IN THE OFFICE OF ADMINISTRATIVE HEARINGS STATE OF ARIZONA

0 0 Keith L. Hendricks, Bar No. 00 Joshua T. Greer, Bar No. 00 0 N. Central Avenue, Suite 00 Phoenix, AZ 00 KHendricks@law-msh.com Telephone: 0.0.0 Douglas C. Nelson, Bar No. 00 LAW OFFICE OF DOUGLAS C. NELSON, P.C. 000 North th Street, Suite 0-0 Phoenix, AZ 00 DougCNelson@cox.net Telephone: 0.. Attorneys for the LG Water Users IN THE OFFICE OF ADMINISTRATIVE HEARINGS In the Matter of the Decision by the Director to Grant the Salt River Valley Water Users Association s Amended Applications Nos. E-, R-0, R-, R-, R-, R-, A-, and A- for Permits to Store and Beneficially Use Water on the Salt and Verde Rivers, and Issue Permits Nos. -, -00, -00, -00, -00 and -00 STATE OF ARIZONA No. A-SW00-DWR LG WATER USERS PROPOSED FINDINGS OF FACTS AND CONCLUSIONS OF LAW P HO EN IX, AZ

0 0 TABLE OF CONTENTS A. PRIOR APPROPRIATION AND ITS HISTORY AND POLICY... B. PRE-CODE APPROPRIATIONS AND THE RECLAMATION ACT.... C. WATER CODE.... D. ARIZONA ADMINISTRATIVE PROCEDURES ACT... E. ARIZONA ADMINISTRATIVE CODE... F. APPLICATION R-0.... G. APPLICATION R-.... H. APPLICATION R-.... I. APPLICATION R-.... J. APPLICATION R-.... K. APPLICATION A-... L. APPLICATION A-... M. APPLICATION E-.... N. SLOAN AND CRAGIN REPORTS... O. COMMUNICATIONS REGARDING THE APPLICATIONS.... P. AMENDMENTS TO APPLICATIONS.... Q. PROTESTS BY GREENBACK WATER USERS AND LG WATER USERS.... R. EVALUATION OF PROTESTS BY THE DEPARTMENT.... S. THE DEPARTMENTS REVIEW OF HISTORICAL DOCUMENTS... T. THE DEPARTMENT CONTINUED TO COMMUNICATE WITH SRP.... U. THE DEPARTMENT APPROVES THE AMENDED APPLICATIONS WITHOUT A HEARING... V. THE DEPARTMENT PROPOSES DRAFT PERMITS.... W. SRP AND THE KENT DECREE... X. LG WATER USERS WATER RIGHTS.... P HO EN IX, AZ i

0 0 Y. DIVERSIONS AT GILLESPIE DAM... Z. APPROVAL OF APPLICATION FOR HORSESHOE DAM SPILLWAY GATES... AA. APPROVAL OF NEW WADDELL DAM AND MODIFIED ROOSEVELT DAM... BB. THE DEPARTMENT FAILED TO ADEQUATELY EVALUATE THE APPLICATIONS.... CC. THE DEPARTMENT S ANALYSIS IS INCONSISTENT WITH THE POLICIES UNDERPINNING THE PRIOR APPROPRIATION DOCTRINE.... ISSUE NO. : ISSUE NO. : ISSUE NO. : ISSUE NO. : WHETHER THE DEPARTMENT PROPERLY DETERMINED THAT THE AMENDED APPLICATIONS DID NOT CONFLICT WITH PRIOR VESTED WATER RIGHTS... WHETHER ADWR PROPERLY DETERMINED THAT THE AMENDED APPLICATIONS ARE NOT A MENACE TO PUBLIC SAFETY.... WHETHER ADWR PROPERLY DETERMINED THAT THE AMENDED APPLICATIONS ARE NOT AGAINST THE INTERESTS AND WELFARE OF THE PUBLIC.... WHETHER ADWR PROPERLY DETERMINED THAT THE AMENDED APPLICATIONS WERE BASED ON THE BENEFICIAL USE DOCTRINE AND WERE NOT UNLAWFULLY BASED ON THE RIPARIAN DOCTRINE. ISSUE NO. : WHETHER ADWR PROPERLY DETERMINED THAT GRANTING THE AMENDED APPLICATIONS WOULD NOT CREATE FLOATING WATER RIGHTS.... 0 ISSUE NO. : WHETHER ADWR PROPERLY DETERMINED THAT GRANTING THE AMENDED APPLICATIONS WOULD NOT CIRCUMVENT THE SEVERANCE AND TRANSFER REQUIREMENTS OF A.R.S. -.... ISSUE NO. : WHETHER ADWR PROPERLY DETERMINED THAT GRANTING THE AMENDED APPLICATIONS DOES NOT VIOLATE A.R.S. -... ii

