DISCUSSION: The hydrologic cycle and the law. Role of administrative
agencies and of the courts.
MR. THOMAS: Mr. Arens, you give me new heart. I had become accus-
tomed to hearing a legal discussion of water start with the statement that
we recognize that there are probably interrelations of the hydrologic
cycle, but so far as the law is concerned the earth is flat, that there are
four corners and in those corners we have water courses, percolating
water, diffused surface water and undefined underground streams, but you
don't dare go into that corner very often. I am glad to hear that there is a
challenge here, and I think it is good for the whole legal profession, if they
can rise above the past and acquaint themselves with the realities of today!
CHAIRMAN HABER: I would like to comment on that, briefly. I think
there may have been an exaggeration about these dichotomies existing in the
law. I think there is a lot of talk in those terms by the courts, and by law-
yers and by people who have criticized the courts. But actually you do get
in many states this development of a so-called reasonably use rule in
underground waters. That is the first thing. That reasonable use rule has
usually been described as meaning that you can use all the water you want
on your own land but you can't transport and pump it; but actually, as far
as the Michigan cases are concerned, and some of the cases on which the
Michigan cases are based, it is not as clear as that. It may be that you
can't even use all the water on your own land and interfere with someone
else, if the court should find that, even that use, unreasonable. ...
Actually, the development of that reasonable use law in the United States
is somewhat interesting, because the New York cases where it was first. I
think, discussed, discussed the old English cases. The old English cases
said that you could have a rule of capture as far as ground water was con-
cerned, that everybody can get it to the extent that he gets anything out of
the ground. The New York cases started to distinguish those English cases
by saying, "Well, it just happened that in every one of those cases it was
reasonable for them to get it." Actually there isn't any rule of capture that
even those cases establish. The fact that there are no clear-cut decisions
which say that we are going to relate the surface, the ground water and the
stream water law is simply because there aren't very many cases that deal
with this type of interrelation. The question hasn't reached the courts. So,
it is very unfair to say that the courts have been blind to the interrelation-
ship, because they have not had occasion to consider it.
I think what you can say is that the judicial process is one where it may
be that these questions, though they actually exist, don't come up very
often, because the parties may not know of the interrelationship, and be-
cause the court cannot just bring in on its own all the possible interrela-
tionships in a particular basin.
What I am trying to say is that the law, to some extent, as far as we
can see on the basis of some of these studies, has been trying to reflect
the pressure of need. The courts have been trying to reflect it, but they
haven't had occasion-simply because of the nature of the judicial proc-
ess-to do it fully, but not because there has been as much ignorance as
has been suggested or as much rigidity as has been suggested at times
MR. THOMAS: Don't you think the precedent constitutes a handicap?
SSo often you will see cases referred to of 70 years ago...
CHAIRMAN HABER: Except we have illustrations where it does not.
We have illustrations where the precedent is simply either disregarded
or it is distinguished...
MR. BEUSCHER: I would like to add to Mr. Haber's rather pertinent
comment that it seems to me, in essence, what Mr. Arens has done is to
suggest that there is in the Michigan law scme elements of extreme flex-
ibility, on the basis of which one can look forward to the future.
To illustrate this flexibility from another state, across the lake from
Michigan, let me comment on what has just'happened in Wisconsin in terms
of underground water. We had one of these cases, not 70 years old, but 53
years old. It didn't follow this reasonable use rule. It followed the English
cases rather blindly. A man by the name of Merkel-you probably know
this case, Mr. Thomas-out of pure malice, as the court found, let his
artesian well flow day and night for the sole purpose of injuring the wells
of his neighbors who were on higher land than his land. He succeeded in
drying up their wells, and then they went to the legislature and got a bill
passed that all artesian well owners should have their wells capped.
