JUNE 29, 1995. Hon. ORRIN HATCH, Federal Building, Attn: Kathleen Re: Comments on the Omnibus Property Rights Act Thank you for the opportunity to comment on this proposed legislation. I have been extensively involved in assisting irrigation districts on Bureau of Reclamation projects for the past 15 years having worked with 26 irrigation agencies in Utah, Washington, Idaho, Nevada, California, New Mexico, Wyoming, Montana, Nebraska, Kansas and Texas. In this work, I have researched the original Reclamation Act of 1902 and subsequent supplementary acts along with Congressional reports and applicable court decisions with regard to the land, property and contractual rights of the water users. My findings are that the United States contracted to sell water rights to the water users on Reclamation projects. Sections 5 and 8 of the Reclamation Act of 1902 refer to the "sale" of water and state that water rights are “acquired" by the water users. All subsequent acts such as the Acts of August 9, 1912, August 26, 1912; August 5, 1914; January 25; 1917, May 15, 1922; May 25, 1926; August 9, 1939; July 2, 1956; June 21, 1963; and Reclamation Reform Act of 1982 either specifically recognize or otherwise preserve the principle of sale of water to the water users. In addition, Supreme Court decisions such as Ickes v. Fox et. al. (1936) and Nebraska v. Wyoming (1944) state that the United States is not the owner of the water, but that the water is owned by the water users. Specific language for Nebraska v. Wyoming (1945) reads (italic type for emphasis only): * The appropriations [of water] under state law were made to the individual landowners pursuant to the procedure which Congress provided in the Reclamation Act. The rights so acquired are as definite and complete as if they were obtained by direct cession from the federal government. Thus even if we assume that the United States owned the unappropriated rights, they were acquired by the landowners in the precise manner contemplated by Congress. My review of the proposed Omnibus Property Rights Act triggered a review of just recently proposed rules published in the Federal Register Vol. 60, No. 63, April 3, 1995, Department of the Interior, Bureau of Reclamation, 43 CFR Parts 426 and 427, entitled "Acreage Limitation and Water Conservation Rules and Regulations". The agency's analysis of takings (page 16940) is entirely inadequate, erroneous, and misleading with regard to the rights of water users. The published analysis states (italic type for emphasis only): *** Because districts and individual water users hold only contractual rights to services provided by Reclamation and the proposed rule would have only a de minimus impact on the value of any Constitutionally protected property right if such right exists, it has been determined that this proposed rule does not present a significant taking. This statement indicates that the contractual rights of the water users are only in relation to services provided by Reclamation. The analysis fails to recognize the property rights of water users on over 40 million acre-feet of water in the West and summarily "takes" this water as federal property through the rules and regulations process. The value of this water is staggering (on the order of several trillion dollars) and the implications of the above statement are astounding. They are in direct conflict with existing law and contracts. This example shows that the Omnibus Property Rights Act is badly needed. Federal officials must be made to recognize and protect the property and contract rights of the people. I have also reviewed the comment letters of Steven L. Hernandez and Ronald K. Christensen transmitted to your office and fully concur with and recommend their comments. I appreciate and support your efforts in the passage of this bill. Sincerely, HARVEY L. HUTCHINSON, P.E., R.C.E. Senator ORRIN G. HATCH, STEVEN L. HERNANDEZ, ATTORNEY AT LAW, Las Cruces, NM, June 28, 1995, Thank you for the opportunity to comment on this legislation. Our office represents numerous irrigation districts formed under Reclamation Law in New Mexico, Idaho, California, Nebraska, Washington, Montana and Nevada. We are also involved in several stream adjudications involving the United States Bureau of Reclamation (Bureau) and their claims to water rights. Not the least of many of my clients problems has been the effect of the Endangered Species Act on the operation of these irrigation projects and their delivery of water to constituents. My comments come from the point of view of an irrigation district formed under Reclamation Law and how this legislation would affect them. Keep in mind that in many states, the water right for the project is held in the name of the United States and the United States has been reluctant to agree that they are not the owners of the water rights. In fact, after the Madera case in California, the Bureau has taken the aggressive position that water users only have a contingent contract right to receive water and that the Bureau can reallocate project water for other uses such as fish and wildlife and wetlands without compensation as part of water delivery contract renegotiations. In other instances, the Bureau is claiming that it will take an act of congress to convey a water right to a district that has repaid all of its construction costs to the United States