North Gualala Water Co. v. State Water Resources Control Board

Opinion

The North Gualala Water Company (NGWC) appeals from a judgment denying two consolidated petitions for writ of mandate. The petitions challenge the State Water Resources Control Board’s (Board) jurisdiction to compel NGWC to obtain a permit to pump groundwater from two wells located near the North Fork Gualala River, as well as the Board’s interpretation of pumping limitations placed on the permit. In an issue of first impression, the parties dispute the proper construction of the statutory phrase, *1581 “subterranean streams flowing through known and definite channels,” which has defined the Board’s permitting jurisdiction over the state’s groundwater resources since 1914. 1 As a fallback position in the event that the Board’s statutory permitting authority over the wells is upheld, NGWC argues that the Board has placed unwarranted conditions on the company’s permit. We affirm the trial court’s judgment denying NGWC’s petitions.

I. BACKGROUND

A. Water-right Permit 14853 and Term 9

NGWC provides municipal water service to approximately 1,000 customers in, or near, the Town of Gualala. Between 1965 and 1989, NGWC diverted surface water directly from the North Fork of the Gualala River (North Fork) by means of an infiltration gallery located at the confluence of the North Fork and the Little North Fork Gualala River. 2 This diversion was authorized by appropriative water-right permit 14853 (Permit 14853), issued by the Board’s predecessor in 1965.

Permit 14853 authorized NGWC to divert two cubic feet per second from the North Fork. To resolve a protest to its permit application by the California Department of Fish and Game (DFG), NGWC agreed to accept limitations on its right to divert water from the river that were intended to maintain instream flows for the protection of fish life. These limitations were set forth in “Term 9” of the permit. However, given flow conditions in the North Fork at that time, Term 9 in its original form never actually limited NGWC’s diversions.

In 1978, as a result of a further protest by DFG and after discussions between NGWC and DFG, the Board amended Term 9 to read as follows: “For the protection of fish and wildlife, permittee shall during the period: (a) from November 15 through February 29, bypass a minimum of 40 cubic feet per second; (b) from March 1 through May 31, bypass a minimum of 20 cubic feet per second; (c) from June 1 through November 14, bypass a minimum of 4 cubic feet per second. The total streamflow shall be bypassed *1582 whenever it is less than the designated amount for that period.” 3 Under certain flow conditions, the amended Term 9 did restrict NGWC’s right to divert water from the North Fork.

B. NGWC’s Production Wells: 1989-2001 Proceedings

In 1989 and 1996, NGWC developed two production wells, “Wells 4 and 5,” in an area adjacent to the North Fork known as Elk Prairie. Both wells were located approximately 200 feet from the river. One purpose of constructing the wells was to improve the quality of water and reduce water treatment costs. The wells draw groundwater from depths of approximately 50 and 140 feet below the ground.

When NGWC developed Well 4 it did not seek any water right permit for it because NGWC believed that Well 4 was pumping percolating groundwater which is not subject to the Board’s permitting jurisdiction. (See § 1200.) 4 In a June 1989 letter replying to a third party complaint lodged against NGWC by the Gualala River Steelhead Project, the chief of the Board’s Division of Water Rights addressed the jurisdictional issue as follows: “Your letter also requested information regarding [NGWC’s] River Deep Well. Our information indicates that the well is located near the North Fork Gualala River, about 100 feet upstream of [NGWC’s] point of diversion. The well is about 100 feet deep. Analysis of the well water indicates that it has a composition different than the surface supply which suggests that well water is percolating ground water, not river underflow. The Board does not have jurisdiction over the use of percolating ground water.”

