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Water Implications and Likely Legal Challenges

A (Limited) Win for the Environment and Those of Us Living in It 

Colorado Efforts to Protect Water Resources

California has a storied and complex history of water rights evolution that has resulted in over a century’s reliance on a successful water rights permitting system. However, as a megadrought strains water resources across the southwest, the State Water Board is pushing back on California’s longstanding water rights scheme in favor of a more innovative approach: a voluntary water rights sharing agreement program. California joined the Union as the thirty-first state on September 9, 1850. After gaining its statehood, California embraced the water rights system of the Eastern United States, based on English common law, and adopted the riparian rights system . Under the riparian rights system, water rights stem from ownership of land that borders a water source. The riparian property owner possesses the right to use that water. This right runs with the land and will remain valid even if it is never exercised. However, the pure riparian system would not last in California. After prospectors discovered gold in 1848, California was flooded with ambitious miners hoping to find fortune in gold, as well as others hoping to find the same in providing services and goods to those gold rush miners. After the miners came the farmers, bringing great agricultural interest to the state of California. Riparian rights proved to be problematic for these two groups. Riparian rights are land based, and at this time most of the land in California was held by the federal government, with very little private land ownership. Therefore, early miners and farmers had very little opportunity to gain water rights . Additionally, riparian rights only attach to natural flow. This principle only allows water to be taken from the flow of the river as it naturally runs. This means water cannot be stored during wet years and seasons for release and use in dry years and seasons. Because of this, the system was wholly impractical for these two groups to store any large amounts of water to rely on as reserves for their operations. Consequently, these early miners and farmers were unable to rely solely on the riparian rights system to meet their needs. As a result of this struggle, in 1855 the California Supreme Court decided Irwin v. Phillips , recognizing another kind of water right: the appropriative water right. Appropriative water rights are based on the doctrine of prior appropriation. Much to the relief of newly settled miners and farmers, water rights in the prior appropriation system are not based on owning land. The doctrine of prior appropriation rewards those who are able to put the water to beneficial use and create the most social value from the water. Under the doctrine of prior appropriation, water is allocated based on priority. The phrase used to describe this principle is “first in time, first in right.” In general, the first person to put the water to beneficial use first has priority and is considered the senior user. The senior user is able to use the amount of water they need before the junior user is able to access the water. If appropriative rights are not used, the holder loses them. Appropriative rights may be taken from the source and stored anywhere to be used later, making them the ideal right for the western, arid California. Despite developing a water rights system that better fit California’s needs, the state opted to keep its system of riparian rights alongside the newly minted appropriative rights system. In 1872, California enshrined the principle of riparian rights in its state constitution. In the beginning of the twentieth century California was still relying on common law as its system to allocate water. There was no state government agency monitoring these water rights issues. California concluded that it needed a more efficient system for allocation. As a result, California passed the Water Commission Act of 1913 (“Act”). The Act created both a water right permitting system and the predecessor agency to what is the modern-day State Water Resources Control Board. The State Water Resources Control Board is the current authority charged with issuing water rights permits. In recent years, the growing population and changing weather patterns have put a strain on California's water supply, unlike any seen during the inception of California’s water rights permitting system. As of July 2022, more than thirty-two percent of land in the Western States was classified as experiencing extreme drought, with California listed as one of the states experiencing the most severe conditions, such as rapid depletion of reservoirs, explosive wildfires, and even major declines in bird populations. In fact, the past two decades have been the driest in a 1,200-year period for California. By studying thousands of tree rings, scientists are able to measure historical moisture patterns and have concluded that the Western United States is experiencing a “megadrought,” something unseen since 800 A.D. As a result of this climate crisis, debates are beginning to erupt regarding the best way to amend California’s century-old water rights system to best fit life in the