On January 29, 2002, the State Water Resources Control Board (SWRCB) issued a report entitled “Review of the Laws Establishing the SWRCB’s Permitting Authority Over Appropriateness of Groundwater Classified as Subterranean Streams and the SWRCB’s Implementation of those Laws” that was prepared for the SWRCB by Professor Joseph Sax of the University of California, Berkeley. Despite its somewhat lengthy title, this report (which is now commonly referred to as the “Sax Report”) is an important development in California’s ongoing debate on how to manage the state’s groundwater resources.

As described below, the Sax Report crystallizes two concepts that have gained some popularity and credence during the past few years. First, the Sax Report advocates that Water Code § 1200, which grants the SWRCB authority over “Subterranean streams flowing through known and definite channels,” be read to grant the SWRCB authority over groundwater when the extraction of that groundwater would have an “appreciable and direct impact” on a surface stream. Second, the Sax Report indicates that the SWRCB possesses and should exercise authority over groundwater, either under the public trust doctrine or under the waste and unreasonable use doctrine, when the extraction of that groundwater might have an adverse impact on instream values.

The Sax Report represents a serious and thoughtful attempt to shift the conceptual focus of California groundwater law from notions of real property (e.g., overlying ownership) to the protection of environmental resources (e.g., impacts on instream values). This effort is fundamentally flawed, however, for three reasons. First, the legal analysis supporting the “impacts” test simply doesn’t survive scrutiny. The Sax Report ignores a basic canon of statutory interpretation: when the courts have interpreted statutory language and the Legislature then re-enacts that language in a new law, there is a virtually conclusive presumption that the Legislature intended to adopt the judicial interpretation of that language. Second, the Sax Report’s view of the public trust doctrine ignores significant procedural and substantive problems. Third, and most important, the Sax Report – like much current dialogue about groundwater – proceeds on the assumption that the interconnected nature of groundwater and surface water requires an integrated legal regime. Examining the differences between groundwater and surface water, however, suggests that there are sound policy reasons that California has decided to treat those two resources separately.

SWRCB Jurisdiction – The Impacts Test

The Sax Report spends more than half of its length developing an interpretation of Water Code § 1200 as being intended to: create an impact test (impact of pumping on surface stream flows), rather than seeking to identify a physical entity with a specific shape, despite the conventional ‘subterranean stream’ language the law picked up from the old treaties.

The Sax Report proceeds to this goal in two major steps.

First, the report discusses a number of the seminal groundwater cases, beginning with Los Angeles v. Pomeroy, 124 Cal. 597 (1899). The report argues that the California Supreme Court’s goal in Pomeroy was to ensure the City of Los Angeles a secure water supply if, when the question was finally presented, the Supreme Court were to decide that California law gave an overlying landowner absolute ownership of all groundwater that could be extracted from the land. The report then notes that in Katz v. Walkinshaw, 141 Cal. 116 (1903), the Supreme Court repudiated the notion of the absolute ownership of groundwater, instead substituting the concept of correlative ownership of the groundwater resource. Indeed, the Sax Report notes that the Supreme Court found the concept of a subterranean stream to be unnecessary a mere one month after it decided Katz. In McClintock v. Hudson, 141 Cal. 275, 281 (1903), the Supreme Court stated that it was: to a large extent immaterial whether the waters in this land wee or were not a part of an underground stream, provided the fact be established that their extent, or to some substantial extent, the waters flowing in the stream.

The net result of these cases, argues the report, was to focus squarely on whether “groundwater was known to be contributing to the stream.” The Sax Report, not surprisingly, takes these cases as establishing the intent of the California Supreme Court to develop an impact test for groundwater. (That theory is probably accurate but is irrelevant to the interpretation of Water Code § 1200 for the reasons described below.)
Second, the Sax Report turns to the Legislature’s enactment of Water Code § 1200 itself. Because there are no surviving records of the Legislature’s debates on the bill language that became Water Code § 1200, the report turns its attention to the debates of the Conservation Commission, which was charged with providing the Legislature with recommendations that eventually became the Water Commission Act (and so is the progenitor of Water Code § 1200). The report concludes that the bill proposed by the Conservation Commission sought to eliminate the “distinctions between groundwater and surface water legal regimes, and to institute integrated, parallel systems.” By extension, argues the report, Water Code § 1200 should be interpreted with these goals in mind and so be read to demand an impacts test.

The key problem with this analysis – which the Sax Report, to its credit, in part acknowledges – is that the Legislature did not accept the language recommended by the Conservation Commission. Instead, the Legislature reverted to the subterranean stream language originally used by the California Supreme Court in the Pomeroy decision. As the Sax Report states (emphasis added):

But – and this is the most important ‘but’ in this Report – as it turned out, the legislation upon which Water Code § 1200 rests did not follow in the path that Justice Shaw and the California Supreme Court’s subsequent pueblo rights cases set out for it. Instead, by a circuitous path, the legislature was led back to the distinction and the formulation that the Pomeroy Court had used.