In November 1992, a groundwater geologist hired by the Sea Ranch Water Company, Richard Slade, reported to the Board that relatively impermeable rock formations underlie the North Fork channel, that the stream valley itself is filled with alluvial deposits 5 of unconsolidated layers of gravel, sand, silt, and clay, and that a water quality analysis indicated that the source of the well water was the Gualala River system. The report concluded that the *1583 groundwater extracted by Well 4 from the alluvium underneath Elk Prairie was from a subterranean stream as defined by the Board. Based on the Slade report, the Board staff notified NGWC that its extraction from Well 4 was an illegal diversion of water, and advised it to submit a water right application for the well.

In February 1993, NGWC filed a petition to change the authorized points of diversion in Permit 14853 to include Well 4. In its petition, NGWC stated that it was reserving the right to challenge the Board’s conclusion that Well 4 pumped water from a subterranean stream after conducting additional field work. NGWC filed a petition to add Well 5 to Permit 14853 in 1994.

In January 1998, NGWC’s consultants, Luhdorff & Scalmanini Consulting Engineers, filed a technical report with the Board regarding the groundwater pumped by Wells 4 and 5. Based on its own measurements and data collection, Luhdorff & Scalmanini concluded that the groundwater in the alluvial deposits under the Elk Prairie is not recharged from the North Fork and is not flowing in a subterranean stream. Contrary to the conclusion of the Slade report, Luhdorff & Scalmanini found that the groundwater underneath Elk Prairie is maintained by a combination of deep percolation of surface precipitation during the rainy season and subsurface flow from the underlying bedrock formations into the alluvium during the dry season. Also contrary to Slade’s analysis, Luhdorff & Scalmanini concluded that the underlying bedrock beneath Elk Prairie was not relatively impermeable, but was highly fractured and permeable, most likely due to its proximity to the San Andreas fault zone.

The chief of the Board’s Division of Water Rights responded to NGWC that, after reviewing Luhdorff & Scalmanini’s analysis, the Division of Water Rights still believed the groundwater pumped by Wells 4 and 5 was flowing in a known and definite channel, and thus was subject to the Board’s jurisdiction. Citing Slade’s analysis, other studies of the area, and the Board’s own investigations, the Division of Water Rights rejected Luhdorff & Scalmanini’s critical finding that the bedrock was permeable to water relative to the overlying alluvium. It opined instead that “it appears that the bedrock is sufficiently impervious relative to the alluvial aquifer material to form the bed and banks of a subterranean stream.” The Division of Water Rights advised that if NGWC wished to withdraw its petition to change the point of diversion, it would recommend that the Board hold a groundwater classification hearing to resolve the issue of the Board’s permitting authority.

*1584 NGWC made no formal request for a groundwater classification hearing at that time. It informed the Board that it wished to continue the process of petitioning to change the point of diversion, while reserving the issue of groundwater classification for any future hearing to be held on its change petitions.

In August 1999, the Board adopted Order WR-99-09-DWR which granted NGWC’s petitions to substitute Wells 4 and 5 for the previous points of diversion. DFG and other fishing interests protested the change sought by NGWC. The protestants expressed concern that NGWC was not meeting the bypass flow requirements of Term 9, and that the company would have trouble supplying the water demand of its customers if it was required to reduce diversions from the wells to meet these requirements. To address these concerns, Order WR-99-09-DWR required as a condition of the approval that NGWC submit a surface flow measurement plan to ensure compliance with Term 9 of Permit 14853. A subsequent order, Order WR 99-11, added a further condition that NGWC prepare a water supply contingency plan to address how municipal water needs would be met if the natural flow of the North Fork fell below the minimum amounts specified in Term 9.

NGWC did not challenge any of the findings or conditions in the 1999 orders, but proceeded to develop and file proposed plans for measuring surface flows and addressing water supply contingencies. In January and August 2000, the Board staff requested changes in these plans. Through its attorneys, NGWC agreed to some of the changes. At the same time, NGWC asserted that the Board had never issued a formal decision on the issue of whether the groundwater pumped by Wells 4 and 5 was part of a subterranean stream or percolating groundwater, and that NGWC had not waived its rights on that issue. In addition, NGWC disputed whether, by its terms, the second sentence of Term 9 (“[t]he total streamflow shall be bypassed whenever it is less than the designated amount for that period”) placed any limitation on the pumping of groundwater from Wells 4 and 5 so long as the pumping did not reach a level that would reverse the normal groundwater gradient between the wells and the river, thereby reducing surface streamflows. NGWC requested that its issues concerning the classification of the groundwater and the application of Term 9 be resolved through a formal hearing.

