1 in the matter of the department ) transcript of hearing · perfecta reporting 1 in the office of...
TRANSCRIPT
PERFECTA REPORTING
1
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
In the Matter of the Department )of Water Resources' Denial of ) No. 16A-AWS001-DWR Yavapai Land Holdings, LLC's ) Application for Analysis of Assured)Water Supply, Application No. )28-402259.0000. )___________________________________)
TRANSCRIPT OF HEARINGDAY 1
BEFORE: Judge Diane MihalskyAdministrative Law Judge
APPEARANCES: Mr. Stanley B. Lutz, Esq.Ms. Marla Hudgens, Esq.Ms. Carla A. Consoli, Esq.LEWIS ROCA ROTHGERBER CHRISTIE, LLPRepresenting Yavapai Land Holdings, LLC
Ms. Janet L. Miller, Esq.Ms. Jennifer Heim, Esq.Ms. Nicole D. Klobas, Esq.ARIZONA DEPARTMENT OF WATER RESOURCES
Phoenix, ArizonaNovember 14, 2016
(Copy)PERFECTA REPORTING8513 E. Angus Drive
Angela Furniss Miller, RPR Scottsdale, Arizona 85251Certified Reporter (AZ 50127)
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I N D E X
PROCEEDINGS PAGE
Opening Statement by Mr. Lutz 29Opening Statement by Ms. Miller 36
WITNESS PAGE
JAMES KEVIN BURDETTE
DIRECT EXAMINATION BY MR. LUTZ 42
VOIR DIRE EXAMINATION BY MS. HEIM 44
CONTINUED DIRECT EXAMINATION BY MR. LUTZ
45
CROSS-EXAMINATION BY MS. HEIM 57
REDIRECT EXAMINATION BY MR. LUTZ 60
MICHAEL JAMES PEARCE
DIRECT EXAMINATION BY MS. HUDGENS 63
CROSS-EXAMINATION BY MS. HEIM 158
REDIRECT EXAMINATION BY MS. HUDGENS 171
GARY YOUNG
DIRECT EXAMINATION BY MS. HUDGENS 173
CROSS-EXAMINATION BY MS. KLOBAS 222
* * *
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E X H I B I T S
NO. OFFERED ADMITTED
Yavapai 4 through 6 28
Yavapai 9 28
Yavapai 11 28
Yavapai 13 through 45 28
Yavapai 47 through 51 28
Yavapai 53 189 190
Yavapai 56 44 45
Yavapai 70 28
ADWR 1 through 64 28
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P R O C E E D I N G S
HON. MIHALSKY: We're on the record. It is --
let's see -- 8:32 a.m. on November 14th, 2016. This is
the hearing in Case No. 16A-AWS001-DWR, that is the matter
of the Department of Water Resources' denial of Yavapai
Land Holdings, LLC's, Application For Analysis For Assured
Water Supply, Application No. 28-402259.000.
My name is Diane Mihalsky, I'm the Administrative
Law Judge who has been appointed to conduct the hearing in
this matter. I don't have my sign-in sheets, but I think
it's better if the attorneys make their appearances for
the record and acknowledge any witnesses or experts who
you have here that you want to acknowledge.
Beginning on my left.
MR. LUTZ: Good morning, Stan Lutz with the law
firm Lewis, Roca, Rothgerber, Christie on behalf of
Yavapai Land Holdings. With me today we have my
colleague, Marla Hudgens, my colleague Carla Consoli; a
client representative, Mr. Kevin Burdette. We also have
two witnesses with us, Your Honor, Mr. Michael Pearce, Mr.
Gary Young -- Mr. Young I believe has his counsel, Ms. Lee
Storey with him -- and our assistant is here in case we
need some assistance.
HON. MIHALSKY: Very good.
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MS. MILLER: Good morning, Your Honor. Janet
Miller appearing on behalf of the Arizona Department of
Water Resources. With me are co-counsel Jennifer Heim to
my immediate left, and Nicole Klobas at the next table.
With us also this morning are representatives from the
Arizona Department of Water Resources, Frank Corkhill, the
Chief hydrologist; Keith Nelson who is in charge of our
modeling section; and Doug -- I'm sorry, Doug Dunham is
who is the manager for -- was the prior manager for the
Assured and Adequate Water Supply Program, and still has a
supervisory role in that capacity.
HON. MIHALSKY: Have you been acknowledged?
MS. KLOBAS: Yes. Thank you.
HON. MIHALSKY: All right. Very good. We also
have a court reporter here and I didn't bring my sheet-in
sheet.
THE COURT REPORTER: Angela Miller.
HON. MIHALSKY: Angela Miller, very good. We
have some pending motions and so I guess that it would be
best to address the pending motion.
Mr. Lutz, do you want to add anything to your
motion to exclude?
MR. LUTZ: Yes, Your Honor. At this point in
time we received yesterday -- I received this morning,
actually, copies of several additional proposed exhibits
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from DWR, as well as a response to the objection and
motion to preclude.
This notebook is the exhibits that we've received
from DWR, excluding the first several. I will tell you to
be -- to be clear, Exhibits 64 through 68 were disclosed
to us. So, as Your Honor can see, this much of the
notebook was disclosed to us October 27th. The remaining
portion of that notebook was disclosed to us last Tuesday,
and then today we received another small stack of proposed
exhibits from -- from the Agency, Your Honor.
At this time I'd like to further our motion to
preclude the use of any of the material that was received
last week, and move to preclude all of these new exhibits
that have been received, as well as Mr. Nelson from
testifying.
Realizing that this is an informal proceeding,
nonetheless, the Administrative Code still provides that
the Court should look to the civil rules if there's not a
specific statute and/or guidance in the Administrative
Code. Arizona Rule of Civil Procedure 37 has a
presumption -- 37(c), specifically, has a presumption
against allowing documentary evidence or other material
that's first disclosed later than 60 days after
disclosures are to be made, which in this case was May of
this year. But has a presumption that such disclosure if
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made at hearing should not be allowed unless supported by
an affidavit showing good cause; and 37 includes the
sanction of excluding those materials. It includes other
sanctions.
And I told Ms. Miller prior to this hearing, in
20 years of practice, I have never yet seen a Party
disclose potential exhibits on a Sunday before a hearing
starts. And, frankly, I do not say this lightly, because
I've never before said this, I think that is an
appropriate time for sanctions to be imposed. I think the
appropriate sanctions in this instance are preclusion of
those materials and precluding Mr. Nelson from testifying.
In its response which I received this morning,
DWR attempts to lay the blame for its late disclosures on
Yavapai and it does so in a very roundabout way, Your
Honor. It basically says, because Yavapai disclosed
things in May and modeling in May that weren't considered
as part of the analysis. And as we told Your Honor back
when we had our last status conference and discussed the
motions in limine, the materials that were disclosed with
respect to modeling were not intended for -- were not
intended to demonstrate compliance with the assured water
supply rules, rather they were a demonstration that DWR's
direction to use a model that it had developed called the
PrAMA or Prescott AMA model was inappropriate. And that
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that determination and that direction by DWR was part of
the arbitrary and capricious nature and unsupported nature
of its unsupported decision, and that Mr. Miller's
testimony, which was disclosed in May -- or, the exhibit
related to Mr. Miller's testimony was disclosed in May --
were to demonstrate that DWR's initial direction and
guidance in this matter was misguided and that ultimately
resulted in a misguided decision.
At that time, Your Honor allowed -- as DWR
recognized -- said that you would not preclude that
material from trial and DWR then requested some additional
information from us which we provided. We also got
together with DWR and worked out a schedule resulting in
today's hearing, Your Honor. Had they not had enough
time, they could have asked for more time. At any point
in time during this period, they could have asked for more
time. They did not.
We complied with the stipulated order to be ready
for trial on this date. DWR on the other hand waited to
ambush us on the Sunday before hearing with additional
materials and now would like us to be ready to undertake
those materials. Every day we delay, Your Honor, costs
our client money, prejudice -- further prejudices our
client with respect to its property. We have no desire to
further delay this matter.
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As you may recall -- and I think that this is
relevant, Your Honor, to the extent that it demonstrates
the nature of DWR's decision in this -- initially DWR
wanted this matter heard in March. When we took over as
counsel in late December or early January, DWR was
unwilling to stipulate. And at that time they told us,
well, we can't hold a hearing a couple of months later
because we're moving our offices in May, and we suggested
June and were told that wouldn't work; we suggested July.
Ultimately, DWR suggested September, we agreed with that
and set a hearing for September.
When new materials -- when DWR came back and said
there's new materials, we agreed to a further extension
through November. The witnesses that DWR and the exhibits
that DWR now suggest should be allowed at this hearing
were all available to DWR. It may have required work, but
the witnesses are DWR employees. DWR can direct them as
to how to prioritize their work. The fact that DWR sat on
its hands and didn't do so some reasonable period before
this hearing, is simply improper.
I have never before in my -- in my career used
the terms "sanctionable" but, honestly, Your Honor, that's
the only word I can find that properly describes what's
happened here. And I would suggest, Your Honor, that
under 37(c), the Rules of Civil Procedure and the comments
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thereto, they -- they clearly indicate and recognize the
quote, unquote, "prejudice from the lateness of disclosure
is so likely at this stage."
"However, the proponent of such evidence must
make a substantially heightened showing of good
cause of harmlessness" -- and it quotes a case
called AllState -- "and that the parties seeking
to use such information should disclose it as
soon as practicable and then promptly file a
motion and affidavit for leave to allow use for
the information."
None of which happened here.
Your Honor, when DWR approached us about adding a
witness at the end of October, we took the reasonable
position, I think in accordance with your prior orders,
that we weren't going to contest that and that we would
allow DWR to present Mr. Nelson as an additional witness
despite the fact that he hadn't been disclosed seven or
eight months earlier as required by case management
orders. We were even willing, Your Honor, to stipulate
Mr. Nelson or Mr. Corkhill could rely on the two modeling
reports that DWR provided on October 27th that directly
relate to the PrAMA model.
Since then, they've added a thousand pages of
exhibits in the last week, none of which directly relate
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to the PrAMA model, and which constitute entirely new
information that I don't know how we can even prepare for
it at this point in time.
So, Your Honor, with that, I would submit that
the proper response here is to preclude AWR from
presenting either any of the witnesses or testimony that
it has late disclosed in the last two weeks and that that
should simply be precluded from trial.
HON. MIHALSKY: Ms. Miller?
MS. MILLER: Good morning. I listened to Mr.
Lutz's characterization of the history of this case and
suffice it to say I disagree with it in large part.
Many efforts were, as he stated, made to try to
find suitable hearing dates earlier than where we are now.
And in spite of our efforts, every time we would come up
with a date, then we were pushed back by the other side.
Now, instead of spending this morning talking
about that kind of history, I think we need to look at the
larger picture here.
We made a -- the Department of Water Resources
made a decision on December 3rd, 2015, to deny Yavapai's
analysis application. Prior to that time, there was no
objection by Yavapai or its consultant to using the
Prescott AMA model. In fact, they submitted at least two,
if not three, hydrologic reports and/or narratives that
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discussed the results of their use of that model. The
Department of Water Resources was never advised by the
Applicant that there was a problem in its view with that
model.
Now, in addition to that, after the decision was
filed, Yavapai -- as it is entitled to do -- changed
counsel, and in consideration of the fact that new
counsel, obviously, was going to have to be brought up to
speed over years of watching these applications go through
the Department, the Department of Water Resources tried to
be as accommodating as possible to scheduling certain
deadlines.
And I might add at this point, the years that
were involved before the Department of Water Resources
were not of ADWR's making. There were several -- many
extensions of time required by the Applicant to go through
the application process and review with ADWR, and at every
turn we granted extensions of time. There was no request
for an extension of time before we issued our decision.
To create what has happened here -- they've
created a new model, it's not just a demonstration of
their disagreement with the use of the PrAMA model. And
they never objected to it before, but now they're
objecting to it afterwards.
So, in addition to all of that, we have deadlines
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that were agreed upon for providing each other -- for
disclosing documents. That agreement was made before
Yavapai provided to the Department of Water Resources
many, many files of data. Tens of thousands of lines of
modeling data to the Department on -- we didn't receive it
until August 30th. We had to ask for it, and they
provided it to us, but they didn't provide a narrative to
explain what they'd done. They didn't provide a narrative
to explain their modeling assumptions. They didn't
provide a narrative to explain their modifications that
they had made to the Prescott AMA model. They did not
provide an explanation of the methodology that they used
for their apparent modifications to the Prescott AMA
model.
So, what -- what did that mean to the Department?
We have two experts within the Department who have
modeling expertise as well as hydrology expertise. Both
of those people spent over a hundred hours, perhaps each,
or at least in total at the minimum, reviewing -- if you
can imagine, if you ever looked at a computer printout and
it's just lines of data, trying to figure out what Yavapai
had done.
Now, this is all coming in after we made our
decision, there's no explanation for what was done, and it
understandably took the Department of Water Resources'
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experts -- two of them; not just one but two of them -- to
comb through all that data and try to extract an
understanding of what the basis was for the modifications
to the Prescott AMA model that they had never objected to
initially.
So, in our view, it is understandable that it
took our experts the time that it did to try to at least
come up with a partial understanding of what was done.
And as you will find, if we have to go this far
with the testimony that's presented during this hearing,
we still aren't sure what happened. We still have
questions about what was done.
So, I remind the ALJ with all due respect,
Yavapai has the burden in this case and they have tried to
flip this around by providing new information to the
Department at the last minute without providing the
Department an adequate opportunity to review it. That's
how we ended up to this place.
Now, some of the exhibits that are being
represented to you in these large notebooks over here on
Mr. Lutz's counsel table, they're nothing more in large
part -- 90 percent of them -- are well-respected,
well-accepted documents that describe hydrologic
principle, they're USGS reports and other types of
reports. They're commonly used in the field. And it's
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not like his expert shouldn't be familiar with all these
materials. So, we don't think it's prejudicial at all.
Regarding the three exhibits that we are -- have
just developed over the weekend, those are -- two of them
are slide shows that describe what our two experts
ultimately concluded, to the extent that they could, what
had happened to the PrAMA model, what did Yavapai do to
the PrAMA model. Those are to help to communicate to
Yavapai what ADWR found when it tried to go through the
information that was presented to it, as well as to let
the ALJ know what the Department concluded.
Now, I'm saying the word "conclude," but it's a
conditional conclusion. It's only a conclusion to the
extent we were able to figure out what it was that was
done to the Prescott AMA model.
I have to emphasize no objection was made to
using the Prescott AMA model before our decision was made.
So, this is in our view a situation of Yavapai's own
making and I do not believe this is sanctionable under the
Civil Rules of Procedure. This is a consequence of the
fact that Yavapai -- I'm sorry, Yavapai provided
information to the Department of Water Resources of a
significant nature that was not presented to us before the
Department made its decision. If that information had
been presented to us previously, if the history of this
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application is any indication of anything, all they had to
do was ask for an extension of time and if the history of
this case is any indication, we would have granted it to
them. But, no, they did not.
They waited until after the decision. They put
all of this information in front of us after we requested
it and it was presented in such a way that it was almost
impossible for us to figure out what the consultant had
done to the PrAMA model, without undergoing unbelievable
periods of time of solely devoted to looking at that
information in addition to their other duties and
responsibilities.
So, if anybody has been prejudiced here, Your
Honor, it's the Department of Water Resources. This is
really -- we have never gone through a hearing like this
where the Applicant has come to us after the decision has
been made with, in essence, presenting a new application.
What you really have now is a new application with new
hydrologic data, new modeling data, and the Department of
Water Resources was expected to analyze all of that in a
couple of months before the hearing started.
Now, Mr. Lutz has already stated he wouldn't have
been happy about a continuance; he wants this thing to go
forward. So, we did our best in a very bad situation.
MR. LUTZ: Your Honor, if I may be heard?
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HON. MIHALSKY: You may respond.
MR. LUTZ: First, I would caution Your Honor that
much of what Ms. Miller said was essentially testimony as
to the facts of this matter. We dispute that. And I will
tell you that part of our presentation will be testimony
that DWR was warned as part of the pre-application
meeting, that Yavapai did not believe the PrAMA model was
appropriate for use, that DWR nonetheless insisted upon
the use of that model for considering this application.
Ms. Miller also talked about the fact that the
materials that they've presented are supposedly learned
texts or treatises concerning general hydrological
matters. To the extent that's true, Your Honor, those
materials add nothing to this hearing. Frankly, her
experts can speak to those matters if that's true.
I would further add that she's now claimed that
the Department is anticipating calling two experts with
regard to this matter, which generally is precluded under
the appropriate Rules of Civil Procedure as an undue
burden and waste of time.
Ms. Miller seems to believe that what Yavapai has
done is start the application process anew by submitting
an expert report in this determin- -- or, in this
litigation, if you will, challenging the Department's
decision. Yavapai did not submit a new model to ADWR.
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Yavapai has submitted the results of the work of its
expert on modeling and hydrology, Mr. Nathan Miller, to
this tribunal as stated in the original Notice of Appeal
and throughout the briefing in this case. One of the
matters that Yavapai is contesting is the appropriateness
of DWR's initial decision-making process, the procedure
that DWR required the Applicant to use. To the extent
that procedure is flawed, then DWR's decision rests on a
flawed basis and cannot be upheld.
The exhibits that were produced and the materials
that were produced to DWR are the supporting materials for
that challenge. To the extent DWR wanted a narrative or
needed a narrative, it could have asked. It sent multiple
information requests, that was not something that was
requested.
I would further add, Your Honor, that DWR should
have known that it needed more time, and while we would
not have been happy with a further continuance, had we
received a request two weeks ago, three weeks ago, a month
ago, if this was going to be such a burden on the
Department, I can't tell you with a hundred percent
certainty that we would have been willing to stipulate to
that, but I strongly suspect based upon everything we've
done in this case, that we would have been willing to
stipulate to an extension to allow DWR to complete its
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work.
Your Honor, providing documents the Sunday
afternoon before a hearing simply provides the opposing
party no opportunity to prepare, to examine those
documents, to have its experts look at those documents to
see if those conclusions are correct. We have no
opportunity to know what Mr. Corkhill or Mr. Nelson did
before they get on a stand and explain what various graphs
they've prepared mean.
I am not a hydrologist, Your Honor. I don't
pretend to be one. Forcing counsel to engage in that kind
of trial by ambush is simply -- it should not be
countenance. And with that, I would again request that
this material and Mr. Nelson be precluded from this
hearing.
HON. MIHALSKY: I'm going to deny the motion
which probably comes as no surprise. The reason that I am
denying the motion is, one, I'm not real sure exactly what
this information is except that it's voluminous.
According to the motion to exclude, the exhibits appear to
be general texts related to modeling and geography, with
no direct relevance to the matters at issue in this case.
You still have a relevance objection, but I don't know --
I don't know what the exhibits are and I'm not going to
rule on it now.
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According to DWR, these exhibits reflect
hydrologic and modeling principles upon which ADWR relied
which are widely accepted and also contain information
related to the DCM upon which Yavapai relied. If it is
general background information that might help me
understand the testimony, I'm also not a hydrologist and
this is my first assured water supply case, though I have
heard cases involving water before, so it's not totally
foreign to me, but I -- if background information is
relevant, I welcome it. If it's not relevant, I have more
than enough documents and I suspect that I will be
focusing on only a handle -- a handful of these documents
when I write my decision relatively speaking. But, who
knows. I don't commit to anything.
And, finally, the biggest reason. Always, in one
of these administrative cases in which I make a
recommendation, I err on the side of inclusion and hearing
evidence, because if I don't -- if I hear the evidence and
I'm not impressed by it, or if -- I mean, even relevance,
we'll be hearing a lot, I'm sure, in this hearing as in
most hearings, objections over the weight of evidence, and
I won't let you spend a lot of time on evidence that I
think are marginal or cumulative or not really all that
material. But at the same time, if the referring agency
agrees or disagrees with my characterization, I want that
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referring agency to be able to look over my shoulder and
to see what we had. Because I don't want to conduct a
rehearing because I refused to consider evidence that the
referring agency believes that I should have at least
looked at. And that will prolong this matter
unnecessarily, I think, if we have a rehearing because I
wanted to move forward.
Certainly relevancy objections may be made and
not all evidence will be given the same weight and some
evidence may come in and will be given no weight by me at
least, but it will be there for -- for the Director of
ADWR.
And, as I said, I don't really -- well, no, I
don't. I won't say "really." I don't know at all what
these exhibits are. To the extent they are just
background, they may be useful. If they were truly
irrelevant, they probably will not be considered. And
certainly the parties going forward may continue to make
objections on an exhibit-by-exhibit basis. You may,
especially with the basis set forth in A.R.S.
Section 41-1097 -- I'm sorry, -1092.07(d), which sets
forth all those phases.
In addition, if there truly is unfair prejudice,
let me know and I will do everything I can as -- as you
see the exhibits, and I understand you are going to become
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familiar with them at the same time that I become familiar
with them perhaps. I mean, I think you probably know a
little bit more about them now than I do, but that
you're -- you're still having familiarity.
On an exhibit-by-exhibit basis, let me know what
I need to do to minimize prejudice if you can state to me
why you could not have anticipated arguably relevant
evidence and what you need to go forward. But we need --
we need to get this matter on track, we need to go
forward. I don't know what evidence I'm going to rely on.
I don't know that I'm not going to exclude down the road
any of these exhibits, I may do that. But I need to make
more of an effort than just non- -- and more of a record
than nondisclosure because I'm not sure exactly what these
exhibits are.
The parties need to put their history behind them
and just go forward on the evidence that we have here and
I will do the best I can with that and I will do the best
I can to make sure that both parties receive a fair
hearing in this matter, and that the record that the
Director of ADWR and the public that is very interested in
this matter -- at least some members of the public -- and
the property owners, that they -- they know that they were
heard regardless of the outcome and that there is a good
record there for any of you: The Superior Court, the
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Director of ADWR, and anyone else who has an interest in
this matter.
And, so, do we have any other preliminary
matters?
MR. LUTZ: Your Honor, I do. I think we have a
couple of additional matters. First, the parties had
talked about order of presentation, and you may recall
back at the case management conference, DWR proposed
potentially going first and we had told them that we
prefer to go first. However, we had listed a number of
former and current DWR employees that may play a much more
minor role in this matter, and depending upon what the
principal -- principal disclosed witnesses say or the
testimony that's induced, may not even need to be called
at some point in time.
