Supreme Court sides with developer in water dispute

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The Arizona Supreme Court has given the go-ahead to new development in and around Sierra Vista even if it could dry up the San Pedro River — and even if it turns out that the home buyers later end up with nothing but sand coming out of their faucets.

In a ruling with statewide implications, particularly for rural areas, four of the seven justices concluded Thursday that the Department of Water Resources is required only to consider whether developer Castle & Cooke Inc. and the Pueblo del Sol water company it owns have a 100-year supply of water beneath its land where it plans to construct up to 7,000 homes on 2,000 acres, the legal right to the water, and the financial ability to supply it.

More to the point, the majority said the state agency need not consider other potential future claims for the same underground water — in this case, by the federal Bureau of Land Management — or even the possibility that those other claims could end up leaving the development and the people who buy homes there high and, literally, dry.

“Whether the adequate water supply designation process should go further in protecting consumers is a matter for the Legislature,” wrote Justice John Lopez for himself and three colleagues. And he said that the way water laws are crafted “demonstrates the Legislature’s intent to provide only limited protection to consumers and simultaneously encourage development.”

Thursday’s ruling is unlikely to be the last word in whether Castle & Cooke, a private company owned by David Murdock, can construct its Tribute development about five miles from the river and whether his Pueblo del Sol can pump an extra 3,400 acre-feet of water a year — about 1.1 billion gallons — out of the ground for the project.

Robin Silver, one of the plaintiffs in the case, vowed an appeal to federal court. He said that, given Arizona’s laws and the way they’re applied by Arizona courts, that may be the only way to protect the river.

“This is what happens when we live in a state dominated by Republicans, uncaring Republicans,” he said, and “courts that interpret the law to the benefit of developers.”

Rick Coffman, senior vice president for Castle & Cooke, said his firm is “gratified” by the ruling.

But he said more than just this development is at stake. He said outstanding questions about the BLM claims to the water have effectively halted all new development in and around Sierra Vista — and in the whole San Pedro valley — for the last five years.

Arizona law considers groundwater as belonging to whoever owns the property above. That means the owner can withdraw as much as can reasonably be used on the property without “liability for a resulting diminution of another landowner’s water supply.”

The issue here stems from a decision in 1980 by Congress to designate about 36 miles of the San Pedro River basin as a national conservation area. Congress also created a federal water right for the area “in a quantity sufficient to fulfill the purpose” of protecting the riparian area.

Only thing is, the process of determining water rights to the entire Gila basin, which includes the San Pedro, have been going on now for about 40 years. That makes the amount of water to which BLM is entitled “unquantified” at the moment.

Challengers, including the BLM, Silver and Patricia Gerrodette, argued that DWR could not conclude that Pueblo del Sol has the legal right to the water it wants without considering whether it would impair the yet-to-be-adjudicated federal claim. That goes to the hydrological questions of whether taking more water from the aquifer will dry up the San Pedro, one of the few remaining free-flowing rivers in the Southwest.

But Lopez said that development in the area need not be halted while these outstanding issues are resolved.

Thursday’s ruling drew a pair of stinging dissents.

“Essentially, the majority would allow the Arizona Department of Water Resources to ignore the legal inadequacy of a proposed water supply until the problem becomes a reality,” wrote Chief Justice Scott Bales. “This interpretation defeats the adequate water supply’s manifest purpose to proactively protect consumers in Arizona before they purchase property.”

And Bales said there are “hydrologic realities” that pumping groundwater for the new development could diminish the river’s flow and “imperil the riparian system,” meaning BLM’s claim could be found superior to that of the water company. That, he said, requires DWR to evaluate that claim before giving the go-ahead for more pumping.

Lopez disagreed. But he conceded it eventually could turn out there really isn’t enough water in the area for the development if it turns out the riparian area needs some — or all — of that

In fact, attorneys for the water company conceded during the hearing earlier this year that claims to the water could evaporate if the BLM’s demands force it to reduce its pumping and leave the development without sufficient water. They said the company would “`have no problem” letting buyers know that.

“We admonish Pueblo to perform on its promise to be forthright with consumers about the potential impact of BLM’s federal reserved water right on the development’s water supply,” Lopez wrote.

Coffman said the firm will put such a notice into the report developers are required by state law to give to buyers.

“We’ll have to figure out the exact language,” he said. But he does not think that disclosure will dampen sales, pointing out there are many rural areas of the state where there is no requirement to prove a 100-year water supply, only a mandate to disclose that fact to buyers. And he said people buy lots in those areas, too.

In his own dissent, Justice Clint Bolick said his colleagues are “creating a Swiss cheese statute with robust obligation on either side and a hole in the middle.”

He said they claim the statute “provides consumers with vigorous protections against unscrupulous developers.” But Thursday’s ruling, Bolick said, “eviscerates” that law because there is no meaningful analysis that the promised 100-year water supply really will be available for the homeowners.

Bolick also pointed out that if the BLM’s claims are borne out, DWR later can revoke the certificate of assured water supply that allowed Castle & Cooke to build in the first place. But he said that is “cold comfort to homeowners who purchased homes in reliance of that determination,” especially as they then cannot sue the state.

There was no immediate comment from Gov. Doug Ducey who in previous years vetoed legislation specifically designed to allow Castle & Cooke to go ahead with the project despite questions of whether there is sufficient water available.

In his veto messages, he acknowledged concerns by Sen. Gail Griffin, R-Hereford, that the federal government was exercising too much control of the water supply in Cochise County in its bid to ensure the continued flow of water in the San Pedro River. But Ducey said there are greater issues at work.

“While I appreciate the sponsor’s efforts to protect Arizona from federal overreach, I’m concerned that (the two bills) would encourage a patchwork of water ordinances throughout our cities and leave our water supplies in peril,” he wrote. “I will not sign legislation that endangers Arizona’s water future.”