In April 2001, the chief of the Division of Water Rights informed NGWC that its plans were not approved. The chief’s letter explained that Term 9 applied to any diversions of water under the permit, and since Wells 4 and 5 are the only points of diversion in the permit, Term 9 applied to them. NGWC petitioned the Board for reconsideration of the chief’s decision. The petition asked the Board to hold a hearing on the legal classification of the groundwater pumped by Wells 4 and 5 and on the interpretation of Term 9.

*1585 In Order WR 2001-14, issued in June 2001, the Board: (1) upheld the chief’s decision that NGWC’s water measurement and water supply plans were inadequate; (2) determined that a groundwater classification hearing was not properly part of a proceeding seeking reconsideration of the chief’s decision to disapprove the two plans submitted by NGWC; (3) discussed and rejected NGWC’s interpretation that Term 9 was not a limitation on its ability to pump groundwater from Wells 4 and 5; and (4) invited NGWC to petition to change the bypass flow requirements in Term 9 and to bring the groundwater classification issue before the Board, either by raising it as a defense to a future enforcement action or by initiating an independent proceeding.

In July 2001, NGWC filed a complaint for declaratory relief and petition for writ of mandate challenging the sufficiency of the evidence to support Order WR 2001-14 (2001 mandate petition). NGWC’s 2001 mandate petition also challenged the Board’s interpretation of Term 9. The trial court stayed the case in December 2001 to allow NGWC to formally petition the Board for a groundwater classification hearing and to permit the Board to resolve that issue before the case proceeded.

C. 2002 Groundwater Classification Hearing

NGWC filed its request for a groundwater classification hearing in January 2002 and a hearing was conducted on June 4 and 5, 2002. In addition to NGWC, the participants included DFG and a “permitting team” from the Division of Water Rights. By established Board procedure, the permitting team was separated by an ethical wall from the “hearing team” that assisted the hearing officer and Board members in the hearing.

The Board proposed to apply a four-part test for determining whether groundwater fell within its permitting authority that it had first utilized in a 1999 decision concerning the Garrapata Water Company: “[F]or groundwater to be classified as a subterranean stream flowing through a known and definite channel, the following physical conditions must exist: [f] 1. A subsurface channel must be present; [f] 2. The channel must have a relatively impermeable bed and banks; [f] 3. The course of the channel must be known or capable of being determined by reasonable inference; and [f] 4. Groundwater must be flowing in the channel.” 6 (In re Garrapata Water Co. (June 17, 1999) State Wat. Resources Control Bd. Dec. No. 1639 chttp:// www.waterrights.ca.gov/hearings/Decisions.htm> [as of May 31, 2006] (Garrapata).) The Board based the Garrapata test on its reading of an 1899 *1586 California Supreme Court case, City of Los Angeles v. Pomeroy (1899) 124 Cal. 597 [57 P. 585] (Pomeroy).

NGWC accepted the four-part test with certain qualifications, but argued that the groundwater pumped by Wells 4 and 5 did not satisfy its requirements because: (1) the only subsurface channel present, that formed by the alluvial materials in the vicinity of the North Fork, does not narrow or contract in the direction of the alleged flow as would be required under a correct reading of Pomeroy, (2) the Franciscan bedrock forming the bed and banks of the alluvial channel is not sufficiently impermeable to satisfy the second element of the test; and (3) the groundwater underneath Elk Prairie is not in fact flowing “in the channel,” but in a direction perpendicular to it.

