Public Trust in Appropriated Waters: California Supreme Court Decides Mono Lake Case

Antonio Rossmann

Editors' Summary: On February 7, 1983 the California Supreme Court issued an eagerly awaited decision on the application of the public trust doctrine to the appropriation of the waters feeding Northern California's Mono Lake by the City of Los Angeles. In a significant victory for environmentalists who seek to stop what they see as the draining of the unique ecological resource to slake the excessive thirst of the Southern California megalopolis, the court held that under California law the public trust must be taken into account in such appropriation decisions. Moreover, the court ruled that the state has a duty to monitor past appropriations, such as those affecting Mono Lake, and to readjust them if necessary to give effect to the public trust. In a secondary ruling the court also held that the state courts have jurisdiction concurrent with that of the state water board to resolve challenges to appropriations. Mr. Rossmann describes the background of this important case, reviews the court's holding, and considers its implications for water use and natural resource protection in California.

Mr. Rossmann, of the San Francisco firm of McCutchen, Doyle, Brown & Enersen, teaches water resources law at the University of California Hastings College of Law. Former Chair of the State Bar Committee on the Environment, Mr. Rossmann has served as special counsel to Inyo County in its water resources matters. This article is adapted, with permission, from a manuscript to be published by the WESTERN NATURAL RESOURCE LITIGATION DIGEST.

[13 ELR 10109]

Entering into one of the major ecological battles and water disputes in the nation, the California Supreme Court on February 7 rendered a significant judgment, 13 ELR 20272, affecting the future of Los Angeles' diversions from Mono Lake in the Eastern Sierra. The court has broken new ground by applying the public trust doctrine for the first time to water appropriated for use — a not surprising continuation of the court's recent precedents expanding both the public trust and the police power to reallocate water resources without compensation. The court's decision, however, raises new questions as to the trust's applicability to the concrete facts of the Mono Lake dispute, andto other water use practices in the state. This decision not only significantly restates California water law, but also initiates a process of either confrontation or collaboration in striking a contemporary balance between resource preservation and development.

The Setting

In 1913 the City of Los Angeles completed its first aqueduct from the Owens Valley, permitting the city to expand dramatically by the creation of a bountiful new water supply. The well-documented "rape of the Owens Valley" is a compelling chapter of western cultural history.¹ Notwithstanding its immense Owens Valley resources in the 1930s, the city sought additional waters by construction of an extension of the aqueduct to connect the closed Mono Basin to the headwaters of the Owens River. In 1933, Los Angeles applied to the State Water Rights Board to secure the unappropriated waters of four of the five creeks draining into Mono Lake. That application was granted, the city constructed the tunnel and in 1940 received a state board permit to divert the water. In issuing the permit, the board dismissed environmental challenges, disclaiming discretion to do other than grant a permit to the unappropriated waters available.

[13 ELR 10110]

Initially, the Mono Lake waters were merely a reserve for Los Angeles; the city took very little in the first three decades. The first aqueduct could not export all of the water to which Los Angels had rights in the Eastern Sierra, but the city simply didn't need the water. Citing the "use it or lose it" principle, the state board warned Los Angeles that its permits might be revoked. Accordingly, the city in 1963 approved and in 1970 completed construction of a second aqueduct, designed to take increased Owens Valley groundwater extractions² as well as the full entitlement of Mono Basin diversions.

The decade following the second aqueduct's completion saw increasing diversions from the tributary streams of Mono Lake. The level of the lake lowered dramatically, exposing alkalai flats to severe winds. The decrease in the lake's volume increased its salinity, cutting the lake's unique brine shrimp population, and in turn, threatening the food supply of the California gulls, which use Mono Lake as their principal nesting ground. In 1979, the declining lake level caused one of the two main islands in the lake to become a peninsula, destroying its utility as a nesting ground when predators invaded the site. Two yerrs later, Mono gull chicks suffered a startling 95 percent mortality rate. As this ecological damage came to light, a coalition of environmental organizations commenced and prosecuted the litigation that produced the California Supreme Court's decision.

