The legacy of Schodde V. Twin Falls Land and Water Company: the evolving reasonable appropriation principle.

• Author: Tarlock, A. Dan

1. INTRODUCTION: THREE SCHODDE STORIES II. THE SUPREME COURT CASE: ORIGINS AND OPINION A. Irrigation on the Hardscrabble Snake River Plain B. A Feisty Settler Challenges the Reclamation Dream A Triple Play: A Loss at Every Judicial Level III. WIEL GETS IT RIGHT IV. THE FIRST THREE DECADES: SCHODDE INCONSISTENTLY APPLIED V. SCHODDE REEMERGES A. The Lessons Initially Ignored as Groundwater Conflicts Intensify B. Colorado Applies and Extends Schodde C. Idaho Takes a Large Step Forward and a Half Step Back VI. CONCLUSIONS: WHAT CAN WATER LAWYERS LEARN, IF ANYTHING, FROM SCHODDE'S REEMERGENCE? I. INTRODUCTION: THREE SCHODDE STORIES

   This symposium honors two leading water law scholars who have had quite different scholarly agendas during their long, productive, and distinguished careers. Professor Huffman has devoted much of his career to firming up the federal-state relationship over the control of western waters that emerged in the late nineteenth century and to maintaining the integrity of classic prior appropriation law to trigger water markets. (1) While Professor Huffman has worked diligently to keep water law within its historic envelope, Professor Neuman has tried to push the envelope to adjust water resources allocation to the emergence of environmental protection as a public value and to reform prior appropriation to promote the more efficient use of water to free up supplies for instream use. (2) Both have contributed greatly to western water law scholarship. (3)

   This Article tries to straddle both strains of their western water law scholarship by examining a not unknown, (4) but underappreciated (5) 1912 Supreme Court decision, Schodde v. Twin Falls Land & Water Co. (6) Schodde refused to enforce a prior right because it would have required dedicating the entire pre-dam current of the Snake River to lift the small amount of water actually devoted to beneficial use. (7) This precedent ultimately gave rise to the reasonable appropriation rule. Today, courts, legislatures, and administrative agencies are increasingly relying on Schodde as they struggle with the inefficiencies of prior appropriation in an era of increasing scarcity. (8)

   There are three Schodde stories. The first is a classic David and Goliath tale. A small landowner asked a court to enforce a recognized property right, a senior appropriation, against a subsequent but more powerful right holder. (9) The second story is an important chapter in the late nineteenth century effort to eliminate all vestiges of riparian rights from western water law to allow the triumph of the conservation era (10) dream of efficiently dammed and diverted rivers "reclaiming" vast tracts of arid lands. (11) The third story is the continual judicial, legislative, and administrative adjustment of "frontier" or pure prior appropriation--the economic and social costs of the exercise of a prior right be dammed--to the ever evolving problems of modern western water management. (12) The perpetual problem of scarcity has become more pressing as the region confronts the real stresses of climate change. (13) This Article focuses on the third story.

   Schodde is a classic example of the development of a judicially imposed background limitation on a private property title. Western courts have long recognized that at the margin of property rights in water, there is a small space to adjust them to changing conditions and the needs of other users. (14) This exercise of judicial discretion has taken on greater importance in light of the Supreme Court's willingness to recognize judicial takings claims. (15) This Article's basic argument is that the sensitive way in which courts have applied Schodde illustrates that courts can satisfactorily balance the protection of individual expectations about the use of resources of property with changing conceptions about the best use of resources, without the straightjacket of the Fifth Amendment.

2. THE SUPREME COURT CASE: ORIGINS AND OPINION

   1. Irrigation on the Hardscrabble Snake River Plain

      Schodde arose from a challenge to a Carey Act (16) dam and irrigation project on the Snake River Plain, that "beautiful [] vast sage plain that fails in great steps from the mountains to the canyon of the Snake, and then rises gradually on the other side to other mountains." (17) Idaho was one of the last areas of the West to be settled. Gold was discovered in Idaho around Boise in 1860, and three years later Congress created the Idaho Territory, (18) although Idaho did not become a state until 1890. (19) After the Civil War, a few adventurous souls settled on the Snake River plain around what is now Twin Falls. (20) It was a hard life where "the heat of summer and lack of water desiccated the once high spirits of Oregon-bound emigrants." (21) Early farmers used water wheels, a legacy of downstream gold mining, to draw water from rivers to irrigate surrounding lands. (22)

