Monthly Archives: July 2016

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Navajo Nation - San Juan River

Navajo Nation closes in on water rights settlement

It appears that the Navajo Nation, the federal Bureau of Reclamation, and the State of Utah are closing in on a settlement over the Utah Navajo’s water rights to the San Juan River.  While the settlement must still be approved by Congress, the aforementioned parties are all in agreement on a settlement they say is both fair and likely to calm uncertainty as it relates to the San Juan River, which is a major tributary of the Colorado River that covers some 383 miles in the Four Corners area.  If approved, the Navajo Nation settlement will resolve one of the largest outstanding water rights claims in Utah.

Navajo Nation’s Water Rights Have Been Hard to Quantify Historically

The Navajo Nation was originally established via a treaty in 1868, which was long before many of the current users began drawing water from the region’s rivers.  By law, the Navajo Nation theoretically holds senior water rights to most competing uses, according to the “first in time, first in right” principle.  But for the Navajo Nation, as with many tribes, quantifying those rights has meant decades-long trudges through political negotiations and, sometimes, litigation.

The Navajo Nation Approves Settlement Over Water Rights, Allocating 81,500 Acre-Feet of Water Annually

In January 2016, lawmakers in the Navajo Nation approved the settlement by a vote of 13-7 without any debate.  The approved settlement will give the Navajo 81,500 acre-feet of water annually, which the settlement allows the Navajo to draw from aquifers and the San Juan River and its tributaries.  The Navajo could also potentially draw their share of water from Lake Powell, but the Navajo have said they have no interest to do so.

While the Utah Navajo currently use only a small portion of the 81,500 acre-feet of water that will be allocated to the tribe under the settlement, it has been reported that “the agreement will allow for economic development and leasing of water to entities off the reservation, and the tribe wouldn’t lose any water it did not put to use, according to the settlement.”  Tribal President Russell Begaye has said, “We do not intend to only utilize the water for drinking or housing purposes. We would also like to see it benefit business startups, tribal offices, schools and other programs on the Navajo Nation.”

Husband and Wife Attorney Team Hired to Advise Navajo Nation Over Settlement

The Navajo Nation has hired Daniel Cordalis and his wife Amy Cordalis, both attorneys and members of the Navajo tribe, to advise the Navajo Nation as it relates to the settlement over the San Juan River.  Mr. Cordalis has said, “That analysis led us to believe the settlement is fair and provides the Navajo Nation a favorable resolution of their Utah water rights claims.”

Congress to Allocate $200 Million for Navajo Nation Water Projects

In addition to the annual water allocated to the Navajo, the settlement calls for a Congressionally allocated, $200 million Utah Navajo Water Development Fund for Utah Navajo water projects.  The settlement also includes a waiver of any past legal claims by the Navajo Nation against the State of Utah and the U.S. government within Utah, a provision that is standard operating procedure in Indian water settlements.

Is First in Time Really Last in Line?

A somewhat controversial part of the settlement contains an agreement by the Navajo Nation that, if there is not enough water to fill its needs, the Navajo Nation will not assert priority over pre-existing, non-Native water users.  This provision of the settlement has purportedly raised some concerns in the water conservation community over the value of water rights conservationists say cannot be enforced.  “It kind of tells me that the state of Utah understands that there’s no water left for the tribes,” said John Weisheit, conservation director for Living Rivers, a Utah-based water advocacy group. “They’re first in rights, but last in line for water.”

However, Mr. Cordalis has said that while water supplies from the Colorado River may be in doubt, that is not the case as it relates to the San Juan River.  “The San Juan River is not burdened with downstream water rights such that those existing water rights present a significant detriment to Navajo’s 81,500 acre-feet a year (AFY) right,” he said. “In our opinion, there will be enough water in the San Juan River to achieve the full settlement value on a yearly basis.”

Grassroots Activists Feeling Left Out

Some grassroots activists have also complained that they have been left in the dark about the settlement’s terms, a concern that harkens back to 2012, when a massive outcry among Navajo activists led to the defeat of the Navajo-Hopi Little Colorado River Water Settlement Act of 2012.

“We want to be part of the decision-making, but we are not,” said Anna Frazier, a long-time activist with the Navajo grassroots group Diné CARE.  Still, there has not been public opposition to the Utah San Juan settlement as there was to the Little Colorado proposal in 2012.

Indian Water Settlements Proving Costly for Federal Government

In addition to the Utah settlement, American Indian water rights settlements nationwide have cost the federal government $4.3 billion, the Interior Department has said.  Congress enacted most of the 31 other settlements, while the others came about through federal agencies or court order. Four are pending in Congress for tribes in Montana, Oregon and California, according to the Interior Department.

