Court Opinion

ID: 3154147
Source: CourtListenerOpinion
Date Created: 2015-11-12 17:02:56.541398+00
Date Added: 2024-06-11T12:00:31.447455
License: Public Domain

IN THE

    SUPREME COURT OF THE STATE OF ARIZONA
ARIZONA DEPARTMENT OF WATER RESOURCES, AN AGENCY OF THE STATE OF
ARIZONA; FREEPORT MINERALS CORPORATION, A DELAWARE CORPORATION,
                            Petitioners,

                                   v.

HON. CRANE MCCLENNEN, JUDGE OF THE SUPERIOR COURT OF THE STATE OF
          ARIZONA, IN AND FOR THE COUNTY OF MARICOPA,
                           Respondent,

   MOHAVE COUNTY, A POLITICAL SUBDIVISION OF THE STATE OF ARIZONA,
                        Real Party in Interest.

                           No. CV-15-0223-SA
                        Filed November 12, 2015

       Special Action from the Superior Court in Maricopa County
                The Honorable Crane McClennen, Judge
                          No. LC2014-000624
                     VACATED AND REMANDED

COUNSEL:

Kenneth C. Slowinski, Janet L. Miller (argued), Jennifer Heim, Arizona
Department of Water Resources, Phoenix, Attorneys for Arizona
Department of Water Resources

L. William Staudenmaier (argued), Snell & Wilmer, Phoenix; and Timothy
Berg, Sean T. Hood, Rhett A. Billingsley, Fennemore Craig, P.C., Phoenix,
Attorneys for Freeport Minerals Corporation

John F. Munger, Adriane J. Hofmeyr (argued), Robert J. Metli, Lawrence V.
Robertson, Jr., Munger Chadwick, P.L.C., Tucson, Attorneys for Mohave
County

Mark Brnovich, Arizona Attorney General, John R. Lopez IV, Solicitor
General, Theresa M. Craig, Assistant Attorney General, Phoenix, Attorneys
for Amicus Curiae Arizona State Land Department
                ADWR V. MCCLENNEN (MOHAVE CO.)
                        Opinion of the Court

Mark Brnovich, Arizona Attorney General, John R. Lopez IV, Solicitor
General, James F. Odenkirk, Assistant Attorney General, Phoenix,
Attorneys for Amicus Curiae Arizona State Game and Fish Department

David K. Wilhelmsen, Lance B. Payette, Favour & Wilhelmsen, PLLC,
Prescott, Attorneys for Amicus Curiae Hualapai Tribe

Jay Johnson, David Johnson, Central Arizona Project, Phoenix, Attorneys
for Amicus Curiae Central Arizona Water Conservation District

John B. Weldon, Jr., Lisa M. McKnight, Salmon Lewis & Weldon PLC,
Phoenix, Attorneys for Amicus Curiae Salt River Project Agricultural
Improvement and Power District

Jeffrey W. Crockett, Crockett Law Group PLLC, Phoenix, Attorneys for
Amici Curiae La Paz County and the Arizona Association of Counties

CHIEF JUSTICE BALES authored the opinion of the Court, in which VICE
CHIEF JUSTICE PELANDER, and JUSTICES BRUTINEL, TIMMER, and
BERCH (RETIRED) joined.

CHIEF JUSTICE BALES, opinion of the Court:

¶1            Under Arizona law, a right to use surface water may be
acquired by appropriation. This right may be severed from the land to
which it is appurtenant and, subject to the approval of the Director of the
Arizona Department of Water Resources (“ADWR”) and other conditions
listed in A.R.S. § 45-172, may be transferred without losing its priority.
“Interested persons” may file objections with ADWR to a proposed
severance and transfer, and they may seek judicial review if ADWR grants
approval over their objections.

¶2           We hold that § 45-172 identifies the only grounds on which
ADWR can deny a properly filed application to sever and transfer a water
right. We further hold that the “interested persons” entitled to object to a
proposed severance and transfer are limited to those with interests
protected by § 45-172. In this case, ADWR properly denied objections filed
by Mohave County because the County did not allege any violation of
conditions specified in the statute and did not qualify as an “interested
person.”

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                ADWR V. MCCLENNEN (MOHAVE CO.)
                        Opinion of the Court

                                     I.

¶3            In 2010, Freeport Minerals Corporation (“Freeport”) filed
applications with ADWR to transfer water rights appurtenant to land
within Planet Ranch in Mohave County along the Bill Williams River
corridor. The applications sought to sever water rights from Planet Ranch
and transfer them to a wellfield near Wikieup, which in turn would be used
at the Bagdad Mining Complex in Yavapai County for mining and
municipal uses, and to other areas within Planet Ranch for use in the Lower
Colorado River Multi-Species Conservation Program. No water would be
physically moved from Planet Ranch to the Bagdad Mining Complex. The
transfers instead concern the “right” to use water for certain purposes
“without losing priority theretofore established.” A.R.S. § 45-172(A).

