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Greg Hill of Furnas County v. State

Supreme Court of Nebraska

March 10, 2017

Greg Hill of Furnas County et al., appellants,
v.
State of Nebraska and Nebraska Department of Natural Resources, a state agency, appellees.

         1. Motions to Dismiss: Appeal and Error. A district court's grant of a motion to dismiss is reviewed de novo.

         2. Motions to Dismiss: Pleadings: Appeal and Error. When reviewing an order dismissing a complaint, the appellate court accepts as true all facts which are well pled and the proper and reasonable inferences of law and fact which may be drawn therefrom, but not the plaintiff's conclusion.

         3. Property. A takings analysis begins with an examination of the nature of the owner's property interest.

         4. Property: Title: Statutes. No compensation is owed in a takings claim if the State's affirmative decree simply makes explicit what already inheres in the title itself, in the restrictions that background principles of the State's law of property and nuisance already place upon land ownership.

         5. Irrigation. Rights of irrigation in Nebraska exist only as they have been created and defined by the law and are therefore limited in their scope by the language of their creation.

         6. Irrigation Districts: Waters. The adjudication of a water right gives to an irrigation district and its predecessors in interest a vested right to the use of the waters appropriated, subject to the law at the time the vested interest was acquired and such reasonable regulations subsequently adopted by virtue of the police power of the state.

         7. Waters: Irrigation. The law gives to every citizen of the state the right to appropriate for beneficial purposes the unappropriated public waters of the state, and it protects him or her in the enjoyment of this appropriation after his or her right is once vested. An appropriator takes this right, however, subject to the rights of all prior and [296 Neb. 11] subsequent appropriators, and he or she cannot infringe upon their rights and privileges.

         8. States: Federal Acts. A compact, having received Congress' blessing, counts as federal law.

         9. Agriculture: Crops: Irrigation. The inability to withdraw enough water to grow a crop does not amount to being deprived of all economic use of the land.

         10. Administrative Law: Waters: Natural Resources Districts. Nebraska has two separate systems for the distribution of its water resources: One allocates surface water, and the other allocates ground water. The Department of Natural Resources regulates surface water appropriators, see Neb. Rev. Stat. § 61-201 et seq. (Reissue 2009 & Cum. Supp. 2016), and ground water users are statutorily regulated by the natural resources districts through the Nebraska Ground Water Management and Protection Act, see Neb. Rev. Stat. § 46-701 et seq. (Reissue 2009 & Cum. Supp. 2016).

         11. Administrative Law: Waters: Jurisdiction. Neb. Rev. Stat. § 46-715 (Cum. Supp. 2016) limits the Department of Natural Resources' jurisdiction to surface water.

         Appeals from the District Court for Furnas County: James E. Doyle IV, Judge. Affirmed.

          David A. Domina, of Domina Law Group, P.C., L.L.O., for appellants.

          Douglas J. Peterson, Attorney General, Justin D. Lavene, Emily K. Rose, and Kathleen A. Miller for appellees.

          Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy, Kelch, and Funke, JJ.

          Heavican, C.J.

         I. INTRODUCTION

         In 2013 and 2014, the Nebraska Department of Natural Resources (DNR) issued orders and sent closing notices to holders of surface water permits for natural flow and storage in the Republican River Basin (Basin). Appropriators Greg Hill, Brent Coffey, James Uerling, and Warren Schaffert, representing themselves and a class of farmers who irrigate with water delivered by the Frenchman-Cambridge Irrigation District [296 Neb. 12] (FCID), subject to Nebraska's allocation of water under the Republican River Compact (Compact), filed suit, alleging two regulatory takings claims against the State of Nebraska and the DNR.

         The district court consolidated the claims for the 2013 and 2014 crops, dismissed both claims, and denied the appropria-tors' requests for leave to amend. The appropriators appeal. We affirm.

