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U.S. Supreme Court Wades Into Western Water Law, Sets Precedent for Return Flows

By Jeff B. Kray
June 2, 2011

The U.S. Supreme Court has decided that Wyoming did not breach its water-sharing compact with Montana when its farmers changed their irrigation practices to consume more water, reducing the amount of water running off from Wyoming farms and returning to the Yellowstone River and its tributaries. The Court held in Montana v. Wyoming, et al.,[1] that although the 1951 Yellowstone River Compact (“Compact”) limits the amount of water Wyoming may divert from the rivers it does not prohibit Wyoming farmers from improving the efficiency of their irrigation systems to increase the amount of the diverted water that they consume. In reaching its holding, the Court limited the scope of the “law of no injury” that prevents upstream users from reducing the amount of water left to flow downstream to senior water right holders[2] and – for the first time – rejected the “law of return flows” that, if binding, would have required an upstream state such as Wyoming to return, after use, the same amount of water it had returned to the rivers sixty years ago, when the Compact was adopted.[3] The decision marks a rare and significant federal foray into a previously unsettled area of state law and will affect water law throughout the western United States by providing upstream senior water-users with support for the argument that they can consume additional water through more efficient irrigation techniques without concern for downstream junior water rights holders.

Background

Water law is a creature of state law. Wyoming and Montana water law, like almost all western water law, operate on the “prior appropriation” system of water rights.[4] Prior appropriation is based on a “first in time, first in right” policy which means that the first party to put a water quantity to beneficial use has exclusive senior rights to that water and later junior users can only make additional water withdrawals on the condition that the senior user’s rights are met first. Prior appropriation recognizes a right to use water but actual water ownership is generally reserved to the public, through the state.

From its headwaters in Wyoming, the Yellowstone River flows nearly 700 miles northeast into Montana and then North Dakota, where it joins the Missouri River.[5] Several of its tributaries, including the Clarks Fork, Tongue, Powder, and Bighorn Rivers, also begin in Wyoming and cross into Montana before joining the main stem of the Yellowstone River.[6] The river system’s monthly and annual flows are dictated largely by snow melt and, therefore, vary widely.[7]

As a precursor to funding new water storage facilities, Congress sought agreement as to the allocation of the Yellowstone River system among Wyoming, Montana, and North Dakota.[8] In 1951, the three states ratified the Yellowstone River Compact, and Congress consented to it.[9]

The Yellowstone River Compact

The Compact divides the Basin’s water into three tiers of priority.[10] First, Article V(A) of the Compact provides: “Appropriative rights to the beneficial uses of the water of the Yellow-stone River System existing in each signatory State as of January 1, 1950, shall continue to be enjoyed in accordance with the laws governing the acquisition and use of water under the doctrine of appropriation.”[11] Second, Article V(B) of the Compact allocates to each State the “quantity of that water as shall be necessary to provide supplemental water supplies” for the pre–1950 uses protected by Article V(A).[12] Third, “the remainder of the unused and unappropriated water” of each tributary is divided by percentage: Wyoming receives 60% of the remaining water in the Clarks Fork River, 80% in the Bighorn River, 40% in the Tongue River, and 42% in the Powder River; the rest goes to Montana.[13]

The Montana v. Wyoming Decision

In February 2008, Montana filed a bill of complaint in the Supreme Court,[14] alleging that Wyoming breached the Compact by consuming more than its share of the Tongue and Powder Rivers. With regard to the issue the Supreme Court decided, Montana alleged that Wyoming was allowing its upstream pre–1950 water users to switch from flood to sprinkler irrigation, which increases crop consumption of water and decreases the volume of runoff and seepage returning to the river system. Thus, even if Wyoming’s pre–1950 users divert the same quantity of water as before and use that water to irrigate the same acreage as they did in 1950, less water reaches downstream users in Montana. The Supreme Court appointed a Special Master to address a motion Wyoming filed to dismiss Montana’s complaint. Concluding that the Compact permits more efficient irrigation systems so long as the conserved water is used to irrigate the same acreage watered in 1950, the Special Master found that Montana’s increased-efficiency allegation failed to state a claim. Montana filed an “exception” seeking U.S. Supreme Court review of the Special Master’s decision.[15]