¶4            Approval of these applications is a requirement of settlement
agreements between Freeport, the Department of the Interior (“DOI”), the
Arizona Game and Fish Department, and the Hualapai Tribe. Congress
approved the settlement agreements in the Bill Williams River Water Rights
Settlement Act of 2014, Pub. L. No. 113-223, 128 Stat. 2096-2110 (2014)
(“Act”). The Act will expire on December 31, 2015, if certain conditions are
not met, including issuance by December 15, 2015, of a final non-appealable
decision to grant Freeport’s severance and transfer applications. Freeport,
DOI, and the Tribe may jointly agree to extend the deadlines.

¶5             As required by A.R.S. § 45-172(A)(7), ADWR published notice
of Freeport’s severance and transfer applications in newspapers circulated
in Mohave County. The notice stated that “any interested person” could
file written objections. Mohave County filed objections with ADWR,
alleging that approving the applications might negatively affect “an already
strained water supply” and increase tax burdens on County residents. The
County also argued that the proposed severance and transfer would be
against the public interest.

¶6            ADWR eventually rejected the County’s objections. In an
appealable agency action, ADWR found that the County had not identified
any water rights held by the County that would be affected by granting the
applications and that ADWR was not authorized to deny the applications
on the grounds that they are against the public interest or might result in
an increased tax burden on Mohave County residents. After an
administrative appeal, an Administrative Law Judge (“ALJ”) rejected the

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                 ADWR V. MCCLENNEN (MOHAVE CO.)
                         Opinion of the Court

County’s arguments and concluded that the County failed to assert any
legally valid objection under § 45-172. Because none of the County’s
objections were based on the “limitations and conditions” enumerated in
§ 45-172(A), the ALJ determined that ADWR lacked authority to deny
Freeport’s applications. ADWR accepted the ALJ’s decision as its final
decision in November 2014.

¶7            In December 2014, the County filed an appeal in superior
court. In June 2015, the superior court vacated ADWR’s final decision. The
court, without explaining its decision, ruled that ADWR’s decision was
contrary to law, arbitrary and capricious, and an abuse of discretion.

¶8             ADWR and Freeport filed an appeal with the Arizona Court
of Appeals and then moved to transfer the appeal to this Court. Given the
approaching December 15 deadline for a final non-appealable decision on
the applications, Freeport and ADWR also filed a petition for special action
in this Court.

¶9            Because the case presents a legal issue of first impression and
statewide importance, and a final decision may be necessary before
December 15, we accepted special action jurisdiction. By separate order, we
grant the motion by ADWR and Freeport to transfer the pending appeal to
this Court, and we dismiss that appeal as moot in light of today’s opinion.

                                     II.

                                     A.

¶10           Arizona law provides that the surface waters of the state
“belong to the people and are subject to appropriation and beneficial use as
provided [in chapter 1 of A.R.S. title 45].” A.R.S. § 45-141. Cf.
Davis v. Agua Sierra Resources, L.L.C., 220 Ariz. 108, 110 ¶ 10, 203 P.3d 506,
508 (2009) (discussing how Arizona law distinguishes surface water from
groundwater). Generally, the “person . . . first appropriating the water shall
have the better right.” A.R.S. § 45-151(A). Applications for the
appropriation of water are submitted to ADWR, which is directed to reject
an application if it “or the proposed use conflicts with vested rights, is a
menace to public safety, or is against the interests and welfare of the
public.” A.R.S. § 45-153(A).

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                 ADWR V. MCCLENNEN (MOHAVE CO.)
                         Opinion of the Court

¶11            A water right is protected in various ways, see, e.g., § 45-
151(D) (providing that a right “shall not be diminished, impaired or
otherwise affected because other water is or may be available to the
appropriator”); § 45-172(A)(2) (providing that transfers of water rights shall
not affect, infringe upon, or interfere with “vested or existing rights”); see
also Adams v. Salt River Valley Water Users’ Ass’n, 53 Ariz. 374, 387–89 P.2d
1060, 1066 (1939) (describing water rights). Such rights, however, cease to
exist, “and the water shall revert to the public and shall again be subject to
appropriation,” if the owner of the right fails to use the appropriated water
for five successive years. § 45-141(C).

