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Water Suppliers Litigation Roundup

Water Suppliers Litigation Roundup

So far, 2017 has seen some important movement in litigation involving water suppliers in the United States. Across the country, there have been several pivotal moments in many long-running disputes about water-usage rights and water quality.

California

In the Coachella Valley, the Agua Caliente Band of Cahuilla Indians won a precedent-setting decision in the federal Ninth Circuit Court of Appeals. A three-judge panel found that a 1908 US Supreme Court decision, Winters v. United States, which held that Native American tribes are entitled to surface water for their reservations, also extends to groundwater. The Coachella Valley Water District and the Desert Water Agency argued that the tribe is entitled to groundwater rights on the same basis as other property owners in the state and should not receive preferential federal rights. O’Melveny is representing the Coachella Valley Water District in its petition for certiorari to the Supreme Court. In the meantime, the case will go back to the lower court to resolve several other legal issues, including exactly how much groundwater the tribe is entitled to. The ruling comes just as California is set to begin implementation of the Sustainable Groundwater Management Act, designed to regulate rights to draw water from underground aquifers.

California’s First District Court of Appeal issued a mixed ruling in a battle between the San Diego County Water Authority (“SDCWA”) and the Metropolitan Water District of Southern California (“MWD”) over the rate MWD charges SDCWA to convey purchased water through the Colorado River Aqueduct. Based in Los Angeles, MWD is a major water wholesaler in Southern California and supplies water to SDCWA. SDCWA also uses the MWD’s conveyance facility to import water that SDCWA purchases from the Imperial Irrigation District. The Court of Appeal upheld the trial court’s decision invalidating MWD’s inclusion of a “stewardship fee”—which MWD uses to fund conservation and development of local resources—in its conveyance rate and ordered a recalculation of the actual amount owed. At the same time, however, the court concluded that MWD could pass on system wide transportation costs, even when the water only passed through a portion of MWD’s conveyance facilities. Both sides are expected to appeal the decision, which comes on the heels of a California Court of Appeal’s decision published earlier this year limiting conveyance owners’ ability to pass system-wide costs through to water agencies that, unlike SDCWA, are outside a water supplier’s system.

Georgia

In state-versus-state water litigation, Special Master Ralph Lancaster recommended that the US Supreme Court reject Florida’s requested cap on water consumption by consumers and utilities in Georgia from the Apalachicola-Chattahoochee-Flint River basin. Florida and Alabama had argued that Georgia drew more than its share of water from Lake Lanier as it flowed down into the Apalachicola Bay in Florida. The special master concluded that Florida failed to show that the cap was necessary and that Florida could not effectively continue the case without joining the Army Corps of Engineers as a party. At the same time, however, he emphasized that Georgia’s conservation efforts have been “remarkably ineffective.” The dispute over Lake Lanier water has been an issue among the states since the lake was formed by the building of the Buford Dam in 1956, and the special master’s decision followed a failed effort by US senators from Florida and Alabama to require the Corps to obtain allocation approval from all three states. While waiting for a decision, Georgia has moved to intervene in litigation over the Corps’ operation of dams in the basin, which is also at issue in the Supreme Court case.

Iowa

The Des Moines Water Works announced that it will spend $15 million to expand nitrate removal facilities for drinking water taken from the Raccoon and Des Moines rivers, following dismissal of its federal court case against several drainage districts. The suit alleged that nitrate runoff from agricultural activities is contaminating water that must be treated for drinking. High nitrate levels has been a significant source of concern for other water providers throughout the country, including in California’s Central Valley. Des Moines Water Works argued that the drainage districts should be regulated under the Clean Water Act as “point sources” of pollution. The federal district court concluded that the districts lacked the police-power authority necessary under state law to address the utility’s injury, and so did not address the underlying Clean Water Act issue.

Alabama

In a similar vein, several Alabama water providers sued dozens of carpet and chemical manufacturers, arguing that chemicals used for stain resistance and non-stick coatings contaminated drinking water, forcing the water providers to procure alternate supplies and, eventually, to install filtration equipment. A similar lawsuit filed in federal court under the Resource Conservation and Recovery Act by Tennessee Riverkeeper survived a motion to dismiss in February, when the court concluded that the chemicals at issue could be considered hazardous waste. Since 2016, at least eight Alabama water systems have changed water sources in order to reduce the concentration of these chemicals—known as perfluorinated chemicals (“PFC”)—to a level below that advised by the EPA. EPA issued a health advisory last year warning about PFC exposure in locations across the country.

Montana

The City of Missoula settled pending litigation through an agreement with Liberty Utilities Co., the owner of Mountain Water Co., the private utility supplying water to the city. In a thread of litigation beginning in the 1980s, the City sued to use its power of eminent domain to purchase Mountain Water Co. from then-owner The Carlyle Group. The settlement entails the City purchasing the water utility for $96.4 million. The suit and settlement is similar to the Ojai, California, water system eminent domain suit that settled in a $34.5 million purchase of the water system from Golden State Water Company in April.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Jake Leraul, an O'Melveny associate licensed to practice law in California, and Heather Welles, an O'Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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