North Gualala Water Co. v. State Water Resources Control Board

Opinion

The North Gualala Water Company (NGWC) appeals from a judgment denying two consolidated petitions for writ of mandate. The petitions challenge the State Water Resources Control Board’s (Board) jurisdiction to compel NGWC to obtain a permit to pump groundwater from two wells located near the North Fork Gualala River, as well as the Board’s interpretation of pumping limitations placed on the permit. In an issue of first impression, the parties dispute the proper construction of the statutory phrase,

In February 1993, NGWC filed a petition to change the authorized points of diversion in Permit 14853 to include Well 4. In its petition, NGWC stated that it was reserving the right to challenge the Board’s conclusion that Well 4 pumped water from a subterranean stream after conducting additional field work. NGWC filed a petition to add Well 5 to Permit 14853 in 1994.

In January 1998, NGWC’s consultants, Luhdorff & Scalmanini Consulting Engineers, filed a technical report with the Board regarding the groundwater pumped by Wells 4 and 5. Based on its own measurements and data collection, Luhdorff & Scalmanini concluded that the groundwater in the alluvial deposits under the Elk Prairie is not recharged from the North Fork and is not flowing in a subterranean stream. Contrary to the conclusion of the Slade report, Luhdorff & Scalmanini found that the groundwater underneath Elk Prairie is maintained by a combination of deep percolation of surface precipitation during the rainy season and subsurface flow from the underlying bedrock formations into the alluvium during the dry season. Also contrary to Slade’s analysis, Luhdorff & Scalmanini concluded that the underlying bedrock beneath Elk Prairie was not relatively impermeable, but was highly fractured and permeable, most likely due to its proximity to the San Andreas fault zone.

The chief of the Board’s Division of Water Rights responded to NGWC that, after reviewing Luhdorff & Scalmanini’s analysis, the Division of Water Rights still believed the groundwater pumped by Wells 4 and 5 was flowing in a known and definite channel, and thus was subject to the Board’s jurisdiction. Citing Slade’s analysis, other studies of the area, and the Board’s own investigations, the Division of Water Rights rejected Luhdorff & Scalmanini’s critical finding that the bedrock was permeable to water relative to the overlying alluvium. It opined instead that “it appears that the bedrock is sufficiently impervious relative to the alluvial aquifer material to form the bed and banks of a subterranean stream.” The Division of Water Rights advised that if NGWC wished to withdraw its petition to change the point of diversion, it would recommend that the Board hold a groundwater classification hearing to resolve the issue of the Board’s permitting authority.

In August 1999, the Board adopted Order WR-99-09-DWR which granted NGWC’s petitions to substitute Wells 4 and 5 for the previous points of diversion. DFG and other fishing interests protested the change sought by NGWC. The protestants expressed concern that NGWC was not meeting the bypass flow requirements of Term 9, and that the company would have trouble supplying the water demand of its customers if it was required to reduce diversions from the wells to meet these requirements. To address these concerns, Order WR-99-09-DWR required as a condition of the approval that NGWC submit a surface flow measurement plan to ensure compliance with Term 9 of Permit 14853. A subsequent order, Order WR 99-11, added a further condition that NGWC prepare a water supply contingency plan to address how municipal water needs would be met if the natural flow of the North Fork fell below the minimum amounts specified in Term 9.

NGWC did not challenge any of the findings or conditions in the 1999 orders, but proceeded to develop and file proposed plans for measuring surface flows and addressing water supply contingencies. In January and August 2000, the Board staff requested changes in these plans. Through its attorneys, NGWC agreed to some of the changes. At the same time, NGWC asserted that the Board had never issued a formal decision on the issue of whether the groundwater pumped by Wells 4 and 5 was part of a subterranean stream or percolating groundwater, and that NGWC had not waived its rights on that issue. In addition, NGWC disputed whether, by its terms, the second sentence of Term 9 (“[t]he total streamflow shall be bypassed whenever it is less than the designated amount for that period”) placed any limitation on the pumping of groundwater from Wells 4 and 5 so long as the pumping did not reach a level that would reverse the normal groundwater gradient between the wells and the river, thereby reducing surface streamflows. NGWC requested that its issues concerning the classification of the groundwater and the application of Term 9 be resolved through a formal hearing.