Time Will Tell What Settlement Will Mean for Future of Navajo Nation and its Use of Water

While the Navajo settlement in Utah still needs the blessing of Congress, it appears that it may help with development and infrastructure within the tribe.  “What the settlement does is provide that flexibility for tribal members to both use water now and have enough water for future development, which ultimately is most important,” Mr. Cordalis said.  Similar to Mr. Cordalis, Leonard Tsosie, a Navajo Nation Council delegate, has promoted the settlement among his colleagues and constituents as a way to support existing and future Navajo communities in southeastern Utah.  “We can dream all we want but if there is no water, there is no development,” he said.

Only time will tell whether the Navajo settlement will provide the necessary water the tribe needs to fulfill their visions for progress and expansion.  Furthermore, demand on the Colorado and San Juan Rivers will only increase over time, which may mean that although the Navajo’s water rights are superior, they may be limited by the right of other non-Native users as set forth in the settlement.  It would seem awkward that the Navajo Nation has been granted this water right, but other non-Native users may trump that right if there is not enough water to fulfill the Navajo’s allocation.  In that case, first in right will be last in line.

* Photo Cred.: chrisbrownphotography.com

Copyright 2016


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PSC - Well Lease Agreement

PSC decision over well lease stands

In a recent case before the Utah Court of Appeals, a decision by the Utah Public Service Commission (“PSC”) involving a well lease agreement originating in 1977 was at issue.  In Dansie v. Public Service Commission, the court was asked to determine whether PSC had exceeded its jurisdiction when it concluded that the well lease was void and unenforceable.

1977 Well Lease Agreement and Subsequent Amendment

In 1977, Jesse H. Dansie (the Dansie Trust’s predecessor) entered into a well lease agreement with Gerald Bagley (Hi-Country’s predecessor), which allowed Bagley to connect his water system to Dansie’s well for ten years.  In return, Dansie received and initial payment and monthly rental fees, as well as water and a number of free residential hook-ups.  Eight years after they entered into the well lease agreement, Dansie and Bagley agreed to an amendment to the lease.  The amendment gave Dansie “the right to receive up to 12 million . . . gallons of water per year from the combined water system at no cost for culinary and yard irrigation on the Dansie property.”  The amendment also stated that the well lease bound Bagley, Dansie, and their successors and assigns in perpetuity.

PSC Grants Foothills CPCN to Operate as Public Utility

In 1985, Bagley created the Foothills Water Company, and thereafter applied to the PSC to operate the water system as a public utility.  The PSC granted Foothills’’ request, providing Foothills with a certificate of public convenience (“CPCN”) and authorizing interim rates.  Later that same year, Bagley transferred all interest and stock in Foothills to Dansie, but Dansie and Foothills were subsequently sued by H-Country Estates Homeowners Association, contesting Foothills’ and Dansie’s interests in the water system and seeking to quiet title in the Association.

PSC Finds Well Lease Agreement Void Unenforceable

In March 1986, the PSC held general rate setting hearings for Foothills and issued an order.  In the course of determining “just and reasonable rates,” the PSC considered the well lease agreement.  The PSC determined that the well lease was:

[G]rossly unreasonable e requiring not only substantial monthly payments, but also showering virtually limitless benefits on Jesse Dansie and the members of his immediate family.  The PSC further determined that it would be unjust and unreasonable to expect Foothills’ . . . active customers to support the entire burden of the Well Lease Agreement.  If Dansie and his family received water through the water system, the PSC ordered that they would have to pay the actual pro-rata . . . costs for power chlorination and water testing involved in delivering that water.

PSC Decertifies Water System as Public Utility

In 1993, the Homeowners Association assumed control of the water system and the CPCN and developed a new well, discontinuing the use of the Dansie well. A year later, the Association disconnected the water lines to the Dansie property after the Dansies alleged refused to pay the costs required by the PSC’s 1986 order.  Then, in 1996, the PSC decertified the Association as a public utility.

Hi-Country Estates I

In 2005, a court determined that the well lease was an enforceable contract, finding that the contract was neither void as against public policy nor unconscionable.  The Utah Court of Appeals affirmed that decision in Hi-Country Estates I.  There, the Utah Court of Appeals found that after the PSC revoked the status of the water system as a public utility, the PSC no longer had jurisdiction.  That meant that the Dansies were not required to pay the costs ordered by the PSC’s 1986 order.

Hi-Country Estates II

Following the Court of Appeals decision, the Dansies filed a motion to modify the judgment against them in light of the appellate ruling that they were not responsible to pay the costs associated with the 1986 order.  The lower trial court denied the motion, and the Dansies again appealed to the Utah Court of Appeals.  The Court of Appeals affirmed (Hi-Country Estates II), explaining that ‚”the effect of the Final Judgment . . . is that the Dansies are, going forward, entitled to their contractual rights to free water and free hookups unless the PSC intervenes and determines otherwise.”

