Snell & Wilmer. Phoenix, Arizona

Transcription

1 Snell & Wilmer L.L.P. LAW OFFICES One Arizona Center, 00 E. Van Buren, Suite 0 Phoenix, Arizona L. William Staudenmaier (#0) wstaudenmaier@swlaw.com SNELL & WILMER L.L.P. One Arizona Center, Suite 0 00 East Van Buren Street Phoenix, Arizona 00- Telephone: (02) Attorneys for Applicant Freeport Minerals Corporation IN THE OFFICE OF ADMINISTRATIVE HEARINGS In the Matter of the Department of Water Resources Denial of Mohave County s Objections to Freeport Minerals Corporation s Applications to Sever and Transfer Certain Water Rights Appurtenant to Land Located Within Planet Ranch and Lincoln Ranch along the Bill Williams River Docket No. 1A-SW001-DWR NOTICE OF FILING OF APPEAL TO SUPERIOR COURT FROM FINAL ADMINISTRATIVE DECISION -and- REQUEST FOR EXPEDITED TRANSMITTAL OF RECORD TO SUPERIOR COURT AND FILING OF CERTIFICATION OF RECORD ON REVIEW Freeport-Minerals Corporation ( Freeport ) hereby provides notice to the Office of Administrative Hearings that Mohave County has filed a Notice of Appeal for Judicial Review of Administrative Decision in the Maricopa County Superior Court ( Notice of Appeal ), seeking review of the Arizona Department of Water Resources ( ADWR ) Final Decision in this matter, dated November 2, 1. A copy of the Notice of Appeal is attached to this filing as Exhibit 1. In its Final Decision, ADWR accepted, with some minor modifications, Administrative Law Judge Tammy Eigenheer s decision issued on November 1, 1. The County s appeal has been designated as Maricopa County Superior Court Case No. LC1-000 and has been assigned to the Honorable Crane McClennen. Judge McClennen has issued a minute entry order requiring certain initial.1

2 Snell & Wilmer L.L.P. LAW OFFICES One Arizona Center, 00 E. Van Buren, Suite 0 Phoenix, Arizona actions be taken by the parties. A copy of the minute entry order is attached to this filing as Exhibit 2. Freeport respectfully requests that the Office of Administrative Hearings expedite its transmittal of the record of this case to the Superior Court and expedite the filing of the Certification of Record on Review. As described at greater length in Freeport s Motion to Expedite Hearing filed in this proceeding on August, 1, expediency is warranted due to the critical time limitations that are included in the Bill Williams River Water Rights Settlement Act, Pub. L. No. -, Stat. - (1), signed into law by President Obama on December, 1. This important Indian water rights settlement act will become null and void unless all objections to Freeport s applications are resolved by December 1, 1. Accordingly, Freeport requests that the record be transmitted and that the Certification of Record on Review be filed as soon as possible to facilitate expedited review in the Superior Court. RESPECTFULLY SUBMITTED this th day of January, 1. SNELL & WILMER L.L.P. By /s/ L. William Staudenmaier L. William Staudenmaier One Arizona Center, Suite 0 00 East Van Buren Street Phoenix, Arizona 00- Attorneys for Applicant Freeport Minerals Corporation

3 Snell & Wilmer L.L.P. LAW OFFICES One Arizona Center, 00 E. Van Buren, Suite 0 Phoenix, Arizona COPY of the foregoing electronically filed with the Office of Administrative Hearings on January, 1 and ed to: Janet L. Miller Nicole D. Klobas Arizona Department of Water Resources 0 North Central Avenue Phoenix, Arizona 0 jlmiller@azwater.gov ndklobas@azwater.gov Carlos D. Ronstadt The Law Office of Carlos D. Ronstadt, PLLC 000 North th Street, Suite 0, No. Phoenix, Arizona 0- carlos@carlosronstadt.com Special Counsel for Objector Mohave County Shilpa Hunter-Patel Senior Counsel-Water Freeport Minerals Corporation North Central Avenue Phoenix, Arizona 00 Shilpa_HunterPatel@fmi.com Counsel for Applicant Freeport Minerals Corporation COURTESY COPY ed on January, 1 to: Adriane Hofmeyr Munger Chadwick, P.L.C. N. Wilmot Suite 00 Tucson, Arizona ajhofmeyr@mungerchadwick.com /s/ L. William Staudenmaier - -.1

4 EXHIBIT 1

5 MUNGER CHADWICK, P.L.C. National Bank Plaza 2 North Wilmot, Suite 00 Tucson, Arizona Telephone: () -0 Facsimile: () - Attorneys@MungerChadwick.com John F. Munger (ASB#00) J FM unger@mungerchadwick.com Adriane J. Hofineyr (ASB#000) AJHofineyr@MungerChadwick.com Robert J. Metli (ASB#Ol 0) RJMetli@MungerChadwick.com Lawrence V. Robertson, Jr. (ASB#OOl 0) tubaclawyer@aol.com Aflorneys for Appellant IO I 1 IN THE SUPERIOR COURT OF THE ST A TE OF ARIZONA IN AND FOR THE COUNTY OF MARICOPA 1 1 MOHAVE COUNTY, a political subdivision of the State of Arizona, 1 Appellant, v. 1 ARIZONA DEPARTMENT OF WATER I RESOURCES, a political subdivision of the State of Arizona; FREEPORT MINERALS 1 CORPORATION, a Delaware corporation, Appellees. Case No.: NOTICE OF APPEAL FOR JUDICIAL REVIEW OF ADMINISTRATIVE DECISION Assigned to: NOTICE IS HEREBY GIVEN that, pursuant to A.R.S. -01, et seq., including but not limited to -0(A) and -0(A), and Rule, Arizona Rules of Procedure for Judicial Review of Administrative Decisions, and A.R.S. -l l (B), Appellant MOHAVE COUNTY hereby appeals to the Superior Court of Arizona, County of Maricopa, from the final decision of Appellee ARIZONA DEPARTMENT OF WATER RESOURCES ("the Department") dated November 2, 1, in which the Department rejected every one of Mohave County's written

