 1984), the court permitted a municipality to set its own rates, which rates varied with usage. In City of Fayetteville v. Fayette County, 171 Ga. App. 13, 318 S.E.2d 757 (Ga. App. 1984) the court noted that "tt~he establishment of water rates by a municipality is a legislative or governmental power." Id. at 758. The power of a city to prescribe its own rates, rules, and regulations, is not without limit. It must be

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-87- nondiscriminatory and reasonable. (See Banberry Development Corporation v. South Jordan City, 631 P.2d 899 (Utah 1981~; Lafferty v. Pays on City, 642 P.2d. 376 tUtah lynx): and Home owners Loan corporation v. Logan Citv. et. al. 97 Utah 235. 92 P.2d 346 (1939)). AS noted above, If a city has adequate water to meet its needs during a drought, the water rights it owns will almost assuredly provide a surplus during normal and wet years. I have by contract worked out arrangements that solved the problem during dry periods without creating these surpluses in normal or wet years. In one instance I negotiated with farmers the right to take their water for a single season, or a part of a season, to meet urgent needs of a city during a drought. The city paid $25,000 for the privilege of taking the water whenever it wanted, but whenever it takes the water it is required to replace to the farmer the hay that he normally would have grown had he used the water. This was agreed by contract to be 300 tons of hay per season. The city would notify him that it was going to take the water. It then had to replace, at city expense, the 300 tons of hay. The farmer saved the cost of harvesting, and this was a benefit; the city was required to make a further payment of $1,000 each year it took the water; and the hay fields (although dry) produced pasture. With this arrangement the city could take the water from farmlands and use it in the city's water system. Since the farmer in question had the first priority on the stream, the city was able to divert up to 5 cfs, which was enough to meet the city's needs. The arrangement has been in operation for about 25 years. The city has only called upon the water three times. During the other 22 years the farmer has been able to go on with his farming. If the city had acquired this water permanently, it would (during each of these 22 years) have had a surplus, and the city would have had to find a lease for the water. In another instance, a mutual irrigation company serving about 70 farms owned all the water of a stream. The farmers had no storage, and their canal system was inefficient. My client agreed to provide the money to build a storage reservoir and to line the canals. In return therefor it obtained the right to secure water to tide it over a dry cycle. Here the money advanced was utilized to improve the system. During normal years the farmers are much better served, and during a dry cycle

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-88- they are willing to take care of the municipal and industrial needs, up to an agreed level. Throughout the West the water that is dependably available and that can be appropriated at acceptable expense has long since been appropriated. There are areas where the extreme high water available in random years can be stored and carried over. For example, a project in Wyoming, which has 240,000 acre-feet of storage space, can provide a firm annual supply of only 62,000 acre-feet. This amount of water (62,000 acre-feet) is not available every year above existing rights, but water above 62,000 acre-feet is available with sufficient frequency in random years so that with 240,000 acre-feet of storage a reasonably firm supply of 62,000 acre-feet can be made available for annual use. New projects, using water that is available only in random years, are more likely to be developed as a part of a large, multipurpose, publicly financed project. The two main federal agencies that do this kind of construction are the Bureau of Reclamation and the Corps of Engineers. . - . . _ %. . When the Bureau of Reclamation builds a project, it is normally required to make a state water filing for that project by Section 8 of the National Reclamation Act of 1902 (see California v. United States, 98 S.Ct. 2985, 440 U.S. 59, 59 L.Ed.2d 144 (1978~. The Corps makes no filing, but frequently has a local sponsor who does. The application for a permit may itself make some initial allocation of the water, simply because the data required in completing the application form require it. The application will normally name the water source, the point of diversion, the location of the impounding dam, and place and purpose of use, and so on. When the state engineer approves the application, the right is like any other water right and takes its place in the state priority system. See In re Green River Adjudication v. United States, 17 Utah 2d 50, 404 P.2d 251 (1965~. When the works are completed and the water is placed to beneficial use. Proof of anDronriation is filed (showing certificated or aaJua~cacea ~ DUE one water allocation process only nominally takes place at this point. Generally, the project has a local sponsor, which receives the project water supply, in return for an agreement to repay the project costs. Then the local sponsor makes the ultimate allocation to the ultimate user. ' r r r ~ the details of actual use) and the right is _ ~ _ 1 ' ~ ' _ _ ~ _ ~ ~ . . ~ . ~ ~ -

