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Court Issues Decision Addressing The State Board’s Jurisdiction Over Groundwater

By: Alfred E. Smith

In North Gualala Water Company v. State Water Resources Control Board, the California Court of Appeal, First Appellate District, rendered an important decision addressing the scope of the State Water Resources Control Board’s ("State Board") jurisdiction over groundwater. At issue in North Gualala was, inter alia, whether the State Board had jurisdiction to require a water company to obtain a permit to pump groundwater from two production wells, and the State Board’s interpretation of pumping limitations placed on the permit.

The water company argued that the State Board did not have jurisdiction because the groundwater was percolating water exempt from the Board’s permitting process. The State Board argued it properly asserted jurisdiction under Water Code section 1200, which grants the Board permitting authority over "subterranean streams flowing through known and definite channels." To determine if it had jurisdiction, the State Board relied on a four-part test requiring the following physical conditions: (1) a subsurface channel must be present; (2) the channel must have a relatively impermeable bed and banks; (3) the course of the channel must be capable of being determined by reasonable inference; and (4) groundwater must be flowing in the channel.

Applying a fact-specific analysis with "limited deference" to the Board’s interpretation of the statutory language in Water Code section 1200, the court concluded that the Board properly asserted jurisdiction over the groundwater production. Affirming the trial court’s decision, the court found that the channel was contracted and bounded. The court focused not on the source of the water gathered in the subterranean stream, but on the "physical coherence of the stream once it is formed." The court noted that evidence in the administrative record suggested the alluvium was two and one-half to three orders of magnitude more permeable than the surrounding bedrock.

While affirming the trial court’s decision, the appellate court placed limitations on the State Board’s permitting authority. The parties disputed the relevance of groundwater flow direction. The water company argued there was not a known and defined channel, noting that the flow direction at certain points was perpendicular to the alluvial channel forming the bed and banks of the asserted stream. The State Board asserted that was irrelevant. Noting that the presence of local obstructions or seasonal variations in flow volume, among other conditions, may sometimes affect flow direction, the court ruled in favor of the Board. At the same time, the court expressly stated: "[c]onstrued together, the words of the subterranean stream clause clearly contemplate that the stream flows in the same general direction as the channel . . . the subterranean stream clause of section 1200 cannot properly be construed to grant jurisdiction over a groundwater stream that wanders independently of the banks of the putative channel."

The court also rejected the "impacts" test suggested by the trial court. The trial court stated: "Once the fact of the impact is established, then the [State] Board has jurisdiction over the matter." The appellate court found that the State Board did not rely on an "impacts" test, noting that application of an impacts test would be contrary to law. The appellate court concluded: "[w]e reject as inconsistent with section 1200 the trial court’s passing suggestion that once the operation of [the water company’s] wells is shown to have an impact on the North Fork surface flows, the Board’s jurisdiction over the wells follows automatically."

Alfred E. Smith, II is a Partner in Nossaman's Los Angeles office who specializes in environmental, water and complex commercial litigation. He represents public and private water purveyors, major water users, corporations and public agencies on matters including environmental compliance, water rights disputes, conjunctive use, public utility regulation, groundwater management and litigation over allegedly contaminated water and soil. Alfred is a graduate of the Harvard Law School, and he is an appointed member of the Association of California Water Agencies’ (ACWA) Legal Affairs Committee. He can be reached at (213) 612-7800 or

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