6 objections to certain applications filed by Appellee FREEPORT MfNERALS CORPORATION 2 IO I I ("Freeport") to sever and transfer water rights in Mohave County. A. FINAL ADMfNISTRATIVE DECISION SOUGHT TO BE REVIEWED Almost five years ago, on March 1,, Freeport-McMoran Corporation (now Freeport Minerals Corporation) ("Freeport") filed with the Department seventeen applications pursuant to A.R.S. - ("the Applications") to sever and transfer water rights appurtenant to land within Planet Ranch located in southern Mohave County along the Bill Williams River near its confluence with the Colorado River. 1 At the time, Freeport was not the owner of the water rights. Freeport is still not the owner of the water rights. By letter dated September 0,, Mohave County filed with the Department timely objections to the Applications (' Objections"). In its Objections, Mohave County asserted that: (I) diverting water to another county for mining operations would have a negative effect on water supplies in the area, including the Big Sandy aquifer, riparian areas and flows to the Colorado River; and (2) granting the Applications would continue to diminish an "already minute percentage" of land holdings along the Bill Williams River corridor that would result in an increased tax burden on county taxpayers. On June, 1, almost four years after Mohave Couty filed its Objectios, the Department issued to Mohave County a "Notice of Appealable Agency Action" in which the Department summarily rejected Mohave County' s Objections, on inter a/ia the following grounds: (I) Mohave County lacked standing to object because it had no "vested or existing water rights;'' (2) Mohave County lacked standing to object on behalf of others who had "vested or existing water rights;" () the statute did not authorize the Department to deny the Applications on the basis that they were against public interest; and ( ) the statute did not authorize the 1 The Applications have not yet been granted or denied by the Department. -2-

7 Department to deny the Applications on the basis that they would result in an increased tax 2 I I burden on Mohave County taxpayers. On July, 1, Mohave County filed a timely Notice of Appeal of the Appealable Agency Action with the Office of Administrative Hearings. On August, I, the Department issued a Notice of Hearing to Mohave County and to Freeport notifying them that a hearing would be held on Appellant's appeal before Administrative Law Judge Tammy L. Eigenheer ("the ALJ"). On October, 1 and October, 1, 2 oral argument was held before the ALJ. On November 1, 1, the ALJ issued her written decision, recommending the rejection of Mohave County's Objections. On November 2, 1, the Department' s Assistant Director issued the Department's final decision, upholding its initial rejection of Mohave County's Objections ("the Decision") (the agency action appealed herein). In the Decision, the Assistant Director asserted that he had authority to make the decision because the Director "had recused himself" because of a "potential conflict of interest" and had delegated the Director's statutory authority to him. The Decision is subject to review under A.R. S. -0 I, et seq. Venue is proper under A.R.S. -01 and -0(). B. STATEMENT OF THE FINDINGS AND DECISION TO BE REVIEWED Mohave County appeals the Department's findings that: I. Mohave County failed to establish that it would suffer a threatened or actual injury from granting the Applications; A second oral argument had to be held after the AU advised the parties that the audio recording of the first oral argument was defective. The Department adopted the ALJ 's decision in its entirety (with a few minor corrections). Attached hereto marked Exhibit A. --

8 2. Mohave County failed to establish that it had standing to file the Objections on the basis that granting the Applications would affect, infringe upon or interfere with the vested or existing water rights of others;. Mohave County failed to show that its Objections are within the scope of A.R.S. -l 2(A)() as the statute requires that the party filing the objections have an existing or vested water right that would be adversely affected should the severance and transfer be granted;. The Department does not have authority under A.R.S. - to deny a severance and transfer application on the ground that it is against the public interest;. The Department does not have authority under A.R.S to deny the Applications on the ground that the Applications would result in a negative effect on water supplies in the area;. The Department does not have authority under A.R.S. - to deny the Applications on the ground that granting the Applications would result in an increased tax burden on county taxpayers;. Mohave County did not timely raise the public trust doctrine argument in its Objections; and. The public trust doctrine does not apply to the beds of the waterways or to the water flowing through the Bill Williams River and the Big Sandy River because those rivers were not navigable at the time of statehood. C. STATEMENT OF THE ISSUES PRESENTED FOR REVIEW The Department's findings and conclusions were in error because they were contrary to law, were arbitrary and capricious, and/or were an abuse of discretion for the following reasons: I. The Department applied the wrong test to establish whether Mohave County has standing to object to the Applications; --

