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Full Opinion
In the Matter of the General Determination of All the Rights to the Use of Water, Both Surface and Underground, Within the Drainage Area of the UINTAH BASIN in Utah.
Strawberry Water Users Association, a Utah nonprofit corporation; and Strawberry High Line Canal Company, a Utah nonprofit corporation, Petitioners and Appellants,
v.
Bureau of Reclamation; United States of America; and Department of the Interior, Respondent and Appellees.
Supreme Court of Utah.
*412 Shawn E. Draney, Keith A. Call, Scott H. Martin, Salt Lake City, for Strawberry parties.
Norman K. Johnson, L. Ward Wagstaff, Michael Steeves, Salt Lake City, for Utah State Engineer.
Paul M. Warner, U.S. Att'y, Daniel D. Price, Asst. U.S. Att'y, Salt Lake City, and Kathryn E. Kovacs, Washington, D.C., for Bureau of Reclamation, Department of the Interior.
AMENDED OPINION
McIFF, District Judge:
INTRODUCTION
¶ 1 This appeal probes whether jurisdiction should lie in the federal district court or in the courts of the State of Utah. The dispute centers around competitive applications filed by the Strawberry Water Users[1] and the United States with respect to water imported from the upper reaches of the Duchesne River, a Colorado River tributary, into the Great Basin. The water is collected in the Strawberry Reservoir as part of the Strawberry Valley Project[2] and delivered through a transbasin diversion tunnel for use primarily in the southern end of Utah County. The parties before the court are the Strawberry Water Users, the United States, and the Utah State Engineer.
¶ 2 The Strawberry Water Users argue that the water rights in question are the product of following the application and beneficial use requirements of Utah law and that Utah courts have exclusive jurisdiction to adjudicate claims relating thereto. "[T]he United States disagrees and contends that Strawberry's rights to use water derive solely from its contracts with the United States." It asserts "the proper forum for resolution of Strawberry's contract-based claims is federal district court." The State Engineer has submitted memoranda in partial support of the position of the United States.
¶ 3 The parties have not always been so certain about jurisdiction. This litigation began on April 24, 2001, when the Strawberry Water Users filed a petition for an interlocutory decree in the general adjudication of water rights pending since 1936 in Utah's Third Judicial District Court in and for Salt *413 Lake County.[3] Strawberry named the United States Bureau of Reclamation as respondent. One day later, Strawberry filed an identical petition in the general adjudication of water rights pending since 1956 in Utah's Eighth Judicial District Court in and for Duchesne County.[4] One day after that, it filed an action seeking essentially the same relief in the United States District Court for the District of Utah.[5]
¶ 4 Strawberry's uncertainty has been matched if not exceeded by that of the United States. In support of its motion to dismiss the consolidated case in the federal district court, the United States asserted, "[N]either the state engineer nor the court in this action has jurisdiction to adjudicate title to water rights under Utah law." Further evidence of the uncertainty of the United States is found in its protest of Strawberry's change application filed with the State Engineer:
[A]n adjudication of the [ownership of] water rights is required before a change of use application can be processed by the state engineer for this applicant. However, the authority to adjudicate water rights is vested by the Utah Constitution in the [Utah] courts and not given to the state engineer.... Thus, the applications must be dismissed pending the necessary adjudication.
¶ 5 After Strawberry filed its petitions in the state courts seeking adjudication, the United States made a complete reversal and urged dismissal for failure to exhaust administrative remedies. It later withdrew this argument when the State Engineer granted conditional approval of change applications for both Strawberry and the United States. The condition was that the parties obtain a judicial determination establishing who has the right to file such applications. We think it fair to conclude that the parties have struggled with how best to proceed and that the State Engineer, in particular, both needs and seeks direction. We note that it is not possible to flesh out the jurisdictional issue and provide appropriate guidance without a more extensive discussion of the substance of the dispute than would normally be required at this stage of the proceedings.