It was contested, and the court said that Mr. Merkel was within his
legal rights. He captured the water and he could do with it what he wanted,
even though maliciously harming his neighbors, therefore that the statute
is unconstitutional. Recently the court had to decide whether it was going
to follow Huber v. MerkeL It said, "We will follow Huber v. Merkel," but
it didn't really follow it. It announced again that the landowner owned all
the underground water but that proper legislation would be upheld by the
court. The trouble with the legislation in the Huber case was that it was
legislation for one man. i
Now, the court has said in effect to the legislature, "Here is the ball.
You carry it for awhile. Adopt some kind of a basis for regulation and we
will uphold it." It suggests, of course, our law does respond to pressure.
I think this is the way that perhaps we ought to be looking at a good deal of
this case law more often than we do to get understanding of the really im-
portant water law cases; how responsive has it been, and try to find out the
economic situations in which the cases came and how the court responded...
MR. TRELEASE: We have these examples but there are others the
other way. A recent case in Texas, about two years ago, came before the
court where a very large spring in west Texas had been the foundation of
appropriation of surface water rights since the 1860's, and a well driller
went in the valley above it; and drilled, I believe...22 wells across this U-
shaped valley looking for the source of this spring and successfully found
it, and dried up the water they had. That was upheld by the Texas courts
LAW OF WATER ALLOCATION
on the theory of the English rule, which was, it seems to me, a deliberate
theft and violation of the rule of priority which Texas had. There was a
case in which two different rules of water law came into direct conflict,
and what I would say, and I think many of us here would say, the wrong
rule prevailed. (The name of the case is Pecos Valley. That is all I can
recall of it.)
MR. BILLINGS: Does constitutional limitation put anything in the way
of the judiciary as to water rights in Michigan?...
Isn't there some wording to the effect that the judiciary can't get into
CHAIRMAN HABER: That is always a very difficult question to decide-
when does the judiciary get into executive duties?
The judiciary very often does through its equity powers make very de-
tailed decisions; it does sometimes supervise these decisions and carry
them out. If you have a statute which provides a standard, that is the leg-
islative function which is taken over. The judiciary then is interpreting
When it issues a decree under its equity powers, it is doing no more
than providing a remedy under that statute. It can be looked at that way.
Its further supervisory power sometimes can occur and has occurred
where it allows the parties to come in and seek enforcement of the de-
cree. If you make one of those parties an administrative agency, then,
of course, part of the executive power will be in that agency. But the
final enforcement in each particular instance will be through a judicial
decree or judicial order.
This is a quite common procedure in various kinds of combinations
of administrative and judicial functioning that go on today, that the admin-
istrative agency really seeks redress in the court, asks the court to issue
the final order of enforcement and issue the final decree.
The question is, is this really more desirable than having the agency
do it itself? That turns on various policies. Partly, on this matter of
expense that we have been talking about. Partly, the policy that Mr. Haar
was talking about in the morning, the feeling we have about the judiciary,
about its fairness, about its expertise in judging the kind of questions that
are going to inevitably come up which cannot always be decided by mathe-
matical formula, as to whether a particular use should prevail over an-
other and how much compensation should be allowed.
The proposal mentioned at the end of our Michigan study does suggest
that the administrative agency should go as far as they can with that. But
I venture to say, as far as I know, I have not heard of anyone who says
that a group of economists and engineers can sit down today and allocate
water in great detail and absolutely prove that their particular allocation
is correct and absolutely prove that the particular system of compensation
So, somewhere there is going to be an element where the agency on the
spot has to feel its way and be fair in an intuitive sense. Where that comes
in, the judiciary is supposed not only expert, but is supposedly more in-
sulated from immediate public pressures. An administrative agency is usu-
ally subject to greater immediate political pressures than the judiciary
supposedly is. In some states the judiciary is subject to the same pressures.
Under a good judiciary system, the judiciary system will be more or less
MR. BEUSCHER: As a practical matter, in the allocation of use rights of
water in the eastern states, haven't we sort of decided this, basically? For
example, the construction oi power dams across major streams. Don't we
universally have requireme ts that the hydrq-electric company get a permit
from the administrative agency, with all the judicial review, and aren't we
there with an adversary pr cess which frequently brings in a second admin-
istrative agency before the first administrative agency, namely, concerned
with hunting and fishing protection of public rights, boating and swimming?
