Opposition Brief — Kansas v. Nebraska and Colorado (No. 220126-ORG)
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No. 126, Original
an The
Supreme Court of the Anited States
S
STATE OF KANSAS,
Plaintiff,
v.
STATE OF NEBRASKA
and
STATE OF COLORADO,
Defendants.
%
BRIEF OF THE STATE OF NEBRASKA
IN RESPONSE TO KANSAS’
MOTION FOR LEAVE TO FILE PETITION
a
JON BRUNING
Attorney General of Nebraska
DAVID D. COOKSON
Deputy Attorney General
JUSTIN D. LAVENE
Assistant Attorney General
Counsel of Record
OFFICE OF THE ATTORNEY GENERAL
2115 State Capitol
Post Office Box 98920
Lincoln, Nebraska 68509-8920
(402) 471-2682
Justin.Lavene@nebraska.gov
DONALD G. BLANKENAU
THOMAS R, WILMOTH
Special Assistant Attorneys General
BLANKENAU WILMOTH LLP
206 South 13th Street, Suite 1425
Lincoln, Nebraska 68508-2002
(402) 475-7080
Attorneys for State of Nebraska
COCKLE LAW BRIEF PRINTING CO. (800) 225-6964
OR CALL COLLECT « 402) 342-2431
TABLE OF CONTENTS
Page
yr i PF tt gti, , + 4): FRR emonnmtsnrcenn neem iii
TT hsccdsnitsnnicieindineriendsiobatsise a Pe tprate rem aee 1
I. Hydrologic Conditions Following Execution
ee tie tcctatenibind cvlececdnianventenadmeaatsees 2
Il. Nebraska’s Efforts to Ensure Compact
Compliance Leading Up To and Following
LR IAAI Sela RP Dae LAS A force Naas HEA SS
lil. The Positive Results of Nebraska’s Compli-
RS IN rei clog ee eee ee
IV. Kansas’ Demands on Nebraska...................
V. Kansas’ Plans to Finance New Water Projects
with Anticipated Litigation Recoveries.........
VI. The 2008-09 Arbitration ..............0.0.0000.0.0....
Vil. Nebraska Continues Its Efforts to Ensure
COSEEE CCMITERIIGD 2.0 cccnnccscsecccesscsscsecsens
SUMMARY OF THE ARGUMENT .......................
IIE itrtibihieibittnded tee eee
I. Standing Alone, Kansas’ Claims Do Not Mer-
it Exercise of This Court’s Jurisdiction .......
A. Kansas Cannot Recover for “Unjust
Enrichment”; Its Actual Damages are
Se ND si iecccesenandtansecderecempecrcael
B. Kansas’ Demands for Prospective Re-
lief are Not Justiciable.........................
TABLE OF CONTENTS -— Continued
Page
II. Nebraska’s Claims Concern Issues Central
to the Purposes of the Compact and Merit
I Oe I TD viicisisttecndedendcnicnnadcanetioten 24
lil. Issues Now Undergoing Arbitration ........... 26
ae RII fsichice hs dasdnchela siecle satcdanissstaacscemiasiininishetians 27
APPENDIX INDEX
PN, ME i cecscetecbumnitaebiaencnmn App. l
Arbitrator’s Final Decision on Legal Issues ....... App. 23
Arbitrator’s Final Decision..............0........::e App. 79
ill
TABLE OF AUTHORITIES
Page
CASES
Arizona v. New Mexico, 425 U.S. 794, 96 S.Ct.
ARENT ANSE het eRe ree ne Oe IS Oe oe 15
California v. Texas, 457 U.S. 164, 102 S.Ct.
RRR i SM OS Rie AO EI BOER a 20
Hall v. Beals, 396 U.S. 45, 90 S.Ct. 200 (1969) ...21, 22
Honig v. Doe, 484 U.S. 305, 108 S.Ct. 592
cB ESOS AER ss Oe CAM de Ne RE A 20
Illinois v. City of Milwaukee, 406 U.S. 91, 92
ns I IPG Soh re a eee soma 20
Kansas v. Colorado, 533 U.S. 1, 121 S.Ct. 2023
FER eS, ee eA RON SE AERO RA SR ce eae 16
Kansas v. Colorado, 543 U.S. 86 (2004)...............0..... 19
Louisiana v. Texas, 176 U.S. 1, 20 S.Ct. 251
ERE REREI Re ete Dee el nen RE OAR RE POA 15
Maryland v. Louisiana, 451 U.S. 725, 101 S.Ct.
UN ng rae 15
Mississippi v. Louisiana, 506 U.S. 73, 113 S.Ct.
SVEN xis -denanniit-sic-d ain pademdadesmacaaaadeseetoneiessoeensie eae 16
National Park Hospitality Assn. v. Department
of Interior, 538 U.S. 803, 123 S.Ct. 2026
SE ichetopusciicadunniedbiatabsnnidddncadscnesstendebeocuaianankeonees 22
Renne v. Geary, 501 U.S. 312, 111 S.Ct. 2331
III isss ditcndensaseuionicchpiasicdatiidaage se uhieastenannaina ueniuceminacenie 22
Reno v. Catholic Social Services, Inc., 509 U.S.
i ee Ce I OI sivitrdccrd ccist diekedade'scacenaunvinctiounss 21
1V
TABLE OF AUTHORITIES — Continued
Page
Rescue Army v. Municipal Court, 331 U.S. 549,
of ts BT fy RES TeR eRe ote eee 23
Socialist Labor Party v. Gilligan, 406 U.S. 583,
Ft Ss By fe. - SRRRRIRSUR RAR AP Ra ly sete iecutNneN meer eer 23
South Carolina v. North Carolina, __ U.S. ___
Se nn, I eed asian 16
Spear T Ranch, Inc. v. Knaub, 691 N.W.2d 116
I eee 22
Texas v. New Mexico, 462 U.S. 554, 103 S.Ct.
EE eRe eters SP Dee My NT NUR DLP 16
Texas v. New Mexico, 482 U.S. 124 (1987)........... 10, 19
Wyoming v. Oklahoma, 502 U.S. 437, 112 S.Ct.
+ RRP perso seen Onn gone TE aT ONT 15, 20
FEDERAL REGULATIONS
Se ry te I 5c cacccanstudcussmredinmssndeacuanamenmedans 20
STATUTES
KAN. STAT. ANN. § 82a-1804 (2008)........0...00..... 9, 10, 20
INGER. REV. DEAT. G5 66-701 OF B00. ..20cccccesccccasecscscaccneceese 5
A X_N DE MEE reper 5
NEB. REV. StatT. §§ 46-713 through 46-715 .................. 5
IMR. FEBV. TRA. F 4B 7 LIEN). osc ccciccocsncincsscnssescesssccces 6
eM ROE er ee et 13
v
TABLE OF AUTHORITIES — Continued
Page
OTHER AUTHORITIES
Second Report of the Special Master in Kansas
wy. Colorado, INO. 106, CPIGiROl .....0.cccsccsscesescccccsessees ll
1
STATEMENT
Kansas’ allegations that Nebraska violated this
Court’s 2003 Decree by consuming water in excess of
its allocation under the Republican River Compact
and in contravention of the Final Settlement Stipula-
tion (“FSS”) approved by the Decree, do not merit this
Court’s jurisdiction. Kansas’ recitation of material
facts leading to this action omits essential informa-
tion that exposes the weakness of its claims. In
contrast, Nebraska has raised claims of its own which
reflect Kansas’ persistent efforts to prevent an
accurate accounting of Republican River waters. To
the extent this dispute merits the exercise of this
Court’s jurisdiction, it is Nebraska’s claims that
supply the requisite seriousness and dignity.
Among other things, Kansas neglects to inform
this Court of the outcome of the arbitration it
initiated in 2008 pursuant to Section VII of the FSS
(“Dispute Resolution”). This non-binding arbitration
resulted in a recommended award to Kansas of
$10,000 for the same claims Kansas brings here.
Significantly the arbitrator explained that Kansas
did not provide any evidence it was harmed by
Nebraska’s alleged non-compliance. The arbitration
also revealed that Kansas initiated the arbitration
against Nebraska, basing its hydrologic analysis on
repealed regulations. The Arbitrator also refused to
award any prospective relief, but admonished
Nebraska to do more to constrain its uses in “Water-
Short Years” as defined in the FSS. Nebraska is now
working on a thire generation of regulations to
2
address the Arbitrator’s recommendations. The fact
Kansas’ claims are based on the wrong set of regu-
lations renders moot Kansas’ arbitrated claims, and
Kansas’ present demands for prospective relief are
unripe.
I. HYDROLOGIC CONDITIONS FOLLOWING
EXECUTION OF THE FSS.
The years just before and immediately following
execution of the FSS were marked by severe condi-
tions in the Basin. Declaration of Brian Dunnigan,
Director of the Department of Natural Resources,
attached as App. 1-22 (“Dunnigan Decl.”). These
conditions came on the heels of a period when
groundwater pumping in Nebraska had reached its
apex (i.e., prior to the FSS, when such pumping was
allowed). When the FSS was executed, Nebraska had
to overcome depleted groundwater levels, historically
low stream flows, and reservoirs at historically low
storage levels. Jd.
These difficult hydrologic conditions impacted the
calculated Virgin Water Supply (“VWS”) of the
Republican River and, consequently, the allocations
available to the States under the Compact. Dunnigan
Decl. 9 26, App. 8. The size of a State’s allocation
varies with the calculated VWS, which decreases
during dry years: The smaller the VWS, the smaller
each State’s allocation. Nebraska’s average alloca-
tions for the 2002-2006 period represented the small-
est average allocations for Nebraska since at least
3
1980 and were well below the basic allocation af-
forded Nebraska in the Compact, which in turn were
based on a period that included the Dust Bow! era.
Dunnigan Decl. { 27, Fig. 1, App. 8. The smaller a
State’s allocation, the more difficult it is to comply
with the Compact.
Thus, after execution of the FSS, Nebraska faced
two significant challenges: (1) extreme drought con-
ditions and (2) a declining allocation within which to
limit its consumption. Because they were unprece-
dented in terms of both magnitude and duration,
these conditions posed considerable challenges for
water managers in the Basin. Further complicating
Nebraska’s compliance effort was the fact that
Colorado had consistently overused, on average, ap-
proximately 10,000 acre-feet annually since the FSS
was signed. Dunnigan Decl. 9 28, App. 9. It is within
this context that Nebraska undertook to ensure it
complied with its obligations under the Compact and
the newly instituted FSS.
II. NEBRASKA’S EFFORTS TO ENSURE COM-
PACT COMPLIANCE LEADING UP TO AND
FOLLOWING THE FSS.
Nebraska historically managed consumption of
groundwater and surface water in the State under
separate legal regimes. The Department of Natural
Resources (“DNR”), a state agency, was responsible
for surface water, while local Natural Resources
Districts (“NRDs”) managed groundwater. Dunnigan
Decl. 4 7, App. 2. The FSS demanded management of
4
these regimes be integrated in Nebraska, and
Nebraska responded by overhauling its entire water
management structure.
Nebraska’s efforts to manage hydrologically con-
nected waters actually began before the FSS was
executed. Dunnigan Decl. 4 8-9, App. 2-3. In 1996, the
Legislature passed Legislative Bill (“L.B.”) 108, allow-
ing NRDs to pursue integrated management of hydro-
logically connected groundwater and surface water. In
addition, the NRDs were authorized to develop “joint
action plans” with various water users and DNR for
the integrated management of hydrologically con-
nected groundwater and surface water. Jd. This effort
was initiated immediately, but was ultimately super-
seded by Kansas’ original litigation. Jd. During this
time, a moratorium on the construction of new wells
was applied to all or part of three Republican River
NRDs. The Upper Republican NRD adopted a mora-
torium in 1997; the Middle Republican NRD adopted
a moratorium in June 2002, and the Lower Repub-
lican NRD adopted a moratorium in the area up-
stream of Guide Rock, Nebraska effective on December
9, 2002. Dunnigan Decl. ¥ 10, App. 3.
As the litigation came to a close among the three
States in 2002, the Nebraska Legislature passed L.B.
103 (2002), mandating creation of a Water Policy
Task Force to address further management of hydro-
logically connected water supplies. The 49 member
Task Force provided the Legislature with draft legis-
lation and suggested changes to statutes in December
2003. The Legislature considered the Task Force
i)
recommendations in its 2004 session and passed
L.B. 962 (2004). Dunnigan Decl. 4 12, App. 4. Gover-
nor Mike Johanns signed L.B. 962 into law on April
15, 2004, and it is now codified as part of the
Nebraska Groundwater Management and Protection
Act. NEB. REV. STAT. §§ 46-701 et seg. The law repre-
sented landmark legislation in Nebraska, requiring
integrated management of hydrologically connected
water supplies in river basins to achieve a sustain-
able supply.
The significance of L.B. 962 is reflected in the
findings of the Nebraska Legislature, which recog-
nized hydrologically connected groundwater and sur-
face water would require different management than
waters not so connected. NEB. REv. StTaT. § 46-703(2).
A critical component of L.B. 962 was its requirement
for Integrated Management Plans (“IMPs”) within
areas of the State determined to be “fully” or “over”
appropriated. NEB. REv. STaT. §§ 46-713 through 46-
715. Because the Republican River Basin was deter-
mined to be fully appropriated, IMPs and complemen-
tary rules and regulations implemented by the NRDs
and DNR were instituted to govern the use of
hydrologically connected waters in the Basin. These
initial IMPs contained a blueprint for sustainable
water management in the Basin and charted a course
for Nebraska’s Compact compliance. Dunnigan Decl.
4] 13, App. 4.
The original IMPs lasted from 2005 to 2007 and
required a groundwater pumping reduction of 5%
from the baseline period (1998-2002). Dunnigan Decl.
6
4 14, App. 5. During 2007 and early 2008, DNR, in
conjunction with the NRDs, adopted revisions to the
initial IMPs. Dunnigan Decl. 9 15, App. 5. Together,
these “second generation” IMPs (1) limit each NRD to
its share of Nebraska’s allowable groundwater deple-
tions, and (2) require each NRD to further reduce its
share of the groundwater consumptive use by 20%
from the baseline period. Dunnigan Decl. ¥ 16, App.
5. These additional limitations were needed in part
because of the length and severity of the drought.
Again, the regulatory measures in an IMP must “be
sufficient to ensure that the state will remain in com-
pliance with applicable state and federal laws and
with any applicable interstate water compact or de-
cree. ” NEB. REv. Stat. § 46-715(4)(b) (emphasis
supplied).
Nebraska simultaneously undertook other mea-
sures to ensure compliance with the Compact.
Dunnigan Decl. {{ 29-34, App. 9-10; 43-50, App. 14-
16. From 2006 to 2008, the NRDs and DNR leased a
total of 98,368 acre-feet of surface water from irriga-
tion districts to reduce Nebraska’s consumption un-
der the Compact by 51,614 acre-feet. The total cost
of these surface water leases was approximately
$18,722,500. Dunnigan Decl. 9 30, App. 9. Nebraska
also sought to reduce its consumption by taking
advantage of available federal conservation programs
(e.g., the Environmental Quality Incentives Program
and the Conservation Reserve Enhancement Pro-
gram). Over 48,000 irrigated acres in the Basin were
retired through these programs. Dunnigan Decl. { 31,
App. 9. Nebraska worked to reduce water lost within
7
its borders to non-beneficial uses, and by the end of
2007, Nebraska had cleared over 150 river miles of
invasive vegetation along and in the Republican
River channel and tributaries to help improve water
conveyance to Kansas. The Nebraska Legislature con-
tinued to appropriate funds for additional vegetation
management efforts and more work was (and re-
mains) planned for the future. Dunnigan Decl. { 32,
App. 10.
Ill. THE POSITIVE RESULTS OF NEBRASHKA’S
COMPLIANCE EFFORTS.
Together, these efforts had a tangible, positive
impact on the Basin. DNR has compiled annual
information concerning irrigation levels within the
Basin, and contrary to Kansas’ implications, ground-
water pumping in the Nebraska portion of the Basin
has declined steadily and significantly since the FSS
was executed. Dunnigan Decl. { 33, Fig. 2, App. 10;
contrast KS Brief at 15. These trends show reductions
in the volumes of groundwater pumping for irrigation
throughout the NRDs, continuing even after water
supplies in the Basin began to rebound. Far from
worsening the situation or otherwise “destroying”
Kansas’ interests in the Basin, KS Brief at 21,
Nebraska’s post-FSS management efforts have yielded
positive Compact accounting balances since 2007.
Dunnigan Decl. 4 34, Fig. 3, App. 10. In other words,
there is no dispute Nebraska is in compliance today.
8
IV. KANSAS’ DEMANDS ON NEBRASKA.
On December 19, 2007, Kansas _ accused
Nebraska of violating the FSS and demanded
Nebraska pay damages to be measured by the greater
of Nebraska’s gains or Kansas’ losses. In addition,
Kansas requested a draconian shutdown of wells and
groundwater irrigation in Nebraska within 2% miles
of the Republican River and its tributaries. Dunnigan
Decl. { 35, App. 11.
Nebraska responded by letter on February 4,
2008, reminding Kansas of Nebraska’s earlier stated
concerns over significant accounting errors which
prevent accurate accounting of each State’s calculated
beneficial consumptive use (“CBCU”), a key element
of Compact accounting used to determine Compact
compliance. Dunnigan Decl. { 36, App. 11. Nebraska
asserted the Republican River Compact Administra-
tion (“RRCA”) must first deal with these errors before
compliance could be properly calculated. Nebraska
also communicated concerns over Kansas’ excessive
demands in light of Nebraska’s efforts to maintain
compliance, asserting Kansas’ proposed remedy could
reduce Nebraska’s consumptive use far more aggres-
sively than required under the Compact. Finally,
Nebraska urged Kansas to take a close look at
Nebraska’s second generation IMPs and offered to
meet with Kansas to explain the components and
operation of the newly revised IMPs. Jd.
