Opinion ID: 867316
Heading Depth: 2
Heading Rank: 2

Heading: Future Rights to Groundwater

Text: ¶ 17 The court of appeals held that a grantor may reserve rights to the commercial use of percolating groundwater beneath land that the grantor no longer owns. Davis, 217 Ariz. at 396 ¶ 43, 174 P.3d at 308. In so holding, the court reasoned that a landowner has a property right to the usufruct of underlying groundwater and that this right is subject to the general common law rule that [a] grantor has the right to make a reservation of an interest in real property. Id. at 393 ¶ 23, 174 P.3d at 305 (quoting Phoenix Title & Trust Co. v. Smith, 101 Ariz. 101, 106-07, 416 P.2d 425, 430-31 (1966)). Supporting this conclusion, the Agua Sierra parties argue that the right to prospectively use groundwater is one of the sticks in the bundle of a landowner's property rights, and the landowner can reserve this stick when conveying the surface estate to another. ¶ 18 For a deed reservation of commercial groundwater rights to be valid, however, the grantor must in fact have a real property interest in such rights. Thus, we first consider whether Arizona law recognizes a real property right to the potential future use of groundwater. ¶ 19 This Court has noted that Arizona law recognized no right to reserve water for some potential future use. Gila River I, 171 Ariz. at 239, 830 P.2d at 451. The court of appeals dismissed this language as irrelevant to the validity of Agua Sierra's reservation of commercial water rights, stating that Gila River I concerned only appropriable surface waters (which include surface-stream subflows) and not percolating groundwater. Davis, 217 Ariz. at 395 ¶ 37, 174 P.3d at 307. Gila River I, however, cannot be read so narrowly. ¶ 20 Gila River I concerned both real property owners who claimed rights to appropriable subflows and other land owners who claimed that their interests would be impacted by any legal determination of when underground water is appropriable. 171 Ariz. at 239, 830 P.2d at 451. The second group, who were not then using groundwater, claimed that they had a property right to use groundwater in the future, and thus were entitled to constitutionally adequate notice in the Gila adjudication. Id. The Court squarely rejected this argument: Having no legally recognized property right in potential, future groundwater use, they have no due process rights of which they could be deprived. Id. ¶ 21 The Court in Gila River I also cited its earlier decision Chino Valley II, which addressed groundwater rights under the GMA, not appropriable water rights. Gila River I, 171 Ariz. at 239, 830 P.2d at 452 (citing Chino Valley II, 131 Ariz. at 82, 638 P.2d at 1328). In Chino Valley II, we stated that [i]n the absolute sense, there can be no ownership in seeping and percolating waters until they are reduced to actual possession and control by the person claiming them because of their migratory character. Like wild animals free to roam as they please, they are the property of no one. 131 Ariz. at 82, 638 P.2d at 1328. Thus, we held that there is no right of ownership of groundwater in Arizona prior to its capture and withdrawal from the common supply and that the right of the owner of the overlying land is simply to the usufruct of the water. Id. ¶ 22 Chino Valley II used the term usufruct to describe the rights of landowners with respect to underlying groundwater. But Chino Valley II's use of that term does not mean that landowners have some vested real property right in the potential use of groundwater. See Gila River IV, 198 Ariz. at 344, 9 P.3d at 1083 (citing Chino Valley II and Gila River I to reject landowners' claim that an expansive definition of subflow resulted in a taking of private property rights to future groundwater use). Rather, as Chino Valley II makes clear, the landowner's right is perhaps better described as an unvested expectancy insofar as it concerns the potential future use of groundwater that has never been captured or applied. This is why this Court concluded in Chino Valley II, and the federal courts concluded in Cherry, that the restrictions on groundwater use under the GMA did not unconstitutionally infringe the rights of landowners. ¶ 23 Recognizing that Arizona's groundwater is a critical public resource, the legislature has granted landowners outside of AMAs a limited right, essentially an opportunity, to pump groundwater for reasonable and beneficial uses as permitted by the GMA. See A.R.S. §§ 45-453, -541 to -554; see also Leshy & Belanger, supra, at 715-16 (discussing GMA's impact on reasonable use doctrine). The legislature is free to choose between competing uses of groundwater and to modify such rights in the public interest as an exercise of its police power. Chino Valley II, 131 Ariz. at 83-84, 638 P.2d at 1329-30; Sw. Eng'g Co. v. Ernst, 79 Ariz. 403, 409-10, 291 P.2d 764, 768-69 (1955). ¶ 24 Agua Sierra and its predecessors have not identified any pre-existing or current use of the groundwater underlying the CF Ranch that is embraced by the reservation of commercial water rights. Arizona law does not recognize a real property interest in the potential future use of groundwater that has never been captured and applied to reasonable use. [1]