DFG expressed its concern that absent regulation by water right permit, NGWC could significantly expand its pumping and reduce river flows to levels inadequate for fish protection.

The Board found in Order WRO 2003-0004 that all elements of its four-part test had been met and that the water pumped from NGWC’s wells required a water right permit. Upon NGWC’s ensuing petition for reconsideration, the Board rejected NGWC’s argument that the water in a subterranean stream must always be flowing in a direction parallel to the sides of the subsurface channel. The Board found that “water is in fact flowing generally downstream within the channel under Elk Prairie, following a hydraulic gradient and following the path of least resistance.”

D. 2003 Mandate Petition

In May 2003, NGWC filed a new petition for writ of mandate, challenging Order WRO 2003-0004, which was eventually consolidated with NGWC’s 2001 mandate petition.

The trial court concluded that the Board’s four-part test was the appropriate means of making the determination required by section 1200. The court applied the substantial evidence standard to each of the four elements, and found that substantial evidence existed to support the Board’s findings as to all four elements. The court denied NGWC’s consolidated petitions for writ of mandate, and entered judgment in favor of the Board on December 14, 2004. This appeal followed.

II. DISCUSSION

A. Standard of Review

The parties differ over the applicable standard of review. The Board concedes that its interpretation of the “subterranean stream” language in *1587 section 1200 is subject to de novo review, but argues that if the four-part Garrapata test properly effectuates the intent of that language, the Board’s findings that the various elements of the test have been satisfied must be upheld unless they are unsupported by substantial evidence. NGWC maintains that this court must conduct a de novo review of the Board’s determination that it has jurisdiction over the wells because the Board made no findings of fact on “the principal disputed factual issues.”

NGWC had maintained that to be part of a subterranean stream coming within section 1200 the groundwater must (1) flow in a direction generally parallel to the subterranean channel and (2) not be maintained by subsurface inflows emanating from fractures in the underlying bedrock. It asserts that Order WRO 2003-0004 contained no findings of fact on these disputed factual issues. According to NGWC, the Board must therefore have determined as a matter of law that the groundwater is part of a subterranean stream for purposes of section 1200 based solely on the fact that the groundwater occurs in alluvial deposits which are more permeable than the Franciscan bedrock underlying them. Although we do not believe this accurately characterizes the Board’s findings or methodology in this case, we concur that the materiality of groundwater source and flow direction present questions of law that we will consider de novo.

In sum, both parties agree that the Board’s interpretation of the “subterranean stream” clause of section 1200 presents a question of law subject to de novo review. Issues regarding the materiality of groundwater source and flow direction under section 1200 also present questions of law subject to de novo review. To the extent that NGWC disputes any of the facts found by the Board, as opposed to disputing the legal methodology the Board applied to determine its jurisdiction, the Board’s findings must be upheld unless they are unsupported by substantial evidence. (§ 1126, subd. (c); Code Civ. Proc., § 1094.5, subd. (c).) 7

*1588 B. Deference Due to Board’s Interpretation of Section 1200

The parties also differ over the degree of deference which this court should give to the Board’s interpretation of section 1200. According to the Board, because the Legislature has delegated a “designated field of expertise” to the Board, the Board’s statutory interpretation should “generally be followed unless it is clearly erroneous.” (San Mateo City School Dist. v. Public Employment Relations Bd. (1983) 33 Cal.3d 850, 856 [191 Cal.Rptr. 800, 663 P.2d 523].) NGWC maintains that the proper standard is that applicable when a court must decide whether an agency regulation exceeds the authority delegated to the agency by the Legislature. (See Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 11, fn. 4 [78 Cal.Rptr.2d 1, 960 P.2d 1031] (Yamaha); Environmental Protection Information Center v. Department of Forestry & Fire Protection (1996) 43 Cal.App.4th 1011, 1022 [50 Cal.Rptr.2d 892].) According to NGWC, when an agency is construing a statute affecting its own jurisdiction, the proper standard of review is therefore one of “ ‘respectful nondeference.’ ” (Environmental Protection Information Center v. Department of Forestry & Fire Protection, at p. 1022.)