0 0 ISSUE NO. : ISSUE NO. : ISSUE NO. 0: ISSUE NO. : WHETHER ADWR PROPERLY DETERMINED THAT THE BENEFICIAL USES INCLUDED IN THE DRAFT PERMITS WERE AUTHORIZED BY A.R.S. -... WHETHER ADWR PROPERLY DETERMINED THAT IT HAS AUTHORITY TO ISSUE THE DRAFT PERMITS EVEN THOUGH THE RESERVOIRS HAVE ALREADY BEEN CONSTRUCTED AT LOCATIONS AND FOR USES THAT DIFFER FROM THE ORIGINAL APPLICATIONS AS PART OF A FEDERAL RECLAMATION PROJECT... WHETHER ADWR PROPERLY DETERMINED THAT THE AUTHORIZED AMOUNT OF WATER IN STORAGE FOR EACH RESERVOIR INCLUDES CONTINUOUS FILLS... WHETHER ADWR PROPERLY DETERMINED THAT THE APPELLANTS WERE NOT DENIED PROCEDURAL DUE PROCESS... ISSUE NO. : WHETHER ADWR PROPERLY DETERMINED THAT CERTAIN ORIGINAL APPLICATIONS THAT HAD BEEN LISTED AS CANCELLED IN THE RECORDS OF ADWR S PREDECESSOR WERE NOT VALIDLY CANCELLED.... ISSUE NO. : WHETHER ADWR PROPERLY DETERMINED THAT THE PRIORITY DATES FOR THE DRAFT PERMITS MUST BE BASED ON THE DATE OF FILING AS REQUIRED BY A.R.S. -(B).... ISSUE NO. : WHETHER ADWR PROPERLY REJECTED THE APPELLANTS CONTENTION THAT BY INCLUDING THE PRIORITY DATES FOR THE DRAFT PERMITS BASED ON THE DATE OF FILING AS REQUIRED BY A.R.S. - (B) ADWR UNLAWFULLY APPLIED MANY PROVISIONS OF THE SURFACE WATER CODE RETROACTIVELY... ISSUE NO. : WHETHER ADWR PROPERLY DETERMINED THAT IT DOES NOT HAVE AUTHORITY TO DETERMINE WHETHER GRANTING THE AMENDED APPLICATION WOULD RESULT IN AN UNLAWFUL TAKING OF APPELLANT S ALLEGED PROPERTY RIGHTS.... iii

0 0 ISSUE NO. : WHETHER ADWR PROPERLY DETERMINED THAT THE AMENDED APPLICATIONS SHOULD NOT BE DENIED TO THE ALLEGED OVER-APPROPRIATION OF THE GILA RIVER SYSTEM AND SOURCE, INCLUDING THE SALT AND VERDE RIVERS...00 ISSUE NO. : WHETHER ADWR PROPERLY DETERMINED IT HAS STATUTORY AUTHORITY TO ISSUE PERMITS PURSUANT TO A.R.S. - THAT IS INDEPENDENT OF THE GENERAL STREAM ADJUDICATION FOR THE GILA RIVER SYSTEM AND SOURCE...00 ISSUE NO. : ISSUE NO. : WHETHER ADWR PROPERLY DETERMINED THAT IT DOES NOT HAVE JURISDICTION TO DETERMINE THE NATURE, EXTENT AND RELATIVE PRIORITY OF THE APPELLANTS WATER RIGHTS IN THIS PROCEEDING. 0 WHETHER ADWR PROPERLY DETERMINED THAT SRP IS A PROPER APPROPRIATOR...0 iv

0 0 A. Prior Appropriation and its History and Policy.. Arizona water law bears similarities to the water laws of several other western states in that it is based on the doctrine of prior appropriation and beneficial use.. If water is applied to a defined beneficial use a water right can be created, if it is not so used, no water right is created.. The doctrine of prior appropriation is different from the riparian doctrine. The riparian doctrine has been adopted in most of the eastern United States. Under the riparian doctrine the water in a stream is an adjunct of the real property to which the stream is adjacent. Thus, under the riparian doctrine, beneficial use is not required to own the water right, simply ownership of the land is sufficient. This is not true under the prior appropriation doctrine. SRP Paddock, Survey of Statutes Governing Appropriation of Water Rights in Eleven Western States (Page ) ( The water laws of the eleven states lying west of the 00 th meridian all follow, to a greater or lesser extent, the doctrine of prior appropriation. ); Day Transcript, :- (DuMars); See also Day Transcript, :-: (Roberts). Day Transcript, :-: (DuMars); LG - Water Code, at (LG00) ( Beneficial use shall be the basis and the measure and the limit to the use of water in the State ); LG 00-0 Reclamation Act, at, (LG00) (same); A.R.S. -(b)(same); Salt River Val. Water Users' Ass'n v. Kovacovich, Ariz. App., 0, P.d 0, 0 ()( Under the doctrine of beneficial use, the appellees are not entitled under all circumstances to appropriate a given number of acre feet of water per year. Beneficial use is the measure and the limit to the use of water. ). Day Transcript, :-: (DuMars). See also United States v. River Rouge Improvement Co., U.S.,, S. Ct.,, 0 L. Ed. ()(riparian owner has, in addition to the rights common to the public a property right, incident to his ownership of the bank ); Maricopa Cnty. Mun. Water Conservation Dist. No. v. Southwest Cotton Co., Ariz.,, P.d, () reh'g denied and opinion modified, Ariz., P.d ()( the fundamental principle [of riparian water] of which was that the water could be used by riparian proprietors alone ).

0 0. The riparian doctrine did not work in the West and has not worked in the West since the 0s.. The prior appropriation doctrine permits water to be transferred away from the stream for defined beneficial uses on real property.. Upon such use, the water becomes appurtenant to the real property upon which the water is used.. Arizona s Constitution rejects the common law doctrine of riparian water rights. Instead, Arizona follows the doctrine of prior appropriation and beneficial use.. Among other things, this doctrine provides that a party only gets a right to water that it actually puts to beneficial use. Under the doctrine of prior appropriation, just because a party has a claim for a water right for a certain quantity, the party does not receive that water right or that amount of water unless it has put and continues to put the water to beneficial use.. The prior appropriation doctrine provides certainty to an individual who invests capital in the development of a water project as to the amount of water that the Day Transcript, :- (DuMars); see also Southwest Cotton, Ariz. at, P.d at (riparian doctrine rejected in Arizona because [w]here water is scarce and valuable it is important to provide against monopolies, and that it should be used as much as possible for the common good. ). SRP Paddock, Survey of Statutes Governing Appropriation of Water Rights in Eleven Western States (Page ). Day Transcript, :0-: (DuMars). A.R.S. Const. Art. ( The common law doctrine of riparian water rights shall not obtain or be of any force or effect in the state. ); ee also Maricopa Cnty. Mun. Water Conservation Dist. No. v. Sw. Cotton Co., Ariz. at, P.d at ( This declaration amounted to a statutory repudiation of the doctrine of riparian rights and an establishment of the so-called doctrine of prior appropriation as suited to the conditions prevailing in Arizona ); Day Transcript, 0:-0; :0-0 (Johnson); Day Transcript, :0- (Johnson); Day Transcript, 0:-0 (Roberts). Day Transcript, :-: (Johnson); Day Transcript, 0: - (Johnson).