So, we have agreed -- DWR suggested and we
concur, that we will put on our principal witnesses, which
will be four that I'll talk to you about briefly in an
opening, and that DWR will then present with the
presentation of their two or three principal witnesses.
At that point in time, if we need the additional former
employees or current employees of DWR, we will call them
following -- following DWR's presentation.
I believe that's an accurate representation.
MS. MILLER: That's correct, Your Honor.
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HON. MIHALSKY: Very good.
MR. LUTZ: And second matter, Your Honor, and on
this one I'm no longer quite as sure. Walking in I had a
list, I believe the parties had agreed to stipulate to the
foundational basis for admission of a number of exhibits,
and my understanding was that constituted basically
exhibits presented by Yavapai 4 through 51, there was one
question regarding Yavapai 14 and there a number of
exhibits in there that were never located in DWR's
database, so we have some -- some skips or blanks in that
record that I can provide for you.
With respect to No. 14, it appeared that there
were two documents included in our original exhibit and
we've separately broken that out, so it's now I believe
Exhibit 14 and Exhibit 70.
And that we were willing to stipulate to the
foundation for admission of DWR 1 through 64. And if that
understanding is still correct, I -- I would propose that
the parties just stipulate rather than having to go
through the rather tedious process of admitting all of
those documents witness by witness.
MS. HEIM: Jennifer Heim for the Department.
Yes, that's correct, we did come to that agreement and I
think the way that Mr. Lutz has characterized it is
correct.
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I would actually suggest that we might move to --
actually, for admission prior to receiving testimony from
witnesses to those exhibits that we might agree could be
admitted with no objection. And I don't -- I'm not
proposing that that will be all of those that Mr. Lutz
just disclosed, but we could talk about that.
HON. MIHALSKY: Okay. Well, we can take a break
and we can add to them if you'd like. I mean, right now
it looks like we have Yavapai 4 through 51 and 70 and DWR
1 through 64. At least that's what I wrote down.
MR. LUTZ: Your Honor, it was actually Yavapai 4
through 51.
HON. MIHALSKY: Right. Yavapai 4 through 51 and
Yavapai 70 which was formerly part of 14.
MR. LUTZ: That's correct, Your Honor. And based
upon what you have previously said in response to the
motion and in ruling on the motion, we would agree with
Ms. Heim, that those should just be deemed admitted with
the parties retaining their objections as to relevance and
weight and so on. But --
HON. MIHALSKY: And that's -- yeah. That is
going to be the issue for the most part, not whether it
comes in, but the weight I give it, how much I consider
it.
MS. HEIM: Okay. I think that's fine, Judge.
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HON. MIHALSKY: Okay.
MR. LUTZ: Your Honor, actually, let me do this.
Let me ask Ms. Heim to take a look, I prepared -- I
apologize, I had prepared a -- kind of a sheet that showed
the numbers so that you have something in front of you.
Maybe perhaps we take five minutes to allow DWR to discuss
that and make sure they're comfortable with that and, if
so, we can -- I can provide it to you and you'll have it
in front of you what those exhibits will be.
MS. HEIM: That sounds great.
HON. MIHALSKY: Okay. Very good. I'll be back
in five.
MR. LUTZ: Thank you.
HON. MIHALSKY: And with that we're off the
record.
(Recess taken from 9:09 a.m. to 9:20 a.m.)
MR. LUTZ: Your Honor, may I approach?
HON. MIHALSKY: You may.
MR. LUTZ: Let me get back to a microphone.
Your Honor. I just handed you two
documents. One of which contains a list --
HON. MIHALSKY: We're back on the record.
MR. LUTZ: I apologize, Your Honor.
HON. MIHALSKY: I'm sorry.
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MR. LUTZ: Your Honor, I just approached and
handed you two documents, one of which contains a list of
the exhibits that the parties agreed to stipulate to the
foundational -- to the admission of those documents. The
parties reserve in accordance with your earlier ruling,
their objections related to relevance and weight to be
given to those materials, but have no objection otherwise
to their admission.
And the second document is a notice that if you
look on the second page prepared by DWR, it's a notice
that cross-references. There are some duplicative
documents because the parties' exhibits and so that notice
cross-references those for everyone's ease of use. We
will attempt -- and I make no promises -- we will attempt
to make reference to the cross-referenced documents when
we're examining witnesses. But that at least provides you
with the ability to see that -- for instance, there's a
number of letters that Yavapai has included the letter and
the attachments as one exhibit, and ADWR has broken them
out into several exhibits, so that gives you a quick
reference guide, if you will.
There's one document on there that we have some
question about and that is ADWR 51. Our records indicate
there's a slight discrepancy between ADWR's 51 and
Yavapai's 34. The parties are going to look at that and
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we'll get back to you on that, but we think that that
accurately represents the cross-referenced -- or, the
duplicate exhibits.
HON. MIHALSKY: Very good.
MR. LUTZ: And so with that I think, Your Honor,
we would move the admission of those documents.
HON. MIHALSKY: Okay. I will just read this into
the record: Pursuant to the parties' stipulation, Yavapai
4 through Yavapai 51 are admitted with the notation that
no documents have been designated as Yavapai 7, Yavapai 8,
Yavapai 10, Yavapai 12, or Yavapai 46.
Pursuant to the parties' stipulation, Yavapai 70
is also admitted.
Pursuant to the parties stipulation ADWR 1
through ADWR 64 are admitted.
(Yavapai Exhibits 4 through 6, 9, 11, 13 through
45, 47 through 51, and 70 are admitted in the record.)
(ADWR Exhibits 1 through 64 are admitted in the
record.)
HON. MIHALSKY: And I will keep that
cross-reference of documents. I'm sure that will be very
helpful as the hearing goes forward.
Is there any other preliminary matter?
MR. LUTZ: Your Honor, I think that's all that we
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had from Yavapai.
HON. MIHALSKY: Okay.
MS. MILLER: We have nothing further for ADWR,
Your Honor, on housekeeping.
THE COURT: Very good. Very good. And it makes
sense to go with the usual order of presentation as the
parties noted. Yavapai bears the burden of proof to show
that it is entitled to receive an assured water supply --
or, finding of an assured water supply, and so -- and the
burden, of course, is a preponderance of the evidence,
more likely than not.
Mr. Lutz, would you like to make an opening
statement?
MR. LUTZ: Your Honor, I would like to make just
a brief opening statement just to provide some context and
probably more importantly acquaint you with the witnesses
that you're going to be hearing so you have a sense of
what you will be hearing from those witnesses.
We discussed this, seems like many, many months
ago, I told you I like to talk and I tried to limit myself
and I committed to being brief, and I will.
This case has a significant legal component, and
that's specifically the question revolving around the
concept of subflow and the protections provided to holders
of surface waters rights in Arizona. I'm not going to
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address that in my opening here today. I think it's been
dealt with in the pre-hearing brief somewhat, I would
anticipate that that legal analysis will be furthered
following this hearing, but I did want to provide you with
some factual context.
Yavapai owns land now that is located along the
highway that leads into Prescott Valley. If you've ever
traveled there, you may have seen the farm that has the
pumpkin festival, that's Young's Farm. And that land was
purchased from Young's Farm, Mr. Gary Young, who has lived
there who was the co-applicant on the sever and transfer
and application with Yavapai. Historically, it's been
operated as a farm; it continues to have some farming
operations right now as it's approaching development.
The Young's Farm properties are associated with
some of the earliest water rights in that area. In some
instances, those water rights pre-date Statehood by
40-plus years. That property has continually used water
from the Agua Fria River for irrigation and domestic
purposes, and there have been significant withdrawals for
mining operations from that property over the years.
As that river originally -- you're going to hear
testimony or see documentary evidence that says that --
that shows that originally that water was likely diverted
through ditches and laterals and irrigation work, but that
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as the channel of the river cut down over the years, as it
incised into the ground and dropped 20, 30 feet below the
surrounding land surfaces, that those diversions changed
from direct -- directly into a ditch to shallow surface
water wells that take water from that river.
There's no dispute that those wells directly and
appreciatively impact the Agua Fria River. It's already
been established by DWR.
DWR also established that Young's Farm perfected
surface rights to approximately 651 acre feet annually of
surface water. Now, due to the uncertainty regarding the
quantity of those rights, Young's Farm and Yavapai entered
into an agreement as the property was acquired, basically
that agreement, that separate agreement beyond the
property agreement, provides that Young's Farm will
transfer whatever surface water rights it holds to Yavapai
upon the issuance of two determinations from DWR. One is
a Sever and Transfer Order that allows the rights at
Young's Farm to be used on the property being proposed for
development and establishes that those rights have been
perfected; and, two, an Analysis of Assured Water Supply
finding that the rights are legally, physically, and
continuously available.
The purpose of that agreement was to quantify
those rights and allow the parties to value those rights.
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And I want to emphasize that DWR was aware of that
agreement and those conditions.
Now, DWR issued a Sever and Transfer Order in
2014. That order found that the surface water rights --
that Young's Farm held surface water rights for that
property. Those rights were perfected, they hadn't been
abandoned or forfeited, so those rights were legally
establish and they're available for use. They quantified
that up to 651.36 acre feet of surface water can be used
on Yavapai's property.
ADWR identified and found 12 wells on the Young's
Farm property with point of diversion wells that withdraw
surface water from the river. And they found, in
accordance with the legal principles established in
Arizona water law, that those wells had a direct and
appreciable impact on the river.
Finally, the Sever and Transfer Order established
priority dates, the very early priority dates that I was
speaking of for that water.
Now, we're here because DWR denied Yavapai's
Application for an Analysis of Assured Water Supply.
You're going to hear testimony regarding the showing that
Yavapai made in support of its application; you're going
to hear testimony regarding, as we've already extensively
discussed this morning, ADWR's direction and input
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throughout the process and how that was flawed and led to
a flawed decision, including requirements that Yavapai use
a ground water model that was ill suited to the analysis
required by ADWR; and historical and other information
that DWR simply failed to consider in making its decision.
I would anticipate -- and before I get there, I
guess I should say, you're going to hear testimony I would
anticipate from DWR attempting to walk back or repudiate
the determinations it made in its Sever and Transfer
Order. Specifically, that the 12 wells constitute points
of diversion and, specifically, that the property at
Young's Farm is associated with significant surface water
rights.
I would expect subsequent to hearing that you
will be asked to hear additional legal arguments over the
impacts of those showings. Most specifically, that the
impact that DWR's position in this case has on the
question of surface water and subflow under Arizona water
law, and how that position is simply irreconcilable to
current Arizona water law.
At the end of the hearing we're going to ask that
you recommend that DWR's decision be reversed and that DWR
issue an Analysis of Assured Water Supply demonstrating
the legal, physical, and continuous availability of the
surface water rights at issue.
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Now, today we're going to be presenting several
witnesses. And we're going to start, Your Honor, I just
want to take the briefest moment to tell you who those
witnesses are and what you can expect to hear from them.
We're going to start with Mr. Kevin Burdette.
Mr. Burdette is the manager of Yavapai Land Holdings, he's
going to provide you with some background on the company
and the project, overview of where things stand,
information about the acquisition and agreement between
Young's Farm and Yavapai. We're going to present Mr.
Burdette first, he has a medical situation for a family
member that he needs to be excused for and likely will be
unable to come back to the hearing as a result, but we
wanted to get him on.
He will be followed by Mr. Michael Pearce. Mr.
Pearce represented Yavapai throughout the application
process. He's the person who probably had the most direct
contact with the Agency and with the documentary record
here. Mr. Pearce will not be testifying as to privileged
conversations and so on with his client or anything along
those lines, but will be limited to talking about what
happened with the application process with DWR.
Following Mr. Pearce, we're going to call Mr.
Gary Young. Mr. Gary Young lived on Young's Farm from the
1950's onward. He farmed Young's Farm for a large portion
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of his life. He's going to provide you with information
and testimony concerning the history of the farm, the
water use on the farm and around the farm, the contractual
arrangements between Yavapai and Young's Farm, and his
interactions with DWR.
And the final in at least this trunch of
witnesses, the final witness we will be calling is Mr.
Nathan Miller. Mr. Miller is a hydrologist and modeler.
He has extensive experience in both areas. We will be
presenting Mr. Miller as a hydrological and modeling
expert, and expect him to testify concerning the work his
company did on behalf of Yavapai as part of the
application process, and his subsequent work looking at
the models and input that DWR required Yavapai to use as
part of the application process.
At that point in time, we'll allow ADWR to
present its principal witnesses, Your Honor, and make a
determination on whether or not we need to call any
remaining witnesses that we've identified. I can't tell
you, and I don't want to burden you with discussing what
they may or may not testify to at this point in time. If
we get there, I will suggest that if we need to call any
of those witnesses, we give you a head's up and let you
know we anticipate this person will be testifying and kind
of give you a sense of what they will be testifying about
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at that point in time.
All that being said, Your Honor, as I said, at
the end of the day we're going to be requesting that you
recommend that ADWR's decision be reversed. And with
that, I have nothing further. I'll allow Ms. Miller to
present her opening and we will then proceed to call Mr.
Burdette.
HON. MIHALSKY: Ms. Miller.
MS. MILLER: Thank you, Your Honor. The
Department of Water Resources disagrees with a few of the
comments that were just made during the opening by Mr.
Lutz, but I don't think this is the proper point to engage
in a discussion of those, and I think as we go through the
hearing it will become clear to the ALJ, Your Honor, what
the Department's position is on some of the matters that
were raised.
I would like to emphasize a couple of the things
that we had in our pre-hearing brief, one of which is the
distinction between the Sever and Transfer Application
which is frequently mentioned by Yavapai and relied upon
by them to some extent. The Sever and Transfer Decision
and Order was entered on April 1st, 19- -- I'm sorry,
2014, and it -- it speaks for itself. And in addition to
the items that Mr. Lutz referred to in his opening
remarks, there is a significant omission of what's in that
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Sever and Transfer Order, which is that it is subject to
conditions; and that before any of the determinations and
the rights that are granted by the Sever and Transfer
Order become effective, those conditions have to be
satisfied. And I do not intend to argue those points
right now, but to just direct Your Honor's attention to
that part of our pre-hearing brief where those matters are
discussed.
Also, it's important to note that the Sever and
Transfer Decision and Order looked backwards in time. And
looking backwards in time, certain determinations were
made. The assured -- the analysis application filed by
Yavapai, however, looks forward in time. And in order for
the determinations that Yavapai seeks to be made by the
Department of Water Resources, we have to look forward in
time a hundred years. And it is Yavapai's burden to make
the necessary demonstrations that the water upon which it
seeks to rely for its proposed master-planned community on
the Young's Farm property will be physically,
continuously, and legally available for 100 years.
We have three witnesses who we intend to call.
One is Doug Dunham who was involved in the processing of
the analysis application for the Department of Water
Resources in his role in the Assured and Adequate Water
Supply Program.
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The second witness is Mr. Frank Corkhill. I
referred to him earlier, he's our chief hydrologist for
the Department of Water Resources. In addition to being a
hydrologist, he has a background in modeling. In fact, as
the -- as the testimony will show, he was a pri- -- he was
one of the two people who were involved in constructing
the Prescott model.
Our third witness is Keith Nelson. As I
indicated earlier, he's in charge of our modeling section
and he has done extensive work related to the information
that Yavapai presented to the Department of Water
Resources on August 30th.
The Department's testimony will address two main
areas. First the Department will provide testimony
relating to the decision-making process, all of the events
that led up to December 3rd, 2015, when the Department
issued its decision denying the analysis application.
The second part of the Department's case will
address the information that Yavapai presented after the
decision had been made.
Regarding the legal issues of subflow and whether
or not the Department properly interpreted all of that,
there will be some testimony that will talk about
hydrologic principles, that will talk about hydrogeologic
principles; but in our view those are legal issues that do
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involve some facts but will primarily be addressed through
briefing.
And that concludes my remarks.
HON. MIHALSKY: Thank you.
Your first witness?
MR. LUTZ: Your Honor, Yavapai calls Mr. Kevin
Burdette. And I presume that you would like him at the
desk next to you?
HON. MIHALSKY: I will so he can be next to his
own microphone and next to the court reporter.
(Whereupon the witness takes the witness stand.)
MR. LUTZ: And, Your Honor, before we get started
and before we swear Mr. Burdette in, just a quick
procedural question for you. As we are going through,
there are a number of exhibits that weren't stipulated to
admission, one of those being one of the exhibits that I
will be using with Mr. Burdette. Do you prefer -- I have
a copy for you -- do you prefer me to provide you a copy
or just reference where it is in the notebooks? And I ask
the same of Ms. Miller.
HON. MIHALSKY: Do I have notebooks from you?
MR. LUTZ: You do not have a separate notebook
from me, then I will provide you with a copy of each
exhibit as I use it, Your Honor.
HON. MIHALSKY: Okay. And in past cases that I
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have participated in or in which I've conducted, I have
the exhibits here and -- or, at least the exhibits that
had been downloaded so far. And I think that there are --
the more recent exhibits are not there.
Generally we have these monitors, the court
reporter is able to look at it, the witness is able to
look at it, it does tend to go faster if we limit ourself
to the electronic exhibits because you can go there
directly. And so I always ask my parties with the
attorneys because there's more of you than there is of me
and I'm not real good in multitasking -- that you have
someone assigned to go through -- there you go -- there
you go.
MS. HUDGENS: Yes.
HON. MIHALSKY: -- go through the exhibit list
and pull up things as you need them, and you -- we just
hit the highlighted part and that should bring up the
exhibit.
And if you want to also give me hard exhibits,
that's fine. I will recycle them after the hearing.
But -- and I may use them as well because, certainly, when
I'm drafting my decision in -- in a Web-based case,
because I'm part of an older generation, I generally do
print out the stuff that is really, really important that
I'm -- I'm going to rely upon, just because it's
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comforting to me to be able to hold it in my hands.
But it does generally -- the hearing goes more
smoothly where people can just look at the screen and
immediately see what we're talking about rather than
fumbling with exhibit books.
MR. LUTZ: And, Your Honor, we're happy to do
that. I wanted to get your preference. I know different
ALJs prefer -- have different preferences.
HON. MIHALSKY: Yeah.
MR. LUTZ: I want to make sure what's easiest for
you.
HON. MIHALSKY: I think that is easiest and it is
your preference on whether you want to also give me hard
copies, but it's nice to be able to just look at exhibits
and have someone who is responsible for that, and everyone
can kind of follow along.
And the people who are sitting in the back,
hopefully you can at least see something on -- on the
screens in front of you. And I guess we also have a big
screen, okay.
So, Mr. Burdette, could you raise your right
hand.
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PERFECTA REPORTING
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JAMES KEVIN BURDETTE,
called as a witness herein, having been first duly sworn,
was examined and testified as follows:
HON. MIHALSKY: Could you state your name for the
record and spell your name for the court reporter.
THE WITNESS: James Kevin Burdette,
B-U-R-D-E-T-T-E.
HON. MIHALSKY: Mr. Lutz, you may proceed.
DIRECT EXAMINATION
BY MR. LUTZ:
Q. Mr. Burdette, can you tell us your business
address as well?
A. It's 2200 South 75th Avenue.
Q. And what is your position with Yavapai Land
Holdings?
A. I'm the manager of the LLC.
Q. Can you briefly describe for the tribunal here
what Yavapai Land Holdings is and what its purpose is?
A. It's a single-purpose entity created to own the
former Young's Farm, that was the vehicle we purchased the
land in.
Q. Okay. And let me pull up and show you what's
been marked -- previously marked as Yavapai 56.
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MR. LUTZ: And, Your Honor, this is an exhibit
that has two pages and not previously been stipulated for
admission.
Q. BY MR. LUTZ: The two pages I will represent to
you are -- are copies of an aerial photo. One has white
dots and the second page has white dots with black points
in them, that's the only difference between the two
photos. We weren't sure which would show up more clearly,
so when we prepared the exhibit we included both pages.
Mr. Burdette, let me ask you to take a look at
what's been identified as Yavapai 56. Can you tell me
what's shown on that document?
A. That is the aerial view of the property itself.
Q. And where is that located?
A. It's the corner of Highway 69 and 169.
Q. And does Exhibit Yavapai 56 accurately represent,
to your knowledge, the layout of the Young's Farm
property?
A. It does.
Q. And can I ask, do you know what the yellow line
shows?
A. The yellow line is the boundary line of the
entire 300 acres.
MR. LUTZ: Your Honor, we would move admission of
Yavapai 56.
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(Yavapai Exhibit 56 is offered in evidence.)
MS. HEIM: Your Honor, if I could just ask the
witness a question?
THE WITNESS: Yes, ma'am.
HON. MIHALSKY: Yes.
VOIR DIRE EXAMINATION
BY MS. HEIM:
Q. Hello, Mr. Burdette. I'm Jennifer Heim. I think
we've had one phone conversation but we've never met
face-to-face, so it's nice to meet you.
Do you know who prepared this image?
A. You know, I do not know who prepared the image.
Q. And so your testimony that it accurately reflects
the boundaries of the Young's Farm property is based upon
what?
A. Well, I've looked at the actual ALTA survey many
times and it looks very similarly, clearly the shape of
that and the way the boundary across the river and very
unique. And as best as my memory serves, it's a similar
shape of all the surveys I've seen prior.
Q. And, I'm sorry, I just have a note if you would
be able to speak up a little bit. People are having some
difficulty hearing.
A. Yeah. No problem.
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Q. And how about the well locations, did you -- do
you know who prepared those well locations?
A. For this particular drawing?
Q. Yes.
A. If I'm going to believe the bottom, it looks like
Southwest Ground Water but I'm not sure how they did that.
MS. HEIM: Okay. Thank you.
We don't object to the admission of the
document.
HON. MIHALSKY: Yavapai 56?
MR. LUTZ: Yes, Your Honor.
HON. MIHALSKY: Is admitted.
MR. LUTZ: Thank you.
(Yavapai Exhibit 56 is admitted in evidence.)
MR. LUTZ: Your Honor, we have a blow up of
Yavapai 56 that we're going to put up. I think it will be
helpful throughout testimony. I'm not sure it will be
helpful much more with Mr. Burdette's testimony but just
give people the ability to see the whole thing rather than
just seeing part of it on the screen.