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-89- WATER ALLOCATION AND CONJUNCTIVE USE It is customary in the process of allocating water from such projects to address the problems incident to water shortage. Frequently, municipal users are given preference. In any event, there is an opportunity in that allocation process to deal with adjustments for drought. , e _ ~ a A significant amount of "new'' water can also be "found" through better coordination of existing uses, which take maximum advantage of the short-lived high water flows. For example, in Salt Lake County there is an area that was dependent on a spring for its water needs. The area was historically agricultural and the high flows were applied to irrigation. The low flow was sufficient to provide domestic water for a small cluster of homes. As homes expanded into this area and irrigation was abandoned, the high flow (about 10 cfs) became a flood problem because there was no place to put it; the low flows of August were not adequate to fill the domestic needs of the increased number of homes in the area. The system was taken over by the Salt Lake County Water Conservancy District, which had a pipeline system large enough to take the maximum flows and put them to beneficial use. When the low flows developed, the district had other sources of water--primarily wells and surface storage--so that it could take care of the needs. The spring yields 2,000 acre-feet a year. As a part of a larger system, 2,000 acre-feet would take care of the annual needs of nearly 8,000 people. By itself, however, it could barely meet the needs of 53 homes, or about 200 people. In Salt Lake County there are three major suppliers of water. One is the Salt Lake County Water Conservancy District, which furnishes water on a wholesale basis to many cities, districts, and water companies. Its primary source of supply is wells. The other two suppliers are interrelated--one is Salt Lake City and the other is the Metropolitan Water District of Salt Lake City. The city holds the primary rights to the mountain streams and Metropolitan has a large amount of water in storage in Deer Creek Reservoir. By statute, it must make that storage water available to the city, but by contract it sells its surplus to the conservancy district. If each of these agencies were to use water strictly in accordance with their individual rights, there would be times in the year--e.g., the early spring

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-90- runoff--when Salt Lake City could not use all of the water accruing under the city's rights and flowing in the mountain streams. The unused portion would flow into Great Salt Lake unused. During this period the streams meet the city's total needs, the streams furnishing water to Deer Creek normally fill the reservoir, and it spills. If at the same time the conservancy district meets its total needs through the pumping of its wells, underground storage is depleted. By agreement Salt Lake City and the metropolitan district sell water to the county district. They provide aqueducts, treatment plants, and conveyance facilities so that the surplus water can be used. The price is about the cost of pumping the wells. They collectively use the direct flow from streams; then if the reservoir is full, they draw on it to a reasonable extent, and none of them pump wells. This permits the ground-water basin to recharge. The county district can sharply reduce its total use from the underground and thus also permit it to recharge. When they need it, all three entities pump their wells; but they do so usually from a fully recharged ground-water basin. A similar conjunctive use was approved in Hewitt v. Rincon Del Diablo Municipal Water District, 107 Cal. App. 3rd 78, 165 Cal. Rptr. 545 Cal. Ct. App. lYbO). In one sense, the large reclamation projects of the Bureau can firm up local supplies. The Provo River, which is a major source of water for the heavily populated Wasatch Front area, including Salt Lake City, might yield 1,500,000 acre-feet during a random wet year, 1,000,000 acre-feet during an average year, and only 500,000 acre-feet during a dry year. With Provo River storage, the use can dependably approach the average. However, to use all the Provo River water, a supplemental supply is needed. The Bonneville Unit of the Central Utah Project is developing that supply. That project will make 99,000 acre-feet of new water available from the random high flows of the Provo River for use in the Salt Lake-Provo areas, and because the project will also have large quantities of water in carry-over storage from the Colorado River, it can firm up the supply from the Provo River, if this is needed, so that cities can dependably rely on whatever water the river will yield. It is not planned to use the 99,000 acre-feet of new water every year. If we have a wet year and the local streams can meet the needs, they will be called upon to do so and the 99,000 acre-feet will