9 2. Mohave County has standing under A.R.S - to object to the Applications; Mohave County is an interested person" pursuant to A.R.S -l 2(A)();. Mohave County is not required to hold a vested or existing water right under A.R.S - to establish standing;. The Department is required to account for or take into consideration the public interest when analyzing and considering the Applications;. The Department has authority to deny the Applications on the ground that they are against the public interest;. The Department has authority to deny the Applications on the ground that they will result in a negative effect on water supplies in Mohave County;. The Department has authority to deny the Applications on the ground that they will result in an increased tax burden on Mohave County taxpayers;. Mohave County alleged a threatened or actual mjury if the Applications are granted;. Mohave County was not required to "establish" a threatened or actual injury prior to an evidentiary hearing at which such an injury can be "established;". The Department erred in concluding that Mohave County failed to identify or establish that granting the Applications would affect, infringe upon or interfere with the vested or existing water rights of others;. The Department failed consult with Mohave County under A.R.S -2.0; 1. The Department failed to consider the Public Trust Doctrine when evaluating the Applications; 1. Mohave County is an 'interested person' because of its legislated mandate under A.R.S

10 1. The Department and the ALJ lacked subject matter jurisdiction to take action on the Applications because the Applications lapsed because of the passage of the statutory time period pennitted in A.R.S. 1-(B) and under Arizona Administative Code R -1-0 l ;. The Department and the ALJ lacked subject matter jurisdiction to take action on the Applications because the Applications lapsed because oflaches; 1. At the time of the ALJ hearings and at the time of the Decision, the Applications had lapsed because of the passage of the statutory time period permitted in A.R.S. 1-(B); 1. At the time of the ALJ hearings and at the time of the Decision, the Applications had lapsed because of!aches; 1. The Department and the ALJ lacked subject matter jurisdiction to take action on the Applications because Freeport, the applicant, was not at the time of the Applications (and is not now) the owner of the subject water rights;. The Department erred in failing to reject the Applications because the applicant, Freeport, was not at the time of the Applications (and is not now) the owner of the subject water rights;. The Director' s acknowledged conflict of interest renders the Decision null and void; and. The Director' s attempt to delegate his authority to his Assistant Director was contrary to law, and thus the Decision is null and void. D. MOHAVE COUNTY IS ENTITLED TO ITS ATTORNEYS' FEES Mohave County is entitled to attorneys' fees and other expenses incurred in bringing this appeal pursuant to A.R.S. -.01, as well as for fees and other costs for the proceedings before the ALJ pursuant to A.R.S. 1-0(E). 2 --

11 RESPECTFULLY SUBMITTED this 0TH day of December, 1. 2 MUNGER CHADWICK, P.L.C. I) (. '-\, )\ V.J J. A 'A.v l l t '(1 John F. Munger Adriane J. Hofmeyr Robert J. Metli Lawrence V. Robertson, Jr. Attorneys for Appellant I

12 Exhibit A

13 ARIZONA DEPARTMENT OF WATER RESOURCES 2 BEFORE THE DIRECTOR IN THE MATTER OF THE DEPARTMENT OF WATER RESOURCES. DENIAL OF MOHAVE COUNTY' S OBJECTIONS TO FREEPORT MINERALS CORPORATIONS' APPLICATIONS TO SEVER AND TRANSFER CERTAIN WATER RIGHTS APPURTENANT TO LAND LOCATED WITHIN PLANET RANCH AND LINCOLN RANCH ALONG THE BILL WILLIAMS RIVER I. Introduction No. 1A-SWOOJ-DWR FINAL DECISION On March I,, Freeport-McMoRan Corporation (now Freeport Minerals Corporation, referred to herein as 'Freeport..) filed with the Arizona Department of Water Resources (.. Depament") seventeen applications (.. Applications'') to sever and transfer water rights appurtenant to land within Planet Ranch located in Mohave County pursuant to A.R.S. - I 2. Eleven of the Applications sought to sever and transfer water rights from Planet Ranch for use at the Bagdad Mine Complex for current and future mining purposes and for use at the Town of Bagdad for future municipal purposes, all within Yavapai County. Six of the Applications sought to sever and transfer water rights from locations within Planet Ranch to other areas within Planet Ranch for Lower Colorado River Multi-Species Conservation Program purposes. By letter dated September 0, I 0, the Mohave County Board of Supervisors ("'Mohave County..) filed with the Department a timely objection to the Applications (''Objection"). In its Objection, Mohave County asserted that: ( 1) diverting water to another county for mining operations would have a negative effect on water supplies in the area, including the Big Sandy aquifer, riparian areas and flows to the Colorado River; and (2) granting the Applications would result in a 2

14 consolidation of public land holdings along the Bill Williams River conidor that would result in an 2 increased tax burden on county taxpayers. On June, 1, while the Applications were pending, the Department issued to Mohave County a notice of appealable agency action (' Appealablc Agency Action..) denying the Objection. In the Appealable Agency Action, the Department gave the following reasons for denying the Objection: 1. Mohave County did not identify any vested or existing water rights held by it that would be affected, infringed upon or interfered with if the Applications were granted. 2. To the extent that Mohave County contends that the Applications would affect, infringe IO upon or interfere with the vested or existing water rights of others, Mohave County lacks standing to object to the Applications on that basis.. Mohave County's contention that the Applications should be denied because diverting 1 water to another county for mining purposes would have a negative effect on water I supplies in the area is essentially an argument that the Applications are against the public 1 interest, and the Department has no authority to deny an application under A.R.S. - I 2 on the ground that it is against the public interest. 1. Whether granting the applications would result in an increased tax burden on county 1 taxpayers is not a consideration under A.R.S. -. I On July, 1, Mohave County filed a timely Notice of Appeal of the Appealable Agency Action. On August, 1, the Department issued a Notice of Hearing to Mohave County and 2 I Freeport notifying them that a hearing would be held on Mohave County's appeal at the Arizona Otlice of Administrative Hearings (''OAH'"). The parties, including the Department, subsequently 2 a!,rreed to proceed without a hearing and to resolve the legal issues hased on stipulated facts, written 2