In April 2001, the chief of the Division of Water Rights informed NGWC that its plans were not approved. The chief’s letter explained that Term 9 applied to any diversions of water under the permit, and since Wells 4 and 5 are the only points of diversion in the permit, Term 9 applied to them. NGWC petitioned the Board for reconsideration of the chief’s decision. The petition asked the Board to hold a hearing on the legal classification of the groundwater pumped by Wells 4 and 5 and on the interpretation of Term 9.

NGWC accepted the four-part test with certain qualifications, but argued that the groundwater pumped by Wells 4 and 5 did not satisfy its requirements because: (1) the only subsurface channel present, that formed by the alluvial materials in the vicinity of the North Fork, does not narrow or contract in the direction of the alleged flow as would be required under a correct reading of Pomeroy, (2) the Franciscan bedrock forming the bed and banks of the alluvial channel is not sufficiently impermeable to satisfy the second element of the test; and (3) the groundwater underneath Elk Prairie is not in fact flowing “in the channel,” but in a direction perpendicular to it.

DFG expressed its concern that absent regulation by water right permit, NGWC could significantly expand its pumping and reduce river flows to levels inadequate for fish protection.

The Board found in Order WRO 2003-0004 that all elements of its four-part test had been met and that the water pumped from NGWC’s wells required a water right permit. Upon NGWC’s ensuing petition for reconsideration, the Board rejected NGWC’s argument that the water in a subterranean stream must always be flowing in a direction parallel to the sides of the subsurface channel. The Board found that “water is in fact flowing generally downstream within the channel under Elk Prairie, following a hydraulic gradient and following the path of least resistance.”

D. 2003 Mandate Petition

In May 2003, NGWC filed a new petition for writ of mandate, challenging Order WRO 2003-0004, which was eventually consolidated with NGWC’s 2001 mandate petition.

The trial court concluded that the Board’s four-part test was the appropriate means of making the determination required by section 1200. The court applied the substantial evidence standard to each of the four elements, and found that substantial evidence existed to support the Board’s findings as to all four elements. The court denied NGWC’s consolidated petitions for writ of mandate, and entered judgment in favor of the Board on December 14, 2004. This appeal followed.

A. Standard of Review

The parties differ over the applicable standard of review. The Board concedes that its interpretation of the “subterranean stream” language in

The parties also differ over the degree of deference which this court should give to the Board’s interpretation of section 1200. According to the Board, because the Legislature has delegated a “designated field of expertise” to the Board, the Board’s statutory interpretation should “generally be followed unless it is clearly erroneous.” (San Mateo City School Dist. v. Public Employment Relations Bd. (1983) 33 Cal.3d 850 , 856 [ 191 Cal.Rptr. 800 , 663 P.2d 523 ].) NGWC maintains that the proper standard is that applicable when a court must decide whether an agency regulation exceeds the authority delegated to the agency by the Legislature. (See Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1 , 11, fn. 4 [ 78 Cal.Rptr.2d 1 , 960 P.2d 1031 ] (Yamaha); Environmental Protection Information Center v. Department of Forestry & Fire Protection (1996) 43 Cal.App.4th 1011 , 1022 [ 50 Cal.Rptr.2d 892 ].) According to NGWC, when an agency is construing a statute affecting its own jurisdiction, the proper standard of review is therefore one of “ ‘respectful nondeference.’ ” (Environmental Protection Information Center v. Department of Forestry & Fire Protection, at p. 1022.)