I think we ought to recognize that as a related matter. I don't think there is
too much chance that we will backtrack on that and turn the job of issuing
dam permits over to courts would we?
CHAIRMAN HABER: The question is really to what extent we want to ex-
tend this kind of activity in e hands of administrative agencies. You are
quite right, that in some ar as of water use you have fairly extensive admin-
istrative determination. The Federal Power ICommission determination, for
example, and then the state commissions that duplicate the Federal Power
Commission, and so on. Bu the suggestion that is here made is that this
now be done with respect toj many other areas of water use, not only with
respect to drawing of water) from the stream for industrial uses, for munic-
ipal uses, for irrigation uses.
One of the problems that does arise was a problem that was raised in the
last discussion with respect to the permit system, and that is, is there any
de minimis? Let's assume for a moment that it is important to do this and
it would be useful to do this. Should we draw any line? Should every little
piddling water use come into the administrative agency picture? Somebody
suggested before that we draw a line in terms of a certain quantity of use,
that people who use very little water do not come in. I think that is a ques-
tion of fact that would have to be decided in various areas in various states,
because small quantities of use can add up.
More than that, even no quantity of use may be of great importance. For
example, if somebody uses "water for purposes of raising fish. He may not
be consuming any water, but he may need a great deal of water there, and
also in a particular state oJ quality. So, his right to raise fish will depend
on what uses are made upstream, whether those uses are polluting uses. It
is very difficult, therefore, to simply draw the standard that is simple in
terms of a de minimis quantity. I think what this proposal does suggest
are the more detailed discussions that would have to take place if you
wanted to go into this kind 0f a statute.
LAW OF WATER ALLOCATION
MR. BEUSCHER: How would this work in a case that we now have on
hand?...that has to do again with the underground water problem posed
by the case that, shall we say, limits Huber v. Merkel. The City of
Fond du Lac decides the community is running short of water. They pro-
ceeded to go out into the country eight or ten miles and take options on
about 1100 acres of land with the intent of drilling lots of deep wells. Only
after they had drilled the first test well did the farmers in the area realize
what was happening, and then all hell broke loose, if the ladies will pardon
it. The farmers caused the local rural town board to pass legislation say-
ing, "You can't have a well with a pipe bigger than six inches. You can't
transport water across town lines if it comes out of a well from this
Incidentally, the court had no trouble annulling those ordinances. Then
the farmers brought an action on behalf of 592 farmers to enjoin the City
from drilling these wells, on the theory that they would have to deepen
[their own wells]...In all probability there is enough water there for every-
body at present, but they will have to get their wells down. The court said
under Huber v. Merkel that the City can go ahead and drill those wells and
take enough water for its needs, that it is up to the legislature to do some-
thing about this in the future. Specifically, under the kind of general broad
standards that you have in mind, just how would a court operate in this
situation, where the City is there, needs the water badly, and the farmers
are there and need the water badly, and the court says, "Well, we will
come to some balance of convenience here and just require the City to pay
for deepening the wells and everything will be lovely as long as there is
enough water to go around?" How do you operate in the court, or, for that
matter, in the administrative agency?
CHAIRMAN HABER: I think that raises a very pertinent question and
one that you can't answer in general.
MR. BILLINGS: There may not be enough water to go around.
CHAIRMAN HABER: If there isn't enough water to go around, the ques-
tion will have to be to what extent you can handle it through compensation,
the extent of ability to pay, and so on. The courts will have to have power,
though, to consider these elements as important. Under the present law,
as you describe it, they wouldn't have power to do that, would they?
MR. BERGEN: Don't you have to add something else there? There may
not be enough water to go around in that area as it is now developed. Surely.
there is much more water in the state that could be developed and brought
MR. BEUSCHER: You can go 40 miles to Lake Michigan.