CONTINUED DIRECT EXAMINATION
BY MR. LUTZ:
Q. Mr. Burdette, could you maybe step up actually to
the demonstrative and outline for me, if you would, the
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boundaries of the Young's Farm property held by Yavapai
Holdings -- Land Holdings?
A. Yes, sir. It goes all the way down here on the
other side of the river; it follows up the river to
Highway 169; over to 69 -- there's some really odd little
cuts it makes. This area right here signifies what is a
separate parcel but pre-designated as a commercial parcel,
and then everything else is -- is zoned agriculture. And
the southern boundary runs down the south side and does
some really interesting things, but for the most part
follows down 169 that leads to Prescott Valley from I-17.
Q. All right. So, with respect to the commercial --
just so we're clear on the record, the commercial portion
of the property that you described is that small outlined
yellow portion at the north end of the property?
A. That's correct. It's a rectangular piece that
joins 169, Highway 169.
Q. And that has a number of wells in it, looks like
the Bert Addy Well up in that area, is that what we're
talking about?
A. That's correct.
Q. All right. Thank you.
A. You're welcome.
Q. Mr. Burdette, can you tell me a little bit about
the plans for this parcel?
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A. Well, they evolve. Obviously, the ultimate plan
is to develop it in some sort of commercial/residential
mix. We started that out early on and then, you know, as
commercial -- as time changes and this continues to drag
on, it -- it obviously needs to evolve to more current
standards whatever developments could happen.
Q. When did you start planning for the development
of this parcel?
A. 2006. Probably instantly when it was first
purchased, the land site was first purchased.
Q. All of us having lived through the economic
downturn in 2008, did that have any impacts in terms of
the development out here?
A. Absolutely it did, there were no buyers in the
market at that particular time, right? But it just kind
of gave us -- afforded us a longer period of time to do a
more thoughtful process.
Q. And who did you acquire this property from? Who
did Yavapai acquire this property from?
A. From Mr. Young, Gary Young and his family.
Q. Do you know the approximate amount of property
that was acquired?
A. Three hundred acres.
Q. Now, let me talk to you a little bit about the
water issues with the property. Did you receive anything
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related to water from Mr. Young or from Young's Farm as
part of that initial purchase?
A. There were some existing ground water rights that
came along with the actual --
MS. HEIM: Your Honor, I'm sorry. I'm going to
object to the introduction of testimony regarding the
terms of purchase and sale of the land as the Department
has asked a number of occasions for the actual contract
and has been told that that was not pertinent to this
matter. And it's, in essence, a best evidence issue, Your
Honor. If Yavapai would like to submit the terms of that
purchase, we believe the contract is the best evidence of
that.
MR. LUTZ: Your Honor, two responses. One, the
purchase agreement that I'm speaking about with Mr.
Burdette does not relate to the transfer of the surface
water rights. Two, that transfer in conversations with
DWR will be discussed by Mr. Pearce who had those
discussions with DWR and those discussions are
memorialized in his letters with DWR, copies of which have
now been admitted to this case. And, three, there are
good commercial reasons for that exhibit not being made
part of -- or, that contract not being made part of the
public record.
So, to the extent that Ms. Heim is suggesting
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that the best evidence rule precludes a witness from
personal testimony talking about something they know
about, I think that's a misapplication of that rule.
MS. HEIM: And, I'm sorry, I might have
misunderstood the first part of the response. Is the
witness not testifying about the purchase and sale
agreement between Yavapai and --
HON. MIHALSKY: I'm -- I'm a little bit confused.
MR. LUTZ: I think, Your Honor, then let me step
back. There are multiple agreements between Yavapai and
Young's Farm. One of those is a purchase and sale
agreement concerning the sale of the property; there is a
separate agreement that relates to the surface water
rights. That separate agreement is conditioned upon
certain determinations by DWR, specifically the issuance
of a Sever and Transfer Order and the issuance of an
Analysis of Assured Water Supply. Right now I'm asking
Mr. Burdette about the purchase and sale agreement
relating to the land, not the surface water.
MS. HEIM: And, I'm sorry, may I make one more
comment. I would -- I would maintain the objection with
respect to discussions of any contents of a contract. If
the purpose of the testimony is to establish what in fact
the contract says or what the terms of the contract are,
the Department of Water Resources does not have -- does
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not have those documents, was never provided with those
documents and that, in fact, the purpose of the best
evidence rule is to allow the other party an opportunity
to review those terms and not rely solely on the testimony
of an expert or a witness.
HON. MIHALSKY: And, again, I think that the
purchase of the land, there was a separate agreement, and
the purchase of the water rights is contingent on the
two -- okay. So, why is he testifying about the wells
that were on the property and water when you're asking him
about the purchase of the land?
MR. LUTZ: Your Honor, I just -- as I indicated
to Mr. Burdette, I wanted to ask him what was included in
the purchase of the property. The purchase of the
property also included a transfer of certain ground water
claims. I don't want to testify here, but in Arizona as
you may have seen from the pre-hearing briefing, there is
a difference between surface water and ground water.
Ground water is subject to what is called the
ground water code -- the Ground Water Management Code.
That has very specific requirements especially if you're
located in an area known as AMA, which the Prescott area
is one of those areas. It requires reporting, well
pumping, it requires -- it has a number of procedural
requirements related to ground water.
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HON. MIHALSKY: And I assume that you are going
to use this ground -- these ground water rights?
MR. LUTZ: No, Your Honor. And so what I was
trying to just establish was provide you with background
in terms of the purchase agreement and how it was
structured, that these claims to ground water were part of
that purchase agreement, but that separately the surface
water was not transferred, that that's subject to a
separate agreement.
HON. MIHALSKY: Okay. Are the ground water
rights part of the assured water supply?
MR. LUTZ: They were not included as part of the
assured water supply application, Your Honor.
MS. HEIM: I'm -- I'm not sure of their
relevance, then, in this case.
MR. LUTZ: Your Honor --
HON. MIHALSKY: I -- I will overrule the
objection. Let's not spend a lot of time here, then,
okay? But I can hear it as background, I guess.
Q. BY MR. LUTZ: Mr. Burdette, can you describe for
me generally the transaction with Young's Farm, how that
was structured?
A. We were to and did buy the land, title fee land,
along with certain ground water rights.
Q. Okay. How about with respect to surface water
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rights, did you receive any surface water rights as part
of that transfer?
A. We did not.
Q. And how was that handled contractually?
A. A separate contract. It -- because at the time,
nobody could quantify the amount, so its done under a
separate contract that we would work jointly with Young's
to perfect those.
MS. HEIM: Your Honor, I'm sorry, I would object
at this point. I don't know if my previous objection is
sustained through this, but I would just object again to
the testimony of what's in that separate purchase and sale
agreement related to the transfer of surface water rights
because Department of Water Resources has never been
provided a copy of that document.
HON. MIHALSKY: Okay. And he's saying it wasn't
included and you don't want me to accept that unless I can
look at it or you can look at it and see that it wasn't
included?
MS. HEIM: I think his last piece of testimony
was related to the sale agreement with respect to
quantification of surface water rights. So, I believe
now --
HON. MIHALSKY: No. He said that, I think, the
surface water rights weren't included in the sale
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PERFECTA REPORTING
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agreement of the land because they could not be
quantified. So, I don't think he's actually talking about
quantification of the surface water rights because he says
it couldn't be done.
MS. HEIM: Okay. Then, I'll just -- so I don't
have to make the objection again, I'll just say that --
I'll stand on my previous objection.
HON. MIHALSKY: Okay. I will recognize a
standing objection --
MS. HEIM: Okay.
HON. MIHALSKY: -- to any testimony about the
terms of the purchase of land agreement. Okay? You'll
have a standing objection.
Since this does seem to be background and that
none of the water that was transferred in that agreement
forms a part of the assured water supply, I'll allow it as
background for what it's worth.
Go ahead, Mr. Lutz.
But I do recognize your standing objection
which you -- that the Applicant has refused to provide
this document to ADWR.
Q. BY MR. LUTZ: All right. Mr. Burdette, we're not
going to spend a lot of time on this, can you just explain
to me how the parties to the sale of Young's Farm
approached the surface water rights' issue?
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A. There was a separate contract that, again, took
into account that the quantities were unknown and the time
period was unknown as to when those could be perfected,
so.
Q. And did you have any issues with providing that
to DWR as part of the public record?
A. Yeah, it's a business deal, I didn't see any
relevance how it affected the water nor the supply of the
water to the project.
Q. So, you objected to the terms of that deal being
in a public record?
A. Absolutely. It's a very competitive market.
Q. All right. How did the parties approach
quantifying that surface water right, then?
A. We jointly worked with the Young's to -- to start
the process, to start the application process.
Q. And what was the expectation on Yavapai's part
that would happen, that would result in the transfer of
those surface water rights?
A. We fully expected that -- that they would be
eventually perfected and we would be able to purchase
them.
Q. And what did Yavapai expect to receive before
those water rights were -- were transferred?
A. Yavapai -- sorry. I don't understand.
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Q. What conditions were there to the transfer of
those water rights?
A. The issuance of the sever and transfer and
then -- obviously -- and then a hundred-year assured water
right certificate.
Q. So you expected to see a Sever and Transfer Order
and Analysis of Assured Water Supply?
A. That's correct.
Q. Why was it handled that way?
A. We -- I don't know, I'll be honest, I didn't
negotiate the contract in the beginning. I don't know
that.
Q. Do you know what a Certificate of Assured Water
Supply sufficed for to trigger those conditions in that
contract?
A. Yes.
Q. A certificate or an analysis?
A. You know, I don't know the difference, to be
honest.
Q. Okay. All right. Do you know if ADWR was ever
informed of those conditions?
A. I don't recall either way.
Q. All right. Now, let's turn for a moment to the
sever and transfer process. Once you received that Sever
and Transfer Order -- do you recall receiving that from
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DWR?
A. I do.
Q. Once you received that, what did you expect would
come to pass with respect to the Application for Analysis
of Assured Water Supply?
A. Not ever really being involved in the process
like this before, maybe -- I assumed that that would just
be the beginning of the process to -- to eventually get
the hundred-year assured water right also.
Q. Did you expect that that sever and transfer
agreement would provide a basis for an Analysis of Assured
Water Supply?
A. I did. I didn't think it would have been granted
without that.
Q. Can you tell me what the current status of
development is as it relates to Young's Farm absent the
Analysis of Assured Water Supply?
A. We've walked back any planning that we've done
prior on the site and it's now converted back to purely
agriculture, and then a little bit of -- very small amount
of retail up on the corner of 169.
Q. And is the denial, the Department's denial of
application, holding up further work on this parcel?
A. Yes, absolutely.
Q. And what impact has that had on Yavapai?
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A. It's tremendous. It's a fairly expensive piece
of property bought at the top of the market and we're
sitting around paying interest on that money for ten
years.
Q. So, is it having a financial impact?
A. Huge financial impact.
MR. LUTZ: Your Honor, nothing further at this
time for Mr. Burdette.
HON. MIHALSKY: Ms. Heim, will you cross-examine
this witness or...
MS. HEIM: Yes, Your Honor.
HON. MIHALSKY: Okay. Very good.
CROSS-EXAMINATION
BY MS. HEIM:
Q. Mr. Burdette, you noted that you are the manager
for Yavapai?
A. The manager for both Yavapai and the manager for
Carefree Capital, LLC, which is the ultimate manager of
Yavapai.
Q. Okay. And is Carefree -- and you said Carefree
Capital Investments is the manager for Yavapai?
A. That is correct.
Q. When did Carefree become the manager?
A. I can't remember the exact date. Sometime
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probably '09, '10, maybe. Maybe in that area, sometime
around there.
Q. Okay. And when did you become the manager for
Carefree?
A. In the same time period just prior to that. Just
prior to Carefree becoming the manager of Yavapai Land.
Q. Okay. And prior to you becoming the manager, do
you know who was the manager for Yavapai?
A. I believe it was Monogram Companies maybe, I
can't recall absolutely to be honest.
Q. Monogram?
A. I believe so from memory.
Q. Okay. And was Don Allison the principal of
Monogram?
A. He was one of the three principals of Monogram.
Q. Okay. So, you were not the manager of Yavapai
when Yavapai filed its application initially for analysis?
A. I believe that's correct, yes.
Q. Okay. You -- was Yavapai represented in
connection with the application by legal counsel?
A. The only legal counsel that I was ever familiar
with was Mr. Pearce.
Q. Okay. And I'm not asking you to provide me with
information about the content of what you discussed with
Mr. Pearce, but in a general sense, were you the person
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for Yavapai who was responsible for coordinating with Mr.
Pearce with respect to the application?
A. Yeah. Once I took over as manager, yes.
Q. Okay. And did Mr. Pearce apprise you of status
-- in a general sense, did Mr. Pearce apprise you of the
status of the application process that was going forward?
A. Yes. He educated me.
Q. Okay. And were you being provided with copies of
correspondence from -- throughout the process from the
Department or from other entities who might have interest
in the application process?
A. Via Mr. Pearce, yes.
Q. Okay. Do you -- do you know whether an Analysis
of Assured Water Supply is sufficient in order to begin
developing, subdividing, selling or leasing land?
MR. LUTZ: Objection. Calls for a legal
conclusion, Your Honor.
THE WITNESS: I do not.
HON. MIHALSKY: Okay. The witness has answered
the question, so.
MS. HEIM: Okay.
HON. MIHALSKY: And that -- yeah.
Q. BY MS. HEIM: And you don't know -- I believe you
testified previously that you don't quite understand
exactly how an analysis and certificate relate to one
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another; is that correct?
A. That's correct.
MS. HEIM: Your Honor, if I could just have one
second.
HON. MIHALSKY: Sure.
Q. BY MS. HEIM: Mr. Burdette, does the -- is the
property currently zoned for agricultural use?
A. Yes.
Q. Okay. Do you know if Dewey-Humboldt -- is the
town Dewey-Humboldt?
A. It is.
Q. Okay. Have they -- let me ask you this: It's
not zoned for development; is that correct?
A. There's a overlay via Dewey-Humboldt of the
corner, the 30-acre commercial yield that's pre-designated
commercial, but right now the rest of it I believe is just
A1 agriculture.
MS. HEIM: Okay. I have nothing further.
MR. LUTZ: Your Honor, do you have any questions?
HON. MIHALSKY: Mr. Lutz?
REDIRECT EXAMINATION
BY MR. LUTZ:
Q. The only, I guess, follow-up question I would ask
is, Mr. Burdette, has any work on rezoning the property
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been put on hold? Any work rezoning the property for a
different usage than agriculture, is that currently on
hold?
A. It is on hold.
Q. And what is the cost of that?
A. The pending decision or appeal now thereof of the
assured water rights.
MR. LUTZ: Nothing further, Your Honor.
HON. MIHALSKY: Thank you, Mr. Burdette.
THE WITNESS: Thank you.
HON. MIHALSKY: You may stay or leave as Mr. Lutz
decides.
THE WITNESS: Yes. Thank you.
(Whereupon the witness is excused from the
witness stand.)
MR. LUTZ: Your Honor, before we call our second
witness, I would just indicate it's been about an hour and
40 minutes probably, that we have a court reporter --
HON. MIHALSKY: Thank you for keeping track of
that. I appreciate that.
We'll take a 15-minute break. It is 10:08.
We'll be back on the record at about 10:23.
MR. LUTZ: Thank you, Your Honor.
(Recess taken from 10:08 a.m. to 10:30 a.m.)
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MR. LUTZ: Your Honor, Ms. Hudgens will be
handling the examination of Mr. Pearce. I did just
want to provide you however --
HON. MIHALSKY: Let's go on the record. We're on
the record, could you --
MR. LUTZ: You bet. Your Honor, Ms. Hudgens will
be examining Mr. Pearce and I'll turn the time over to
her. I just did want to provide you with a reference to
Rule of Evidence 1007, which provides that the proponent
of a document, quote: "May prove the content of a
writing, recording, or photograph by the
testimony, deposition, or written statement of
the party against whom the evidence is
proffered."
Your Honor, I just real realized that it
says "against the property whom the evidence is
proffered," so I'm not going to go on any further with
that.
HON. MIHALSKY: Okay.
MR. LUTZ: In looking at that, we'll just ignore
that. We're having someone look at the best evidence rule
and we'll get back to you on that.
HON. MIHALSKY: Very good.
Mr. Pearce?
(Whereupon the witness takes the witness stand.)
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MICHAEL JAMES PEARCE,
called as a witness herein, having been first duly sworn,
was examined and testified as follows:
HON. MIHALSKY: State your name for the record
and spell your last name for the court reporter.
THE WITNESS: Michael James Pearce, P-E-A-R-C-E.
DIRECT EXAMINATION
BY MS. HUDGENS:
Q. Mr. Pearce, what is your occupation?
A. I'm an attorney.
Q. And do you practice in Arizona?
A. I do.
Q. In what area of practice?
A. Almost exclusively in water-related matters.
Q. I understand that you have done some work for
ADWR; is that right?
A. I was employed by the Arizona Department of Water
Resources for 13 years and worked there, and I still do
work as a contract lawyer for the Department of Water
Resources.
Q. When you're not acting as a contract lawyer for
the Department of Water Resources, what are you doing at
that point?
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A. I'm in private practice representing clients on
water-related matters.
Q. How are you related to this case?
A. I was introduced to it by being contacted by
Yavapai Land Holdings, LLC, who was then managed by
Monogram Companies sometime around 2006, early 2006.
Q. What did you understand Yavapai's goals to be at
that point in time?
A. Yavapai had just acquired the land and hired me
to look at the water-related issues with the ultimate goal
to obtain an assured water supply so the land could be
developed.
Q. Were you present this morning for Mr. Burdette's
testimony?
A. Yes, I was.
Q. Mr. Burdette had testified to a demonstrative
that we have behind you that's Yavapai -- that has been
marked as Yavapai Exhibit 56. It's also available for you
on the screen. Have you seen this document before?
A. I've seen similar documents. I don't recognize
this particular version, but it looks very similar. It's
a satellite image base with some overlays on it.
Q. Does the -- does Exhibit 56 accurately reflect
what you understand Yavapai's property to be?
A. Yes. It includes the Bagby property which was
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acquired later but, yes, as far as I can tell it's an
accurate depiction of the land base.
Q. When Yavapai approached you to represent it, did
Yavapai already own the land?
A. Yes, they did.
Q. Did you understand Yavapai to seek to develop the
land?
A. Yes, that was their intention.
Q. What did the -- what did Yavapai need from the
Department of Water Resources in order to begin its
development?
A. Well, eventually, to develop the land they were
going to need a Certificate of Assured Water Supply, could
possibly have received service from a designated provider,
but that was highly unlikely. What they needed was a
Certificate of Assured Water Supply to prove the
hundred-year supply for the land so that they could go to
platting.
Q. At the time that Yavapai purchased the land, was
water being used for municipal use?
A. Other than the commercial property at the north
end which I believe had a Type 1 and Type 2 right
associated with it that could be industrial/commercial
use, but the bulk of the land was irrigated agriculture.
Q. What did Yavapai need to do in order to change
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the nature of the water from agricultural use to municipal
use?
A. That would have depended on whether the water
would be characterized as ground water or surface water.
Q. Who would make that characterization?
A. I think it was our option at the initial stage to
decide which course of action we wanted to pursue and
examine the facts and -- and see if the facts bore out our
determination.
Q. And what did Yavapai decide to do at that point?
A. Well, we knew that the land came with certain
grandfathered ground water rights that had been issued in
the 1980's pursuant to the 1980 Ground Water Management
Act, and those are in place and functioning so to speak.
The land was being irrigated with water, but in the
Prescott Active Management Area, the conversion from
ground water irrigation rights to a 100-year assured water
supply is complicated by the fact that the municipal
supply, the assured water supply, needs to be consistent
with the management goal, that's one of the elements of an
assured water supply.
And a straight conversion, a one-for-one
conversion, from ground water use to municipal use does
not qualify, and that was discussed early on with Yavapai
and led to the conclusion that the surface water rights
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associated with this historic land base were probably more
important than the ground water rights for future
development.
Q. With respect to the change in use from
agricultural to municipal use, did Yavapai need to file an
application in order to change that use?
A. Yes. Looking at the property and its assets, the
opportunity was there to utilize the historic surface
water rights on the land to build the foundation for the
hundred-year assured supply, but in order to do that, the
surface water rights would have to be converted from
irrigation use to domestic or municipal.
Q. Did Yavapai file an application in order to do
that?
A. Yes. We initially -- and I say "we" in that
context, that was a joint effort between the Young
entities and Yavapai -- approached the Arizona Department
of Water Resources with the proposal that we would like to
seek to use the surface water rights associated with this
property for ultimate development. And recognizing that
surface water law required that we change the use, we
proposed to file an application with the Department of
Water Resources to change the beneficial use of the
surface water rights from agricultural to domestic or
municipal use.
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The only reason I hedge about the domestic or
municipal is oftentimes "domestic use" means everything
other than irrigation and includes what we commonly call
municipal use today. So, in this context, they're pretty
much interchangeable.
Q. In addition to an application to change the
beneficial use, did Yavapai also need to seek an Analysis
of Assured Water Supply?
A. Yes. Because of the nature of the underlying
transaction between Yavapai and the Young entities, there
were two requirements to be met.
MS. HEIM: Your Honor --
THE WITNESS: One that --
MS. HEIM: I'm sorry.
HON. MIHALSKY: Okay. I think there's an
objection.
MS. HEIM: I would make on an objection on the
same grounds as before with respect to the testimony
related to the contents of the -- the terms of the
purchase agreement with respect to the sale of the surface
water rights.
HON. MIHALSKY: I thought it was the sale of the
land.
MS. HEIM: Well, the term --
HON. MIHALSKY: And that that was already done
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when he got on board.
MS. HEIM: I believe Mr. Pearce was starting to
testify regarding the conditions that were required to be
met before the purchase and sale would be completed.
HON. MIHALSKY: I -- I -- you mean of the land
or...
MS. HEIM: The land and the attendant surface
water rights.
MS. HUDGENS: I don't remember having asked that
question at all. So, maybe counsel understood Mr. Pearce
to begin to testify about a matter that I don't think that
Mr. Pearce was testifying to.
HON. MIHALSKY: I -- I did not hear that. I
think he's still talking about transactions, what he set
up, what they needed, not whether it was a condition of
the sale. And so for now that objection is overruled.
MS. HEIM: Okay. Thank you.