0 0 individual is entitled to receive if available because of scarcity of water. 0. The doctrine of prior appropriation and beneficial use does not permit a party to tie up a water right for years based only on the possibility that they may use a certain amount of water in the future. 0 B. Pre-Code Appropriations and the Reclamation Act.. Prior to the effective date of the Arizona Water Code, a water right could be established in one of two ways. First, a party could simply beneficially use water. Second, a party could file with the county recorder and post a notice at the point of diversion.. In 0, the Reclamation Act, Fifty-Seventh Congress, Sess. I. Ch. 0, was passed by the United States Congress, and became effective. The Reclamation Act Day Transcript, :-:, 0:-0: (DuMars); See also LG 00-0 Reclamation Act, at, (LG00)(charges shall be determined with a view of returning to the reclamation fund the estimated costs of construction and shall be apportioned equitably), (payments required by this Act are made for the major portion of the lands irrigated from the waters of any of the works provided for herein); (beneficial use is the limit of the water right); Day Transcript, :- (August); Day Transcript, :-:0 (Ten Eyck). 0 Day Transcript, :-: (DuMars); LG Water Code, at (LG00) ( Beneficial use shall be the basis and the measure and the limit to the use of water in the State ); LG 00 0 Reclamation Act, at, (LG00) (same); A.R.S. -(b)(same); Salt River Val. Water Users' Ass'n v. Kovacovich, Ariz. App., 0, P.d 0, 0 ()( Under the doctrine of beneficial use, the appellees are not entitled under all circumstances to appropriate a given number of acre feet of water per year. Beneficial use is the measure and the limit to the use of water. ). Day Transcript, :-:, :-: (Johnson); DWR Letter from the Department to SRP with Regulations (Page )(R--0(A); LG Administrative Procedure Act ( APA )(Page, Rule ). Day Transcript, :0-:0 (August).

0 0 provided a way for landowners to borrow money from the Federal Government to pay for reclamation projects.. With regard to water rights, Section of the Reclamation Act provided that the Reclamation Act did not interfere with state laws relating to the appropriation or use of water. Rather, a person seeking to acquire a right to use water in a reclamation project was required to act in conformity with state law. is measured by and limited to appurtenant irrigated land as follows: Pursuant to Section, the water That nothing in this Act shall be construed as affecting or intended to affect or 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 Interior, in carrying out the provisions of this Act, shall proceed in conformity with such laws, and nothing herein shall in any way affect the right of any State or the Federal Government or any landowner, or user of water in, to, or from any interstate stream or waters thereof: Provided, That the right of 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.. The concept that beneficial use shall be the basis, measure, and the limit of the right is significant because it requires a party seeking a water right to physically divert it and prohibits a party from using more than that party needs. LG 00 0 Reclamation Act (Page ); Day Transcript, :-: (Roberts); Day Transcript, :-: (Roberts). Day Transcript, :- (Roberts). LG 00 0 Reclamation Act (LG00). LG 00 0 Reclamation Act (LG00) (emphasis added). Day Transcript, 0:-: (DuMars); See also Day Transcript, :- (Johnson); Southwest Cotton Co., Ariz. at 0, P.d at ( Beneficial use shall be the basis, measure and limit to the use of water. ); Kovacovich, Ariz. App., 0, P.d 0, 0 ()( The holding in all of these cases is to the effect that a water right is attached to the land on which it is beneficially used and becomes appurtenant thereto, and that the right is not in any individual or owner of the land. It is in no sence [sic] a floating right, nor can the right, once having attached to a particular piece of land, be made to do duty to any other land ).

0 0. The fact that water is diverted from a facility constructed by the United States Bureau of Reclamation by itself does not create federal water rights in favor of the United States or other users of the water. Any rights a water user may receive from the project are subject to the laws of the state where the project is located. Thus, a party seeking to appropriate water from a federal reclamation permit is subject to state specific regulation such as, actual beneficial use, compliance with state permitting law, and abandonment for non-use. C. Water Code.. As populations increased in the western United States, the competition on the river systems also increased in virtually every western state, including Arizona. This increased competition prompted nearly every western state to adopt a permit system.. Water is a public resource and is allocated for the public good. While a party can obtain property rights associated with water, those rights are usufructuary rights and burdened with the obligations imposed by the State. subject to loss for failure to follow state law regarding the use of water. 0 As a result, these rights are. On June,, the Arizona Water Code (the Water Code ) became effective. Once the Water Code became effective, the only way to establish a new water right was by filing an application pursuant to the Water Code.. The Department of Water Resources (the Department ) took the position in LG 00 0 Reclamation Act (LG00); Day Transcript, 0:0-0: (DuMars). Day Transcript, :-: (DuMars); SRP Paddock, Survey of Statutes Governing Appropriation of Water Rights in Eleven Western States (Page ). ( Each of these states also has procedures for the recognition and quantification of water rights that came into existence prior to statehood or prior to the enactment of the statutory schemes that require a permit as a condition of making an appropriation. ). 0 Day Transcript, :- (DuMars). Day Transcript, :-: (Johnson); DWR Letter from the Department to SRP with Regulations (Page ); LG APA, Rule () (p.).