¶12         The transfer of water rights is addressed in A.R.S. § 45-172(A),
which provides:

          A. A water right may be severed from the land to which
             it is appurtenant . . . and may be transferred for use . . .
             without losing priority theretofore established, subject
             to the following limitations and conditions:

                 1. [N]o such severance and transfer shall be made
                    unless approved by the director [of ADWR].
                 2. Vested or existing rights to the use of water shall
                    not be affected, infringed upon, nor interfered
                    with [by the proposed severance and
                    transfer] . . . .
                 3. The water rights sought to be transferred shall
                    have been lawfully perfected . . . and shall not
                    have thereafter been forfeited or abandoned. . . .
                 7. An application for severance and transfer of a
                    water right shall be filed with the director. The
                    director shall give notice of the application by
                    publication . . . in a newspaper of general
                    circulation in the county or counties in which
                    the watershed or drainage area is located. The
                    notice shall state that any interested person may
                    file written objections to the proposed severance
                    and transfer with the director within thirty days
                    after the last publication of the notice.

(emphasis added).

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                 ADWR V. MCCLENNEN (MOHAVE CO.)
                         Opinion of the Court

¶13           Resolving this case requires us to decide if ADWR can deny a
properly filed application for reasons other than those identified in § 45-172
and if Mohave County is an “interested person” entitled to file objections
to the proposed transfers.
                                         B.

¶14            In construing statutes, we seek to give effect to the
Legislature’s intent. J.D. v. Hegyi, 236 Ariz. 39, 40 ¶ 6, 335 P.3d 1118, 1119
(2014). By its terms, § 45-172(A) provides that water rights may be severed
and transferred “with the consent of the owner,” and “without losing
priority theretofore established, subject to the following limitations and
conditions.” Subsections (1) through (7) specify various limits or conditions
on transfers, such as a directive that ADWR “shall by order . . . define and
limit the amount of water to be diverted or used annually” to ensure that
the transfer does not affect vested or existing rights. A.R.S. § 45-172(A)(2).

¶15          Moreover, ADWR’s review of an application for the
severance and transfer of water rights is a “licensing decision” as that
phrase is defined in A.R.S. §§ 41-1001(12) and (13). Section 41-1030(B)
prohibits ADWR from basing a licensing decision “in whole or in part on a
licensing requirement or condition that is not specifically authorized by
statute.” The parties do not dispute this point.

¶16           Mohave County does not contend that the proposed transfers
violate any of the limitations and conditions specified in § 45-172. Instead,
the County argues that this statute and others allow ADWR to consider
other factors, such as whether a transfer is contrary to the public interest.
This argument, however, is not supported by the language of § 45-172 or
the other statutes identified by the County.

¶17            The County notes that § 45-172(A) states that a water right
“may be severed . . . and . . . transferred,” and argues that use of the
conditional “may” suggests that ADWR has discretion to deny a transfer
application for reasons other than those identified in § 45-172(A). When
read in context, however, “may” is more plausibly understood as referring
to the ability to sever and transfer the right, cf. Davis, 220 Ariz. at 110 ¶ 10,
203 P.3d at 508 (holding that groundwater rights are not severable), rather
than defining ADWR’s authority in reviewing applications. The word

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                 ADWR V. MCCLENNEN (MOHAVE CO.)
                         Opinion of the Court

“may” at the beginning of § 45-172(A) is followed by the explicit statement
that transfers are “subject to the following limitations and conditions.”

¶18            Under § 45-172(A)(1), water rights generally cannot be
severed and transferred “unless approved by [ADWR]” and such approval
“shall prescribe the conditions of the approval.” To interpret “may” as
affording ADWR broad discretion to deny or condition applications for
reasons other than those set forth in § 45-172(A) would effectively ignore
the limiting language that appears in the same sentence.

¶19            The County identifies two other statutes in arguing that
ADWR can deny applications for reasons not specified in § 45-172(A).
Section 45-141(A), the County notes, states that surface waters “belong to
the public.” That statement, however, is qualified by the recognition that
such waters “are subject to appropriation and use as provided in this
chapter,” § 45-141(A). Once appropriated pursuant to the relevant statutes,
a water right belongs to its owner, with the prospect that the water may
“revert” to the public if the right is forfeited or abandoned, § 45-141(C). In
its objections, the County did not allege any abandonment or forfeiture of
water rights. That surface waters generally belong to the public does not
expand ADWR’s authority to deny – or restrict the owner’s right to effect –
the severance and transfer of an existing water right under § 45-172.