On review, the Supreme Court held in a 7-1 decision (Justice Scalia dissenting)[16] that because the Compact incorporates the ordinary doctrine of appropriation without significant qualification, and because in Wyoming and Montana that doctrine allows appropriators to improve their irrigation systems, even to the detriment of downstream appropriators, Montana’s increased-efficiency allegation failed to state a claim for breach of the Compact.[17]

Specifically, the Court held that background appropriation law principles did not support Montana’s position. The doctrine of appropriation provides that rights to water for irrigation are perfected and enforced in order of seniority, starting with the first person to divert water from a natural stream and apply it to a “beneficial use.” Once perfected, that water right is senior to any later appropriators’ rights and may be fulfilled entirely before the junior appropriators get any water. However, junior appropriators do acquire rights to the stream basically as it exists when they find it. Under this “no-injury rule,” junior users may, subject to the fulfillment of the senior users’ existing rights, prevent senior users from enlarging their rights to the junior users’ detriment.

In this case, the question was whether switching to more efficient irrigation with less return flow was within Wyoming’s pre–1950 users’ existing appropriative rights or was an improper enlargement of that right.[18] The Court acknowledged that “the law of return flows is an unclear area of appropriation doctrine.”[19] Wyoming and Montana did not direct the Court “to any case on all fours with this one” and cited with approval a report that no western state court has conclusively answered the question of whether junior water users have a right to return flows.[20] “Despite the lack of clarity” in the law of return flows, the court held that the Special Master correctly concluded that Wyoming’s pre–1950 users may switch to sprinkler irrigation.[21]

The Court relied on the fact that Wyoming’s change in irrigation methods did not appear to run afoul of the no-injury rule in Montana and Wyoming.[22] The Court reviewed Wyoming and Montana case law and determined that the no-injury rule generally concerns changes in the location of the diversion and the place or purpose of use. Thus, under this interpretation of the rule, the Court held that an appropriator may increase his consumption by changing to a more water-intensive crop so long as he makes no change in acreage irrigated or amount of water diverted.[23] The Court further held that ordinary, day-to-day operational changes or repairs also do not violate the rule and that consumption can even be increased by adding farm acreage, if that was part of the plan from the start, and diligently pursued through the years.[24]

The Court determined that irrigation system improvements are the same sort of changes, a view it found was consistent with the fact that by 1950 both Wyoming and Montana had statutes regulating certain changes to water rights but neither required farmers to take official action before adjusting irrigation methods. The decision states that cases in both States frequently describe the no-injury rule as applying to changes in point of diversion, purpose of use, and place of use.[25] The Court determined that an abundance of litigation over such changes – and the absence of any litigation over the sort of change at issue in Montana v. Wyoming – strongly implied that irrigation efficiency improvements were considered within the scope of the original appropriative right.[26]

Next the Court held that the doctrine of recapture – which permits an appropriator who has diverted water for irrigation to recapture and reuse his own runoff and seepage before it escapes his control or his property – also supports treating irrigation efficiency improvements as within the original appropriative right.[27] The Court reviewed Montana and Wyoming cases and determined that they appear to apply the doctrine of recapture without any qualification based on whether the return flow would re-enter the original stream or not.[28] Thus, the Court found that by using sprinklers instead of flood irrigation, Wyoming’s pre–1950 water users effectively recapture water because the sprinklers reduce loss from seepage and runoff and are simply different mechanisms for increasing the volume of water available to crops without changing the amount of diversion.