0 0 the hearing that the Water Code, not the current law that exists today, should govern whether or not these Applications should be granted. 0. Michael J. Johnson is the Assistant Director for Engineering and Permits Division in the Department, and has the responsibility for programs of dam safety, floodplain management, flood warning, surface water rights, groundwater use permits, well drilling permits and support to the adjudication court.. Dr. Johnson testified I do not believe that rules that are promulgated after the fact of the filing of an application apply to that application, that is that s the position we took.. Dr. Johnson also testified as follows: Q. Okay. So the Department s position is that the application, the law that should govern whether or not these applications should be granted is the law in the initial Water Code of ; not the law that exists today. A. Yes. As shown below, this position was not consistently advanced, or applied by the Department.. Despite the stated position that the Water Code should govern these Applications, Dr. Johnson s initial testimony at the hearing was based solely on the current statutes, not the Water Code.. The Director s Decision (referenced below) only refers to the current Day Transcript, :0-: (Johnson). Unless noted otherwise, the term Department refers not only to the Department of Water Resources, but also to its predecessors in regulating surface water applications in Arizona. Day Transcript, :- (Johnson). Day Transcript, :-0 (Johnson). Day Transcript, : - : (Johnson). Day Transcript :-0; :-0: (Johnson).

0 0 statutes as the Applicable Statutes, not the Water Code.. All of the correspondence between the Department and the Applicant prior to the hearing referred only to the current statutes.. The Department did not conduct an analysis of whether the Applications complied with prior law. For example, Dr. Johnson also testified as follows: ALJ SHEDDEN:... So the question was, did the Department do any analysis as to whether the applications complied with rules that were in existence during the pendency of the applications THE WITNESS: No.. Dr. Johnson was the author of the Decision of the Director to Grant the Salt River Valley Water Users Association s Amended Application Nos. E-, R-0, R-, R-, R- R- A- and A- (the Director s Decision ). Dr. Johnson testified as to the procedure that the Department employed in considering the Applications and the Director s Decision. 0. Despite the Department s position that the Water Code governs whether or not the Application could be granted, the Department also took the position that current statutes authorize the Department to grant the permits at issue in this hearing (the Permits ) with new rights of use, new quantities, and any beneficial use currently allowed, even if such quantity or use was not permitted under the Water Code. DWR - Director s Decision (Page ). DWR Letter from the Department to SRP with Regulations (Pages -, ); DWR May 0, 000 Letter (Page ). Day Transcript, :- (Johnson)(lines - [colloquy with counsel] omitted). 0 Day Transcript, :- (Johnson); The Director s Decision is in the record as DWR s Exhibit. Day Transcript, :- (Johnson).

0 0. Section of the Water Code provides that surface water belongs to the public and beneficial use is the basis, measure and limit of an appropriative right. Specifically, the Water Code states: The water of all natural streams, or flowing in any canyon, ravine or other natural channel, or in definite underground channel, and of springs and lakes, belongs to the public, and is subject to beneficial use as herein provided. Beneficial use shall be the basis and the measure and the limit to the use of water in the State and whenever hereafter the owner of a perfect and developed right shall cease or fail to use the water appropriated for a period of five () successive years the right to use shall thereupon cease and revert to the public and become again subject to appropriation in the manner herein provided. 0. Section of the Water Code requires every party, including the United States, to obtain an permit: provision. Any person, association or corporation municipality or the State of Arizona or the United States hereafter intending to acquire the right to the beneficial use of any waters shall, before commencing the construction, enlargement or extension of any dam, ditch, canal or other distributing or controlling works, or performing any work in connection with said construction, or proposed appropriation make an application to the Commissioner for a permit to make such appropriation.. Dr. Johnson testified that Section of the Water Code is a mandatory. Section of the Water Code provides in relevant part: Each application for a permit to appropriate shall set forth the name and post office address of the applicant, the source of water supply, the nature and amount of the proposed use, the location and description of the proposed ditch, canal, or other work; the time within which it is proposed to begin construction, the time required for the completion of the construction, and the time for the complete application of the LG Water Code at (LG00-0). LG Water Code at (LG00). Day Transcript, 0:-: (Johnson).

0 0 water to the proposed use..... Section of the Water Code contains additional requirements for water used for agricultural purposes. These requirements are as follows:... If for agricultural purposes, it shall give the legal subdivisions of the land and the acreage to be irrigated as near as may be.. Neither the Water Code, nor current statute, permitted the use of a service area to describe lands to which water would become appurtenant.. Section of the Water Code contains additional requirements for water use for hydropower. These requirements are as follows:... If for power purposes, it shall give the nature of the works by means of which the power is to be developed, the pressure head and amount of water to be utilized, the points of diversion and release of the water, and the uses to which the power is to be applied..... Section of the Water Code contains additional requirements if the applicant sought to construct a reservoir. These requirements are as follows:... If for the construction of a reservoir, it shall give the height of dam, the capacity of the reservoir, and the uses to be made of the impounded waters..... Section of the Water Code contains additional requirements if the applicant sought to utilize water for municipal uses. These requirements are as follows:... If for municipal water supply, it shall give the present population to be served, and, as near as may be the future requirements of the city.... 0. Section of the Water Code required the application to be LG Water Code at (LG00). LG Water Code at (LG00). See generally, LG Water Code at (LG00). LG Water Code at (LG00). LG Water Code at (LG00). 0 LG Water Code at (LG00).