15 argument and oral argument. Oral arguments were held b y Administrative Law Judge Tammy L. 2 Eigenheer ("ALJ"') at OAH on October, 1 and October, 1. The AU held the record open until October On November J, 1, the ALJ transmitted to the Director of the Department (" Director..) the ALJ "s written decision ('"AL.I Decision" ) pursuant to A.R.S. 1 - I 02.0(A). The ALJ Decision contains Findings of Fact, Conclusions of Law and an Order. In the Conclusions of Law. the ALJ made the following conclusions with respect to the issues identified in the Notice of Hearing and one issue raised by Mohave County in its opening brief on appeal that was not raised in its Objection: 1. Mohave County conceded in written and oral arguments that it does not possess any vested or existing water rights in the Bill Williams watershed that would be affected, infringed upon or interfered with if the Applications were brranted. (Conclusion of Law 1 No. ) Mohave County failed to establish that it would suffer a threatened or actual injury from 1 granting the Applications or that it had standing to file the Objection on the basis that granting the Applications would affect, infringe upon or interfere with the vested or 1 existing water rights of others. (Conclusion of Law No. 2 ). 1. Mohave County failed to show that its Objection is within the scope of A.R.S. - 1 J 2(A)() as the statute requires that the party filing the objection have an existing or vested water right that would be adversely affected should the severance and transfer be granted. (Conclusion of Law No. ).. The Department does not have authority under A.R.S. - to deny a severance and 2 transfer application on the ground that it is against the public interest. Therefore, the

16 Department does not have authority under that statute to deny the Applications on the 2 ground that the Applications would result in a negative effect on water supplies in the area or on the ground that granting the Applications would result in an increased tax burden on county taxpayers. (Conclusion of Law Nos. 2 through ).. Mohave County did not raise the public trust doctrine argument in its Objection, therefore, it may not be raised in this matter. (Conclusion of Law No. ). If it should be considered, the public trust doctrine does not apply to the beds of the waterways or to the water flowing through the Bill Williams River and the Big Sandy River because those rivers were not navigable at the time of statehood. (Conclusion of Law No. ). JO The A LJ s order states that for the reasons set out in the Conclusions of Law. Mohave County s appeal is dismissed. II. DECISION 1 The Director has recused himself from this matter because of a potential conflict of interest 1 and has delegated to me the authority to make the Department" s final decision. As provided in 1 A.R.S (), I may accept, reject or modify the AU Decision. A ft er reviewing the A LJ Decision and the record in this matter, 1 have decided to accept the 1 ALJ Decision in its entirety, v. ith several minor con-ections as shown in Attachment I hereto. The 1 1 ALJ Decision with the corrections shown in Attachment 1 is the Depament" s final decision in this 1 matter. Notice of Right to Request a Rehearing or Review A party to this matter may file a motion for rehearing or review within thirty (0) days after service of this Final Decision pursuant to A.R.S. ~ 1-2.0(A)(I ). As provided in A.R.S. 1-2

17 l 2.0(A)(), a party is not required to file a motion for rehearing or review to seek judicial review 2 of this Final Decision. DATED this ;2. day of November, 1. /ilan~ ~~ Thomas Buschatzke Assistant Director Arizona Department of Water Resources A copy of the foregoing is +l filed electronically this,,) aay of November, 1 with: Office of Administrative Hearings 0 W. Washington, Suite 0 Phoenix, AZ 00 1 A copy of the foregoing is 1 hand-delivered this~ "day of November, 1 to: 1 Janet L. Ronald, Deputy Counsel J Nicole D. Klobas, Deputy Counsel Arizona Department of Water Resources 1 0 N. Central Ave. Phoenix, AZ 0 1 A copy of the foregoing is sent J by certified mail thi~ t;}+ day of November, 1 to: Carlos D. Ronstadt 2 J THE LAW OFACE OF CARLOS D. RONST ADT 1 PU..C 000 N. 1 St., Suite 0, No. Phoenix, AZ 0-2 Attorney for Mohave County Certified Mail No. ~lt1 2.cg Q?Qo ~tzo 'Bt-

18 I L. William Staudenmaier Certified Mail No. JOOY l S1 o o ooo &!DIDO 'tj J SNELL & WILMER, L.L.P. 2 One Arizona Center, Smte 0 00 E. Van Buren St. Phoenix, AZ 00- Attorney for Freeport Minerals Corporation