modern era. In 2022, California Senate Democrats introduced a $7.5 billion-dollar proposal for a “climate resilient water system.” This system would entail purchasing lands with senior water rights from holders willing to sell. After acquiring these lands, the plan would “retire water use incrementally from multiple water uses in a basin and across wide geographies.” Proponents of the plan claim this will help achieve the desired goal of providing clean drinking water and improving conditions of wildlife refuges and fish habitats. However, this proposal poses significant legal risks that may harm some senior rights holders and leave California State vulnerable to litigation. Water rights are a property interest. By attempting to regulate senior water rights, California State might have had to defend against takings claims. Instead of taking a risky regulatory approach, the State Water Board is testing something novel: a voluntary water rights sharing agreement program. Water rights holders in the Upper Russian River watershed in Mendocino and Sonoma Counties are piloting this program. Anticipation of a water supply shortage following the unrelenting drought conditions of the last year was the spark needed to drive innovation in the method of allocating water. The water rights holders of these counties began to meet once a week in hopes of striking a new agreement to avoid possible curtailments. The Upper Russian River program was formed as a result of these meetings. Eligible to all water rights holders by enrollment, the program provides for a twenty to thirty percent reduction of water use by senior rights holders. In addition to senior rights holders, cities of the region have also begun enforcing water conservation. The water savings resulting from this use reduction are shared with junior rights holders, whose use would otherwise have been curtailed. For rights holders not enrolled in the program, there is an emergency curtailment regulation in place. These backstop curtailments will become effective based on seniority. In effect, the trickle-down results of the program serve to prevent the previous all or nothing result of the appropriative water rights system. While the Upper Russian program is green and remains unchallenged, there is promising precedent that could provide solid legal footing for programs that deviate from their state water rights scheme. In a fight over groundwater rights in Diamond Valley, Nevada, the state Supreme Court held that its state engineer could deviate from Nevada’s seniority-based water law scheme. The Nevada Supreme Court’s decision authorized the controversial Diamond Valley groundwater plan to continue. Unlike the Upper Russian program, the Diamond Valley groundwater plan required all rights holders to reduce their use, rather than relying solely on volunteers. With this strict distinction came significant discussion by the dissent in the case regarding the constitutional implications of this decision and whether the government must pay just compensation to senior water rights holders for the plan’s effects on their rights. Only time will tell if the strict approach of the Diamond Valley plan will be upheld as the mainstay precedent for innovative programs such as these; or perhaps the voluntary nature of the Upper Russian program will offer the best compromise. However, the cooperative nature of the Upper Russian program places it as the most likely candidate for success. By being voluntary, the Upper Russian program is more likely to be praised as a win for its flexibility and promotion of innovation in times of crisis, and it is less vulnerable to criticism labeling it as over regulatory or burdensome. For these reasons, the Upper Russian program model could be applied in Colorado, as it has strong potential to establish itself as the foundation for novel voluntary water rights sharing programs across the West. Sources California State Library Multimedia, Water and Drought in California: A Legal Primer , Youtube (Nov. 9, 2022), https://www.youtube.com/watch?v=rVti_wb6RaA . Daniel Rothberg, Justices uphold groundwater plan in ruling that could 'significantly affect water management,’ The Nevada Independent (June 22, 2022), https://thenevadaindependent.com/article/justices-uphold-groundwater-plan-in-ruling-that-could-significantly-affect-water-managementefbfbc . Ian James, Western megadrought is worst in 1,200 years, intensified by climate change, study finds , Los Angeles Times (Feb. 14, 2022), https://www.latimes.com/environment/story/2022-02-14/western-megadrought-driest-in-1200-years . Paul Rogers, Current drought is worst in 1,200 years in California and the American West, new study shows , The Mercury News (Feb. 14, 2022), https://www.mercurynews.com/2022/02/14/current-drought-is-worst-in-1200-years-in-california-and-the-american-west-new-study-shows/ . Stephanie Elam, Property owners and officials find ways around century-old laws as the West runs out of water , CNN (July 10, 2022), https://www.cnn.com/2022/07/10/us/west-water-crisis-property-rights-climate/index.html . Water Law in California , Water Education Foundation (last updated 2020), https://www.watereducation.org/aquapedia/water-rights-california#:~:text=California's%20growth%20has%20closely%20paralleled,of%20land%20bordering%20a%20waterway .

