Penalties for Water Law Violations Go Into Effect July 1, 2009
June 1st, 2009
Whether you currently own water rights or plan to acquire water rights in the State of Nevada, it’s important to know that beginning July 1, 2009, fines and penalties for the violation of certain provisions governing the use of water within Nevada will go into effect. While the new regulations were adopted September 18, 2008, no process or enforceable procedures were in place to assess the fines and penalties – until now.
As you know, water continues to be a complex, yet very important topic in Nevada. The State Engineer’s recently adopted regulations and ability to assess penalties only enhances the responsibilities of water rights owners within Nevada. In light of these recent changes, it is important to understand Nevada Water Law and the specific terms and conditions of your permits and certificates which serve as evidence of your ownership interest in this valuable commodity.
We not only have to safeguard water rights against cancellation or forfeiture proceedings, but now are faced with penalties should we not be good stewards of this precious resource.
This client alert involves Nevada Revised Statutes (NRS) Chapters 533, 534, 535, and 536 which are enforced by the Nevada Division of Water Resources, Office of the State Engineer (State Engineer) and its adopted regulations within the Nevada Administrative Code (NAC).
The New Regulations: What it means to you and your business
The new regulations, which amend Chapter 532 of the Nevada Administrative Code, authorize the State Engineer to assess a penalty for a violation of any provision of Nevada Water Law with respect to appropriation of water rights, surface and stream water rights, underground water rights and wells, as well as dams and ditches. Penalties may also be assessed by the State Engineer for a violation of any permit, certificate, order, decision, or regulation adopted by the State Engineer. Finally, the newly adopted regulations also set forth procedures for a hearing before the State Engineer wherein penalties could be assessed for a violation of Nevada Water .
These new regulations are broad sweeping as they provide for the assessment of penalties not only for violations of Nevada Water Law, but specific terms and conditions of water rights permits and certificates, which are often unique to the circumstances under which the permit or certificate was issued. Violations also include engaging in any activity without a required permit or without approval required to engage in certain activities. Finally, a violation is also defined as the failure to perform a requirement or the failure to perform a requirement in a timely manner.
To better illustrate, one water rights owner may be assessed a fine based upon a violation of a permit term for an activity that a second water rights owner is engaged in, but because the activity is not in violation of the second owner’s permit, no fine is levied against the second owner. One particular instance that comes to mind would be the amount of water a person is permitted to use under a particular permit or certificate issued by the State Engineer. These amounts can vary on a case by case basis, as do related deadlines to file a proof of completion or proof of beneficial use. Therefore, water rights holders will need to be ever vigilant in not only complying with Nevada’s Water Law, but the specific terms and conditions set forth within the permits and certificates issued by the State Engineer.
As background, prior to September 2008 and since 2007, the State Engineer had maintained statutory authority to levy fines pursuant to Nevada Revised Statutes (NRS) NRS 533.481, NRS 534.193, NRS 535.200, and NRS 536.200, but no regulations had been adopted to set forth the procedure to enforce the law and levy fines.
Enforcement Actions and Penalty Assessment: Three forms of action
When the State Engineer determines there is a violation, the staff may take one of three forms of action: (1) issue a warning letter setting forth the alleged violation and request that the violation be corrected; (2) commence an administrative enforcement action; or (3) bring an action with the District Courts seeking injunctive relief to enjoin the alleged violator from continuing to engage in the unlawful activity.
If the State Engineer chooses to commence an administrative enforcement action, the water rights owner is afforded an opportunity to appear at a hearing wherein the State Engineer will make one of the following determinations: (1) no violation; (2) a violation with no penalty assessed; or (3) find a violation and forward the same to a penalty panel to determine what penalty should be assessed. Once a penalty has been assessed by the State Engineer, the water rights owner can negotiate with the State Engineer to settle the dispute through what is deemed to be an alternative but equal penalty. Resolution through this process is a compromised settlement, not subject to judicial review.
Alternatively, if the water rights owner chooses not to engage in negotiations with the State Engineer regarding the penalty, the penalty will be assessed and the owner has 30 days after the imposition of the penalty to seek a hearing before an independent advisory committee to determine if the penalty was just and proper. The advisory committee, which is appointed by the Director of the State Department of Conservation and Natural Resources, has 30 days from the date of the appeal to schedule a hearing. Ultimately, the advisory committee’s ruling is subject to judicial review proceedings before the District Court, providing various levels of review.
The Penalties: Monetary Fines, Reimbursement to the State Engineer, and Water Replacement
The newly adopted regulations provide the State Engineer with the discretion to assess very harsh penalties on violators, depending on the circumstances of the violation. First, the State Engineer may assess a penalty not to exceed $10,000 per day for each violation. Although the cap on this portion of the penalty is $10,000, the amount of the penalty accrues for each the violation is not rectified.
Second, in addition to the administrative fine described above, the State Engineer may also assess enforcement costs. Enforcement costs include time spent to enforce actions surrounding the violation by State Engineer staff, supervisors, as well as the Attorney General’s Office. Additionally, the State Engineer can assess the costs associated with compliance inspections as a part of the administrative penalty. The reimbursement of these costs, pursuant to the regulation, is at the full cost of the hourly rate of each employee, including salary, benefits, overhead and directly related costs.
Third, the State Engineer can order that the violator replace up to 200 percent of any water that has been unlawfully used, wasted, or diverted. Considering the cost of water today, this portion of the penalty could easily be the most expensive, and is obviously designed to deter illegal activity.
Clearly, the State Engineer has many options with respect to the penalties it can assess under these new regulations. The amount of the total penalty assessed, however, is not purely at the discretion of the State Engineer, as the regulations provide the State Engineer with some guidance in this regard. Finally, only time will tell the severity of penalties the State Engineer will levy on a case by case basis.
Penalty Assessment: Six Factors to Consider
The State Engineer is to consider the following factors when assessing a penalty: (1) the gravity of the violation, including any economic injury or impact to other persons; (2) whether the violator made significant progress toward correcting the violation and attempted to comply with any applicable orders of the State Engineer; (3) whether the violator has committed any prior violations; (4) the economic benefit, if any, derived by the violator from committing the violation; (5) in the case of unlawful use, waste, or diversion of water, the amount of water involved; and (6) any other relevant facts established at the hearing before the State Engineer.
Contact Us
Should you have any questions about your present water rights and the implication of these new regulations, please contact Sev Carlson from Kummer Kaempfer’s water law group at 702-792-7000, 775-852-3900, or by email at scarlson@kkbrf.com.
This client alert is intended for informational purposes only. Nothing in this alert is to be considered as either creating an attorney-client relationship between the reader and Kummer Kaempfer or as rendering of legal advice. Readers are responsible for obtaining such advice from their own legal counsel.
No client or other reader should act or refrain from acting on the basis of any information contained in this client alert without seeking appropriate legal or other professional advice on the particular facts and circumstances at issue.