because there must be specific legislation to convey any property owned by the United States. Since many of the reclamation projects throughout the west have not had the project water right adjudicated, the Bureau is free to claim that their actions involving project water do not amount to taking, therefore, this legislation must be flexible enough to cover the many situations that these irrigation districts face throughout the west. As part of an effort to find water for the ESA and wetlands, the Bureau has also proposed project water conservation regulations to take water away from existing uses by dangling "discretionary funds" in the face of many districts that had relied on miscellaneous revenues for operation and maintenance purposes. Similarly, the United States has insisted on storage rights in projects in Idaho in order to meet flow requirements for Salmon. With this background, I offer the following sugges tions. SECTION 203 If "private property" is intended to include "the right to use and receive water", wouldn't it be clearer if the language were "the right to appropriate, use, and receive water under federal or state law, or based upon contract." It bothers me that the definition of private property is so broad. For example, aren't users of project water under Warren Act contracts "private property" owners under the definition even though under their contracts and the law, there is clearly no property or ownership? SECTION 204 AND SECTION 502 In the part of these sections that states that "private property has been physically taken for public use", isn't this universe condemnation under the Fifth Amendment's takings clause already? Why is it here in this bill if "taking" under this new bill does not include condemnation? In the part of these sections that states "and any other circumstances there is a fundamental difference between the words "and" versus "or". Under statutory construction using "or" means that you get compensation for any of the categories named. Using "and" means that all the categories listed must be applicable before the property owners get compensation. I am unclear as to what "its action substantially advances the state's purpose" means. Is this a defense which may be raised by the United States against the property owner? Should this be "government's purpose"? If so, a definition of "government" would be helpful, because it would clarify that any claim brought against the "government" would be only against the United States, federal agencies and instrumentalities etc. Instead of the state irrigation district that also deals with project water. SECTION 404 In that part of this section where "An agency shall not issue rules that require uncompensated takings", isn't this the intent of the entire bill? in other words, isn't the purpose of the bill to protect against indirect/regulatory takings? The word "require" sounds like there has to be express language in the rule to this effect. Wouldn't a better choice of words be "that result in uncompensation takings"? SECTION 508 The "statute of limitations" says the owner has 90 days to file a claim "after final agency action". This language is troublesome because we do not know what is "final agency action." Where does the property owner file his claim? With the offending agency? Is this a notice of claim provision to the agency or a statute of limitations? Section 406 says you have six years to file a lawsuit. This section appears to be an administrative procedure section to file with the agency first, before you can file a lawsuit (exhaustion of administrative remedies). It's not really clear that this is the intent. In addition, isn't the binding arbitration section in conflict with Section 301? I know that this is a very quick review of the legislation, but I hope it helps and please do not hesitate to contact me if you have any questions. JUNE 28, 1995. Hon. ORRIN HATCH, Re: Comments on the Ominibus Property Rights Act Thank you for the opportunity to comment on this proposed legislation. It is badly needed and I would like to commend Senator Hatch and all those who have and will contribute to the drafting and passage of this bill. The right to property is fundamental to our liberty and must be protected to ensure our continued freedom. Government intrusion on property rights is eroding our rights and our freedom. This bill will do much toward correcting this problem. I have several suggestions and concerns that I believe should be considered. So you will understand my concerns and my perspective, I work for a large international engineering consulting firm as a water engineer and have been working in the water resources field for many years. I have had much experience with Bureau of Reclamation projects throughout the West and am currently working on a doctoral dissertation dealing with the rights and interests of water users in these projects. I am finding, both in my work as a private consultant and in my research, that the rights of water users on Reclamation projects are in many cases, being disregarded and ignored by Reclamation officials. The property rights of the water users appears to be one of the least of the concerns of many of these officials. For example, when the manager of the Midvale Irrigation District complained of how new rules and regulations were diminishing the rights held by the water users for many years