HON. MIHALSKY: Do you remember the question or
where you were going --
THE WITNESS: Let me try and rephrase the answer.
What Yavapai was interested in is whether or not we could
obtain formal administrative approval by the Department of
Water Resources that these surface water rights were
available to Yavapai to capture the water and put it to
beneficial use for municipal/domestic use, and whether
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that water supply would qualify as physically,
continuously, and in part legally available for the land
base. That was the goal then and now.
Q. BY MS. HUDGENS: So, is it accurate to say then
that in 2006 Yavapai identified two applications that it
would need to file with the Department of Water Resources,
one was a change in beneficial use and the other was an
analysis for assured water supply?
A. That is correct.
Q. Mr. Pearce, I am going to have my colleague bring
up for us Yav- -- or, ADWR Exhibit 1.
Can you see it there on your screen?
A. Yes, I can.
Q. Can you tell me what this document is, Mr.
Pearce?
A. It is my letter to Mr. Scott Miller of the
Department of Water Resources indicating that I am filing
an application for analysis of assured supply; and it's
dated August 3rd, 2006.
Q. The cover letter refers to surface water claims
to support the analysis for assured water supply. Can you
describe what surface water claims are generally?
A. Yes. Surface water claims, when you use the word
"claims," typically means a claim of right that was
perfected before 1919. Those types of rights are
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recognized as valid surface water rights, but they don't
have any governmental approval necessarily associated with
them like a certificate of water right. They are founded
upon the beneficial user's claim of that right and so
they're referred to as surface water claims.
Q. How do surface water claims differ from ground
water rights?
A. Well, they're much different. A surface water
claim is a claim to use --
MS. HEIM: Your Honor, I'm going to object. The
Department filed a motion in limine in this matter to
exclude any sort of legal opinion evidence from Mr.
Pearce, and I understand Mr. Pearce is here to testify
about the procedural and factual history of the
application, but I think we're maybe starting to veer a
little bit into giving some legal conclusions about
characterizing the difference between surface water claims
and ground water.
MS. HUDGENS: Your Honor, because the letter
refers to surface water rights, the purpose of my question
is to ask Mr. Pearce why that choice was made to file the
application based on surface water rights. In order to
set the foundation for understanding that decision, it is
not only helpful but necessary for the Court to understand
the difference between those two rights.
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HON. MIHALSKY: Okay. And I'm not going to allow
this witness to testify about what -- what he believes the
water that's available to that property is, what kind of
water, but I will allow him to answer that question on the
difference you were telling me, how surface water claims
differs from ground water.
MS. HUDGENS: Ground water --
HON. MIHALSKY: Ground water.
MS. HUDGENS: Ground water rights.
THE WITNESS: Well, Arizona administers its water
resources under two separate sets of laws, the ground
water laws and the surface water laws. And surface water
rights, surface water claims, are administered under the
doctrine of prior appropriation with all its attended
requirements and benefits. Ground water sometimes
referred to as percolating ground water is administered by
a different set of laws. And the dividing line between
the physical nature of the two legal classifications of
water has been a source of much consternation for the
parties and the courts over many, many years.
But the answer to your question, I think, is that
the different types of water are administered under very
different laws and have different attributes and different
privileges and burdens.
Q. BY MS. HUDGENS: The cover letter that we're
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looking at, Exhibit No. 1, refers to the application for
change in beneficial use, and in the letter you state that
that application is filed concurrently with the
Application for Analysis of Assured Water Supply. And on
page 2 you also say that the applications are
interconnected. Can you tell this tribunal what you meant
when you say they are "interconnected"?
A. Yes. And the application to change the
beneficial use spoke to the underlying nature and quality
of the surface water rights that were being claimed, and
the application for analysis of assured supply was
dependent on that water being correctly classified as
surface water and being available to Yavapai's use under
the laws that regulate the use of surface water.
So, the application for analysis was in a sense,
if not totally, extremely dependent upon the results of
the application to change the beneficial use.
Q. I -- now, I'd like to show you what has been
marked as ADWR Exhibit 2. Do you recognize this document?
A. Yes, I do.
Q. Can you tell the tribunal what it is?
A. This is the Department of Water Resources
then-standard form for the Application of Analysis of
Assured Water Supply filled out by myself with the
information provided in the blanks with the intention to
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be submitted to the Department for determination of the
analysis.
Q. So, in other words, it's Yavapai's Application
for Analysis of Assured Water Supply?
A. Yes.
Q. Okay.
A. In much briefer words, yes.
Q. Did you assist Yavapai in filing the application?
A. I did, yes.
Q. And through the application, what did Yavapai
request from the Department?
A. We requested a determination for analysis that
the supply was physically, legally, and continuously
available for the required 100-year term. And the
quantity of water that I think is expressed here is 700
acre feet, something like that, 702 acre feet.
Q. At the time of the application, what was the
proposed source of water?
A. The surface water.
Q. And remembering that the cover letter to this
application, in there you stated that this application was
interconnected to the Change in Beneficial Use
Application. Did the Department also view those two
applications as interconnected?
A. Well, I don't know if I can speak for them, but
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that process did not occur in a vacuum. We met with the
Department of Water Resources and discussed this matter,
and we certainly attempted to make clear that because of
the reliance on surface water rights, that the application
to change beneficial use and the application for analysis
should proceed in parallel and simultaneously because of
the interdependent nature of the two.
Q. Did the Department actually coordinate review of
the Application for Analysis of Assured Water Supply and
the application for change in beneficial use?
A. I thought that they did.
Q. After you submitted the Analysis for Assured
Water Supply Application and after the change in bene- --
beneficial use applications were filed, what happened next
with respect to those applications?
A. The next major event was a determination by the
Department of Water Resources that the land base acquired
by Yavapai didn't exactly match what they perceived to be
the historically-irrigated acres that were the foundation
or the base for the pre-1919 surface water rights; and
they concluded that in order to use the surface water
rights for the ultimate development of the land and the
assured water supply process, that we would have to do a
severance and transfer of the surface water rights from
the historically-irrigated acres to the current land base.
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Q. So, is it fair to say that the Department asked
the parties to amend or to change the application for
Change in Beneficial Use Application to a Sever and
Transfer Application?
A. I would say "asked" would be a polite way of
saying it, yes.
We -- everybody understood at that time that the
difference between an application to change beneficial use
and an application to sever and transfer represented a
large difference in effort, processing time, and issues;
and we were hopeful that the change in beneficial use
would suffice. When it became apparent that it would not
and we would have to proceed with the severance and
transfer application, it was with the understanding it was
going to involve considerably more effort.
Q. I'd like to show you what has been marked as ADWR
Exhibit 25.
Have you seen this particular exhibit before?
And there's a mouse also on your desk, if that's easier.
A. Yes. I've seen this document recently and I
remember it.
Q. What's the best way to describe the document?
A. This is, again, my letter to the Department of
Water Resources advising them that we were undertaking
that day to file an application to sever and transfer the
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historic surface water rights associated with the Young's
Farm property to the land base held by Yavapai Land.
Q. Mr. Pearce, how big was the difference between
the land base that triggered the filing of the Sever and
Transfer Application?
A. It was, I thought, relatively minor. The one
thing that I do remember is that Yavapai did acquire the
Bagby Well and Bagby Well site which was depicted on your
map earlier. That was a very small parcel of land. There
may have been some minor boundary issues, but overall it
was a relatively minor shift in total acreage.
Q. Is it fair to say that the filing of the Sever
and Transfer Application slowed the process?
A. It is fair to say that because in order to file
an application to sever and transfer, if there is a
downstream irrigation district on the watershed that
has -- that depends on the water supply, that irrigation
district has to be consulted first and either give express
approval or be deemed to have waived approval or
objection.
So, the Maricopa Water District which operates
the new Waddell Dam and facilities on the lower Agua Fria
River in Maricopa County was such a district. So,
immediately upon undertaking the change from a change in
use to a severe and transfer, the first step in the
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process was to seek and obtain the express written
approval of the Maricopa Water District and that took a
considerable amount of time.
Q. And that process is referred to in the first
couple of sentences of the second paragraph of this letter
which was Exhibit 25?
A. Yes, it is. We -- and, again, I say "we,"
Yavapai Land and the Young entities were in cooperation --
sought the approval of the Maricopa Water District, met
with them on multiple occasions, met with their attorneys,
and eventually achieved a formal resolution of the Board
of Directors approving the filing of the Sever and
Transfer Application, and so this letter is in effect a
culmination of that effort.
Q. If you are able to -- my colleague can help --
scroll to the third page of this document. Do you
recognize that as the application to sever and transfer
that was filed in 2009?
A. It certainly appears to be.
Q. Did Yavapai Land Holdings and Young Acres, Inc.,
jointly file the application?
A. We said in the letter that it was jointly filed.
I don't know if we were listed -- scroll up to the
beginning.
Yes, we did. We listed ourselves "in the
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alternative." Yavapai Land Holdings, LLC, and Young
Acres, Inc.
Q. And can you describe why the application was
jointly filed?
A. We believed that it would be helpful to show that
both parties were cooperating with this and desirous of
seeing it through to conclusion, that there wasn't a
dispute between the parties or any kind of difference of
opinion that would impede the process.
Q. If we scroll back up to the second page of the
letter, and I'm looking at the paragraph that starts:
"You will note that this application." Do you see that
paragraph?
A. Yes, I do.
Q. In that paragraph you describe also why the
application was jointly filed?
A. Yes, I do.
Q. And can you summarize that paragraph for the
tribunal?
A. The point of this paragraph is to make clear that
the ultimate relinquishment of the surface water claims by
the Young entities was contingent on the successful
completion of the severance and transfer and Analysis of
Assured Water Supply Application.
Q. After submitting the Sever and Transfer
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Application, what happened next with respect to both
applications?
A. In that time frame, the Department of Water
Resources was focusing its attention on the severance and
transfer application. The application for analysis of
assured supply languished somewhat, and along the way in
that time period, we were advised that there wasn't much
point in moving forward on the application for analysis
until the application to sever and transfer had either
been granted or at least was close to being granted. And
that made sense to me, I understood the reasoning behind
that and we acquiesced in it.
Q. We talked about how the applications were -- were
focused on surface water rights rather than ground water
rights. How would -- how did Yavapai propose that the
surface -- that it would use surface water for its
development?
A. Physically -- if the question is physically, we
would intend to withdraw surface water from wells
constructed or existing that would withdraw water from the
alluvial aquifer underlying the property.
Q. My understanding is that there were a number of
wells on the Yavapai -- on Yavapai's land at that time; is
that right?
A. Yes. There were several wells, 18 or 19.
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Q. So, in processing the Sever and Transfer
Application and the Application for Analysis of Assured
Water Supply, was the Department concerned with
establishing which wells for pumping surface water versus
the wells pumping ground water?
A. Yes. They were concerned if any of the wells
were withdrawing appropriable surface water; that was the
first major hurdle that we faced was resolving that and it
was a critical issue. The entire future of the project,
so to speak, depended upon that determination.
Q. Was that concern ultimately resolved by the
Department?
A. Yes. It was over a period of time, it wasn't an
instantaneous resolution, but we attempted to show that
certain of the wells were so shallow and so much in the
easily discernible recent alluvium or younger alluvium or
Pliocene alluvium of the Agua Fria River, that it would be
difficult to believe that they were withdrawing anything
other than appropriable surface water. But that was not a
conclusion that was readily accepted, we had meetings on
that, discussion, we talked about it at considerable
length.
But eventually, the Department of Water Resources
identified I think a dozen, 12 wells, that they felt met
the criteria that would show that at least as of that
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moment in time, and perhaps historically, were withdrawing
exclusively surface water.
Q. I'd like to show you what's been marked as ADWR
Exhibit 28.
If you take a minute to determine whether you've
seen this document before.
A. Yes, I've seen this document recently. It is my
letter to the Department of Water Resources dated
July 16th, 2010.
Q. It looks like it's a letter that was addressed to
you.
A. I'm sorry, yes, I said that backwards. It's the
Department's letter to me dated July 16th, 2010. I'm
sorry, my mistake.
Q. In the process of handling these applications,
was communication pretty frequent between yourself and the
Department?
A. Yes. We talked frequently over the course of the
years and at several different times we communicated more
formally in writing like this. Typically these letters
did not represent much of a surprise to either side, we
knew what the issues were, but to commit the matter to
formal means we would write letters back and forth of
which is typical.
Q. If you'll turn to the second page or scroll to
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the second page of the document. What I'm looking at is
what it's been bolded and underlined under No. 4 as "New
Points of Diversion"?
A. Yes, I see that paragraph.
Q. And in this paragraph the Department writes to
you: "Please be advised that the Department has
determined that not all the existing wells are
suitable points of diversion because not all of
the existing wells are pumping solely
appropriable water. A list is enclosed of the
wells that the Department has identified as
appropriable new points of diversion under the
Sever and Transfer Application."
Do you see that?
A. I do.
Q. Is that the first time that the Department
indicated to you or to Yavapai that it had isolated
certain wells as pumping solely appropriable water?
A. Yes. This was a written announcement of that
decision and a major turning point in the process.
Q. Why do you say "a major turning point"?
A. Well, as I indicated, we had initially postured
that all the wells were pumping appropriable surface
water, the Department disagreed maybe to the point of
saying none of the wells were pumping appropriable surface
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water; we worked through that issue and they isolated
certain wells that they felt made the -- met the criteria
and this was their announcement of the listing of those
wells. And it was a major turning point because it means
that these particular wells that they had selected were at
that moment in time acknowledged to be withdrawing
appropriable surface water.
Q. Also on the same page it is bolded and underlined
"AWS Application." In this particular paragraph it looks
to me like the Department is asking or demanding that
Yavapai refile or amend its Analysis of Assured Water
Supply Application; is that right?
A. That is correct, yes.
Q. Why was that demand made?
A. It was because the initial application depicted a
subdivision design that was based upon what is called a
dry lot subdivision or a subdivision that is -- where lots
are sold without a central distribution water system in
place and each individual lot owner is expected to
construct or acquire its own individual source of water
such that the initial plan of the subdivision would have
called for many, many wells on the property, up to 175
wells, for example, at 175 lots. And ADWR had expressed
to us their concern that trying to establish 175 wells as
points of diversion for appropriable surface water was
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going to be difficult and cumbersome, indeed, and wouldn't
it be easier to realign the subdivision with a centralized
municipal water distribution system. And that had been
discussed for many, many months prior to this letter and
DWR was correct in that position, it was a much better
scenario for us to go to a centralized distribution system
with just a few production wells and distributions to the
lots.
And what they are saying here is that you told us
you would do this, where is it? And we were kind of
waiting to see where the Sever and Transfer Application
was. But we did, in fact, follow up and file an amended
application to that effect.
Q. Before we get to the amended application, in the
last full -- or, last full sentence of the page we're
looking at, it says -- it starts: "In addition, please be
advised that the quantity of surface water that
is severed and transfer will depend upon the
demand calculations for the AWS application."
What does that mean to you?
HON. MIHALSKY: What page are you reading from?
MS. HUDGENS: It starts on page 2, it's the very
last sentence. "In addition."
There we go.
HON. MIHALSKY: Okay.
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THE WITNESS: Yes, as Mr. Burdette testified to
earlier, when Yavapai first acquired this land it really
didn't have any ability to quantify the number of acre
feet per year of surface water right that was available
from Mr. Young, and it was a difficult question to answer
and one that we were looking very much to the Sever and
Transfer Application to provide that answer, because that
answer would be developed in part on the Department of
Water Resources review of historical acres and the water
use on those acres; the application of some form of water
duty, meaning the amount of water that needs to be applied
to each historically irrigated acre; and the determination
of the, at least, relative validity of the pre-1919 claims
associated with the Young's Farm property.
So, we were very much looking to the sever and
transfer process to quantify the surface water right. And
as an initial matter we made a guess of 702 acre feet
which was reflected in that first application for analysis
that we reviewed a few moments ago, and the Department of
Water Resources is telling us here that the sever and
transfer amount is going to be less than that; and we knew
that and so we were anticipating it. But that's the
significance of this sentence is that it's saying it's
going to be less, so take that into account when you file
your new application for analysis.
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Q. BY MS. HUDGENS: If we go back to the second page
-- let's see here -- under No. 3, which is entitled
"Quantification of Amount to Be Severed and Transferred,"
can you describe here the -- take a minute, read the
paragraph, describe sort of what was happening at this
particular time and what the Department was intending to
convey to you on behalf of Yavapai?
A. Yes. Yes, I've reviewed it. The issue here was
the quantification of the precise quantity, annual
quantity of water that could be captured and used under
the pre-1919 surface water claims that had been filed by
Young's Farm and entities. And this is a difficult
undertaking, one that I've been through many times and
understand it and it's difficult. You have to look at
very sketchy records from a long time ago and try to
understand what was going on at the turn of the 20th
Century, you have to take into account water that may or
may not have been available in any year, how much water
would need to be applied to land to be productive under
varying conditions of efficiency; it's a complicated
process to try and establish a quantification of a
hundred-plus-year-old surface water use.
So, we had discussed on many occasions how that
might be accomplished, and there are several ways to go
about it. One is to simply guess, make an educated guess
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how much water is necessary to irrigate an acre of land
under typical circumstances; another way is to try to
track the historical use of water, which is usually
impossible for lack of records; and then the way that the
Department of Water Resources was suggesting is that we
adopt the methodology that the Department uses to quantify
ground water irrigation rights under its progressive
management plans for the use of ground water in the active
management areas. And that was under discussion for a
considerable amount of time and the Department here is
pointing out that there was a similar example several
years before on the Santa Cruz River involving property
owned by an outfit called Rio Rico, and they were inviting
us to take a look at that resolution and see if that would
be an acceptable resolution of this difficult
quantification issue.
Q. So in this paragraph, the second sentence from
the bottom of the paragraph that says: "For example,
please see the enclosed decision and order." If you
scroll through this document about three or four pages --
let's see here -- is this the -- is this the decision and
order that the Department was referring to?
A. Yes, it is. It was attached to that letter, yes.
Q. And is this the same decision and order that you
were just referring to related to Rio Rico?
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A. I believe it is. Yes, it says "Rio Rico
Properties" right at the top of it.
Q. The Department describes the scenario in Rio Rico
as having remarkably similar facts. Do you agree with
that characterization?
A. Yes, I do.
Q. Did you represent any of the parties in Rio Rico?
A. I represented the Department of Water Resources
in Rio Rico and, coincidentally, Lee Storey represented
Rio Rico. So, the Department is telling us in their
letter to look at Rio Rico, but they knew Lee and I were
both intimately familiar with that case.
Q. Was there ever a Certificate of Assured Water
Supply issued with respect to Rio Rico?
A. Yes. I believe there was, yes.
MS. HEIM: Your Honor, I'm going to object on the
grounds that Mr. Pearce was the attorney for the
Department of Water Resources at the time these
applications in the Rio Rico matter were processed and a
decision was issued, and it's improper for him to provide
testimony regarding things within the scope of his
representation of the Department. It violates the
attorney-client privilege.
MS. HUDGENS: I asked if a decision was made and
Mr. Pearce can testify as to whether a decision was made
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or not. There's no recognizable objection on those
grounds.
HON. MIHALSKY: I think you're treading pretty
close, though, on conversations about the specific facts
and how similar it is here. I assume that the document
does speak for itself and does state that an assured water
supply was issued.
But the objection is sustained to the extent
factual similarities and discussions he had with ADWR,
okay.
MS. HUDGENS: Yes, Your Honor, and I didn't
intend to ask about those.
HON. MIHALSKY: Okay.
MS. HUDGENS: Let's see here.
Q. BY MS. HUDGENS: In response to -- in response
generally when you received a letter or correspondence
from the Department, would you typically respond in
writing as well?
A. Yes, we typically did for these types of formal
communications. There was usually an inquiry and a
response both in writing.
Q. If you will -- or, I'll have my colleague turn to
Exhibit 29.
MR. LUTZ: ADWR?
MS. HUDGENS: Yes, ADWR 29.
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Q. BY MS. HUDGENS: And although we can't look at
these two documents side to side, I'm going to ask you if
you can review this and see if you recognize this as a
response to the letter that we just looked at from the
Department to you.
HON. MIHALSKY: I think there is a way that you
can do it but I don't know how. I've seen other people do
it in other cases.
THE WITNESS: I don't think that it is necessary.
Yes. I'll get this right this time, this
is my letter to the Department of Water Resources
responding to the letter that we were just looking at.
And it was intended to be formatted to be a reciprocal
image to those questions that were posed. So, the
headings are -- were intended to be, if not identical, at
least clearly similar.
Q. BY MS. HUDGENS: One of the topics that was
discussed in the Department's letter to you and then in
your response to the Department is under -- is highlighted
under No. 6, "Special Warranty Deed."
A. Yes. I see that.
Q. Can you describe the nature of the communications
about a specialty -- special warranty deed?
A. Let me read this paragraph again.
Yes, this paragraph numbered 6 and the one
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immediately following it are explaining the fundamental
terms of the transaction between Yavapai and Young's --
Young Acres, Inc., on the quantification of the surface
water right both for sever and transfer and analysis
purposes and the ultimate purchase price to be paid upon
the issuance of those two documents.
And it goes on to adopt or concur with a
suggestion made by the Department of Water Resources that
in order to ensure that all right, title, interest, claim
to surface water on this property was vested in Yavapai
[sic] acres, that the Young entities would quitclaim all
of that to Yavapai at the conclusion of this process, and
I thought that was a very rational and agreeable way to
handle the matter and it was ultimately adopted. But this
letter is expressing my agreement to that concept.
Q. So, let's break that down a little bit. At the
time that these letters were being sent back and forth
between you and the Department, was the Department aware
of the nature of the agreement between Yavapai and Young
Acres with respect to the transfer of surface water
rights?
A. I believe they were.
Q. And to your understanding, did the Department
acknowledge that surface water rights would be transferred
upon the issuance of an analysis for assured water supply?
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A. Well, I thought that they understood that. I --
I explained it several times in conversations. The
Department was asking for a copy of that agreement, and as
Mr. Burdette said, we were declining to supply it because
we didn't want it in the public record to be viewed by
anybody who took the time to look. But I was trying to
assure the Department that it was as simple as I've
attempted to explain it here in writing, that the purchase
price was contingent on the number of acre feet of water.
MS. HEIM: Your Honor, I'm sorry, I object. We
don't object, obviously, to the testimony related to the
communication within the letter; but, again, to the extent
that he's testifying to what the contract in fact says, I
think it violates the best evidence rule.