MR. BERGEN: Compensation wouldn't be the only possibility.
CHAIRMAN HABER: There is the possibility of alternative means. I
think the court function can be expanded. I think you can have a statute in
some states, and maybe in many states, that the courts can be empowered,
the parties can be empowered to enjoin affected users on a stream basis,
SYMPOSIUM DISCUSSION 435
and perhaps even interrelated users of surface and ground waters, and
bring them all in as parties in one proceeding. However, I think that you
would go a little far if you include considerations such as the transporta-
tion of water from another watershed. I think you would be caught in a lot
of trouble with that type of situation. This is one of the reasons why the
suggestion was made in the paper that the proceedings should be really
handled by an administrative agency, a state agency, with regional sub-
divisions which can consider such questions, which would be not only an
allocating agency but a developing agency at the same time, so that it can
consider both those alternatives. And one of the elements will be the ele-
ment of cost in transporting water from Lake Michigan as to the benefit
of all these users.
MR. TIMMONS: What wculd be the difficulties with compensation? As
I understood Mr. Beuscher's presentation, there might well be expected
to be an increase [in welfare for] the city and the farmers; is that correct?
CHAIRMAN HABER: I didn't hear that.
MR: BEUSCHER: He asked whether or not there would be an increase
in social welfare in the agg 'egate as a result of these wells for the benefit
of the urbanites who would Be supplied with this water. Obviously, there
would be. From the point o view of the farmer, no, there isn't any like-
lihood that the water is goih g to be brought to his door. The farms are too
MR. TIMMONS: This is a problem that is fairly common in the general
field of what we call theoryr of welfare economics," where we are bringing
about an economic reorganization that will have adverse effects upon some
of the people involved in it. But the main question is whether there is a
surplus that is sufficient to compensate those that are damaged. If there
is, presumably the ones getting the benefits can compensate the ones that
are suffering damages and still there will be a net surplus left. That type
of problem can be handled < either in a cardinal or ordinal framework, that
is, in terms of whether you have more or legs under different alternatives
of action. I think the thing that bothers me from an economic viewpoint is
that I don't think there is an y difficulty in handling this kind of a natural
situation, I think it is one of the junctures where economics and law should
come much more closely together than they are now, in working out jointly
some of the answers to sorry e of these problems that must draw on both
disciplines. The question I am raising is, isfthere any reason why the
compensation principle as developed in welfare economics could not be
used in this instance, if the aggregate benefits exceed-after the reorgan-
ization, shall we call it-those prior to the reorganization?
CHAIRMAN HABER: I d m't think there are any difficulties in terms
of the creation of possible legislation that takes those things into account.
I do think that the present 1 w doesn't allow you to consider that broad a
MR. TIMMONS: Why?
LAW OF WATER ALLOCATION
CHAIRMAN HABER: Because all you have before the court generally are
two parties. The only question that arises as between those two parties is tc
what extent one of them was injured, and the damages are awarded in terms
of the loss of value in the property of the person who was injured, rega rdles
of the extent of benefit derived.
It may be true that a new user won't go into a new use if he knows he has
to pay more than the benefit that he derives from the new use. But one of thi
aspects of the judicial process is, as it now operates, that you don't know
how much you are going to have to pay. In other words, you first make your
use and then you are slapped with the damages. You don't know what those
damages are going to amount to, because they are purely, as I said, in term,
of the loss in market value to the property to the injured party.
MR. TIMMONS: Those uncertainties can be just as real as price and cos
uncertainties in causing people to engage in an economic expansion.
CHAIRMAN HABER: I assume they would be. But I have heard in this
discussion, and one of the things that has puzzled me, that in practice thus
far this hasn't amounted to much, in other words, that water use has in-
creased in all the eastern states, that industries are coming in and using
water. Apparently there is some reason why they are not concerned. I
don't know why they are not concerned.