      This primitive, "customary" water use eventually frustrated the irrigation visionaries. To them, the Idaho Territory was central to the irrigation movement that blossomed in the 1880s. (23) The Snake River Plain's several millions of acres of volcanic soil cried out for cultivation. (24) Potatoes, introduced by Mormon settlers in southern Idaho, flourished on the plain. (25) Irrigated agriculture goes back to the dawn of civilization. In the United States it became a major utopian and political movement after the Civil War, although it took until 1902 to work out a way to finance irrigation outside of Utah and a few colonies in California and Colorado. (26) The railroads and promoters enticed many settlers to the empty region with dreams of a good life in a Jeffersonian community. In the 1880s, private irrigation schemes (27) lured settlers to Idaho, but these were undercapitalized and most failed, as the late Wallace Stegner so vividly described in his masterpiece, Angle of Repose. (28) In the American West, "[n]inety percent of the private irrigation companies were in or near bankruptcy by 1902." (29)

      The early proponents of irrigation realized that government support was necessary. Initially, they believed that irrigation promotion was solely a state function and only urged the succession of federal lands to the states for this purpose. (30) In 1894, Congress responded to the state responsibility argument with the last large-scale distributions of the public domain--the Carey Act ceded one million acres to each of the Desert Lands Act (31) states. (32) In return, the states were to develop irrigation plans based on available water supplies and sell the land to "actual settlers" in tracts of no more than 160 acres. (33) The Carey Act relied on private capital to construct the dams and canals, (34) but this defect was soon cured by the Reclamation Act of 1902 (35) which provided federal "loans" for projects. (36) The Carey Act is usually understood as a failed precursor to the Reclamation Act of 1902, (37) but it actually worked in Idaho--the major beneficiary of the Act. (38) The federal government transferred 618,000 acres of desert lands to the new state, (39) and several major projects were built including the dam that wiped out Henry Schodde.

      [FIGURE 1 OMITTED]

      Sufficient capital was raised for a large private project around Twin Falls. The centerpiece was a dam envisioned by Ira Perrine, a local rancher and resort owner, who chose the site and designed it. (41) He persuaded Stanley B. Milner, a Salt Lake City banker, (42) and Frank Buhl, a millionaire from Pittsburgh who had sold his steel mill to Andrew Carnegie's U.S. Steel, to finance the dam. (43) Buhl formed a company and as president of the Twin Fails Water Company raised $3.5 million from investors. (44) The dam, named Milner in honor of the financier who died before its completion, was built between 1903 and 1905 and supplied water to an initial 262,000 acres. (45) The Twin Falls project is generally considered one of the few successful privately financed Carey Act projects and today supplies water for 500,000 acres in the Magic Valley. (46) The dam was listed on the National Register of Historic Places in 1986. (47)

   2. A Feisty Settler Challenges the Reclamation Dream

      Schodde was a classic conflict between old and new technology triggered by a stubborn German immigrant settler in the Idaho Territory. (48) Schodde was one of the millions of Germans who left Germany in the mid-nineteenth century in search of a better life. (49) He was eighteen years old when he arrived in New Orleans in 1854 and bounced around the Midwest, Utah, and Nevada before becoming one of the first settlers near what is now Burley, Idaho. (50) In 1874, he chose a spot near where the Snake plunged into a 600-foot canyon to grow hay to feed his cattle. (51) The rapids caused by the descending river provided the power for eleven wheels which lifted water to the rim of the Snake to grow hay and grain. (52) Eventually, Schodde had three tracts of land along the Snake which were used both for mining and crops. (53) His water rights totaled 1250 miner's inches and were based on appropriations by an earlier landowner in 1889 and Schodde himself in 1895. (54) But progress claims losers, and the Milner Dam wiped out Schodde's water wheels, leaving his entire irrigation system useless. He claimed compensation for the loss of the pre-dam, natural current of the Snake River. (55) The Twin Falls Company offered Schodde land in the new irrigation project, but he rejected this offer and chose to stand on his perfected water rights. (56)

      Schodde's claim that a property right must be enforced without any consideration of the economic impact of the person who interfered with it was articulated in a contemporary New York Court of Appeals case. In that case, the court refused to balance the equities when it enjoined a large pulp mill that polluted a farmer's stream: (57)

      Although the damage to the plaintiff may be slight as compared with the defendant's...