HON. MIHALSKY: That objection is going to be
sustained until I get some analysis on the best evidence
rule. You know, you can't have it both ways. You can't
decline to provide it and then tell me what it says.
And, you know, I don't know if it's possible, I
don't think it is in this proceeding, to -- I don't know
of anything that allows me to make anything confidential,
but it's either relevant or it's not. And, you know...
MS. HUDGENS: If I can lay some foundation, Your
Honor.
HON. MIHALSKY: Okay.
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Q. BY MS. HUDGENS: Mr. Pearce, what were your
conversations with the Department of Water Resources with
respect to the agreement between Yavapai and Young Acres?
A. I thought as I understand their interest and
concern, part of the -- at least the assured water supply
aspect, requires a clear showing that to own the surface
water rights and that nobody else has an interest that can
allow them to take those rights away or transfer them at
some future time, part of the process of showing that it
is a hundred-year supply. And they wanted to be sure that
we, being Yavapai, had the sole and exclusive right to --
to use the surface water. And I was trying to help them
understand our position which is that was part of the
deal, that we would have sole and exclusive right, but in
order to get that, we had to know the number.
Q. And so is it fair to say that you described on
more than one occasion the nature of the transaction or
the nature of the agreement between Yavapai and Young
Acres?
A. Yes. On multiple occasions.
Q. One of the exhibits that we looked at was
Exhibit 25. If you can just go back to that exhibit.
On the second page, second paragraph, in this
paragraph have you described the nature of the transaction
between Yavapai and Young Acres to the Department?
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A. In the second-to-last paragraph here, "Because of
the continuing interest"?
Q. Actually the paragraph right before that which
is, "You will note."
A. Oh. Okay. Let me read that.
Yes, that is attempting to explain it. But
now as I read it, it's incomplete. That is not entirely a
correct statement because my understanding was it would
require not only the final decision of the severance and
transfer but of the analysis as well. That's always been
my understanding, but for whatever reason I didn't include
the analysis component in this paragraph of this letter.
But that -- to the extent it is of any significance, that
is incorrect, it should have said both. It should have
said the severance and transfer decision and then the
analysis.
Q. And then if we flip back to Exhibit 29, which we
were just looking at on page 3 under No. 6, "Special
Warranty Deed," again as you were testifying earlier, this
is another attempt that you made to explain the nature of
the transaction to the Department?
A. Yes, it is. And I think this -- this does
expressly mention the analysis of the assured supply,
whichever is less.
Q. So, after you had explained the nature of the
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transaction at least twice that we see here in the
documents to the Department, the Department suggested then
that the compromise could be to make the Sever and
Transfer Order conditional on the quitclaiming of surface
water rights from Young Acres, Inc., to Yavapai?
A. Yes, that is correct. They -- my letter seems to
say that we accept that proposal from the Department of
Water Resources, but I know it was discussed mutually much
in advance of that letter having been written. But I
thought that it was a very appropriate and reasonable way
to resolve that issue, was to simply make the severance
and transfer conditional on the finalization of the
purchase and the execution and delivery of the Quitclaim
Deed.
Q. Who from the Department did you have those
discussions with?
A. I think mostly with Mr. Doug Dunham. He was
managing the file so to speak at the Department of Water
Resources. Elizabeth Logan was in the Surface Water
Division and she and I spoke on a couple of occasions. I
think the correspondence in that particular instance was
signed by her, but it was either conversations in a
meeting situation where several people were at the table
or on some occasions just one-on-one conversations.
Q. So, in 2010, then, it's fair to say DWR
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understood the nature of the transaction between Yavapai
and Young Acres?
A. Yes. I think they understood it or I would have
tried even harder to make them understand it, but...
Q. I'm going to have you next look at Exhibit 30.
In the letters we've just been talking about and earlier,
you testified that the Department suggested Yavapai refile
an Analysis of Assured Water Supply because of its
decision to move from a dry lot development?
HON. MIHALSKY: And for the record, that's ADWR
Exhibit 30?
MS. HUDGENS: Yes. ADWR Exhibit 30.
MR. LUTZ: And, Your Honor, if I could just let
you know, this is one of those exhibits that is
cross-referenced, it's also Yavapai 13.
HON. MIHALSKY: Thank you.
Q. BY MS. HUDGENS: Mr. Pearce, is this the
Application for Analysis of Assured Water Supply?
A. Yes, it certainly appears to be. It's my effort
in filling out the form and signed by Mr. Burdette.
Q. And can you describe briefly again why the
application was refiled in December of 2010?
A. Well, the principal reason was to make the shift
from dry lot to central distribution system, that was
something Mr. Dunham and I had discussed for a long period
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of time, years, and it was the right thing to do. So,
that was the principal reason.
And then the secondary reason was we had to
adjust the quantity of assured water supply being
requested to match the apparent quantity that would be
approved in the eventual Sever and Transfer Order so that
they were -- they were intended to be identical.
Q. And at that time, how did you know what amount to
ask for?
A. We had advanced from the discussion about the
quantification of the surface water rights to a point
where it looked like we would agree to use the second
management plan quantification of ground water rights as
the standard by which we would quantify the surface water
rights. So, at that time, we were able to make a fairly
precise calculation of the water that would be determined
to be severed and transferred in the ultimate Sever and
Transfer Decision and Order.
So, we had a -- we thought we knew the number
exactly, but as you will see, there was a small
discrepancy of about 4 acre feet that had to be corrected.
But we knew -- at this time, we knew very close to where
we were, so.
Q. You've mentioned the management plan or the
second management plan, can you describe that?
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A. Yes. The Department of Water Resources in the
1980 Ground Water Management Act is required to adopt
management plans more or less every decade to regulate
ground water use within the active management areas.
Those plans include what become mandatory conservation
requirements on certain users, and they are intended to
become more stringent over the decades and actually
effectively reduce ground water consumption through
conservation efforts being imposed upon the users of
ground water. And we are currently in the third
management period and operating under the third management
plan being more or less three decades of these plans, and
the fourth management plan is under consideration right
now and will be adopted here in the -- in the very near
term.
The second management plan ended, I think,
2001/2002 when the third management plan became effective.
Q. And so you mentioned that the management plan is
applied in the ground water context. Why was it applied
in this case when the parties were applying to use surface
water?
A. It was the method that we agreed to use to
quantify the surface water right using the Rio Rico matter
as a precedent and adopting the water duty employed in the
second management plan for a per-acre water duty for the
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surface water right. So, it was essentially a compromise
or agreement to borrow the quantification standard of the
second management plan for irrigated agriculture in the
active management areas and apply for the quantification
of these pre-1919 claimed surface water rights.
Q. So, now we've talked about the Sever and Transfer
Application and the Analysis for Assured Water Supply
Application, what happened after both of those amended
applications were filed?
A. There was some further work to be done on the
severance and transfer application. There was a little
bit more back and forth, but we began on our end to turn
our attention to trying to prove up the assured water
supply.
Q. At some point the Department determined to issue
the sever and transfer decision. Were you aware of that,
that that decision was made?
A. Yes, I was aware of it.
Q. Can you -- I'll have Stan go to ADWR Exhibit 35.
Is this the decision that was made on the Sever and
Transfer Application?
A. Yes, it appears to be. I know that you had it
labeled and I looked at it before.
Q. Was the application resolved in favor of Yavapai?
A. Yes, I think so.
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Q. What's the general effect of the decision?
A. It does several things, all of which I felt were
significant. It -- first of all, it approved the historic
record that we used to demonstrate the actual diversion
and use of surface water on this property dating back to
the 1800's, that in itself was a fairly significant
undertaking to prove that, and the Department accepted
that designation; it listed the points of diversion which
I commented before was very significant in that it
recognized those as points where appropriable surface
water could be withdrawn under these rights; it identified
the land base upon which the property could be used; it
quantified the rights by agreement but, nonetheless,
quantified them at a level that we felt was reasonable;
and it, in essence, assured us that we had, subject to the
conditions stated, the right to access and use this water
for the development of the Yavapai Land.
Q. If we turn to page 13 of the document, try to
scroll down. This is a little quicker.
A. Thirteen, signature page?
Q. Right. Under paragraph No. 5 on that page, there
are two conditions that are listed before the Sever and
Transfer Order can take effect. Are you generally
familiar with those two conditions?
A. Yes, I am.
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Q. And the first one is that Yavapai -- in order for
Yavapai to actually apply this to water at issue for
municipal use, Yavapai needs to provide the Director with
a deed or deeds whereby Young Acres would transfer its
right through a Quitclaim Deed to Yavapai. Do you see
that there?
A. Yes, that is correct.
Q. And we talked about earlier that this condition
was a proposal that was made by the Department?
A. Yes, or mutually disclosed and agreed upon. I
don't really remember the Department unilaterally proposed
it, but we talked about it. It was an agreeable idea.
Q. And so when this condition was included in the
order, were you surprised to see it?
A. No, not at all. Not at all. I knew it was going
to be in here.
Q. And at the same time that this order had been
issued, the Analysis for Assured Water Supply Application
was pending, correct?
A. Yes, it was pending, correct.
Q. And did the Department at any time indicate that
this condition would prevent Yavapai from actually
obtaining an analysis for assured water supply?
A. No. No, that would have been contrary to the
entire process.
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Q. The second condition before the water may be
severed and transferred and applied to municipal use is
that the Director issue a Certificate of Assured Water
Supply to Yavapai. Were you aware of this -- that this
was would be a condition to the sever and transfer?
A. I was aware that the Department felt it was
important to put this in. To me it went without saying
but, it's true, we do have to have a certificate of
assured supply. So, I didn't find it objectionable to put
this condition in the Sever and Transfer Order.
Q. When you say it goes without saying, what do you
mean?
A. Well, we all knew that the ultimate goal here was
to obtain a Certificate of Assured Water Supply for the
development of this process. That was the finish line,
everything else was just a step along that -- that road,
so.
We also knew that until such time as we had a
certificate and approved plat, that this farm was going to
be continued to be farmed. So, it didn't -- what I'm
trying to say is that we understood that a certificate
would be required long before this water would ever be
used for municipal purposes, so it didn't trouble us at
all that that was a requirement of using this water for
municipal purposes.
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Q. So, is it fair to summarize these two conditions
as saying that before -- before Yavapai can actually
develop the land and build its development and apply this
water to municipal use, it has to do two things: It has
to obtain a Certificate of Analysis of Assured Water; and
it has to show the Department Quitclaim Deeds saying that
Young Acres actually transferred those surface water
rights?
A. Yes. That's correct.
Q. And did Yavapai have any objections to those
conditions?
A. No. We understood both of them and that was
consistent with what we were trying to accomplish.
Q. If we scroll about three pages further in the
document, there is a chart that's listed at the top,
"Exhibit B, New Points of Diversion."
A. Oh. Further down. Exhibit B, yes. I'm getting
there, sorry.
Yes, I see this chart.
Q. These were the wells that were listed by the
Department as pumping solely appropriable surface water,
correct?
A. Yes.
Q. Did Yavapai have any objection to Exhibit B?
A. No, no. We thought this was a very fine list.
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MS. HUDGENS: Your Honor, if you agree, we would
suggest that this might be a nice time to take a break for
lunch. If I keep going further it might break halfway
through and we'd have to pick up mid-testimony.
HON. MIHALSKY: I think we're about due for a
break for the court reporter, we're about an hour and ten
minutes. So, let's go off the record and discuss when
we'll be coming back.
(Whereupon the noon recess was taken at 12:40
p.m. until 1:14 p.m.)
HON. MIHALSKY: We're back on the record. Over
lunch there is a notice of erratum from Ms. Hudgens on
Exhibit 2. This came in last week, this was November 7th.
Was that replaced with the Web Master?
MS. HUDGENS: It should have been.
HON. MIHALSKY: Okay.
MS. HUDGENS: I will check with my office. But
essentially it included some extra pages that had -- when
the documents had been produced, they weren't produced in
individual PDF's, so it included extra pages that it
should not have included.
HON. MIHALSKY: Okay.
MS. HUDGENS: So, that was the purpose of the
errata, but I will make sure with my office it was
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actually corrected with the Web Master.
HON. MIHALSKY: Very good. And I haven't been
able to check with the Web Master, I note that my list
doesn't include the most recent exhibits but we'll get
that straight.
MR. LUTZ: And, Your Honor, just before we begin
testimony again, I'm thinking that this is a good time so
that we're not dealing with this at the end of the day.
You invited earlier some thought or consideration in terms
of dealing with prejudicial late disclosures and we have
done that over -- over lunchtime.
Just to be clear, yesterday DWR disclosed at
least two documents that are PowerPoints from experts that
contain modeling results that they apparently have done.
We don't have the backup data for that and we don't have a
narrative explaining exactly what they've done with regard
to that work. I was able -- or, we were able over lunch
to get those PowerPoints to our expert so he can start
looking at them. He most likely will be called early
tomorrow to -- for testimony.
I think to avoid -- and it doesn't avoid,
frankly, but to lessen the prejudice of having to examine
DWR's witnesses on modeling work without backup, without a
narrative, all of the things that DWR was complain about
earlier today, that I need to consult at a minimum with my
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expert and have an opportunity for him to review those
PowerPoints. My suggestion would be, Your Honor, that we
continue at the end of today, we continue 'til Wednesday,
we're slated for this entire week. But that at least
gives me an opportunity to talk with my expert and to
review these PowerPoints before I have to try and
cross-examine witnesses, you know, cold with respect to
those PowerPoints.
As I said, I don't think it fully mitigates the
prejudice of the late disclosure but it would lessen it,
and that would be my suggestion of an alternative way to
lessen that prejudice.
MS. MILLER: Your Honor, that would not be a
problem for us. However, in order to make sure that we
try to complete this process this week, we would be in a
position to go forward with testimony by Doug Dunham who
is going to speak to many of the same topics that have
been covered so far by Mike Pearce in terms of the
processing of the application, if that would be
acceptable.
HON. MIHALSKY: I -- I don't know. Mr. Lutz, is
the problem here that you can't be in two places at one
time?
MR. LUTZ: Well, that's part of the problem, Your
Honor. I need to be here whether or not I'm
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cross-examining Mr. Dunham and, frankly, Ms. Hudgens is
doing that. But as part of the team, I think, one, it's
appropriate that I be here for that because that will
impact the questioning that I'm going to have for Mr.
Corkhill and Mr. Nelson; and, beyond that, that prevents
us from presenting our case as originally outlined, you
know. We've already agreed that once we complete our four
principal witnesses, we are going to allow DWR to make its
presentation. But that just further -- that just causes
additional problems from where I'm sitting, Your Honor.
HON. MIHALSKY: Okay. Would it help if we --
would you be able to work with a half day on Tuesday as
far as -- you know, or do you need a full day to do that?
MR. LUTZ: I don't honestly know as I sit here,
Your Honor. I -- I got one -- one of the two PowerPoints'
hard copy this morning. They were filed yesterday at
1 o'clock in the afternoon. We got them to our expert --
we finished transferring them to our expert today just
before or at lunch time. I don't know what he's going to
tell me in terms of what he needs to do to look at these
to be prepared to respond to questioning about them. I
presume DWR is going to question him about what's
contained in these documents.
As I sit here I think a half day is probably
insufficient.
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HON. MIHALSKY: Okay. Well, maybe what we can
do, then, is we will go from 8:30 to noon or lunch, a good
breaking point tomorrow, and then you'll have the
afternoon and we will be waiting to hear from you and once
you get into it. And if you can give us notice, it's
possible we'll take the morning of Wednesday off.
MR. LUTZ: Your Honor. We were going to be
putting our expert on the stand tomorrow morning. I'm not
certain he'll have completed his review of this material
from DWR tonight. If, Your Honor, is suggesting that we
should stay up tonight and get that done, we will do so.
HON. MIHALSKY: No. No, no, no. Of course not.
I was thinking of taking the ADWR witness that Ms. Miller
suggested.
MR. LUTZ: So then I -- I, again, would suggest
that as a practical matter if at the end of a half day
tomorrow afternoon I still need additional time with my
witness, do I then file a motion for additional
continuance? How do I -- how do I handle that, Your
Honor?
HON. MIHALSKY: File a motion. And I will let
you know that if you need it, you've got it, okay? So,
it's not going to be -- we'll trust your good faith and
your good judgment and you can let us know then if you
need it and I will then adjourn the hearing until the
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afternoon on Wednesday.
MR. LUTZ: Your Honor, I would just -- not to
beat a dead horse here but I, again, would renew my
objection to Mr. Dunham intruding into the middle of the
presentation of our case.
HON. MIHALSKY: Oh. Okay. So, that's not okay
with you?
MR. LUTZ: That's what I thought I had conveyed,
Your Honor.
HON. MIHALSKY: Forgive me.
MS. MILLER: May I make a comment, Your Honor?
HON. MIHALSKY: Yes.
MS. MILLER: First of all, which of the two
PowerPoints do you have in front of you, Mr. Lutz?
MR. LUTZ: I have 78.
MS. MILLER: You have 78. Here's 79.
MR. LUTZ: Thank you.
MS. MILLER: And, second, I thought I heard Mr.
Lutz indicate that they were concerned that we would be
asking their expert witness about our PowerPoints and I do
not see the Department moving in that direction. What we
want to do is present our direct case using these
PowerPoints. I'm assuming that their expert will be
present or could be present during the testimony that we
are giving, and they certainly are -- if they would like
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to have Mr. Miller talk about what he heard during our
presentation of our case, then he would be able to do so
after our testimony is completed.
We're not asking them to use a crystal ball to
try to figure out what we're talking about. The timing of
this is what it is and --
HON. MIHALSKY: And -- and that is a good point.
I usually tell my self-represented litigants that they
don't have to anticipate their opponent's case, that they
will have been opportunity for rebuttal. So, I'm
struggling here a little bit on understanding why you feel
it's necessary for your experts to address those
PowerPoints in their direct testimony.
MR. LUTZ: Well, Your Honor, two reasons. One,
as the Applicant here, we're entitled to present our case
as we see fit subject, obviously, to Your Honor's
evidentiary rulings and so on, but we're entitled to
control our case; and, secondly, that's one of the
purposes of our expert. To the extent that these
PowerPoints undercut anything that he's prepared to speak
to or add additional factors that he needs to address as
part of his analysis, that shouldn't have to wait for
rebuttal.
If -- if there's an issue that DWR has
identified, there's no reason that we should then present
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a witness that -- that tells you what his conclusions were
under a set of facts or set of analyses that may no longer
be valid given what DWR has sprung on us on Sunday.
HON. MIHALSKY: I think taking a day off, a full
day off, likely will mean we don't finish this week.
MR. LUTZ: Your Honor --
HON. MIHALSKY: And -- and, I mean, you're the
one who -- I'm trying to expedite it for you. And, again,
as I said this morning, it's not going to really expedite
it for you if you have to come back on a rehearing. So,
I'm really trying to avoid that. And on this one, it's
like, okay, we take a day off, you're able to anticipate
or maybe you're not, but maybe you will be able to
anticipate ADWR's case. And given the level of effort
that has been put into this so far and the time that has
passed, I am struggling a little bit to see why this is so
necessary that we are going to risk not finishing this
week.
MR. LUTZ: Your Honor, if I might address that.
Two thoughts spring to mind. First, in asking for this,
we're attempting to lessen the prejudice brought on by
DWR's late disclosure. To the extent that we are unable
to lessen that, I think we heighten the reverse at the
Superior Court level for having an adjudication process
that fundamentally burdened the Applicant or prejudices
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the Applicant. So, that causes a great deal of concern
for me.
HON. MIHALSKY: And, again, you are making
assumptions about these exhibits and about your expert's
reactions to these exhibits that may or may not be borne
out.
MR. LUTZ: And, Your Honor, that -- that is true.
But these exhibits will inform our examination of our
expert. One way or the other, we need to account for the
information.
HON. MIHALSKY: Okay. And I'm -- again. It
seems like we have -- and I realize it's part of your job
as an attorney to control a hearing or a trial, and in
parts you do that by anticipating the worst-possible
outcome because then you'll be ready for it. But my job
as a judge is not necessarily to do that. My job is to
expedite the hearing, my job is to make it as far as I can
make it, but not assume when I'm scheduling that I'm going
to have the worst-possible outcome, and that I am going to
have to schedule the case to allow all the time that the
parties' attorneys think they may need to address
uncertain eventualities. I mean, and that's what I'm
hearing here.
MR. LUTZ: And, Your Honor, if that's the case, I
will tell you we will likely make a paper record and
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likely file something requesting that -- that continuance
just so it can be denied and we have that in the record
for appellate purposes if necessary.
HON. MIHALSKY: Okay. We have been on the record
and --
MR. LUTZ: I understand.
HON. MIHALSKY: -- so we will have a court
reporter transcript, we have an audio record. You can, of
course, file what you feel is necessary to protect your
client.
MR. LUTZ: Understood.
HON. MIHALSKY: I'm -- I'm trying to...
MR. LUTZ: I was going to say, Your Honor, we --
we have two principal witnesses after Mr. Pearce is done
remaining. I don't share the same concerns in terms of
timing that you do, but you control the -- and DWR has
three witnesses, you control the scheduling of the case
and we will obviously do whatever it is that you direct us
to do.
HON. MIHALSKY: Okay.
MR. LUTZ: To the extent that we can --
HON. MIHALSKY: I have your motion under
advisement, okay. I've indicated my concerns, I have not
formally ruled on it. I will let you know by the end of
today.
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MR. LUTZ: Thank you, Your Honor.
HON. MIHALSKY: And, Ms. Miller, if you have
anything more to say on that now or later --
MS. MILLER: Nothing further.
HON. MIHALSKY: -- I want -- I want to take time
to consult my colleagues about this, that is my general
practice on -- when things come up which I don't plan for.
And that was like that.
MR. LUTZ: Understood. And, Your Honor, just --
I'm just going to throw this out and I'm not questioning
what you've said. You know, potential alternative if we
take time off, we would probably prefer to do that in the
morning rather than the afternoon.
HON. MIHALSKY: Okay.
MR. LUTZ: Just because it's easier to do that.
That would also enable us time to determine if we needed
more time and get something on file if we did.
HON. MIHALSKY: Of course. Then, at a bare
minimum we'll have tomorrow morning.