Nebraska, on February 22, 2008, again urged
Kansas to address the states’ differences at upcoming
9
RRCA meetings in Kansas City. Dunnigan Decl. { 38,
App. 12. At a March 11, 2008 RRCA Special Meeting,
Kansas brought its claim for damages to the RRCA in
the form of a written Resolution containing a demand
for payment from Nebraska. Jd. No background infor-
mation was provided to explain or justify the claim.
In April 2008, Kansas first identified the scope of its
payment demand at over $72,000,000. Dunnigan
Decl. ¢ 39, App. 12. Kansas submitted its Resolution
to the RRCA for a vote at a subsequent Special Meet-
ing on May 16, 2008. That Resolution failed and
Kansas immediately invoked the dispute resolution
process pursuant to Section VII of the FSS. Dunnigan
Decl. 7 40, App. 13.
V. KANSAS’ PLANS TO FINANCE NEW
WATER PROJECTS WITH ANTICIPATED
LITIGATION RECOVERIES.
Meanwhile, as Kansas’ demand was pending, and
before it invoked Arbitration, the Kansas Legislature
passed Senate Bill 89. KAN. Stat. ANN. § 82a-1804
(2008). This legislation created a plan for Kansas to
spend anticipated monetary recoveries from Republi-
can River litigation against Colorado and Nebraska.
The law requires a reload of the Interstate Litigation
Fund, up to $20,000,000. After the fund reaches
$20,000,000, the law assigns one-third of the remain-
ing litigation recoveries to the State Water Plan
Fund. Under the law, any person or entity may apply
for money from this fund, but priority is given to
projects that will help maintain compliance with the
Compact. KAN. STAT. ANN. § 82a-1804 (2008). The
10
remaining two-thirds of any recovery is to be spent on
water conservation in the Lower Republican River
Basin. /d. There is a conspicuous absence of any
funds earmarked for individuals in the Basin who
may have been actually harmed by a lack of water
supply.
VI. THE 2008-09 ARBITRATION.
Section VII of the FSS allows “any matter” to
proceed to non-binding Arbitration when the RRCA
fails to resolve the matter. Non-binding Arbitration
concerning Kansas’ claims and certain other claims
by Nebraska commenced in earnest in October 2008.
Dunnigan Decl. 4 40, App. 13. Arbitrator Karl Dreher,
a former Idaho State Engineer hand-picked by the
three States, bifurcated the Arbitration to deal with
preliminary legal issues before discovery. All legal
issues were fully briefed, and the Arbitrator held an
initial hearing on December 10, 2008 to resolve those
issues.
The Arbitrator phrased one of the issues as fol-
lows: “If Nebraska has violated the Compact or the
consent decree of May 19, 2003, causing damage to
Kansas, is Nebraska subject to remedies for civil con-
tempt of court, including disgorgement of Nebraska’s
gains as monetary sanctions, or should any damages
awarded to Kansas be limited to actual damages suf-
fered by Kansas.” On January 22, 2009, the Arbi-
trator issued his decision rejecting Kansas’ “unjust
enrichment” theory. Grounding his ruling in this
Court’s decision in Texas v. New Mexico, 482 U.S. 124
11
(1987), and the Second Report of the Special Master
in Kansas v. Colorado, No. 105, Original, the Arbi-
trator held damages should be limited to any actual
harm suffered by Kansas. A copy of the Arbitrator’s
Decision on Legal Issues is attached as App. 23-78.
Following the Arbitrator’s initial ruling, Kansas
adjusted its damage claim to reflect the actual harm
to its users. This adjustment reduced the total
Kansas claim to about $9,000,000 — $63,000,000 less
than the amount originally demanded.
The decision on legal issues narrowed the dispute
to three main issues for fina] hearing: (1) the amount
of Kansas’ actual damages; (2) the merits of Kan-
sas’ remedy for future compliance by Nebraska; and
(3) Nebraska’s proposed corrections to Compact
accounting under the FSS. Over a two-week period in
March 2009, the Arbitrator conducted an evidentiary
hearing in Denver, Colorado to address these issues.
Kansas offered the testimony of three expert wit-
nesses to support its claims. Nebraska likewise
offered countervailing expert evidence showing Kan-
sas enjoyed record crop yields in 2005 and 2006. On
June 39, 2009, the Arbitrator issued a 73-page
decis:«* in which he concluded Kansas had failed to
prove it had been harmed. He recommended a nomi-
nal damage award of $10,000. Material excerpts from
the Arbitrator’s Final Decision are attached as App.
79-108.
Concerning Kansas’ demand for prospective re-
lief, Nebraska’s experts showed it would yield over
1.7 million acre-feet more water to Kansas than to
12
which it was entitled under the Compact over the
next 50 years. Dunnigan Decl. 9 41, Fig. 4, App. 13.
Ultimately, the Arbitrator found Kansas’ remedy
unwarranted and affirmed Nebraska’s sovereign right
to regulate water use within its borders. However, the
Arbitrator recommended Nebraska undertake addi-
tional measures to ensure compliance in Water-Short
Years as defined by the FSS. App. 109.
Regarding Nebraska’s proposed corrections to
Compact accounting, the Arbitrator found Nebraska’s
proposal for calculating the VWS more consistent
with the Compact and Accounting Procedures than
the current method. However, because the Arbitrator
found aspects of Nebraska’s proposal problematic, he
recommended the RRCA resurrect the original
technical modeling team to re-evaluate procedures for
determining CBCU. App. 107-108.
Kansas provides the Court with no details of this
extensive Arbitration in its initial filings with this
Court. The omission is striking, as the Arbitration
uncovered serious flaws in Kansas’ damages claim,
found Kansas’ future compliance remedy to be un-
warranted, and recognized Nebraska’s proposal for
calculating the VWS and CBCU was more consistent
with the Compact and FSS Accounting Procedures
than the method currently employed.
13
VIL. NEBRASKA CONTINUES ITS EFFORTS
TO ENSURE COMPACT COMPLIANCE.
Nebraska’s understanding of the demands of in-
tegrated water management has improved immensely
since execution of the FSS and passage of L.B. 962.
Today, Nebraska continues to improve its efforts to
manage hydrologically connected water supplies in
the Basin, illustrated by several innovative develop-
ments.
In 2007, the Nebraska Legislature passed L.B.
701 (2007). This legislation included, in part, a
requirement to forecast future water supplies in river
basins “whenever necessary to ensure that the state
is in compliance with an interstate compact or de-
cree. ” NEB. Rev. STAT. § 46-715(6) (emphasis
supplied). The forecasting methods developed by DNR
since 2007 are increasingly sophisticated. While pre-
dicting future water supplies is inherently difficult,
DNR has made great strides to enhance the accuracy
of its forecast. The improved forecast has allowed the
NRDs and DNR to begin efforts to incorporate more
refined plans into the IMPs for Water-Short Years.
Dunnigan Decl. 4 43, App. 14.
Legislative Bill 701 also authorized a property
tax levy and an occupation tax levy for the NRDs.
Litigation over the constitutionality of the taxes en-
sued, ultimately striking down the property tax and
leaving a cloud over the validity of the occupation tax.
Dunnigan Decl. 7 44, App. 14. In 2010, however, the
Nebraska Legislature passed L.B. 862 (2010). This
14
legislation addresses the constitutionality concerns
by broadening the occupation tax authority and aug-
menting funding sources for NRDs to manage inter-
connected water supplies throughout Nebraska.
Thus, two events led Nebraska to begin recently
a third round of revisions to the IMPs. First, Arbi-
trator Dreher recommended Nebraska implement
additional regulations for Water-Short Years. Second,
the L.B. 701 litigation impeded non-regulatory man-
agement options in the Basin. These events spurred a
new effort by the NRDs and DNR to design a regu-
latory back-stop for Water-Short Years to incorporate
into the IMPs. Dunnigan Decl. 9 45, App. 15. The
NRDs in the Basin are currently working with DNR
to finalize these new modifications for Water-Short
Year planning. Although the plans are complex and
must undergo extensive public hearings and review
prior to adoption, it is expected the new plans will be
adopted by each NRD this year. Dunnigan Decl. ¥ 46,
App. 15.
Nebraska also is develop:ng plans for projects
that augment stream flows. Dunnigan Decl. 4 47,
App. 16. A preliminary feasibility study is complete,
and an augmentation engineering study is underway.
When completed, Nebraska’s augmentation system
will assist Nebraska in managing Compact compli-
ance, especially during Water-Short Year Administra-
tion. Jd.
Today the NRDs are better equipped than they
ever have been to manage groundwater resources in
the Basin through augmentation projects, surface
15
water purchases, riparian vegetation management,
and other non-regulatory management practices. /d.
Nebraska is not neglecting its obligations under the
Compact, the Decree or the FSS. Rather, it has over-
come the most difficult drought in the Basin’s history
and taken extraordinary steps to ensure it remains in
Compact compliance. Notwithstanding early chal-
lenges, and the inherent period of time recognized by
the FSS for Nebraska to implement new laws for
integrated management, Nebraska is now compliant
with the Compact. Kansas does not (and cannot)
claim otherwise. Far from constituting a “flagrant
disregard” for its obligations, KS Brief at 19,
Nebraska is doing what is necessary to remain within
its Compact allocation.
SUMMARY OF THE ARGUMENT
This Court’s origina] jurisdiction is exercised
only “sparingly.” See Wyoming v. Oklahoma, 502 U.S.
437, 450, 112 S.Ct. 789, 798 (1992); Maryland v.
Louisiana, 451 U.S. 725, 739, 101 S.Ct. 2114, 2125
(1981); Arizona v. New Mexico, 42° ‘'.S. 794, 796, 96
S.Ct. 1845, 1846 (1976). Its original “jurisdiction is of
so delicate and grave a character that it was not
contemplated that it would be exercised save when
the necessity was absolute.” Louisiana v. Texas, 176
U.S. 1, 15, 20 S.Ct. 251, 256 (1900). The Court has
“substantial discretion to make case-by-case judg-
ments as to the practical necessity of an original
16
forum in this Court,” Texas v. New Mexico, 462 U.S.
554, 570, 103 S.Ct. 2558, 2568 (1983).
In determining whether to exercise its original
jurisdiction, this Court focuses on “the nature of the
interest of the complaining State,” and in partic-
ular the “seriousness and dignity” of the claim as-
serted. South Carolina v. North Carolina, __ U.S.
__., 130 S.Ct. 854, 869 (2010) quoting Mississippi
v. Louisiana, 506 U.S. 73, 77, 113 S.Ct. 549 (1992).
The history of events surrounding Kansas’ claims
reveals those claims standing alone do not merit the
exercise of this Court’s original jurisdiction.
As a preliminary matter, Kansas’ effort to obtain
damages based on the greater of Nebraska’s gain or
Kansas’ loss is frivolous. Kansas Prayer for Relief No.
4. Kansas once before sought to recover damages on
this basis from a neighboring Compact state, but was
rebuffed. Kansas v. Colorado, 533 U.S. 1, 121 S.Ct.
2023 (2001). The proper measure of any damage
claim is Kansas’ actual loss, rather than Nebraska’s
gain. Jd. However, any actual harm Kansas water
users may have suffered is de minimis. After a
lengthy evidentiary hearing, Kansas could muster no
convincing evidence of actual harm at all.
Kansas’ proposed injunctive and punitive mea-
sures are equally frivolous, and Nebraska’s actions
have rendered those demands non-justiciable. Kan-
sas’ arguments are based on the original IMPs, which
were repealed and replaced by the second generation
IMPs prior to Kansas invoking the dispute resolution
17
process in 2008. Kansas brought this issue to Arbi-
tration using the wrong set of regulations. Once this
fact was exposed at the arbitration hearing, it was
not until the eleventh hour (during its rebuttal
presentation) that Kansas offered any analysis on the
validity of Nebraska’s second generation IMPs. By
the time this Court rules on Kansas’ motion, Ne-
braska may well be on its third iteration of the IMPs,
and we will be twice removed from the source of
Kansas’ original claim.
Kansas’ claims do, however, open the door to a
wider array of Compact issues that, taken as a whole,
rise to the level of seriousness and dignity befitting
exercise of this Court’s original jurisdiction. Nebraska
has identified serious errors in the Compact Ac-
counting Procedures under the FSS. These errors
distort actual hydrologic conditions and result in
erroneous allocation assignments. The errors prevent
an accurate determination of the VWS, CBCU, and
allocations as required by the Compact. Although
Kansas has acknowledged these deficiencies, it has
steadfastly blocked all attempts to amend the FSS
Accounting Procedures to capture actual conditions
because the errors inure to Kansas’ benefit.
Kansas has similarly blocked efforts by Colorado
to build a pipeline to provide augmentation water to
the Republican River. The pipeline may be the only
means by which Colorado can come into compliance
with its Compact obligations. These and other issues
affecting the orderly administration of the Compact
are the subject of a second round of Arbitration now
18
ongoing before the former director of the Oregon
Department of Water Resources, Ms. Martha Pagel.
By agreement of the parties, that Arbitration will
conclude in November 2010.
Given the significance of the Compact accounting
issues in question, Nebraska submits the Court
should grant Kansas’ motion, but for the purpose of
addressing all issues presented to Arbitrator Dreher
below and currently before Arbitrator Pagel. To en-
sure all disputed Compact issues are resolved in an
orderly, economical manner, Nebraska urges the
Court to defer appointment of a Special Master until
the arbitration pending before Arbitrator Pagel has
concluded and those issues can be joined in the
instant action as appropriate.
+
ARGUMENT
Viewed in isolation, Kansas’ claims fail to meet
the standard justifying exercise of this Court’s
jurisdiction. Kansas has not undertaken any serious
measures to resolve its concerns by any method other
than litigation. Kansas’ motion for leave and its peti-
tion do, however, provide a means by which a wide-
range of other vexing issues associated with Compact
compliance can be resolved. Granting Kansas leave to
file will, therefore, allow Nebraska and Colorado to
raise all material issues for final resolution.
19
I. STANDING ALONE, KANSAS’ CLAIMS
DO NOT MERIT EXERCISE OF THIS
COURT’S JURISDICTION.
A. Kansas Cannot Recover for “Unjust
Enrichment”; Its Actual Damages are
De Minimis.
As a preliminary matter, Nebraska does not
“agree” it violated the Decree to the tune of 71,005
acre-feet. KS Brief at 11. Rather, as Kansas acknowl-
edges: (1) the first test for Water-Short Year compli-
ance was 2006, id., and (2) “(tlhe FSS allows for
multi-use averaging of Compact allocations and
consumptive use to determine Nebraska’s compliance
with its Water-Short Year Administration obliga-
tions.” Jd. at 10. Thus, Nebraska’s maximum violation
could be no greater than the average overuse in 2005
and 2006 (or 35,505 acre feet).
Kansas’ attempt to equate the magnitude of the
violation here with those at bar in Texas v. New
Mexico, 482 U.S. 124 (1987) and Kansas v. Colorado,
543 U.S. 86 (2004) is absurd at best. KS Brief at 15.
The former case involved an ongoing, 33 year viola-
tion amounting to over 340,000 acre feet, while the
latter involved an ongoing, 44 year violation amount-
ing to approximately 400,000 acre feet. At the out-
side, the violation at bar here represents a single year
of non-compliance and is one-tenth and one-twelfth,
respectively, the size of the violations at issue in those
cases. Moreover, there is no ongoing violation at
issue.
20
Even assuming a one-time violation of 35,505
acre-feet, Kansas’ damage claim lacks merit. During
the Arbitration, it became clear the claim was com-
pletely unrelated to any actual harm Kansas might
have suffered and was, instead, an estimate of an
alleged financial gain to Nebraska water users re-
sulting from the overuse. As noted above, Kansas is
not entitled to recover based on Nebraska's gains. Its
actual damages are somewhere between zero and
$9,000,000. With due regard for the solemn obliga-
tions imposed by the Compact, Nebraska submits
Kansas’ damage claim is de minimis and appears to
be nothing more than a means to fund desired water
projects in the Basin. KAN. Stat. ANN. § 82a-1804
(2008). No water user in Kansas, who may have been
shorted water, will obtain money from this litigation.
Standing alone, this claim does not warrant exercise
of this Court’s jurisdiction.
B. Kansas’ Demands for Prospective Relief
are Not Justiciable.
This Court construes its jurisdiction under 28
U.S.C. §1251(a)(1) as it does jurisdiction under
Article III, § 2, cl. 2, in the sense it honors its original
jurisdiction, but considers it obligatory only in appro-
priate cases. Wyoming v. Oklahoma, 502 U.S. 437,
450-51, 112 S.Ct. 789 (1992) discussing Illinois v. City
of Milwaukee, 406 U.S. 91, 93, 92 S.Ct. 1385, 1387
(1972) and California v. Texas, 457 U.S. 164, 168, 102
S.Ct. 2335, 2337 (1982). “Under Article III of the Con-
stitution this Court may only adjudicate actual,
ongoing controversies.” Honig v. Doe, 484 U.S. 305,
21
317, 108 S.Ct. 592 (1988). Ripeness (as well as moot-
ness) reflect constitutional considerations that impli-
cate “Article III limitations on judicial power,” as well
as “prudential reasons for refusing to exercise juris-
diction.” Reno v. Catholic Social Services, Inc., 509
U.S. 43, 57, n. 18, 113 S.Ct. 2485 (1992).
In Hall v. Beals, 396 U.S. 45, 48, 90 S.Ct. 200
(1969), the Court made clear that suits before it must
be viewed in light of current regulatory schemes, not
those that might have given rise to earlier causes of
action. The Court there found moot a challenge to a
Colorado law that, when subsequently amended, no
longer threatened the interests of the plaintiff. Jd.
Kansas here demanded Nebraska shut off all wells
within 2% miles of the Republican River and its
tributaries (an area roughly 15 times larger than the
District of Columbia) and agree to a “Court-appointed
River Master.” These demands were based on Kansas’
calculation that Nebraska would again fall out of
compliance sometime after 2020. But, Kansas’ entire
analysis was based on the initial IMPs repealed and
replaced by the second generation IMPs.