Yamaha distinguishes between two types of administrative rulemaking: “[Tjhere are two categories of administrative rules .... One kind—quasi-legislative rules—represents an authentic form of substantive lawmaking: Within its jurisdiction, the agency has been delegated the Legislature’s lawmaking power. [Citations.] . . . When a court assesses the validity of such rules, the scope of its review is narrow. If satisfied that the rule in question lay within the lawmaking authority delegated by the Legislature, and that it is reasonably necessary to implement the purpose of the statute, judicial review is at an end. [][]... [][] [T]he other class of administrative rules, those interpreting a statute, . . . does not implicate the exercise of a delegated lawmaking power; instead, it represents the agency’s view of the statute’s legal meaning and effect, questions lying within the constitutional domain of the courts. But because the agency will often be interpreting a statute within its administrative jurisdiction, it may possess special familiarity with satellite legal and regulatory issues. It is this ‘expertise,’ expressed as an interpretation (whether in a regulation or less formally . . .), that is the source of the presumptive value of the agency’s views. An important corollary of agency interpretations, however, is their diminished power to bind. Because an interpretation is an agency’s legal opinion, however ‘expert,’ rather than the exercise of a delegated legislative power to make law, it commands a commensurably lesser degree of judicial deference.” (Yamaha, supra, 19 Cal.4th at pp. 10-11, italics omitted.)

The degree of deference to which the Board’s interpretation of section 1200 is entitled depends on a series of situation-specific factors identified in Yamaha: “[There are] two broad categories of factors relevant to a court’s assessment of the weight due an agency’s interpretation: Those ‘indicating that the agency has a comparative interpretive advantage over the courts,’ and those ‘indicating that the interpretation in question is probably correct.’ [Citations.] [][] In the first category are factors that ‘assume the agency has expertise and technical knowledge, especially where the legal text to be interpreted is technical, obscure, complex, open-ended, or entwined with issues of fact, policy, and discretion. A court is more likely to defer to an agency’s interpretation of its own regulation than to its interpretation of a statute, since the agency is likely to be intimately familiar with regulations it authored and sensitive to the practical implications of one interpretation over another.’ [Citation.] The second group of factors . . . —those suggesting the agency’s interpretation is likely to be correct—includes indications of careful consideration by senior agency officials (‘an interpretation of a statute contained in a regulation adopted after public notice and comment is more deserving of deference than [one] contained in an advice letter prepared by a single staff member’ [citation]), evidence that the agency ‘has consistently maintained the interpretation in question, especially if [it] is long-standing’ [citation]) (‘[a] vacillating position ... is entitled to no deference’ [citation]), and indications that the agency’s interpretation was contemporaneous with legislative enactment of the statute being interpreted. If an agency has adopted an interpretive rule in accordance with Administrative Procedure Act provisions—which include procedures (e.g., notice to the public of the proposed rale and opportunity for public comment) that enhance the accuracy and reliability of the resulting administrative ‘product’—that circumstance weighs in favor of judicial deference. However, even formal interpretive rules do not command the same weight as quasi-legislative rales. Because ‘ “the ultimate resolution of . . . legal questions rests with the courts” ’ [citation], judges play a greater role when reviewing the persuasive value of interpretive rales

The central issue in Pomeroy was the valuation of lands condemned by the City of Los Angeles under its eminent domain powers. (Pomeroy, supra, 124 Cal. at p. 604.) The lands were to be used for the purpose of constmcting a tunnel and filtration galleries to divert water flowing underneath the bed of the Los Angeles River at its narrow outlet from the San Fernando Valley, to supply the city’s inhabitants. (Id. at pp. 604-607.) The city asserted that the groundwater on the defendants’ property was part of the river’s underflow for which the city would not have to pay compensation. (Id. at pp. 607, 617.) The defendants maintained that the groundwater was percolating groundwater which they owned and for which compensation must be made in the jury’s award. (Id. at p. 617.) After being instructed in detail about how to distinguish percolating groundwater from water flowing in a subterranean stream, the jury made no award for the value of the water. (Id. at pp. 616-617.) On appeal in the Supreme Court, the defendants challenged several of the jury instructions on this issue. (Id. at pp. 630-636.) The court affirmed the judgment and upheld the trial court’s instructions. (Id. at pp. 630-636, 650.)