The Contentions

Plaintiffs National Audubon Society, Mono Lake Committee, and Friends of the Earth contended in their superior court action that the public trust doctrine should apply to the waters feeding Mono Lake, and that the doctrine prohibited the state from alienating the lake's navigability without express authorization from the legislature evincing an awareness of the ecological impacts that the alienation would produce. Los Angeles responded that no trust was impressed upon the nonnavigable waters feeding into Mono Lake; that if such a trust had been impressed at one time, the state lawfully abandoned it in granting the 1940 permits; and that if the state wished to reallocate these waters, it had to do so by eminent domain and payment of compensation. The state ultimately entered the litigation as defendant to argue that a public trust does exist, but that it is subsumed into the California water rights system and doctrine of reasonable and beneficial use. The state also argued that the plaintiffs were required to exhaust their remedies before the State Water Resources Control Board, whose predecessor had issued the diversion permits. Finally, the United States entered the case when Los Angeles interpleaded other Mono Basin diverters. The United States removed the action to the federal district court in Sacramento.

With all parties joined in the matter before federal district Judge Lawrence Karlton, that court stayed proceedings to secure from the parties a state court declaratory judgment on the public trust and exhaustion issues. The California superior court answered both questions adversely to the plaintiffs, who then secured immediate Supreme Court review by writ of mandate.

The Holding

The California Supreme Court ruled in favor of the plaintiffs on both questions. The court summarized its holding as follows:

The water rights enjoyed by DWP were granted, the diversion was commenced, and has continued to the present without any consideration of the impact upon the public trust. An objective study and reconsideration of the water rights in the Mono Basin is long overdue. The water law of California — which we conceive to be an integration including both the public trust doctrine and the board-administered appropriative rights system — permits such a reconsideration; the values underlying that integration require it.

With regard to the secondary issue of exhaustion of administrative remedies, the powers, experience, and expertise of the Water Board all argue in favor of granting that agency primary jurisdiction. Long-established precedent, however, declares that courts have concurrent jurisdiction in water right controversies. The Legislature, instead of overturning that precedent, has implicitly acknowledged its vitality by providing a procedure under which the courts can refer water rights disputes to the water board as referee. We therefore conclude that the courts may continue to exercise concurrent jurisdiction, but note that in cases where the board's experience, or expert knowledge may be useful, the courts should not hesitate to seek such aid.³

To reach these conclusions the court traced the development of the public trust doctrine and California's water rights sytem. As to the former, it observed that in California the public trust doctrine protects not only navigation, commerce and fishing, but the changing public needs of ecological preservation, open space maintenance and scenic and wildlife preservation.⁴ Then, relying on precedent,⁵ the court applied the public trust to nonnavigable waters, diversions from which would affect the navigable Mono Lake. Finally, interpreting the public trust doctrine, the court held that the state as trustee had an ongoing obligation to protect the people's common heritage of streams and lakes, in the fulfillment of which it even could revoke previously granted "rights" without compensation. The court then described the state's water rights system, which had culminated in the adoption of the constitutional reasonable and beneficial use doctrine⁶ and subsequent judicial interpretations that authorized the state without compensation to terminate water rights that had become unreasonable.⁷

Observing that the appropriate water rights system and the public trust doctrine had developed on competing grounds independently of each other, the court declined to elevate one system over the other; water rights could [13 ELR 10111] not be acquired independently of the public trust, but neither would the court hold that all appropriation permits affecting navigability had bleen impermissibly granted. Instead, the court merged the two systems. It noted that "the state may have to approve appropriations despite foreseeable harm to the public trust."⁸ More important, the court for the first time declared the state also holds a sovereign duty to monitor appropriative rights, and terminate or reallocate those rights in the public interest, "not confined by past allocation decisions which may be incorrect in light of current knowledge or inconsistent with current needs."⁹ This duty applies to decisions made with prior consideration of their effect on trust values, but applies especially to the Mono controversy, in which no body had passed upon the values competing with Los Angeles' taking of previously unappropriated water. The court called for a "responsible body" to reconsider the Mono diversions in light of contemporary conditions, expressly declaring that "no vested rights bar such reconsideration."¹⁰