0 0 accompanied by maps and drawings. These requirements are as follows:... All applications shall be accompanied by such maps and drawings, and such other data as may hereafter be prescribed by the Commissioner, and such accompanying data shall be considered as a part of the application.. The Water Code allows for corrections to defective applications so that the defective applications would not lose priority date if promptly returned. There is no explicit language that permits amendments. provides, in relevant part; Section of the Water Code... If upon examination the application is found to be defective it shall be returned for correction or completion, and the date of and reasons for return shall be endorsed thereon and made of record in his office. No application shall lose its priority of filing on account of such defects, provided acceptable maps and drawings and date are filed in the office of the Commissioner within sixty days from the date of said return to the applicant. 0. Section of the Water Code provides: The approval or rejection of an application shall be endorsed thereon, and a record made of such endorsement in the Commissioner s office. The application so endorsed shall be returned immediately to the applicant in person or by mail. If approved, the applicant shall be authorized, on receipt thereof, to proceed with the construction of the necessary works and to take all steps required to apply the water to a beneficial use, and to perfect the proposed appropriation. If the application is refused, the applicant shall take no steps toward the construction of the proposed work or the diversion and the use of water so long as such refusal shall continue in force.. Section of the Water Code allows a permit to be assigned. In the event of an assignment, the assignee accepts the permit under the conditions precedent established by law and any actions taken regarding the permit. LG Water Code at (LG00). LG Water Code at (LG00-); Day Transcript, :- (Johnson). LG Water Code at (LG00-). LG Water Code at (LG00). 0

0 0. Section 0 of the Water Code requires a party to proceed in construction of its works with reasonable diligence. These requirements are as follows: Actual construction work, except under applications by municipal corporations for municipal uses or purpose shall begin within one year from the date of approval of the application, and the construction of any proposed irrigation or other work shall thereafter be prosecuted with reasonable diligence and be completed within a reasonable time, as fixed in the permit, not to exceed five years from the date of such approval..... Recognizing a distinction that a right to store water is not the same as the right to beneficially use water, the Water Code provided for the issuance of a primary permit for storage of water and a secondary permit for the beneficial use of the stored water. Specifically, Section of the Water Code provides in relevant part: All applications for reservoir permits shall be subject to the provisions of the foregoing sections except that an enumeration of any lands proposed to be irrigated under this act shall not be required in the primary permit. But the party or parties proposing to apply to a beneficial use the water stored in any such reservoir shall file an application for permit, to be known herein as the secondary permit, in compliance with the provision of the foregoing sections..... In the 0s an application for a primary permit for the storage of water was designated as an R Application.. Working with SRP, the federal government paid for and constructed the reservoirs at issue. The federal government maintains title to the land and the projects. Despite the fact that the federal government, through the Bureau of Reclamation ( BOR ) LG Water Code at 0 (LG00). LG Water Code at (LG00). Day Transcript, :- (Johnson). Day Transcript, :-0, :0- (Roberts). Day Transcript, :- (Roberts); LG 00 0 Reclamation Act, (LG00)( Provided that the title to and the management and operation of the reservoirs and the works necessary for their protection and operation shall remain in the Government until otherwise provided by Congress. ).

0 0 has title to the reservoirs, SRP was the Applicant.. n the 0s an application for a secondary permit to appropriate was designated as an A permit. 0 Under the Water Code, an applicant for a secondary or A permit must show by documentary evidence that an agreement has been entered into with the owners of the reservoir for a permanent and sufficient interest in said reservoir to impound enough water for purposes set forth in said application.. The Water Code required the payment of a fee for a permit for the appropriation of water. Specifically, Section of the Water Code states in relevant part: At the time of the submission of proof of appropriation, or at the time of the taking of testimony for the determination of rights to water, the Commissioner shall collect from each of the claimants or owners a fee of two dollars ($.00) for the purpose of recording the water right certificate, when issued, in the office of the county recorded together with the additional fee of twelve cents for each acre of irrigated lands up to and including one hundred acres, and ten cents per acre for each acre in excess of one hundred acres; also twenty-five cents for each theoretical horsepower up to and including one hundred horsepower, and fifteen cents for each horsepower in excess of one hundred up to and including one thousand horsepower, and five cents for each horsepower in excess of one thousand horsepower up to and including two thousand horsepower as set forth in such proof, the minimum fee, however, for any claimant or owner in such cases to be $.0; also a fee of $.00 for any other character of claim to water..... Despite his testimony that the Water Code governed whether the Applications should be granted, Dr. Johnson did not review the Water Code in its entirety before signing the decision letter, and there was no evidence that anyone at the 0 Day Transcript, :- (Johnson). LG Water Code at (LG00). LG Water Code at (LG00); see also Water Code at (LG00).

0 0 Department reviewed the Water Code prior to the issuance of the Director s Decision or the Permits.. The Water Code required state approval for severance and transfer of water appurtenant to legally-described subdivisions for irrigation purposes to avoid loss of priority. Specifically, Section of the Water Code provides: All water used in this State for irrigation purposes shall remain appurtenant to the land upon which it is used; provided, that if for any natural cause beyond control of the owners it should at any time become impracticable to be beneficially or economically use water for irrigation of any land to which water is appurtenant, said right may be severed from said land, and simultaneously transferred and become appurtenant to other land, without losing priority of right theretofore established, if such change can be made without detriment to existing rights, on the approval of an application of the owner to the Commissioner. Before the approval of such transfer an inspection shall be made by the Commissioner or persons deputized by him, and the Commissioner shall approve or disapprove such transfer and prescribe the conditions therefor. Such order shall be subject to appeal as in this act provided. 0. Dr. Johnson testified that the severance and transfer statute under the Water Code was different from the current statute and that he was unaware how the Water Code was implemented in the 0s.. Dr. Johnson testified that the Water Code did not authorize the continuous fill of a reservoir.. As shown below, the Applications at issue were: R-0 (primary permit to construct a [larger than built] reservoir and store water for Mormon Flat Reservoir [at a different location]). R- (primary permit to construct a reservoir and store water for Day Transcript, :- (Johnson). LG Water Code at (LG00). Day Transcript, :-:0 (Johnson). Day Transcript, :- (Johnson). DWR Application R-0 (Page ).