It is well-settled that… where the language of a statute uses terms that have been judicially construed, the presumption is almost irresistible that the terms have been used in the precise and technical sense that had been placed upon them by the courts. (People v. Lawrence, 24 Cal.4th 219, 231 (2000)).

The Legislature, of course, is presume to be “aware of existing laws and judicial constructions in effect at the time the legislation is enacted” and so the use of judicially construed language is deemed to reflect the intent to codify that judicial construction. (See Wilson v. John Crane, Inc., 81 Cal.App.4th 847, 855 (2000)). Accordingly, there is an “almost irresistible” presumption that – notwithstanding the efforts of the California Supreme Court to depart from the “subterranean stream” language of Pomeroy – the California Legislature disagreed with the Supreme Court and readopted in enacting Water Code § 1200.

The Sax Report struggles against this conclusion, contending that the “likeliest explanation” for the Legislature’s use of the subterranean streams language is that the legislative draftsmen “simply plugged in familiar language that was already a part of water law terminology.” However, the report’s rationale for this casual disregard for the specific words in the statute is that the “subterranean stream language of Pomeroy was the only established verbal tool” for achieving the Legislature’s goal. Given that the Legislature was and is presume to know the law, it would have been exceedingly odd for the Legislature to use the phrase “subterranean stream” to codify the abolition of that doctrine. Accordingly, while the Sax Report tries mightily to establish a case for an impacts test for groundwater jurisdiction under Water Code § 1200, that effort is, in the end, not successful.

SWRCB Jurisdiction – Public Trust and Waste/Unreasonable Use

Perhaps recognizing the futility of contending that the Legislature did not really mean to codify Pomeroy in using the language of subterranean streams in Water Code § 1200, the Sax Report spends its last major chapter exploring whether the expansion of the SWRCB’s jurisdiction under either the public trust doctrine or the waste and unreasonable use doctrine (as codified in Water Code § 275) could be used to create a more rational system of groundwater management. In so doing, the Sax Report articulates the possibility of the SWRCB acting on its own motion to expand its jurisdiction to address groundwater management.

The Sax Report separates its discussion into the substance of the public truest doctrine and the waste and unreasonable use doctrine, which it does not address explicitly, and the procedural question of whether the SWRCB can, on its own motion, hear cases alleging the violation of either the waste and unreasonable use doctrine or the public trust doctrine. On the procedural question, the Sax Report relies on a series of decisions, including Environmental Defense Fund v. East Bay MUD, 20 Cal.3d 327 (1977), National Audubon Society v. Superior Court, 33 Cal.3d 419 (1983), Imperial Irrigation District v. SWRCB, 186 Cal.App.3d 1160 (1986), and Imperial Irrigation District v. SWRCB, 225 Cal.App.3d 548 (1990) (IID II), for the proposition that the SWRCB could “assert jurisdiction over percolating groundwater pumping to adjudicate and remedy claims that come within the scope of waste and unreasonable use covered by Water Code § 275.” The report recognizes, however, that such jurisdiction is an expansion beyond the current sate of the law in that each of these cases relied upon in the analysis involved circumstances where the SWRCB already had jurisdiction over the water in question, which, of course, would not be the case for percolating groundwater. On the substantive issues, the Sax Report states that such broad-ranging jurisdiction “could be a powerful tool to deal with pumping that impairs instream flows needed to protect fish and reparian values.”

The Sax Report’s belief discussion of these issues poses two key issues that the water community will need to grapple with in the years to come. First, on the substance of applying either the waste and unreasonable use doctrine or the public trust doctrine to percolating groundwater, the Report simply assumes that it is appropriate to use these doctrines to address the impairment of fish and wildlife values. This view – which is reflected in the IID II decision – effectively eliminates the balancing of competing uses of water under the public trust doctrine and the broad assessment of a variety of social considerations that is inherent in the waste and unreasonable use doctrine. Given the implicit repudiation of (at the very least) the tone of the IID II decision by the Supreme Court in City of Barstow v. Mojave Water Agency, 23 Cal.4th 1224, 1248 (2000), this conclusion seems contrary to the current direction of the Supreme Court. See generally “Property Rights Triumphant: Barstow v. Mojave Water Agency,” 11 Cal. Water L. & Pol’y Rptr. 7 (October 2000). Second, on the procedural ability of the SWRCB to bring cases to itself for enforcement, it seems that such a practice would, at a minimum, create significant due process considerations absent new legislation separating the enforcement branch of the SWRCB from the hearings branch. That issue is already before the SWRCB in several contexts; the Sax Report’s suggestion that the SWRCB has the authority to prosecute cases on its own motion is likely to bring this question to the forefront in the near future.

Pomeroy Was Right – The Rationale for Separate
Regulation of Surface and Groundwater

The underlying assumption of the Sax Report – and much of the current debate over groundwater management – runs something like this: “Groundwater and surface water are really one and the same resource, with the difference being that one is found above the surface of the earth and the other is found beneath the earth’s surface. Most states have recognized this hydraulic connection; California should do so as well and should repeal the legal distinction between surface water and groundwater as having been based on primitive 19th century science.” As the Sax Report states: To put the matter as simply as possible, the above categories [surface water, percolating groundwater, and subterranean streams flowing through known and definite channels] do not accord with scientific understanding of the occurrence and distribution of water on and in the earth . . .

