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Silver v. Pueblo Del Sol Water Co. - 8/9/2018

The Arizona Supreme Court holds that the Arizona Department of Water Resources is not required to consider unquantified federal reserved water rights when it determines whether a development has an adequate 100-year water supply.


A private water company owned by a developer asked the Arizona Department of Water Resources (“ADWR”) for an adequate water supply determination in connection with a proposed development.  Two individuals and the Bureau of Land Management (“BLM”), which manages a national conservation area near the proposed development, objected, noting the existence of significant unquantified federal reserved water rights.  ADWR issued a draft decision and order finding that water would be continuously, legally, and physically available to satisfy the proposed development’s needs despite the presence of unquantified federal reserved water rights appurtenant to the national conservation area.

The objectors sought judicial review in the superior court.  The superior court vacated ADWR’s decision, finding that ADWR was required to consider potential and existing legal claims that may affect the water supply under legal availability analysis, including any unquantified federal reserved water rights.  On appeal, the Court of Appeals vacated the superior court’s decision and remanded to ADWR, concluding instead that ADWR was required to consider unquantified federal reserved water rights under physical availability analysis.

All parties petitioned for review.  The Supreme Court granted review, noting that the petitions presented issues of statewide importance as to whether ADWR is required to consider unquantified federal reserved water rights in determining whether a developer has an adequate 100-year water supply under A.R.S. § 45-108.

A developer who must demonstrate an adequate water supply must make two showings under A.R.S. § 45-108(I).  First, the developer must show that sufficient water of adequate quality will be continuously, legally, and physically available to satisfy the water needs of the proposed development for at least 100 years.  Second, the developer must demonstrate that it has the financial capability to construct the water facilities necessary to make the supply of water available for the proposed development.

The Court held that a developer need not consider unquantified federal reserved water rights under physical availability analysis.  The development satisfied both prongs of the physical availability inquiry.  It demonstrated that the wells from which the water would be drawn were within the service area of the applicant and that the groundwater would be withdrawn from an acceptable depth.  This is all that physical availability analysis requires.

The Court also held that a developer does not need to consider unquantified federal reserved water rights under legal availability analysis.  As the relevant statutes do not define the term “legally available,” nor do they mention federal reserved water rights, the Court held that the term is ambiguous.  Applying the prior-construction canon, the Court concluded that when the legislature amended A.R.S. § 45-108, it intended to adopt ADWR’s definition of legal availability, which provides that a private water company has a legally available supply of groundwater when it possesses a valid certificate of convenience and necessity from the Arizona Corporation Commission.  To the extent that this interpretation undermines the consumer protection purpose of the A.R.S. § 45-108, the Court concluded that this was a problem that only the legislature could remedy.

Chief Justice Bales, joined by Justice Pelander, dissented on the grounds that, viewed in context and in light of its consumer protection purpose, A.R.S. § 45-108 unambiguously requires ADWR to consider the possible impact of unquantified federal reserved water rights in deciding whether water is legally available for 100 years.

Justice Bolick, also joined by Justice Pelander, dissented on the grounds that, contrary to the statute’s plain text and consumer protection purpose, the majority’s interpretation renders essentially meaningless the command in A.R.S. § 45-108 that ADWR consider whether water will be legally available to satisfy demand for 100 years.

Justice Lopez authored the opinion of the Court, in which Vice Chief Justice Brutinel and Justices Timmer and Gould joined.  Chief Justice Bales, joined by Justice Pelander, concurred in part and dissented in part.  Justice Bolick, joined by Justice Pelander, concurred in part and dissented in part.  Justice Pelander filed an opinion concurring in the partial dissents of Chief Justice Bales and Justice Bolick.

Posted by:  Phillip W. Londen

Posted On: 8/29/2018