MR. ARENS: Don't you think one of the elements in this situation is that
the courts apparently are not as correctly oriented as they might be, and
that is a subject upon which some educational influences could be brought
CHAIRMAN HABER: I think they are as corrective-decree oriented as
well as they can be and as the lawyers get them to be.
MR. ARENS: Perhaps that is the area of appropriate educational in-
MR. NELSON: I would like to make an observation. Doesn't this par-
ticular problem which is posed, which I think is common to every state
in the nation, doesn't that point out that the administrative approach is the
only approach that we can take if we want to do more than decide a squabble
over the use of water that is presently available, that every city in the na-
tion is faced with the idea that they have to look into the future and find
out where their expanded uses are coming from.
If we are going to limit the decisions to just those points which are up
before the court, no one is in a position to plan ahead for where alternate ,
sources could be developed.
I have in mind this gigantic game of checkers that is going on in Cal-
ifornia whereby by replacing water all the way down the line somebody in
the south end of the state ends up with water...by moving water all the way
up and down the state they have greatly increased the amount of water. I
think only the administrative agency concept lets you look over the horizon
and make plans, because obviously we have to have more water. The City
of Fond du Lac has to get if from somewhere. If we just decide who is going
to get the water coming out of the well, you haven't solved your basic prob-
lem, as I see it. You are forever in a squabble unless someone has the
authority to look ahead and to develop.
MR. BEUSCHER: I mig t just say that, in terms of the welfare economics
approach, that the city offi ials of Fond du Lac are, I think, reasonably good
welfare economists, judging from the way they react to the problem. They
said, "If the supreme court will just tell us that we have the legal power to
do this, we will go out and negotiate a contract with a big well-drilling firm
and sink these wells deeper as needed, and we will assure the farmers this
will be done right now atfolr expense." But the supreme court didn't know
how to handle that.
MR. TIMMONS: It seenrs to me that is the thing that we need to have,
enough imagination to be able to handle it. In that instance, there would be
an increase in total aggregate welfare in the entire community, wouldn't
MR. BEUSCHER: Yes.
MR. TIMMONS: The farmers would be as well off as before, and the
municipality would have an increase in welfare.
CHAIRMAN HABER: Oie of the elements in this proposal made in this
paper is that a court or a inistrative agency should be empowered to
order physical improvement, that in considering alternative water use pat-
terns it should consider alternatives in terms of different possible physical
improvements, that the standard upon the basis of which it finally adopts a
particular water use pattern should be in terms of the ability to pay of the
various users, which woulo be, I suppose, derived, in the case of some
users, in terms of the revenue producing or economic value of the product.
There will be some cases where that will not be true. In some cases
there may be ability to pay based on general taxation and tax funds avail-
able. There again there is an area where the courts couldn't come in as
easily as an administrative agency. Within limits that are feasible, then,
a court could consider alternative patterns including some physical im-
provement where it is possible in terms of the ability to pay of various
This is not as completely new as it sounds, because the courts have
done it in instances. They have ordered improvement under their equity
powers. They haven't don4 it systematically or under any standard, but
Where they have felt it could be done, they have done it, ordered the im-
This proposal is not anjattempt to create something completely new,
but it is to take the reasonable use system as it has been administered
by the courts in terms of its philosophy, and some of its remedies, and
Expand it, namely, to give he courts more powers to carry it out better
than they have been able t4 carry it out, and to give it some better
standards, perhaps, than they have been able to formulate in terms of
this case-to-case determination.
LAW OF WATER ALLOCATION
One of the problems, for example, which arises is this: Under the reas-
onable use system, what happens is, when you get a use that is a later use,
but that for some reason the court decides is one in the greater public in-
terest, it is possible for the courts to cut out the previous use entirely, if
necessary, without any compensation, and to allow the new user to make
the use, or cut down the previous use so the new user can make full use
without any compensation to the previous user. The theory being, in balanc-
ing the whole reasonableness, it finds that one use is more reasonable than
the other in the local picture. On the other hand, if it should find a new use
not as reasonable, there are two possibilities: The court might enjoin it,
which would stop it altogether, or it might decide that because it has some
equities on its side, such as that it is a very large investment that has
been made, then, in balancing the equities it may refuse to enjoin, but
there would be damages-but the damages would amount to the loss in
market value to the old user, to the extent that you can approximate that
by different, various kinds of evidence.
