“Overlying Production is Rather Mythical.”
BCVWD Transcript 04 03 2017
7:30 BCVWD Counsel Markman: I’ve been asked to talk about the Adjudication Judgement that’s been in effect since 2004 on the Beaumont Basin. I love to talk about Water Adjudications. I’ve been doing them since 1969 and I’ve had three full Trials, been in the Court of Appeals, and the State Supreme Court on the Issues I’m about to talk about.
8:00 Markman: I’m going to talk about first is what I would say is the typical approach to Adjudication and the issues that are raised in Adjudications and how Water Rights Allocations are made and then I’m going to talk about the Beaumont Basin Judgement which is very, very unusual and very different and has reached different results, practical results. So, the purpose of Adjudicating a Basin is the fact that, if you’ve seen these new documentaries on California Ground Water – there is none, or there was none until the SIGMA was adopted a few years ago. So it’s a wild-wild west. There’s no administrative body to run to, there’s nothing but Lawsuits and Adjudications that can parcel-up or allocate the water rights depending upon your priorities when you’re pumping from a groundwater basin, so it has been, essentially, wide open. Back in 1951 there was the first Adjudication in the Raymond Basin in Pasadena and ever since then there’s been somewhere on the order of 20 – 30 Adjudications. Most of them, all but three or four, are down here in Southern California.
9:00 Markman: Water Adjudication is just a way to end up managing the Basin in accordance with a Judgement that’s entered and administered by the Court under continuing Jurisdiction. So instead of fighting battles every three years about who has the right to allocated water, you enter into these ‘deals’, these Adjudications, these Basin Adjudications, and if anyone needs relief there’s an administrative Watermaster is usually a Board, which is an arm of the Court, it’s actually a Court Referee. And if there’s major problems you can take a Motion directly to Court. So it’s a way of managing through the Court system and pretty much only found in California, mostly Southern California. What’s usually required to start out with, after you do the Engineering [Wildermuth], which should lead everybody to the conclusion – I’ll can’t say that enough. Science and Engineering should lead the correct conclusions. If you don’t start with that, then it’s really a deal that you can’t rely on.
10:00 Markman: So once you understand what the Safe Yield of the Basin is; it’s approximately how much water is made available and compare that with how much water is consumed in the Basin or pond, you can safely allocate water rights and then create a system of physically managing the system that you’ve created. So you have to start out with water rights and the priority of water rights in California, leaving you Tribal rights and exotic Federal rights that pop up where there’s an Indian Tribe occupying a Reservation or where there’s a Military Instillation. Leaving those types of things aside; the number one priority is the location of the Well you’re pumping and what you do with the water. If you pump the water out of a piece of property you own and you use it within the Basin on another piece of property or the same property you own; that’s called an ‘Overlying Right’ and its of equal priority and Constitutionally protected as an Aquarian Right, where you’re diverting water out of a river when you own the land right next to the river.
11:00 Markman: If you own land over a Basin you can pump water, put it on that land for beneficial uses. And having done about eight of these Cases I can tell you there are people who are completely religious about the nature of that right and don’t ever concede that it should be sacrificed, modified, or every agree to these Agreements. The position they take is that everybody who serves water to people, Appropriators like this District, pump water out of your property, but they serve it to other people for beneficial uses on their property, or a Distributor, in your case a retailer, you have a ‘second level’ priority under the normal allocation. These people I call the religious Overlyers think that they never have to cut back on their draw until everyone else turns the water off. All the Appropriators turn the water off and the whole area, the whole economy, is essentially dried up. Then maybe they have to cut back. I have never seen a Court enter such an Order and I don’t expect to see a Court enter such an Order, but there are people who feel that way.