         We find that the Compact, as federal law, supersedes the appropriators' property interests. We further find that the DNR does not have a duty to regulate ground water; thus, a failure by the DNR to regulate ground water pumping that affects the Basin does not give rise to a cause of action for inverse condemnation.

         II. BACKGROUND

         Under the Nebraska Ground Water Management and Protection Act, the DNR is required to conduct an annual forecast to determine whether the State's projected water supply from the Basin and projected consumption is sufficient to comply with the Compact.[1] The DNR conducted such a forecast on January 1, 2013, and again on lanuary 1, 2014. The DNR's forecasts for both years indicated that the State's consumption would exceed its allocation under the Compact. Therefore, in each of those years, the DNR issued an order referred to as a "Compact Call" in the Basin and issued closing notices on all natural flow and storage permits.

         The FCID owns water rights for surface water natural flow within the Basin for irrigation purposes. The appropriators allege that as a result of the DNR's orders to close the natural waterflow and preclude the release of storage water, " 'the entirety of FCID's surface water appropriation bypassed [the appropriators] and was diverted for the public use of satisfying Nebraska's obligation to the state of Kansas under the Compact.'"

         [296 Neb. 13] The appropriators brought these actions on behalf of themselves and a class of water users consisting of "[a]ll FCID water users in 2013 [and 2014] who did not receive their full water allocation supply due to the acts, omissions, and takings of [the State and the DNR] and who suffered damages due to diminished or eliminated crop production yields of growing crops." In their complaints, the appropriators alleged that each holds prior appropriation rights to surface water and that in each crop year, there was available surface water within Nebraska's allocated share of the Basin's waters which was not needed to meet Nebraska's obligations under the Compact. The appropriators further alleged that the available water was taken from the appropriators and given to Kansas, in excess of the requirements of the Compact, and constituted inverse condemnation of their water rights.

         1. Basin "Interstate Compact"

         Nebraska, the states of Kansas and Colorado, and the United States of America are parties to the Compact. The FCID and all class members own surface water appropriations allowing diversion of surface water from the Basin for beneficial use. The Basin has been the subject of the Compact since 1943.

         In Kansas v. Nebraska, [2] the U.S. Supreme Court described the river:

The Republican River originates in Colorado; crosses the northwestern corner of Kansas into Nebraska; flows through much of southwestern Nebraska; and finally cuts back into northern Kansas. Along with its many tributaries, the river drains a 24, 900-square-mile watershed, called the Republican River Basin.

         The U.S. Supreme Court described the Compact as

apportion[ing] among the three States the "virgin water supply originating in" . . . the . . . Basin. . . . "Virgin [296 Neb. 14] water supply, " as used in the Compact, means "the water supply within the Basin, " in both the River and its tributaries, "undepleted by the activities of man." Compact Art. II. The Compact gives each State a set share of that supply-roughly, 49% to Nebraska, 40% to Kansas, and 11% to Colorado-for any "beneficial consumptive use." Id., Art. IV; see Art. II (defining that term to mean "that use by which the water supply of the Basin is consumed through the activities of man"). In addition, the Compact charges the chief water official of each State with responsibility to jointly administer the agreement. See id., Art. IX. Pursuant to that provision, the States created the Republican River Compact Administration (RRCA). The RRCA's chief task is to calculate the Basin's annual virgin water supply by measuring stream flow throughout the area, and to determine (retrospectively) whether each State's use of that water has stayed within its allocation.[3]

         In 2002, the Compact was modified before the U.S. Supreme Court via a "Final Settlement Stipulation" (FSS) approved by the Court.[4] Under the FSS, the parties agreed to use the Compact's administration accounting procedures and the ground water model to determine Nebraska's compliance with the Compact. Based on those accounting procedures, Nebraska must use 5-year averaging in normal allocation years and 2-year averaging during "water short" years. Nebraska is obligated by the Compact to limit its consumption of the Basin's waters to its annual allotment.