PSC Reassumes Jurisdiction Over Water System

In the time after Hi-Country Estates II was decided, the Homeowners Association presented evidence that it was providing water services to customers outside its boundaries and requested reinstatement of the CPCN.  The PSC reinstated the CPCN, bringing the water system back within the PSC’s jurisdiction.  A year later, the Homeowners Association filed a general rate case application with the PSC.  The application included a specific rate for the Dansie Trust.

The Dansie Trust argued to the PSC that he had a right to 12 million gallons of water from the well at no cost, and so the rate charge ordered by the PSC was prohibited under the well lease agreement.  However, similar to their 1986 order, the PSC determined:

There has been no evidence presented that would persuade us to overturn our prior 1986 order finding that the Well Lease . . . is unreasonable, unjust, and not in the public interest. Therefore, based on the [PSC]’s earlier order, the lack of contrary evidence, and the Division’s evidence and recommendation in this docket, we decline to deviate from our prior precedent. We find the Well Lease . . . is void and unenforceable as against the public interest. Thus, the [Association] has no obligation to provide water to Mr. Dansie, and therefore, the [Association’s] proposed fee of $3.85 per 1,000 gallons to deliver water to Mr. Dansie is moot and disallowed from the tariff.

The PSC also concluded that Dansie’s western-most 40-acre parcel falls within the Association’s service area, but the remainder of his “back 80” acres does not.  Dansie requested rehearing and reconsideration.  The PSC denied these requests. The Dansie Trust timely petitioned this court for judicial review of the PSC’s order.

On appeal, the Dansie Trust set forth three issues: 1) that the PSC exceeded its jurisdiction by declaring the Well Lease void and unenforceable; 2) that the PSC improperly approved the Association’s rate case without then-trustee Jesse Rodney Dansie’s presence at the rate case hearings; and 3) that the property was owned by Dansie and had been covered under the original service area for the water system.

Utah Court of Appeals Determines PSC has Jurisdiction

In addressing PSC’s jurisdiction, the Court of Appeals noted that the legislature granted the PSC “broad powers,” and included in those broad powers was the authority to set rates for public utilities.  Or, in other words, the PSC’s authority to fix rates overcame any “antecedent contracts,” like the well lease in the instant case.  The Court of Appeals highlighted that its determination in Hi-Country Estates II came at a time when the PSC had revoked the water system’s status as a public utility, but that the PSC had now reasserted its jurisdiction over the water system when it reinstated the water system as a public utility.

As to the issue approving the rate case without the Dansie Trust’s trustee present at the rate hearing, the Court of Appeals determined that the PSC adequately addressed the trustee’s inability to attend the rate case hearing.  While the court rejected the issue on the grounds that it was inadequately briefed, the court did note:

It originally scheduled the hearing for March 4, 2014.  When the Trustee was unable to attend due to his hospitalization, the PSC continued the hearing one week.  It did so with the agreement of all parties, including the Trust’s attorney, who stated that March 11 was “acceptable” and that if the Trustee was still not available on that date, another member of the Trust would be able to testify.  When the Trustee could not attend the March 11 hearing and no other member of the Trust appeared, the Trust’s attorney asked the PSC to continue the hearing a second time, but the attorney did not know when the Trustee would be available.  The Trust’s attorney acknowledged at both hearings that the PSC ‚is statutorily required to issue a decision within 240 days‛ and was facing that deadline.  Additionally, prior to the March 4 hearing, the Trustee had submitted direct and surrebuttal written testimony.  When he was unable to attend the March 11 hearing, the PSC gave the Trust the opportunity to file a post-hearing brief, which it did not do.  Finally, the Trustee’s absence did not disadvantage the Trust alone, but also other parties, because it gave the Trust the right to submit the Trustee’s testimony in written form without cross-examination.

Turning to the final issue, the Court of Appeals held that the PSC properly excluded Dansie property from the service area.  Again, the court found that this argument was inadequately briefed, and that:

The Trust identifies no provision of the Well Lease or any other evidence that would obligate the Association to provide water service to the excluded portions of the Dansie property.  The PSC noted that the Trust “presented no basis in law or fact for altering” the Association service area and we conclude the same on appeal.

PSC has “Broad Authority”

The major takeaway from Dansie is that the PSC has broad authority for setting rates as it relates to public utilities, and that authority trumps antecedent contracts.  In Dansie’s case that meant that a contract, which gave the Trust access to approximately 12 million gallons of water a year in perpetuity, is no longer enforceable, and the Trust is now liable to pay the costs of the PSC’s rate order.  The fact that the Utah Court of Appeals had found the contract enforceable in Hi-Country Estates II was of no consequence once the PSC re-established its jurisdiction over the water system.  Once jurisdiction was re-established, the rates associated with the water system were in the PSC’s control.

* Photo Cred.: marvelcinematicuniverse.wikia.com

Copyright 2016