0 0 McDowell Reservoir, which was never built); R- (primary permit to construct a [smaller] reservoir and store water for Mormon Flat Reservoir); R- (primary permit to construct a reservoir and store water for Pine Creek Reservoir, which was never built); 0 R- (primary permit to construct a reservoir and store water for Horse Mesa Reservoir [Apache Lake]); A- (secondary permit to appropriate water in McDowell Power Canal, which was never built); A- (secondary permit to appropriate water in Horse Mesa Power Canal, which was never built); and E- (a permit for enlargement or extension of the Salt River Project by the enlargement of Roosevelt Dam and Reservoir and the construction of Pine Creek [which was never built], Horse Mesa and Mormon Flat Dam).. Dr. Johnson testified that there was not an A application, or other application to appropriate water, for Mormon Flat Reservoir.. There was never an A application filed for Stewart Mountain, Horse Mesa, Bartlett Dam, or Horseshoe Dam.. Dr. Johnson testified that an E Application is not an appropriate application to appropriate water in a new reservoir.. Despite the fact that he testified that an E Application is not an appropriate application to appropriate water for a new reservoir, Dr. Johnson testified that DWR Application R- (Page ). DWR R- Application (Page ) 0 DWR Application R- (Page ) DWR Application R- (Page ) DWR Application A- (Page ). DWR Application A- (Page ). DWR Application E-(Page ). See generally, DWR Application A- and DWR Application ; Day Transcript, :- (Johnson). See generally, DWR Application A- and DWR Application. Day Transcript, :- (Johnson), but see Day Transcript, 0:- (Johnson).

0 0 contrary to the language in the application, or the language on the permit form itself notwithstanding, he believes that E applications have at times been used and accepted by the State as an application for appropriation, but he could not think of one example where an E application was accepted by the State to appropriate water for a new reservoir. No testimony or evidence was ever produced of an example where the Department or the State granted a permit to appropriate water for a new reservoir under an E application.. The Department never did an analysis or reached a conclusion as to whether an E application was appropriate for use in the expansion of the Salt River Project as a whole, or whether is it was only appropriate for use with an individual facility such as a reservoir.. Pursuant to the Water Code, on October,, the Paradise Verde Irrigation District filed application R-, the first application to construct a reservoir. At this time, the federal government had provided the Paradise Verde Irrigation District the exclusive right to construct a reservoir on the Verde River. 0 D. Arizona Administrative Procedures Act.. As of, the Arizona Administrative Procedures Act contained rules and regulations relating to the appropriation of surface water. 0. These regulations were in force during at least some period when the applications were pending. Day Transcript, :-: (Johnson). Day Transcript, :-0:, :0-0 (Johnson). 0 SRP Ledger (Page ); Day Transcript, :-: (Roberts); Day Transcript, :- (August). LG Arizona Administrative Procedure Act (Page ). Day Transcript, :- (Johnson).

0 0. The Administrative Procedures Act required a survey and preparation of maps in order to obtain a permit.. The Administrative Procedures Act also required the applicant to furnish information including the nature and quantity of water. In cases where more than one use was contemplated by the application, the applicant was required to insert the nature of each use and the quantity of water necessary for each use.. The Administrative Procedures Act also required the applicant to submit a separate application to appropriate water prior to withdrawing water from a reservoir for irrigation, stock watering or other purposes.. The Administrative Procedures Act further provided: Application for Enlargement. In the event it is proposed to enlarge an existing ditch, reservoir or other project involving an increase in the amount of water proposed to be appropriated, an application shall be made in the same form as for an original application. The application shall be made for the additional amount of water proposed to be appropriated, reference being made to the permit or certificate of water right already existing. The map accompanying an application for enlargement of an existing facility shall conform to all requirements pertaining to an original application. The proposed enlargement should be shown in solid lines and the existing works should be shown by lines dotted, or otherwise different to distinguish the existing from the proposed works. The application shall be made to appropriate only the additional amount applied for over the amount previously appropriated by the original works.. The Administrative Procedures Act also allowed for severance and transfer LG Arizona Administrative Procedure Act (Page ); Day Transcript :- (Johnson). LG Arizona Administrative Procedure Act (Page ); Day Transcript, :- : (Johnson). LG Arizona Administrative Procedure Act (Page ); Day Transcript, :- : (Johnson). LG Arizona Administrative Procedure Act (Page ) (emphasis added).

0 0 of existing rights from one location to another if approved by the State Land Department. This is similar to the current practice of the Department.. Pursuant to the Administrative Procedures Act, the application must contain an acceptable map that complies with the requirements of the Administrative Procedures Act in order for the application to be in the proper form application. The map was part of the. If a map was not submitted within 0 days from the filing of the application, the application was to be automatically rejected under the Administrative Procedures Act. E. Arizona Administrative Code.. As of, the Arizona Administrative Code contained regulations related to the appropriation of public waters. 0. These regulations were in force during at least some period when the applications were pending. 0. The regulations required filing a map and fee with the State Land Department.. The map submitted with the application is a part thereof and was required to LG Arizona Administrative Procedure Act (Page ); Day Transcript, :0- (Johnson). LG Arizona Administrative Procedure Act (Page ); Day Transcript, :- (Johnson). LG Arizona Administrative Procedure Act (Page ) 0 DWR Letter from the Department to SRP with Regulations (Page ); Day Transcript, :- (Johnson). Day Transcript, :- (Johnson). DWR Letter from the Department to SRP with Regulations (Page ); Day Transcript, :-.