19 ATTACHMENT 1

20 2 Attachment 1 IN THE OFFICE OF ADMINISTRATIVE HEARINGS In the Matter of the Department of Water No. 1A-SW001-DWR Resources' Denial of Mohave County's Objections to Freeport Minerals ADMINISTRATIVE Corporation's Applications to Sever and LAW JUDGE DECISION Transfer Certain Water Rights Appurtenant to Land Located Within Planet Ranch and Lincoln Ranch along the Bill Williams River HEARING: Oral arguments held on October, 1, and October, 1, with the record held open until October 2, 1. APPEARANCES: Mohave County was represented by Carlos D. Ronstadt. Freeport Minerals Corporation was represented by L. William Staudenmaier. The Arizona Department of Water Resources was represented by ~lh Janet L. Miller and Nicole D. Klobas. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer FINDINGS OF FACT 1. On March 1,, Freeport McMoran Corporation and the City of Scottsdale (Scottsdale) jointly filed seventeen applications to sever and transfer water rights appurtenant to land within Planet Ranch (Sever and Transfer Applications), located in Mohave County along the Bill Williams River within the Bill Williams River watershed. 2. On March 1,, Freeport McMoran Corporation also filed an application to sever and transfer water rights appurtenant to land within Lincoln Ranch (Lincoln Ranch Application), located in La Paz County. The Lincoln Ranch Application is not directly involved in this matter.. All the sever and transfer applications were filed pursuant to A.RS. -.. Freeport McMoran Corporation later changed its name to Freeport Minerals Corporation (Freeport). Office of Administrative Hearings 0 West Washington. Suite 1 Phoenix, Arizona 00 (02) 2-2

21 Eleven of the Sever and Transfer Applications were filed to sever and transfer water rights from Planet Ranch for use at the Bagdad Mine Complex for current and future mining purposes and for use at the Town of Bagdad for future municipal purposes. I The remaining six Sever and Transfer Applications were filed to sever and transfer water rights from certain locations within Planet Ranch to another area of Planet Ranch for Lower Colorado River Multi-Species Conservation Program purposes (MSCP Applications).. The Bagdad Mine Complex is located in Yavapai County and is owned and operated by Freeport.. Freeport currently supplies water for the Bagdad Mine Complex from wells located in the vicinity of Wikieup, Arizona, near the Big Sandy River, a tributary to the Bill Williams River.. In August and September, legal notice of the Planet Ranch and MSCP Applications was published once a week for three consecutive weeks in two local newspapers of general circulation.. During the 0-day objection period that followed publication, Mohave County filed its objection to the Planet Ranch and MSCP Applications by letter dated September 0, (Objection).. In the Objection, Mohave County asserted that (1) diverting water to another county for mining operations would have a negative effect on water supplies in the area, including the Big Sandy aquifer, riparian areas, and flows to the Colorado River; and (2) granting the Sever and Transfer Applications would result in a consolidation of public land holdings along the Bill Williams River corridor that would result in an increased tax burden on county taxpayers.. On December 1,, Scottsdale conveyed Planet Ranch to Freeport and assigned to Freeport its interest in the Sever and Transfer Applications. 1. On December 1,, Freeport conveyed all land and water rights associated with Planet Ranch to Byner Cattle Company (Byner). a wholly owned subsidiary of Freeport. 2

22 By letter dated June, 1, the Arizona Department of Water Resources (ADWR or the Department) issued its notice of appealable agency action denying the Objection (Appealable Agency Action Letter) based on the following reasons: a. Mohave County did not identify any vested or existing water rights held by Mohave County that would be affected, infringed upon, or interfered with, if the Sever and Transfer Applications were granted. b. To the extent that Mohave County contended that the Applications would affect, infringe upon, or interfere with the vested or existing water rights of others, Mohave County lacked standing to object to the Sever and Transfer Applications on that basis. c. ADWR did not have authority under A.RS. - to deny the Sever and Transfer Applications on the grounds that they were against the public interest due to Mohave County's alleged negative effects on water supplies in the area, including the Big Sandy Aquifer, riparian areas, and flows to the Colorado River. d. ADWR did not have authority under A.RS. - to consider whether granting the Sever and Transfer Applications would result in an increased tax burden on Mohave County taxpayers. 1. ADWR's Appealable Agency Action Letter also provided as follows: a. The eleven ~ rl - Applications sought to provide additional legal authority for Freeport's existing withdrawals of water from the Wikieup wellfield for use at the Bagdad Mine Complex and Bagdad Townsite. b. If the... ~ 1 ' ni-..ft-' r, (: R Applications were granted, there would be a reduction in water use at Planet Ranch, but water would not be physically moved to the Wikieup wellfield, the Bagdad Mine Complex, or any other location outside of Planet Ranch. c. If the MSCP Applications were granted, water rights appurtenant to certain lands within Planet Ranch would continue to be used on other lands within Planet Ranch.

23 By letter dated July, 1, Mohave County filed its Notice of Appeal from ADWR's Appealable Agency Action Letter and responded to the legal arguments raised therein. 1. Mohave County acknowledged that it did not hold any water rights in the Bill Williams watershed. 1. The parties agreed to proceed without a hearing in this matter and to resolve the legal issues based on the stipulated facts, written arguments, and oral arguments. APPLICABLE LAW A.RS. - governs the process regarding applications for severance and transfers and provides as follows: Transfer of water rights; application; limitations; required consent A. A water right may be severed from the land to which it is appurtenant or from the site of its use if for other than irrigation purposes and with the consent and approval of the owner of such right may be transferred for use for irrigation of agricultural lands or for municipal, stock watering, power and mining purposes and to the state or its political subdivisions for use for recreation and wildlife purposes, including fish, without losing priority theretofore established, subject to the following limitations and conditions: 1. Except as otherwise provided in this section no such severance or transfer shall be made unless approved by the director, and the approval of the director shall prescribe the conditions of the approval. 2. Vested or existing rights to the use of water shall not be affected, infringed upon nor interfered with, and in no event shall the water diverted or used after the transfer of such rights exceed the vested rights existing at the time of such severance and transfer, and the director shall by order so define and limit the amount of water to be diverted or used annually subsequent to such transfer.. The water rights sought to be transferred shall have been lawfully perfected under the laws of the territory or the state of Arizona and shall not have thereafter been forfeited or abandoned.. No such severance or transfer of water rights shall be permitted or allowed from lands within the exterior boundaries of any irrigation district, agricultural improvement district or water users' association without first having obtained the written consent and approval of such irrigation district, agricultural improvement district or water users' association.. No right to the use of water on or from any watershed or drainage area which supplies or contributes water for the irrigation of lands within an irrigation district, agricultural improvement district or water users'