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-91- all be held in storage. A 320,000 acre-feet reservoir is being built for this purpose. It is backed up by more than 1,000,000 acre-feet of new storage on Colorado River tributaries. Then, in a dry year, 200,000 or 300,000 acre-feet may be withdrawn from storage. Developing 99,000 acre-feet of new water, with storage capacity to hold it over several years, has the effect of firming up the local streams so that the dependable new supply is more in the magnitude of 123,000 acre-feet, rather than the 99,000 acre-feet of new municipal and industrial water. To make the system function this way, however, we must have management of the local supplies. The advantages of this type of management are illustrated by the voluntary operation in Salt Lake County, Utah, described above. In 2 Kinney, Irrigation and Water Rights, (2d ea., 1912), the rule is stated as follows: S704. Appropriation for storage. Again, not only may a valid appropriation of the water from a natural stream be made for immediate use, but the water may be saved up and stored in times of plenty and thus saved for the ultimate purpose of using the same in times of scarcity for irrigation, or any other useful purpose. 5 Clark, Water and Water Rights (Robert E. Clark, ea., Allen Smith, Co., Indianapolis, Indiana, 1967) agrees (see S408:3~: The storage of water for future uses has long been held to be a beneficial use. Without storage, beneficial uses would be limited to short periods of runoff during the year, and on many western streams power could not be generated except at irregular intervals. In 1 Hutchins, Water Rights Law in the Nineteen Western States (W. A. Hutchins, U.S. Government Mass Publication No. 1206, 1971), it is stated: Recognition of reservoir storage as one of the chief features of water utilization appears in the water rights jurisprudence throughout the West. Storage is a means of conserving water, by capturing it when plentiful and holding it back for future use, as well as an implement in flood

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92 protection programs. Thus, with use of upstream reservoirs, spring floodflows may not only be prevented from inundating downstream lands, but may be stored and made available for late-season use when unregulated flows are low. And they may even be carried over from so-called "wet" years to mitigate the deficiencies of "dry" seasons. (See also J. R. Long, Irrigation S276 (W. H. Courtright, 2d ea., 1916), and 1 Well, Water Rights in the Western States TO Dare 410 (3d ed.). The court cases also support the propose talon that carry-over storage is a beneficial use. See Edwards v. City of Cheyenne, 19 Wyo. llO, 114 P.611 (1911~; VanTassel Real Estate & Live Stock Co. v. City of Cheyenne, 54 P.2d 906 (Wyo. 1936~; A-B Cattle Go. v. United States, 589 P.2d 57 ( Colt,. 1979) Friends of the Earth v. Armstrong. 485 F.2d 1 (lOth Cir. 1973~; East Side Canal ~ Irr. Co. v. United States, 76 F.Supp. 836 (Ct. C1. 339 U.S. 978 (1950~; city of-Frisco v. the Texas Water Rights Commission, 579 S.W.2d 66 (Text Civ. App. 1979), reh'g denied. PREFERENTIAL USE 1948), cert. den. The acquisition of water rights and the reservation of that water for future municipal growth is generally recognized in the law. For example, under S73-1-4, Utah Code Anna. 1953, as amended, the state legislature has provided for forfeiture where the water is appropriated and then not put to beneficial use. This section permits the state engineer to grant extensions of time, but requires the applicant to show good cause as to why he has not been using the water. It identifies financial crises, industrial depression, operation of legal proceedings, or unavoidable causes, and concludes by saying, "the holding of a water right without use by any municipality, metropolitan water districts or other public agencies to meet the reasonable future requirements of the public shall constitute reasonable cause for such nonuse." Texas law gives to cities a right to displace existing uses for subsequently arising municipal needs. This is an exception to the general rule in Texas that first in time is first in right (see Tex. Rev. Civ. Stat. Art. 74-72~54~. This section provides that allotments of

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-93- water for all purposes other than municipal or domestic use "shall be granted subject to the right of any city . . to make further appropriations of said water thereafter without the necessity of condemnation or paying therefor . . . ." We have found no Texas court cases construing the statutes and are not aware of any instance in which a Texas city has endeavored to invoke this statute. Prather v. Eisenmann, 261 N.W. 2nd 766 (Neb. 1978) interpreted Nebraska's preference statute with regard to the domestic use of ground water between private parties. The matter is addressed in Water and Water Rights volume 1, page 369, where the following observation is made: . In this context a preference is a beneficial use that receives a special, or higher, priority or value than some other beneficial use. Not all beneficial uses have equal value to the community. This is the rule even in the prior-appropriation states where first in time is ordinarily first in legal right. The concept of preference was recognized in the common law by separating "artificial" or extraordinary uses from "natural" or ordinary uses which were preferred because essential to human survival. Domestic uses were preferred to the extent of allowing a riparian owner to reduce or deplete a streamflow for his household uses despite injury to lower riparian owners. In the Southwest a preference exists through the pueblo right which preserves a superior municipal claim for human uses even though prior appropriators are injured by stream diversions. Modern law separates preferences into three general classes. First is a right or high priority that may be exercised irrespective of all other rights and in the exercise of which no compensation is paid. This is sometimes called a true preference. Secondly, there are preferred uses defined by statute that are enforced by condemnation; in these cases compensation must be paid for taking another's water right. A third type of preference is found in the administrative discretion granted to public officials to choose among different uses in granting applications for permits to use water. A hierarchy of preferences is often established by statute and the official