THE DECISIONS BELOW
¶ 6 Both the Third and Eighth District Courts dismissed Strawberry's petitions for an interlocutory decree under Utah's general adjudications statute, Utah Code Ann. §§ 73-4-1 to -24 (2004). The dismissal orders are abbreviated and do not contain any legal analysis. The Third District Court stated that it "is not satisfied that petitioners' claims are properly a general adjudication proceeding," and that "petitioners seek to adjudicate ownership of water rights based upon federal contract, which should properly be before the Federal Court." The Eighth District Court essentially agreed but also determined that the United States had not been properly joined in the general adjudication in the Uintah Basin and that suits for interlocutory orders brought under Utah Code section 73-4-24 do not qualify for waiver of federal sovereign immunity under 43 U.S.C. § 666 (2005). Because the petitions sought essentially the same relief in each district court and were dismissed for similar reasons, the appeals of those dismissals have been consolidated.
STANDARD OF REVIEW
¶ 7 We review the district courts' dismissals for lack of subject matter jurisdiction for correctness and accord no deference to their legal conclusions. Beaver County v. Qwest, Inc., 2001 UT 81, ¶ 18, 31 P.3d 1147; *414 see also Petersen v. Bd. of Educ., 855 P.2d 241, 242 (Utah 1993) (applying the correctness standard of review to denial of a motion to dismiss based on governmental immunity).
ANALYSIS
I. REVERSAL WITH GUIDANCE
¶ 8 After thoughtful review we have determined that the dismissals should not stand, but we have also determined that the jurisdictional question does not lend itself to an either/or response. Depending upon how the parties proceed in light of our ruling, there could be issues suitable for either or both state and federal courts. It is our design herein to delineate as best possible between water law issues over which Utah courts have exclusive jurisdiction and contract issues arising under the federal reclamation contracts over which the federal district court has jurisdiction. Moreover, there may be issues as to whether contractual arrangements, even if clear, would run afoul of Utah water law, which the United States Congress has recognized as controlling. To the extent possible at this juncture, we have attempted to provide guidance to the parties. We note particularly our responsibility to correct erroneous interpretations or assumptions of the State Engineer, who ultimately looks to this court for direction regarding application of Utah water law. Before examining the specific legal issues, we think it imperative to briefly outline the history of federal water reclamation projects followed by the particular history of the Strawberry Valley Project and the origin of the dispute between these parties. We also address the matter of the United States' waiver of sovereign immunity regarding disputes arising from reclamation projects.
II. FEDERAL WATER RECLAMATION PROJECTS
A. History[6]
¶ 9 "The final westward migration of the late 1800s resulted in an enormous demand by settlers for irrigation systems." Peterson v. United States Dep't of Interior, 899 F.2d 799, 802 (9th Cir.1990). "As early as 1891, settlers in the western states organized annual irrigation congresses to discuss their water needs and to urge Congress to fund irrigation projects." Id. at 802 n. 6. "Western states themselves lacked the means to finance the enormous systems of dams, reservoirs, and canals needed to regulate and distribute water from the western rivers and snow melt." Id.; see also California v. United States, 438 U.S. 645, 663, 98 S.Ct. 2985, 57 L.Ed.2d 1018 (1978).
¶ 10 "By the turn of the century, most of the land that could be profitably irrigated by small-scale private reclamation efforts had been put to use. Pressure mounted on the Federal Government to provide the funding for massive projects that would be needed to complete the reclamation." California, 438 U.S. at 649, 98 S.Ct. 2985; see also Peterson, 899 F.2d at 802; United States v. Alpine Land & Reservoir Co., 887 F.2d 207, 209 (9th Cir.1989). Responding to the pressing demand for financial assistance in funding reclamation projects, Congress enacted the Reclamation Act of 1902. Pub.L. No. 57-161, 32 Stat. 388 (codified as amended at 43 U.S.C. § 371 (2005)).