Upon the strength of the more strident, second
generation IMPs, the Arbitrator rejected Kansas’
demand, but noted Nebraska should undertake even
greater regulatory efforts to ensure Compact compli-
ance during periods of drought. Nebraska has since
begun efforts to modify its regulations to address the
concerns identified by the Arbitrator in third gen-
eration IMPs, which should be online by the end of
2010. Yet even today, Kansas still relies for support
22
on a Nebraska Supreme Court decision resolving
conflicts that preceded enactment of L.B. 962 and
Nebraska’s integrated water management regime. As
noted above, the very conflicts the Nebraska Supreme
Court lamented in Spear T Ranch, Inc. v. Knaub, 691
N.W.2d 116 (Neb. 2005) were addressed in that legis-
lation. Thus, contrary to Kansas’ assessment, KS
Brief at 23, Nebraska does have mechanisms in place
today to control the depletions about which Kansas
complains.
Simply put, Kansas’ claims based on the initial
IMPs are moot. Kansas’ claims (if any) based on the
se ead generation IMPs are unripe. In evaluating a
claim to determine whether it is ripe for judicial
review, this Court considers both “the fitness of the
issues for judicial decision” and “the hardship of
withholding court consideration.” National Park Hos-
pitality Assn. v. Department of Interior, 538 U.S. 803,
808, 123 S.Ct. 2026 (2003). Alleged future injury,
which theoretically might occur through a series of
“speculative contingencies” affords no basis for this
Court’s jurisdiction. Hall, 396 U.S. at 49-50. Nor does
mere evidence of past non-compliance ripen into a
legally cognizable claim for future injunctive relief
without evidence of continuing adverse effects. Renne
v. Geary, 501 U.S. 312, 320-21, 111 S.Ct. 2331 (1991).
In this case, the second generation IMPs have
not yet injured Kansas, and present no threat of
injury that is cognizable. The second generation IMPs
were implemented in 2008 and Nebraska has been in
compliance since that time. Nebraska anticipates
23
third generation IMPs will be complete in 2010.
Kansas cannot credibly claim it will be injured by the
second generation IMPs because they are functioning
to ensure ongoing Compact compliance today. And, it
certainly cannot be heard to complain about the third
generation IMPs, which are not yet final.
As the Court has explained, “(pjroblems of pre-
maturity and abstractness may well present ‘in-
superable obstacles’ tw the exercise of the Court’s
jurisdiction, even though that jurisdiction is tech-
nically present.” Socialist Labor Party v. Gilligan, 406
U.S. 583, 589, 92 S.Ct. 1716, 1720 (1972) citing
Rescue Army v. Municipal Court, 331 U.S. 549, 574,
67 S.Ct. 1409, 1422 (1947). As in Socialist Labor
Party, the issues presented by Kansas’ motion have
become moot, and nothing on the face of Kansas’
motion or supporting materials shows Kansas has
suffered any injury thus far under Nebraska’s present
regulations.
Finally, to the extent Kansas’ claims for pro-
spective relief are live and ripe, they should still be
rejected because Kansas has not exhausted the
remedies afforded it under the Dispute Resolution
provisions of Section VII of the FSS. That section
establishes a series of remedies Kansas has not begun
to apply to the IMPs presently in place. There is no
question that exhaustion of the Section VII dispute
resolution process is a fundamental prerequisite to
approaching this Court and that failure to follow
those requirements is a jurisdictional bar.
24
II. NEBRASKA’S CLAIMS CONCERN ISSUES
CENTRAL TO THE PURPOSES OF THE
COMPACT AND MERIT REVIEW AT THIS
TIME.
The first duty of the RRCA is to account for the
VWS. As defined by the Compact, the VWS is the
“waters of the basin undepleted by the activities of
man.” It is from the VWS that each State’s allocation
of water is derived. Determination of the actual VWS
is, therefore, essential to achieving the purposes of
the Compact. The VWS is, in part, comprised of de-
pletions to streamflow resulting from well use.
Accounting for those depletions was one of the major
features of the FSS and required the development of
a joint basin-wide groundwater model. In simple
terms, the model is a computer program that pro-
duces mathematical outputs, which are then applied
to the FSS Accounting Procedures to arrive at the
VWS.
In 2007, Nebraska became aware of an error in
the FSS Accounting Procedures related to how out-
puts from the model are applied within the Account-
ing Procedures. Specifically, the error related to the
application of the outputs used to determine the
CBCU, and the Imported Water Supply Credit as
defined in the FSS. The error was of such a mag-
nitude and degree that final Compact accounting
balances were in error by as much as 10,000 acre-feet
per year. In effect, the Accounting Procedures were
distorting the actual hydrologic conditions of the
Basin and undermining the allocations specifically
25
provided for in the Compact. Dunnigan Decl. { 51,
App. 17.
In response to this problem, Nebraska developed
a relatively straight-forward adjustment to correct
the CBCU problem. Dunnigan Decl. 9 52, App. 17.
Nebraska explained the CBCU issue (along with
several other lesser accounting issues) and offered its
proposed solution. After study, Kansas agreed the
CBCU accounting created a problem but declined to
accept Nebraska’s solution and offered specific criti-
cisms to direct Nebraska’s efforts to find an alterna-
tive solution. Acting on those suggestions, Nebraska
refined its proposed accounting amendment and
presented the same to the RRCA for review. This time
Kansas rejected Nebraska’s proposed changes for rea-
sons that were diametrically opposed to the reasons it
gave for rejecting Nebraska’s first proposal. Kansas
also refused to offer any solutions of its own. Id.
With no other options available, Nebraska began
a parallel track toward dispute resolution in October
2008. Like the Kansas issues, Nebraska’s CBCU and
other accounting issues were arbitrated in March
2009. The Arbitrator’s Final Decision acknowledged
Nebraska’s CBCU proposal was more consistent with
the definition of VWS in the Compact than the
existing procedure. App. 86. Although he ultimately
recommended against adoption of Nebraska’s pro-
posal, he recommended the RRCA thoroughly re-
evaluate the problem for possible alternative solu-
tions. Unfortunately, no further action by the RRCA
is possible because, although Kansas acknowledges
26
the problem presented, it has blocked all attempts to
resolve the errors within the RRCA and Dispute
Resolution. This Court remains the only avenue for
resolution.
lil. ISSUES NOW UNDERGOING ARBITRA-
TION.
In addition to the issues previously arbitrated,
two other important issues presently are in arbitra-
tion pursuant to Section VII of the FSS, which was
initiated on March 22-24, 2010. One issue concerns
how a damage payment by Nebraska for any Compact
overuse will be reflected relative to Compact account-
ing. In basic terms, Nebraska contends that if pay-
ment is made to Kansas, the overuse appearing on
the RRCA’s ledger must be credited. This is important
because the multi-year accounting feature of the FSS
causes the entry for one year to impact the results for
subsequent years. Dunnigan Decl. 4 54-5, App. 18.
Without a credit it is possible for a state to recover for
a violation occurring in one year and recover again for
that same violation as if payment had never been
made. That would constitute a double recovery and
must be avoided. This issue is referred to by the
States as “Nebraska’s Crediting Issue.” Resolution of
the Nebraska Crediting Issue within this proceeding
is essential to avoid Nebraska later filing a separate
motion for leave to file a Bill of Complaint to address
the issue.
27
In addition to the Nebraska Crediting Issue, the
current Arbitration involves the Colorado Compact
Compliance Pipeline (“CCP”). The CCP is designed to
facilitate Colorado’s efforts to come into Compact
compliance by augmenting stream flow. Since 2003,
Colorado has been unable to achieve Compact compli-
ance and believes it will be impossible to achieve
compliance unless it develops the CCP, allowing it to
withdraw water from areas hydrologically remote
from the Republican River and pump that water into
tributaries of the Republican River.
To obtain credit for the CCP within the Compact
accounting, Colorado must receive approval from the
other States, and the FSS Accounting Procedures
must be modified. Both Kansas and Nebraska ini-
tially opposed the CCP fearing harm to their users.
After Colorado provided additional detail regarding
proposed operation of the CCP, Nebraska changed
its position. Kansas, however, remains opposed, and
the ongoing Arbitration will determine whether
Kansas has unreasonably withheld its consent. Like
Nebraska, Colorado likely will file a separate motion
for leave to file a Bill of Complaint if the CCP is left
outside the present proceeding.
°
CONCLUSION
While Kansas’ motion standing alone is in-
sufficient to merit this Court’s attention, the other
issues presented do warrant review. However, given
28
the existence of the ongoing Arbitration, Nebraska
suggests the Court defer appointment of a Special
Master until
the Arbitration has concluded in
November 2010. Judicial economy will result and the
States will enjoy a similar economy of effort.
June 2010
Respectfully submitted by,
JON BRUNING
Attorney General of Nebraska
Davip D. CoOKSON
Deputy Attorney General
JUSTIN D. LAVENE
Assistant Attorney General
Counsel of Record
OFFICE OF THE ATTORNEY GENERAL
2115 State Capitol
Post Office Box 98920
Lincoln, Nebraska 68509-8920
(402) 471-2682
DONALD G. BLANKENAU
THOMAS R. WILMOTH
Special Assistant Attorneys General
BLANKENAU WILMOTH LLP
206 South 13th Street, Suite 1425
Lincoln, Nebraska 68508-2002
(402) 475-7080
Attorneys for State of Nebraska
‘
App. 1
Declaration of Brian Dunnigan
Director of the Nebraska
Department of Natural Resources
COMES NOW, Brian Dunnigan, pursuant to 28
U.S.C. § 1746, states as follows:
PERSONAL AND
PROFESSIONAL BACKGROUND
1. I am the Director of the Nebraska Depart-
ment of Natural Resources (Department). In this
capacity, I am responsible for managing the State’s
surface water resources and the State’s compliance
with interstate water compacts, including the Repub-
lican River Compact (Compact).
2. Iwas appointed Acting Director on March 24,
2008, and appointed Director on December 9, 2008.
Prior to that time, I served as Acting Deputy Director
beginning on August 20, 2005 until I was appointed
Deputy Director on January 3, 2007.
3. Ihave worked within the Department, in one
capacity or another, for the last 25 years. Before be-
coming the Deputy Director, and later Director, I was
previously the division head for Floodplain Manage-
ment, Dam Safety, and Surveys.
4. I am a licensed professional engineer. [ re-
ceived my undergraduate degree at the University of
Nebraska-Lincoln in Civil Engineering in 1981.
5. As Director, I am Nebraska’s Commissioner
on the Republican River Compact Administration
App. 2
(RRCA). The RRCA is composed of one Commissioner
from each of the three States of Colorado, Kansas,
and Nebraska. In that capacity I am responsible for
administering the Compact.
6. Ihave read the Brief in Opposition to Kansas’
Motion for Leave to File Petition to which this decla-
ration is attached as Appendix A. The facts stated in
the brief are true and correct to the best of my know!l-
edge, information, and belief.
BACKGROUND ON WATER
ADMINISTRATION IN NEBRASKA
7. While I am not an attorney, in my capacity as
Director, I am familiar with the legal principles
governing Nebraska water administration. Generally
speaking, Nebraska administers surface water under
the prior appropriation doctrine. Groundwater is ad-
ministered under a modified version of the correlative
rights doctrine. The Department is primarily respon-
sible for administration of surface water supplies,
while Nebraska’s twenty-three Natural Resources
Districts (NRDs) are primarily responsible for ad-
ministration of groundwater supplies.
8. Nebraska’s efforts to manage hydrologically
connected waters began in earnest in 1996 when the
Legislature passed LB 108. The law allowed NRDs to
consider whether integrated management of hydro-
logically connected groundwater and surface water
was necessary. See Neb. Rev. Stat. § 46-656.28. In
addition, the NRDs were authorized to develop “joint
App. 3
action plans” with various water users and the De-
partment for the integrated management of hydro-
logically connected groundwater and surface water.
Id.
9. In July, 1996, the Republican River NRDs
asked the Department to begin the studies and hear-
ing process provided for in LB 108. The Department
made a preliminary determination that there was
reason to believe the use of hydrologically connected
groundwater and surface water resources was con-
tributing to or was in the reasonably foreseeable
future likely to contribute to disputes over the Com-
pact. The Department began, in cooperation with the
Republican River NRDs, studies to determine the
cause of such possible disputes and the extent of the
area affected. That work ultimately was superseded
when Kansas started its initial litigation.
10. During this time, a moratorium on the
construction of new wells was applied to all or part of
three Republican River NRDs. The Upper Republican
NRD adopted a moratorium in 1997; the Middle
Republican NRD adopted a moratorium in June 2002,
and the Lower Republican NRD adopted a morato-
rium in the area upstream of Guide Rock, Nebraska
effective on December 9, 2002.
11. After Kansas sued Nebraska in 1998 for vio-
lations of the Compact, the three states entered into a
settlement agreement known as the Final Settlement
Stipulation (FSS), which I understand was approved
by this Court in 2003. Execution of the FSS, as well
App. 4
as internal pressures on Nebraska’s water resources,
called for greater integration of water management in
Nebraska, and today the Department and NRDs
coordinate management of waters that are hydro-
logically connected (e.g., groundwater supplies that
are interconnected to such a degree that their use can
impact stream flows).
12. Before the litigation came to a close between
the three States in 2003, the Nebraska Legislature
passed L.B. 103 (2002), mandating creation of a
Water Policy Task Force to address the management
of hydrologically connected water supplies. The forty-
nine member Task Force provided the Legislature
with draft legislation and suggested changes to stat-
utes in December 2003. The Legislature considered
the Task Force recommendations in its 2004 session
and subsequently passed L.B. 962 (2004), which is
codified as the Nebraska Groundwater Management
and Protection Act.
13. A eritical component of L.B. 962 (2004) was
its requirement for Integrated Management Plans
(IMPs) within areas of the State determined to be
fully or over appropriated. Because the Republican
River Basin was subsequently determined to be fully
appropriated, IMPs and complementary rules and
regulations implemented by the NRDs and DNR are
in place to govern the use of hydrologically connected
waters in the Basin. These IMPs represent a blue-
print for sustainable water management in the Basin
and facilitate Nebraska’s Compact compliance be-
cause the state law requires the regulatory measures
App. 5
in an IMP must “be sufficient to ensure that the state
will remain in compliance with applicable state and
federal laws and with any applicable interstate water
compact or decree. ” Neb. Rev. Stat. § 46-715(4)(b).
14. The original IMPs for the Republican River
Basin lasted from 2005 to 2007 and required a pump-
ing reduction of 5% from a representative baseline
period (1998-2002). The IMPs limited the depletions
by groundwater users within each NRD to the NRD’s
fixed percentage of Nebraska’s total allowable Com-
puted Beneficial Consumptive Use (CBCU) for
groundwater (CBCUg) in the Basin. The NRDs in the
basin previously agreed to limit their groundwater to
the following shares of Nebraska’s CBCUg: 26% for
the Lower Republican NRD, 30% for the Middle
Republican NRD, and 44% for the Upper Republican
NRD. This requirement ensures Compact require-
ments will be met under any and all water supply
conditions that may occur in the Basin.
15. During 2007 and early 2008 the Department,
in conjunction with the NRDs, adopted revisions to
their original IMPs. The second generation of IMPs in
the Republican River Basin presumptively cover the
five-year period from 2008 to 2012. These IMPs in-
creased the target pumping reduction to 20% from
the baseline period (1998-2002).
16. In other words, the IMPs required the
NRDs to take affirmative actions to reduce ground-
water pumping in their respective districts to meet a
consumptive use reduction of 20% from the pumping
App. 6
experienced from 1998 to 2002. Like the original
IMPs, the second generation IMPs also limited each
NRD’s allowable groundwater depletions to the
NRD’s fixed percentage of Nebraska’s total allowable
CBCUg.
BASICS OF COMPACT ACCOUNTING
17. The Compact does not require Nebraska to
deliver a certain amount of water to Kansas. Rather,
the Compact (as interpreted in the FSS) effectively
requires Nebraska to constrain its uses and live
within an annual allocation.
18. The Compact allocations are based on a
percentage of the calculated Virgin Water Supply
(VWS). This VWS value is calculated annually by the
RRCA. The size of a State’s allocation varies with the
calculated VWS, which decreases during dry years:
the smaller the VWS, the smaller each State’s alloca-
tion. The smaller a State’s allocation, the more diffi-
cult it is to comply with the Compact.
19. The RRCA also calculates each State’s
CBCU and CBCUg and the Imported Water Supply
(IWS) Credit for Nebraska. Simply put, if Nebraska’s
CBCU is less than its allocation plus the IWS Credit
in the relevant accounting period, Nebraska is con-
sidered to be in Compact compliance.
20. A major complicating factor that arises from
this approach is that the accounting is inherently
retrospective. One State cannot know whether it has
App. 7
complied with the Compact (or not) in any one year
until all data are collected for that year and analyzed
by the RRCA. Only at that time, usually the following
spring or summer, does a State first learn whether or
not it has complied with the Compact by living within
its allocation.
21. In part to help the States address this, the
FSS incorporated the concept of averaging, which
provides that a State will be deemed to be in Compact
compliance if that state lives within its allocation
over an average of 2 years (during water short year
administration) or five years (during normal year
administration).
22. While this makes it somewhat easier to
manage resources to ensure Nebraska does not ex-
ceed its allocation (on average), the reality remains
that Nebraska must anticipate, to some degree, the
appropriate extent of regulation within its borders in
any given year.
CHALLENGES FOLLOWING THE FSS
23. Unfortunately, the Nebraska portion of the
Republican River Basin faced extraordinary chal-
lenges leading up to and immediately after the FSS
was approved. Due to a combination of factors,
streamflows in Nebraska were about 20% of the long-
term average.
24. In addition, prior to approval of the FSS,
Nebraska maintained groundwater use was not
App. 8
subject to Compact regulation, and groundwater de-
pletions in the Nebraska portion of the Republican
River Basin reached their highest levels immediately
before the FSS was executed.
25. Thus, immediately after the FSS was exe-
cuted, the Nebraska portion of the Basin had to
overcome both depleted groundwater levels and
historically low gaged streamflows in an effort to en-
sure Compact compliance. In addition, in the years
following the FSS, federal reservoirs were at historic-
ally low levels. Because they were unprecedented in
terms of both magnitude and duration, these con-
ditions introduced considerable challenges for water
managers in the Basin.
