Court Opinion

ID: 2961214
Source: CourtListenerOpinion
Date Created: 2015-09-21 15:08:09.935657+00
Date Added: 2024-06-11T11:42:18.522002
License: Public Domain

ORDER OF REVERSAL AND REMAND

                             These consolidated appeals challenge the district court's
                 orders denying judicial review of the State Water Engineer's decisions
                 affecting water rights. Seventh Judicial District Court, Eureka County;
                 Dan L. Papez, Judge. Under NRS 533.370(2), the State Engineer "shall
                 reject" an application for a proposed use of water or change of existing
                 water rights where that "proposed use or change conflicts with existing
                 rights." The parties ask this court to determine whether this section
                 allows for the State Engineer to take into account the applicant's ability to
                 mitigate the drying up of existing rights holders' water sources when
                 determining if a proposed use or change will conflict with existing rights.
                 However, even assuming that under NRS 533.370(2) the State Engineer
                 has authority to grant an application that conflicts with existing rights
                 based upon a determination that the applicant will be able to mitigate, the
                 State Engineer's decision to approve the applications and issue the
                 permits at issue here is not supported by sufficient evidence that
                 successful mitigation efforts may be undertaken so as to dispel the threat
                 to the existing rights holders. We thus reverse the district court's decision
                 denying judicial review of the State Engineer's decisions and remand.
                                                       I.
                             At the heart of this appeal is the Mount Hope Mine, a large
                 proposed molybdenum mine that General Moly, Inc. seeks to establish in
                 Eureka County. The mine's contemplated life is 44 years, and will require
                 an estimated total of 11,300 acre feet of water per year (afa). To provide
                 the water for the mine, General Moly seeks to pump groundwater by well
                 from the Kobeh Valley and Diamond Valley groundwater basins, basins
                 that already source many existing water rights, which will cause a
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                     drawdown of the water table throughout the two valleys. According to a
                     water resources monitoring plan created by Eureka Moly, LLC, a
                     subsidiary of General Moly, the vast majority of this water for the Mount
                     Hope Mine "will be consumptively used in processing activities of the
                     [mining] Project (i.e.[,] no water will be returned to the aquifer)."
                                 General Moly created respondent Kobeh Valley Ranch, LLC
                     (KVR) to hold and control the water rights for the project. Water rights
                     already appropriated by a predecessor entity associated with the mining
                     project were transferred to KVR, as were existing applications to
                     appropriate water that the predecessor had filed in 2005. Throughout
                     2006 to 2010 KVR also filed numerous applications to change the point of
                     diversion, the place of use, and the manner of use of other of its existing
                     water rights. Appellant Eureka County protested KVR's applications on
                     numerous grounds, including that KVR's groundwater appropriations
                     would conflict with existing rights under NRS 533.370(2). A number of
                     holders of senior water rights sourced in Kobeh Valley and Diamond
                     Valley also protested on those, and other, grounds. The State Engineer
                     originally held a hearing on the applications, then pending, in 2008, after
                     which he approved some of KVR's applications over these objections, but
                     upon review the district court vacated the ruling and remanded the matter
                     back to the State Engineer for a new hearing.
                                 The State Engineer held another hearing in 2010, in which he
                     accepted the evidence presented at the first hearing and allowed
                     additional evidence to be presented regarding specific water usage at the
                     proposed mining project. The State Engineer ultimately granted all of
                     KVR's applications in his Ruling Number 6127.