With the Reclamation Act of 1902, Congress committed itself to the task of constructing and operating dams, reservoirs, and canals for the reclamation of the arid lands in 17 western states. The projects were to be built on federal land and the actual construction and operation were to be in the hands of the Secretary of the Interior.
Peterson, 899 F.2d at 802 (citing California, 438 U.S. at 650, 664, 98 S.Ct. 2985).
¶ 11 When Congress enacted the Reclamation Act of 1902, it had far greater expectations for the program than to simply increase agricultural production. With the Reclamation Act, Congress created a blueprint for the orderly development of the West, and *415 water was the instrument by which that plan was to be carried out. See Ivanhoe Irrigation Dist. v. McCracken, 357 U.S. 275, 292, 78 S.Ct. 1174, 2 L.Ed.2d 1313 (1958). Congress's plan included purposeful and continued deference to state water law, which was to govern the ownership of all water rights absent a clear Congressional directive to the contrary. See California, 438 U.S. at 653-70, 678-89, 98 S.Ct. 2985; United States v. New Mexico, 438 U.S. 696, 702 & n. 5, 98 S.Ct. 3012, 57 L.Ed.2d 1052 (1978). Section 8 of the Reclamation Act left little room for doubt.
Nothing in this Act shall be construed as affecting or intended to affect or in any way interfere with the laws of any state... relating to the control, appropriation, use, or distribution of water . . . and the Secretary of the Interior, in carrying out the provisions of this Act, shall proceed in conformity with such laws. . . .
43 U.S.C. § 383 (emphasis added).
¶ 12 The monies initially provided by Congress under the 1902 Reclamation Act were placed in a separate "Reclamation Fund" to be used by the Secretary of the Interior to fund construction of reservoirs and irrigation works. See, e.g., 43 U.S.C. § 391; Twin Falls Canal Co. v. Foote, 192 F. 583, 585 (C.D.Idaho 1911). Using this fund, the Bureau of Reclamation was able to construct large dam and reservoir projects similar to the Strawberry Valley Project. See, e.g., id.; Burley Irrigation Dist. v. Ickes, 116 F.2d 529, 530 (D.C.Cir.1940).
¶ 13 After construction of a particular reclamation project was completed, the water users or irrigation district, as the contracting party, was required to repay all the construction costs of the project. See 43 U.S.C. §§ 419, 461. In this manner, the Reclamation Fund was to be replenished and used in turn to fund new projects. All monies received thereafter from the sale and disposal of public lands were also to be paid into the fund to the credit of the project on which such lands were located. See 43 U.S.C. §§ 374-375, 391-392.
B. The Strawberry Valley Project[7]
¶ 14 On December 15, 1905, the Secretary of the Interior, acting under authority of the Reclamation Act, authorized construction of the Strawberry Valley Project. The Project was to include a large complex of many different water works, including a series of diversion dams and feeder canals in the upper Duchesne River drainage. These included the Strawberry Dam, the Strawberry Tunnel driven through the Wasatch Mountains from the Strawberry Reservoir on the east side of the said mountains into Sixth Water Creek on the west side, allowing the water to flow down Diamond Fork to its confluence with the Spanish Fork River and farther on down that river to a point of rediversion into delivery canals for beneficial use on lands being acquired principally by homesteaders in southern Utah County.
¶ 15 In anticipation of the Project, one Frank C. Kelsey had filed with the State Engineer Application No. 79 for the appropriation of 100,000 acre-feet of water from the Strawberry River, Trail Hollow Creek, Indian Creek, and Horse Creekall located in the Duchesne River drainage. The application, filed January 27, 1904, provided that the water would be stored in the then-proposed Strawberry Reservoir for release and transbasin diversion for beneficial use in southern Utah County. The application was assigned to the Strawberry Irrigation and Reservoir Committee, a Strawberry predecessor, on May 16, 1905, and was reassigned to the Bureau of Reclamation on August 11, 1905. The Utah State Engineer approved Application No. 79 on January 23, 1906, subject to proof of actual appropriation and beneficial *416 use, which would take many more years to achieve.