24 association shall be severed or transferred without the consent of the governing body of such irrigation district, agricultural improvement district or water users' association. All proposed applications for the severance and transfer of a right to use water of or from any watershed or drainage area which supplies or contributes water for the irrigation of lands within any irrigation district, agricultural improvement qistrict or water users' association shall be submitted to the governing body of such irrigation district, agricultural improvement district or water users' association prior to the filing of such application with the director. Within forty-five days after the receipt of the application such governing body shall reject or approve the proposed application. Failure of such governing body to approve or reject the proposed application within forty-five days after receipt shall constitute approval of the proposed application by such governing body. No application for the severance or transfer of a right to the use of water of or from any watershed or drainage area which supplies or contributes water for the irrigation of lands within any irrigation district, agricultural improvement district or water users' association shall be accepted for filing by the director unless accompanied by the written consent of the governing body of such irrigation district, agricultural improvement district or water users' association to the proposed application or by satisfactory evidence that such governing body failed to either accept or reject the proposed application within forty-five days after receipt by such governing body.. A severance and transfer of an irrigation water right appurtenant to lands within the boundaries of an irrigation district to other lands within the boundaries of the same irrigation district for agricultural use may be accomplished by the exclusion of lands to which a water right is appurtenant from within the boundaries of an irrigation district, and the inclusion in lieu of other lands within the boundaries of such irrigation district. Such severance and transfer of a water right shall require the consent of only the irrigation district within which the affected lands are situated and of the owners of the lands affected by the severance and transfer. No proceedings before nor approval by the director shall be required to accomplish such severance and transfer.. An application for severance and transfer of a water right shall be filed with the director. The director shall give notice of the application by publication once a week for three successive weeks in a newspaper of general circulation in the county or counties in which the watershed or drainage area is located. The notice shall state that any interested person may file written objections to the proposed severance and transfer with the director within thirty days after the last publication of the notice. In appropriate cases, including cases in which an objection has been filed, an administrative hearing may be held before the director's decision on the application if the director deems a hearing necessary. 0

25 B. Section -, subsections A and B govern administrative proceedings, rehearing or review and judicial review of final decisions of 2 the director under this section CONCLUSIONS OF LAW 1. Mohave County bears the burden to show that ADWR's Appealable Agency Action Letter was issued in error or is contrary to law. See A.A.C. R2-1- (). 2. The standard of proof on all issues in this matter is that of a preponderance of evidence. A.AC. R2-1-(A).. A preponderance of the evidence is "[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other." BLACK'S LAW DICTIONARY 1 (th ed. 0).. A.R.S. 1-0() provides, in pertinent part, as follows: An agency shall not base a licensing decision in whole or in part on a licensing requirement or condition that is not specifically authorized by statute, rule or state tribal gaming compact.. Relevant definitions are included in A.R.S as follows: () "License" includes the whole or part of any agency permit, certificate, approval, registration, charter or similar form of permission required by law, but does not include a license required solely for revenue purposes. () "Licensing" includes the agency process respecting the grant, denial, renewal, revocation, suspension, annulment, withdrawal or amendment of a license.. The August, 1 Notice of Hearing in this matter identified four issues to be addressed at hearing that are addressed in turn. ISSUE 1: Whether Mohave County raised a proper objection based on A.R.S. - (A)(2). where Mohave County failed to allege that it holds vested or existing water rights that would be affected. infringed upon or interfered with if the Sever and Transfer Applications were granted.

26 . Mohave County conceded in written and oral arguments that it does not possess any vested or existing water rights in the Bill Williams watershed that would be affected, infringed upon. or interfered with if the Sever and Transfer Applications were granted. ISSUE 2: Whether Mohave County has standing under A.RS. -(A)(2) to object to the Sever and Transfer Applications on the grounds that granting the Sever and Transfer Applications would allegedly affect. infringe upon or interfere with the vested or existing water rights of others.. Mohave County's Objection asserted (1) that diverting water to another county for mining operations would have a negative effect on water supplies in the area. including the Big Sandy aquifer, riparian areas, and flows to the Colorado River and (2) that granting the Sever and Transfer Applications would result in a consolidation of public land holdings along the Bill Williams River corridor that would result in an increased tax burden on county taxpayers.. In its Objection, Mohave County did not assert that the Sever and Transfer Applications would affect. infringe upon, or interfere with the vested or existing water rights of others. Rather, Mohave County asserted that the water supply in the Bill Williams River and Big Sandy River areas would be affected if the Sever and Transfer Applications were granted.. Assuming the Objection properly alleged that granting the Sever and Transfer Applications would affect, infringe upon, or interfere with the vested or existing water rights of others, Mohave County must establish that it had standing to raise an objection on behalf of those who hold the vested or existing water rights.. Mohave County asserted that "standing is not a requirement for challenging an action under Arizona law" 1 and cited State v. B Bar Enterprises, lnc., 2 in support of this assertion.. The Court in B Bar Enterprises acknowledged that Arizona's constitution does not include a case or controversy provision. However, "Arizona courts consistently have required as a matter of judicial restraint that a party possess standing 0 1 Mohave County's Opening Brief at p.. n Ariz., P.2d (12).