In identifying the "responsible body" that would reexamine the Los Angeles appropriations, the court observed that while administrative practice would suggest that the issue be presented to the water board whose permits were at issue, judicial precedent in California favors concurrent jurisdiction of the administrative agencies and the courts to enforce the public trust.¹¹ To rebut the argument that concurrent jurisdiction would remove the water board's experrtise from the process, the court noted recent state legislation permitting state and federal courts to refer questions to the board. Finally, it pointed out that the state legislature, well aware of the courts' assertion of concurrent jurisdiction, had not granted the board exclusive jurisdiction over water rights disputes.

The court directed the superior court to enter judgment on the state law claims consistent with its decision. When that declaratory judgment was entered, the matter presumably reposed again in the federal district court.

Significance of the Case

In many respects the court's decision is not surprising. The California Supreme Court has consistently reaffirmed and expanded the exercise of the police power to reallocate "water rights" without effectuating a compensatory taking.¹² Also consistent with past decisions,¹³ the court asserted the state's duty to account for changing conditions in its water use allocations. Finally, the court reaffirmed the traditionally enormous power vested in California trial courts to control water use.¹⁴

The California Court has nonetheless crafted a dramatic restatement of California and western water resources law. Confronted with a claim that the public trust applies to waters themselves, rather than to an underlying lake or stream bed, the court (while relying on the touchstone of the navigability of Mono Lake) recognized a trust value in the waters, not the land. Faced with the dilemma that such a holding imposes a potential trust obligation on all appropriations, the court imposed a flexible — if uncertain — standard to govern the reallocation of water resources.

In the context of the specific Mono controversy, moreover, the court has forced Los Angeles for the first time in its history to face a compromise of her previously unregulated water rights. Finally, the court's firm reassertion of the police power to reallocate lends strong support to other environmental initiatives, most particularly that of Inyo County, to regulate and reallocate the Owens Valley groundwater resources that previously lay under Los Angeles' exclusive control.

Having resolved the "legal conundrum" before it, the court raised at least as many questions as it answered. At what point have conditions changed sufficiently to require a reconsideration and reallocation of water resources? Who shall have standing to initiate such a reconsideration; in adjudicated disputes, need the new challenger have participated in that prior adjudication? What forum will ultimately hear and determine the competing claims that define the reallocation; in the Mono Lake litigation, will the federal court proced to that determination, or will it once again abstain on the premise that determination of the trust-imposed reallocation forms a significant and unanswered question of state law? Will the preservationists hold the burden of proof to change, or the appropriator the burden of proof to maintain, the level ofextractions? By what substantative standard will the balance be struck, and what standard of review will govern a reviewing tribunal? Will — and can — the legislature override the Supreme Court's ruling, or the trial court's reallocation of water¹⁵ Finally, are there any waters of the state not embraced in the public trust; is there any reason, for example, why groundwater does not deserve the same protection?

The Future

Before this case is final, Los Angeles or one of the private appropriators in the Mono Basin will have the opportunity to present an appeal to the United States Supreme Court, alleging that the California court has unconstitutionally taken property without just compensation.¹⁶ But the Supreme Court recently dismissed a similar appeal of the Arizona Supreme Court's holding that the police power authorizes reallocation of groundwater resources.¹⁷ Such an appeal might in any event be considered [13 ELR 10112] premature, until application of the public trust doctrine to produce an actual reallocation of Los Angeles' water rights.¹⁸

If the California Supreme Court decision stands, it will likely stand at the apogee of a second phase of western water resource allocation. The first phase, extending from the gold rush to the post-war years, saw the appropriation and development of resources, generally subject only to the constraint of noninterference with competing, prior appropriators. In the second phase, the police power has overtaken, controlled and constrained the prior appropriation doctrine, authorizing and now directing a reallocation of resources to consider public, non-proprietary concerns. This second phase, like the first, too often left it to the courts to resolve questions of competing interests in California water resources.