on the Riverton Project in Wyoming and that it was difficult to determine how to manage the project and respond to Reclamation's requirements, the Reclamation official responded that it was rather simple. All you need to remember is one word: "compliance". That is quite a response from a federal official in the land of the free! Obviously, there must be a greater incentive and requirement for federal officials to respect the property rights of private citizens. I will first make specific comments on the language of the various sections of the Act and then will offer a suggestion for addressing an additional very important property right concern with regard to the recent use of the public trust doctrine by the courts in both water and land law. SECTION 203 In defining property, I would suggest that wording "the right to use and receive water" be expanded to read "the right to appropriate, use and receive water under federal or state law, or based upon contract". I think this would be more definitive and inclusive of water rights on Reclamation projects. SECTION 403 I suggest that the taking impact analysis include a requirement for disclosure of potential disputes and claims by property right holders including disclosure of the opposing arguments raised by the property rights holders, an objective analysis of these arguments and the potential legal costs of the government in defending the taking. If unsuccessful, the cost of the defense should be borne by the agency in its current budget. Also the exemption of trust properties from the TIA is troubling. The Supreme Court decision, Nebraska v. Wyoming (1945) as quoted later below indicates that Reclamation is a "trustee" and "carrier" for the water users. Not being a lawyer, I find a concern for what this might mean in terms property rights for Reclamation project water users. Could Reclamation use the trust exemption to avoid a TIA on Reclamation projects? SECTION 404 I applaud this section. An example of an agency's disregard of property rights and one that will result in uncompensated takings is published in the Federal Register Vol. 60, no. 63, April 3, 1995, Department of the Interior, Bureau of Reclamation, 43 CFR Parts 426 and 427, entitled "Acreage Limitation and Water Conservation Rules and Regulations". The agency's analysis of takings as reviewed under Execu tive Order 12630 (page 16940) is entirely inadequate, erroneous and misleading. The published analysis states (italic type for emphasis only): * Because districts and individual water users hold only contractual rights to services provided by Reclamation and the proposed rule would have only a de mínimus impact on the value of any Constitutionally protected property right if such ́right exists, it has been determined that this proposed rule does not present a significant taking." This statement indicates that the contractual rights of the water users are only in relation to services provided by Reclamation. This cannot be farther from the truth. The contractual rights of the water users are rights to the purchase the water rights under Reclamation and state law. The water rights are the rights to the use of the water sold by the United States for the purchase price of the cost of construc tion of irrigation works. To defend these statements with regard to purchase and sale of water, I quote sections 5 and 8 of the Reclamation Act of 1902. Sec. 5. [Reclamation requirements for entrymen-No water for more than 160 acres of private lands in one ownership-Residence of landowner-Receipts to reclamation fund. The entryman upon lands to be irrigated by such works shall pay to the Government the charges apportioned against such tract * * No right to the use of the water for land in private ownership shall be sold for a tract exceeding 160 acres to any one landowner, and no such sale shall be made to any landowner unless he be an actual bona fide resident on such land, or occupant thereof residing in the neighborhood of said land, and no such right shall permanently attach until all payments therefor are made. All moneys received from the above sources shall be paid into the reclamation fund* perma The effect this section along with sections 3 and 4 not quoted here appears to have been to authorize the Secretary to construct irrigation works and sell water to both public lands entered and settled under the homestead laws and to lands already in private ownership subject to the terms and conditions of the Act. For both public lands entered under the homestead laws and for private lands, it appears that the right to the use of the water was sold to the landowner and was to be nently attached to the land title as a right of the land to receive water. It appears to have been a sale of water. The price of sale appears to have been the propor tionate cost of the construction of the works required to provide the water. Thus, the right to the use of the water appears to be as much of a property right as that of the land itself. It appears that the patent (or title) to the land was to include the right to the use of the water on the land. The Act of August 9, 1912 modified these provisions somewhat providing for the issuance of a water right certificate in lieu of including the water right in the patent for the land. However, the fundamental intent of sale and purchase of the water right was preserved with the