Finally, the Court was not persuaded by Montana’s argument that, if background appropriation law principles do not support its position, the Compact’s definition of “beneficial use” nonetheless restricts the scope of pre–1950 appropriative rights to the net volume of water that was actually being consumed in 1950. The Compact defines “beneficial use” as “that use by which the water supply of a drainage basin is depleted when usefully employed by the activities of man.”[29] Montana contended that the term means the amount of depletion, and thus any activity increasing Wyoming’s pre–1950 depletions beyond pre–1950 levels exceeds the Compact’s scope. The Supreme Court held that a plain reading of the Compact indicates that “beneficial use” is “a type of use that depletes the water supply.”[30]

The Court looked to the circumstances in the signatory States when the Compact was drafted and noted that at that time, Wyoming had a statutory preference for irrigation, a depletive use, over power generation, a non-depletive use.[31] The Court, therefore, determined that it made sense for the Compact to protect irrigation uses that were legislatively favored and represented the predominant use of the Yellowstone River system. By contrast, the Court determined that Montana’s reading would redefine the Compact’s definition of the term “beneficial use” because the amount of water put to “beneficial use” had never been defined by net water consumption and, in irrigation, that amount had always included a measure of necessary loss, e.g., runoff or evaporation. Thus, the Court concluded, if the Compact were intended to guarantee Montana a set quantity of water, it could have done so plainly, as done in other compacts, e.g., the Colorado River Compact of 1922.[32]

The Supreme Court’s decision resolves only one of the four claims that Montana brought against Wyoming. Left unresolved are questions about whether Montana is actually receiving its fair share of water from the Yellowstone Basin as Wyoming builds new reservoirs, and as the amount of water used by methane gas production and agriculture expands. In order to address those issues, the parties are working on calculating how much water Wyoming is using.

Conclusion

The Supreme Court’s decision in Montana v. Wyoming is not binding on the other western states that apply the prior appropriation doctrine because water law is established on a state-by-state basis and, as the Supreme Court reaffirmed in its decision, the “highest court of each State of course, remains ‘the final arbiter of what is state law.’”[33] Water-users in future litigation in other western states will almost certainly rely on the Court’s reasoning. Given the economic and environmental incentives for increasing irrigation efficiency, agricultural water-users throughout the west will continue to increasingly employ water conservation techniques that reduce return flows and trigger future claims by junior water right holders. Senior water right holders now have powerful new support for the argument that they can employ such techniques without concern for providing water to downstream junior water rights holders.

For more information about Marten Law’s water resources practice please contact Jeff Kray.

[1] 563 U.S. ____ (2011), Slip Opinion issued May 2, 2011.

[2] Slip Opinion at 10.

[3] Id. at 15-16.

[4] Id. at 6.

[5] Id. at 1.

[6] Id. at 2.

[7] Id.

[8] Id.

[9] Act of Oct. 30, 1951, 65 Stat. 663.

[10] Slip Opinion at 4.

[11] Act of Oct. 30, 1951, 65 Stat. 663, at 666.

[12] Ibid.

[13] Id. at 666–667.

[14] Under Article III of the Constitution, the Supreme Court has original jurisdiction over disputes that arise between the states. See U.S. Const., Art. III § 2; 28 U.S.C. § 1251.

[15] Slip Opinion at 3-4.

[16] Justice Elena Kagan did not participate in the case because she worked on it while in the Solicitor General’s office.

[17] Slip Opinion at 19.

[18] As between Wyoming and Montana, the Compact assigned the same seniority level to all pre-1950 water users in those states. When, however, the rivers are low, Montana’s downstream pre-1950 users might get no water at all because the equally senior users upstream in Wyoming may lawfully consume all of the water. Slip Opinion at 6-7.

[19] Slip Opinion at 7.

[20] Id. (citing Trelase, Reclamation Water Rights, 32 Rocky Mt. L. Rev. 464, 469 (1960).

[21] Slip Opinion at 8.

[22] Id. at 10.

[23] Id. at 9 (cites omitted).

[24] Id. (cites omitted).

[25] Id. at 10.

[26] Id.

[27] Id.

[28] Id. at 11-14.

[29] 65 Stat. 665.

[30] Slip Opinion at 17 (emphasis in original).

[31] Id. (citing Wyo. Stat. Ann. §71-402 (1945)).

[32] Id.

[33] Slip Opinion at 8, fn. 5.

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