¶ 16 The Bureau of Reclamation constructed the Strawberry Valley Project between 1906 and 1915, thus opening the door for homesteaders to make application to beneficially use Project water. Once accepted and approved by the United States, the water rights applications constituted binding contracts between the applicants and the United States. Each applicant became obligated to put the water to beneficial use and to repay a proportionate share of construction costs and annual operation and maintenance costs of the Project. Upon full performance, the applicant became entitled to a certain quantity of Project water annually in perpetuity. A typical patent for the homesteaded lands described the tract "together with the right to the use of water from the Strawberry Valley Reclamation Project as an appurtenance to the irrigable lands in said tract TO HAVE AND TO HOLD . . . unto the said [patentee] and to his heirs and assigns forever."
¶ 17 In 1924, Congress adopted the Fact Finders Act, Pub.L. No. 68-292, 43 Stat. 702 (codified as amended at 43 U.S.C. § 500 (2005)). This Act mandated that operation and maintenance of reclamation projects be turned over to a water users association or an irrigation district. Thereafter, the United States was obliged to deal with associations or districts rather than thousands of different individual water users. The Strawberry Water Users Association had actually been formed in 1922 for the very purposes contemplated by the Fact Finders Act, which was adopted two years later. Virtually all of the individuals and entities that had entered into contracts with the United States for Project water became Strawberry Water Users Association shareholders. Their water rights were transferred to the Association in exchange for shares of stock. In turn, the Association entered into contracts with the United States to repay the then-unpaid construction costs of the Project, operate and maintain the Project, and deliver water to the Project water users who were now shareholders. The contracts between the Association and the United States, which have governed the relationship of these parties until recent years, are dated September 28, 1926 ("1926 Contract"), November 20, 1928 ("1928 Contract"), and October 9, 1940 ("1940 Contract").
¶ 18 By the early 1930s, the appropriation efforts were complete and proofs of appropriation were filed with the State Engineer. On March 13, 1933, the Engineer issued Certificate of Appropriation No. 2115 (later designated as water right 43-3001) for the 100,000 acre-feet covered by Application No. 79, which had originally been filed in 1904. The certificate was based exclusively upon the beneficial use of Project water by the individual Strawberry users whose contractual interests had been assigned to the Association in exchange for shares of stock. The certificate provided for capture and storage in Strawberry Reservoir, delivery down Diamond Fork into the Spanish Fork River for rediversion into the Highline Canal for irrigation of 53,522.24 acres of land, specifically describing such land, all of which is located in southern Utah County. The certificate was issued in the name of the United States and remains in the name of the United States at present.[8]
¶ 19 On December 23, 1974, the Strawberry Water Users paid the United States the final installment due on construction of the Strawberry Valley Project. This satisfied the combined obligation of all the individual parties who conveyed their rights to the Association in exchange for shares of stock. All costs incurred by the United States in appropriating and perfecting the Strawberry water rights were fully repaid, and the United *417 States no longer held any type of lien on the patented land or the right to use the Project water appurtenant to such land even though the certificates of appropriation remained in the name of the United States.
¶ 20 Were the story to end here, the issues would be easier to frame and to resolve. However, in mid-1985, a decade or more after full performance of the contracts by which Strawberry obtained rights to use Project water in perpetuity, the Strawberry Dam was replaced by the Soldier Creek Dam, a Central Utah Project facility also constructed by the Bureau of Reclamation. The new dam increased the capacity of Strawberry Reservoir from roughly 270,000 acre-feet to more than 1,100,000 acre-feet.[9] After the enlarged reservoir was in place, the parties entered into what they refer to as the 1991 Operating Agreement. Under the terms of this agreement, Strawberry is guaranteed annual delivery of 61,000 acre-feet from the enlarged reservoir. Strawberry's petition alleged that it had historically received some 70,000 acre-feet. The United States in the federal action claims the historical average was 61,500 acre-feet. Whatever the figure, it appears that it no longer varies with the ebbs and flows of wet and dry years, but is fixed at 61,000 acre-feet annually. It also appears that the United States relies heavily upon the 1991 Operating Agreement to advance its arguments in this dispute.