0 0 agree in all respects with the statements contained in the application.. The Regulations further provided: Application for Enlargement. In the event it is proposed to enlarge an existing ditch, reservoir or other project involving an increase in the amount of water proposed to be appropriated, an application shall be made in the same form as for an original application. The application shall be made for the additional amount of water proposed to be appropriated, reference being made to the permit or certificate of water right already existing. The map accompanying an application for enlargement of an existing facility shall conform to all requirements pertaining to an original application. The proposed enlargement should be shown in solid lines and the existing works should be shown by lines dotted, or otherwise different to distinguish the existing from the proposed works. The application shall be made to appropriate only the additional amount applied for over the amount previously appropriated by the original works. F. Application R-0.. On August 0, 0, Auxiliary Eastern Canal Landowners Association ( Eastern Canal ) filed an application R-0 in the office of the State Water Commissioner.. Application R-0 states that the name of the proposed reservoir was Mormon Flat Reservoir and was to be filled from the waters of the Salt River.. Application R-0 proposed to store approximately 00,000 acre feet of water to be used for irrigation and power.. The application was not complete. DWR Letter from the Department to SRP with Regulations (Page ); Day Transcript, :- (Johnson). DWR Letter from the Department to SRP with Regulations (Page ). DWR R-0 Application (Page ). DWR R-0 Application (Page ). DWR R-0 Application (Page ). Day Transcript, :-0: (Johnson); Day Transcript, :-(Johnson).

0 0 application.. The Department does not have a record of any maps attached to this. The application states that it was returned for correction and completion in accordance with a letter dated November, 0. 0. The application further states that in order to retain its priority, the application must be returned to the State Water Commissioner on or before January, 0. 0. Dr. Johnson testified that it was his belief that the application needed to be returned on or before January, in order to retain its priority.. The application does not indicate that it was ever returned to the State Water Commissioner.. The Department has no evidence that any party sought an extension of the time to return the application for correction. corrections.. The Department has no evidence that the application was returned with. On November,, Eastern Canal assigned whatsoever rights it had in Application R-0 to the Salt River Valley Water Users Association ( SRP ). Day Transcript, 0:- (Logan). 0 DWR R-0 Application (Page ). DWR R-0 Application (Page ). Day Transcript, :-: (Johnson). DWR R-0 Application (Page ). Day Transcript, :- (Johnson). Day Transcript, :-, 0:- (Johnson). DWR R-0 Assignment (Page ). Mr. Roberts testified that the Salt River Project consisted of two separate entities: ) the Salt River Valley Water Users Association and ) the Salt River Project Agricultural Improvement and Power District. Day Transcript, :0- (Roberts). Mr. Roberts testified that for the purposes of these applications, there was no distinction between the two entities. Id.; Day Transcript, :-:. Accordingly, these findings refers to both entities collectively as SRP

0 0. The Department admits that applications can be cancelled. Dr. Johnson testified: [G]enerally speaking, applications can canceled. I m not sure permits or certificates can be unilaterally canceled.. Application R-0 contains on its face a stamp stating CANCELLED.. Application R-0 further states // For the reason that the Salt River Valley Water Users Association having built the Mormon Flat Reservoir.. On Page of the application, the application contains another stamp stating CANCELLED as well as a handwritten date //. 00. The predecessors to the Department maintained the official index and record of all applications and permits in a document that is called the Black Book. 0 0. In the Black Book, Application R-0 is also stamped Rejected. 0. Application R-0 also contains a hand-written notation in the Black Book stating Cancelled --. 0. Application R-0 is also stamped CANCELLED in the Department s Black Book. 0. The assignment document transferred to SRP all rights to the stored water that may be impounded for irrigation and power purposes. 0. The Department has never recognized an assignment for any other uses for Application R-0. 0 Day Transcript, :- (Johnson). DWR R-0 Application (Page ). DWR R-0 Application (Page ). 00 DWR R-0 Application (Page ). 0 SRP Ledger (Page ). 0 SRP Ledger (Page ). 0 SRP Ledger (Page ) 0 SRP Ledger (Page ). 0 DWR R-0 Assignment (Page ). 0 Day Transcript, :-: (Johnson). 0

0 0. During the 0s, no party filed an application to appropriate water in Mormon Flat Reservoir. 0 G. Application R-.. On October, 0, SRP filed Application R- in the office of the State Water Commissioner. 0. Application R- states that the name of the proposed reservoir was McDowell Reservoir and was to be filled from the waters of the Verde River. 0. Application R- proposed to store approximately,000 acre feet of water to be used for irrigation and hydro-electric power on the Salt River Project. 0. Application R- states that the Reservoir was to be filled partly from normal and flood flow of Verde River and partly from the proposed McDowell Power Canal. 00. Specifically, Application R- states: This reservoir is to be used to hold water drawn for power development from Roosevelt Reservoir during periods when not required for irrigation; to store waters of the Verde River now forming a portion of the water supply of the Salt River Project so as to add to the economy and facility of operation of said Project, and secure a greater amount of beneficial use of such irrigation water. The available storage will be used to supplement the present water supply in times of drought. Power will be developed at this site as indicated in the application of even date by the Salt River Valley Water Users Association for permit for the McDowell Power Canal. 0. Application R- contains a handwritten note stating Appl # R- Cancelled. 0 Day Transcript, :- (Johnson). 0 DWR R- Application (Page ). 0 DWR R- Application (Page ). 0 DWR R- Application (Page ). DWR R- Application (Page ). DWR R- Application (Page ). DWR R- Application (Page ).

