Opinion ID: 867316
Heading Depth: 2
Heading Rank: 3

Heading: Severability of Right to Potential Use of Groundwater

Text: ¶ 25 The Agua Sierra parties also argue that the deed reservations were at least effective to sever and reserve to the grantor whatever rights a surface owner would otherwise have to the future use of groundwater. We therefore consider whether a landowner's qualified right or expectancy to the potential use of groundwater is an interest that can be severed from the surface estate. ¶ 26 The court of appeals observed that Arizona law generally permits the severance and transfer of water rights from the associated real property. Davis, 217 Ariz. at 392 ¶ 21, 174 P.3d at 304 (citing W. Maricopa Combine, Inc. v. Ariz. Dep't of Water Res., 200 Ariz. 400, 407 ¶ 35, 26 P.3d 1171, 1178 (App.2001)). The court further noted that the right to use groundwater is a property right, id. at ¶ 22 (citing Paloma Inv. Ltd. P'ship v. Jenkins, 194 Ariz. 133, 138 ¶ 22, 978 P.2d 110, 115 (App.1998)), and that because this right is a hereditament, it must be conveyed by deed, id. (citing Neal v. Hunt, 112 Ariz. 307, 310-11, 541 P.2d 559, 562-63 (1975)). ¶ 27 The cases cited by the court of appeals, however, do not establish a severable right to the potential future use of groundwater. West Maricopa Combine involved the transfer of Central Arizona Project water via the Hassayampa riverbed. 200 Ariz. at 402 ¶ 1, 26 P.3d at 1173. In rejecting arguments by landowners that they could prohibit such transfers through their property, the court of appeals discussed how Arizona law distinguishes water rights from real property rights. Id. at 407-08 ¶¶ 35-40, 26 P.3d at 1178-79. In this context, the court cited its earlier decision in Paloma for the proposition that water rights can be bought and sold distinct from land. W. Maricopa Combine, 200 Ariz. at 407 ¶ 35, 26 P.3d at 1178. ¶ 28 Paloma, however, did not involve the severance of a right to the potential future use of groundwater. Instead, Paloma concerned a water rights agreement giving one party a share of the proceeds from future sales of water from the land by the fee owner. See 194 Ariz. at 138 ¶ 24, 978 P.2d at 115 (We recognize that [the] interest is not to use the water itself, the ordinary form of water rights.). The court of appeals characterized this right as a royalty interest that, as a real property interest, bound successor landowners. Id. at ¶ 25-26. Thus, even if we assume arguendo that it was correctly decided, Paloma does not establish the right of a grantor to sell groundwater from land that it no longer owns. ¶ 29 Nor did this Court in Neal decide whether the potential use of groundwater is a property right severable from the overlying land. In that case, the grantor reserved certain water rights to a ranch he had sold. 112 Ariz. at 309, 541 P.2d at 561. Citing George v. Gist, 33 Ariz. 93, 263 P. 10 (1928), the Court stated that water rights in land must be conveyed by deed and that conveyances of groundwater, a hereditament, are subject to the recording statute. Neal, 112 Ariz. at 310-11, 541 P.2d at 562-63. We did not address the validity of such a reservation in Neal, but rather held only that if not recorded, a reservation cannot be effective against a subsequent bona fide purchaser who lacks notice. 112 Ariz. at 311, 541 P.2d at 563. ¶ 30 Neal preceded this Court's decision in Chino Valley II, which rejected as dicta language in prior decisions, including Howard, suggesting that a landowner may have a property interest in groundwater. See Chino Valley II, 131 Ariz. at 81, 638 P.2d at 1327. Given Chino Valley II, our holding in Neal cannot be understood as holding that rights to the potential future use of such water may be severed from the overlying land by a deed reservation. ¶ 31 On the issue of severability, more pertinent is the language of the GMA itself, which provides that the landowner must consent to the transportation of water off the property: A city or town that owns land consisting of historically irrigated acres in the Big Chino sub-basin of the Verde River groundwater basin . . . or a city or town with the consent of the landowner, may withdraw from the land for transportation to an adjacent initial active management area an amount of groundwater determined pursuant to this section. A.R.S. § 45-555(A)(emphasis added). ¶ 32 Section 45-555(A) presumes that a landowner has authority to consent to a city or town's withdrawing water from the land for transportation. But a landowner would not be able to grant such consent if a prior owner could reserve and sever from the land the rights to the potential future use of groundwater. If the legislature had contemplated that such rights exist and are transferable apart from the land, we do not believe the legislature would have required the consent of the landowner for the withdrawals contemplated by § 45-555(A). ¶ 33 We recognize that there are many policy arguments for or against allowing the transfer, outside of AMAs, of rights to prospectively use groundwater, but those arguments should be weighed by the legislature if it thinks it desirable to amend this aspect of the GMA. See Chino Valley II, 131 Ariz. at 81, 83, 638 P.2d at 1327, 1329 ([I]f any change in the law is necessary, it should be made by the Legislature.).