Pomeroy rejected the defendants’ claim that “all water passing through sand, gravel, and [boulders] is percolating water” and instead endorsed the view that a subterranean stream can exist “when the material through which the water forces itself fills a well-defined channel with impervious sides and bed.” (Pomeroy, supra, 124 Cal. at p. 631.) Later in the opinion, the court observed that such a channel could be formed by the “comparatively impervious mountain sides” creating the opening through which the disputed water passed out of the San Fernando Valley. (Id. at p. 632, italics added.)

Turning its attention to the proper definition of a subterranean stream, the Pomeroy court quoted in full from and endorsed as a correct statement of the law the following discussion found in Clesson S. Kinney’s 1894 volume, A Treatise on the Law of Irrigation (hereafter Kinney on Irrigation): “ ‘Subterranean or underground water courses are, as their names indicate, those water currents that flow under the surface of the earth. A large portion of the great plains and valleys of the mountainous regions of the west is underlaid by a stratum of water-bearing sand and gravel, and fed by the water from the mountain drainage. This water-bearing stratum is of great thickness, the water is moving freely through it, is practically inexhaustible, and, if it can be brought to the surface, will irrigate a large portion of the country overlying it. In and near the mountains many streams have a bed which was originally a

D. Parties’ Conflicting Analyses of Section 1200

As an initial matter, the Board claims that NGWC cannot challenge whether the Garrapata test reflects a correct interpretation of section 1200 on this appeal because NGWC failed to exhaust its administrative remedies. The Board maintains that both sides explicitly accepted the Garrapata framework in their arguments and presentation of evidence before the Board, but merely disputed whether certain elements of the test were satisfied as applied to the groundwater pumped by NGWC’s wells. (See San Franciscans Upholding the Downtown Plan v. City and County of San Francisco (2002) 102 Cal.App.4th 656 , 686-687 [ 125 Cal.Rptr.2d 745 ] [exhaustion of administrative remedies doctrine bars party from offering its own property appraisal methodology for the first time on appeal].) NGWC insists that it did exhaust its administrative remedies because: (1) it expressly argued to the Board that the Garrapata test must be qualified in specified respects, and (2) the arguments and evidence on which it relies on appeal are in substance identical to those it advanced in the administrative proceedings. With the possible exception of one argument, discussed post, that NGWC raised for first time in the trial court, we agree

While the Board’s “relatively impermeable bed and banks” requirement might profit from greater specificity, we cannot say that NGWC’s “significant boundary” formulation is an improvement, or that it is more consistent with the pre-1913 case law. It fails most notably to draw any distinction between the various means by which groundwater may enter the channel and the degree to which the channel contains and confines the water once it has entered.

3. Relevance of Flow Direction

Third, NGWC points out that section 1200 and Pomeroy both refer to subterranean streams flowing through a known and definite channel. (§ 1200; Pomeroy, supra, 124 Cal. at p. 632.) NGWC construes this to mean that the groundwater flow must be parallel to the channel or, if not precisely parallel to it, then at least flowing in the same general direction at all times. NGWC maintains that the water pumped by Wells 4 and 5 flunks this essential test because its flow direction underneath Elk Prairie is perpendicular to the alluvial channel forming the bed and banks of the asserted subterranean stream. In NGWC’s view, the north-south flow direction is caused by the significant amounts of groundwater entering the alluvial channel through fractures in the bedrock north of Elk Prairie. According to NGWC, this north-south stream is flowing across the defined alluvial channel, not through it as contemplated by section 1200. NGWC rejects as inconsistent with the available data any theory that the groundwater underneath Elk Prairie is merely “channelized” groundwater moving in a westerly direction along the alluvial channel that has been deflected south by the damning effect of a subsurface geological formation.

DFG’s expert presented an alternative theory to account for the flow direction at Elk Prairie. He cited evidence (which was disputed as insufficient by NGWC) that groundwater is flowing from east to west through the subsurface channel just upstream of Elk Prairie, before it encounters a

In its decision in this case, the Board held specifically as follows: “The fourth element in [the Garrapata test] does not require that the flow direction within the subterranean streamflow be parallel to the channel. . . . Further, any directional deviation of the subterranean stream from parallel to the channel is irrelevant to the issue of whether [NGWC’s] wells are taking water from a subterranean stream in a known and definite channel. Nothing in Water Code section 1200 or ... in the [relevant] case law requires that a subterranean stream exactly follow the course of the channel. Therefore, the test is satisfied as long as the water is flowing within the channel.” The Board asserted that this analysis was consistent with the behavior of surface streams: “In a surface stream, the flow may deviate or even reverse at points from the general direction of flow as water enters from a tributary, flows around a barrier, or moves along the bottom of the stream. Likewise, such deviations may occur in a subterranean stream.”