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                            Pertinent to this appeal, the State Engineer recognized that
                certain springs located on the Kobeh Valley floor that are in hydrologic
                connection with the underlying water table and that source existing,
                senior water rights would be "impacted" by KVR's pumping. However, the
                State Engineer found that KVR could fully mitigate any impact, and to
                that end required KVR to prepare, with the assistance of Eureka County,
                a monitoring, management, and mitigation plan (3M Plan) for approval by
                the State Engineer before KVR diverted any water. The State Engineer
                then issued KVR the various requested use and change permits requested
                by KVR.
                            Eureka County, as well as appellants Kenneth F. Benson,
                Diamond Cattle Company, LLC, and Michel and Margaret Ann
                Etcheverry Family, LP, (collectively referred to as Benson-Etcheverry), all
                of whom hold existing, senior rights in the valleys, petitioned the district
                court for judicial review of Ruling 6127. The district court denied the
                petition, finding that substantial evidence supported the State Engineer's
                decision that KVR would be able to mitigate any adverse impacts to
                existing water rights. The district court further held that NRS 533.370(2)
                "does not prevent the State Engineer from granting applications that may
                impact existing rights if the existing right can be protected through
                mitigation, thus avoiding a conflict with existing rights."
                            While Ruling 6127 was before the district court, KVR
                developed a 3M Plan in coordination with Eureka County. Though the
                State Engineer approved the 3M Plan, he retained ultimate authority over
                it, stating that the 3M Plan was approved with the "understanding that
                components of the Plan are subject to modification based on need, prior
                monitoring results, or changes in the approved water rights." Benson-

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                Etcheverry petitioned the district court for judicial review of this decision,
                but the district court denied that petition as well.
                            Eureka County and the appellant senior right's holders appeal
                the district court's order denying judicial review of Ruling 6127. The
                appellant senior right's holders also appeal the district court's subsequent
                order denying judicial review of the State Engineer's approval of the 3M
                Plan.

                                                      A.
                            The State Engineer, who is charged with administering the
                water rights in this state, Desert Irrigation, Ltd. v. State, 113 Nev. 1049,
                1061, 944 P.2d 835, 843 (1997), is required to approve applications to
                appropriate new water rights or to change the place, manner, or use of
                existing water rights if the applicant meets certain statutory
                requirements. NRS 533.370(1). However:
                            Except as otherwise provided in subsection 10
                            [which excepts applications for environmental or
                            temporary permits], where there is no
                            unappropriated water in the proposed source of
                            supply, or where its proposed use or change
                            conflicts with existing rights or with protectable
                            interests in existing domestic wells as set forth in
                            NRS 533.024, or threatens to prove detrimental to
                            the public interest, the State Engineer shall reject
                            the application and refuse to issue the requested
                            permit.
                NRS 533.370(2) (emphases added).
                            The State Engineer and KVR submit that the State Engineer
                may conditionally grant proposed use or change applications on the basis
                of future successful mitigation, thereby ensuring that the new or changed
                appropriation does not conflict with existing rights, in accordance with
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                 NRS 533.370(2). This court has never addressed whether the statute may
                 be read in this manner, and we need not do so at this time. Even
                 assuming that the State Engineer may grant a proposed use or change
                 application on the basis of the appropriator's ability to successfully
                 mitigate and bring the existing water rights back to their full beneficial
                 use, substantial evidence does not support the State Engineer's decision
                 that this is the case here. Town of Eureka v. Office of State Eng'r of State
                 of Nev., Div. of Water Res.,    108 Nev. 163, 165, 826 P.2d 948, 949 (1992)
                 ("With questions of fact, the reviewing court must limit itself to a
                 determination of whether substantial evidence in the record supports the
                 State Engineer's decision.").
                                                       B.
                             The State Engineer in his Ruling 6127 recognized that there
                 would be extensive" drawdown of the water table in Kobeh Valley near
                 KVR's main well field area due to KVR's groundwater pumping, which
                 could "impact" existing "rights on springs and streams in hydrologic
                 connection with the water table ... includ[ing] valley floor springs." He
                 also recognized that:
                             Water rights that could potentially be impacted
                             are those rights on the valley floor where there is
                             predicted drawdown of the water table due to
                             mine pumping. The Applicant recognizes that
                             certain water rights on springs in Kobeh Valley
                             are likely to be impacted by the proposed
                             pumping. These springs produce less than one
                             gallon per minute and provide water for livestock
                             purposes.