C. Origin of the Current Dispute
¶ 21 The current dispute first arose in August 1997, when Strawberry filed three change applications seeking to update and correctly reflect current points of diversion and place of use of Project water and to provide for municipal and industrial use. More specifically, Strawberry sought the right to use Project water for the irrigation of small lots, including lawns and gardens, as opposed to larger agricultural tracts. In its protest before the State Engineer, the United States claimed that it was the owner of the water and urged the State Engineer to dismiss the Strawberry applications until the ownership issue could be resolved, presumably in Utah courts. After the lawsuits were filed, the United States advanced the further claim that Strawberry is contractually prohibited from changing use without consent of the Secretary of the Interior. In due course, the United States sought to have all matters adjudicated in the federal district court.
¶ 22 Separate and apart from these initial change applications filed by Strawberry are competing applications filed by each of the parties in December 1997 seeking to recapture Project water after it has been fully utilized and passed beyond the control of either party. These applications are extremely ambitious and far-reaching. The application of the United States, filed December 4, 1997, seeks to appropriate 49,200 acre-feet of return flow of Project water for storage in Utah Lake and delivery in Salt Lake County. Strawberry's "exchange application," filed eight days later, seeks to recover the return flow from 64,400 acre-feet by pumping or diverting from existing wells, springs, and streams in southern Utah County. These competitive applications raise fundamental Utah water law issues of first impression that potentially impact appropriators throughout the Jordan River drainage and beyond.
D. Waiver of Sovereign Immunitythe McCarran Amendment
¶ 23 We now consider whether and for what purposes the United States is subject to joinder in either the federal or the state court suits that have been filed. We begin with the proposition that the United States is immune from suit unless Congress has waived that immunity. Lehman v. Nakshian, 453 U.S. 156, 160, 101 S.Ct. 2698, 69 L.Ed.2d 548 (1981); In re Bear River Drainage Area, 2 Utah 2d 208, 271 P.2d 846, 848-49 (1954).
*418 ¶ 24 Congress has waived the United States' sovereign immunity for joinder in both federal and state court actions arising out of federal water reclamation projects. It has consented to joinder in federal district court "to adjudicate, confirm, validate, or decree the contractual rights of a contracting entity and the United States regarding any contract executed pursuant to federal reclamation law." 43 U.S.C. § 390uu (2005) (emphasis added). It has consented to joinder in state court
(1) for the adjudication of rights to the use of water of a river system or other source, or (2) for the administration of such rights, where it appears that the United States is the owner of or is in the process of acquiring water rights by appropriation under state law . . . and the United States is a necessary party to such suit.
43 U.S.C. § 666 (emphasis added).
¶ 25 The consent to joinder in state court came in the McCarran Amendment to the 1902 Reclamation Act. Section 8 of the Act had decreed noninterference with state law "relating to the control, appropriation, use, or distribution of water," and further, that "the Secretary of the Interior, in carrying out the provisions of this Act, shall proceed in conformity with [state] laws." 43 U.S.C. § 383 (emphasis added). These mandates had limited meaning unless the United States could be compelled to join in state court proceedings. The 82nd Congress came to grips with this problem in 1952 with the adoption of the McCarran Amendment. The Amendment had been preceded by the efforts of most western states to develop orderly and comprehensive procedures for the general adjudication of water rights.
By the time the McCarran Amendment was passed, most Western states had adopted some statutory procedure for the mass adjudication of water rights. While these statutory adjudications seemed to promise an end to the confusing and conflicting adjudication of water rights in multiple cases, the system was impaired by the refusal of the federal government to participate. Since the United States had large landholdings and extensive reserved water rights in the West, its claims of sovereign immunity significantly diminished the value of the comprehensive state adjudications. Congress sought to remedy this problem by enacting the McCarran Amendment in 1952. See S.Rep. No. 755, 82d Cong., 1st Sess. 4-6 (1951).
