ROBIN SILVER, M.D.; UNITED STATES OF AMERICA, U.S. DEPARTMENT OF INTERIOR, BUREAU OF LAND MANAGEMENT; and PATRICIA GERRODETTE, Plaintiffs/Appellees,
PUEBLO DEL SOL WATER COMPANY, an Arizona corporation; THOMAS BUSCHATZKE, in his official capacity as Director of the Arizona Department of Water Resources; ARIZONA DEPARTMENT OF WATER RESOURCES, an agency of the State of Arizona, Defendants/Appellants.
from the Superior Court in Maricopa County No.
LC2013-000264-001, LC2013-000271-001, LC2013-000272-001
(Consolidated). The Honorable Crane McClennan, Judge, Retired
AGENCY ACTION REMANDED
Denver, Earthjustice, Heidi J. McIntosh (pro hac vice)
Cynthia Christine Tuell Counsel for Plaintiff/Appellee Silver
Department of Justice Environment & Natural Resources
Division, by John L. Smeltzer, R. Lee Leininger, Katherine J.
Barton (pro hac vice) Counsel for Plaintiff/Appellee United
States of America et al.
Arizona Center for Law in the Public Interest, by Joy
Herr-Cardillo, Timothy M. Hogan And David McDevitt Counsel
for Plaintiff/Appellee Patricia Gerrodette
Office of William P. Sullivan, P.L.L.C., by William P.
Sullivan Counsel for Defendant/Appellant Pueblo
Arizona Department of Water Resources, by Kenneth C.
Slowinski, Nicole D. Klobas, Janet L. Miller Counsel for
Defendant/Appellant ADWR et al.
Office of Bruce A. Burke, P.C. By Bruce A. Burke Counsel for
Amicus Curiae Leshy and Glennon
Offices of Jesse J. Richardson Jr., Morgantown, West Virginia
By Jesse Richardson, Jr. (pro hac vice) And Snell &
Wilmer, L.L.P., Phoenix By L. William Staudenmaier Counsel
for Amicus Curiae Water Systems Council
Fennemore Craig, P.C., Phoenix By Sean T. Hood, Rhett A.
Billingsley Counsel for Amicus Curiae Freeport Minerals
Presiding Judge Jon W. Thompson delivered the opinion of the
Court, in which Judge Maurice Portley (Retired) and Judge
Patricia K. Norris joined.
THOMPSON, PRESIDING JUDGE
This is an Adequate Water Supply Designation (AWSD or
Designation) case. We are asked to decide whether the
superior court erred by reversing the decision of the Arizona
Department of Water Resources (ADWR or Department) approving
the application by Pueblo Del Sol Water Company (Pueblo) to
allow its development in Cochise County to proceed. We are
also asked to decide whether the Department erred by not
considering the unquantified federal water rights reserved to
the United States Department of the Interior, Bureau of Land
Management (BLM). Finally, we are asked to determine whether
the court erred by awarding the individual plaintiffs, Robin
Silver, M.D., and Patricia Gerrodette, attorneys' fees.
By statute, "Adequate Water" is "[sufficient
groundwater, surface water or effluent of adequate quality
[that] will be continuously, legally and physically available
to satisfy the water needs for the proposed use for at least
one hundred years" and requires that the proposed user
has demonstrated the "financial capability . . . to
construct the water facilities necessary to make the supply
of water available for the proposed use, including a delivery
system and any storage facilities or treatment works."
Ariz. Rev. Stat. (A.R.S.) § 45-108(I) (2009) (emphasis
At issue is whether ADWR was required to consider the
unquantified federal water rights of BLM in determining
whether such water was statutorily available to Pueblo.
Specifically, BLM asserts the Department erred in its
"legally available" analysis. BLM and the
individual plaintiffs (collectively, unless identified
separately, Plaintiffs) additionally argue Pueblo's
proposed pumping will eventually interfere with the San Pedro
Riparian National Conservation Area's (Conservation Area)
We uphold the Department's interpretation of
"legally available, " as outlined in its regulation
R12-15-718, finding the Department's
interpretation serves a valid purpose in the context of the
entire application process. The Department's AWSD
process, when taken as a whole, adequately considers whether
sufficient water will be continuously, legally, and
physically available to satisfy the needs of the proposed
user for at least one hundred years and insures that the
proposed user has the financial capability to construct,
store, and deliver that supply of water. See A.R.S.