¶20           The County also points to ADWR’s authority under § 45-
153(A) to deny applications for the appropriation of water if, among other
things, the proposed use would be “against the interests and welfare of the
public.” Section 45-153(A) is inapposite, however, because it applies to
initial appropriations of water, which are not at issue here. It does not
address ADWR’s authority in reviewing applications for the severance and
transfer of existing water rights. That the legislature directed ADWR to
consider the public interest in § 45-153(A) but omitted any such directive in
§ 45-172 itself suggests that the latter statute more narrowly defines
ADWR’s authority in reviewing applications for severance and transfer. See
Lewis v. Debord, 238 Ariz. 28, 31-32 ¶ 11, 356 P.3d 314, 317-18 (2015)
(declining to construe statute as impliedly including a requirement
expressly stated in related statutes).

¶21          The County is likewise unconvincing in arguing that the
proposed transfers should be treated as de facto new appropriations
because they involve “a new location with different geography, geology,

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                 ADWR V. MCCLENNEN (MOHAVE CO.)
                         Opinion of the Court

rainfall, and neighbors.” Accepting this argument would displace § 45-
172(A), which recognizes that the transfer of a water right involves its use
in a new location, and also takes into account certain aspects of the existing
and proposed location, §§ 45-172(A)(4)-(6) (discussing transfers of rights
either from within or into boundaries of irrigation districts, agricultural
improvement districts, or water users’ associations), and impacts on certain
“neighbors,” § 45-172(A)(2) (providing that severance and transfer shall not
affect other vested or existing water rights).

¶22           In short, ADWR’s authority to deny a properly filed
application for the severance and transfer of water rights is defined by the
“limitations and conditions” set forth in § 45-172(A). Accordingly, ADWR
did not abuse its discretion, act arbitrarily or capriciously, or act contrary to
law in denying the County’s objections to the proposed transfers, when
those objections did not identify any violation of § 45-172(A).

                                       C.

¶23          The scope of ADWR’s authority to deny an application for
severance and transfer is related to the second question we address: who
qualifies as “any interested person” entitled to file objections to an
application under § 45-172(A)(7)?

¶24            The phrase “any interested person” is ambiguous because it
is not statutorily defined and is subject to more than one reasonable
meaning. See State ex rel. Montgomery v. Harris (Shilgevorkyan), 234 Ariz. 343,
345 ¶ 12, 322 P.3d 160, 162 (2014). We therefore must rely on other tools of
statutory construction in resolving the ambiguity to give effect to the
legislature’s intent. See id. at 345 ¶ 13, 322 P.3d at 162.

¶25           The County argues that “interested” generally means having
an interest in or concern about something, as its objections to the
applications reflect, and thus it is an “interested person” authorized to file
objections. But this argument effectively renders the word “interested”
meaningless, as it would result in reading the statute as saying that any
person may file objections if so inclined. It also ignores the fact that
statutory words cannot be construed in isolation from their context. See
Lewis, 238 Ariz. at 28 ¶ 16, 356 P.3d at 318.

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                 ADWR V. MCCLENNEN (MOHAVE CO.)
                         Opinion of the Court

¶26            It is a “fundamental principle of statutory construction (and,
indeed, of language itself) that the meaning of a word cannot be determined
in isolation, but must be drawn from the context in which it is used.” Deal
v. United States, 508 U.S. 129, 132 (1993). The relevant phrase here is “any
interested person” and it is used in a statute identifying those who may file
objections to applications to sever and transfer water rights. The
combination of “interested” with “person” means that the words must be
interpreted together. As the Supreme Court has noted in a similar context,
“two words together may assume a more particular meaning than those
words in isolation.” FCC v. AT&T Inc., 562 U.S. 397, 404–06 (2011) (refusing
to interpret “personal privacy” based on meaning of “personal” in
isolation). For example, we “understand a golden cup to be a cup made of
or resembling gold. . . . A golden opportunity is one not to be missed.” Id.
at 406.

¶27           Read in context, the phrase “any interested person” is most
reasonably understood as referring to any person who has an “interest” that
is protected by § 45-172 and that may be affected by the proposed transfer.
Under this reading, for example, persons with “vested or existing rights to
the use of water” could object to an application on the grounds that it would
interfere with their rights. The County acknowledges that it has no such
rights. Similarly, persons could object to an application if their consent was
required but not obtained for a proposed severance and transfer. See § 45-
172(A)(6). Without intending to exhaustively list those who may qualify as
“interested persons,” we also think such persons would include those who
contend that an application concerns a right that has been abandoned or
forfeited and the objecting party has an interest in appropriating the water
from the public domain. See A.R.S. §§ 45-172(A)(3); 45-141(C). But the
County made no such allegation in its objections before ADWR.