MS. MILLER: I do have a concern now, Your Honor,
which is we don't want our witness's testimony split. So,
I don't know if that's part of the one consideration --
HON. MIHALSKY: No, we're not going to hear from
your witness.
MS. MILLER: It will be just a continuance for
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the morning or whatever it is?
HON. MIHALSKY: Right.
MS. MILLER: And, again, I will just reiterate
quickly, because Mr. Lutz has already touched on it,
earlier comments that I made about how we got to this
place in this case, and this is not the normal
administrative review proceedings. A lot of information
has been provided to us and, quite honestly, we don't know
what Mr. Miller is going to say because we didn't get a
narrative; and we're willing to sit through this process,
listen to what has to say, and then take it from there.
And if we have to present -- well, we get to go next. So,
as part of our direct case, potentially, we would be able
to address whatever concerns we had with whatever Mr.
Miller says. So, there's really no reason in our view to
go out of the normal rotation of presentation of witness
testimony.
HON. MIHALSKY: Well, I think -- I think we're
back to the normal rotation of presentation of witness's
testimony and that the Applicant is going to finish their
case before we hear from you.
MS. MILLER: Okay. And I guess what I was also
commenting on, and I understand you have it under
advisement, but the Department's position is there is no
reason for a break. That they're -- their expert, Mr.
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Miller, will listen to what we have to say and that will
be much more beneficial to him than trying to figure out
what we might be saying. And that's the position that the
Department is taking on this matter, and I respect that
you're taking it under advisement.
HON. MIHALSKY: I am taking it under advisement.
Again, Mr. Lutz and his witnesses can have the morning,
and I really do anticipate you're going to finish with
your witness because I don't -- I don't think that you
need a full day to anticipate their whole case. You do
have a right to present rebuttal testimony because you
have the burden of proof.
And, honestly, you know, at some point the
parties need to figure out their analysis and decide that,
"this is the analysis we believe in, this is the best
analysis," and show me a little bit of conviction, you
know, and that's really what I'm looking for in this
hearing.
So, with that, can we finish with this witness?
MS. HUDGENS: I am ready to move forward, Your
Honor.
HON. MIHALSKY: Thank you.
MS. HUDGENS: Let's just get our technology set
up here.
MR. LUTZ: Your Honor, if you could, I believe
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you have to sign in so we can get to the exhibits.
HON. MIHALSKY: Oh. That's right. Thank you.
And there it is. So, you can -- I mean,
you had just brought that up?
MS. HUDGENS: Right. I'll actually stay with
that exhibit.
HON. MIHALSKY: Okay. Very good. And that
exhibit is?
MS. HUDGENS: That exhibit is 35, ADWR
Exhibit 35.
HON. MIHALSKY: Thank you.
BY MS. HUDGENS:
Q. Mr. Pearce, we just took a break for lunch, but
right before we took a break we were talking about the
Department's decision to issue a Sever and Transfer Order
to Yavapai; is that right?
A. Yes, that's right.
Q. And did Yavapai rely on the Sever and Transfer
Order in any way?
A. Yes. We considered it a very, very significant
document and significant step in the process.
Q. And why was that the case?
A. Well, because the severance and transfer order
was an official decision and order of the Director of
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Water Resources affirming certain key points regarding the
water rights available to Yavapai Land on the property. I
enumerate some of those points but, just quickly, it
established the historical basis of the claim; established
that the rights had not been forfeited or abandoned;
established that the land base upon which those rights
could be deployed; established this list of authorized
points of diversion for the appropriable surface water to
be put to use and beneficial use under that right. It was
a very significant determination.
I left off quantification of the amount of that
right, which is equally important.
All of those elements are contained within the
four corners of this document and it is a significant
document. It took us several years to achieve it and we
regarded it as such. We regarded it as the final word on
these particular matters.
Q. If you can turn to page 4 of the actual order.
Let's see if Stan can help here.
I'm going to have you look at paragraph 11. And
it talks about quantifying historical surface water use
and it mentions that the Department used the 1980 Ground
Water Management Act in order to quantify the water
authorized for use. You mentioned the Ground Water
Management Act earlier and one phrase that you use or one
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way of describing this is that it was a compromise between
the Department and Yavapai. Why was it a compromise?
A. We believed that the gross diversion of quantity
of surface water on the -- on the old historic farm was
probably higher than the quantification based on the use
of the second management plan conservation requirements
adopted under the 1980 Ground Water Management Act, and
that was reflected in our initial application for
analysis; and the numbers, the actual annual
quantification in this Sever and Transfer Decision and
Order was a lesser number, and we understood that that
would be the case if we agreed to the suggested method of
quantification.
Q. Why was Yavapai willing to make that compromise?
A. In the interest of getting to a final resolution
of this document. It was to expedite it.
Q. When the Department determined in the Sever and
Transfer Order that 651.36 acre feet a year of water was
the maximum quantity of water available for municipal
purposes, would that amount be sufficient for the purpose
of the development that it had proposed?
A. Yes. Given that -- assuming that the development
would be tailored to meet that quantity of water. Could
have used more, but that was the water supply that was
available and we were confident that we could develop a
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subdivision into an attractive master-planned community
based on that quantity of water.
Q. After the Sever and Transfer Order was issued,
what did Yavapai do next?
A. It's a little chicken-and-egg there. I think we
actually started working on the assured water supply
aspects before April 2014, because we were confident that
we had reached a conclusion conceptually on the Sever and
Transfer Order with the Department of Water Resources and
we were prepared to move forward even though the formal
decision itself was being drafted and approved and
finalized.
So, we were -- we had begun focusing our
attention on the next step in the process, which was to
advance the calculation of the necessary elements of the
assured water supply. That actually happened a little bit
before the decision and order and then, of course, when
this formal document was released, that process continued
thereafter.
Q. Were there any issues related to the Application
for Analysis of Assured Water Supply that were resolved by
the Sever and Transfer Order?
A. Yes. Particularly the quantification. In fact,
at the last minute there was a small discrepancy between
how we had calculated the second management plan water
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duties versus the Department, just an arithmetic error
basically, and they pointed that out to us and we accepted
their correction. But that was the biggest thing we had
to know was what the actual number was so we could
incorporate it into a renewed application for analysis and
into our future modeling efforts to work with that number.
So, that was what we were really waiting for.
That and, of course, the point of diversion wells were
critical because when we went forward with the modeling
process, we were going to utilize some or all of those
wells as our modeled points of withdrawal and production
of water. That was very significant because we intended
to show continuous physical availability of water using
those very specified wells, and that's what we endeavored
to do.
Q. So, one of the phrases that has come up a couple
of times is the phrase "point of diversion" or "point of
diversion wells." What does that mean?
A. A point of diversion is an attribute of the
right-to-use surface water, and it's an attribute because
the location of where the water is actually diverted from
the stream can be important regarding relative other water
users. There are times when you can change the point of
diversion to have a detrimental effect on other people.
So, part of the fabric of a surface water right
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is to have a known and fixed point of diversion where the
water can be removed from the natural water course and
transported to the place of beneficial use.
Q. So, one of the questions that -- that existed
before the Sever and Transfer Order was issued was whether
the wells pumped surface water. Was that question
resolved by the Sever and Transfer Order?
A. It was to my satisfaction because the wells were
carefully evaluated and picked by the Department of Water
Resources based on their characteristics, their physical
characteristics, and I construed that to be a
determination that those wells, those wells that they
chose, those points of diversion, were extracting
exclusively appropriable surface water.
Q. Did you ever communicate to the Department your
view that the question of whether water extracted from
shallow wells could be legally considered as surface water
had been resolved?
A. I think that thought was expressed in perhaps a
subsequent letter. I certainly had conversations to that
effect. I thought it was mutually understood, but I do
think there was a written reference to it.
Maybe you can help me out to find that.
Q. That's the next document that I'm going to show
you which has been marked as ADWR Exhibit 36.
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MR. LUTZ: And, Your Honor, if I could just point
out to you just for your assistance, ADWR 35 also is
Yavapai 17, and ADWR 36 is contained within Yavapai 18.
HON. MIHALSKY: Thank you.
Q. BY MS. HUDGENS: And, Mr. Pearce, this appears to
be a letter that you drafted June 19th, 2014, to the
Department?
A. Yes. I'm looking at my letterhead and the date
there.
Q. If you scroll down to the bottom of the first
page starting with the paragraph, "Your letter of
January 20th, 2011." If you'll just take a minute to read
that.
A. Yes, I've read that paragraph and it's consistent
with -- with what I just related.
It reminds me as well that -- we have not read it
here this morning, but there was another letter marked as
an exhibit that was issued by the Department of Water
Resources early on, went on for several pages and
contained several questions, very pointed questions
regarding the question of whether the water to be
extracted from the alluvial aquifer underlying the
alluvial land was ground water or surface water. And a
lot of those questions were never answered expressly or
affirmatively by a written response.
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And this paragraph was my attempt to state in
writing what I considered to be obvious, was that when Mr.
Dunham was referring in his letter of January 20th that
there were several unanswered questions, I was pointing
out that most of those questions had been resolved in the
severance and transfer process. And that was quite true
in my belief and opinion, that going back and saying there
are many unanswered questions was true, but it was kind of
a moot point at that -- at that juncture, most of those
questions had already been answered. And that's what I
was trying to communicate in this particular paragraph.
And I think it says rather plainly that the water
extracted from these shallow wells listed as points of
diversion is surface water.
Q. So, this letter was written to Mr. Dunham. Do
you recall Mr. Dunham disagreeing with your conclusion
that, as expressed in that paragraph, the issue of whether
the water extracted from the point of diversion wells was
surface water?
A. No. Throughout the time between this letter and
the time when it became apparent in the fall of 2015, that
the Department disagreed with our ultimate conclusion, I
don't remember anybody debating -- further debating the
point of whether these shallow wells that they had
identified were -- were pumping appropriable surface
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water. The question at that point shifted to "will that
water be there a hundred years from now," not what it was
at the time. And, yeah -- that -- I had many
conversations in that period of time but, no, we never had
a conversation to the -- to the effect that the words
stated in this paragraph were incorrect or a
misunderstanding.
Q. So, is it fair to say, then, that after the Sever
and Transfer Order was issued, the focus for Yavapai's
purposes was to prove that the water was physically and
continuously available?
A. Yes. Absolutely. That became our sole focus was
to prove that the water would be physically present in the
alluvial aquifer for the duration of the hundred-year
water supply period.
Q. Was legal availability at that point a focus for
Yavapai?
A. I did not consider it as such; I thought that had
been adequately resolved. With one exception which, if
it's okay, I'll take the opportunity to point out. And
Doug Dunham and I discussed this many times.
There's -- there's perhaps two facets to legal
availability. Oftentimes when you have a centralized
distribution system in a master-planned community, some
entity has to have the right to distribute that water to
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the residents and to the customers, and that a monopoly
generally speaking so it's a regulated activity. You
either have to be, for example, an investor-owned utility
that's a regulated monopoly regulated by the Arizona
Corporation Commission or you have to be a recognized
municipality, a city or town or county, or you have to be
a special district that has the authority to distribute
water to customers and charge them rates for that
delivery. That is one very important aspect of legal
availability as it is defined in the assured water supply.
That was not our concern. We -- we had known and chose to
defer that until the certificate stage of this process.
What we were concerned about was showing that the
water was legally available to Yavapai Land Holdings as
the landowner. That the surface water rights were
adequate to the task to authorize the extraction and
beneficial use of appropriable surface water on that land
base for the hundred-year term. That was the legal
availability component that we were seeking. And we
believed that the severance and transfer order made that
determination subject only to what we perceived the
administerial act of issuing, delivering, and recording
the Quitclaim Deeds at the end of the process.
Q. From the issuance of the Sever and Transfer Order
and until the order denying the Analysis of Assured Water
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Supply was issued, at any point during that time did the
Department raise to you the issue of whether Yavapai had
proved the legal availability of water?
A. No, not to my recollection. That was never
discussed again.
Q. When proving physical and continuous availability
of the water for a hundred-year period, how did Yavapai go
about making that proof?
A. Well, we knew that we would have to rely on
computer modeling to demonstrate the projected 100-year
supply and the question was how best to approach that
task, what type of model to use, how to construct it, what
would be acceptable to the Department to prove the
projected supply over the course of the hundred-year term.
That was the focus of our attention. We had engaged
Southwest Ground Water Consultants to assist us in that
task and they were actively working with us during this
time period and they were our technical expert to help
develop the technical tools that we needed to make the
requisite demonstration.
Q. Did Southwest Ground Water Consultants have a
model that it sought to use in order to make the offer of
proof of physical and continuous availability?
A. No, they did not have a model sitting on the
shelf, so to speak, that they could use. They had done
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some work many years before in the Prescott Active
Management Area; had done some modeling work, they had
some elements, but they would have had to construct a
model dedicated to the purpose of analyzing this
particular water supply.
Q. Did the Department have a particular model that
had been in place at that time to demonstrate physical and
continuous availability?
A. The answer to that depends on when "at that time"
was. Back in 2006, no, they did not. Through 2010 when
we filed the amended application for analysis, no, they
did not.
I believe this letter -- if I could maybe scroll
down a little bit -- identifies a date where we met with
the Department to have that very conversation of what type
of model would be acceptable to use for the purpose of
supporting this particular application for analysis.
Q. Did the Department provide Yavapai with a choice
of the model that it could use for the purpose of this
analysis?
A. Well, as described in this letter on page 2, the
first full paragraph, we met with the Department on
July 1st, 2013. I was present, Mr. William Greenslade
from Southwest Ground Water was present, several DWR
representatives were present, I don't know that I could
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enumerate all of them, Gary Young, and Lee Storey was
present. And the purpose of that meeting was specifically
to discuss what the Department would expect and require
for the modeling effort to support this application.
And we met, sat down, and after brief
introductions, the Department told us that they were
nearing completion of a comprehensive ground water model
for the Prescott Active Management Area and that we were
to use that particular model to do the modeling work on
this application.
Mr. Greenslade was there and made the point that
from what he understood and knew at the time, because the
model that DWR was working on had not been released to the
public, that that model was a ground water model, in his
mind, designed to predict relative change in the ground
water aquifer and was not well-suited to predicting
surface water runoff and stream flow within the Prescott
Active Management Area, and that other types of modeling
efforts would be more suited to trying to predict surface
flow, visible surface flow in a stream.
But that objection did not persuade the
Department representatives and they, again, told us that
they felt that their new model would be adequate to the
task and that it was realistically the only choice that we
had.
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I can't remember the exact words that were used
in that discussion but the message was immanently clear.
We were to use the Prescott model when it was released in
accordance with the Department's instructions on how to
use the model to run the modeling runs that would be used
to determine the merits of this particular application.
Q. So one of the phrases that we've heard today is
"the PrAMA model," is that the model to which you are
referring?
A. Yes. PrAMA being an acronym for Prescott AMA,
active management area.
Q. Mr. Pearce, were you here today for opening
statements and preliminary arguments?
A. Yes.
Q. Ms. Miller, counsel for DWR, stated that Yavapai
did not object to the PrAMA model; is that true?
A. We did object. Mr. Greenslade objected that very
day, but we were overruled and proceeded to follow
instructions and use the PrAMA model. Not only just to
use it, but to use it in accordance with DWR's directions
as the process evolved through a couple of iterations, at
least, on how to use it.
Q. And another argument that was made was that
Yavapai did not state its belief in any way that the model
was flawed or could be flawed; is that true?
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A. No, I don't think that's true. I can think of at
least two specific occasions where we at least verbally
stated the viewpoint that the model was flawed or
inadequate to the task.
Q. To your knowledge, had -- had the model ever been
used before it was presented to Yavapai?
A. I don't know that it had ever been used in an
actual application proceeding in a formal way. When we
had that meeting in July of 2013, of course Mr. Greenslade
being a professional hydrologist and working in the field
on a daily basis, was well aware that the model existed
and that the Department of Water Resources was working on
it, it was common knowledge in hydrologic circles. I
guess in computer software terms they call that the beta,
the beta stage where it's under test; it does exist, it
does function, but it's being fine tuned.
And we were told they would let us know when it
was ready for release. And we had to wait for it, a
couple of three months, I can't remember exactly how long.
But we had to wait until they had finished their internal
review and final tweaking before it was released to us.
So, if we weren't the first, we certainly had to be one of
the very first.
Q. One of the things you just mentioned was that you
can recall at least two occasions verbally where potential
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flaws in the PrAMA model were conveyed to the Department.
Do you remember who you were speaking with?
A. Well, the first occasion was the one I just
described where Mr. Greenslade made the point that he did
not believe that a ground water model constructed along
the lines that he understood the PrAMA model as you called
it was being constructed, would be a good predictor of
surface flow at the bottom end of the AMA in the Agua Fria
River. and I have to believe that point was understood by
the Department, they just disagreed with it.
Then after we had run the model a couple of
times, we pointed out to the Department that we felt the
model underpredicted the historic stream flow at the
Humboldt gauge, and that to us was a very significant
point; and we followed that up with an actual written
report to that effect comparing the prediction of surface
flow at the Humboldt gauge within the model to the known
database of the historical record of the gauge. And I'm
not a modeling expert, but the one thing I do know about a
model is that if it can't predict the past, it's got a
serious problem.
Q. Did Yavapai end up using the model precisely as
ADWR had demanded that it be used?
A. Yes. As far as I know, we followed their
instructions explicitly. Some things were left to our
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discretion, but anything that they told us to do, we did.
Including running the model under different scenarios;
going out and physically testing -- physically manually
testing the depth of water in some of these point of
diversion wells to reconfirm the physical depth of water
in the wellbore so that that could be inputted into the
model; running the model as I said in alternative
scenarios, one with our proposed extractions of 651 acre
feet per year for the next hundred years and one without.
Everything that they asked us to do, we certainly
tried to do and complied with to the best of my knowledge.
Q. How did Yavapai get the data it needed in order
to input that into the model?
A. Well, the model itself contains data and -- and
information. Models are constructed looking at a land
base and dividing it into individual cells, and there is
information incorporated into those cells that reflect the
known hydrologic and geologic conditions of the area. So,
there's some information there.
Other information has to be supplied. One of the
areas -- because the model was so new, I think -- that was
uncertain was whether or not the model incorporated all of
the approved current, committed, and projected demands of
the Prescott Active Management Area at the time that it
was given to us to run. And my recollection of the
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situation was that we were instructed -- "we" being
Yavapai and Southwest Ground Water -- to assimilate that
data and incorporate it into the model. And Mr. Miller
and Mr. Greenslade did that, ran the model accordingly,
and then upon DWR's review, were told that those values
that they input were somewhat incorrect. Not grossly
incorrect, but somewhat incorrect.
And so the Southwest Ground Water requested that
DWR give us numbers that they were comfortable with, and
they did, and we incorporated those into the model and it
made a slight difference, very slight. But the point was
that there was data that needed to be input, we made an
effort at it, apparently we didn't do it as well as we
should have, they corrected it, we reran it with that
data. And that took some period of time, a few months to
do that.
Q. So what you were just describing is that DWR
required that Yavapai input into its model committed
demands. What are committed demands?
A. Committed demands -- well, the three categories
are: Current demand, committed demand, and projected
demand. Current demand is just what it sounds like, it's
ground water actually being used today.
Committed demand is a more esoteric subject, it
is subdivision lots that have been platted but not yet
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built. Because those lots have been platted, the
Department of Water Resources considers them to be
actively using the water that they were projected to use.
It's almost a current demand in the sense that it shows up
in the model as water actually being used, but it's a
unique category peculiar to the Assured Water Supply
Program.
Q. So, another way of describing it is that ADWR
wanted Yavapai to account for any committed potential uses
of surface water within that area?
MS. HEIM: Your Honor, I'm going to object to the
question as leading.
HON. MIHALSKY: It is. Sustained.
Q. BY MS. HUDGENS: Let me ask it a different way.
A. Okay.
Q. If you're describing committed demands to a
non-lawyer, to someone who doesn't know anything about
water, to a non-hydrologist, what would be the most simple
way of explaining that?
A. That it's -- in modeling terms, it is a demand on
the system for water that's not currently being used but
will be used sometime in the future.
Q. And if you input that data into the model, what
does it do to the model?
A. It increases the demand, the stress on the -- on
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the total system, and depletes the water resource.
Q. After Yavapai conducted its modeling, did DWR
express any negative commentary on the modeling
methodology?
A. Yes. They -- they questioned a couple of things
in the -- there's a couple of letters that we haven't
gotten to quite yet, but there's a little bit of back and
forth regarding the final results of the model. But then
there came a point in time somewhere in the summer of
2015, where I don't know if it was really spoken or not,
but there was kind of a mutual understanding that we were
done. It was either finished or not, there wasn't
anything left to go back and try or rerun. So, somewhere
along that summer to fall of 2015, we had reached --
reached that understanding.
Q. So, let's go back a little bit. What did you
understand DW -- DWR's concerns to be with respect to the
availability of -- the physical and continuous
availability of surface water?
A. Yes. The biggest -- point out the biggest
concern that was expressed in both of their letters, I
think, was that the model predicted that there would be no
surface flow visible on the surface of the Agua Fria River
in the later years of the modeling exercise, somewhere on
the order of 75 to 85 years out into the modeling process,
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and they suggested to us that proved or maybe it disproved
our ability to show what they called a continuous
availability.
Q. If we turn to Exhibit 41 -- excuse me, yes, ADWR
41. There's a letter here dated August 5th, 2014,
directed toward -- to you. And if you scroll through the
document it's about -- it's, essentially, just a page.
Is this one of the letters that you were
referring to where DWR expresses its concerns with some of
the modeling?
A. Yes. This is, I believe, the earlier of the two
letters. It makes three points: The committed demand
numbers were incorrect; the second point is beginning in
the year 2086, stream file data indicates the absence of
water flow on the Agua Fria River; and the third point is
the agricultural recharge component of the Young's Farm
property should become zero during the 100-year
simulation.
My understanding is that we concurred with the
first and the third point as technical comments that were
meritorious and made those corrections, and then the
second bullet became an issue of dispute.
Q. And then if you turn to DWR 46 -- 45, sorry.
This is another letter dated November 6th, 2014, directed
to you. If you scroll down, you'll see this is also about
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a page long. Is this the second of the two letters that
you refer to?