By its decision in the Mono Lake case, the California Supreme Court points the way toward a third phase of resource allocation: that of compromise by and collaboration among the competing interests. While the Mono Lake proceeding does not at present seem a likely candidate, both the environmental plaintiffs and the truculent City of Los Angeles might surprise us all by implementing a "third phase collaborative resolution" of the dispute. If not now, that result will eventually obtain; the Supreme Court's patience is not infinite. If nothing else, the costs of litigation and its attendant uncertainty may eventually convince both preservationists and developers that we share a common resource and a common duty to govern it with mutual respect for all its users.

1. See generally W. KAHRL, WATER AND POWER (1982). An excellent description of the Mono Lake controversy and public trust doctrine, which in many respects anticipated the Supreme Court's decision, appears in Comment, The Public Trust Doctrine and California Water Law: National Audubon Society v. Department of Water & Power, 33 HASTINGS L.J. 653 (1982).

2. The second aqueduct first produced conflict in the Owens Valley, where the County of Inyo since 1972 has resisted the city's increased groundwater extractions. County of Inyo v. City of Los Angeles [four cases], 124 Cal. App. 3d 1 (Cal. Ct. App. 1980); 71 Cal. App. 3d 185, 7 ELR 20583 (Cal. Ct. App. 1977); 61 Cal. App. 3d 91, 6 ELR 20758 (Cal. Ct. App. 1976); 32 Cal. App. 3d 795, 3 ELR 20513 (Cal. Ct. App. 1973); see generally Rossmann & Steel, Forging the New Water Law: Public Regulation of "Proprietary" Groundwater Rights, 33 HASTINGS L.J. 903 (1982).

3. 13 ELR at 20273.

4. Marks v. Whitney, 6 Cal. 3d 251, 2 ELR 20049 (Cal. 1971).

5. People v. Russ, 132 Cal. 102 (Cal. 1901); People v. Gold Run Ditch and Mining Co., 66 Cal. 138 (Cal. 1884).

6. CAL. CONST. art. X, § 2.

7. People v. Shirokow, 26 Cal. 3d 301 (Cal. 1980); Joslin v. Marin Mun. Water Dist., 67 Cal. 2d 132 (Cal. 1967).

8. 13 ELR at 20280.

9. Id.

10. Id.

11. Environmental Defense Fund, Inc. v. East Bay Mun. Utility Dist. (II), 26 Cal. 3d 183 (Cal. 1979).

12. People v. Shirokow; In re Water of Long Valley Creek Stream System, 25 Cal. 3d 339 (Cal. 1979); Joslin v. Marin Mun. Water Dist.

13. Marks v. Whitney; Joslin v. Marin Mun. Water Dist.; Prather v. Hoberg, 24 Cal. 2d 549 (Cal. 1944).

14. For example, in City of Los Angeles v. City of San Fernando, 14 Cal. 3d 199 (Cal. 1975), the Supreme Court endowed trial courts with authority to disregard prior doctrinal solutions and instead effectuate physical solutions of groundwater disputes, guided only by the trial court's sense of equity.

15. The Supreme Court explained the need for its "judicially fashioned public trust doctrine" to protect against possible statutory repeal — suggesting that "the non-codified public trust doctrine" might rest on a constitutional foundation. 13 ELR at 20280 n.27.

16. Los Angeles may be unable to present such a claim, since the Supreme Court has ruled that municipalities do not have standing to raise such claims against the will of the state. Trenton v. New Jersey, 262 U.S. 182 (1923).

17. See Town of Chino Valley v. City of Prescott (II), 131 Ariz. 78, 688 P.2d 1324 (Ariz. 1981), appeal dismissed, 102 S. Ct. 2897, reh'g denied, 103 S. Ct. 199 (1982).

18. See San Diego Gas & Elec. Co. v. City of San Diego, 450 U.S. 621, 632 n.12, 11 ELR 20345, 20347 n.12 (1981); Agins v. City of Tiburon, 447 U.S. 255, 262, 10 ELR 20361, 20362 (1980).