¶28           The County makes several other arguments for a broader
interpretation of the phrase “any interested person,” but we find them
unconvincing. First, the County argues that because § 45-172(A)(7) requires
that notice of an application be published in the county or counties where
the watershed or drainage is located, the phrase “interested person” must
encompass more than just those who have existing water rights, as a notice
could be more narrowly targeted to such persons. This argument fails
because requiring public notice about pending applications is not
inconsistent with limiting objections to those who have interests protected
by § 45-172(A), and the latter group is not necessarily limited only to those

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                 ADWR V. MCCLENNEN (MOHAVE CO.)
                         Opinion of the Court

who currently hold permits or certificates issued by ADWR under § 45-
151(E).

¶29            Relying on general standing principles, the County also
asserts that it has alleged the applications will cause it an “injury” and
therefore it is an “interested person” under § 45-172(A)(7). The County
argues that granting the applications could “have a negative effect on water
supplies in the area” or increase the tax burden on County residents by
increasing the amount of government-owned, untaxed land in the County.
These alleged injuries are disputed. But more importantly, the County’s
argument incorrectly conflates standing, which is a prudential doctrine by
which courts eschew deciding issues when the plaintiff fails to allege a
sufficient injury, see e.g., Bennett v. Napolitano, 206 Ariz. 520, 524 ¶ 16, 81
P.3d 311, 315 (2003), with the question of who is statutorily authorized, as
an “interested person,” to file objections in an ADWR administrative
proceeding under § 45-172(A).

¶30            The County cites A.R.S. § 11-269.09(A) for the proposition that
ADWR must consult and coordinate with the County before deciding on
the applications. This statute, however, generally provides that a county
shall “demand by any lawful means” that the federal or state government
“coordinate” with the County before enforcing a “law, regulation, plan or
policy” that is stricter than those of the County itself. A.R.S. § 11-69.09(A).
This statute does not apply here.

¶31            The County also cites A.R.S. § 11-804 as support for its claim
that it is “statutorily obligated to plan for and protect water resources in
Mohave County.”           Section 11-804 requires counties to develop
comprehensive plans generally intended to guide development. A.R.S.
§ 11-804(A). Plans for counties with a population exceeding 125,000, like
Mohave County, must include “[p]lanning for water resources that
addresses the known legally and physically available surface water,
groundwater, and effluent supplies.” Id. at § 11-804(B)(3)(a). This statute,
however, does not purport to give the County any authority over the
severance and transfer of water rights. Nor do the planning obligations
otherwise create any right on the part of the County that is recognized or
protected by § 45-172.

¶32           Finally, the County argues that § 45-172(A) should be applied
liberally to “promote the ends of justice,” noting the Court adopted this

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                 ADWR V. MCCLENNEN (MOHAVE CO.)
                         Opinion of the Court

approach in construing the phrase “party beneficially interested” in
Arizona’s mandamus statute. See A.R.S. § 12-2021; Armer v. Superior Court,
112 Ariz. 478, 480, 543 P.2d 1107, 1109 (1975). But the County does not
convincingly explain why the phrase “party beneficially interested” should
be considered synonymous with the phrase “any interested person.” The
mandamus statute reflects the Legislature’s desire to broadly afford
standing on members of the public to bring lawsuits to compel officials to
perform their “public duties.” See Armer, 112 Ariz. at 480, 543 P.2d at 1109.
In contrast, the phrase “any interested person” in § 45-172(A)(7) has nothing
to do with satisfying standing to file a lawsuit. Rather, it allows certain
persons to file objections to an application for severance and transfer of
water rights being considered by ADWR.

¶33           For the reasons noted, we construe the phrase “any interested
person” in § 45-172(A)(7) as referring to persons who allege that they have
an interest that is protected by that statute and that would be affected by
the application for severance and transfer. Because Mohave County has
identified no such interest, ADWR correctly concluded that the County is
not an “interested person” entitled to file objections to the applications here.

                                      III.

¶34            Under A.R.S. § 45-172(A), “any interested person” may file
objections to severance and transfer applications on the grounds that they
violate the “limitations and conditions” of that statute. Mohave County
does not qualify as an “interested person” and it has not challenged the
applications as contrary to any of the requirements of § 45-172(A). ADWR
did not err in denying the County’s objections.

¶35            We vacate the judgment of the superior court and affirm
ADWR’s final decision, which is not subject to further appeal. In the
superior court and before this Court, ADWR requested an award of
attorney fees pursuant to A.R.S. § 12-348.01. Because ADWR is the
successful party, we grant the request but remand the case to the superior
court for a determination of the amount of the award and other proceedings
consistent with this opinion.

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