Are current punitive damages caps sufficient to deter bad actors from contaminating the environment? The recent train derailment in East Palestine, Ohio, demonstrates that Ohio’s punitive damages cap may be a drop in the bucket for large corporations. Nearly every state has its own cap on punitive damages, which is usually tied to a defendant’s liability for compensatory damages. These statutory caps may defeat the purpose behind punitive damages: punishment and deterrence. On February 3, 2023, a Norfolk Southern train carrying chemicals and combustible materials derailed and caught fire in East Palestine, Ohio. [i] The train was carrying vinyl chloride, a “toxic flammable gas.” [ii] Vinyl chloride is used to make PVC and is produced in tobacco smoke; it is also associated with an increased risk of liver cancer. [iii] To limit the chance of explosion and shrapnel, authorities authorized a controlled release of the chemicals on the train. [iv] All residents were evacuated within the one-by-two mile area surrounding the derailment. [v] Latest reports indicate that the derailment was caused by a wheel bearing overheating to above two hundred and fifty degrees Fahrenheit above ambient temperature. [vi] Norfolk Southern’s safety guidelines do not require train operators to “take action until wheel bearings reach one hundred seventy degrees Fahrenheit above ambient temperature.” [vii] The temperature jumped nearly one hundred and fifty degrees between defect detectors along the track. [viii] Upon hearing the alarm, the crew attempted to bring the train to a stop, but the wheel bearing failed. [ix] The National Transportation Safety Board indicated that while more detectors could have prevented the derailment, the crew followed safety regulations. [x] Since the derailment, however, there have been major concerns regarding the safety of East Palestine’s air and water as some residents have experienced headaches and rashes. [xi] On February 15 th the Governor of Ohio, Mike DeWine, informed residents that water was safe to drink and that the Environmental Protection Agency (“EPA”) found no contaminants in the water. [xii] However, out of an abundance of caution, EPA will continue to independently test water once a week. [xiii] Many local residents are skeptical of these tests and have requested that private contractors also test their water because they continue to smell chemicals and experience headaches and rashes. [xiv] Following the derailment, the Ohio Department of Natural Resources indicated that at least forty-three thousand fish have died in the area. [xv] Norfolk Southern describes itself as one of the nation’s premier transportation companies, operating 35,316 miles of track in twenty-two states and transporting industrial products across the country. [xvi] On March 1, 2023, Norfolk was worth approximately fifty-one billion dollars . [xvii] However, the company’s worth has dropped thirty percent in 2023, and is currently worth only forty-five billion dollars. [xviii] EPA has ordered Norfolk Southern to clean up contaminated soil and water in the area, and if Norfolk Southern fails to do so, EPA will fine it seventy thousand dollars a day . [xix] Regardless, Norfolk Southern may still be liable to the residents of the area for adverse impacts on their current and future health and lowered property values. At this time, at least eight class action lawsuits have been filed, requesting a total of five million dollars in damages. [xx] One complaint alleges that in one week, Norfolk Southern leaked more vinyl chloride than all other industrial emitters in a year. [xxi] That complaint also alleges that Norfolk Southern acted recklessly when it lit chemicals on fire instead of taking other measures to contain the chemical leakage, because when vinyl chloride is lit, it becomes phosgene gas, a chemical agent used in World War I. [xxii] Phosgene