A. Yes, I believe it is. And this makes also three
points. The first is their request to run the model with
the proposed Yavapai Land withdrawals in use of 651 acre
feet per year for a hundred years and without. And they
have requested the MODFLOW as they call them -- MODFLOW
being, I think, a trademark of a particular type of
computer model -- for the four wells that we had chosen
for the modeling effort. And we did that, we -- we ran
the model in accordance with these instructions with and
without our proposed 651 acre foot per year withdrawal
being part of the demand or not part of the demand.
Q. So, the first letter that we just looked at and
then the second letter, one of the concerns that DWR
expressed was whether there was an absence of surface
water during that some period of time in the next
100 years?
A. Yes.
Q. Did you ever respond to that concern raised by
DWR?
A. I did. I did respond in writing; we also met on
that subject.
Q. What was the summary of your discussions with DWR
on that topic?
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A. We discussed at the -- maybe I'll start with the
in-person meeting. Is that...
Q. Sure. That's great.
A. Yeah, I can't remember what came first, the
letter or the in-person meeting, but they were about the
same time.
But at the in-person meeting we met with
several from the Department of Water Resources, several of
us were there, it was a big meeting, and it was getting
close -- we all knew we were getting close to the point of
decision, and it seemed that the only area of disagreement
that we had was the fact that the model predicted a series
of dry years on the surface of the Agua Fria River in the
later modeling years of the model. And the discussion
focused on whether that was an obstacle at all, whether it
could be overcome, or whether it was a legal dispute that
we could not resolve.
Our contention was that it was not an obstacle at
all, that the model as constructed by the Department and
as run in accordance with their instruction showed that
the water was physically present and accessible through
the point of diversion wells and that was all they needed
to show into the analysis. I think we all agreed that
further modeling effort wasn't going to change those
results unless we began tinkering with the model itself.
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And we did not do that, but for very good reasons.
And then as a discussion progressed it seemed
to -- to reveal that the real issue was more of a legal
issue as to what that water sitting in the alluvial
aquifer would be legally characterized as 75, 85 years
into the future.
And I wrote a letter expressing my point of view
on the subject.
Q. Well, I'll stop you there because I'll have you
go to the letter which is DWR 49.
If you will take a minute to review this letter.
It's dated July 7th, 2015. It's addressed to Mr. Dunham.
MR. LUTZ: And, Your Honor, while Mr. Pearce is
doing that, I would just note that ADWR 49 is also part of
Yavapai 34.
HON. MIHALSKY: Thank you.
Q. BY MS. HUDGENS: So, the first two topics that
you address in the letter relate to the revision of
modeling and depth of water measurements. Those were two
of the points that DWR raised that Yavapai did not have an
issue with as far as responding to those and to taking
direction from DWR. Is that fair to say?
A. That's fair to say, yes.
Q. And then the discussion under continuous
availability of subflow, is this the topic that you had a
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dispute with DWR related to the periods -- dry periods in
the future that the model purported to show?
A. Yes. That was the point of this letter was to
set forth our position on the substance of that issue and
to hopefully persuade the Department of Water Resources
that this was a correct view of the situation and should
resolve the issue in favor of granting the analysis of
assured supply.
Q. In this discussion you refer to a number of water
law cases and water law principles. Did you ever receive
a subsequent response from DWR either agreeing with or
disputing your presentation of the treatment of subflow?
A. No, I don't recall ever receiving a written
response to the points made in this letter.
Q. Do you recall having conversations with anyone at
the Department about those issues?
A. Yes, I believe that I did. And it was -- it was
obvious that we were at loggerheads on that.
Q. So, is it fair to say that the -- that the issue
where the party -- where DWR and Yavapai diverged was the
treatment of subflow?
A. Yes. I would -- in my words I would say it was
the last issue and the only issue that kept us apart, was
whether the water in the alluvial aquifer at the tail end
of the model 75, 85 years out, was legally characterized
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as ground water or surface water. I did not hear and was
not ever told that there was a dispute whether the water
was physically there or not. It was just whether the
legal characterization of that water somehow changed over
the course of the modeling exercise, and that is the final
word that I understood on the subject.
Q. And so the next event that happens is essentially
the denial of the analysis for assured water supply?
A. Yes, that's correct. And I -- have to understand
that these are people that I've worked with and known for
many, many years and have great respect for and trust. I
knew that that was going to be the result and it was just
a matter of waiting for the formal denial to come forward
from the Department. So, we -- we anticipated it and read
it.
Q. So, if you will now look at DWR 63. This is a
letter dated December 3rd, 2015, directed to your
attention. Is this the letter conveying the Department's
denial of Yavapai's Application For Analysis of Assured
Water Supply?
A. Yes, it is. It's a letter and a Notice of
Appealable Agency Action. It was the -- it was considered
by the Department to be the final administrative response
for a -- hope I get the terminology right -- a contested
case without a hearing.
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Q. Did DWR deny the application on all three factors
meaning physical supply, continuous supply, and legal
availability?
A. Yes, they did.
Q. Before the decision was issued, had the
Department taken any issue or conveyed any concern with
respect to the legal availability of the water?
A. No. That was the only thing really in this
letter that surprised me was the position that they took
on -- on legal availability. I would have thought that
that would have been dispensed with in another way, but
they chose to take issue with it here and it's included
here.
Q. With respect to continuous supply and legal --
and physical availability, those two issues you had -- you
knew that the Department intended to deny the application
on those two issues, right?
A. Yes. Although, there was some doubt as to
whether the issue was physical or continuous availability.
You have to understand, in this context they're very
similar and this letter says we failed to prove either
physical or continuous.
Over the course of discussing this through the
years, continuous always seemed to be the primary concern.
But, as I said, they're very similar in the final analysis
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here.
MS. HUDGENS: Your Honor, if we may just take
about five minutes to make sure and have an opportunity to
look at my notes.
HON. MIHALSKY: I think it's getting to be a good
time for a break and I generally take 15 minutes in the
break just because I think that's what's needed for
everyone to refresh themselves. So, it is 2:21 p.m.
We'll be back on the record at 2:37.
(Recess taken from 2:22 p.m. to 2:44 p.m.)
HON. MIHALSKY: We're back on the record. I did
consult with my colleagues and we will adjourn again after
we get done today, tomorrow at 1:00. I'll give you a half
day, Mr. Lutz. If you feel like you need more time,
you're going to need a written motion and tell me exactly
why it is that these exhibits -- which generally those
kinds of exhibits are demonstrative exhibits that put
together previously-provided information, but exactly
what's in those exhibits that is going to have such a huge
effect on your -- or potential effect, I don't know, on
your expert 's testimony that you need a full day to
decide how to deal with it.
And I've never actually adjourned for even a half
day to allow a party that has the burden of proof to meet
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its opponent's evidence. The reason I'm doing here -- I'm
doing it here today is because these flowcharts weren't
disclosed until Sunday. But, again, I -- I will need some
avowal that the information in the flow charts were not
previously disclosed and some specific reason why you need
a full day to go over them with your experts. And -- and
I will get a response to that. It's going to be quick.
I'll look for that motion around 11:00 tomorrow.
MR. LUTZ: Your Honor, if we're going to make
that, we will. Just to make sure I'm clear, are we going
in the morning and then adjourning at 1:00 or are we
expected --
HON. MIHALSKY: No. We're going to -- I'm
expecting you to be here at 1:00 --
MR. LUTZ: Okay.
HON. MIHALSKY: -- to go forward with your case.
MR. LUTZ: All right. Thank you.
HON. MIHALSKY: I'm not going to take the
Department's witnesses out of order. And so you will have
the morning, you will have this evening, and we will go on
the record at 1:00.
If there is a serious problem that you do not
believe that you can meet with your experts on and decide
the effect, if any, of these flowcharts on your case, you
need to let me know exactly why it is you need additional
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time.
And, Ms. Miller -- I'm expecting to see your
motion by 11:00 if you decide to make it -- your response
will be due at noon.
MS. MILLER: That's fine, Your Honor.
HON. MIHALSKY: And I will be looking for that
and I'll -- I'll get an order out by 12:30.
MS. MILLER: May I address another housekeeping
issue that I overlooked while we were talking earlier?
HON. MIHALSKY: Certainly.
MS. MILLER: The slideshow Exhibit 78, was filed
with the Web Master this morning as required, and accurate
copies of that slideshow 78, Exhibit No. 78, were provided
to counsel for Yavapai. And I have a hard copy for Your
Honor of both of them, if you would like them, the hard
copy of both of the slideshows.
The reason that I'm bringing this up is that we
also sent to Your Honor by e-mail, as requested, a copy of
our slideshows and another document labeled ADWR 77.
HON. MIHALSKY: Okay.
MS. MILLER: I just want to make sure that you
saw it before today and we understand that sometimes it's
been an issue in the past.
HON. MIHALSKY: I will -- I will look. You know,
MSN is doing weird things with my personal e-mail. But it
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has to been submitted to the --
MS. MILLER: Yes. And the reason I bring it up
is because the copy we sent to you -- of course we copied
counsel on our e-mail to you -- had the wrong version of
Exhibit 78, so don't bother.
HON. MIHALSKY: Okay. I will not bother, then.
I will not.
MS. MILLER: And the hard copy that we just
provided to Mr. Lutz is the correct one and the one we
filed with the Web Master is the correct one. So, if you
would like a copy --
HON. MIHALSKY: No, I would not.
MS. MILLER: Okay. So, I wanted to clarify that
for everyone. Thank you.
HON. MIHALSKY: Okay.
MS. HUDGENS: I just had one question on that.
So, the correct version you handed to Mr. Lutz in a hard
copy?
MS. MILLER: Yes.
MS. HUDGENS: Do we have electronic access to
those documents?
MR. LUTZ: That's what I was going to ask. You
e-mailed --
MS. MILLER: They were posted -- sorry.
MR. LUTZ: You e-mailed a copy yesterday, was
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that also the incorrect version that was e-mailed to us
because that's what we now provided to our expert to
review.
MS. MILLER: Yes, and that's why I'm bringing it
up. The correct copy is the one -- and I tried explain
that earlier this morning but we got off on a different
foot.
MS. KLOBAS: The difference is the one we gave to
you has five extra slides.
MS. MILLER: Right.
MS. KLOBAS: So those slides are removed in the
corrected version. So, it's -- and we just didn't replace
them with anything.
MS. MILLER: Would you like to know which slides
they were?
MR. LUTZ: If you could, that will be wonderful.
MS. MILLER: They're slides 9, 10, 12, 13, and
14.
MR. LUTZ: Nothing, Your Honor.
MS. MILLER: Nothing further. Thank you.
HON. MIHALSKY: Okay. Thank you. Thank you.
And I -- I think that there's been a little
bit of a delay. What happens here is that it's a little
bit cumbersome to work from -- directly from the Internet
versions in the hearing, and so what happens is that the
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Web Master downloads exhibits and then brings the complete
exhibit list in here to be placed on the hard drive. And
so the exhibits we have today are not complete because the
Web Master hasn't gotten around to bringing them in here.
And if there is a problem because we're going to talk
about -- I mean, it seems like it's mainly ADWR's
exhibits, and so probably it's going to be okay. Before I
leave today, I'll make sure the exhibit list on the
Website and in the hearing room -- although I guess it
doesn't really matter because we won't be on the record in
the morning, but I will follow up with the Web Master.
MS. HUDGENS: Is it possible, Jan, for your
office to e-mail those to me and to Stan so we can get
those to the expert quickly?
MS. MILLER: Sure. Except I think the point of
our conversation was that the version that you have that
we are not relying on is exactly the same as the version
that we are going to rely on with the exception of five
slides. So, there's less work to do and they aren't being
replaced.
MS. HUDGENS: Great.
HON. MIHALSKY: Okay. So, yeah, I mean, it's
better. There's more problems with a -- an exhibit that
includes more information rather than less information.
Thank you.
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Are you ready to proceed?
MS. HUDGENS: I am. I have a few more questions
for Mr. Pearce.
HON. MIHALSKY: Okay.
Q. BY MS. HUDGENS: Mr. Pearce, in your experience
as a practicing attorney in the area of water law, have
you reviewed models like the ones we've been talking about
today?
A. I have seen them in -- in action, I haven't
studied the data files or the actual computer technology
that runs them. I don't know much of anything about that,
but I've been associated with many -- many models in many
different situations over the years.
Q. When you are looking at modeling results, do you
know generally how to read them?
A. They're usually translated to a form that's
recognizable by attorneys by the time I see them.
There's -- usually if you're talking to a technical
expert, a hydrologist, what they like to see is the data
files, the model files they call them. I don't have any
experience in reviewing those nor would I understand them.
Q. In this particular case did you see a version of
the modeling results that, like you referred to earlier,
would be that an attorney could understand them?
A. Oh, yes. We -- we had supplied and requested
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corrected or improved versions of what we were referring
to as hydrographs of the four wells that showed the
depth-to-water within the wellbore over the course of a
hundred-year modeling exercise, and that is intended to be
in a user-friendly format so you can see it and understand
it.
And that, of course, in trying to relate this
information to the Department, I spent considerable time
with Mr. Miller and Mr. Greenslade going over the modeling
results, asking questions, and just generally conferring
on what the results were. But the most significant
feature was those hydrographs, those four graphic
depictions of the water level in the well during the
simulated period of withdrawal over the hundred-year term.
Q. So, what were the results of the testing, of the
modeling that was done in this case?
A. They showed that the water level at the end of
the hundred-year term -- including the Yavapai Land
proposed withdrawals and including all of the projected
demands, current demands, committed demands of the
Prescott AMA, everything -- there was still water in the
alluvial aquifer accessible by those four shallow wells.
Q. Throughout your testimony you've referred to the
term "surface water." When you use that term, are you
referring only to water on the surface of the ground or
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are you also including water underneath the surface as
well?
A. It is both. The term "surface water" in Arizona
since the 1930's has included a subsurface component, the
extent and definition of which has been subject to
intensive debate over the many years. But it clear -- it
is clear there is a subsurface component of appropriable
surface water recognized by the Arizona water management
system.
Q. Is the subsurface component that you're referring
to also known as "subflow"?
A. "Subflow" is a common term that people use to
describe it.
Q. So, earlier when we were talking about the
disagreement between Yavapai and the Department over
subflow, that disagreement concerned the treatment of
water under the surface, in other words it wasn't on the
surface of the ground; is that fair to say?
A. Yes. That is fair to say.
Q. And so the Department disputed with Yavapai the
treatment of subflow?
MS. MILLER: Objection, Your Honor. Leading.
HON. MIHALSKY: It is.
Q. BY MS. HUDGENS: Did the Department dispute the
treatment of subflow in this case?
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A. Yes. That was the -- the final dispute was the
legal characterization of the water found in the alluvial
aquifer beneath the surface of the earth.
Q. You also referred to committed demands and
current demands. Can you again briefly explain the
difference between those two?
A. Yes. I'll put it in context. The Assured Water
Supply Program is intended to show or determine whether a
proposed new use of water for a subdivision will have a
water supply available to it for the next 100 years, and
in order to make that determination through computer
modeling to predict that future activity, the Department
of Water Resources includes all current, committed, and
projected demands that they have approved in the Assured
Water Supply Program as the baseline condition such that
it -- the model acts as though those demands were actually
being met to today and will continue to be met over the
next 100 years.
So that in a way you characterize it as a
worst-case scenario but with good reason, that's what it's
supposed to be. It's supposed to show conditions of the
water levels in the aquifer after a hundred years of
intensive depletion.
Q. Were the committed demands that DWR asked be
inputted into the model, were those -- did those also
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include ground water demands or --
A. Oh. They're virtually all ground water, yes.
Committed -- current, committed, and projected demand in
the Prescott Active Management Area is virtually all
ground water. Very, very little of it would be surface
water.
Q. What's the difference between the analysis of the
Assured Water Supply Program and a Certificate of Assured
Water Supply?
A. The certificate is a more comprehensive process,
you have to show all elements of the assured water supply
in order to obtain a certificate. Also, a certificate is
very dependent on the actual plat of the proposed
subdivision. So, from a developer's point of view, you
have to be fairly certain what your subdivision is going
to look like at final plat before you're ready to go to
the certificate of assured supply; because, if you do so
prematurely, you'll end up with a plat you don't want to
build.
So, you'd wait until you're pretty certain what
your plat is going to look like. A lot of times have
taken the preliminary plat through the local municipal
zoning authority so you're comfortable you know what
you're talking about, then you get your certificate of
assured supply, then you go to final plat. And that --
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that has proven to be a wise course of action by
experience throughout the history of the shared water
supply process.
The analysis on the other hand allows you to come
in and chose what components of an assured water supply
you would like to prove. You still have to meet the same
standard, equally rigorous, but you can have a
determination made that, for example, you have proven
physical availability.
And the big benefit of the analysis is that if
you do, for example, prove physical availability, that
official determination by the Department of Water
Resources, that piece of paper that says an analysis of
assured supply goes into the projected demand numbers.
So, that water is now set aside for you and anybody else's
model that comes after you. And in areas where water
supply in the aquifer is limited, having that water
reserved to you can be an extremely valuable component.
So, a lot of people pursue analyses to do just that, to
stake a claim to a certain amount of ground water that
they can hold onto. An initial analysis is good for ten
years, it can be renewed for a couple of five-year spans.
So it's a way to, like I said, lay a claim on a
specific volume of water while you're going about your
business to get your plat organized and move eventually
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onto a certificate.
Q. So, the committed demands that were inputted into
the model in this case would include these types of
subdivisions, for example, where an analyses has been
granted but nothing has been built yet today?
A. Actually, if it's an analysis that has been
granted, that would fall under the category of projected
demand. But all three are included in the model.
Current, one physically used; committed, lots that have
been platted but not yet built; projected is certificates
with no plat analyses, the portfolio-designated providers
that are currently unused, things like that. Where the
water has been spoken for, but is not currently being
used.
Q. Earlier in your testimony you talked about the
model in this case and that there were some flaws that
weren't fixed that Yavapai identified. Why weren't those
flaws fixed?
A. We ran the model for the final time and produced
the hydrographs that DWR requested and those hydrographs
showed at the end of the hundred-year term there was water
physically present in the alluvial aquifer that was
accessible through the four point of diversion wells, at
least within the alluvial aquifer at those points of
diversion if those wells were deepened slightly, but not
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through the floor of the alluvium, and we felt that was
all the model needed to show. Any further fine tuning
beyond that was unnecessary because those hydrographs
proved the element of physical and continuous
availability.
MS. HUDGENS: I think those are all the questions
I have for Mr. Pearce for right now.
MS. HEIM: I do have some questions for cross,
but I was wanting to confer with the witness on a matter.
Is that --
HON. MIHALSKY: Or to confer with your witness?
MS. HEIM: Yes.
HON. MIHALSKY: Oh. Okay. I thought, that's
unusual.
We'll take five minutes. We're off the record.
(Recess taken from 3:03 p.m. to 3:07 p.m.)
HON. MIHALSKY: We're back on the record.
Ms. Heim?
CROSS-EXAMINATION
BY MS. HEIM:
Q. Hello, Mr. Pearce. I'm actually not sure if we
have formally met.
A. I don't think we have.
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Q. But it's nice to meet you.
A. Nice to meet you.
Q. You testified that you served as chief counsel
for the Department for approximately 13 years. Do you
know the dates that that -- that that was?
A. I actually was employed by the Department for
13 years. I started in 1989, I was appointed as chief
counsel in 1995, and I left in 2002.
Q. Okay. And while you were working for the
Department of Water Resources, did you work with Mr.
Dunham?
A. Oh, yes.
Q. And did you work with him -- did he oversee the
assured and adequate water supply --
A. Yes.
Q. -- while you were chief counsel?
Would you say that you had a good working
relationship with Mr. Dunham at that time?
A. I would say that, yes.
Q. And would you say that you've continued to have a
good professional relationship with Mr. Dunham?
A. I would say that, yes.
Q. Do you know Mr. Corkhill?
A. I do.
Q. Okay. And did you work with Mr. Corkhill while
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you were chief counsel for the Department?
A. Yes, I did.
Q. Do -- do you believe Mr. Corkhill to be
competent -- well, let me ask you: Who is Mr. Corkhill?
A. He is now the chief hydrologist of the Department
of Water Resources.
Q. And at the time you were chief counsel, was he a
hydrologist?
A. He was in the hydrology staff. Greg Wallace, the
late Greg Wallace was the chief hydrologist part of the
time when I was there. I think Frank became chief
hydrologist while I was still there, but I'm not a hundred
percent sure about that. But I've known Frank a long,
long time.
Q. And do you know Frank to be a competent
hydrologist?
A. Absolutely.
Q. Would you go so far as to say he's actually, in
fact, a good hydrologist?
A. Misguided at times but a very good hydrologist.
Q. Did you ever rely on Mr. Corkhill's work as a
hydrologist in representation of the Department?
A. Absolutely, many times.
Q. Given your past experience working with people
within the Department, is it fair to say that you would
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have felt comfortable raising concerns that you might have
had arising out ADWR's processing of the analysis
application?
A. I did raise concerns, yes.
Q. Okay. And you testified earlier about some
instances in which you expressly raised some concerns in
writing about, for instance, the interpretation of the
effect of lack of stream flow in the future on the Agua
Fria River; is that correct?
A. That is correct.
Q. Okay. You spoke about a meeting that occurred,
and I believe you referred to it as a meeting in July of
2013?
A. Yes. There was a meeting on July 1st of 2013,
yes.
Q. Okay. And that meeting was, I believe as you
described it, there was conversation at that meeting to
discuss how to go about -- how Yavapai would proceed to
establish physical, continuous availability?
A. Yes.
Q. Okay. And there was discussion of the use of the
Prescott AMA model for that purpose?
A. Yes.
Q. Okay. And I don't want to put words in your
mouth, but I believe your testimony was that -- well,
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first, let me ask you: You testified that Bill Greenslade
was present at the meeting?
A. That's correct, he was.
Q. Okay. Do you know, was Nathan Miller also
present at the meeting?
A. I don't believe Nathan was there, he may have
been but I can't remember. I remember Bill because Bill
was speaking.
Q. Okay. And do you recall who was there for the
Department?
A. I was thinking that I could not remember if Frank
Corkhill was at that meeting or not. I'm confusing in my
mind two different meetings, one where we were discussing
whether the wells situated on the Young's Farm property
were withdrawing subflow and Mr. Corkhill and I got into a
rather lengthy discussion about that subject, and then
there was another meeting where we discussed modeling and
I can't remember if Mr. Corkhill was at the modeling
meeting or not, he'd have to tell me.