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                 (Footnotes omitted)} But the evidence to which the State Engineer cited
                 demonstrates that more than just an "impact" to these low-flow springs
                 would occur. For instance, the State Engineer cited to KVR's
                 hydrogeology expert Terry Katzer's testimony at the 2010 hearing that
                 KVR's pumping would dry up certain springs and stock watering wells:
                            Q: Okay. Will the pumping over time cause
                            impacts to springs in direct stock watering wells
                            in the floor of Kobeh Valley?
                            A: I believe it will. And I can't name the springs
                            because I am not that familiar with them. Mud
                            Springs, for instance, I know where that is. I've
                            been there. It will probably dry that up with time.
                            And other springs that are in close proximity to
                            the well field.
                            Q: Stock watering wells?
                            A: Stock watering wells, yes, probably.
                 Flow modeling reports by KVR's hydrogeology and groundwater modeling
                 expert, Dwight Smith, to which the State Engineer also cited, confirmed
                 this assessment:
                            Springs located in lower altitudes in the Roberts
                            Mountains. . . are more likely to be impacted due
                            to closer proximity to the KVCWF[ Kobeh Valley
                            Central Well Field], resulting in larger predicted
                            drawdown at these locations. Discharge at Mud
                            Spring (Site 721) and Lone Mountain Spring (Site
                            742), located near the southeast edge of the
                            KVCWF near proposed well 226, are predicted to
                            be impacted and will likely cease to flow based on

                       'Eureka County challenges the "less than a gallon per minute"
                 finding, but KVR's 2010 flow modeling report indicates that these springs
                 produced less than a gallon per minute. And, while the inventory KVR
                 prepared in 2011 shows an estimated less than five gallon flow for Mud
                 Spring, this is not inconsistent with a less than one gallon flow finding.

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                                predicted drawdowns of 40 to 50 feet. Both of
                                these springs discharge less than approximately
                                one gallon per minute.
                 Smith also testified that Mud Springs and another spring called Lone
                 Mountain Spring would cease to flow fairly soon after KVR begins
                 pumping.
                                The federal Bureau of Land Management (BLM) claims
                 unadjudicated reserved rights sourced from Lone Mountain Springs. And
                 respondent Etcheverry Family, LP, holds permitted existing rights in Mud
                 Springs, rights consisting of 10.86 afa to use for stock watering purposes.
                                Therefore, contrary to the State Engineer's, KVR's, and amici's
                 assertions, 2 KVR's pumping would not merely impact existing water
                 rights; the very evidence upon which the State Engineer relied
                 demonstrates that KVR's appropriation would cause the complete
                 depletion of the source of existing water rights. The Legislature did not
                 define exactly what it meant by the phrase "conflicts with" as used in NRS
                 533.370(2), but if an appropriation that would completely deplete the
                 source of existing water rights does not "conflict with" those existing
                 rights, then it is unclear what appropriation ever could. Furthermore,
                 dictionary definitions from around the time a statute is enacted can aid
                 this court in deciphering that statute's meaning, Douglas v. State, 130
                 Nev., Adv. Op. 31, 327 P.3d 492, 494 (2014), and contemporaneous
                 reference material with the Legislature's adoption of the "conflicts with"
                 aspect of NRS 533.370(2), defines "conflict," in verb form, as "No be in

                       2 This
                           court authorized two amicus briefs, one filed on behalf of
                 several municipal water purveyors and one filed on behalf of Nevada
                 Energy.

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                opposition; be contrary or at variance."           See 2 THE CENTURY
                DICTIONARY AND CYCLOPEDIA, WITH A NEW ATLAS OF THE WORLD, at
                1186 (rev. enl. ed. 1911); 1913 Nev. Stat., ch. 140, § 63. To the extent that
                KVR's proposed appropriations would deplete the water available to
                satisfy existing rights at issue, they are undeniably "in opposition" thereto,
                and thus "conflict with" the existing rights under NRS 533.370(2). 3
                                                      C.
                              Considered separate and apart from any potential mitigation
                techniques, the appropriations in question are in conflict with existing
                water rights in the valleys. But the State Engineer found KVR could
                implement mitigation techniques that would ameliorate the depletion of
                Mud Springs: "The State Engineer finds that this flow loss can be
                adequately and fully mitigated by the Applicant should predicted impacts
                occur." Furthermore, because "the only way to fully ensure that existing
                water rights are protected is by closely monitoring hydrologic conditions
                while groundwater pumping occurs," the State Engineer found that "a
                monitoring, management and mitigation plan prepared with input from
                Eureka County must be approved by the State Engineer prior to pumping
                groundwater for the project." The State Engineer thus concluded that:
                "Based upon substantial evidence and testimony, and the monitoring,
                management and mitigation plan requirement, the State Engineer