27 to maintain an action." Sears v. Hull, 12 Ariz., 1, 1P.2d1, 1 (Ariz. 1). A party must assert a distinct and palpable injury, while "[a]n allegation of generalized harm that is shared alike by all or a large class of citizens generally is not sufficient to confer standing." Id. at, 1 P.2d at A.RS. -(A)(), provides, in pertinent part, that "any interested person may file written objections to the proposed severance and transfer." 1. A fundamental rule of statutory construction requires that statutes be interpreted to give meaning to every word used. Yavapai Apache Nation v. Sandra Fabritz-Witney, Ariz., 0, P.d 2, 0 (Ariz. App. ). Further, statutes should be construed in conjunction with other statutes that relate to the same subject or purpose. Id. 1. Mohave County argued that it could bring objections on behalf of others because "any interested person" can bring an objection under A.RS. -(A)().. Mohave County asserted that unlike the entities referenced in the other paragraphs of A.RS. -(A), A.RS. -(A)() does not state a requirement that the objector have an existing or vested water right that would negatively be affected by a severance and transfer. 1. ADWR and Freeport contended that Mohave County's interpretation of "any interested person" fails to give meaning to the term "interested person". "Interested person" is defined as "[a) person having a property right in or claim against a thing, such as a trust or decedent's estate." BLACK'S LAW DICTIONARY (th ed. 0). 1. If a party raising an objection is not required to have an existing or vested water right as Mohave County asserts, that could have been achieved with the phrase "any person" instead of "any interested person." Thus, Mohave County's interpretation would render the word "interested" as having no meaning. 1. Mohave County referenced other examples in the Arizona water code that specifically limit those who can file objections to persons whose water rights might be 2 0

28 adversely affected by issuance of a permit or certificate or that otherwise limit the basis for objections.. ADWR argued that the other statutes referenced by Mohave County, while part of the water code, are unrelated to the issue of severance and transfer of water rights and instead address groundwater management and underground water storage, savings, and. Mohave County also asserted that, because it has a statutory mandate under A.RS. -0 to prepare a comprehensive plan for future growth, it has standing to object to the Sever and Transfer Applications.. Although Mohave County has an obligation to plan water use for future growth, political bodies with that duty are not included in A.RS. -(A)() as an "interested person." 2. Mohave County failed to establish that it would suffer a threatened or actual injury from the Sever and Transfer Applications or that it had standing to file the Objection on the basis that granting the Sever and Transfer Applications would affect. infringe upon, or interfere with the vested or existing water rights of others.. Mohave County failed to show that its Objection is within the scope of A.RS. -(A)() as the statute requires that the party filing the objection have an existing or vested water right that would be adversely affected should the severance and transfer be granted. ISSUE : Whether the Department has authority under A.RS. - to deny the Sever and Transfer Application on the grounds that granting the Sever and Transfer Applications allegedly would result in a negative effect on water supplies in the area. including the Big Sandy Aquifer. riparian areas and flows to the Colorado River. contrary to the public interest. ISSUE : Whether the Department has authority under A.RS. - to deny the Sever and Transfer Applications on the grounds that granting the Sever and Transfer Applications allegedly would result in an increased tax burden on county taxpayers. 2 0 Specifically, Mohave County referenced A.RS. -(), A.RS. -2(), and A.RS

29 Together, these issues concern the public interest argument raised by Mohave County. 2. Mohave County asserted that prior to granting an application to sever and transfer under A.RS. -, the Department must consider the public interest concerns addressed in A.RS. -1(A). 2. A.RS. -1(A) addresses applications for permits to appropriate surface water, which allow the permit holder to put water to beneficial use. A.RS. - 1(A) provides that to obtain a permit to appropriate surface water, the application must be in the proper form and must seek to appropriate water for a beneficial use. However. "when the application or the proposed use conflicts with vested rights, is a menace to public safety, or is against the interest and welfare of the public, the application shall be rejected." 2. A.RS. - addresses applications for the severance and transfer of vested or existing water rights to a different place of use and for a different purpose. A.RS. - provides that to obtain a severance and transfer, "vested or existing water rights to the use of water shall not be affected, infringed upon nor interfered with." 2. A.RS. - does not include any reference to the public safety, interest, or welfare included in A.RS. -1(A). 0. Although Mohave County asserted that the elements of A.RS. - 1(A) should be read into A.RS. -, the rules of statutory instruction dictate that the additional elements in A.RS. -1(A) must be excluded from consideration of A.RS "A well established rule of statutory construction provides that the expression of one or more items of a class indicates an intent to exclude all items of the same class which are not expressed." 2. If the legislature desired that issues of public interest be considered in determining an application to sever and transfer, it would have included those issues in A.RS ~ Pima County v. Heinfeld, 1 Ariz. 1, 1, P.2d, (Ariz. 12). See also Goulder v. Arizona Oep't of Transportation, 1 Ariz. 1, P.2d (Ariz. App. 1).