Yamaha distinguishes between two types of administrative rulemaking: “[Tjhere are two categories of administrative rules .... One kind—quasi-legislative rules—represents an authentic form of substantive lawmaking: Within its jurisdiction, the agency has been delegated the Legislature’s lawmaking power. [Citations.] . . . When a court assesses the validity of such rules, the scope of its review is narrow. If satisfied that the rule in question lay within the lawmaking authority delegated by the Legislature, and that it is reasonably necessary to implement the purpose of the statute, judicial review is at an end. [][]... [][] [T]he other class of administrative rules, those interpreting a statute, . . . does not implicate the exercise of a delegated lawmaking power; instead, it represents the agency’s view of the statute’s legal meaning and effect, questions lying within the constitutional domain of the courts. But because the agency will often be interpreting a statute within its administrative jurisdiction, it may possess special familiarity with satellite legal and regulatory issues. It is this ‘expertise,’ expressed as an interpretation (whether in a regulation or less formally . . .), that is the source of the presumptive value of the agency’s views. An important corollary of agency interpretations, however, is their diminished power to bind. Because an interpretation is an agency’s legal opinion, however ‘expert,’ rather than the exercise of a delegated legislative power to make law, it commands a commensurably lesser degree of judicial deference.” (Yamaha, supra, 19 Cal.4th at pp. 10-11, italics omitted.)

*1589 The interpretation of section 1200 that the Board has formulated in the context of deciding the Garrapata and subsequent groundwater cases comes within the class of administrative rules interpreting a statute under Yamaha. Deciding these cases is not an exercise of the Board’s quasi-legislative power to adopt regulations of general applicability. Thus, we reject the Board’s proposed standard—based on pre-Yamaha case law—that we must defer to the Board’s interpretation of section 1200 unless it is clearly erroneous. At the same time, the issue before us is not whether the Board has adopted a regulation or test that is outside of the realm of authority delegated to it by the Legislature. Whether the Board’s interpretation of section 1200 is correct or not, its power to formulate and apply a constmction of that statute in the course of adjudicating permitting disputes is not in question in this proceeding. The Board could not decide groundwater classification issues if it did not have that power. NGWC’s proposed standard of “ ‘respectful nondeference’ ” is thus also inapplicable.

The degree of deference to which the Board’s interpretation of section 1200 is entitled depends on a series of situation-specific factors identified in Yamaha: “[There are] two broad categories of factors relevant to a court’s assessment of the weight due an agency’s interpretation: Those ‘indicating that the agency has a comparative interpretive advantage over the courts,’ and those ‘indicating that the interpretation in question is probably correct.’ [Citations.] [][] In the first category are factors that ‘assume the agency has expertise and technical knowledge, especially where the legal text to be interpreted is technical, obscure, complex, open-ended, or entwined with issues of fact, policy, and discretion. A court is more likely to defer to an agency’s interpretation of its own regulation than to its interpretation of a statute, since the agency is likely to be intimately familiar with regulations it authored and sensitive to the practical implications of one interpretation over another.’ [Citation.] The second group of factors . . . —those suggesting the agency’s interpretation is likely to be correct—includes indications of careful consideration by senior agency officials (‘an interpretation of a statute contained in a regulation adopted after public notice and comment is more deserving of deference than [one] contained in an advice letter prepared by a single staff member’ [citation]), evidence that the agency ‘has consistently maintained the interpretation in question, especially if [it] is long-standing’ [citation]) (‘[a] vacillating position ... is entitled to no deference’ [citation]), and indications that the agency’s interpretation was contemporaneous with legislative enactment of the statute being interpreted. If an agency has adopted an interpretive rule in accordance with Administrative Procedure Act provisions—which include procedures (e.g., notice to the public of the proposed rale and opportunity for public comment) that enhance the accuracy and reliability of the resulting administrative ‘product’—that circumstance weighs in favor of judicial deference. However, even formal interpretive rules do not command the same weight as quasi-legislative rales. Because ‘ “the ultimate resolution of . . . legal questions rests with the courts” ’ [citation], judges play a greater role when reviewing the persuasive value of interpretive rales *1590 than they do in determining the validity of quasi-legislative rules.” (Yamaha, supra, 19 Cal.4th at pp. 12-13.)