United States v. Oregon, 44 F.3d 758, 765 (9th Cir.1994) (citation omitted) (emphasis added).
¶ 26 The purposes of the McCarran Amendment are clear, and its language is broad. After providing for joinder, it goes on to state:
The United States when a party to any such suit, shall (1) be deemed to have waived any right to plead that the state laws are inapplicable or that the United States is not amenable thereto by reason of its sovereignty, and (2) shall be subject to the judgments, orders, and decrees of the court having jurisdiction, and may obtain a review thereof, in the same manner and to the same extent as a private individual under like circumstances. . . .
43 U.S.C. § 666 (2005) (emphasis added). The United States Supreme Court has characterized the Amendment as "an all-inclusive statute concerning the adjudication of rights to the use of water of a river system which in § 666(a)(1) has no exceptions and which, as we read it, includes appropriative rights, riparian rights and reserved rights." United States v. Dist. Court in and for the County of Eagle, 401 U.S. 520, 524, 91 S.Ct. 998, 28 L.Ed.2d 278 (1971) (internal quotations omitted). Here the courts are dealing with "appropriative rights" and competing claims of ownership, the right to file change applications, and the competitive claims seeking to capture and use return flow water. In the language of the Supreme Court, and the Amendment, these issues relate to "the adjudication of rights to the use of water of a river system." Id. (emphasis added). While there are contract issues that need to be addressed by the federal district court, there are also important water law issues that will ultimately need to be addressed by Utah courts.
*419 III. STRAWBERRY'S PETITIONS AND THE UNITED STATES' RESPONSE
¶ 27 Strawberry advanced three claims for relief in the petitions filed in the general adjudications in the Third and Eighth District Courts. First, it sought a declaration that Strawberry, for the use and benefit of its shareholders, holds equitable title to Project water which the shareholders have applied to beneficial use over approximately the last ninety years. It claims this ownership extends to the right to recapture return flows. Second, Strawberry sought a declaration that the Association and the individual water users have the right to use the water for purposes of irrigation regardless of the size of the tract. Finally, Strawberry sought a declaration that it has the right to file change applications with the State Engineer without the consent or approval of the United States.
¶ 28 Strawberry bases its petition before us on Utah water law. The State Engineer also addresses the issues from the standpoint of Utah water law but misapplies both statutory provisions and certain decisions from this court. The United States makes no attempt to discuss Utah water law, nor does it undertake to identify any contractual provisions which it claims to be relevant or to have been violated. The depth of its legal analysis in the briefing before this court is to point to the fact that in its petitions in state courts, Strawberry recounted the history of the Strawberry Valley Project and the contractual relationship of these parties. From this the United States concludes: "Thus the Petitions themselves assert that the water rights at issue derive from contracts entered into pursuant to federal reclamation law," and further, "Strawberry's rights to use water derived solely from its contracts with the United States." While this assertion is repeated more than once, it is wholly conclusory and without analytical support.
¶ 29 The fact that two parties contract with each other to cooperatively pursue a certificated right to the use of water belonging to the people of the State of Utah does not lead to the conclusion that the water rights "derive from contracts" or that the rights of one derive from its contract with the other. That is a simplistic surface analysis that disregards the source of the water rights. The rights of both parties derive from the State of Utah through their joint effort in following the appropriation procedure outlined by statute. Simply stated, the foundation of these water rights is an approved application to appropriate followed by actual beneficial use on the ground. As stated in Robinson v. Schoenfeld, 62 Utah 233, 218 P. 1041, 1043 (1923), "The sine qua non of making a valid appropriation is and was to apply the water attempted to be appropriated to some beneficial use." The contracts between these parties were designed to facilitate this process, but they are not the source of the right to use the water.