12:00 Markman: They took that position in the Mojave Case, Santa Maria Case, and they’re now taking that same position in Paso Robles. There are lots of them and they fund oppositions to these lawsuits. That’s the normal Allocation. The totem pole is locational rights, overlying rights have priority over appropriative rights. But then if you have a system that’s in Overdraft, a Basin Overdraft for five consecutive years or more, everything changes because public entries, the Distributors, acquire Prescriptive Rights. Essentially, through Adverse Possession. You’ve invaded the Safe Yield by pumping water when there’s no surplus available. so you’ve essentially challenged invaded, publicly trespassed really, on the Overlying Rights’ priority. If you do that for five consecutive years; you now have prescriptive rights and there’s a conversation of the Overlyers’ to something called ‘Self-Help Rights’. How much did they pump during the same five year period.
13:00 Markman: So now you’re on equal footing and that’s usually where we find ourselves when we start talking Allocations in these cases. Prescriptive Rights for the Water Supplies and Self-Help Rights for the Overlyers and lets divide it up and when I say divide it up I mean to allocate it. There’s only two things that can happen; if you have supplemental water to buy, which is more expensive normally, the question is – who pays the greater price for the water. Who has to pay for that supplemental water that you bring in to balance the Basin. You can either bring it in by someone bringing it directly or you can spread the water, percolate it in the Basin and replenish the Basin. The idea always sustainability. Keeping water supply equal with consumption, that’s sustaining a Basin over the long haul. The one way to do it is supplemental water, so it becomes a question of money, the price of water. The other way to do it, normally, is cut-backs. Frankly, there are cut-back Basins in California.
14:00 Markman: The Raymond Basin, the first case was cut back 1/3 by everybody pumping from the Basin by 1/3. Whatever they were, Cities or Overlyers, were cut back something like 20-25% as I recall. They agreed on that after a big reference to the Department of Water Resource Board and a trip to the California Supreme Court. The first major case, the Seminole Case, was a cutback case. You don’t usually see cutback cases. They may be headed for one up north in Paso Robles because there’s so much overproduction by Overlyers alone, the wine growers, essentionally, wine grape growers, that municipal production is neither here nor there, they’re overproducing tremendously all on their own. Overlyers, essentially, have to correlate their own rights, so if you have 100 acre/feet of production and only 80 acre/feet of safe yield, it’s all overlying production.
15:00 Markman: Everybody has to proportionally reduce their pumping on some logical, equitable basis. Acreage is one way to do it. Different use, depending on crops, is another way to do it. So they have correlative rights among themselves. But if you look at this Basin, it’s going to move me to this Basin and comparing this to what i just said; this is very much seems to have different objectives when this was done and it certainly led to different results than what I described. I described the classic model of getting sustainability over the long-haul where everyone can keep their beneficial uses going even if they have to conservation, nobody’s cut out. There’s no cutbacks unless there’s no supplemental water, then there’s proportionate cutbacks. That’s just a classic, simple model. A good one to look at is the main San Gabriel Case if you want to look at an application of that classic model. Now their problem; they’re depending assessments to replenish the water if you overproduce.
16:00 Markman: The question’s going to become; well, metropolitan keeps suppling replenishing water, particularly at the lower rate than what they supplied it at before because it’s an interruptible supply. So that’s your classic approach to an Adjudication. Now let me talk about the Beaumont Basin. All these Adjudications deviate in some way or another, but this one deviates a lot. I can discern that some of you were here when this happened and knew better. I’m just looking at and discerning what the goals were by looking at what happened and where it ended up. That Judgement was entered after a negotiated Stipulation in February, 2004. The major deviation from the norm is that instead of finding a way to balance supply and demand as quickly as possible to sustain the Basin; there was an objective there to pump down the Basin, ‘Mine the Basin’, overproduce it, for at least ten years.
