Opinion ID: 1208095
Heading Depth: 3
Heading Rank: 3

Heading: Whether DNR Acted Outside Its Authority By Extending the Water Rights Permits?

Text: When DNR extended the permits, it reasoned that extension of the permits ... [was] preferable to the issuance of certificates of appropriation, because of the complexity of the issues and the potential change in land ownership. The decision further provided: The permits to appropriate water will be extended through the 1993 mining season. This date corresponds with the authorization to mine issued by BLM and the NPDES permit issued by EPA. The transfer of lands selected by Calista from BLM should be completed by that date, if not sooner. Calista will then have a say in the use of its lands for mining and Tuluksak Dredging will then be required to work with Calista. It is expected that the federal mining claim held by Tuluksak Dredging will be relinquished in order to facilitate the transfer of lands to Calista. TNCC argues that DNR was not authorized to extend the water rights permits because TDL did not demonstrate diligent effort toward completing the appropriation pursuant to 11 AAC 93.120(f). Specifically, TNCC contends that establishing diligent effort required TDL to demonstrate separate diversions from each of the streams in the Tuluksak River system. TDL and Calista explain in their joint brief [11] that a placer mining operation requires a mining company to move equipment and build new settling ponds in order to mine different locations within the larger project area. They apparently claim that it is not feasible to work all locations within a project area in a given season, and therefore, TDL's failure to work all locations is not evidence of any lack of diligence. Further, TDL argues that it has demonstrated diligence because its permit applications and subsequent activities constitute open steps providing notice of ... [its] intent to secure appropriative rights on each of the permitted streams. Alaska Statute 46.15.110 provides that [r]easonable extensions of time shall be permitted for good cause shown. Additionally, DNR's regulation elaborates that: Upon the commissioner's receipt of a written request from the permittee showing diligent effort toward completing the appropriation, the permit will, in the commissioner's discretion, be extended for a period of time not to exceed the relevant maximum time period listed in ... this section. 11 AAC 93.120(f) (emphasis added). Therefore, we consider whether the two reasons provided by DNR  the complexity of the issues and the potential change of land ownership  constitute good cause shown or demonstrate a diligent effort by TDL as required by the statute and regulation. We have not previously addressed good cause or diligent effort in the context of the relevant statute or regulation. However, two other state courts have discussed good cause in the context of extending permits. In Kuiper v. Warren, 195 Colo. 541, 580 P.2d 32 (1978), the Colorado Supreme Court discussed good cause to extend a permit to construct a well and appropriate water. [T]he [Ground Water Management Act] and the [Colorado Ground Water Commission] guidelines afford appropriators the opportunity to obtain extensions upon a showing of good cause. The good cause shown provision, while not identical to the doctrine of due diligence, affords appropriators many of the same protections. Both the statutory extension procedure and the doctrine of due diligence afford appropriators, who are reasonably proceeding to complete appropriations under conditional rights, protection against loss of their rights. Designated ground water appropriators must construct their wells, place water to beneficial use, and comply with the statutory filing and time provisions or lose their right to divert. Id., 580 P.2d at 35. In Associated Enter. v. Toltec Watershed Improvement Dist., 578 P.2d 1359 (Wyo. 1978), the Wyoming Supreme Court addressed the good cause requirement for a permit extension to complete construction of a reservoir. Thus, the sole criterion for extending these periods is whether the permittee has shown good cause for the extension. The above-quoted provision from § 41-4-506 finds its genesis in the common-law concept of due diligence which, in the context of water law, has been expressed as follows: ... [T]he law does not require any unusual or extraordinary efforts, but it does require that which is usual, ordinary, and reasonable. The diligence, required in the prosecution of the construction of all works necessary for the diversion and application of water in an attempted appropriation of the same is that constancy or steadfastness of purpose or labor which is usual with [people] engaged in like enterprises, and who desire a speedy accomplishment of their designs ... 2 Kinney on Irrigation and Water Rights, p. 1269... . It is basic that the determination of diligence is factual in nature and is to be determined from the circumstances surrounding each particular case. Id. at 1365-66 (citations omitted). We hold that the regulatory standard of requiring an applicant to demonstrate diligent effort toward completing the appropriation for a permit extension satisfies the more general statutory standard of granting an extension for good cause shown. Therefore, DNR can extend a permit if the applicant shows diligent effort. To obtain a finding of reasonable diligence, the holder of the right must prove continuous, project-specific effort directed toward the development of the conditional right commensurate with his [or her] capabilities. Reasonable diligence must be evidenced by reasonable progress in the development of the conditional appropriation in the most expedient and efficient manner. Trans-County Water v. Central Colo. Water Conservancy Dist., 727 P.2d 60, 64 (Colo. 1986). DNR stated that it extended the permits because of the complexity of the issues and the potential change in land ownership. However, DNR failed to follow its own regulation in extending the permits based on these two reasons because neither basis bears on whether TDL demonstrated a diligent effort toward completing the appropriation as required by 11 AAC 93.120(f). DNR extended TDL's permits for reasons alien to the regulation. Moreover, TDL also failed to demonstrate diligent effort in its extension applications. DNR should have required TDL to describe the work which had been done to perfect the appropriation, show how the water had been beneficially used, or, at a minimum, explain why no use had yet been made, and state precisely why additional time was needed. Without this information, DNR could not determine whether TDL had made a diligent effort warranting permit extensions. TDL could not rely on its initial applications for water rights, because they did not contain information that would have satisfied the requirements of 11 AAC 93.040. We hold that on this record DNR was not authorized to extend the permits.