¶ 30 In an effort to understand the substantive legal position of the United States in this dispute, we have been compelled to examine not only its limited response here, but the more extensive disclosures in its counterclaim in the federal district court, attached as an addendum to its brief. As set forth in its counterclaim, the United States asserts that it "is the owner in fee of the Strawberry Valley Project facilities and the record title owner of the Strawberry Valley Project water rights" and that "it was ... the intent of congress that these project water rights remain permanently in federal control." In support of this claim, the United States cites 43 U.S.C. §§ 383, 498. Neither of these sections supports the claim with respect to water rights as opposed to Project facilities, nor does applicable case law. See Nevada, 463 U.S. at 125-27, 103 S.Ct. 2906 (citing Ickes v. Fox, 300 U.S. 82, 94-95, 57 S.Ct. 412, 81 L.Ed. 525 (1937)). These decisions stand for the proposition that "the water-rights became the property of the land owners, wholly distinct from the property of the government in the irrigation works." Nevada at 125, 103 S.Ct. 2906; Ickes at 95, 57 S.Ct. 412.
¶ 31 The United States proceeds to repeat its claims that "[t]he Association's right to the use of the project facilities and water from the federally owned SVP water rights were solely and totally contractual from their inception." There is nothing new in this, but there is in that which follows. The United *420 States then asserts that when the Association entered into the 1991 Operating Agreement, it "did not retain their [sic] contractual interests in Strawberry Valley Project water rights as provided under the 1926, 1928 and 1940 contracts, but instead gave them up in return for a contractual interest in a guaranteed water supply." Perhaps most revealing and germane to the jurisdiction inquiry is the allegation with respect to return flows. The United States asserts:
The right to use return flows within the SVP service area was given to the Highline Canal Company through a contract with the United States. The Association has not used them in the nearly 100 years of the SVP's existence and still cannot recapture them within the boundaries of the SVP. Under state law, since the return flows result from a transbasin diversion the United States may track and reuse the return flows. . . . The Association gave up its right to the Strawberry Valley Project water rights in the 1991 Agreement and therefore has no claim to return flows, which derive from the initial water rights.
(Emphasis added.)
¶ 32 The foregoing reveals why the underlying facts of this case do not lend themselves to a determination that jurisdiction rests in but one place, state or federal. The 1991 Operating Agreement is not before us, nor are the earlier agreements of 1926, 1928, and 1940. Under 43 U.S.C. § 390uu (2005), it is the prerogative of the federal district court to examine the contractual relationship and "to adjudicate, confirm, validate, or decree the contractual rights . . . regarding any contract executed pursuant to Federal reclamation law." (Emphasis added.) Separate and apart from this prerogative is the prerogative of Utah courts to determine how the contractual relationship plays out under Utah water law. That law cannot be changed by contract. We reiterate that the Secretary of the Interior in carrying out the provisions of the Reclamation Act is obliged to "proceed in conformity with [state] laws. . . relating to the control, appropriation, use, or distribution of water." 43 U.S.C. § 383 (emphasis added). Further, we note and underscore that the United States presumes more than it should when it undertakes to articulate Utah law regarding return flows from a transbasin diversion.
¶ 33 We cannot here resolve all the competing claims, including the ultimate issues regarding return flow, which we envision will come to us at a future time. Accordingly, we tailor our discussion to correction of misstatements of Utah water law advanced in the briefs and to identification and examination of the underlying substantive issues sufficient to determine whether and to what extent jurisdiction rests in state or federal court. The difficulty of the task and the demonstrated uncertainty of the parties has compelled us to move beyond a surface analysis. We look first at the so-called "ownership" issue and the certificate of appropriation.