Subject to certain qualifications, we agree with the Board’s position. Nothing in the relevant case law requires that a subterranean stream precisely follow the course of the channel. As in surface streams, flow direction need not be parallel to the banks of the channel at all locations along its length. The presence of local obstructions or seasonal variations in flow volume, among other conditions, may affect flow direction. Thus, a directional deviation of the subterranean stream from parallel to the channel at the point of diversion would, in general, be irrelevant to the issue of whether the Board would have jurisdiction over appropriations from the stream, as the Board stated in Order WRO 2003-0004.

At the same time, the further statement in the Board’s decision that the Garrapata test “is satisfied as long as the water is flowing within the channel” is gratuitous, and may invite an overbroad application of the Garrapata test in future cases. Construed together, the words of the subterranean stream clause clearly contemplate that the stream flows in the same general direction as the channel. The following sentence from Pomeroy is illustrative: “ ‘[T]here are undoubtedly a great many underground streams whose waters flow in confined channels but whose courses are not known, and, following the above rule, these are all classed with percolating waters.’ ” (Pomeroy, supra, 124 Cal. at p. 634, quoting Kinney on Irrigation, supra,

An administrative agency must “render findings sufficient both to enable the parties to determine whether and on what basis they should seek review and, in the event of review, to apprise a reviewing court of the basis for the board’s action.” (Topanga Assn. for a Scenic Community v. County of Los Angeles (1974) 11 Cal.3d 506 , 514 [ 113 Cal.Rptr. 836 , 522 P.2d 12 ].) But such findings need not be stated with the formality and precision required in judicial proceedings. (Alford v. Pierno (1972) 27 Cal.App.3d 682 , 691 [ 104 Cal.Rptr. 110 ].) They are to be liberally construed to support rather than defeat the decision under review. (Fair Employment Practice Com. v. State Personnel Bd. (1981) 117 Cal.App.3d 322 , 329 [ 172 Cal.Rptr. 739 ].) Nor must the court remand if it determines that necessary findings may be reasonably implied. (Alford v. Pierno, at p. 691.) We must uphold the decision of an administrative agency challenged pursuant to section 1094.5 if “the agency ‘in truth found those facts which as a matter of law are essential to sustain its . . . [decision].’ ” (Topanga Assn. for a Scenic Community v. County of Los Angeles (1989) 214 Cal.App.3d 1348 , 1356 [ 263 Cal.Rptr. 214 ], quoting McMillan v. American Gen. Fin. Corp. (1976) 60 Cal.App.3d 175 , 184 [ 131 Cal.Rptr. 462 ].)

Construing Order WRO 2003-0004 and the Board’s ensuing order denying reconsideration together, we believe the Board did make adequate findings explaining the perpendicular flow direction of the stream underneath NGWC’s wells. The Board found the flow direction at that site was caused by clay sediments under Elk Prairie that deflected the water toward the south.

NGWC also contends that the Board failed to make a finding as to the source of the groundwater under its wells. However, it is inherent in the theory advanced by DFG’s expert—that the flow direction turns in a southerly direction at Elk Prairie due to subsurface geologic conditions—that the alluvium to the east is a major source of the groundwater being pumped. This finding, and the evidence supporting it, was explicitly discussed in the Board’s order denying reconsideration.