17:00 Markman: And when you see what the numbers on compared to the present Safe Yield, it really becomes absolutely obvious. And you can, sometimes, mine the Basin and lower it if you’re trying to create space because you’re losing an opportunity to get water somewhere else and store it in the Basin and use it. And I don’t know if that’s a reason, that’s one of the recitals in this Judgement, but it doesn’t really talk about how much, and that’s called ‘Temporary Surplus’, but it doesn’t talk about how much space is there, how much water we’re going to overproduce, how much we’re going to take down the elevation. It’s just quiet about that. Usually when you do that you pretty much spell it out; how much you’re going to overproduce per year. This does allow overproduction for a ten-year period. There are two groups that have water allocations in the Basin. The first one is the Overlyers and they had an allocation of 6,783.87 acre/feet per year, which I think exceeds the present, the revised Safe Yield in and of itself.
18:00 Markman: That is supposedly based on prior production statistics. They have three columns and it’s hard to tell how that matches up, I wasn’t there to negotiate this, but that’s an allocation of a whole lot of water rights to Overlyers who, at least talking to Eric [Fraser] and other people since I’ve been here, the years I’ve been here [7], don’t think that much water was being produced back then. Those are just negotiated numbers. So you start out with almost 7,000 acre feet of a negotiated number for Overlyers; meaning farmers, meaning people like the egg farmer and other people who supposedly are doing agriculture or something else on the ground that is not apparent at that amount. So that’s sitting out there. Then comes the kind of staggering large number, which indicates they’re trying to take down the Basin, mine it, for ten years and that number was an allocation to a short list of Appropriators to the tune of 18,805 acre/feet per year.
19:00 Markman: So without any conversions or anything else, you can see there’s allocations of almost 25,000 acre/feet. Your Safe Yield is less than 7 [,000 ac/ft] now. It’s revised, so you can look and see that the intention never was to create a system for at least ten years, just a whole lot of production that could serve not only then existing uses, but also could serve growth demand, especially that 18,000 they entered at acre/foot allocations to the Appropriators. So for ten years that production was allowed to go on and everybody – I remember in 2014 people were saying that we’re going to fall off a cliff. 42.5% of that water was allocated to this District [BCVWD], so you can see this District had an allocation of over 9,000 acre/feet it could produce from the Basin just based on that allocation.
20:00 Markman: That was the basis; take down the elevations to create storage space? I don’t know. To meet demands that were seen coming down because of all the entitlements supplied for? Yes, it would have covered that and as we know there were a lot of units that were entitled during that process that everybody wasn’t supposed to worry about for at least ten years and then something else was supposed to happen. Probably supplemental water from the State Water Project. Something was ‘assumed’ was going to happen at the end of the ten year period, which obviously we’ve talked about it here dozens of times – it hasn’t happened in the amounts that were expected, obviously. There’s a couple other items I want to mention in the Judgement. Where water rights can, essentially, transferred. And they’re transferred from the Overlyers to the Appropriators, which, again, this District is an Appropriator. One type of transfer was what I called a ‘Conversion of Overlying Rights’ to the Appropriators.
21:00 Markman: When somebody sells their property for development, the development occurs, the demand is calculated of how much water will be required annually to serve this development. If this District became the water supplier, this District gets to pump what they still call ‘Overlying Rights’. And the person with the overlying rights forbears from producing that amount of water. That’s really a permanent transfer of water, however you want to use the terminology. So, a lot of that water was transferred to this District and other Retailers because of Development. What does that do? The person with the property now doesn’t have to pay water supply fees and doesn’t have to reduce the value of the property because the Developer has to find a way to bring water in or pay water supply fees. So essentially; it’s like a big injection of value right into the land because the water right that may not even been being produced is now transferred to the retailer, so that’s that part.
22:00 Markman: And the last part that popped up actually was generated long after the Judgement was entered by a Watermaster Rule. The Watermaster decided that ,well first of all you calculate the amount of overlying right on a five-year rolling basis. So for every five years that overlyer gets to pump 5 times the water rights stated in the Judgement. At the end of every five-year period you look and see; if they pump less than that this new Watermaster says that delta is going to be allocated proportionately to all of the appropriators, including this District. So let’s say somebody has 100 acre/feet per year allocation, 500 acre/feet for every five-year rolling period. You get to a year and only 250 acre/feet has been pumped during the previous five years; the retailers get an allocation of 250 acre/feet of which this District is going to get a little more than 200 acre/feet and it goes into the Storage Account.