This raises a certain question. First of all, can you approach the same
philosophy by somewhat different remedies? One remedy being modified
to this extent, that we will not cut out any previous user without compen-
sating because this creates the uncertainty in investment. The other thing
is that when you compensate, is it really necessary to compensate in terms
of the full loss in market value? In terms of investment protection, it may
not be necessary. We have instances where it is enough from the point of
view of investment protection to pay somebody back his capital outlay and
some percentage of profit.
Maybe if you guarantee that much, some formula of that sort, it will be
enough to assure people to come in, to make the investment. At the same
time it may not make new uses-if they should be found to be in the greater
public interest-as costly as they would be if you make them compensate
fully for the loss in market value. In some cases there might be a lesser
cost that way. You could rationalize that as not deviating from the reason-
able-use situation because you have compromised the situation. You have,
on the one hand, taken away the danger that somebody may lose his use al-
together without any compensation and, on the other hand, you have reduced
the extent of compensation that you would get where you do get compensa-
tion. It is a kind of compromise. All of these issues are not only of legal
significance but should be discussed by the economists, just what formula
of investment protection is desirable... We just threw out one pos-
MR. THOMAS: I thought you might all be interested in a somewhat par-
allel situation, under the appropriation doctrine, to that of Fond du Lac. I
know Bob Smith could tell it better. But in the State of Kansas, Wichita has
a well field that is several miles away from the city, for very good reason.
The Arkansas-Kansas River is a polluted river. They have gone into a val-
ley, what they call the Equus Beds, and have a group of wells that have been
pulling the water down in that valley as they supply the city. There were
some wells there, prior to this time, owned by the farmers. The case
hasn't come into any court, but the City of Wichita has apparently recog-
nized compensation as an obligation, and so has deepened the domestic
wells of the farmers in th4t valley; so the farmers with their rights to
water are still getting the water from wells. However, a big question
there is as to the water th4t was not pumped from wells. Before they
started pumping the water table was relatively close to the surface,
with the result that the farmers were able to get not only dry-land crops
but sub-irrigated crops in places. They mourn the loss of that and are
very unhappy about it.
There is the complicating condition that Kansas has been dry and has
been getting drier and dri r in the past five years, so you don't know to
what extent that table has dropped due to drought. There is that question
in a use that isn't recogni ed in most states, sub-irrigation where the
plants take the water. There has been no diversion from any source, as
far as the man is concern d, but he had a natural situation where he could
get alfalfa to grow in a country where he didn't have to irrigate it where
he would otherwise. Ther4 is the case of compensation being recognized
in the case of prior wells, but a question involved in the use of water that
now prevents the use of the land as sub-irrigated land.
MR. BILLINGS: There was a case in Michigan of dried-up celery land...
MR TRELEASE: There has been a good deal of talk here that I have
been interested in of court administration of water rights and talk about
the possibilities of the courts doing some of these things. I would like to
simply add that if you look far enough west you find precedents for these
physical substitutions, sudh as you say the Wisconsin court was unwilling
or did not know what to do with.
The California court in| quite a few cases has emphasized the physical
solution, some method of getting water to the subordinated user by the
usurping user, and they have developed quite a doctrine of this so-called
physical solution to their 4ases. Much the same has been done in Utah, in
some cases. Whitemore v! Salt Lake City* was an interesting one, in which
a power company absolutely dried up a river at an appropriated headgate
but supplied him water from a new and different source. The Central
Valley Project in California is another example of that.
MR. HAAR: There is the same thing in smoke pollution, where the
court tells them to use a different fuel or install new machinery.
* 89 Utah 387, 57 Pacific 2d. 726 (1936).