26. The difficult hydrologic conditions referenced
above directly impacted the calculated VWS of the
Republican River and, consequently, the allocations
available to the States under the Compact.
27. As shown in Figure 1, the available Com-
pact allocations following execution of the FSS in the
period 2002-2007 were amongst the lowest in the
Compact’s history. Allocations dropped significantly
after 2001, and only marginally increased in 2007.
Specifically, the average allocations for the 2002 to
2006 period represent the smallest average alloca-
tions for Nebraska since at least 1980. These were
also well below the basic allocation provided to Ne-
braska in the Compact, which was based on a period
of record that included the Dust Bow] era.
App. 9
28. Further complicating Nebraska’s Compact
compliance is the fact that Colorado has consistently
overused approximately 10,000 acre-feet (AF) annu-
ally as calculated by the RRCA under current Ac-
counting Procedures from 2003-2008. This overuse
complicates Nebraska’s ability to comply with the
Compact by restricting the amount of water entering
Nebraska, further depleting federal reservoirs and
significantly contributing to operational decisions by
surface water users and the Bureau of Reclamation
which contributed to these historically low allocations
for Nebraska..
NEBRASKA’S ADDITIONAL
COMPLIANCE MEASURES
29. In the face of increasing pressures on
Republican River Basin water supplies, Nebraska did
not rely solely on the IMPs to achieve Compact com-
pliance. While working to setup the new integrated
management regime under L.B. 962 (2004), Nebraska
undertook an array of aggressive measures to main-
tain compliance with the Compact.
30. From 2006 to 2008, the NRDs and the
Department leased a total of 98,368 AF of surface
water from irrigation districts to reduce Nebraska’s
consumptive use under the Compact by 51,614 AF.
The total cost of these surface water leases was
approximately $18,722,500.
31. Nebraska also sought to reduce its con-
sumptive use by taking advantage of available federal
App. 10
conservation programs (e.g., Environmental Quality
Incentives Program (EQIP) and the Conservation
Reserve Enhancement Program (CREP)). Over 48,000
irrigated acres in the Basin were retired through
these programs.
32. Nebraska also worked to reduce water lost
within its borders due to non-beneficial consumptive
use. By the end of 2007, Nebraska cleared over 150
river miles of invasive vegetation along and in the
Republican River channel and its tributaries, signifi-
cantly improving water conveyance. The Nebraska
Legislature continues to appropriate new funds for
additional vegetation management efforts and more
work is planned for the future.
33. The combination of the foregoing efforts is
having a tangible effect on the Republican River
Basin. DNR has compiled annual information con-
cerning irrigation levels within the NRDs located in
the Model area. As shown by Figure 2, irrigation
groundwater pumping in the Basin has declined
steadily and significantly since the FSS was executed.
These trends show significant reductions in irrigation
volumes throughout the Republican River NRDs,
continuing even after water supplies in the basin
began to rebound.
34. As Nebraska’s post-FSS management efforts
continue to unfold, the Compact Accounting in Figure
3 demonstrates Nebraska has maintained a positive
annual balance in the Accounting since 2007.
35.
App. 11
KANSAS’ LATEST COMPLAINT
On December 19, 2007, Kansas sent Ne-
braska a letter requesting a monetary payment and
an extensive remedy for future compliance by Nebras-
ka. In addition to monetary payment for the greater
of Nebraska’s gains or Kansas’ losses, Kansas re-
quested the following remedy:
(a)
(b)
(c)
(d)
36.
Shutdown of all wells and groundwater
irrigation in Nebraska within 2 '/% miles
of the Republican River and its tribu-
taries;
Shutdown of all groundwater irrigation
on acreage added after the year 2000
throughout the Republican River Basin
in Nebraska;
Further reductions of net consumptive
use in the Basin in Nebraska necessary
to maintain yearly compliance, or the
hydrologic equivalent of the foregoing;
and
Appointment of a river master to ensure
Nebraska stays in compliance with the
Compact.
Following Kansas’ demand, Nebraska re-
sponded by letter on February 4, 2008. Nebraska
reminded Kansas of Nebraska’s concern over sig-
nificant accounting errors which prevent accurate
accounting of each State’s CBCU. Nebraska asserted
that the RRCA must first deal with these errors be-
fore compliance can be properly calculated. Nebraska
App. 12
also communicated concerns over Kansas’ excessive
demands in light of Nebraska’s efforts to maintain
compliance, stating that Kansas’ proposed remedy
would potentially reduce Nebraska’s consumptive use
50,000 AF more per year than required under the
Compact. Finally, Nebraska urged Kansas to take a
close look at its IMPs and offered to meet with
Kansas face-to-face to explain the components and
operation of the IMPs.
37. Kansas’ first response to Nebraska’s call for
face-to-face discussions came by letter four days later
on February 8, 2008, invoking non-binding arbitra-
tion under the terms of the FSS. On February 19,
2008, Kansas sent Nebraska a second letter ac-
knowledging its concerns and offering to continue
discussions so long as the discussions did not slow the
dispute resolution procedure.
38. A final letter from Nebraska on February
22, 2008 once again urged Kansas to come to the
table to discuss the States’ differences at the up-
coming RRCA meeting in Kansas City on March 11,
2008. Nebraska reiterated its position that exchang-
ing letters did not appear to be an effective manner to
resolve the issues and requested meaningful face-to-
face discussions. At the March 11, 2008 meeting,
Kansas brought its claim to Nebraska for damages in
the form of a written Resolution.
39. On April 22, 2008, after the RRCA meeting
in Kansas City, Nebraska was informed that Kansas
requested $72,365,133 for Nebraska’s non-compliance
App. 13
with the Compact during the 2006 Water Short Year.
Kansas allegedly derived this figure from Nebraska’s
gains, not Kansas’ actual damages.
40. Kansas submitted its claim to the RRCA for
vote at a May 11, 2008 special meeting of the RRCA,
but the Resolution failed to pass. The States later
began non-binding arbitration in October 2008 to
attempt to resolve a growing number of disputes
concerning errors in the Compact Accounting, inter-
pretations of the FSS, and Kansas’ claims for mone-
tary payment and to impose a remedy on Nebraska
for past noncompliance.
41. In the arbitration, I testified on the issue of
Nebraska’s future compliance with the Compact. In
addition, Nebraska introduced evidence, shown in
Figure 4, that Kansas’ proposed remedy would yield
to Kansas over 1.7 million AF of over-delivery over
the next 50 years.
42. While the Arbitrator generally concluded
Nebraska’s IMPs were sufficient, he recommended
Nebraska take further steps to ensure Compact
compliance in extended drought periods. Nebraska
has taken the Arbitrator’s ruling seriously, and the
Department and the NRDs are now working to im-
plement revisions to the IMPs for extended drought
periods.
App. 14
NEBRASKA’S ONGOING
COMPLIANCE MEASURES
43. Today, Nebraska is working on a sophisti-
cated forecasting mechanism to help mitigate the
problems associated with the after-the-fact water use
accounting in the RRCA. Forecasting first arose in
2007 when the Nebraska Legislature passed L.B. 701
(2007). This legislation included, in part, a require-
ment to forecast future water supplies in river basins
“whenever necessary to ensure that the state is in
compliance with an interstate compact or decree. ”
Neb. Rev. Stat. § 46-715(6). The annual forecasting
mechanisms developed by the Department since 2007
are increasingly sophisticated. While predicting fu-
ture water supplies can never be done with absolute
certainty, the Department has made great strides to
enhance the accuracy of its annual forecast. The
improved forecast has allowed the NRDs and DNR to
begin work on incorporating more refined plans into
the IMPs for Water-Short Years as defined in the
FSS.
44. L.B. 701 (2007) also authorized a property
tax levy and an occupation tax levy for the NRDs.
Litigation over the constitutionality of both taxes
ensued, ultimately striking down the property tax
and leaving a cloud over the validity of the occupation
tax. In 2010, the Nebraska Legislature passed L.B.
862 (2010). This legislation attempted to address the
constitutionality concerns by broadening the occupa-
tion tax authority to secure a funding source for
App. 15
NRDs to manage interconnected water supplies
throughout Nebraska.
45. Ultimately, two events led Nebraska to
begin a new round of revisions on the current IMPs.
First, the Arbitrator recommended that Nebraska
implement additional regulations for Water-Short
Years in his final order on June 30, 2009. Second, the
litigation over funding provided by L.B. 701 (2007)
stalled any viable non-regulatory management op-
tions in the Basin. These events spurred a new effort
by the NRDs and the Department to design a regu-
latory back-stop for Water-Short Years to incorporate
into the existing IMPs.
46. In the fall of 2009 the Department and the
NRDs worked together to determine viable options
for additional dry-year regulatory controls in the
IMPs. Dry-year compliance plans list actions to be
taken during potentially dry years to maintain Com-
pact compliance. Based on initial public comments,
the NRDs chose to work toward implementing plans
which would leave pumping allocations close to the
current levels for normal to wet years, but require a
curtailment of pumping in dry years in a zone that is
hydrologically connected to stream flow, along with
curtailment of surface water use. The three NRDs
have passed resolutions stating that they will work
with the Department to complete additions to the
IMPs during 2010. The Department will continue to
work diligently with the NRDs to finalize these
modifications to the IMPs. Once the Department and
each NRD reach agreement, there will be additional
App. 16
public hearings in each NRD to receive public com-
ment.
47. Nebraska also is working on non-regulatory
solutions. For example, we are currently developing
plans for projects that will be used to augment
stream flows of the Republican River. A coalition of
Nebraska NRDs is conducting a preliminary feasi-
bility study for such augmentation. When completed,
Nebraska’s augmentation system will be able to
assist Nebraska in managing Compact compliance,
especially during Water-Short Year Administration.
Today the NRDs are better equipped than they ever
have been to manage groundwater resources in the
Basin through augmentation projects, surface water
purchases, riparian vegetation management, and
other non-regulatory management practices.
48. To my knowledge, Kansas has never eval-
uated the potential effectiveness of Nebraska’s latest
IMPs. Nor has Kansas ever considered the potential
value of the augmentation plans currently under
investigation.
49. In point of fact, | have had no conversations
with my Kansas counterpart concerning the prospects
of Nebraska’s future compliance in the current regu-
latory environment here.
50. As I explained in sworn testimony before
the Arbitrator in 2009, non-compliance is not an
option for the State of Nebraska, and the State is
committed to taking all steps necessary to ensure
Compact compliance in the future.
App. 17
OTHER ARBITRATED ISSUES
51. In addition to the Kansas enforcement
claims, the earlier Arbitration included claims
brought by Nebraska, which are of great importance
to overall Compact accounting. For example, in 2007,
Nebraska became aware of an error in the FSS Ac-
counting Procedures related to how outputs from the
groundwater model are applied within the Accounting
Procedures. Specifically, the error related to the
application of the outputs used to determine the
CBCUg and the IWS Credit. The error was of such a
magnitude and degree that final Compact accounting
balances were in error by as much as 10,000 AF per
year. In effect, the Accounting Procedures were dis-
torting the actual hydrologic conditions of the Basin
and undermining the allocations specifically provided
for in the Compact.
52. Nebraska developed a relatively straight-
forward adjustment to correct the CBCU problem.
Nebraska explained the CBCU issue (along with
several other lesser accounting issues) and offered its
proposed solution. After study, Kansas agreed the
CBCU accounting created a problem but declined to
accept Nebraska’s solution and offered specific criti-
cisms to direct Nebraska’s efforts to find an alter-
native solution. Nebraska, in response, refined its
proposal and presented the same to the RRCA for
review. Kansas rejected Nebraska’s proposed changes
for reasons that were diametrically opposed to the
reasons it gave for rejecting Nebraska’s first proposal.
Kansas also refused to offer any solutions of its own.
App. 18
53. The Arbitrator concluded there was a prob-
lem with CBCU accounting, but was not convinced
Nebraska’s proposed solution was the best fix. He
recommended the RRCA further study the matter,
but the RRCA has taken no such action.
54. Another issue that affects Compact account-
ing is how Nebraska (and possibly Colorado) might
receive credits for any payment the state makes in
furtherance of a damage award. Obviously the state
should not be required to pay twice on the same
claim.
55. In basic terms, Nebraska contends that if
payment is made to Kansas, the overuse appearing
on the RRCA’s accounting ledger must be credited.
This is important because the multi-year accounting
feature of the FSS causes the entry for one year to
impact the results for subsequent years. Without a
credit, it is possible for a state to recover for a viola-
tion occurring in one year and recover again for that
same violation as if payment had never been made.
This issue is referred to by the States as “Nebraska’s
Crediting Issue.” Resolution of the Nebraska Credit-
ing Issue is now being arbitrated before Ms. Martha
Pagel.
I declare under penalty of perjury that the fore-
going is true and correct.
/s/
Brian Dunnigan
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App. 23
NON-BINDING ARBITRATION
PURSUANT TO:
FINAL SETTLEMENT STIPULATION
Kansas v. Nebraska and Colorado
No. 126, Original, U.S. Supreme Court
Decree of May 19, 2003, 538 U.S. 720
ARBITRATOR’S FINAL
DECISION ON LEGAL ISSUES
January 22, 2009
BACKGROUND
On December 15, 2002, the states of Kansas, Nebras-
ka, and Colorado (the “States”) executed the Final
Settlement Stipulation (the “FSS”) “ to resolve the
currently pending litigation in the United States
Supreme Court regarding the Republican River Com-
pact by means of this Stipulation and the Proposed
Consent Judgment. ” FSS, Volume 1 of 5, at 1. The
FSS was filed with the Special Master appointed by
the U.S. Supreme Court (the “Court”) in Kansas v.
Nebraska and Colorado, No. 126, Original, who rec-
ommended entry of the proposed consent judgment
which would approve the FSS. Second Report of the
Special Master (Subject: Final Settlement Stipula-
tion) at 77. On May 19, 2003, the Court entered a
consent decree approving the FSS (the “Consent
Decree”).
App. 24
By 2007, disputes arose between the States regarding
compliance with the FSS and the Republican River
Compact (the “Compact”). The disputes were submit-
ted to the Republican River Compact Administration
(the “RRCA”) pursuant to the provision in the FSS for
dispute resolution. See FSS, Volume 1 of 5, § VII., at
34-40. The RRCA addressed the disputes, but no
resolution of certain disputes was reached. See
Resolution of the RRCA dated May 16, 2008, Exhibit
1 to Arbitration Agreement dated October 23, 2008.
The RRCA submitted these disputes to non-binding
arbitration pursuant to the provisions of § VII. of the
FSS, the States executed the Arbitration Agreement
on October 23, 2008 (the “Arbitration Agreement”),
and I was retained by the States to serve as the
Arbitrator.
Exhibit 2 to the Arbitration Agreement sets forth the
“Time Frame Designation” for the non-binding arbi-
tration, Exhibit 3 to the Arbitration Agreement sets
forth the disputed issues identified by the State of
Kansas to be arbitrated, and Exhibit 4 to the Arbi-
tration Agreement sets forth the disputed issues
identified by the State of Nebraska to be arbitrated.
The disputed issue originally raised by the State of
Colorado with the RRCA, which the RRCA submitted
to non-binding arbitration pursuant to the provisions
of § VII. of the FSS (See Attachment 3 to Resolution
of the RRCA dated May 16, 2008), has been with-
drawn from this non-binding arbitration and is not
included in the Arbitration Agreement.
App. 25
From the issues set forth in Exhibit 3 and Exhibit 4
to the Arbitration Agreement, the States identified
six legal issues to be decided by the Arbitrator by
December 19, 2008, for the purpose of narrowing
discovery and the hearing on the merits scheduled in
mid-March of 2009. Based on a disagreement regard-
ing the appropriate scope of the arbitration, the
Arbitrator identified a seventh legal issue during a
prehearing conference held telephonically on Novem-
ber 5, 2008. Each of the States filed opening briefs on
these seven legal issues with the Arbitrator on
November 10, 2008. (The State of Colorado briefed 3
arguments pertaining to only 4 of the legal issues.)
Responsive briefs were filed on November 24, 2008,
and reply briefs were filed on December 5, 2008. Oral
argument on these legal issues was heard at the
University of Denver, Strum College of Law, on
December 10, 2008.
Each of the States stated the seven legal issues
different'y, and the Arbitrator has synthesized the
statements of the States into the following seven
questions. References to the argument or issue are
from the opening briefs of each of the States.
Question 1: Are Nebraska’s proposed changes to the
Republican River Compact Adminis-
tration Accounting Procedures proper
subjects of dispute resolution and for
this arbitra‘ion?
(Kansas’ Argument A., Nebraska’s Issue
I.A., Colorado’s Argument I.)
Question 2:
Question 3:
Question 4:
Question 5:
App. 26
Is the evaporation from Non-Federal
Reservoirs below Harlan County Lake
required to be included in the Compact
accounting?
(Kansas’ Argument B., Nebraska's Issue
I.B.)
Do the current Republican River Com-
pact Administration Accounting Proce-
dures allocate evaporative losses from
Harlan County Lake entirely to Kansas
when the Kansas Bostwick Irrigation
District is the only entity actually
diverting stored water from Harlan
County Lake for irrigation? If yes, how
should evaporation from Harlan County
Lake be allocated?
(Kansas’ Argument C., Nebraska’s Issue
I.C.)
If Nebraska has violated the Compact or
the consent decree of May 19, 2003,
causing damage to Kansas, is Nebraska
subject to remedies for civil contempt of
court, including disgorgement of Nebras-
ka’s gains as monetary sanctions, or
should any damages awarded to Kansas
be limited to actual damages suffered by
Kansas?
(Kansas’ Argument D., Nebraska’s Issue
III.B., Colorado’s Argument II.)
Is Kansas’ proposed remedy for future
compliance with the Republican River
Compact and the Final Settlement
Question 6:
Question 7:
App. 27
Stipulation a proper subject for this
arbitration, and can the U.S. Supreme
Court formulate and mandate a remedy
for future compliance?