         After the FSS was adopted, the Nebraska Legislature enacted the Nebraska Ground Water Management and Protection Act (hereinafter Act).[5] Under the Act, the DNR and the Basin's three natural resources districts "shall jointly develop an [296 Neb. 15] integrated management plan."[6] And, "[i]n developing an integrated management plan, the effects of existing and potential new water uses on existing surface water appropriators and ground water users shall be considered."[7] The Act also requires that the "ground water and surface water controls proposed for adoption in the integrated management plan . . . (b) be sufficient to ensure that the state will remain in compliance with applicable state and federal laws and with any applicable interstate water compact or decree . . . ."[8]

         The Act further requires that under the monitoring plans imposed by the Act, the DNR must consult with the natural resources districts to ensure compliance with the Compact. In addition, the DNR shall

forecast on an annual basis the maximum amount of water that may be available from streamflow for beneficial use in the short term and long term in order to comply with the requirement of subdivision (4)(b) of this section [the Compact]. This forecast shall be made by January 1, 2008, and each January 1 thereafter.[9]

         2. Relevant Sections of Nebraska Constitution

         The appropriators rely on the following sections of the Nebraska Constitution.

         Neb. Const, art. I, § 21: "The property of no person shall be taken or damaged for public use without just compensation therefor."

         Neb. Const, art. XV, § 4: "The necessity of water for domestic use and for irrigation purposes in the State of Nebraska is hereby declared to be a natural want."

         [296 Neb. 16] Neb. Const, art. XV, § 5: "The use of the water of every natural stream within the State of Nebraska is hereby dedicated to the people of the state for beneficial purposes, subject to the provisions of the following section."

         Neb. Const, art. XV, § 6:

The right to divert unappropriated waters of every natural stream for beneficial use shall never be denied except when such denial is demanded by the public interest. Priority of appropriation shall give the better right as between those using the water for the same purpose, but when the waters of any natural stream are not sufficient for the use of all those desiring to use the same, those using the water for domestic purposes shall have preference over those claiming it for any other purpose, and those using the water for agricultural purposes shall have the preference over those using the same for manufacturing purposes. Provided, no inferior right to the use of the waters of this state shall be acquired by a superior right without just compensation therefor to the inferior user.

         3. Procedural Background

         (a) District Court Actions

         The appropriators filed their initial action with respect to the 2013 crop year in July 2014. The operative complaint as to that crop year was filed on April 10, 2015. On October 30, 2015, the appropriators filed a complaint with respect to the 2014 crop year.

         Other than the crop years at issue, for our purposes, both complaints were identical and alleged that (1) water was taken from the appropriators which was within Nebraska's allocation under the Compact, subject to capture in the Basin's streams, not required or used for compliance with the Compact, and not taken for consumptive beneficial use for any superior or prior legal use and (2) water was taken from the appropriators as a result of the DNR's failure to curtail excessive ground water [296 Neb. 17] pumping which has depleted the Basin's streams by preventing water from reaching them. The appropriators claimed they suffered a loss of crop production as a result of the DNR's actions and omissions.

         On April 30, 2015, the State and the DNR filed a motion to dismiss the appropriators' amended complaint regarding the 2013 crop year. On September 28, the court entered an order denying in part and in part sustaining the State and the DNR's motion to dismiss. On October 28, the State and the DNR filed a motion for clarification and/or a motion for reconsideration and a motion to extend the time to answer.

         (b) May 19, 2016, Order of Dismissal

         A hearing on various outstanding motions was held January 14, 2016. On May 19, the district court issued its consolidated order. As relevant, that order first vacated that portion of its September 28, 2015, order denying the State and the DNR's motion to dismiss, then granted the State and the DNR's motions to dismiss both of the appropriators' causes of action.

         III. ASSIGNMENTS OF ERROR

         The appropriators assign, restated and consolidated, that the trial court erred in holding that (1) the DNR's streamflow administration under the Compact was not a taking and that thus, the regulatory action did not interfere with a legitimate property interest under Neb. Const, art. I, § 21, and ...


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