provision of the water right certificate. The water right certificate was required to specify that the water was appurtenant to the land. Section 8 of the Reclamation Act addresses the assignment of water rights and the conformance to state law. It reads as follows (italic type added for emphasis only): Sec. 8. [Irrigation laws of States and Territories not affected-Interstate Streams Water Rights. Nothing in this act shall be construed as affecting or intended to affect or to in any way interfere with the laws of any State or Territory relating to the control, appropriation, use, or distribution of water used in irrigation, or any vested right acquired thereunder, and the Secretary of the Interior, in carrying out the provisions of this act, shall proceed in conformity with such laws, and nothing herein shall in any way affect any right of any State or of the Federal Government or of any landowner, appropriator, or user of water in, to, or from any interstate stream or the waters thereof: Provided, That the right to the use of water acquired under the provisions of this act shall be appurtenant to the land irrigated and beneficial use shall be the basis, the measure, and the limit of the right. (32 Stat. 390; 43 U.S.C. 372, 383) The last portion of this law states that the right to the use of project water is ac quired by the landowner and it is appurtenant, or directly connected, to the land irrigated. The House and Senate Reports for the Reclamation Act of June 17, 1902 confirm this interpretation. An excerpt from the House Report reads (House of Representatives Report No. 1468, 57th Congress, 1st Session) (italic type for emphasis only): Section 8 recognizes State control over waters of non-navigable streams such as are used in irrigation and instructs the Secretary of the Interior in carrying out the provisions of the act to conform to such laws. It also provides that nothing in the act shall be held as changing the rule of priorities on interstate streams. In order that the water rights acquired under the provisions of the act shall be of the character most approved by centuries of irrigation practice, and such as will absolutely insure the user in his right and prevent the possibility of speculative use of water rights, the character of the right which is contemplated under the act is clearly defined to be that of appurtenance or inseparability from the lands irrigated and founded on and limited by beneficial use. Under this section uniformity of record of the rights is secured and the rules of priorities of rights are not disturbed, while the cost of maintaining the administrative machinery of water distribution is placed on users and the States; the Government is free from all expense or responsibility when projects are completed and paid for. The above discussion indicates that the principles of state water law were to govern the water rights and that the water rights would be acquired by the landowners. The character of the water rights were to absolutely insure the user in his right. The water right was made appurtenant to the land to prevent speculation. This would appear to include both private speculation and speculation by the Federal government. The appurtenance to the land appears to make the water right a property right of the land. The rights are also founded on beneficial use. It is the water users on Reclamation projects that have put the water to beneficial use; not the United States. Thus, the rights appear to belong to the water users as long as they pay their annual construction, operation and maintenance obligations and use the water beneficially. In addition, the Government is to be "free from all expense or responsibility when projects are completed and paid for." This does not square with Reclamation's claim that water users have only contracted for services from Reclamation. In Ickes v. Fox et. al., the Federal Court of Appeals (later affirmed by the U.S. Supreme Court), concluded with respect to water rights on Federal projects the following (italic type added for emphasis only): Appropriation was made not for the use of the government, but, under the Reclamation Act, for the use of the land owners; and by the terms of the law and of the contract already referred to, the water rights became the property of the land owners, wholly distinct from the property right of the government in the irrigation works. Compare Murphy v. Kerr, 296 Fed. 536, 544, 545. The government was and remained simply a carrier and distribu tor of the water (ibid.), with the right to receive the sums stipulated in the contracts as reimbursement for the cost of construction and annual charges for operation and maintenance of the works. As security therefor, it was provided that the government should have a lien upon the lands and the water-rights appurtenant thereto a provision which in itself imports that the water-rights belong to another than the lienor, that is to say, to the land owner. This court decision indicates that the water belongs to the land owner. The importance of the above court case is discussed by the U.S. Supreme Court in Nebraska V. Wyoming (1945). The court cites the above paragraph and adds the following (italic type added for emphasis only): Individual water users contracted with the United States for the use of project water. These contracts were later assumed by the irrigation dis |