                      3 The State Engineer's ruling states that though the BLM originally
                protested KVR's appropriations, it withdrew its protests "after reaching a
                stipulation on monitoring, management and mitigation" with KVR. It
                seems the State Engineer assumed this was sufficient to dispense with the
                conflict under NRS 533.370(2), but this is a less than clear conclusion. In
                any event, Etcheverry Family, LP, has not withdrawn its protest of KVR's
                applications.

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                      concludes that the approval of the applications will not conflict with
                      existing water rights . . . ."
                                   Nowhere in the ruling, however, does the State Engineer
                      articulate what mitigation will encompass, even in the most general sense.
                      And evidence of what that mitigation would entail and whether it would
                      indeed fully restore the senior water rights at issue is lacking: there was
                      no mitigation plan in the record before the district court or in existence
                      when KVR's applications were granted. Indeed, KVR's representative
                      Patrick Rogers acknowledged that he didn't "know what we [General
                      Moly] would propose in a mitigation plan. A mitigation plan hasn't been
                      developed yet. It would be speculative to say what we would or would not
                      propose."
                                   The State Engineer and KVR point to KVR's experts'
                      testimony as evidence that mitigation could occur and would be successful.
                      But Katzer testified only that there were a variety of [mitigation]
                      techniques. You could increase the well if it's being fed by a well or you
                      could run a pipeline to it from part of the distribution system." Smith
                      similarly testified that if predicted water table drawdown were to occur
                      due to KVR's pumping, "certainly there can be mitigation measures taken,
                      many of which could include shifting[] pumping around the well field as an
                      easy example." While KVR's experts testified as to the existence of a few
                      possible mitigation techniques, they did not specify what techniques would
                      work, much less techniques that could be implemented to mitigate the
                      conflict with the existing rights in this particular case. And concerns over
                      precisely how KVR, or its parent company Eureka Moly, would mitigate
                      these conflicts are not without cause: Martin Etcheverry testified that
                      after KVR did some experimental pumping, one of his springs, Nichols

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                 Springs, was noticeably lower than before the pumping and that it had not
                 yet returned to its pre-pumping levels. And according to Eureka County's
                 natural resource manager, the Nichols Springs lowering was brought to
                 Eureka Moly's attention multiple times, including at a meeting at the
                 BLM's Battle Mountain office, but that neither KVR nor Eureka Moly had
                 done anything to address the lowering of that spring.
                             The State Engineer and KVR alternatively assert the existing
                 rights holders conceded that mitigation could be accomplished. But the
                 existing rights holders, including Martin Etcheverry, merely recognized in
                 their 2010 hearing testimony that they would be satisfied if KVR could
                 completely and successfully mitigate the interference with their rights.
                             The State Engineer implies on appeal that KVR's mitigation
                 could encompass providing substitute water to the senior rights holders by
                 arguing that said holders are entitled only to the beneficial use of the
                 amount of their water rights, and have no right to the historical source of
                 their water rights.   See Desert Irrigation, Ltd. v. State, 113 Nev. 1049,
                 1059, 944 P.2d 835, 842 (1997) ("[E]ven those holding certificated, vested,
                 or perfected water rights do not own or acquire title to water. They merely
                 enjoy the right to beneficial use."). But to the extent KVR's mitigation
                 would involve substitute water sources—which is not reflected in the State
                 Engineer's decision or the evidence that was presented to him—there was
                 no evidence before the State Engineer that KVR applied for or committed
                 certain of its already obtained water rights to mitigation or where the
                 substituted water would otherwise come from. And, using the State
                 Engineer's numbers regarding the amount of water in the basin, there
                 may not be any water left to use for mitigation after KVR's appropriation.
                 The State Engineer found Kobeh Valley had 15,000 afa total. KVR's

