Surface water permit holders not entitled to a predeprivation hearing when DNR issues notices to cease witdrawals

by Gary Taylor

Keating v. Nebraska Public Power District, Nebraska Department of Resources, et al.
(Federal 8th Circuit Court of Appeals, November 8, 2011)

Due to a decrease in water levels in the Niobrara watershed, in 2006 the Nebraska Public Power District (NPPD) requested that the Nebraska Department of Natural Resources (DNR) issue Closing Notices (notices to cease water withdrawals) to hundreds of farmers and ranchers who held surface water appropriation permits that were junior to those permits held by NPPD. In the summer of 2007, the DNR issued such Closing Notices to junior permit holders without providing them notice or a hearing prior to the issuance of the Closing Notices. The appellants filed suit, arguing that the Closing Notices effected a property deprivation, and accordingly they were entitled to the procedural due process protections of a predeprivation hearing. The district court dismissed the suit, holding that the claim was not ripe and that appellants had not exhausted administrative remedies prior to filing the complaint.  After an initial decision, an appeal to the 8th circuit and a remand, district court determined that although the appellants held a property right that entitled them to use the surface waters of the Niobrara River, that right was qualified and subject to the DNR’s administration of the appropriation system. Also, the district court held that the DNR’s administration of the system did not cause the appellants to suffer a deprivation of their property rights. Accordingly, the district court granted summary judgment in favor of the appellees.

In this case the appellants argue they are entitled to a predeprivation hearing prior to the DNR conducting its administration of the Niobrara Watershed and issuing Closing Notices. Specifically, appellants seek a predeprivation hearing to challenge the validity of the NPPD’s permits on the grounds that the NPPD was not beneficially using its appropriation to produce power and to challenge the DNR’s determination of water scarcity.  In addressing the right to a hearing – due process question – a court must first determine whether state action has deprived an individual of a protected property interest, and only after finding such a deprivation does the court consider whether available procedures for challenging the deprivation satisfy the requirements of due process. The US Supreme Court “usually has held that the Constitution requires some kind of hearing before the State deprives a person of liberty or property.”  The 8th Circuit noted that the parties agreed that a water permit entitling the holder to use surface water within the capacity limits of the Niobrara Watershed represents a property right under Nebraska law. That right, however, is not one of ownership of the surface water prior to capture. Instead, the holder of a permit acquires the rights granted by the permit, and is subject to constraints articulated by the permit. Here, the appellants’ permits allows them to use specific amounts of surface water so long as there is sufficient capacity, subject to the rights of senior appropriators and subject to regulation by the State through the DNR.  Appellants argued that when the DNR administers the Niobrara in a manner that requires permit holders to stop taking water, the state should conduct a hearing to give permit holders an opportunity to challenge the DNR’s determination that there is a scarcity.  The 8th Circuit rejected this argument. On the face of the permits, permit holders are warned that there are periods of time when water supply on the Niobrara River is insufficient to meet the demands of all appropriators and that permit holders are “hereby given notice that [they] may be denied the use of water during times of scarcity.” Thus, when the DNR determines that the watershed no longer has the capacity to supply all permit holders, appellants no longer have a legitimate claim of entitlement to use the surface water and thus do not suffer a deprivation of a property right.  The 8th Circuit affirmed the determination of the district court that appellants did not suffer a deprivation of their property rights by the DNR’s actions.

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