0 0 0. On Page of Application R- as presented by the Department, the application contains a stamp stating CANCELLED along with a reference to applications R-, R-, A-, and A-. 0. In the Black Book retained by the Department and its predecessors, Application R- is stamped CANCELLED and REJECTED. 0. The Department does not have a record of any maps attached to this application. H. Application R-. 0. On October, 0, SRP filed Application R- in the office of the State Water Commissioner. 0. The application states that the name of the proposed reservoir was Mormon Flats Reservoir and it was to be filled from the waters of the Salt River. 0. The application proposed to store approximately 0,000 acre feet of water to supplement present irrigation supply and incidentally for hydro-electric power on Salt River Project. 0. Specifically, the application states: The primary purposes of this reservoir are to provide storage for water drawn from Roosevelt Reservoir or power development during periods when it is not used for irrigation, and to add to the flexibility of operation of the Salt River Project. The available storage will be used to supplement the present water supply in times of drought. 0 DWR R- Application (Page ). SRP Ledger (Page ). Day Transcript, 0:- (Logan). DWR R- Application (Page ). DWR R- Application (Page ). DWR R- Application (Page ). 0 DWR R- Application (Page ).

0 0 0. The application contains a handwritten note stating Appl # R- Cancelled. 0. On Page of the application as presented by the Department, the application contains a stamp stating CANCELLED along with a reference to applications R-, R-, A-, and A-.. In the Black Book retained by the Department and its predecessors, Application R- is stamped CANCELLED and REJECTED.. The Department does not have a record of any maps attached to this application. I. Application R-.. On December,, SRP filed Application R- in the office of the State Water Commissioner.. The application states that the name of the proposed reservoir was Pine Creek Reservoir and was to be filled from the waters of the Salt River.. The application proposed to store approximately,000 acre feet of water to be used for power.. The application states that the amount of water to be used for power is 000 second feet.. The application states: This is an amended location of the dam described under DWR R- Application (Page ). DWR R- Application (Page ). SRP Ledger (Page ). Day Transcript, 0:- (Logan). DWR R- Application (Page ). DWR R- Application (Page ). DWR R- Application (Page ). DWR R- Application (Page ).

0 0 Clause of application No.. for permit to build Horse Mesa Power Canal, filed October, 0. This development is proposed as an extension of the Salt River Property and is to be used exclusively for the benefit thereof, and this application is supplemental to and a part of Enlargement Application filed herewith.. The Pine Creek Reservoir was never constructed. 0. The Department does not have a record of any maps attached to this application. J. Application R-. 0. On December,, SRP filed Application R- in the office of the State Water Commissioner.. The application states that the name of the proposed reservoir was Horse Mesa Reservoir and was to be filled from the waters of the Salt River.. The application proposed to store approximately,000 acre feet of water to be used for power.. The application states that the amount of water to be used for power is 000 second feet.. The application states: This dam is proposed as an alternate development to the Horse Mesa Power Canal, for which application No. was filed October, 0. This is an extension of the Salt River Property and to be used exclusively for the benefit thereof. DWR R- Application (Page ). 0 Day Transcript, :- (Johnson). Day Transcript, 0:- (Logan). DWR R- Application (Page ). DWR R- Application (Page ). DWR R- Application (Page ). DWR R- Application (Page ).

0 0 This application is supplemental to and a part of Enlargement Application filed herewith.. The Department does not have a record of any maps attached to this application. K. Application A-.. On October, 0, SRP filed Application A- in the office of the State Water Commissioner.. The preprinted form states: A different form of application is provided where storage works are contemplated. These forms can be secured without charge, together with instructions by addressing the State Water Commissioner, Phoenix, Arizona.. The application seeks to appropriate,000 cubic feet per second of the Salt River through the McDowell Power Canal. 0. The application stated that the proposed works would generate 0 theoretical horsepower of electricity and would return water to the Verde River. power would be applied to domestic light and power for manufacturing, pumping, and mining. 0. The application further stated a purpose for municipal supply of Phoenix (and adjacent towns and cities) located in Maricopa, Gila, and Pinal Counties.. The application contains the following remarks: This application does not contemplate an appropriation of DWR R- Application (Page ). Day Transcript, 0:- (Logan). DWR A- Application (Page ). DWR A- Application Page ). 0 DWR A- Application (Page ). DWR A- Application (Page ). DWR A- Application (Page ). The

0 0 additional water for irrigation, but proposes the use of the canal in connection with the proposed McDowell Reservoir to control the annual distribution of water on the Salt River Project and to lend flexibility to the operation of said project.. The Department confirmed that it did not have any additional information regarding this application that would contradict the statement that the application was not contemplating appropriation of additional water for irrigation.. On Page of the application as presented by the Department, the application contains a stamp stating CANCELLED along with a reference to applications R-, R-, A-, and A-.. In the Black Book retained by the Department and its predecessors, Application A- is stamped CANCELLED.. The Department does not have a record of any maps attached to this application. L. Application A-.. On October, 0, SRP filed Application A- in the office of the State Water Commissioner.. The preprinted form states: A different form of application is provided where storage works are contemplated. These forms can be secured without charge, together with instructions by addressing the State Water Commissioner, Phoenix, Arizona. DWR A- Application (Page ). Day Transcript, :-: (Johnson). DWR A- Application (Page ). SRP Ledger (Page ). Day Transcript, 0:- (Logan). DWR A- Application (Page ). DWR A- Application (Page ).