gas was responsible for the deaths of eighty-five thousand people in World War I. [xxiii] It can cause respiratory irritation, and chronic exposure can result in inflammation of the lungs. [xxiv] The plaintiffs further allege that Norfolk Southern’s general philosophy about its infrastructure is to “run it until it breaks,” and that Norfolk Southern “acted with willful and wanton conduct.” [xxv] Plaintiffs request both compensatory and punitive damages. [xxvi] State law governs punitive damage awards, but grossly excessive or arbitrary damage awards violate federal constitutional due process rights. [xxvii] In Ohio , punitive damages are available when “the actions or omissions of that defendant demonstrate malice or aggravated or egregious fraud.” [xxviii] In this case, in order to obtain punitive damages, the plaintiffs will need to demonstrate that Norfolk Southern acted with malice either by failing to maintain the train and train track, or by choosing to burn the chemicals as opposed to taking other steps to clean up the spill. If the case goes to trial, the jury will need to make this determination. This will be a difficult task. In Ohio , courts define malice in civil cases as “a state of mind in which conduct toward another is characterized by hatred, ill will, a spirit of revenge or retaliation, or . . . malice implied from wrongful acts purposely done without reason or excuse to the injury of another.” [xxix] More facts may emerge in the next several months about whether Norfolk Southern acted with or without malice. Under the current Ohio statute, punitive damages may not be available as there appears to be a justification for the burning of chemicals after the derailment, namely, to prevent explosions and shrapnel. In comparison, the Colorado standard for punitive damages is “fraud, malice, or willful and wanton conduct,” with willful and wanton conduct defined as “conduct purposefully committed which the actor must have realized as dangerous, done heedlessly and recklessly, without regard to consequences, or of the rights and safety of others, particularly the plaintiff.” [xxx] Because the Colorado standard includes “willful and wanton conduct,” it is broader than Ohio’s malice only standard. Therefore, had the train derailment occurred in Colorado, there would be a stronger case for punitive damages. Following the train derailment, policymakers in Ohio should revisit their state’s legal standard for punitive damages. Malice is a difficult standard for any plaintiff to prove. Expanding the scope of punitive damages to include willful and wanton conduct could increase the deterrent effect on tortfeasors. Given the impacts on individuals within the community, there is likely enough political will to make substantial statutory change. Punitive damages are meant to deter bad actors. [xxxi] In the 1980s, however, many commentors were concerned about the possibility of runaway punitive damage awards. [xxxii] Many states have placed caps on punitive damages to limit unpredictable punitive damage jury awards. After the Exxon Valdez spill in Alaska, the Supreme Court established a one-to-one ratio of compensatory to punitive damages in the context of maritime law. [xxxiii] As relevant here, the Court in Exxon reviewed statistical evidence of punitive damages awards and determined that runaway damage awards did not pose a significant problem, as most punitive damage awards were less than the compensatory damages awards granted. [xxxiv] In Ohio, however, punitive damages are capped at twice the compensatory damages. [xxxv] And in Colorado, punitive damages are capped at a one-to-one ratio unless the defendant repeated the behavior in a willful and wanton manner or acted willfully and wantonly in further aggravating existing damages in the matter, in which case Colorado courts may award up to three times the sum of compensatory