30 As previously discussed, the Department may not base its decision in this matter on a licensing requirement or condition that is not specifically authorized by statute. See A.RS. 1-0(B).. Mohave County also argued in its opening brief that the failure of the Department to consider the public interest elements in determining the Sever and Transfer Applications was a violation of the public trust doctrine. Mohave County did not raise the public trust doctrine argument in its Objection, therefore, it may not be raised in this matter.. If it should be considered, the public trust doctrine applies only to watercourses that were determined to be navigable at the time Arizona became a state. At the time of statehood, the State takes title to the navigable waters and their beds in trust for the public. PPL Montana v. Montana, S.Ct. 1, (). If the waterway was not navigable at the time of statehood, "the neighboring riparian owners hold title." State v. Arizona Navigable Stream Adjudication Commission, 2 Ariz., 2, P.d 2, (Ariz. App. ).. The Arizona Navigable Stream Adjudication Commission (ANSAC) gathered evidence and conducted hearings regarding the status of the Bill Williams River, the Big Sandy River, and a number of other tributaries of the Bill Williams River. After considering the evidence, ANSAC issued reports regarding the Bill Williams River and the Big Sandy River in. In both cases, ANSAC determined that the rivers were not navigable at the time of statehood on February 1, 1. Mohave County did not seek judicial review of these determinations. As such, the ANSAC determinations are final. See A.RS (), which provides, in pertinent part. as follows: A party may obtain a hearing on an appealable agency action or contested case by filing a notice of appeal or request for a hearing with the agency within thirty days after receiving the notice prescribed in subsection A of this section. The notice of appeal or request for a hearing may be filed by a party whose legal rights, duties or privileges were determined by the appealable agency action or contested case. A notice of appeal or request for a hearing also may be filed by a party who will be adversely affected by the appealable agency action or contested case and who exercised any right provided by law to comment on the action being appealed or contested, provided that the grounds for the notice of appeal or request for a hearing are limited to issues raised in that party's comments. The notice of appeal or request for a hearing shall identify the party, the party's address, the agency and the action being appealed or contested and shall contain a concise statement of the reasons for the appeal or request for a hearing.

31 2. Because the Bill Williams River and the Big Sandy River were not navigable at the time of statehood, the public trust doctrine does not apply to the beds of the waterways or to the water flowing through them. ORDER IT IS ORDERED that, for the reasons set out in the Conclusions of Law, Mohave County's appeal is dismissed. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order is five days after the date of that certification. Done this day, November 1, 1. Isl Tammy L. Eigenheer Administrative Law Judge Transmitted electronically to: Michael J. Lacey, Director Arizona Department of Water Resources

32 EXHIBIT 2

33 SUPERIOR COURT OF ARIZONA MARICOPA COUNTY Michael K. Jeanes, Clerk of Court *** Electronically Filed *** 01/0/1 :00 AM LC DT 01/0/1 THE HON. CRANE MCCLENNEN CLERK OF THE COURT J. Eaton Deputy MOHAVE COUNTY ADRIANE J HOFMEYR v. ARIZONA DEPARTMENT OF WATER RESOURCES (001) FREEPORT MINERALS CORPORATION (001) OFFICE OF ADMINISTRATIVE HEARINGS REMAND DESK-LCA-CCC ADMINISTRATIVE REVIEW ORDERS On December 0, 1, Appellant, Mohave County, filed a Notice of Appeal for Judicial Review of Administrative Decision against Appellee, Arizona Department of Water Resources and Appellee, Freeport Minerals Corporation, pursuant to Arizona Revised Statutes Annotated (A.R.S.) 01 to 1. IT IS ORDERED that Appellant serve all Appellees with a copy of the Notice of Appeal for Judicial Review of Administrative Decision in the manner provided by A.R.S IT IS FURTHER ORDERED that Appellant shall file proof of service with the Clerk of the Superior Court of Maricopa County as required by Rules (g) and (i) of the Arizona Rules of Civil Procedure. IT IS FURTHER ORDERED that Appellant provide all Appellees with a copy of this minute entry. IT IS FURTHER ORDERED that Appellant shall file a notice of action as required by A.R.S. 0(B). IT IS FURTHER ORDERED that Appellant shall order and make arrangements to pay for the preparation of pertinent portions of the record as required by A.R.S. 0(B)(). 1 A.R.S. 0 incorporates the Arizona Rules of Civil Procedure for service of process. See Rules and.1, Ariz. R. Civ. P. Docket Code 02 Form L000 Page 1

34 SUPERIOR COURT OF ARIZONA MARICOPA COUNTY LC DT 01/0/1 IT IS FURTHER ORDERED that a Notice of Appearance from all Appellees shall be due days from the date of service of Appellant s appeal. Appellant is advised that, if Appellant fails to effectuate service or to order the record or the transcripts as ordered herein, this Court may dismiss these proceedings. IT IS FURTHER ORDERED that the administrative agency or board shall transmit its record to the Clerk of this Court as required by A.R.S. 0(B) and provide a Certification of Record on Review to Appellant and a notice to this Court that the transmittal has occurred. IT IS FURTHER ORDERED that Appellant and Appellees are to file briefs in accordance with Rule of the Rules of Procedure for Judicial Review of Administrative Decisions. NOTICE: LC cases are not under the e-file system. As a result, when a party files a document, the system does not generate a courtesy copy for the Judge. Therefore, you will have to deliver to the Judge a conformed courtesy copy of any filings. Docket Code 02 Form L000 Page 2