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                 appropriation is 11,300 afa, and the other committed rights had 1,100 afa,
                 which left 2,600 afa for future appropriation. However, there is 5,530 afa
                 in nonadjudicated claims to vested or reserved rights on file in the State
                 Engineer's office.
                             This is setting aside the further, specious assumption that
                 water from a different source would be a sufficient replacement. Take, for
                 example, the testimony given by an existing rights holder before the State
                 Engineer that he had seen problems before with piping in water for
                 animals because the pipes can freeze and interfere with the flow in the
                 extreme winter cold. Given these, seemingly supported, concerns over
                 such potential problems, it is therefore unclear that substitution water, if
                 available, would be sufficient.   See, e.g., Weibert v. Rothe Bros., Inc.,   618
                 P.2d 1367, 1373 (Colo. 1980) ("In order to determine the adequacy of the
                 [augmentation] plan to accomplish its intended purpose, it is necessary to
                 consider the adequacy of the replacement water rights."); see also Rocky
                 Ford Irrigation Co. v. Kents Lake Reservoir Co., 135 P.2d 108, 114 (Utah
                 1943) (examining whether the exchange of water deteriorates water
                 quality or quantity to such a degree as to "materially impair[ ] the use.").
                             Added to this, a surface water rights holder may be found to
                 have abandoned its right if it no longer delivers the water or maintains
                 the source of diversion. NRS 533.060(4)(a)-(d). Requiring that existing
                 right holders use water other than from the source that they currently
                 have rights in might mean the existing right holder would need to obtain a
                 new permit to appropriate that new water.         See NRS 533.060(5) ("Any
                 such right to appropriate any of the water must be initiated by applying to
                 the State Engineer for a permit to appropriate the water as provided in
                 this chapter."). KVR did not address before the State Engineer this

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                 potential obstacle to providing water from an alternate source to mitigate,
                 and neither did the State Engineer's ruling.
                             Finally, KVR asserts that the State Engineer's determination
                 that "it is readily feasible to avoid conflicts when mitigating impacts to
                 water sources that produce relatively minor amounts of water" merely
                 reflects the State Engineer's "experience and common sense." But this is
                 precisely the problem with the State Engineer's ruling: though the State
                 Engineer certainly may use his experience to inform his decision making,
                 his decisions must be supported by substantial evidence in the record
                 before him, which is not the case here.   Town of Eureka, 108 Nev. at 165,
                 826 P.2d at 949.
                                                      D.
                             Essentially, and with all other arguments aside, the State
                 Engineer and KVR's position is that the State Engineer may leave for a
                 later day, namely the day the 3M Plan is put before him, the
                 determination of exactly what KVR's mitigation would entail. But the
                 State Engineer's decision to grant an application, which requires a
                 determination that the proposed use or change would not conflict with
                 existing rights, NRS 533.370(2), must be made upon presently known
                 substantial evidence, rather than information to be determined in the
                 future, for important reasons.
                             First, those who protest an application to appropriate or
                 change existing water rights must have a full opportunity to be heard, a
                 right that includes the ability to challenge the evidenceS upon which the
                 State Engineer's decision may be based. Revert v. Ray, 95 Nev. 782, 787,
                 603 P.2d 262, 264 (1979); see also NRS 533.365(5) ("Each applicant and
                 each protestant shall. . . provide to the State Engineer and to each
                 protestant and each applicant information required by the State Engineer
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                relating to the application or protest.").   Cf. Bowman Transp., Inc. v.
                Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 288 n.4 (1974) ("[T]he Due
                Process Clause forbids an agency to use evidence in a way that forecloses
                an opportunity to offer a contrary presentation."). This necessarily means
                that the opportunity to challenge the• evidence must be given before the
                State Engineer grants proposed use or change applications. Those who
                protest an application's grant cannot be forced to wait and challenge a
                future 3M Plan because, as Benson-Etcheverry note: "The appeal as to
                Ruling No. 6127 can result in vacating the Ruling, among other remedies.
                However, appeal of the 3M Plan can only result in vacating the Plan." In
                other words, challenging the sufficiency of a later developed mitigation
                plan cannot undo a decision to grant applications for a proposed use or
                change that may have been erroneous. And allowing the State Engineer
                to grant applications conditioned upon development of a future 3M Plan
                when the resulting appropriations would otherwise conflict with existing
                rights, could potentially violate protestants' rights to a full and fair
                hearing on the matter, a rule rooted in due process.    Revert, 95 Nev. at
                787, 603 P.2d at 264.
                            Furthermore, the State Engineer's decision to grant an
                application must be sufficiently explained and supported to allow for
                judicial review. Revert, 95 Nev. at 787, 603 P.2d at 265; see also Port of
                Jacksonville Mar. Ad Hoc Comm., Inc. v. U.S. Coast Guard, 788 F.2d 705,
                708 (11th Cir. 1986) (even under deferential substantial evidence review,
                courts must not merely "rubber stamp" agency action: they must
                determine that the 'agency articulated a rational connection between the
                facts presented" and the decision) (citation omitted). The State Engineer
                thus may not defer the determination of what mitigation would encompass