The relevant situational factors in this case counsel in favor of limited deference to the Board’s interpretation of the statutory language, as embodied in the Garrapata test. The language in issue is unique to section 1200, and has no analogue elsewhere in the statutes of this state. Judging from the record before us, even expert hydrologists disagree about the physical conditions and range of naturally occurring phenomena to which the subterranean stream language might refer. Translating that language into a usable and practical legal test therefore necessarily draws upon areas of the Board’s technical expertise, experience, and familiarity with its own prior precedents. Although the Garrapata test does not reflect a long-standing administrative interpretation of section 1200, it has been adopted and applied by the agency’s highest officials in a considered manner following contested proceedings. These factors warrant some degree of deference on our part to the test the agency has formulated. At the same time, our analysis of the history, text, and intent of the subterranean stream language leads us to the conclusion that the Board’s jurisdiction over groundwater was intended to be the exception rather than the rule when the Legislature adopted the language in issue. Where the Board appears to be seeking endorsement for a more expansive construction of its potential jurisdiction, as in its reading of Los Angeles v. Hunter (1909) 156 Cal. 603 [105 P. 755] (Hunter), we have not deferred to the Board’s views.

C. Historical Roots of the Subterranean Stream Language in Section 1200

California is the only western state that still treats surface water and groundwater under separate and distinct legal regimes. (Sax, We Don't Do Groundwater: A Morsel of California Legal History (2003) 6 U.Denv. Water L.Rev. 269, 270 (hereafter We Don’t Do Groundwater).) The persistence of these alternative regimes inevitably leads to thorny issues of classification and boundary setting. As the present case illustrates, classification disputes in this field quickly take on an Alice-in-Wonderland quality because the legal categories (e.g., “ ‘subterranean streams flowing through known and definite channels,’ ” “percolating water”) are drawn from antiquated case law and bear little or no relationship to hydrological realities. (See generally We Don’t Do Groundwater, at pp. 270-304.) 8 Because the *1591 Legislature has shown little inclination to reformulate this area of law, we are left to try to construe and apply a legal classification that is borrowed from cases decided more than 100 years ago.

1. Origin of Section 1200

Section 1200 derives from section 42 of the Water Commission Act of 1913, which was passed by the Legislature in 1913 as part of Assembly Bill No. 642, and became effective following a public referendum on December 19, 1914. (See Stats. 1913, ch. 586, § 42, p. 1033; People v. Shirokow, supra, 26 Cal.3d at p. 307, fn. 6.)* ** 9 The Water Commission Act grew out of a 1912 report by the California Conservation Commission (Commission), which found that the then-existing means of regulating the appropriation of water and water rights did not adequately protect the public’s interest in the state’s water resources, and did not effectively settle disputes over water rights. Regarding underground water, the Commission called for its statutory regulation and predicted that the failure to enact such legislation would result in increasing litigation over the use of underground water.

As introduced in January 1913, Assembly Bill No. 642 would have given the Board’s predecessor, the State Water Commission, the power to investigate and determine appropriative “rights to water or the use of water” in “all streams, stream systems, portions of stream systems, lakes, or other bodies of water” in the state. (Assem. Bill No. 642 (1913 Reg. Sess.) Jan. 23, 1913, § 10.) Section 42 of the bill as introduced provided that “[t]he word ‘water’ in this act shall be construed as embracing the term ‘or use of water’; and the term ‘or use of water’ in this act shall be construed as embracing the word ‘water.’ ” The bill’s broad grant of authority to the water commission made no apparent distinction between underground and surface water. However, by amendments made on April 2 and 22, 1913, the following sentence limiting the State Water Commission’s jurisdiction to surface water was added to section 42: “Whenever the terms stream, stream system, lake or other body of water or water occurs in this act, such term shall be interpreted to refer only to surface water.” (Italics added.) Finally, on April 30, 1913, the phrase “and to subterranean streams flowing through known and definite channels” was added to this sentence of section 42.