23:00 Markman: Because this overlying production is rather mythical; every time you do one of these calculations you’re accumulating water that supposedly is available and storage in the Basin but wasn’t produced because the overlyer could have produced it. It’s a sort of fiction, obviously, unless you can see the prior production was at the same level. So that’s been going on too. So at the present time where the District finds itself is 18,000 acre/feet less benefited or allocated because that ten-year period where you had all those water rights have passed. So what you’re sitting on now is your imported water, whatever percentage of the State Allocation that may be that you get from Pass [Water Agency], which won’t agree on a permanent allocation, so that’s always a floating number. And you also have your conversion water. Wherever the District has had growth, in the City of Beaumont and elsewhere, you still have the water it takes to serve that demand in your column.
24:00 Markman: That’s a conversion right that was deducted from the overlying rights. You also have a storage account that includes not only what you get by the Pass Agency, but it also includes 42.5% of the water that wasn’t produced, that could have been produced theoretically, by the overlyers. So that’s how this works. Something didn’t happen between the years 2004 – 2014 to take the place of that 18,000 acre/foot allocation of water rights and that’s not coming back unless somebody renegotiates or redoes this Judgement. You can see what the purpose of this was. Saying it’s highly unusual would be an understatement. From what I’ve seen, even the – I’ve seen Basins drafted down in order to create space for surplus water, like they just did that in the Chino Basin to get water that was otherwise spilling from the Santa Ana River at the south end of the Basin.
25:00 Markman: That makes since because that water is wasted for anybody’s use, but this was different because I’ve never seen anything in these documents that identifies what supplemental water, what other water are you making room for, or space for? Don’t you have enough because you were already in overdraft? So that’s the question the Board faces, so obviously what’s happened, what’s puts all the pressure on this Board in the implementation of this Judgement is that you don’t have supplemental water equal to the 18,000 acre/foot allocation that the overlyers all had, which you had 40%, so that’s a whole lot of water rights that you don’t have to pump under that Judgement now nor do you have a firm supply of supplemental water that equates to that. On the other side of the coin, the big buildout didn’t occur for a number of years because of the recession.
26:00 Markman: See, all those Will-Serve Letters and those supplemental assessments were made, most of them, long before 2014, which is sort of judgement day under this Judgement, the ten-year cliff. Now you’re sitting in a position where you a lot of stored water, which theoretically is there. You have a smaller Safe Yield as of just a few months ago. And you have, had at least in recent years that I’ve been here, way less supplemental water from the State Project that you would like to have. And you have development pressures starting again because the recession’s over and they want to move their product. So all of that has resulted from the implementation of the strange, unusual Judgement that gave everybody a ten-year breather to try to get enough water up there to meet the demand for housing and the other growth around here.
27:00 Markman: But now it’s gone away and replacement water has not developed, it hasn’t shown up nor do we get much hope from the Pass that it’s going to show up any time soon. That’s what I would like to tell you about your Judgement. I took a very academic look at this. Again, I wasn’t here, I didn’t hear the arguments, I wasn’t here for the negotiations when they came up with these numbers. But this is what I see that is different and unusual in how this works. I’d be happy to ‘try’ to answer any questions.
28:20 Markman: That’s a good question that you asked about carryover, because there’s nothing in this Judgement that if you don’t pump up to your max amount in any given year that you’re carrying it over for one year, two years, three years. Completely silent on that, so if I had to give an opinion to support somebody by permanent water rights I would say there’s no carryover rights, there’s no evidence of carryover rights. So much a year disappears, the next year the same amount comes back. For you it’s 42% of over 19,000 acre/feet. After 2014 that’s not there any more, after 2013.