(Kansas’ Argument E., Nebraska’s Issue
II., Colorado’s Argument III.)
If Nebraska’s alleged violations during
both 2005 and 2006 are substantiated, is
Kansas entitled to damages for both
2005 and 2006 or for 2006 only?
(Kansas’ Argument F., Nebraska’s Issue
III.A.1.)
Is Nebraska’s issue of crediting pay-
ments for damages for violations from
one year in determinations of compli-
ance in subsequent years a_ proper
subject for this arbitration?
(Kansas’ Argument G., Nebraska’s Issue
III.A.2., Colorado’s Argument I.)
FINAL DECISION
The Arbitrator has treated the briefs filed by the
States as being analogous to cross-motions for sum-
mary judgment under Rule 56 of the Federal Rules of
Civil Procedure. “A party claiming relief may move,
with or without supporting affidavits, for summary
judgment on all or part of the claim.” Fed. R. Civ. P.
56(a). “The judgment sought should be rendered if the
pleadings, the discovery and disclosure materials on
file, and any affidavits show that there is no genuine
App. 28
issue as to any material fact and that the movant is
entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(c).
The Arbitrator has carefully considered the briefs of
counsel for the States and has determined that there
are no material facts genuinely at issue that would
preclude decision of the seven legal issues set forth
above as a matter of law. Therefore, the Arbitrator
issues this decision on these seven legal issues,
including a summary of his reasons for deciding each
issue and supporting analysis. With minor corrections
and the addition of supporting analysis for each of the
seven issues, this decision is materially the same as
the preliminary decision issued by the Arbitrator on
December 19, 2008.
Question I:
Are Nebraska’s proposed changes to the
Republican River Compact Administration
Accounting Procedures proper subjects of
dispute resolution and for this arbitration?
(Kansas’ Argument A., Nebraska’s
Issue I.A., Colorado’s Argument I.)
Decision: Nebraska’s proposed changes to the Repub-
lican River Compact Administration Accounting
Procedures are proper subjects of dispute resolution
and for this arbitration. If any changes to the Ac-
counting Procedures are determined to be warranted,
the appropriate effective date for such changes will be
App. 29
determined following a hearing of the facts. Finding
for Nebraska and Colorado; finding against Kansas.
Summary of Reasoning. The “equitable division” or
“allocation” of the waters of the Republican River
Basin between the States is set forth in Article IV of
the Compact, subject to the proportionate adjustment
required in Article III. This equitable division or
allocation is the paramount reason for the Compact
and cannot be enforced without accurate accounting
of how the waters are actually distributed |» ‘ween
the States. Significant flaws in accounting : sult
in significant differences between the entfurceable
allocations established in the Compact and the actual
distributions of the waters between the States.
Correcting errors in the Accounting Procedures used
by the RRCA will help assure that the States actually
receive the waters to which they are entitled pursu-
ant to the Compact. Correcting such errors will not
change the allocations set forth in the Compact,
which cannot be changed unless the Compact is
amended. Since the Court has jurisdiction to enforce
the distribution of waters pursuant to the Compact, it
must also have jurisdiction to require application of
accurate accounting procedures used to determine
whether the distribution of the waters as required by
the Compact has in fact occurred.
The Compact contains no explicit accounting proce-
dures, but the FSS, which must be construed such
that it is entirely consistent with the Compact, does
provide detailed accounting procedures to be used by
the RRCA (the “RRCA Accounting Precedures”). The
App. 30
FSS provides that: “The RRCA may modify the RRCA
Accounting Procedures, or any portion thereof, in any
manner consistent with the Compact and this Stipu-
lation.” See FSS, § LF. See also RRCA Accounting
Procedures and Reporting Requirements, §I. The
FSS also sets forth a process for dispute resolution in
a separate section. See FSS, § VII. This section of the
FSS clearly states that the dispute resolution process
applies to “Any matter relating to Republican River
Compact administration, including administration
and enforcement of the Stipulation in which a State
has an Actual Interest. ” See FSS, § VII.A., 9 1.
and 4 7. The scope of “Any matter relating to Repub-
lican River Compact Administration ” is broad
and includes accounting procedures’ used _ to
determine compliance with the Compact, unless such
procedures are specifically excluded. The specific
provisions for dispute resolution in the FSS do not
exclude the RRCA Accounting Procedures. Similarly,
the provisions in the FSS affirming that the RRCA
may modify the RRCA Accounting Procedures do not
specifically exclude disputes involving those proce-
dures from the provisions in the FSS for dispute
resolution.
Because the FSS specifies how the RRCA is to deter-
mine compliance with the Compact, the FSS must al-
so be construed as rules and regulations of the RRCA,
pursuant to Article [IX of the Compact, unanimously
adopted by the official in each State charged with the
duty of administering the Compact, which duty is
exclusively reserved to those officials in Article IX.
App. 31
Through § VII. of the FSS, the rules and regulations
of the RRCA include provision for dispute resolution
involving “Any matter relating to Republican River
Compact administration, including administration and
enforcement of the Stipulation in which a State has
an Actual Interest” (FSS, § VII.A., 7 1.) and “any dis-
pute submitted to the RRCA pursuant to this Section
VII.” FSS, § VILA., 9 7.
Analysis. The Republican River Compact begins by
stating in Article I:
The major purposes of this compact are to
provide for the most efficient use of the
waters of the Republican River Basin (here-
inafter referred to as the “Basin”) for multi-
ple purposes; to provide for an equitable
division of such waters; to remove all! causes,
present and future, which might lead to
controversies; to promote interstate comity;
Republican River Compact, Pub. Law No. 78-60, 57
Stat. 86 (1943); codified at § 82a-518, K.S.A. (2007);
App. § 1-106, 2A N.R.S. (1995); and § 37-67-101
C.R.S. (2008).
The “equitable division of such waters” is set forth in
Article TV of the Compact, subject to the propor-
tionate adjustment required in Article III.’ This
' “Should the future computed virgin water supply of any
source vary more than the [sic] (10) percent from the virgin wa-
ter supply as hereinabove set forth, the allocations hereinafter
(Continued on following page)
App. 32
equitable division cannot be provided without accu-
rate accounting of the waters so divided. Significant
flaws in accounting will result in significant differ-
ences between the equitable division of the waters
established in the Compact and the actual distribu-
tions of the waters between the States. However, the
Compact contains no explicit agreement or method-
ology for accounting procedures, but instead Article
IX provides that:
It shall be the duty of the three States to
administer this compact through the official
in each State who is now or may hereafter be
charged with the duty of administering the
public water supplies, and to collect and
correlate through such officials the data nec-
essary for the proper administration of the
provisions of this compact. Such officials
may, by unanimous action, adopt rules and
regulations consistent with the provisions of
this compact.
Id.
The FSS does include explicit, detailed RRCA Ac-
counting Procedures’ that although an integral part
of the FSS approved and adopted by the Court
through its decree dated May 19, 2003 (“Decree”),
made from such source shall be increased or decreased in the
relative proportions that the future computed virgin water
supply of such source bears to the computed virgin water supply
used herein.” Article III, 82a-518, K.S.A. (2007).
* Final Settlement Stipulation, Volume 1 of 5, Appendix C.
App. 33
must also be “rules and regulations” adopted pur-
suant to Article [IX of the Compact: “Such officials
may, by unanimous action, adopt rules and regula-
tions consistent with the provisions of this compact.”
Id. The reason why the FSS must also be “rules and
regulations” adopted pursuant to Article [IX of the
Compact is because the FSS specifies how the RRCA
is to determine compliance with the Compact and
requires that the RRCA Accounting Procedures “
shall be used to determine supply, allocations, use
and compliance with the Compact according to the
Stipulation.” FSS, Volume 1 of 5, App. C, §I., at C6.
The Special Master appointed by the Court in Kansas
vu. Nebraska and Colorado, No. 126, Original (“Special
Master McKusick”), recognized that the FSS em-
bodied rules and regulations adopted pursuant to
Article [X of the Compact when he described the FSS
as including “Rules for the use and administration of
water above Guide Rock, Nebraska ”* since such
rules can only be adopted pursuant to Article IX of
the Compact.
Although the Court approved the FSS in its Decree,
the FSS did not fix the RRCA Accounting Procedures
in perpetuity. Under the Compact, rules and regula-
tions consistent with the Compact can be adopted by
unanimous action, and under the Compact those
rules and regulations can certainly be changed by
* See Second Report of the Special Master (Subject: Final
Settlement Stipulation), { (d), at 28.
App. 34
unanimous action. This is reflected in §I.F. of the
FSS, which states: “The RRCA may modify the RRCA
Accounting Procedures, or any portion thereof, in any
manner consistent with the Compact and this Stipu-
lation.”
Kansas argues that: “Both the FSS, by its plain
terms, and the Supreme Court’s own pronouncements
regarding the nature of its original jurisdiction,
preclude the Court, and thus, by extension, an arbi-
trator, from passing on Nebraska’s proposed changes
to the accounting procedures in the FSS.” Kansas’
Opening Brief on Threshold Legal Issues at 7. Kansas
seems to view changing the RRCA Accounting Proce-
dures, absent unanimous action by the States, as one
in the same with “modification or augmentation of
the FSS” /d., at 8. The FSS is an agreement between
and among the States and with the Court’s approval,
the FSS is also a decree of the Court and can only be
modified as provided for by the FSS itself or by action
of the Court. Kansas’ interpretation that changing
the RRCA Accounting Procedures, absent unanimous
action by the States, is the same as “modification or
augmentation of the FSS” cannot be correct since the
FSS explicitly provides for dispute resolution for:
“Any matter relating to Republican River Compact
administration, including administration and enforce-
ment of the Stipulation in which a State has an
Actual Interest, ” FSS, § VIILA., 91. The term
“Compact administration” clearly includes accounting
App. 35
procedures used to determine compliance with the
Compact,“ and the phrase “Any matter relating to
Republican River Compact administration ” is
broad and inclusive. Since disputed matters relating
to the RRCA Accounting Procedures are not explicitly
excluded in the FSS, they should be considered dis-
puted matters subject to the dispute resolution proc-
ess set forth in § VII. of the FSS, including submittal
of any disputed matter to non-binding arbitration
pursuant to § VII.B. once a State has first submitted
the disputed matter to the RCCA pursuant to § VIIA.
and the disputed matter cannot be resolved by RRCA
within the timeframes set forth in § VII.A.
This broad presumption that disputed matters not
resolved by the RRCA pursuant to § VII.A. may be
submitted to non-binding arbitration, unless speci-
fically excluded from arbitration, is consistent with
the Court’s explanation that:
An order to arbitrate the particular griev-
ance should not be denied unless it may be
said with positive assurance that the arbi-
tration clause is not susceptible of an inter-
pretation that covers the asserted dispute.
Doubts should be resolved in favor of cover-
age.
United Steel Workers of America v. Warrior and Gulf
Navigation Company, 363 U.S. 574, at 582-583.
* Id., at 27-28.
App. 36
In the absence of any express provision
excluding a particular grievance from arbi-
tration, we think only the most forceful
evidence of a purpose to exclude the claim
from arbitration can prevail, particularly
where, as here, the exclusion clause is vague
and the arbitration clause quite broad.
Id., at 584-585.
To conclude otherwise would mean that the Court is
powerless to consider accounting procedures“ —_ used
to determine supply, allocations, use and compliance
with the Compact ” when any one of the States
only has to refuse to consider changes to the account-
ing procedures that may be warranted. FSS, App. C,
§ I., at C6.
Regarding the Supreme Court’s pronouncements con-
cerning the nature of its original jurisdiction, Kansas
cites to Texas v. New Mexico, 462 U.S. 554 (1983). In
addition to Texas seeking a decree from the Court
commanding New Mexico to deliver water in accor-
dance with the Pecos River Compact (/d., at 562),
Texas sought adoption of what it called a “Double
Mass Analysis” as the method for determining when a
shortfall in state-line flows has occurred. /d., at 571.
On the latter, the Court declined stating:
The “Double Mass Analysis” represents a
sharply different approach to how to go
about measuring shortfalls at the state line,
an approach which the Compact leaves the
Commission free to adopt, but which this
App. 37
Court may not apply against New Mexico in
the absence of Commission action.
Id., at 574.
However, the reason the Court declined to impose the
“Double Mass Analysis” sought by Texas was not be-
cause the Court determined that it lacked authority
to review accounting methodology, as suggested by
Kansas, but because the Pecos River Compact itself
specified the method for determining when a shortfall
in state-line flows has occurred.’ Id., at 571-572. The
Court further concluded that:
the “Double Mass Analysis” is not close
enough to what the Compact terms an
“inflow-outflow method, as described in the
Report of the Engineering Advisory Com-
mittee” to make it acceptable for use in
determining New Mexico’s compliance with
its Art. III obligations.
Id., at 574.
The Republican River Compact has no such speci-
ficity in accounting methodologies or procedures. And
* Citing Article III of the Pecos River Compact:
“(c) Unless and until a more feasible method is
devised and adopted by the Commission the inflow-
outflow method, as described in the Report of the
Engineering Advisory Committee, shal}! be used to:
(i) Determine the effect on the state-line flow of any
change in depletions by man’s activities or otherwise,
of the waters of the Pecos River in New Mexico.”
App. 38
if in this instance, as suggested by Kansas, the Court
has no authority to resolve disputes regarding ac-
counting procedures to ensure that accurate account-
ing is performed, then the Court cannot determine
whether the apportionment of the waters of the
Republican River Basin as set forth in Article IV of
the Compact has accurately been made.
Special Master McKusick recognized the importance
of accurate accounting procedures in determining the
allocation of the waters of the Republican River Basin
when he stated in his second report that:
The importance of the States’ collaboration
in developing the more comprehensive RRCA
Accounting Procedures cannot be overem-
phasized. Had the States not reached a final
settlement and instead fully litigated their
claims, accounting methods would of neces-
sity (and with great delay and expense) have
had to be determined as part of the trial for
the purpose of establishing a methodology for
determining water allocation and consump-
tive use figures for years after 1994.
Second Report of the Special Master (Subject: Final
Settlement Stipulation), Kansas v. Nebraska and
Colorado, No. 126, Original, at 48.
App. 39
Question 2:
Is the evaporation from Non-Federal Reser-
voirs below Harlan County Lake required to
be included in the Compact accounting?
(Kansas’ Argument B., Nebraska’s Issue I.B.)
Decision: The evaporation from Non-Federal Reser-
voirs below Harlan County Lake is required to be
included in the Compact accounting. Finding for
Kansas; finding against Nebraska.
Summary of Reasoning. In § VI.A., the FSS affir-
matively provides that: “For purposes of Compact
accounting the States will calculate the evaporation
from Non-Federal Reservoirs located in an area that
contributes run-off to the Republican River above
Harlan County Lake, in accordance with the method-
ology set forth in the RRCA Accounting Procedures.”
The provision is silent about how or whether evapora-
tion from Non-Federal Reservoirs below Harlan
County Lake is required to be included in the Com-
pact accounting. Nebraska asserts that this provision
should be read that because it includes evaporation
from Non-Federal Reservoirs above Harlan County
Lake, it implies exclusion of evaporation from Non-
Federal Reservoirs below Harlan County Lake. How-
ever, the FSS must be read such that it is entirely
consistent with the Compact. To be entirely consis-
tent with Article II of the Compact, which defines
“Beneficial Consumptive Use” as including “water
consumed by evaporation from any reservoir” {em-
phasis added], § VI.A. of the FSS can not mean that
App. 40
evaporation from Non-Federal Reservoirs below
Harlan County Lake is to be excluded in Compact
accounting. Rather, § VI.A. of the FSS simply does
not provide a specific requirement as to how evapo-
ration from Non-Federal Reservoirs below Harlan
County Lake is to be included in the Compact ac-
counting [emphasis added}. Regarding the exclusion
of reservoirs having a storage capacity of less than 15
acre-feet, this can only be consistent with Article II of
the Compact because the evaporation from such small
reservoirs is de minimus.
Analysis. In it’s Opening Brief, Kansas asserts that
evaporation from Non-Federal Reservoirs below Har-
lan County Lake is required to be included in the
Compact accounting. Kansas’ Opening Brief on
Threshold Legal Issues at 13. Nebraska asserts that
such evaporation should not be included in the
Compact accounting. Nebraska’s Opening Brief Re:
Legal Issues at 58.
Section VI.A. of the FSS requires that:
For the purposes of Compact accounting the
States will calculate the evaporation from
Non-Federal Reservoirs located in an area
that contributes run-off to the Republican
River above Harlan County Lake, in accor-
dance with the methodology set forth in the
RRCA Accounting Procedures.
Nebraska reads this provision to mean that evap-
oration from Non-Federal Reservoirs located down-
stream from Harlan County Lake should not be
App. 41
included in the Compact accounting stating that: “No
provision is made for non-federal reservoirs below
Harlan County Lake and none can be imputed.”
Nebraska’s Opening Brief Re: Legal Issues at 58.
In its responsive brief, Nebraska similarly contends:
. that by expressing an intent to include Non-
Federal Reservoirs above Harlan County Lake, the
parties intended to exclude those below Harlan
County Lake.” Nebraska's Responsive Brief Re: Legal
Issues at 26.
Nebraska further asserts that: “Although the Com-
pact and FSS generally refer to ‘all’ Non-Federal
Reservoirs in various contexts, it is clear from the
face of the FSS that ‘all’ does not mean ‘all’ because
there already is an exclusion for reservoirs of less
than 15 acre-feet in capacity.” Jd.
Kansas offers a different interpretation regarding
inclusion of this provision together with a description
of the history of including evaporation from Non-
Federal Reservoirs located downstream from Harlan
County Lake. However, neither is needed to properly
decide this issue.
Section I.D. of the FSS provides that:
The States agree that this Stipulation and
the Proposed Consent Judgment are not in-
tended to, nor could they, change the States’
respective rights and obligations under the
Compact. The States reserve their respective
rights under the Compact to raise any issue
App. 42
of Compact interpretation and enforcement
in the future.
