A use permit condition limiting groundwater extraction to 12,000 acre-feet of water per year did not constitute a taking of property, the Fourth District Court of Appeal has ruled.
An owner of farmland in Imperial County unsuccessfully tried just about every argument there is to convince the court that a taking had occurred. But the unanimous three-judge appellate panel ruled that there had been no physical appropriation of the water, and that the landowner had not shown that the county effected a regulatory taking.
In 1994, Allegretti & Company, which owns 2,400 acres of land, filed an application for a conditional use permit to redrill an inoperable well. The well, one of several on the property, would provide water for crop production on 200 acres. Nearly three years later, the county approved the permit but with a condition limiting Allegretti’s draw of groundwater to 12,000 acre-feet per year from all wells on site. Allegretti never recorded the permit, and there exists today no county-imposed restrictions of groundwater pumping at the site.
In November 1997, Allegretti sued the county for inverse condemnation, arguing that the county had no jurisdiction to require a conditional use permit and that a regulatory taking had occurred. After procedural wrangling that made its way to the Fourth District, Imperial County Superior Court Judge Jeffrey Jones ruled for the county. Judge Jones found that not only did the permit conditions not deprive Allegretti of all economically viable use of its property, Allegretti had failed to show that the conditions “would have any economic impact at all.”
On appeal, Allegretti tried numerous approaches to win a reversal. First, Allegretti alleged that the county’s action amounted to a physical taking in that the county had denied the landowner access to water on its land. Allegretti relied heavily on a Federal Circuit Court of Claims decision in Tulare Lake Basin Water Storage Dist. v. United States, (2001) 49 Fed.Cl. 313. In that case, the court ruled environmental regulations that prohibited farmers from receiving water deliveries to which they were contractually entitled amounted to a physical taking (see CP&DR Environment Watch, March 2004).
The Fourth District, however, said that it was not bound by the decision of an intermediate federal court, that the cases were different because only Tulare Lake involved contractual water rights, that a more recent decision in Klamath Irrigation District v. United States, (2005) 67 Fed.Cl. 504, undercut Tulare Lake, and that it disagreed with the Tulare Lake holding.
The court then considered the regulatory takings arguments. Allegretti contended that the county’s regulation amounted to a total regulatory taking because the landowner had been deprived of all “economically beneficial or productive use” of its property. The court quickly dismissed this argument, noting that a tenant had farmed 400 to 800 acres of the property’s 1,600 cultivatable acres.
The court then undertook a Penn Central takings analysis, which emphasizes three factors: the economic impact of the regulation, the extent to which the regulation interfered with “distinct investment-backed expectations,” and the character of the government action. The court found that Allegretti failed to pass the Penn Central test.
“Allegretti has not demonstrated any economic impact from county’s 12,000 acre-feet per year limitation other than unspecific lay testimony regarding reduced profits via a below market rental rate or diminution in value as a result of its inability to use the entirety of its 2,400-acre property for farming,” Justice Terry O’Rourke wrote for the Fourth District. “It is well established that mere diminution in value of property, however serious, does not constitute a taking.”
Moreover, although Allegretti has superior groundwater rights as an overlying user, those rights are restricted to reasonable beneficial use consistent with Article X, §2 of the state constitution, O’Rourke noted.
The final argument concerned whether the government regulation substantially advances a legitimate state interest. Last year, the U.S. Supreme Court in Lingle v. Chevron U.S.A. Inc., (2005) 544 U.S. 528, disavowed this as a stand-alone takings test (see CP&DR, July 2005). Allegretti argued that the substantially advances test still applies in California because the state Supreme Court used it in one of its most recent takings cases, Landgate, Inc. v. California Coastal Com., (1998) 17 Cal.4th 1006 (see CP&DR Legal Digest, January 1999, June 1998). The court was willing to entertain the argument, and explained, “Under Landgate, no taking occurs if objectively there is ‘sufficient connection between the land use regulation in question and a legitimate governmental purpose, so that the former may be said to substantially advance the latter.’”
Allegretti argued that the permit conditions could not advance a legitimate purpose because the county has no jurisdiction over groundwater usage. The court rejected the argument.
“The permit condition, imposed under county’s police power for the purpose of conserving groundwaters and preventing their undue waste, had an objectively sufficient connection to that valid governmental interest,” O’Rourke wrote. “Allegretti does not identify and thus does not meaningfully challenge county’s underlying reasons for its action, nor does it explain why county’s limitation is in any way arbitrary.”
As long as a governmental entity engages “in decision-making whose purpose is not delay for delay’s sake but legitimate oversight,” there is no compensable taking, the court concluded.
The Case:
Allegretti & Co. v. County of Imperial, No. D045156, 06 C.D.O.S. 3519, 2006 DJDAR 5057. Filed March 28, 2006. Ordered published April 26, 2006.
The Lawyers:
For Allegretti: Michael Berger, Manatt, Phelps & Phillips, (310) 312-4000.
For the county: Ralph Cordova, county counsel’s office, (760) 482-4400.
