Washington Supreme Court Rejects Facial Challenge to 2003 Municipal Water Law; Uncertainty Lingers Over "Pumps and Pipes" Certificates
On October 28, 2010, in Lummi Indian Nation v. State,1 the Washington Supreme Court unanimously upheld Washington's 2003 Municipal Water Law ("MWL") against facial constitutional challenges brought by several Indian tribes and environmental groups. However, the court expressly held out the possibility that the statute could still be unconstitutional "as applied" in particular circumstances. Although this decision should give some comfort to holders of so-called "pumps and pipes" municipal water rights certificates, uncertainty remains regarding the long-term viability of these water rights.
Background: "Pumps and Pipes" Certificates and the 2003 Municipal Water Law
Under principles of Western water law, a water right becomes perfected (vested) only when water is put to beneficial use; beneficial use is the "basis, the measure, and the limit" of a water right.2 Over the past several decades, however, the Washington State Department of Ecology ("Ecology") has issued numerous water right certificates for municipal uses based on system capacity ("pumps and pipes") rather than on actual beneficial use. This practice was intended to enable communities to grow into their water rights over time as their populations expanded. Municipal water rights enjoy a special status under Washington water law and have traditionally been exempt from forfeiture due to nonuse.
The validity of pumps and pipes certificates was cast into doubt in 1998 by a Washington Supreme Court decision involving a private developer, State v. Theodoratus, 135 Wn.2d 582 (1998). In Theodoratus, the court held that Washington's surface and groundwater codes require actual beneficial use in order to perfect a water right and that water rights could not be based on system capacity.3 Although the court cautioned that it was not then considering "issues concerning municipal water suppliers,"4 the implications of the decision created significant uncertainty regarding the validity of existing pumps and pipes certificates.
The 2003 MWL addressed this uncertainty in the context of comprehensive landmark legislation covering a wide range of water resource issues.5 Among other things, the MWL declares that existing pumps and pipes certificates are "right[s] in good standing" and prohibits Ecology from "revoking or diminishing" these certificates except in limited circumstances.6 Going forward, however, Ecology can only issue certificates for municipal water rights based upon actual beneficial use.7 The MWL also defined, for the first time, "municipal water supplier" and "municipal water supply purposes." These new definitions have the effect of retroactively extending municipal water supplier status beyond municipalities to a broader group of suppliers, including private developers whose projects would provide water to 15 or more houses.8 Finally, the MWL authorizes municipal water suppliers to shift their place of use within the boundaries of approved water plans in certain circumstances without consulting Ecology or notifying other water right holders,9 and it sets forth circumstances in which a municipal water right can exceed the number of service connections or population specified in a certificate.10
In 2006, two groups filed separate lawsuits seeking to invalidate various provisions of the MWL as unconstitutional, and the two suits were consolidated in 2007. The plaintiffs argued that the legislature violated separation of powers and made improper judicial determinations by effectively overruling the court's decision in Theodoratus. In the plaintiffs' view, Theodoratus had invalidated all pumps and pipes certificates and established that private developers are not municipal water suppliers. According to the plaintiffs, the MWL contravened this decision by retroactively reinstating the invalid pumps and pipes certificates and by retroactively conferring "municipal water supplier" status upon private developers like the defendant in Theodoratus. In addition, the plaintiffs argued that the MWL violated the due process rights of junior water right holders by retroactively expanding senior water rights.
In June 2008, a King County Superior Court judge agreed with the plaintiffs that certain provisions were facially unconstitutional, while upholding other provisions.11 All parties sought direct review in the Washington Supreme Court.
Washington Supreme Court Analysis
In a unanimous decision, the Washington Supreme Court rejected the facial challenges. The court began by noting that many of the arguments before the court would be better raised in an "as applied" challenge. The court then held that the legislature had not facially violated separation of powers when it "used the fact that this court did not consider 'issues concerning municipal water suppliers' in Theodoratus as an opportunity to secure the rights of some existing water certificate holders."12 Contrary to the plaintiffs' assertion, the court reasoned that Theodoratus did not automatically divest or invalidate any vested or perfected rights, and the challenged provisions of the MWL did not by themselves resurrect any relinquished rights. Further, the legislature's confirmation of existing rights represented by pumps and pipes certificates was a legislative policy decision not an improper factual adjudication.
While the court acknowledged that that some junior water rights were likely detrimentally affected by the MWL, the court concluded that the challenged provisions did not facially violate due process because they could be given a constitutional construction and because junior water right holders were not deprived of vested property rights as a matter of law. The court ended the opinion as it began, by emphasizing that its opinion was limited to the facial constitutional challenges and that nothing in the opinion should be taken to forestall a proper "as applied" challenge.
Conclusion and Practical Implications
The court's opinion suggests that although the court was unwilling to invalidate all pumps and pipes certificates as a matter of law, certain of these water rights could nonetheless be rendered ineffective or otherwise diminished in the context of future "as applied" challenges. It will be important to consider the risk of such challenges when evaluating any water rights portfolio that includes a pumps and pipes certificate or a right derived from a pumps and pipes certificate through the water rights transfer process.
Finally, the court left Ecology with significant room to interpret its opinion in determining how to implement the MWL going forward. Additional guidance from Ecology can be expected in the near future. One issue in particular to watch for is whether Ecology will continue to maintain its litigation position that, notwithstanding the general exemption from statutory forfeiture for municipal rights, a municipal water right may still be relinquished if not used at all for any period of five or more years. The court expressly declined to reach this issue.
2 Dep't of Ecology v. Acquavella, 131 Wn.2d 746, 755 (1997) (internal quotations and citation omitted).
3 Theodoratus, 135 Wn.2d at 593.
5 In addition to addressing the scope of municipal water rights, the legislation addressed issues such as water conservation, water utility service obligations, water right transfers, reclaimed water use, and consistency with local government comprehensive plans and development regulations.
6 See RCW 90.03.330(2), (3).
8 See RCW 90.03.015(3), (4).
10 See RCW 90.03.260(4), (5).
12 Lummi Indian Nation, 2010 WL 4244582, at *7 (quoting Theodoratus, 135 Wn.2d at 594).
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