This provision is an acknowledgement of the legal
fact that the FSS cannot operate to change the Com-
pact, which is both a contract between the States and
a Federal statute. Article II of the Compact defines
“Beneficial Consumptive Use” as follows:
The term “Beneficial Consumptive Use” is
herein defined to be that use by which the
water supply of the Basin is consumed
through the activities of man, and shall
include water consumed by evaporation from
any reservoir, canal, ditch, or irrigated area.
In § II. of the FSS, the term “Beneficial Consumptive
Use” is defined as:
That use by which the Water Supply of the
Basin is consumed through the activities of
man, and shall include water consumed by
evaporation from any reservoir, canal, ditch,
or irrigated area.
The definition for the term “Beneficial Consumptive
Use” in § II. of the FSS is wholly consistent with the
definition of that term in Article II of the Compact.
Again, § VI.A. of the FSS requires that:
For the purposes of Compact accounting the
States will calculate the evaporation from
Non-Federal Reservoirs located in an area
that contributes run-off to the Republi-
can River above Harlan County Lake, in
App. 43
accordance with the methodology set forth in
the RRCA Accounting Procedures.
This provision explicitly applies to Non-Federal Res-
ervoirs located in an area that contributes run-off to
the Republican River above Harlan County Lake. The
provision is silent about how or whether evaporation
from Non-Federal Reservoirs below Harlan County
Lake is required to be included in the Compact
accounting. However, the only way this provision can
be read to be wholly consistent with Article II of the
Compact is if Section VI.A. of the FSS does not mean
that evaporation from Non-Federal Reservoirs below
Harlan County Lake is to be excluded in Compact
accounting. Rather, Section VI.A. of the FSS does not
provide a specific requirement as to how evaporation
from Non-Federal Reservoirs below Harlan County
Lake is to be included in the Compact accounting.
[emphasis added]. Regarding the exclusion of reser-
voirs having a storage capacity of less than 15 acre-
feet, this can only be consistent with Article II of the
Compact because the evaporation from such small
reservoirs is de minimus.
App. 44
Question 3:
Do the current Republican River Compact
Administration Accounting Procedures allo-
cate evaporative losses from Harlan County
Lake entirely to Kansas when the Kansas
Bostwick Irrigation District is the only entity
actually diverting stored water from Harlan
County Lake for irrigation? If yes, how should
evaporation from Harlan County Lake be
allocated?
(Kansas’ Argument C., Nebraska’s Issue I.C.)
Decision: The current Republican River Compact Ad-
ministration Accounting Procedures allocate evapora-
tive losses from Harlan County Lake entirely to
Kansas when the Kansas Bostwick Irrigation District
is the only entity actually diverting stored water from
Harlan County Lake for irrigation. However, the
Accounting Procedures should be modified so that
evaporation from Harlan County Lake is allocated
between Kansas and Nebraska in proportion to each
state’s use of water from Harlan County Lake for all
purposes. Finding in part for Nebraska and in part
for Kansas; finding in part against Kansas and in
part against Nebraska.
Summary of Reasoning. In § IV.A.2.e)(1) of the RRCA
Accounting Procedures, evaporation from Harlan
County Lake is expressly “charged to Kansas and
Nebraska in proportion to the annual diversions
made by the Kansas Bostwick Irrigation District and
the Nebraska Bostwick Irrigation District” except
App. 45
“For any year in which no irrigation releases were
made from Harlan County Lake. ” The States
could have chosen language that would have ex-
pressly apportioned the evaporation losses from Har-
lan County Lake between Nebraska and Kansas
according to the use of water from Harlan County
Lake by each state, whatever those uses might law-
fully be, but they did not. Assuming Kansas’ assertion
of the underlying intent to be true, that the States
would share the consumptive beneficial use associ-
ated with evaporation from Harlan County Lake on
the basis of the relative amount of their uses, that
intent cannot be used to ignore the plain meaning of
the specific language actually adopted by the States.
There is no ambiguity in the language of this provi-
sion, and its plain meaning must be applied until
such time as this provision of the RRCA Accounting
Procedures is modified, as it should be, as provided
for in the FSS.
There is no dispute that Nebraska paid the Nebraska
Bostwick Irrigation District to forgo its use of water
from Harlan County Lake in 2006 and that the
District did not use water from Harlan County Lake
in 2006. By its own admission, Nebraska undertook
this action in an effort to comply with the Compact.
That is, so that Nebraska could continue beneficial
consumptive uses that otherwise may have been sub-
ject to curtailment to comply with the Compact. For-
going direct use of water from Harlan County Lake so
that other uses of water in the Republican River
Basin in Nebraska could continue is still a use of
App. 46
water in Nebraska. An apportionment of the evapora-
tion from Harlan County Lake for such uses would be
equitable and consistent with Article II and Article
XI(a) of the Compact, which impliedly apportions
evaporation based on where the associated beneficial
use occurs not where the evaporation occurs, and the
RRCA Accounting Procedures should be amended to
provide this equity and consistency with the Compact
when water is used for purposes other than irriga-
tion.
Analysis. The last paragraph in §IV.A.2(e)(1) of the
RRCA Accounting Procedures and Reporting Require-
ments provides that:
The total annual net evaporation (Acre-feet)
will be charged to Kansas and Nebraska in
proportion to the annual diversions made by
the Kansas Bostwick Irrigation District and
the Nebraska Bostwick Irrigation District
during the time period each year when
irrigation releases are being made from
Harlan County Lake. For any year in which
no irrigation releases were made from Har-
lan County Lake, the annual net evaporation
charged to Kansas and Nebraska will be
based on the average of the above calculation
for the most recent three years in which
irrigation releases from Harlan County Lake
were made. In the event Nebraska chooses to
substitute supply for the Superior Canal
from Nebraska’s allocation below Guide Rock
in Water-Short Year Administration years,
the amount of the substitute supply will be
included in the calculation of the split as if it
App. 47
had been diverted to the Superior Canal at
Guide Rock.
Kansas’ Opening Brief on Threshold Legal Issues,
Appendix 3, at 23.
In 2006 and 2007, Nebraska reportedly purchased
from the Nebraska Bostwick Irrigation District all of
the water stored in Harlan County Lake on behalf of
the District for the purpose of making it available to
Kansas. The Nebraska NRDs reportedly made a simi-
lar purchase in 2007 from the Frenchman-Cambridge
Irrigation District. Id., at 21; Nebraska’s Opening
Brief Re: Legal Issues at 56. Kansas states that
the intent of the States was to “ share the
consumptive beneficial use associated with evapora-
tion form Harlan County Lake on the basis of the
relative amount of their uses.” Kansas’ Opening Brief
on Threshold Legal Issues at 22. Consequently,
Kansas asserts that “ {an] alternative use by Ne-
braska should not change the charge of evaporation
to Nebraska.” Jd., at 23. Nebraska counters that the
plain language of the RRCA Accounting Procedures
quoted above makes it clear that “ when one
division of the Bostwick Irrigation District does not
divert water, that State’s [Nebraska’s] share of the
evaporation losses from Harlan County Lake is zero.”
Nebraska’s Opening Brief Re: Legal Issues at 57.
Kansas’s description of the intent of the States to
share the consumptive beneficial use associated
with evaporation from Harlan County Lake on the ba-
sis of the relative amount of their uses” is consistent
App. 48
with the last sentence in the last paragraph of
§ IV.A.2.e)(1) of the RRCA Accounting Procedures and
Reporting Requirements which states: “In the event
Nebraska chooses to substitute supply for the Supe-
rior Canal from Nebraska’s allocation below Guide
Rock in Water-Short Year Administration years, the
amount of the substitute supply will be included in
the calculation of the split as if it had been diverted
to the Superior Canal at Guide Rock.” Kansas’
Opening Brief on Threshold Legal Issues, Appendix 3,
at 23. It is also reflected in the second sentence in the
last paragraph of § IV.A.2(e)(1) of the RRCA Account-
ing Procedures which states: “For any year in which
no irrigation releases were made from Harlan County
Lake, the annual net evaporation charged to Kansas
and Nebraska will be based on the average of the
above calculation for the most recent three years in
which irrigation releases from Harlan County Lake
were made.” Jd. It is worth noting that this second
sentence was not originally included in the RRCA
Accounting Procedures. See last paragraph of FSS,
Volume 1 of 5, Appendix C, § IV.A.2(e)(1).
Regardless of the intent of the States, the specific
wording actually adopted by the States in the last
paragraph of § IV.A.2.e)(1) of the RRCA Accounting
Procedures is unambiguous and can not be ignored
simply because this section “ does not expressly
address how evaporation charges are to be allocated if
one of the States changes the use of its water to a
non-irrigation use.” Kansas’ Opening Brief on Thresh-
old Legal Issues at 21. To address circumstances that
App. 49
were not envisioned when the RRCA Accounting
Procedures were adopted, the Accounting Procedures
can be changed by unanimous agreement between the
States, as was done when the second sentence in the
last paragraph of § IV.A.2.e)(1) was added, or pursu-
ant to the dispute resolution process provided for in
§ VII of the FSS.
By its own admission, Nebraska paid the Nebraska
Bostwick Irrigation District to forgo its use of water
from Harlan County Lake in 2006 and 2007 “[iJn an
effort to comply with the Compact and the FSS.”
Nebraska’s Opening Brief Re: Legal Issues at 56.
That is, water from Harlan County Lake was not
used by the Nebraska Bostwick Irrigation District so
that other beneficial consumptive uses could continue
in Nebraska that otherwise may have been subject to
curtailment to comply with the Compact. Forgoing
direct use of water in Nebraska from Harlan County
Lake so that other beneficial consumptive uses of
water in the Republican River Basin in Nebraska
could continue is still a beneficial use of water in
Nebraska. An apportionment of the evaporation from
Harlan County Lake for such uses would be equitable
and consistent with Article II and Article XI(a) of the
Compact, which impliedly apportions evaporation
based on where the associated beneficial use occurs
not where the evaporation occurs’, and the RRCA
* Kansas incorrectly asserts that the Compact provisions
“require evaporation occurring in a State to be allocated as
(Continued on following page)
App. 50
Accounting Procedures should be amended to provide
this equity and consistency with the Compact when
water is used for purposes other than irrigation.
How evaporation from Harlan County Lake should be
equitably apportioned between Kansas and Nebraska
when water in Harlan County Lake is being directly
used for irrigation purposes in only one of the states
but is being used for other purposes by the other state
is an accounting issue that is properly addressed in
these arbitration proceedings. The issue was sub-
mitted to the RRCA for resolution. See Arbitration
Agreement, Exhibit 1, Attachment 3 (Commissioner
Dunnigan’s letter to Commissioners Barfield and
Wolfe dated April 15, 2008). The RRCA addressed the
issue but no resolution was reached. See Arbitration
Agreement, Exhibit 1. The issue was identified as an
issue to be arbitrated. See Arbitration Agreement,
Exhibit 3 at 1, and Exhibit 4 at 2.
consumptive beneficial use to that State.” See Kansas’ Opening
Brief on Threshold Legal Issues at 21.
App. 51
Question 4:
If Nebraska has violated the Compact or the
consent decree of May 19, 2003, causing damage
to Kansas, is Nebraska subject to remedies for
civil contempt of court, including disgorgement
of Nebraska’s gains as monetary sanctions, or
should any damages awarded to Kansas be
limited to actual damages suffered by Kansas?
(Kansas’ Argument D., Nebraska’s
Issue ITI.B., Colorado’s Argument II.)
Decision: Under the facts alleged by Kansas, the FSS,
as a part of the Consent Decree of May 19, 2003, is
properly enforced as a contract, like the Compact
itself. Any damages awarded to Kansas are properly
limited to the actual damages suffered by Kansas,
and evidence pertaining to Nebraska’s gains for its
alleged overuse of water will not be considered.
Finding for Nebraska and Colorado; finding against
Kansas.
Summary of Reasoning. The FSS was approved by
the Court in the Consent Decree and thus must be
construed as part of the Consent Decree. But the FSS
is first and foremost an agreement amongst the
States, sovereigns who each agreed to “resolve liti-
gation in the United States Supreme Court regarding
the Republican River Compact by means of this
Stipulation and the Proposed Consent Judgment. ”
FSS, § LA. Because the FSS specifies how the RRCA
is to determine compliance with the Compact, the
FSS must also be construed as rules and regulations
of the RRCA, pursuant to Article IX of the Compact,
App. 52
unanimously adopted by the official in each State
charged with the duty of administering the Compact,
which duty is exclusively reserved to those officials in
Article [X. While the Court clearly has broad power to
find contempt and to impose sanctions to remedy
violations of its orders and decrees as asserted by
Kansas, the Court also has the correlative power to
limit or decline to impose contempt sanctions. Given
the unique attributes of the FSS (i1.e., consent decree,
contract between the States, and rules and regu-
lations of the RRCA) and given the purpose of the
States in entering into the FSS (i.e., to resolve
litigation regarding breach of the Republican River
Compact, which itself is to be enforced as a contract
between the States), the Arbitrator determines that
the FSS as part of the Consent Decree should be
enforced as a contract between the States, and any
damages awarded to Kansas should be limited to the
actual damages suffered by Kansas.
Limiting any damages awarded to Kansas to the
actual damages suffered by Kansas is also consistent
with the only provision in the FSS itself that provides
a remedy for Nebraska’s violation of § V.B.2.a. of the
FSS, the very violation alleged by Kansas. This
remedy, which is set forth in § V.B.2.f. of the FSS,
limits Nebraska’s compensation (in water) to Kansas
in the first year after Water-Short Year Administra-
tion is no longer in effect, for Nebraska’s exceedance
of its annual allocation above Guide Rock in the
previous year, to a maximum amount equal to
App. 53
Nebraska’s exceedance in the previous year’; i.e.,
Kansas’ actual loss.
Analysis. The FSS was executed by the Governors
and Attorneys General for each of the States and filed
with Special Master McKusick on December 16, 2002.
See Kansas v. Nebraska and Colorado, No. 126,
Original, 538 U.S. 720 (2003). The FSS was sub-
sequently approved by Decree of the Court on May
19, 2003. Id. As part of the Consent Decree, the FSS
should be construed like a contract.* As part of the
Consent Decree, the FSS is also an enforceable decree
of the Court.’ Additionally, since the FSS specifies
how the RRCA is to determine compliance with the
" “Nebraska must either make up the entire amount of the
previous year’s Computed Beneficial Use in excess of its Allo-
cation, or the amount of the deficit needed to provide a projected
supply in Harlan County Lake of at least 130,000 Acre-feet,
whichever is less.” FSS, § V.B.2.f.
* “While a consent decree is a judicial pronouncement, it is
principally an agreement between the parties and as such
should be construed like a contract.” Crumpton v. Bridgeport
Education Assoc., 993 F.2d 1023, 1028 (2nd Cir. 1993).
* “A consent decree no doubt embodies an agreement of the
parties and thus in some respects is contractual in nature. But it
is an agreement that the parties desire and expect will be
reflected in, and be enforceable as, a judicial decree that is
subject to the rules generally applicable to other judgments and
decrees.” Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367,
112 S.Ct. 748 (1992).
App. 54
Compact, the FSS must also be construed as rules
and regulations of the RRCA."
"’ Article IX of the Compact provides:
It shall be the duty of the three states to administer
this compact through the official in each state who is
now or may hereafter be charged with the duty of
administering the public water supplies, and to collect
and correlate through such officials the data nec-
essary for the proper administration of the provisions
of this compact. Such officials may, by unanimous
action, adopt rules and regulations consistent with
the provisions of this compact.
The Compact itself reserves “the duty to administer this
compact” to “the official in each state who is now or may
hereafter be charged with the duty of administering the public
water supplies” (collectively the RRCA) including the “adoptfion
of] rules and regulations consistent with the provisions of this
compact.” Special Master McKusick recognized the FSS as
embodying “rules and regulations” of the RRCA when he
described § V of the FSS as “Rules for the use and admin-
istration of water above Guide Rock, Nebraska. ..” Second
Report of the Special Master (Subject: Final Settlement Stip-
ulation) at 28. The Court’s Consent Decree, which includes the
FSS, can not alter or supersede this provision of the Compact.
Under the Compact Clause, two States may not
conclude an agreement such as the Pecos River
Compact without the consent of the United States
Congress. However, once given, “congressional con-
sent transforms an interstate compact within this
Clause into a law of the United States.” One
consequence of this metamorphosis is that, unless the
compact to which Congress has consented is somehow
unconstitutional, no court may order relief incon-
sistent with its express terms. [internal citations
omitted |
(Continued on following page)
App. 55
Kansas emphasizes the consent decree attribute of
the FSS as controlling and asserts that: “The proper
mechanism for enforcement of that decree is civil
contempt, the goal of which is both to compensate
Kansas for its injuries occasioned by Nebraska’s vio-
lation and to ensure Nebraska’s future compliance.”
Kansas’ Opening Brief on Threshold Legal Issues at
24. As sanctions for civil contempt, Kansas seeks the
disgorgement of ill-gotten gains from Nebraska,
based on unjust enrichment, together with an addi-
tional amount for costs and attorney fees. Jd., at 26-
30. Kansas further states that it seeks such “money
damages as both compensation and as a means to
coerce compliance with the Court’s decree. A fine
payable to the state of Kansas can serve as both
compensation to the state of Kansas and as a means
to coerce Nebraska into compliance.” Kansas’ Reply
Brief on Threshold Legal Issues at 25. Kansas cites
numerous cases to support its assertions. However,
when asked during oral arguments whether Kansas
was aware of any case that included a finding of
contempt when a consent decree entered as part of an
enforcement proceeding for compact compliance was
Texas v. New Mexico, No. 65 Original, 462 U.S. 554, 103 S.Ct.
2558 (1983), at 564.
Thus, for the FSS to govern how the RRCA is to administer and
determine compliance with the Compact, the FSS must be
construed as rules and regulations unanimously adopted by the
three state members of the RRCA.
App. 56
violated, Kansas could not cite to any such case
stating “You don’t find states doing this.”"
Nebraska and Colorado both emphasize _ the
contractual attribute of the FSS as controlling and
assert that any damages awarded to Kansas are
limited to actual damages suffered by Kansas. See
Nebraska’s Opening Brief Re: Legal Issues at 60-63;
Colorado’s Opening Brief on Legal Issues at 11-17.