Moreover, from the technical perspective, the distinction between percolating groundwater and subterranean streams is meaningless, or nearly so.” The report continues: Indeed, these water law terms [underflow, subflow, subterranean streams and percolating groundwater] are geographic conceptions fundamentally at odds with science’s understanding of water’s movements . . . . From a hydrogeological perspective, such geographic categories are dubious at best. From a scientific perspective, efforts to fit water into the law’s categories by using these technical-sounding classifications give the enterprise a somewhat daffy air.

In the way, the conventional wisdom observes the interconnectedness of groundwater and surface water and uses that interconnection to argue for a single legal regime to govern all water within California (the net effect of either the impact test or the extension of the public trust doctrine or the waste and unreasonable use doctrine).

However, from the standpoint of public policy, the interconnection of groundwater and surface water is a necessary – but not sufficient – condition for a single legal regime that would govern all water in California. In order for it to be sensible to regulate all water within California by means of a single legal regime (whether it be impacts on other sources of water, the public trust doctrine or the waste and unreasonable use doctrine), the other necessary precondition is that there must be sufficient similarity between groundwater and surface water so as to make it possible for a single legal standard to regulate both resources.

The most salient difference between groundwater and surface water is the speed with which surface water moves in relation to groundwater – a difference of at least several orders of magnitude. Surface water can move hundreds of miles in a few days; groundwater may move a few inches in the same time. This difference – whish is as fundamental a physical fact as the interconnection of groundwater and surface water – seems to be at the heart of the distinction that California courts and the Legislature have drawn for over a century between groundwater and surface water. Groundwater, because of its slow movement, can appropriately be categorized as part of the fee simply estate and so need not be subject to a special regulatory regime. Instead, disputes over groundwater can be resolved in the same way as other disputes over real property, i.e., through the judicial process. By contrast, because surface water can be pumped great distances fairly quickly (i.e., before detection by the underlying landowner), surface water requires a legal regime that establishes the rights of individuals to take water and move it throughout the state for productive purposes.

Water Code § 1200’s special definition of subterranean streams demonstrates the saliency of this distinction between surface and groundwater. As interpreted by the courts and the State Water Resources Control Board prior to the Pala/Pauma draft decision, the concept of a subterranean stream was limited to those waters that are so closely related to a surface stream as to share that surface stream’s characteristics of movement (e.g., direction, speed, etc.) By contrast, decisions that have found underground water to be percolating groundwater often have noted that such water does not share the movement characteristics of the stream. As the Supreme Court found in Vineland Irrig. Dist. v. Azusa Irrigating Co., 126 Cal. 486, 494 (1899): “[I}t is essential to the nature of percolating waters that they do not form part of the body or flow, surface or subterranean, or any stream.”

In short, therefore, hydraulic interconnection is a necessary but not sufficient condition to treat groundwater as yet another form of surface water. For this reason, the distinctions drawn in Los Angeles v. Pomeroy, 124 Cal. 597 (1899) and adopted by the Legislature in Water Code § 1200 still have merit, contrary to the conventional wisdom.

Conclusion – Whither Groundwater Management?

The debate over the Sax Report illustrates two continuing tensions in California water law. First, the debate illustrates the continuing tension between decentralized and centralized approaches like those proposed in the Sax Report prefer the certainty of statewide regulatory approach, particularly when implemented so as to protect fish and wildlife resources. Those opposed to such approaches, by contrast, point to a number of initiatives in recent years – the Sacramento Groundwater Authority, the effort by a number of Sacramento Valley water rights holders to develop groundwater management through the Phase 8 settlement process, and Monterey County’s recent approval of the Salinas Valley Water Project – as evidence that locally controlled groundwater management efforts can successfully address some of the most difficult problems in California.

The debate over the Sax Report also illustrates the continuing tension between very different ways of conceiving of water law. Proponents of the use of the public trust doctrine, the waste and unreasonable use doctrine, or an impacts test tend to believe it to be proper to view water law as yet another branch of environmental law, where standards must evolve to protect health and safety of both humans and ecosystems and where notions of “rights” are irrelevant. Those who object to the use of these doctrines tend to view water law as a species of real property law where rights are the fundamental focus of inquiry. The public trust doctrine or the waste and unreasonable doctrine are, on this view, important boundaries to the exercise of real property rights but remain mere boundaries, not determinative of the rights themselves.

Neither of these debates is unlikely to end soon; these debates have animated legal developments for the last 30 to 40 years. Nonetheless, by crystallizing the terms of these debates and laying out one side very clearly, Professor Sax has done the California water community a great favor.

David R. E. Aladjem is a partner with the Sacramento law firm of Downey Brand LLP. Mr. Aladjem has extensive experience representing clients in connection with matters involving groundwater regulation and was one of the principal authors of the Association of California Water Agencies’ comments on the Sax Report. The views expressed in this article are those of the author alone and those views should not be attributed to Downey Brand LLP or its clients.