§ 45-108(I). Nevertheless, as we also explain, during
the regulatory process, the Department must consider
BLM's unquantified federal water rights in determining
whether Pueblo has demonstrated the availability of
"adequate water" under A.R.S. § 45-108.
Accordingly, we vacate the superior court's judgment in
favor of Plaintiffs.
Further, we remand this matter back to the Department. On
remand the Department shall give educated consideration to
the unquantified priority federal reserved water rights of
BLM, until such amount is quantified in the General Stream
Adjudication for the Gila River System and Source (Gila
Adjudication). After the quantification in the Gila
Adjudication, the quantified amount must be included in the
AWSD process. The Department is not required to consider
separately the potential impact of proposed pumping on area
streams or the San Pedro River. Further, ADWR is not required
to consider the potential impact of proposed pumping on
either the San Pedro Riparian National Conservation Area or
on the Conservation Area's water right. We also vacate
the $155, 861.50 in attorneys' fees awarded to Plaintiffs
Silver and Gerrodette.
AND PROCEDURAL HISTORY
Pedro Riparian National Conservation Area
The San Pedro River flows from northern Mexico through
southeastern Arizona for approximately 130 miles until it
joins with the Gila River at Winkelman,
Arizona. The San Pedro River is one of the few remaining
free-flowing and undammed rivers in the desert southwest and
it is home to diverse flora and fauna. The town of
Sierra Vista, the military installation Fort Huachuca, and
most of the Conservation Area are located within the Sierra
In 1988, the United States Congress designated approximately
36 miles of the San Pedro River basin as a national
conservation area. At the same time, Congress created a
federal water reserve right for the Conservation Area
"in a quantity sufficient to fulfill the purpose"
of protecting "the riparian area and the aquatic,
wildlife, archeological, paleontological, scientific,
cultural, educational, and recreational resources of the
public lands surrounding the San Pedro River." 16 U.S.C.
§§ 460xx, (a), (1)(d); Arizona-Idaho Conservation
Act of 1988, Pub. L. No. 100-696, 102 Stat. 4571.
The Department of the Interior, through BLM, is mandated to
manage the Conservation Area, and in 1989 BLM asserted a
water rights claim in the Gila Adjudication. At this time, the
Gila Adjudication has been active for approximately 40 years.
ADWR is a technical advisor in the Gila Adjudication.
Since 1989 BLM has filed three amended federal statements of
claim for the Conservation Area that cover the full range of
surface water and groundwater. The Conservation Area has both
a 1988 priority reserved federal water right and a 1985 state
certificate-based water right (CWR No. 33-90103), as well as
two or more state-based pending applications.
BLM's federal reserved rights will be quantified in the
Gila Adjudication. See Pub. L. 100-696. The Gila
Adjudication has exclusive jurisdiction to adjudicate the
conflicting claims and water rights. In re the Gen.
Adjudication of all Rights to Use Water in the Gila River
Sys. & Source (Gila III), 195 Ariz. 411, 416, ¶
12, 989 P.2d 739, 744 (1999) (holding federal reserved water
rights could be invoked to protect groundwater from
diversion) (citing to the McCarran Amendment, 43 U.S.C.
As explained below, calculating BLM's water rights is not
a straightforward mathematical equation. BLM's asserted
federal and state water rights do not cover the exact same
geographic area. BLM's water right claims do not serve
identical purposes or claim identical water sources. Finally,
importantly, BLM's federal claim and state water volume
claims are not identical.
Pueblo Del Sol's Application
Pueblo is a private water company. Pueblo's service area
covers more than 4, 000 acres and is located, variously, 4.5
to 5 miles from the San Pedro River. In June 2011, Pueblo
filed an application for an AWSD through the year 2032. Such
a designation would allow Pueblo to pump groundwater for the
Tribute Master Planned Community (Tribute) in Sierra Vista,
and other projects, as required by Cochise County for new
construction. Tribute could contain up to 6, 959
residential units. As planned, the subdivision would proceed
in four phases and has water conservation measures, including
xeriscape and requirements for water-saving devices in the
homes, as well as for potential rainwater harvesting. As of
the time of the administrative law judge (ALJ) hearing,
Castle & Cooke had invested over $7 million in the
Tribute project, exclusive of the cost of the land.