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-94- must decide between superior and inferior beneficial uses in granting or denying the application. These statutes are not uniform in ordering all of the preferences, but all of them prefer domestic uses over other uses. See also Jarvis v. State Land Dept., 106 Ariz. 506, 479 P.2d. 169 (1970), and statement in later case: "If it is to the State's interest to prefer mining over farming, then the Legislature is the appropriate body to designate when and under what circumstances such economic interest will prevail.'" States having preferential statutes include Colorado, California, Arizona, Oregon, South Dakota, Wyoming, Idaho, and Utah. INTERSTATE TRANSFERS A dispute is currently pending between the State of New Mexico and the City of E1 Paso, Texas, arising out of an effort by E1 Paso to appropriate large quantities of water from an underground basin in New Mexico. The United States Supreme Court in Sporhase et al. v. Nebraska, ex ref. Douglas, Attorney General, 458 U.S. 941, 73 L.Ed. 1254 (1982), had indicated that a carefully drawn statute protecting the interests of the state of origin in the event of water shortage might be permissible, and New Mexico, after losing in the trial court, attempted to draft such a statute. The trial court's opinion (City of E1 Paso v. Revnolds 563 F.Supp. 379 (D.N.M. 1983)), holding that New Mexico's embargo statute was unconstitutional, was appealed. The Tenth Circuit remanded the case to the trial court for "fresh consideration" in light of the amendments to the New Mexico statutes. The district court's decision held the New Mexico statute, which created a total ban on the interstate exportation of water, created an impermissible burden on interstate commerce. Subsequent to the entry of the district court's decision, New Mexico repealed New Mexico Statute Annotated S72-12-19 (1978) and enacted 72-12B-1, which established an application procedure requiring consideration of several factors by the state engineer when ruling on applications for the withdrawal and transportation of ground water from the state. The new statute (in contrast to the outright ban on interstate

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- 9s - transportation of water) provided that "under appropriate conditions" the interstate transportation and use of New Mexico's "public waters" are not in conflict with the public welfare of the state's citizens. In referring to "public waters," the statute is not limited to ground water but would also encompass surface water supplies. The statute requires any person or entity desiring to export water from New Mexico to apply for a permit from the state engineer to make the withdrawal. The state engineer is required to publish notice of the application. The statute stipulates that the state engineer, prior to granting the permit, must find that the withdrawal and transportation of water outside of the state will not impair existing rights. The state engineer must also find that the proposed export is neither contrary to the water conservancy policies of the state nor otherwise detrimental to the public welfare of New Mexico's citizens. In making his decision the state engineer shall consider the following factors: (1) The supply of water available to New Mexico; (2) water demands of New Mexico; (3) whether there are water shortages within New Mexico; (4) whether the water that is the subject of the application could feasibly be transported to alleviate water shortages in New Mexico (5) the supply and sources of water available to the applicant in the state where the applicant intends to use the water; and (6) the demands placed on the applicant's supply in the state where the applicant intends to use the water. The statute also provides that by filing an application to export New Mexico water, the applicant submits to New Mexico law governing and regulating the appropriation and use of water. The state engineer is empowered to condition the granting of any such export permit to ensure that water being exported will be used in accordance with the rules and regulations imposed on in-state users. While the remand was pending before the district court, the New Mexico legislature also enacted H.B. 12, which placed a two-year moratorium on all pending and future applications to appropriate ground water hydrologically connected to the Rio Grande River below Elephant Butte Reservoir. Judge Bratton issued an opinion on August 3, 1984, in Civil No. 81-730 (D.N.M.) addressing the constitutionality of the amended statute and the two-year moratorium. The opinion is reported at 597 F.Supp. 694 (1984~. The court held that S72-12B-1