Clearly, the Court has broad power to find contempt
and to impose sanctions to remedy violations of its
orders and decrees, as asserted by Kansas. However,
the FSS is first and foremost an agreement amongst
the sovereign States and must be construed within
* When asked during oral
“
its four corners.”'
'' ARBITRATOR DREHER: I haven't been able to
find any case where there was a consent decree
entered as part of an enforcement proceeding for
compact compliance that then, upon violation, there
was ever any sort of contempt. Well, number one, I
haven't found that fact pattern anywhere. This — and
this proceeding seems to be unique in that case. Is
that fair or not?
MR. DRAPER: That’s very fair. That is, I think, a
pretty accurate description of the case law as we see
it, as we understand it to exist. You don’t find states
doing this.
Transcript of Proceedings, In re: Non-Binding Arbitration
Pursuant to the Final Settlement Stipulation, Kansas v.
Nebraska and Colorado, December 10, 2008, at 67:4-16.
* ~~. the scope of a consent decree must be discerned
within its four corners, and not by reference to what might
satisfy the purposes of one of the parties to it. .. the
(Continued on following page)
App. 57
arguments whether any of the States interpreted the
FSS to contain an implied remedy, all three States
answered that the FSS did not contain any remedy
other than the dispute resolutions in § VII." However,
instrument must be construed as it is written. ..” United States
v. Armour & Co., 402 U.S. 673, 91 S.Ct. 1752 (1991), at 682.
'’ ARBITRATOR DREHER: Okay. I’m going to ask
this as a question and I obviously have my own
answer kind of what I’m beginning to formulate. But
do any of the States see any implied remedies in the
Final Settlement Stipulation?
MR. DRAPER: Well, answering for Kansas first, we
don’t, we think that this — this set the standards for
compliance in a very detailed way, but in terms of
what — what do you do if a State does not comply with
the FSS? We don’t see that is in there and that,
therefore, has to go to the Supreme Court and you, as
the first instance. I’m not — I don’t — I’m not aware of
any guidance that is given in the FSS or the Compact,
for that matter.
ARBITRATOR DREHER: Okay. Nebraska?
MR. WILMOTH: I think as far as remedy goes, the
dispute resolution process is the remedial provision, if
you will, for how you resolve disputes.
MR. LAVENE: First administrative step that must be
taken and completed before moving on to Supreme
Court, if that is what you are getting at, I think, or is
there something else?
ARBITRATOR DREHER: There is something else
there, but rather than come out with that at this
point, I’m just asking the question at this point, I
think, to get your perspective.
MR. AMPE: As far as the FSS stating a specific
remedy for any type of compact breach, no, it does not.
It’s analogous to the Court in Texas versus New
(Continued on following page)
App. 58
qf. of § V.B.2., the very section of the FSS that
Kansas alleges Nebraska has violated, provides as
follows:
If, in the first year after Water-Short Year
Administration is no longer in effect, the
Compact accounting shows that Nebraska’s
Computed Beneficial Consumptive Use as
calculated above Guide Rock in the previous
year exceeded its annual Allocation above
Guide Rock, and, for the current year, the
expected or actual supply from Harlan
County Lake, calculated pursuant to Sub-
section V.B.1.A., is greater than 119,000
Acre-feet but less than 130,000 Acre-feet,
then Nebraska must either make up the
entire amount of the previous year’s Com-
puted Beneficial Consumptive Use in excess
of its Allocation, or the amount of the deficit
needed to provide a projected supply in
Harlan County Lake of at least 130,000 Acre-
feet, whichever is less.
Thus under the clear meaning of its own terms, the
FSS provides that the most Nebraska is required to
provide Kansas in water during the first year after
Water-Short Administration is no longer in effect,
when in the previous year Nebraska exceeded its
Mexico that the Compact simply does not state any
remedies for that.
Transcript of Proceedings, In re: Non-Binding Arbitration
Pursuant to the Final Settlement Stipulation, Kansas uv.
Nebraska and Colorado, December 10, 2008, at 77:20-79:2.
App. 59
annual Allocation above Guide Rock, is an amount
equal to the previous year’s Computed Beneficial
Consumptive Use in excess of Nebraska’s Allocation.
This amount of water would equal Kansas’ actual
deficit of water and is the same as Kansas’ actual
loss. The award of any monetary damages must be
consistent with the FSS and equal Kansas’ actual
loss, not Nebraska’s gain. To base a remedy on
Nebraska’s gain rather than Kansas’ actual loss,
would impermissibly expand the burdens to which
the States committed when they agreed to the terms
of the FSS.
Kansas asserts that it should be awarded more than
Kansas’ actual loss for Nebraska's alleged violations
of the FSS “as a means to coerce Nebraska into
compliance.” See Kansas’ Reply Brief on Threshold
Legal Issues at 25. After considering Kansas’ position,
the Arbitrator agrees with the principal expressed by
the Special Master in Kansas v. Colorado, No. 105,
Original. The Special] Master in that proceeding cited
to Texas v. New Mexico:
It might also be said that awarding only a
sum of money would permit New Mexico to
ignore its obligation to deliver water as long
as it is willing to suffer the financial penalty.
But in light of the authority to order reme-
dying shortfalls to be made up in kind, with
whatever additional sanction might be
thought necessary for deliberate failure to
App. 60
perform, that concern is not substantial in
our view.
482 U.S. 124, 107 S.Ct. 2279 (1987) at 132.
The Special Master then stated:
I do not see the measure of damages sug-
gested by Kansas as being an effective
deterrent to compact violations. Interstate
water cases are simply too complex to be
guided by the potential form of remedy. And I
have no doubt about the power of equity to
provide complete relief, perhaps even looking
to upstream gain under appropriate circum-
stances.
Special Master Second Report (September 1997) at
82.
Although Kansas v. Colorado involved violations of a
compact rather than alleged violation of a consent
decree entered by the Court, as Kansas correctly
points out, the principal set forth in Kansas uv.
Colorado is valid for interstate water cases generally.
Assuming Kansas’ allegations to be true, that
Nebraska has violated the FSS and future violations
of the FSS by Nebraska are likely (See Kansas’
Opening Brief on Threshold Legal Issues at 31), it is
the Arbitrator’s opinion that money damages to
coerce compliance are less likely to actually result in
compliance with the Compact and the FSS than
would an effective, operating, compliance plan. Since
the latter is also a proper subject for this arbitration
(see Question 5 below), it is appropriate, at least at
App. 61
this juncture, to enforce the FSS as a contract, like
the Compact itself. For the reasons stated above, any
damages awarded to Kansas are limited to the actual
damages suffered by Kansas.
Question 5:
Is Kansas’s proposed remedy for future com-
pliance with the Republican River Compact
and the Final Settlement Stipulation a proper
subject for this arbitration, and can the U.S.
Supreme Court formulate and mandate a
remedy for future compliance?
(Kansas’ Argument E., Nebraska’s Issue II.,
Colorado’s Argument III.)
Decision: Kansas’ proposed remedy for future com-
pliance with the Republican River Compact and the
Final Settlement Stipulation is a proper subject for
this arbitration; however, Kansas can not mandate its
proposed remedy. Any alternative remedy to that
proposed by Kansas can also be considered during
this arbitration, and the U.S. Supreme Court can
formulate and mandate a remedy for future compli-
ance, as it determines to be necessary. Finding for
Kansas and finding in part for Nebraska and
Colorado; finding in part against Nebraska.
Summary of Reasoning. The FSS sets forth a specific
process for dispute resolution. See FSS, § VII. The
FSS clearly states that the dispute resolution process
applies to “Any matter relating to Republican River
Compact administration, including administration
App. 62
and enforcement of the Stipulation in which a State
has an Actual Interest. ” See FSS, § VII.A., 7 1.
and { 7. The remedy proposed by Kansas for future
compliance with the Compact and the FSS is a proper
subject for this arbitration provided it was first
submitted to the RRCA (FSS, § VIILA., 7 1.), the
RRCA was unable reach unanimous agreement or
resolution (FSS, § VII.A., 9 7.), and Kansas desires to
proceed with resolution by submitting to non-binding
arbitration, unless otherwise agreed to by all States
with an Actual Interest (/d.). As documented in the
May 16, 2008, Resolution of the RRCA (Exhibit 1 to
the Arbitration Agreement), Kansas has followed all
three procedural steps.
Kansas presented its proposed remedy for future
Compact compliance and compliance with the FSS in
its letter to Nebraska dated December 19, 2007. The
mere act of presenting a proposed remedy for
Nebraska’s consideration did not impose the remedy,
nor could Kansas impose any remedy on a coequal
sovereign. However, once the facts are heard at
hearing regarding Nebraska’s alleged violations of
the Compact and the FSS, and both Kansas’ and
Nebraska’s proposed plans for future compliance are
presented and considered, it is appropriate for the
Arbitrator to recommend actions that may be neces-
sary for future compliance. If this matter is even-
tually submitted to the Court, the Court certainly can
impose equitable relief in the form of an injunction or
in other form as determined to be necessary to
enforce future compliance with the Compact and the
App. 63
FSS. However, in enforcing the FSS, the Court should
not impose any greater burdens than what the States
have consented to in the FSS.
Analysis. Kansas asserts that “Nebraska has shown
itself to be incapable of meeting its obligations as set
out in the Republican River Compact and the Final
Settlement Stipulation” and therefore, “Nebraska
needs to be told by the Court, and thus by the Arbi-
trator, what measures need to be taken in order to
meet Nebraska’s obligations.” Kansas’ Opening Brief
on Threshold Legal Issues at 31. Nebraska asserts
that “it is improper for Kansas to assume Nebraska
wil] fail to comply with its obligations under the Com-
pact” and that “Kansas seeks to dictate to Nebraska
the means by which Nebraska must comply with the
mandates of the Compact and the FSS to ensure
against future Compact violations anticipated by
Kansas.” Nebraska’s Opening Brief Re: Legal Issues
at 64. Nebraska also asserts that it “has relentlessly
pursued plans and programs designed to ensure
Compact compliance. ”* Nebraska’s Responsive
‘* Nebraska’s Opening Brief Re: Legal Issues contains
numerous factual allegations regarding hydrologic conditions
and Nebraska’s efforts to ensure compliance with the Compact
and the FSS. Kansas disputes many of these allegations.
Because Nebraska’s factual allegations were not presented
under oath, were not subject to cross-examination, and the other
States have not been afforded the opportunity to submit
countervailing evidence, the Arbitrator has not considered or
given any weight to the factual allegations of Nebraska in this
decision.
App. 64
Brief Re: Legal Issues at 10. Colorado offers the
opinion that: “Although Nebraska has violated the
terms of the Compact, there is no indication that such
violations were willful or intentional.” Colorado’s
Opening Brief on Legal Issues at 18.
Kansas and Nebraska are co-equal sovereigns, and
neither can impose specific performance on the other.
However, the States do not dispute the authority of
the Court to formulate and impose a remedy to
ensure future compliance with the Compact and the
FSS, although Nebraska states that the remedy for
future compliance with the Compact and the FSS
proposed by Kansas in its letter to Nebraska dated
December 19, 2007, “is no longer relevant to this
Arbitration.” Nebraska’s Consolidated Reply Brief at
15. Given the propensity of Kansas and Nebraska to
disagree on matters related to compliance with the
Compact and the FSS, a compliance plan that would
further “remove all causes, present and future, which
might lead to controversies” and reduce the likeli-
hood for a series of future original jurisdiction actions
before the Court is appropriate for this arbitration.
The Arbitrator notes that an attribute of the FSS that
increases the likelihood of disputes between the
States is that compliance with the Compact and the
FSS is only determined after-the-fact, rather than
during the course of each year. It may be appropriate
to formulate a compliance plan that provides for
* Republican River Compact, Article I.
App. 65
taking certain actions during each year based on pro-
jected water supplies and projected uses of both sur-
face water and groundwater by the States, together
with after-the-fact compliance accounting and a
system of credits and debits that carry forward, con-
sistent with the Compact and the FSS. Such a plan
may reduce the potential for future disputes regard-
ing compliance and further “the most efficient use of
the waters of the Republican River Basin” and “inter-
state comity.””
Question 6:
If Nebraska’s alleged violations during both
2005 and 2006 are substantiated, is Kansas
entitled to damages for both 2005 and 2006 or
for 2006 only?
(Kansas’ Argument F.,
Nebraska’s Issue III.A.1.)
Decision: If Nebraska’s alleged violations during both
2005 and 2006 are substantiated, Kansas is entitled
to damages for both 2005 and 2006, but not based on
the methodology set forth by Kansas, i.e., not two
times the average of the shortages from 2005 and
from 2006. Nebraska’s compliance with the Compact
in 2005 will be determined based on the evidence
presented at hearing. Finding in part for Kansas and
in part for Nebraska; finding in part against
Nebraska and in part against Kansas.
° Id.
App. 66
Summary of Reasoning. By the plain wording of the
FSS, the States waived “all claims against each other
relating to the use of the waters of the [Republican
River] Basin pursuant to the Compact with respect to
activities or conditions occurring before December 15,
2002,” (FSS, §1.C.) but not “[w]Jith respect to acti-
vities or conditions occurring after December 15, 2002
” FSS, § 1.D. Further, the “States agree[d] that this
Stipulation and the Proposed Consent Judgment are
not intended to, nor could they, change the States’
respective rights and obligations under the Compact.”
Id. The States also agreed “to implement the
obligations and agreements in this Stipulation in
accordance with the schedule attached hereto as
Appendix B.” FSS, §1.B. Appendix B of the FSS
unambiguously sets the “First year Water-Short Year
Administration compliance” as 2006, not 2005. The
FSS also prescribes that “any Water-Short Year
Administration year [is] treated as the second year of
the two-year running average and using the prior
year as the first year.” FSS, § V.B.2.e.i. The common
meaning of a two-year running average is the average
value for a parameter calculated by adding the value
for that parameter in a given year to the value for
that same parameter from the preceding year and
dividing the sum by two. The calculations shown in
Table 5C of the RRCA Accounting Procedures for
determining Nebraska’s compliance during Water-
Short Year Administration are wholly consistent with
this meaning. Therefore, since Appendix B of the FSS
sets 2006 as the first year for Water-Short Year
Administration compliance, the only purpose for the
App. 67
2005 calculations of Nebraska’s Computed Beneficial
Consumptive Use above Guide Rock, Nebraska’s Allo-
cation from sources above Guide Rock, Nebraska’s
share of any unused portion of Colorado’s Allocation,
and credits for imported water, pursuant to § V.B.2.a.
of the FSS and Table 5C of the RRCA Accounting
Procedures, is for calculation of the corresponding
two-year running averages for 2006. Nebraska’s
compliance with § V.B.2.a. of the FSS in 2005 would
require calculation of two-year running averages
using parameter values from 2004 and 2005, but is
not relevant since the FSS plainly established 2006
as the first year for Water-Short Year Administration
compliance.
While compliance with § V.B.2.a. of the FSS in 2005 is
not required by the implementation schedule set forth
in Appendix B to the FSS, this does not relieve
Nebraska from any actual damages to Kansas
resulting from noncompliance with the Compact in
2005.
Analysis. Kansas asserts that:
Applying the methodology for determining
Nebraska compliance in a Water Short Year,
as set out in Section V.B.2.e.1 [of the FSS], to
2006, one must determine the two-year run-
ning average for the year 2006 and the prior
year, 2005. The amount of violation for Water
Short-Year 2006 is therefore that same
amount doubled.
App. 68
Kansas’ Opening Brief on Threshold Legal Issues at
35.
Nebraska contends that:
The Implementation Schedule [in FSS,
Volume 1 of 5, App. B, at B11], provides a list
of dates by which various compliance
mechanisms become applicable. The Imple-
mentation Schedule expressly identifies 2006
as the “First year Water-Short Year Admin-
istration compliance.”
It is not possible to read into this language a
requirement that Nebraska comply with the
WSY Administration accounting in 2005.
Nebraska’s Responsive Brief Re: Legal Issues at 28.
Nebraska further contends that “the FSS specifically
was designed to allow Nebraska time to come into
compliance with the new order of things, which
included a new mandate to regulate table land wells.
The provision of such a grace period was part of the
bargained for exchange embodied inthe FSS. _” _Zd.,
at 29.
Neither Kansas nor Nebraska is correct. Kansas’
interpretation of the provision in § V.B.2.e.i. of the
FSS, which states “with any Water-Short Year
Administration year treated as the second year of the
two-year running average and using the prior year as
the first year,” is inconsistent with the plain wording
of the provision and the plain meaning of “two-year
App. 69
running average.” Nebraska’s contention that there
was to be a “grace period” directly contradicts § I.D. of
the FSS which provides that: “With respect to
activities or conditions occurring after December 15,
2002, the dismissal will not preclude a State from
seeking enforcement of the provisions of the
Compact. ” There is no explicit mention of the
“grace period” that Nebraska suggests was intended
anywhere within the FSS or its appendices.
Using the hypothetical constructed by Kansas in its
Opening Brief on Threshold Legal Issues at 35, to-
gether with the plain wording of the provision in
§ V.B.2.e.i. of the FSS and the plain meaning of “two-
year running average,” if the 2005 accounting of allo-
cation-less-beneficial-consumptive-use in Nebraska
showed a negative 40,000 acre-feet, and the 2006
accounting showed a positive 20,000 acre-feet, the
Water-Short Year violation for 2006 would be 10,000
acre-feet ((-40,000 + 20,000)/ 2). Appendix B to the
FSS does not provide for “Water-Short Year Admin-
istration compliance” prior to 2006 or “normal year
compliance” prior to 2007. Therefore, any alleged
Compact violations occurring after December 15,
2002, but before 2006 for “Water-Short Year Admin-
istration compliance” or 2007 for “normal year com-
pliance” must be separately determined based on the
evidence presented at hearing.
App. 70
Question 7:
Is Nebraska’s issue of crediting payments for
damages for violations from one year in deter-
minations of compliance in subsequent years a
proper subject for this arbitration?