Pueblo's water is supplied by wells and the area at issue
is outside a statutory active water management
area. Groundwater is proposed to be the source
of the water supply. Pueblo projected its water demand for that
service area, through 2032, would rise from 1, 430.85
acre-feet per year (APY) to as much as 4, 870.39 APY. The
mandatory 3-D hydrology model submitted by Pueblo with its
designation application concluded that such a draw would put
the groundwater level no greater than 650 feet below the
surface after 100 years of pumping. By ADWR regulation,
groundwater in the service area may be no greater than 1200
feet below land surface. See R12-15-716(B)(2).
Pueblo's application also referenced its 1972 public
utility certificate of convenience and necessity (CC&N)
from the Arizona Corporation Commission.
BLM, Silver, and Gerrodette each filed objections to the
application.,  ADWR responded to the objections and
issued a decision letter and draft decision. The letter
stated that after consideration of the objections, ADWR
concluded Pueblo's application satisfied the requirements
for the AWSD.
Plaintiffs filed separate appeals and participated in a five-
day evidentiary hearing before an ALJ in late 2012. Witnesses
included three hydrologists, an engineer with experience in
water treatment plant engineering, the senior vice president
of Castle & Cooke, and ADWR's Manager of Recharge,
and Adequate and Assured Water Supply Programs. The ALJ's
24-page decision made 143 findings of fact and 35 conclusions
of law. The ALJ determined that Pueblo had satisfied the
continuously, physically and legally available requirements
of A.R.S. § 45-108. Ultimately, the ALJ concluded that
Plaintiffs had not demonstrated ADWR's decision was
contrary to law or issued in error. The ALJ dismissed
Plaintiffs' appeals. In April 2013, ADWR adopted the
ALJ's decision with some revisions (the Decision).
Plaintiffs filed complaints in superior court seeking
judicial review of the Decision. The complaints were
consolidated. After briefing and argument, the superior court
vacated the Decision. The superior court found ADWR's
regulation defining "legal availability, "
R12-15-718(C), erroneously provided for a decision on this
prong based solely on whether the applicant had a CC&N
"without any investigation of whether there might be any
possible legal constraints on the intended supplies,
including ones based on hydrologic conditions or impacts on
superior water rights." The superior court held
"ADWR failed to meet its mandatory duty under A.R.S.
§ 45-108 to ensure that the proposed source of water
will, among other things, be legally available for at least
100 years" and, therefore, abused its discretion. The
court stated that, on remand, "in determining whether
the amount of water requested by [Pueblo] is legally
available, ADWR must consider the existing legal claims
and/or rights and determine whether and to what extent those
claims and/or rights may affect the availability of the water
supplies requested in [Pueblo's] application."
Under the private attorney general doctrine, the superior
court found an upward deviation in the statutory
attorneys' fees rate of $75 per hour was appropriate and
it awarded legal fees in the amount of $84, 210 for Plaintiff
Silver and $71, 651.50 for Plaintiff Gerrodette. ADWR and
Pueblo appealed the superior court's judgment to this
court. We have jurisdiction pursuant to A.R.S. §§
12-913 (2016), -2101(A)(1) (2016).
Appellants ADWR and Pueblo assert on appeal:
1. ADWR properly determined, under Arizona's statutes and
Department regulations, that Pueblo satisfied the
requirements for an Adequate Water Supply Designation;
2. ADWR was not required to consider or determine the extent
to which existing legal claims and water rights "may
affect" the legal availability of groundwater when
considering Pueblo's application;
3. ADWR was not required to consider whether the grant of an
adequate water designation could have an adverse impact on
the instream surface flow of the San Pedro River; and
4. The superior court abused its discretion in awarding
attorneys' fees against Pueblo under the private attorney
In response, Plaintiffs assert:
1. ADWR violated A.R.S. § 45-108 and abused its
discretion in granting Pueblo an AWSD because the Department
failed to make a valid determination of legal availability
without first examining any senior legal rights or priorities
to the water held by BLM for the conservation of the San
Pedro Riparian Area;
2. Regulation R12-15-718(C), defining legal availability,
conflicts with A.R.S. § 45-108 and is unlawful;
3. ADWR has the authority to determine BLM's unquantified
water reserve and the extent to which groundwater is required