IV. WATER OWNERSHIP IN UTAH
A. A Use-Based Concept
¶ 34 In navigating a course through Utah water law, it is easy to be misled by the word "ownership." In some respects it is a misnomer. It is only the right to use water that is subject to ownership. The first and over-arching principle of Utah water law is this: "All waters in this state, whether above or under the ground, are hereby declared to be the property of the public, subject to all existing rights to the use thereof." Utah Code Ann. § 73-1-1 (2004) (emphasis added). Of equal importance is the second fundamental principle: "Beneficial use shall be the basis, the measure and the limit of all rights to the use of the water in this state." Id. § 73-1-3 (emphasis added). Throughout its history, this court has uniformly recognized that title to "public water is not subject to private acquisition ... even by the federal government or the state itself." See, e.g., Adams v. Portage Irrigation, Reservoir & Power Co., 95 Utah 1, 72 P.2d 648, 652-53 (1937). The State, acting as trustee rather than owner, has assumed the responsibility of allocating the use of the water for the benefit and welfare of all the people. J.J.N.P. Co. v. State, 655 P.2d 1133, 1136 (Utah 1982).
*421 ¶ 35 Notwithstanding these clear and controlling directives, the "ownership" label continues to be part of the vernacular of Utah water law. However, the word has varying meanings and applications that lack the breadth and finality that "ownership" suggests in other contexts. As held in United States v. District Court of Fourth Judicial District in and for Utah County, 121 Utah 1, 238 P.2d 1132, 1134 (1951):
The right to the use of water, although a property right, is very different from the ownership of specific property which is subject to possession, control and use as the property owner sees fit. Such right does not involve the ownership of a specific body of water but is only a right to use a given amount of the transitory waters of a stream or water source for a specific time, place and purpose. . . .
(Emphasis added.) Accordingly, it is not sufficient to ask only who has title to water or in whose name a certificate of appropriation has been issued. The governing statute, Utah Code Ann. § 73-3-17, affords the certificate of appropriation only the status of "prima facie evidence of the owner's right to the use of the water." (Emphasis added.) Here it is undisputed that the right of use rests with Strawberry.
B. Ownership as a Protective Role
¶ 36 The State Engineer draws this court's attention to two decisions where entitlement to file change applications was tied to the holder of the certificate of appropriation. The two decisions are East Jordan Irrigation Co. v. Morgan, 860 P.2d 310 (Utah 1993), and Badger v. Brooklyn Canal Co., 922 P.2d 745 (Utah 1996). Each case illustrates the importance of asking not only the "title" or "ownership" question, but also the second question, which probes roots, purposes, and entitlements. East Jordan and Brooklyn Canal support the concept that a mutual water company as the owner of record of the collective rights of its shareholders is alone empowered to file change applications. But ownership for this purpose is not in derogation of the rights and entitlements of the shareholders who are the ultimate users, it is rather for their benefit. "The agreement between East Jordan and its shareholders imposes the duty on the association to manage its affairs in the interest of its shareholders as a whole." 860 P.2d at 314 (emphasis added). It is a form of ownership akin to that of a trustee. The court offered a succinct justification for the result reached:
We base this decision on the statutory scheme governing the appropriation of public waters, the principles of corporate law bearing on the function and power of boards of directors to manage corporate affairs in the interest of shareholders as a whole, and the dictates of sound public policy.
Id. at 312 (emphasis added); see also Syrett v. Tropic & East Fork Irrigation Co., 97 Utah 56, 89 P.2d 474 (1939) (holding that an irrigation company stands as a single appropriator with a duty to protect the rights of its stockholders).
¶ 37 Our holdings in East Jordan and Brooklyn Canal cannot be read as empowering the United States to emasculate rather than protect the rights of the ultimate beneficial users. Nothing in either decision will support an ownership status other than a protective role on behalf of the rank-and-file persons who have applied the water to beneficial use. In the final analysis, the principal thrust of East Jordan and Brooklyn Canal is not to undermine the importance of beneficial use, but rather to shift the protective focus from the individual shareholder to the shareholders as a collective whole.[10] The effort to use these decisions as a sword against, rather than as a shield in protection of, the collective whole of t