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-96- was not facially unconstitutional when applied to regulate ground-water exports generally, but that it was unconstitutional when used to regulate the export of ground water for domestic use and when used to regulate the transfer of existing ground-water rights for use out of state. He also held the two-year moratorium under H.B. 12 to be facially unconstitutional. The critical portion of S73-12B-1 provides that the state engineer must find that the "use outside the state . . . is not contrary to the conservation of water within the state and is not otherwise detrimental to the public welfare of the citizens of New Mexico" before he can approve an application for the export of water. He must evaluate the six factors identified above in making his findings. The criteria stated above attempt to apply the conservation and public welfare considerations even-handedly at least as to new appropriations. Notwithstanding this, E1 Paso argued that the even-handedness is only superficial because these criteria are meaningless to in-state uses of ground water. New Mexico noted the case of Young ~ Norton v. Hinderlider, 15 N.M. 666, 110 P 1045 (1910) regarding the public interest or public welfare criterion and argued that the public interest criterion is not meaningless as applied to in-state uses. The court rejected this argument and in doing so held that the phrase "conservation of water within the state" referred to the waters to be conserved and did not prohibit exports. The court also rejected the argument that the second criterion directed at protecting the public welfare of New Mexico's citizens rendered that statute ~ ~ ~ ~ ~ unconstitutional. He noted that Sporhase (above) permits a limited preference for the state's own citizens. He held that the preference must be limited to situations in which exercise would not place unreasonable burdens on interstate commerce. also noted that the state could not prefer its own citizens merely to protect local economic interests. A state could, however, prefer its own citizens in times of shortage. The court also indicated that a state might regulate exports to protect against future shortages to a reasonable degree. The proximity in time of a projected shortage, its certainty, its projected severity, and the availability of alternative measures were all factors to be considered in determining the reasonableness of the regulation (see page 701 of the . . ~ opinions. r The court

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-97- E1 Paso also argued that the six factors to be applied to evaluating applications applied only to the export of water and were therefore facially discriminatory. Again, the court rejected this argument and ruled that the six factors (which relate to supply and demand in New Mexico and the importing state) provide information required by the state engineer to determine whether New Mexico can constitutionally prefer its own citizens. Although the six criteria did not make the section facially unconstitutional, the court held that the use of these criteria to regulate the export of ground water for domestic (municipal) use and to regulate the transfer of existing ground-water rights (but not when making an in-state transfer) is unconstitutional (Id. at 703-704~. The court noted that the state engineer is not permitted to consider the conservation or public welfare criteria when acting on applications to appropriate ground water for domestic in-state use, or when acting on in-state transfer applications. The court found no legitimate justification for the distinction in application and consequently held the use of the criteria unconstitutional. The court held the two-year moratorium H.~. 12 to be facially discriminatory. It applied only to two specific aquifers in which the City of E1 Paso has filed applications to export water. It concluded that the only purpose of the moratorium was to prevent E1 Paso from obtaining ground water in New Mexico and on that basis they imposed unfairly on interstate commerce. New Mexico argued that the statute did not violate the commerce clause because it regulated even-handedly and applied equally to in-state and export applications. The court ruled, however, that even-handedness would not validate an illegitimate purpose, which in this case was a complete blockage of the interstate movement of water. Further, even if the statute were not invalid per se, the court held it would fail because it had not been narrowly tailored to its stated purpose, which is a requirement of Sporhase. PUBLIC TRUST In National Audubon Society v. Superior Court of Alpine County, 33 Cal.3rd 419, 659 P.2d 709, 189 Cal. Rptr. 346 (Cal. 1983), modified on denial of rehearing,

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-98- the court held that the public trust doctrine must be considered in the allocation of water resources. CONCLUDING REMARKS The best way to adjust to drought conditions is to plan adequately in advance. Emphasis should be placed on using direct flow waters, which can only be used as nature makes them available. If they go unused, they flow downstream and beyond the reach of the system. These supplies should be used first. Surplus surface supplies should be placed in storage with sufficient capacity so that substantial quantities of water can be carried over from wet cycles to be used during dry cycles. Generally speaking, it is desirable to use surface storage and to conserve ground-water storage. Ground water is not subject to evaporation losses. In a large ground basin, wells can be drilled near the point of use, and there is generally a lag between shortages in a surface system caused by drought and the adverse impacts of the drought on ground water. That lag also reappears during periods of recharge. The management of water supplies is critical. If the normal supply available is not adequate during a drought period, then with a proper statutory unpinning, the authority can be granted to cities, districts, private water companies, and so on, to impose rationing and to conserve water.