*1592 The record before us contains no evidence of contemporaneous statements discussing the legislative intent of the subterranean stream language in section 42 of the Water Commission Act, and no published court cases have interpreted the phrase since its enactment into law in 1914. From the sequence of amendments made to section 42 of Assembly Bill No. 642, it appears that the Legislature deliberately rejected wording that might otherwise have supported a broad assertion of jurisdiction over subsurface water. The addition, a few weeks later, of the phrase “and to subterranean streams flowing through known and definite channels” cannot reasonably be construed as an attempt to restore any major part of that jurisdiction. First, in contrast to the broad and inclusive list used to describe the State Water Commission’s surface water jurisdiction (“stream, stream system, lake or other body of water”), the phrase “subterranean streams flowing through known and definite channels” seems deliberately narrow. Virtually every word in it sets a limiting condition (e.g., flowing, known, definite, channel) that seems to reduce its breadth. Second, the use of the word “only” in the sentence is inconsistent with any legislative intent or understanding that jurisdiction over subterranean streams would encompass a major part of the state’s groundwater resources.

As discussed post, the concept of a subterranean stream flowing through a known and definite channel did not spring fully formed from the 1913 deliberations over Assembly Bill No. 642. The concept played an important role in a series of California Supreme Court water rights cases going back to 1871. One 1899 California Supreme Court case, Pomeroy, used language identical to that adopted by the Legislature in 1913. The parties have therefore properly focused our attention on these pre-1913 water law authorities. (See People v. Lawrence (2000) 24 Cal.4th 219, 231 [99 Cal.Rptr.2d 570, 6 P.3d 228] [where the language of a statute uses terms that have been judicially construed there is a strong presumption that the terms carry the same technical meaning that had been placed upon them by the courts].) 10

2. Distinction Between Flowing and Percolating Groundwater

In several cases decided between 1871 and 1909, the California Supreme Court addressed the distinction between groundwater flowing in subterranean streams and groundwater that was considered to be merely percolating through the soil. The former was governed by riparian and appropriative *1593 restrictions on use, 11 while the latter was (until 1903) subject to the unrestricted ownership rights of the overlying property owner. Thus, in Hanson v. McCue (1871) 42 Cal. 303, 308-309, the court observed that a “subterranean stream of a defined character, and flowing in a defined channel” would be subject to the same riparian rules that govern the use of “similar streams flowing upon the surface of the earth.” In contrast, “[w]ater filtrating or percolating in the soil belongs to the owner of the freehold—like the rocks and minerals found there.” (Hanson v. McCue, at p. 308; see also Southern Pac. R. R. Co. v. Dufour (1892) 95 Cal. 615, 620 [30 P. 783]; Gould v. Eaton (1896) 111 Cal. 639, 644 [44 P. 319]; Pomeroy, supra, 124 Cal. at pp. 630-637; Vineland Irr. Dist. v. Azusa Irr. Co. (1899) 126 Cal. 486, 494-495 [58 P. 1057]; Katz v. Walkinshaw (1903) 141 Cal. 116, 125-126 [74 P. 766] (Katz); Hunter, supra, 156 Cal. at pp. 607-608.) Under the case law, groundwater was presumed to be percolating; the burden of showing that it flowed instead in a defined subterranean stream rested with the party asserting rights in such a stream. (See Hanson v. McCue, at p. 308; Pomeroy, at pp. 628, 633-634; Arroyo D. and W. Co. v. Baldwin (1909) 155 Cal. 280, 284 [100 P. 874].) 12