(Kansas’ Argument G., Nebraska’s
Issue III.A.2., Colorado’s Argument I.)
Decision: Nebraska’s issue of crediting payments for
damages for violations from one year in deter-
minations of compliance in subsequent years is not a
proper subject for this arbitration at this time, since
the issue has not been directly and fully submitted
together with supporting materials to the RRCA.
However, this issue can be addressed at hearing and
in post-hearing briefs to the extent it must be
addressed in considering Kansas’ proposed remedy, or
other alternative remedies or plans that may be
considered at hearing, for future compliance with the
Compact and the Final Settlement Stipulation. Alter-
natively, since this issue was identified in Exhibit 4 to
the Arbitration Agreement, once directly and fully
submitted with supporting materials to the RRCA
and if the RRCA is unable to resolve this issue, it
would then be a proper subject as an issue in this
arbitration. Finding in part for Kansas, Nebraska,
and Colorado; finding in part against Kansas,
Nebraska, and Colorado.
Summary of Reasoning. In Nebraska’s Opening Brief
Re: Issue III.A.2., illustrative information is pre-
sented (See Table 1 in Nebraska’s Opening Brief) to
App. 71
show “the importance of providing Nebraska with a
credit for damages paid for violations in 2006 (a WSY
Administration year).” Nebraska’s Opening Brief Re:
Issue III.A.2. at 8-9. While this information is helpful
to the Arbitrator for context, there is no indication in
the Arbitration Agreement or the States’ opening,
responsive, or reply briefs that demonstrates
Nebraska’s Issue III.A.2. was previously and spec-
ifically defined for the RRCA, that the type of
supporting information presented in Table 1 of
Nebraska’s Opening Brief regarding this issue was
supplied to the RRCA, or that Nebraska designated a
schedule for the RRCA to attempt resolution of this
issue, as expressly required by § VII.A.6. of the FSS.
Nebraska’s Issue IIJ.A.2. may very well need to be
addressed in a limited manner while considering the
formulation of any plan for ongoing compliance with
the Compact and the FSS that is determined to be
necessary, and to the limited extent required to
address other issues that have been properly sub-
mitted to but unresolved by the RRCA. To the limited
extent necessary to address issues specifically set
forth in the May 16, 2008, Resolution of the RRCA
(Exhibit 1 to the Arbitration Agreement), Nebraska’s
Issue IJI.A.1. can be considered in this arbitration.
While the Arbitrator agrees with the principal of
judicial economy in addressing related issues in a
broader context, that principal cannot defeat the
specific requirements of the FSS set forth in
§§ VII.A.1. and 6. Therefore, if Nebraska desires to
App. 72
have its Issue III.A.2. fully addressed in this arbi-
tration, Nebraska must first directly submit this
issue to the RRCA as a separate issue with a specific
definition, supporting materials, and a schedule for
resolution.
Analysis. Nebraska asserts that it is entitled to have
its issue of crediting payments for damages for
violations from one year in determinations of com-
pliance in subsequent years (“crediting issue”)
addressed in this arbitration because Exhibit 4 to the
Arbitration Agreement executed by the States on
October 23, 2008, specifically identifies the crediting
issue as an issue to be arbitrated (Exhibit 4 at 3) and
because | 5. of §A. in the Arbitration Agreement
provides:
The Arbitration is for the purpose of, and
shall result in, the determination by the
Arbitrator of the legal and factual issues set
out in Exhibit 3 (Kansas issues) and Exhibit
4 (Nebraska’s issues), as may be further
refined by the States and the Arbitrator.
Arbitration Agreement at 1-2.
Nebraska further contends that the crediting issue
arises directly from Kansas’ submittal to the RRCA
by letter dated February 8, 2008. See Nebraska’s
Opening Brief Re: Issue III.A.2 at 4-6.
Even though Kansas is a signatory to the Arbitration
Agreement, which included Exhibit 4 identifying the
crediting issue as an issue for arbitration, Kansas
contends that:
App. 73
Prior to October 21, 2008, Nebraska had
never raised this issue with Kansas, and
Nebraska has never presented this issue to
the RRCA. Nebraska has never given Kansas
a proposal as to how this matter could be
resolved, and the matter has not been dis-
cussed by Nebraska and Kansas. Because
Kansas has never seen Nebraska’s proposal
on how to resolve this matter, it is unknown
whether a dispute even exists on this issue.
Kansas’ Opening Brief on Threshold Legal Issues at
40.
Colorado states that: “Nebraska has the right to bring
forth any issues for which it has followed the dispute
resolution process [§ VII. of the FSS] and identified
those issues within the Arbitration Agreement.
Colorado’s Opening Brief on Legal Issues at 7.
Colorado also suggests that: “The significance that
enforcement damages will have upon future com-
pliance with the Final Settlement Stipulation is
useful information to the states and is intrinsically
related to the other issues that the states are already
briefing.” Colorado’s Response Brief on Legal Issues
at 20.
As already discussed for Question 1, the broad
presumption that disputed matters not resolved by
the RRCA pursuant to § VIIA. of the FSS may be
submitted to non-binding arbitration, unless specifi-
cally excluded from arbitration, is consistent with the
Court’s explanation that:
App. 74
An order to arbitrate the particular griev-
ance should not be denied unless it may be
said with positive assurance that the arbi-
tration clause is not susceptible of an inter-
pretation that covers the asserted dispute.
Doubts should be resolved in favor of
coverage.
United Steel Workers of America v. Warrior and Gulf
Navigation Company, 363 U.S. 574, at 582-583.
In the absence of any express provision
excluding a particular grievance from arbi-
tration, we think only the most forceful
evidence of a purpose to exclude the claim
from arbitration can prevail, particularly
where, as here, the exclusion clause is vague
and the arbitration clause quite broad.
Id., at 584-585.
However, although the Arbitration Agreement
executed by the States on October 23, 2008,
specifically identified the crediting issue as an issue
to be arbitrated, § VII.A.1. of the FSS approved as
part of the Consent Decree unequivocally requires
that: “Any matter relating to Republican River
Compact administration, including administration
and enforcement of the Stipulation in which a State
has an Actual Interest, shall first be Submitted to
the RRCA.” [emphasis added] Exhibit 1 to the
Arbitration Agreement is a Resolution of the RRCA
dated May 16, 2008, and identifies the disputes that
have been addressed by the RRCA, as required by
§ VII.A.1. of the FSS, where no resolution was
App. 75
reached. Included in the disputes where no resolution
was reached is Nebraska’s submittal to the RRCA by
Commissioner Dunnigan’s letter dated April 15, 2008,
which is attached to Exhibit 1 of the Arbitration
Agreement. That letter sets forth nine issues
Nebraska has identified as “fast-track” issues in
accordance with § VII.A.3. of the FSS as follows: (1)
Estimation of Beneficial Consumptive Use of
Nebraska’s Virgin Water Supply; (2) Division of
Evaporative Loss from Harlan County Lake when
Only One State Utilizes Reservoir Storage for Irri-
gation: (3) Non-Federal Reservoir Evaporation below
Harlan County Lake; (4) Return Flow; (5) Haigler
Canal Diversion/Arikaree Return Flows; Haigler
Canal Computed Beneficial Consumptive Use Cal-
culations for Nebraska; Arikaree Sub-basin Virgin
Water Supply Calculations; (8) Discrepancies
Between the Accounting Points for Surface Water
Computed Beneficial Consumptive Uses and Ground
Water Beneficial Consumptive Uses Used in the
Accounting Procedures for Calculating Sub-basin
Virgin Water Supplies and Beneficial Consumptive
Uses; and (9) Riverside Canal Issues. None of these
issues have any direct or intrinsic relationship with
the crediting issue.
The requirement in § VII.A.1. of the FSS that any
disputed matter or issue must first be submitted to
the RRCA before it can be submitted to arbitration is
unequivocal. Nebraska did not submit the crediting
issue to the RRCA when it could have in its letter of
April 15, 2008, even though it had received Kansas’
App. 76
proposed remedy for Nebraska’s alleged violations of
the FSS nearly 4 months earlier,’ from which
Nebraska claims the crediting issue arises. Nebraska
has not subsequently provided documentation show-
ing the crediting issue has been submitted to the
RRCA and that the RRCA has not been able to
resolve this issue. Therefore, the broad presumption
afforded disputed issues eligible for arbitration, even
those issues identified in Exhibit 4 of the Arbitration
Agreement, does not apply. The crediting issue is
specifically excluded by lack of submittal to the RRCA
pursuant to §VII.A.1. of the FSS. Additionally,
because Nebraska did not submit this issue to the
RRCA when it clearly could have, the Arbitrator
determines that the crediting issue does not fall
within § VII.C.1. of the FSS as one or more “unfore-
seen issues” that may be added at the discretion of
the arbitrator.”
The crediting issue may or may not have bearing on
other issues that have been submitted to but
unresolved by the RRCA. To the limited extent that
the crediting issue must be considered to appro-
priately address issues specifically set forth in the
May 16, 2008, Resolution of the RRCA (Exhibit 1 to
the Arbitration Agreement) the crediting issue will be
considered in this arbitration. Otherwise, the credit-
ing issue will be excluded unless that issue is fully
" Letter from David Barfield of Kansas to Ann Bleed of
Nebraska, dated Deceinber 17, 2007.
App. 77
submitted to the RRCA and the RRCA determines it
is unable to resolve the issue during the pendency of
this arbitration.
Dated: January 22, 2009
/s/ Karl J Dreher
Karl J. Dreher
Arbitrator
CERTIFICATE OF SERVICE
I, Karl J. Dreher, hereby certify that I caused a copy
of the foregoing Arbitrator’s Final Decision on Legal
Issues to be placed in the U.S. Mail, postage paid, on
this 23rd day of January, 2009, addressed to each of
the following:
John B. Draper, Esq. James J. DuBois, Esq.
Special Assistant Natural Resources
Attorney General Division
Montgomery & U.S. Department
Andrews, P.A. of Justice
Santa Fe, NM 87504-2307 1961 Stout Street,
8th Floor
Denver, CO 80294
Samuel Speed, Esq. Aaron M. Thompson
Assistant Attorney General Area Manager
Memorial Hall, Third Floor U.S. Bureau of
120 SW 10th Street Reclamation
Topeka, KS 66612 203 West 2nd Street
Grand Island, NE 68801
App. 78
Justin D. Lavene, Esq.
Special Counsel to the
Attorney General
Nebraska Attorney
General’s Office
2115 State Capitol
Lincoln, NE 68509
Peter J. Ampe. Esq.
First Assistant Attorney
General
Federal and Interstate
Water Unit
1525 Sherman Street,
5th Floor
Denver, CO 80203
Col. Roger A. Wilson, Jr.
U.S. Army Corps of
Engineers
Kansas City District
601 East 12th Street
Kansas City, MO 64106
/s/ Karl J Dreher
Karl J. Dreher
App. 79
NON-BINDING ARBITRATION
Pursuant to Arbitration Agreement
of October 23, 2008
IN ACCORDANCE WITH:
FINAL SETTLEMENT STIPULATION
Kansas v. Nebraska and Colorado
No. 126, Original, U.S. Supreme Court
Decree of May 19, 2003, 538 U.S. 720
a
ARBITRATOR’S FINAL DECISION
4
June 30, 2009
BACKGROUND
On December 15, 2002, the states of Kansas,
Nebraska, and Colorado (the “States”) executed the
Final Settlement Stipulation (the “FSS”) “ to
resolve the currently pending litigation in the United
States Supreme Court regarding the Republican
River Compact by means of this Stipulation and the
Proposed Consent Judgment ” FSS, Volume 1 of
5, at 1. The FSS was filed with the Special Master
appointed by the U.S. Supreme Court (the “Court”) in
Kansas v. Nebraska and Colorado, No. 126, Original,
who recommended entry of the proposed consent
judgment which would approve the FSS. Second
Report of the Special Master (Subject: Final
Settlement Stipulation) at 77. On May 19, 2003, the
Court entered a consent decree approving the FSS
(the “Consent Decree”).
App. 80
By 2007, disputes arose between the States regarding
compliance with the FSS and the Republican River
Compact (the “Compact”). The disputes were sub-
mitted to the Republican River Compact Admin-
istration (the “RRCA”) pursuant to the provision in
the FSS for dispute resolution. See FSS, Volume 1 of
5, § VII., at 34-40. The RRCA addressed the disputes,
but no resolution of certain disputes was reached. See
Resolution of the RRCA dated May 16, 2008; Exhibit
1 to Arbitration Agreement dated October 23, 2008.
The RRCA submitted these disputes to non-binding
arbitration pursuant to the provisions of § VII. of the
FSS, the States executed the Arbitration Agreement
on October 23, 2008 (the “Arbitration Agreement”),
and I was retained by the States to serve as the
Arbitrator.
Exhibit 2 to the Arbitration Agreement sets forth the
“Time Frame Designation” for the non-binding
arbitration, Exhibit 3 to the Arbitration Agreement
sets forth the disputed issues identified by the State
of Kansas to be arbitrated, and Exhibit 4 to the
Arbitration Agreement sets forth the disputed issues
identified by the State of Nebraska to be arbitrated.
The disputed issue originally raised by the State of
Colorado with the RRCA, which the RRCA submitted
to non-binding arbitration pursuant to the provisions
of § VII. of the FSS (See Attachment 3 to Resolution
of the RRCA dated May 16, 2008), has been
withdrawn from this arbitration and is not included
in the Arbitration Agreement.
App. 82
From the issues set forth in Exhibit 3 and Exhibit 4
to the Arbitration Agreement, the States identified
six legal issues to be decided by the Arbitrator by
December 19, 2008, for the purpose of narrowing
discovery and the hearing on the merits. Based on a
disagreement regarding the appropriate scope of the
arbitration, the Arbitrator identified a seventh legal
issue during a prehearing conference held telephon-
ically on November 5, 2008. Each of the States filed
opening briefs on these seven legal issues with the
Arbitrator on November 10, 2008. (The State of
Colorado briefed 3 arguments pertaining to only 4 of
the legal issues.) Responsive briefs were filed on
November 24, 2008, and reply briefs were filed on
December 5, 2008. Oral argument on these legal
issues was heard at the University of Denver, Strum
College of Law, on December 10, 2008.
The Arbitrator treated the briefs filed by the States
as being analogous to cross-motions for summary
judgment under Rule 56 of the Federal Rules of Civil
Procedure. “A party claiming relief may move, with or
without supporting affidavits, for summary judgment
on all or part of the claim.” Fed. R. Civ. P. 56(a). “The
judgmet sought should be rendered if the pleadings,
the discovery and disclosure materials on file, and
any affidavits show that there is no genuine issue as
to any material fact and that the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(c).
App. 82
The Arbitrator issued his preliminary decision on
these seven legal issues, including a summary of his
reasons for deciding each issue, on December 19,
2008. On January 22, 2009, the Arbitrator issued his
final decision on these seven legal issues. With minor
corrections and the addition of supporting analysis
for each of the seven issues, the final decision is
materially the same as the preliminary decision
issued on December 19, 2008. The Arbitrator’s Final
Decision on Legal Issues is attached hereto” and fully
incorporated herein by reference.
The States submitted expert reports on the remaining
issues to the Arbitrator in lieu of extensive direct
testimony on February 23, 2009. The Arbitrator
subsequently conducted a hearing on those issues at
the Byron Rogers U. S. Courthouse in Denver,
Colorado, beginning on March 9, 2009. The hearing
was recessed on March 19, 2009, and reconvened and
concluded on April 14, 2009. The Arbitrator has
carefully considered the reports and testimony of the
expert witnesses for the States together with post-
hearing briefs submitted by counsel for the States
and issues the following decision.
[Pages 2-60 of Arbitrator’s Final Decision were
omitted]
*“ The date in the first line of the attached Arbitrator’s
Final Decision on Legal Issues, dated January 22, 2009, has
been corrected to December 15, 2002.
App. 83
CONCLUSIONS
Accounting Procedures
1.
For the reasons set forth in the Arbitrator’s Final
Decision on Legal Issues, which is attached and
incorporated herein, Nebraska’s proposed
changes to the Accounting Procedures are proper
subjects for this arbitration.
Accounting Procedures ~— Estimating Computed
Beneficial Consumptive Use for Groundwater and
Imported Water Supply
2.
The assertion made by Colorado and Kansas that
the issue of estimating CBCU of groundwater
and determining the IWS is not a proper subject
for this arbitration, because Nebraska’s expert
report on this issue had not been submitted to
the RRCA for its consideration, is not convincing.
Nebraska’s proposal to use 8 differences cal-
culated using 16 runs of the RRCA Groundwater
Model for each of 4 aquifer stresses is essentially
the same as what was presented to the RRCA in
August of 2008, even though the weighting
coefficients used to combine the differences have
changed. Neither Colorado nor Kansas timely
made this assertion when they submitted their
respective expert reports in_ response to
Nebraska’s expert report on this issue, and
neither timely raised this assertion during the
hearing conducted as part of this arbitration.
Nebraska’s proposed procedure for determining
VWS, whereby what Nebraska terms VWS,,
determined as ( 0 — CKMN), is more consistent
App. 84
with the definition of VWS established in the
Compact and adopted in the Accounting Pro-
cedures than is summing CBCU,, CBCU,, and
CBCU,, less IWS, each calculated in accordance
with the existing Accounting Procedures, to com-
pute VWS...
While Nebraska’s proposal for determining what
it terms VWS, is consistent with the definition of
VWS established in the Compact and adopted in
the Accounting Procedures, Nebraska’s proposed
changes to calculate CBCU., CBCU,, CBCU,,
and IWS, are problematic and adoption of
Nebraska’s proposed changes by the RRCA is not
appropriate.
Although Nebraska’s proposed changes _ to
calculate CBCU,, CBCU,, CBCU,, and IWS,
should not be adopted by the RRCA, the RRCA
should consider reconvening the Technical
Groundwater Modeling Committee to thoroughly
re-evaluate the nonlinear response of the RRCA
Groundwater Model when simulated stream
drying occurs, re-evaluate th
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