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                  to a later date: even if he may grant applications where the resulting
                  appropriations would conflict with existing rights based upon the finding
                  that the applicant would be able to successfully mitigate that deleterious
                  effect, an assumption we do not adopt today, the finding must be based
                  upon evidence in the record to support that mitigation would be successful
                  and adequate to fully protect those existing rights.   See City of Reno v.
                  Citizens for Cold Springs, 126 Nev., Adv. Op. 27, 236 P.3d 10, 18-19 (2010)
                  (law requiring local governments to make a finding about plans for
                  adequate services and infrastructure prior to amending a master plan to
                  allow further development "require[d] something more than the deferral of
                  the issue or broad, evasive conclusions about how officials can build or
                  expand utilities if necessary").

                              In sum, substantial evidence does not support the State
                  Engineer's finding that KVR would be able to "adequately and fully"
                  mitigate the fact that its groundwater appropriations will cause Kobeh
                  Valley springs that sources existing rights to cease to flow. The State
                  Engineer's decision to grant KVR's applications, when the result of the
                  appropriations would conflict with existing rights, and based upon
                  unsupported findings that mitigation would be sufficient to rectify the
                  conflict, violates the Legislature's directive that the State Engineer must
                  deny use or change applications when the use or change would conflict
                  with existing rights. NRS 533.370(2). As appellants have met their
                  burden to show the State Engineer's decision was incorrect, NRS
                  533.450(10), the State Engineer's decision to grant KVR's applications
                  cannot stand. Therefore, we

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                                 REVERSE AND REMAND this matter to the district court for
                      proceedings consistent with this order. 4 Because we reverse and remand
                      on this basis, we do not reach the remaining issues raised in these
                      consolidated appeals.

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                            From the record and Ruling 6127, it is unclear which of KVR's
                            4
                      applications for proposed use or change in Kobeh Valley, if it can be
                      pinpointed, is the appropriation that will cause the springs to dry up.
                      Therefore, we must overturn the entire decision.

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                    cc: Seventh Judicial District Court Dept. 2
                          William E. Nork, Settlement Judge
                          Allison, MacKenzie, Ltd.
                          Schroeder Law Offices, P.C.
                          Eureka County District Attorney
                          Attorney General/Carson City
                          Parsons Behle & Latimer/Salt Lake City
                          Parsons Behle & Latimer/Reno
                          Las Vegas City Attorney
                          Brownstein Hyatt Farber Schreck, LLP/Las Vegas
                          Dana R. Walsh
                          Lewis Roca Rothgerber LLP/Las Vegas
                          McDonald Carano Wilson LLP/Reno
                          Dyer, Lawrence, Penrose, Flaherty, Donaldson & Prunty
                          Gregory J. Walch
                          Carson City District Attorney
                          Henderson City Attorney
                          Rowe Hales Yturbide, LLP
                          Taggart & Taggart, Ltd.
                          Eureka County Clerk

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