3. The Pomeroy Case

Among all of the pre-1913 cases, Pomeroy contains the most extended and detailed discussion of how to classify groundwater as either water flowing in a subterranean stream or percolating in the soil. It also utilizes language identical to that later adopted by the Legislature in section 42 of the Water Commission Act. The specific phrase, “subterranean streams flowing through known and definite channels,” appeared for the first time in Pomeroy and the Pomeroy court emphasized that “the main question in the case” was “the proper definition of a subterranean stream.” (Pomeroy, supra, 124 Cal. at *1594 p. 632.) Pomeroy accordingly provides the best available evidence of the original legislative intent of the phrasing now found in section 1200.

The central issue in Pomeroy was the valuation of lands condemned by the City of Los Angeles under its eminent domain powers. (Pomeroy, supra, 124 Cal. at p. 604.) The lands were to be used for the purpose of constmcting a tunnel and filtration galleries to divert water flowing underneath the bed of the Los Angeles River at its narrow outlet from the San Fernando Valley, to supply the city’s inhabitants. (Id. at pp. 604-607.) The city asserted that the groundwater on the defendants’ property was part of the river’s underflow for which the city would not have to pay compensation. (Id. at pp. 607, 617.) The defendants maintained that the groundwater was percolating groundwater which they owned and for which compensation must be made in the jury’s award. (Id. at p. 617.) After being instructed in detail about how to distinguish percolating groundwater from water flowing in a subterranean stream, the jury made no award for the value of the water. (Id. at pp. 616-617.) On appeal in the Supreme Court, the defendants challenged several of the jury instructions on this issue. (Id. at pp. 630-636.) The court affirmed the judgment and upheld the trial court’s instructions. (Id. at pp. 630-636, 650.)

Pomeroy rejected the defendants’ claim that “all water passing through sand, gravel, and [boulders] is percolating water” and instead endorsed the view that a subterranean stream can exist “when the material through which the water forces itself fills a well-defined channel with impervious sides and bed.” (Pomeroy, supra, 124 Cal. at p. 631.) Later in the opinion, the court observed that such a channel could be formed by the “comparatively impervious mountain sides” creating the opening through which the disputed water passed out of the San Fernando Valley. (Id. at p. 632, italics added.)

Turning its attention to the proper definition of a subterranean stream, the Pomeroy court quoted in full from and endorsed as a correct statement of the law the following discussion found in Clesson S. Kinney’s 1894 volume, A Treatise on the Law of Irrigation (hereafter Kinney on Irrigation): “ ‘Subterranean or underground water courses are, as their names indicate, those water currents that flow under the surface of the earth. A large portion of the great plains and valleys of the mountainous regions of the west is underlaid by a stratum of water-bearing sand and gravel, and fed by the water from the mountain drainage. This water-bearing stratum is of great thickness, the water is moving freely through it, is practically inexhaustible, and, if it can be brought to the surface, will irrigate a large portion of the country overlying it. In and near the mountains many streams have a bed which was originally a *1595 rocky canyon, but has been filled up with [boulders] and coarse gravel. In this debris a large portion or all of the water sinks from sight, to reappear only when some rocky reef crosses the channel and forces the water to the surface. The movement of this water through the porous gravel, owing to the declivity of the stream, is often quite rapid, and a considerable volume may thus pass down the channel hidden from sight.

“ ‘These watercourses are divided into two distinct classes—those whose channels are known or defined, and those unknown and undefined. It is necessary to bear this distinction in mind in our discussion, as they are governed by entirely different principles of law. And in this connection it will be well to say that the word, “defined” means a contracted and bounded channel, though the course of the stream may be undefined by human knowledge; and the word “known” refers to knowledge of the course of the stream by reasonable inference. Regarding the laws governing these two classes, it must be known that if underground currents of wate