damages. [xxxvi] If the court awards the Ohio plaintiffs the five million dollars they have requested, the maximum punitive damages they could receive is ten million dollars. Given Norfolk Southern is worth forty-five billion dollars, an order to pay ten million dollars in punitive damages would hardly deter future, similar conduct. Because these statutory damages caps were passed during the era of tort reform, and corporation profits continue to rise, current caps on statutory damages are outdated. In Exxon , the Court found there was never an issue concerning large punitive damage awards except in outlier cases. [xxxvii] If a corporation acted with truly reprehensible conduct towards the public, then it will not be sufficiently deterred if punitive and compensatory damages are merely a drop in the bucket in comparison to the total value of the corporation. Corporations will argue that the threat of unlimited punitive damages will hurt the economy, chill business, and limit business risk, thereby limiting revenue generation. They may argue that punitive damages awards are unfair because they are so unpredictable. However, reprehensible conduct is not the type of business risk policymakers should encourage. Additionally, the Court in Exxon established that the threat of outlier punitive awards was not a real risk. If state policymakers are hesitant to eliminate all caps on punitive damages, perhaps they can start with eliminating punitive damages caps only on common carriers. In Ohio , a corporation is defined as a common carrier if it operates a “railroad owned by a municipal corporation of the state.” [xxxviii] Additionally, federal law assigns common carrier obligations to rail carriers. [xxxix] Norfolk Southern qualifies as a common carrier in Ohio. Given that common carriers already owe a higher duty of care to the public, if their conduct falls so far as to qualify as willful and wanton, higher punitive damages should be warranted. Common carriers are often required to transport dangerous materials and have the potential to cause extensive damage to human health and the environment. Considering the tragedy in East Palestine, policymakers should expand the scope of liability for punitive damages. There are current bipartisan efforts to ensure that Norfolk Southern does more to help recovery in the community. [xl] Current state laws are insufficient to deter future wrongful conduct from Norfolk Southern or other railroad companies. Less than one month after the trail derailment in Ohio, a train carrying propane derailed in Florida . [xli] In March, additional Norfolk Southern derailments occurred in Springfield, Ohio and in Ayer, Massachusetts . [xlii] Increasing the scope of liability for common carriers is an additional tool to ensure that proper safety measures are taken to limit the risk that future train derailments pose, not just to human health, but to the environment. Sources [i] Christine Hauser, After the Ohio Train Derailment: Evacuations, Toxic Chemical and Water Worries , N.Y. Times (Mar. 1, 2023) https://www.nytimes.com/article/ohio-train-derailment.html?auth=login-google1tap&login=google1tap . [ii] Id. [iii] Vinyl Chloride , Nat’l Cancer Inst., https://www.cancer.gov/about-cancer/causes-prevention/risk/substances/vinyl-chloride (Nov. 3, 2022). [iv] Dennis Romero and Marlene Lenthang, Controlled Chemical Release Scheduled to Prevent Explosion in Wake of Ohio Train Derailment , NBC News (Feb. 5, 2023), https://www.nbcnews.com/news/us-news/explosion-possible-wake-ohio-train-derailment-involving-hazardous-mate-rcna69243 . [v] Id. [vi] Becky Sullivan, Here’s the Most Thorough Explanation Yet for the Train Derailment in East Palestine , NPR News (Feb. 23, 2023) https://www.npr.org/2023/02/23/1158972561/east-palestine-train-derailment-ntsb-preliminary-report-wheel-bearing#:~:text=NTSB%3A%20Overheated%20wheel%20bearing%20led%20to%20Ohio%20train%20derailment%20%3A%20NPR&text=NTSB%3A%20Overheated%20wheel%20bearing%20led%20to%20Ohio%20train%20derailment%20A,prevent%20the%20derailment%2C%20officials%20said . [vii] Id. [viii] Id. [ix] Id. [x] Id. [xi] Id. [xii] East Palestine Water Quality Update , Mike DeWine, Governor of Ohio (Feb. 15, 2023), https://governor.ohio.gov/media/news-and-media/east-palestine-water-quality-update-2152023 . [xiii] East Palestine Update - 2/22/23 , Mike DeWine, Governor of Ohio (Feb. 23, 2023), https://governor.ohio.gov/media/news-and-media/east-palestine-update-022223 . [xiv] Emily Cochrane, Many in East Palestine, Skeptical of Official Tests, Seek Out Their Own , N.Y. Times (Feb. 19, 2023), https://www.nytimes.com/2023/02/19/us/politics/east-palestine-toxic-chemicals-epa.html . [xv] Drew Scofield, ODNR Update on East Palestine: More Than 43,000 Fish Died in Train Derailment , News 5 Cleveland (Feb. 23, 2023), https://www.news5cleveland.com/news/east-palestine-train-derailment/odnr-update-on-east-palestine-tens-of-thousands-of-fish-have-died-since-train-derailment . [xvi] Corporate Profile , Norfolk Southern, http://www.nscorp.com/content/nscorp/en/about-ns/corporate-profile.html (last visited Mar. 1, 2023). [xvii] Norfolk Southern Corporation , Stock Analysis, https://stockanalysis.com/stocks/nsc/market-cap/ (Last visited Mar. 1, 2023). [xviii] Id. [xix] Kris Maher, Ohio Train Derailment: EPA Orders Norfolk Southern to Clean Up Site , The Wall St. J. (Feb. 23, 2023) https://www.wsj.com/articles/epa-orders-norfolk-southern-to-clean-up-ohio-train-derailment-site-ad6591d5 . [xx] Jennifer Edwards Baker, Eight Lawsuits Filed Against Norfolk Southern Over Train Derailment, ‘Chemical Burn’ , Fox 19 Now (Feb. 17, 2023) https://www.fox19.com/2023/02/17/eight-lawsuits-filed-against-norfolk-southern-over-train-derailment-chemical-burn/ . [xxi] Id. [xxii] Id. [xxiii] Id. [xxiv] Medical Management Guidelines for Phosgene , Agency for Toxic Substances and Disease Registry, https://wwwn.cdc.gov/TSP/MMG/MMGDetails.aspx?mmgid=1201&toxid=182 (last reviewed October 21, 2014). [xxv] Baker, supra note xx (citing Class Action Complaint and Demand for Jury Trial, Canterbury v. Norfolk S. Corp. at ¶ 33, No: 4:23-cv-00298-BYP (N.D. Ohio Feb. 15, 2023)). [xxvi] Id. (citing Class Action Complaint and Demand for Jury Trial, Canterbury v. Norfolk S. Corp. at ¶¶ 101, 110, No: 4:23-cv-00298-BYP (N.D. Ohio Feb. 15, 2023)). [xxvii] State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003). [xxviii] Ohio Rev. Code Ann. § 2315.21(C)(1). [xxix] Tibbs v. Nat’l Homes Constr. Corp., 369 N.E.2d 1218, 1224 (Ohio Ct. App. 1977). [xxx] Colo. Rev. Stat. § 13-21-102(1)(a)–(b) (2022) [xxxi] Rachel E. Barkow et al., Modern American Remedies Cases and Materials 177 (Concise 5th ed. 2019). [xxxii] Id. at 188. [xxxiii] Exxon Shipping Co. v. Baker, 554 U.S. 471, 513 (2008). [xxxiv] Id. at 512. [xxxv] Ohio Rev. Code Ann. § 2315.21(D)(2)(a). [xxxvi] Colo. Rev. Stat. § 13-21-102 (2022). [xxxvii] Exxon Shipping Co., 554 U.S. at 512. [xxxviii] Ohio Rev. Code Ann. § 1743.02(B). [xxxix] 49 U.S.C. § 10102. [xl] Liz Brown-Kaiser, Lawmakers Push Norfolk Southern for More Recovery Help After Ohio Train Derailment , NBC News (Feb. 16, 2023) https://www.nbcnews.com/politics/congress/ohio-train-derailment-lawmakers-push-norfolk-southern-aid-rcna71114 . [xli] Chantal Da Silva, Train Carrying Propane Derails a Few Miles from Florida Airport , NBC News (Mar. 1 2023) https://www.nbcnews.com/news/us-news/train-carrying-propane-derails-miles-away-florida-airport-rcna72838 . [xlii] Emily Olson, Another Norfolk Southern Train Derails in Ohio , NPR News (March 6, 2023), https://www.npr.org/2023/03/06/1161262824/train-derailment-springfield-ohio ; Massachusetts Train Derails, No Hazardous Cargo Reported , A.P. News, https://apnews.com/article/freight-train-derailment-massachusetts-307dd02daf1ac56eadaf97ec89c1d9b2 .