NGWC contends in the alternative that any findings made by the Board concerning flow direction and water source are not supported by the evidence. While acknowledging that “complex, conflicting evidence” on the issue was presented by NGWC and DFG experts, NGWC merely asserts in conclusory fashion that “the opinions on source and flow direction offered by [the DFG expert] were demonstrated to be incorrect by cross-examination of him and by rebuttal evidence submitted by [NGWC].” We disagree. Based on our review of the record, both sides drew reasonable but conflicting inferences from the very limited data points available. Our task on appeal is not to decide whether different findings would have been more reasonable, but to determine whether any substantial evidence in the administrative record supports the Board’s findings. (Code Civ. Proc., § 1094.5, subd. (c); Northern Inyo Hosp. v. Fair Emp. Practice Com. (1974) 38 Cal.App.3d 14 , 24 [ 112 Cal.Rptr. 872 ].) In our view, the testimony and opinions of the DFG expert concerning flow direction and water source do constitute substantial evidence supporting the Board’s findings on those issues.

4. NGWC’s Proposed Alternative Approach

Finally, NGWC proposes that the four-part Garrapata test be scrapped altogether in favor of a classification of groundwater found in a 1911 treatise authored by Samuel C. Wiel, Water Rights in the Western States. According to NGWC, three classes of underground water are recognized in the case law; (1) percolating water, (2) the underflow of surface streams, and (3) “definite known underground streams.” NGWC maintains that Pomeroy and other cases involving water flowing in alluvial channels are underflow cases. On the other hand, groundwater flowing in “definite known underground streams,” according to NGWC, is limited exclusively to water flowing through open spaces—fissures, voids, and tunnels—in bedrock formations.

In our view, NGWC waived this issue by failing to timely raise it in 1999 when the Board issued Orders WR-99-09-DWR and WR 99-11. (§ 1126, subd. (b) [“party aggrieved by any decision or order may, not later than 30 days from the date of final action by the board, file a petition for a writ of mandate for review of the decision or order”]; see Travis v. County of Santa Cruz (2004) 33 Cal.4th 757 , 767 [ 16 Cal.Rptr.3d 404 , 94 P.3d 538 ] [holding claim of invalid zoning permit conditions to be untimely]; United States v. State of Cal. (E.D.Cal. 1981) 529 F.Supp. 303 , 312 [dismissing as untimely challenge to state water board decision not filed within 30 days after final decision].) These orders placed conditions on NGWC’s request for a change in the point of diversion—the development of water measurement and water supply contingency plans—that were unmistakably premised on Term 9’s restrictions being fully applicable to groundwater diversions, not just to surface water diversions that could only occur under extreme pumping scenarios. NGWC could not have misunderstood the nature of the protests lodged against its change petition, nor the reading of Term 9 on which the Board predicated its ensuing orders addressing these concerns. It could not, consistent with section 1126, manifest its acceptance of the conditions and then wait until nearly two years later to challenge the premise on which they were self-evidently based.

In any event, we do not find NGWC’s interpretation of Term 9 persuasive on the merits. Generally, we extend considerable deference to an administrative agency’s interpretation of its own regulations and language. (Communities for a Better Environment v. State Water Resources Control Bd. (2003) 109 Cal.App.4th 1089 , 1107 [ 1 Cal.Rptr.3d 76 ]; Bello v. ABA Energy Corp. (2004) 121 Cal.App.4th 301 , 318 [ 16 Cal.Rptr.3d 818 ].) Such interpretation is entitled to great weight unless it is unauthorized, unreasonable, or clearly erroneous. (Bello v. ABA Energy Corp, at p. 318.) Although Term 9 is awkwardly worded in light of the change in the point of diversion, the Board’s interpretation that the term applies to all diversion points subject to the permit is reasonable in light of Term 9’s history and purpose in protecting streamflows and fish life in the North Fork. In contrast, NGWC’s proposed interpretation would make Term 9 substantially, if not completely, ineffective in fulfilling these purposes. Accordingly, the Board may enforce Term 9 according to its interpretation that the term applies to all diversion points subject to the permit.

T

he judgment denying the consolidated petitions is affirmed.

Marchiano, P. J., and Swager, J., concurred.

A petition for a rehearing was denied June 16, 2006, and the opinion was modified to read as printed above. Appellant’s petition for review by the Supreme Court was denied August 30, 2006, S144922.