The representations TDL made in the extension applications reveal that the extension requests fail to meet the diligent effort standard. The initial permits, issued in February and June 1982 stated that TDL would construct and use bucket line dredges. The 1990 extension applications stated: The infrastructure including, but not limited to: airfields; road system; camp sites with complete living, working and power facilities; 2 bucketline dredges; and 1 trommel washplant are well established for support of any of our operations on the contiguous claim block and vicinity. TNCC asserts that these facilities have long been present in the area. For example, ... [Northland Gold Dredging's] [12] dredge was operational in 1981, since it started to destroy the river then; and the dredge at Bear Creek had been in use well before 1988. TNCC's point is apparently that TDL's statement should not be construed as demonstrating a diligent effort by TDL, the permit holder, because Northland had already established the infrastructure. Additionally, TNCC argues that regardless of who completed the infrastructure, Northland or TDL, the fact the infrastructure is established obviates TDL's need for a permit extension. [13] TDL responds that, by nature, mining cannot be confined to one location due to the need to build settling ponds and assemble the intakes of actual diversions. TDL, therefore, suggests that this indicates that the infrastructure has not been completed and extensions are warranted. However, TDL did not provide this information in its extension applications and the agency record does not clearly reveal what TDL may have done to prepare for further operations. Thus, TDL's unsupported assertion that it needs more time to complete the infrastructure is insufficient. TNCC further argues that since the dredges and the wash plant were available, TDL was in a position to make beneficial use of the water before the 1990 expiration of the 1986 extensions, but failed to do so. ADF & G raised this issue with DNR regarding eight of the streams in early 1990. [14] Specifically, ADF & G questioned whether TDL had made any use of the waters, and with the exception of Spruce Creek, whether there were any present plans to mine there. DNR never responded to ADF & G. TDL did not demonstrate any actual water use in its extension applications. Moreover, in many of the applications, TDL stated that mining (and its concurrent use of water) would not begin until an undetermined or vague future date, in some cases commencing after the permits' 1993 expiration date. [15] In other extension applications, TDL stated that it intended to operate in a number of the creeks in vague time frames from 1990 to 1994. [16] An applicant must actually do something during the term of the permit to demonstrate diligence; a statement of intent cannot suffice. City of Denver v. Northern Colo. Water Conservancy Dist., 130 Colo. 375, 276 P.2d 992, 1003-04, 1008 (1954). See also Trans-County Water, 727 P.2d at 64 (citing Orchard Mesa Irrigation Dist. v. City of Denver, 182 Colo. 59, 511 P.2d 25, 28 (1973) (to prove due diligence, there must be concrete efforts to finalize the appropriation; a vague hope to use the water someday is insufficient)). In its decision on appeal, DNR responded to TNCC's assertion that there was no evidence that the mining operation had used water during the past five years by stating that it [found] evidence in the administrative record that water use ... [had] occurred. DNR, however, did not specify what that use was or which streams had been used. TDL's applications failed to demonstrate that TDL had made any beneficial use of the water between 1986 and 1990, or that it intended to do so absent another extension. The record does not clearly indicate what use TDL made of the water before the 1986 extensions expired in 1990. The record does contain information that might have supported findings that TDL operated a wash plant at California Creek and Rocky Creek in 1987-89. The record suggests less clearly that the valley floors were dredged as recently as 1987, but does not specify where any such operations occurred. DNR made no specific findings about what beneficial use of water TDL made while the 1986-90 permits were in force, and made no findings about how any water use at particular sites might have justified extending the permits at all the sites. [17]
TDL contends that its placer mining operation is a single project, therefore, it need not perfect an appropriation from each stream to show diligent effort. TNCC argues that a showing of diligence must be made for each particular stream, claiming that the Colorado Supreme Court expressly rejected an argument identical to the one TDL makes here. Although in City of Denver v. Northern Colo. Water Conservancy Dist., 130 Colo. 375, 276 P.2d 992, 1000 (1954), the Colorado Supreme Court concluded, The priority of appropriation which gives the better right under [the Colorado] Constitution is a priority on a stream rather than on a project, the facts in that case are distinguishable from the dispute before us. The Denver court listed the following considerations: (1) whether streams within a project are confluent with a main water body or somehow physically connected; (2) whether the permittee seeks to divert water from an entirely separate drainage basin; (3) whether the water appropriation on one water body was surveyed and planned years later than the other projects; and (4) whether appropriation on part of the project would directly affect other claimants who are protestants [in that part of the project] but not directly affected by [the other] projects. Id. Thus, the court implicitly acknowledged that a demonstration of diligent effort on a stream within a project can conceivably suffice to show diligence throughout. Applying those guidelines in the instant case would support a conclusion that the fifteen permitted streams are part of a larger project: (1) the disputed permits are for the Tuluksak River and its tributaries; (2) all diversions are from two connected drainage basins within a defined area of operation; (3) TDL's mining and water use plan has always included each of the permitted streams; and (4) the protestants here claim to be directly affected by TDL's operations on each of the permitted streams. However, in light of TDL's failure to demonstrate diligent effort for any of the streams, we cannot extend the finding to the entire project. Consequently, we need not determine on how many individual streams [18] a permittee must demonstrate diligent effort to demonstrate diligence on a project. In sum, TDL did not show a diligent effort in making a water appropriation in its permit extension applications. DNR made no explicit or implicit findings of diligent efforts, but rather, granted the extensions based on the alleged complexity of the issues and a prospective change in ownership of the land. Neither reason bears on whether TDL demonstrated a diligent effort to complete its water appropriation on any stream. DNR's rationale for extending the permits, therefore, is not related to the diligent effort criterion contained in 11 AAC 93.120(f). We conclude that DNR acted arbitrarily in extending the permits, thereby abusing its discretion.