Q. Do you recall any other Department employees who
were present at that meeting?
A. I'm certain that Mr. Dunham was present. I think
his assistant, Ann Ducratic (phonetic) was there. There
was certainly a hydrologist there, but I don't know if it
was Frank or not. I can't remember if Frank was there or
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not.
Q. Okay. But you have a pretty clear memory from
that meeting that Bill Greenslade expressed an objection
over the use of the Prescott ground water model for use of
making their projections?
A. Well, yes, he made the point that he thought that
a ground water model would have limitations, and if we
were really looking at surface water, we should use a
model more orientated to surface water. That was his
point. It wasn't a screaming objection, it was just a
point that he made and I think he believed sincerely. And
it was made and duly noted, but not accepted.
Q. And do you call -- I believe your earlier
testimony was that that objection was overruled. Do you
recall -- your ob- --
A. I'm sorry?
Q. That that objection was overruled by the
Department. Do you recall who overruled that objection?
A. I think Mr. Dunham may have been the spokesperson
for that.
Q. Okay. And did Mr. Greenslade at that time
propose that Yavapai would prepare a more appropriate
model?
A. No, he did not.
Q. Okay. I believe earlier you testified regarding
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some correspondence from Southwest Ground Water regarding
some what have been characterized as concerns regarding
the Prescott model, essentially; is that correct?
A. Yes. I don't know that I would call it
"correspondence." I think it was titled a technical
memorandum.
Q. Okay. And that was prepared by Southwest Ground
Water?
A. That's correct.
Q. Do you know if in that technical memoranda --
memorandum or any other correspondence from Southwest
Ground Water, whether there was any statement that the use
of a ground water model would be inappropriate in these
circumstances?
A. I don't know that I -- I can't point to such a
specific statement. Southwest Ground Water issued a
number of reports, all of which were submitted to the
Department of Water Resources, all of which had textual
commentary in them. There may have been some reference to
that notion somewhere in there; I couldn't point to it
today.
Q. Do you recall in any of the correspondence that
you wrote to the Department, whether or not you raised the
concern that that ground water model was inappropriate for
purposes of projecting surface water availability?
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A. I think I made the point that the model was under
predicting the Humboldt gauge known hydrograph, and I
think that my intention was to point that out as a result
of using a ground water model to predict surface flow. I
hope to think it was understood as that, but that's the
only time I can think of that I would have put something
in writing commenting on the technical aspects of the
model.
Q. Okay. And so you didn't, however, at the time
after the -- that July 1st, 2013 meeting, propose that
Southwest Ground Water would prepare a model which better
-- according to Southwest Ground Water, would have better
predicted surface water flows or supplies?
A. I'm sorry. Is the question did I --
Q. I'm sorry.
A. -- tell DWR that?
Q. It was a poorly-worded question.
Did you or Southwest Ground Water ever
offer or suggest that Southwest Ground Water could prepare
a model that would better simulate or project surface --
surface supplies in the future?
A. I think the direct answer to your question is,
no, we did not. We discussed whether such a proposal
would be feasible, but it seemed to us to be futile
because we did not believe it would be accepted by the
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Department no matter what we did. So, in the context of
things, we never made such a proposal.
Q. Okay. I would -- if we could pull up ADWR 28.
HON. MIHALSKY: Okay. Let's see.
Okay. We got someone over there, great.
MS. HEIM: My assistant.
HON. MIHALSKY: Excellent.
MS. KLOBAS: I've been promoted.
Q. BY MS. HEIM: If we could scroll down to, I
believe it's page -- well, it will be subsection 5 or
section -- I'm sorry, I don't have the page.
MS. KLOBAS: So, pages 2 to 3.
MS. HUDGENS: All right. PDF pages 2 to 3?
MS. KLOBAS: Yes.
Q. BY MS. HEIM: Okay. Thank you.
You testified a while ago about your
understanding of the last two sentences within that
paragraph 5. Do you recall that?
A. The last two sentences? I thought it was the
middle sentences of that paragraph that we were discussing
earlier, but...
HON. MIHALSKY: Yeah, the last sentences on the
page?
Q. BY MS. HEIM: No. I'm sorry, the statement: "In
addition" -- and I'm looking at the sentence that begins:
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"In addition."
In subsection 5: "In addition, please be
reminded that the pending Assured Water Supply
Application is attempting to demonstrate the
physical, legal, and continuous availability.
Compliance with these assured water supply
requirements may reduce the amount of surface
water that may qualify for assured water supply
for the proposed master-planned community."
Do you recall testifying earlier about
that?
MS. HUDGENS: Mischaracterizes the witness's
testimony.
THE WITNESS: I'm sorry, but I thought we were
discussing what I was --
HON. MIHALSKY: Overruled. The witness can
respond if it does.
THE WITNESS: I'm sorry. I didn't mean to
interrupt. Go ahead and do what you need to do.
Q. BY MS. HEIM: No, you're fine. Can you tell me
what you understand the last two sentences of that
paragraph to mean?
A. Okay. I'll read them here to myself.
I'm struggling a little bit because it
refers to compliance with these AWS requirements, and I'm
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trying to decipher what these AWS requirements are.
Q. Well, let me ask you this: Do you understand
that that -- do you understand the last sentence to
reflect that the amount of water that would be determined
to be available through the Assured Water Supply Program
might be less than 702 acre feet per year of surface
water?
A. Oh, yes. I understood that that was the point of
the sentence, yes.
Q. Okay. Earlier you had testified that -- I'm
sorry. To go back to the model, I missed a point.
You had testified that there was no model
available in 2006 -- well, let me ask you: Are you aware
that a model -- the Prescott AMA model was originally
developed in 1995?
A. Yes, I should be very aware of that because it
was used to demonstrate the Prescott Active Management
Area had ceased to be in safe yield.
That is clearly an oversight on my part. There
-- there certainly were models in existence in 2006. One
that was available for ready use to show an assured water
supply, I don't believe was in existence. But there most
certainly were computer models modeling the Prescott
Active Management Area in existence in 2006.
Q. Okay. I actually -- you -- you also testified
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earlier about the, sort of, ability through the Assured
Water Supply Program to reserve water, in essence, for
purposes of future assured water supply determinations.
Do you recall your testimony there?
A. Yes, I think so.
Q. Okay. Do you know whether that reservation
applies to surface water?
A. It wouldn't have nearly the affect in the surface
water context, because surface water rights are already
ranked in terms of priority. So, the ability to reserve a
block of water in the aquifer by the analysis method is
much more important in a ground water situation than it is
in a surface water situation.
Q. And would you know whether, in fact, under the
assured water supply rules that, in fact, surface water is
not reserved in the same way that ground water is reserved
for those purposes?
A. I would agree with that. I think that's a
correct statement, yes.
Q. Okay. Were you involved in preparing the notice
of appeal appealing from the Department's decision letter
denying the analysis application?
A. Very, very little. I came back from an extended
trip as it was due. I was mostly responsible for
corralling Mr. Burdette and making sure that he understood
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that it needed to be done and lining up people to do it.
Q. Okay. Do you know if the notice of appeal makes
mention of the alleged impropriety of using a ground water
model for purposes of projecting Yavapai's proposed water
supplies?
MS. HUDGENS: I'm going to object, Your Honor, on
the grounds that it calls for a legal conclusion.
HON. MIHALSKY: Overruled.
THE WITNESS: I haven't read that document since
it came to be, and I don't really remember, but it seems
like there was a point made to that effect in it. Yeah, I
thought so.
Q. BY MS. HEIM: Do you know if there was anything
raised in that notice -- do you know if the word "model"
was used?
A. If the word "model" was used. I couldn't -- I
couldn't swear one way or the other. I don't -- I haven't
looked at that document in preparation for this. If you
could show it to me, I could certainly see it, but I can't
remember.
It seemed to me it was only a one-page document.
But I don't know -- yeah, I don't know.
MS. HEIM: Okay. I have nothing further.
HON. MIHALSKY: Ms. Hudgens, do you have any
redirect?
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MS. HUDGENS: Just a couple of questions, I hope.
REDIRECT EXAMINATION
BY MS. HUDGENS:
Q. DWR asked you about whether you thought Mr.
Corkhill was a competent hydrologist. Is this case -- in
this case, do you understand Yavapai to be challenging Mr.
Corkhill's or any other hydrologist's competency?
A. No.
Q. You also testified that you thought it was futile
no matter what Yavapai did to challenge the PrAMA model;
is that right?
A. To try to reconstruct an alternative version of
it, yes.
Q. Is that why there was no formal objection to
using that model?
A. The only thing I can say in response to that is I
walked out of that July 1st meeting, 2013, with the
understanding that we were being directed to use the
Department's soon-to-be-released PrAMA model; and in the
course of the next many months, I developed the opinion
that if we try to go behind the model and tinker with it,
that would not be well-received by the Department, that if
we tried to reject that model and come up with our own
alternative model, that likewise would not be acceptable
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to the Department.
It just didn't appear to me to be a realistic
option to do anything other than run the Department's
model to the best of our availability and see what the
results were. Had the results been negative, we may have
pursued a different course of action.
Q. And those conclusions that you made with respect
to the futility of challenging the PrAMA model, those were
based on your discussions with DWR employees, including
Mr. Dunham?
A. Yes. Although, I wouldn't say it was the
so-expressly-worded conversation, more of an understanding
that they felt very strongly about it, and I understood
that and I understood the reasons behind it, and I
developed my own opinion on it.
MS. HUDGENS: I have no further questions.
HON. MIHALSKY: Thank you, Mr. Pearce.
THE WITNESS: Thank you.
HON. MIHALSKY: You're free to go if that's okay
with Mr. Lutz.
THE WITNESS: Okay.
(Whereupon the witness is excused from the
witness stand.)
MS. HUDGENS: Okay. At this point, Yavapai Land
Holdings will call Mr. Gary Young.
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HON. MIHALSKY: Mr. Young.
(Whereupon the witness takes the witness stand.)
HON. MIHALSKY: Would you please raise your right
hand?
THE WITNESS: Yes. I'll stand up.
GARY YOUNG,
called as a witness herein, having been first duly sworn,
was examined and testified as follows:
HON. MIHALSKY: Thank you. State your name for
the record, spell your last name for the court reporter.
THE WITNESS: My name is Gary Young, Y-O-U-N-G.
DIRECT EXAMINATION
BY MS. HUDGENS:
Q. Good afternoon, Mr. Young. Can you tell me where
you currently live?
A. Yes. Well, Oregon, the Blue Mountains are on the
eastern edge of it and there's a finger that juts out
towards the west and we call those the Ochocos, and we
live on the southern watershed of the Ochoco Mountains
near a little town called Paulina, which is about 80 miles
east of Bend.
Q. And when you say "we," are you referring to you
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and your family?
A. I am.
Q. What do you do for work, Mr. Young?
A. Well, we -- we try -- we try to help the soil and
the sun and the water get together to -- to produce and
grow grass for our herd of Angus, red and black Angus
cattle, that produces grass-fed, grass-finished beef for
our customers. If you're interested, you can check us out
on the Website, Bluemtnranch.com.
Q. So, Mr. Young, are you both a farmer and a
rancher?
A. Yes, I am.
Q. Have you been a farmer and a rancher your whole
life?
A. I claim that.
Q. Where were you born and where did you grow up?
A. I was born -- well, we lived in Dewey at that
time, my father and mother, it was a dirt road. The whole
Black Canyon was just dirt road all the way up. So, we
were about 20 miles from Prescott, but we were able to
make it into Prescott, my mother was, so I was born in
Prescott.
Q. Are you from a family of farmers?
A. Yeah. As far back as I know, both sides of the
family are either farmers or preachers.
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Q. When you were growing up, did your family own its
own farm?
A. Yes. Yes, we did.
Q. Did it have a name?
A. Yes. It was called Young's Farm.
Q. Mr. Young, we've previously talked about Yavapai
Exhibit 56, which I'll have Mr. Lutz bring up on the
screen. You'll also see that we've created a
demonstrative of the same exhibit that's sitting behind
you.
Can you describe to me what is depicted in that
exhibit?
A. Yes. This is the land that contains all of our
irrigated acres and -- and more that we sold in 2006 to
Yavapai.
Q. So, does the picture depict the farm that you
owned up until 2006 known as Young's Farm?
A. Yes, it does. We own some more property around
it, too, but this is -- this is the property that we sold.
Q. On the picture there's a yellow border around the
outside. Are those the boundaries of the farm?
A. That is; yes, ma'am, as best as I can tell.
Q. Has the entire area that's outlined in yellow,
has that always belonged to your family?
A. Well, no. No. My dad started with 80 acres --
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you want me to show...
Q. Sure. That will be great.
A. Yeah, my father started with 80 acres. Actually,
it was right in this area (witness gestures.) And then
slowly over the years we added 16 acres here and 5 acres
to take us up here, and this is 9-acre feet, and the
commercial property up here was 6 acres.
We added -- one of biggest purchases was down
here about 60 acres that we added in 1990, to the -- to
the property. And, of course, then we also purchased --
the river was a separate purchase, as well. That happened
I think about '60 -- '68, '67.
Q. So, if I'm describing for the record what you've
just explained to me, if we're -- if we are able to take
the picture in two parts, the top half and the bottom
half, the top half of the picture was owned by your family
from the time that they purchased it, is that a general
description?
A. No. At the time they purchased it, it was
just -- my dad came up in '46 and started working 80 acres
right here in the center, that was all he owned and --
yeah. And down here was owned for a long time by Iron
King Mine. And, actually, my grandfather owned a piece up
here that my dad purchased from him later on. So, it was
bits and pieces over the years we were able to put
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PERFECTA REPORTING
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together and purchase and put the farm together in this
configuration it is now.
Q. You mention the Iron King Mine, a portion of
about 60 acres?
A. Sixty acres; yes, ma'am.
Q. Which wells located on that picture were within
the boundary owned by Iron King Mine?
A. The Bagby Well -- the current wells or the wells
at that time?
Q. Current wells.
A. Current wells. The Bagby Well, the Beardsley
Project Well, the Hand Pump Well, and Park Well, and down
here Steve's Well. Those wells were all in it.
Q. Did you also grew up on the farm?
A. Yes. Yes, we -- I did.
Q. So, was your house located on the farm?
A. Yes. Our house -- the original farmhouse was
here as we were growing up and -- hm-mm.
Q. What are the closest wells to where your home was
located?
A. Where the well -- okay. Well, there was a
Smelter Farm Well right here; then there was two wells
called -- called Lower Well and Livestock Well; and then
the Turkey Pen Well and then the Smelter Well right here.
Those would be the closest ones.
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Q. So, if we're describing in a way the court
reporter can take notes, your home was located generally
near where we see the Smelter Farm Well?
A. Yes. Yes. That was -- yeah. In fact, we used
that for our domestic use at our -- at our home there.
Q. Tell me a little bit about the history of the
farm and what types of farming your family did.
A. Okay. Well, historically it started in the late
'30s. My -- my uncle came up -- came up and started
farming all of this, plus additional, some acreage down
here as well, up to about here is what he -- he started
farming and trying to purchase, but he didn't have the --
he was struggling, he didn't have the means. So, my
grandfather, Ed and Rachel Young got together with my
aunt, Flora Statler, she was kind of a real estate
person/developer, she -- in fact, she subdivided Surprise
and Yarnell were two of her projects that she did.
But, anyway, she -- she was involved in it, I
don't know what extent. But the three -- but they
purchased it, so they ended up with my grandparents owning
80 acres here in the center, my uncle owning about
60 acres here, and then they owned -- Flora Statler ended
up with some property down in this area.
HON. MIHALSKY: Okay. For the record, could
you -- yeah, we're making a -- it seems like your family
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PERFECTA REPORTING
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owned maybe the top third 80 acres there, and underneath
there was your --
THE WITNESS: Uncle.
HON. MIHALSKY: -- your uncle, okay.
THE WITNESS: Right. He owned the middle piece.
HON. MIHALSKY: He owned the middle piece.
THE WITNESS: About 60 acres.
HON. MIHALSKY: About --
THE WITNESS: And the lower end -- toward the
lower end was my -- Flora Statler.
MS. KLOBAS: Your Honor, I just -- I just am
questioning the relevance of this testimony and also
curious about -- about it in respect to the amount of time
that we're going to spend.
HON. MIHALSKY: It's very, very interesting but I
kind of share the same concern.
MS. HUDGENS: I can try to move quickly.
HON. MIHALSKY: If you could.
MS. HUDGENS: Okay.
Q. BY MS. HUDGENS: Let's talk more about the
geography of Young's Farm. Where is it located in
Arizona?
A. Young's Farm is located -- here, I'll sit down
so.
HON. MIHALSKY: Yes. Please take a seat.
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THE WITNESS: We're located at the very lower end
of the upper Agua Fria watershed, the very lower end of
the Prescott AMA, and very lower end of Lonesome Valley.
We're in a little town called Dewey.
Q. BY MS. HUDGENS: If I show you what's been marked
as Yavapai Exhibit 18 -- let's see -- I am going to look
at figure number -- let's see -- figure No. 1. What does
this picture depict?
A. That would be an area picture of the upper Agua
Fria watershed, upper Agua Fria basin.
Q. Does the Agua Fria River run through Young's
Farm?
A. Yes. It runs right down through the -- through
the farm and towards the lower end of what you see. The
yellow line there is the AMA boundary, so we're very close
to the lower end of that. And right about that point is
where the upper Agua Fria basin ends, as well.
Q. So, on this picture we see the yellow line which
you just described as the AMA boundary?
A. Yes.
Q. You also see some blue lines, and what are those?
A. Those are tributaries, rivers all coming down
into -- into the farm. It shows several of the major
ones, there's a number more. Clipper Wash, Texas Wash
comes in over from the west. But they all come right in
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and into the Agua Fria, either just above or in -- in the
farm.
Q. If we go back to Exhibit 56, which we have as the
demonstrative, can you describe to me where the river is
located on Young's Farm?
And, Gary, just so you know, the court reporter
has to write down the descriptions, so the most descript
you can be for the record.
A. Okay. I will try.
Okay. The river runs along the eastern
edge of the farm starting from the very top, just below
the bridge on Highway 169, and runs down, like I say,
along the eastern edge all the way through the farm,
clear -- clear down to almost the lower end -- almost to
where the basin spills over at the end of the valley.
Q. Has the river always run through the same area on
Young's Farm?
A. Well not exactly, no. It's -- the river has
always been a challenge for us because of the erosion.
It's a pretty high-velocity flow when it does -- when we
get storms. So, it has cut and filled and changed course
throughout the years and we've tried very hard to protect
our farm ground in different ways. One of the major one
was an "S" curve that when I was a kid in the '50s, it
came right through here and it was doing an "S" curve,
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cutting through here and coming back over into -- our
neighbor at that time owned this well.
HON. MIHALSKY: Could you describe kind of where
you're pointing on the picture for the court reporter?
THE WITNESS: Yes. Up here in the north end of
the farm just below Highway 169 is where the bridge is.
Where the water comes through there, it was trying to
crowd over towards the west and cutting into our farm and
doing an "S" curve that swung it back over towards the
east and cutting into what we called the Henderson Well
now, which at that time Perry Henderson owned all this
ranch land and all this ranch land on both sides of us.
But, anyways, the Henderson Well, and started to come
close to washing his well out. So, he and my father got
together in the '50s. When they first paved the
Highway 69, they had some equipment there, and they used
SES funds to cut through and straighten out the river,
leave a little island at that time.
But, essentially, it was winding around and would
have -- would have continued, I think, cutting all down
through but -- yes.
Q. BY MS. HUDGENS: So, for purposes of the record,
the river currently runs between -- if we're looking at
the wells -- the Turkey Pen Well and the Henderson Well,
which in this picture is marked, looks like, IW-2?
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A. Yes.
Q. But previously you said that the river has also
run straight down towards the Turkey Pen and Lower Well,
and then made an "S" curve over to the Henderson Well?
A. That's correct, yeah. The Turkey Pen Well is
down where the water was in the riverbed at one time.
Q. Let's look at our demonstrative. And if we are
to split the picture into three parts -- the top third,
the middle third, and the bottom third -- and describe the
river, starting with the top third where we see some of
the wells, including the Turkey Pen Well, can you describe
that area and how the river flows?
A. Sure. It -- it runs -- that has water in it only
when it rains, when there's a flood through, it will run
through and depending on the storm and how long it goes --
how long the river runs.
But, basically, yes, for the upper third of the
place, you only -- you only see water there when there's a
storm when there's runoff from a current storm. It's --
Q. And --
A. You want me to go through the other two as well?
Q. Sure. The second third?
A. Yes. The second third down through here, will
have -- will have water usually coming up in that second
third and towards the lower end of it and starting to run.
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You can see it pretty much with the vegetation of what --
what happens in the river.
But then after -- after a real serious storm or
wet weather, lot of times this will run for a week in this
area. The water will come further up the river. But --
but, usually -- most the year, it is dry down to where the
water comes up more towards the bottom end of that second
third which is right in here.
Q. So, if we're identifying the closest well to
where water runs perennially, which would it be?
A. Perennial, closest one probably right here, the
Center Well is where -- where it usually comes up. In
fact -- yes, we put a gabion -- we built a couple gabions.
One right up here and one here to keep the water because
it was cutting down so bad with every storm. We put
gabions to try to hold that thing.
It usually comes through right below the gabion
and runs perianally.
Q. I was just about to ask you, what does perennial
mean?
A. It means water there whenever you go, it's always
there.
Q. So, if we're looking at the picture about where
the treeline -- treeline starts to become much more heavy,
is that generally where the water starts on the surface
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flow and flows perennially?
A. Yes. Right there, just below the Center Well
right at that point. It comes out below that gabion and
runs and gets bigger as more water gets larger, all the
way down through to the end of the -- I -- probably down
in this area is about as big as it gets, then it goes out
to the end of the valley and off -- over the bedrock dike
that's at the end of valley and runs on downstream.
Q. What's a gabion?
A. A gabion is -- well, you're holding soil, you're
not holding water. Essentially it's a beaver dam that
doesn't hold any water, it just keeps the soil from
washing away.
So, it takes the energy of the flood and
dissipates it in -- in one spot rather than all the way
down through the valley where it can continually gather
steam and energy and do -- do some serious damage.
Q. In your lifetime, have you seen the river run
dry?
A. Run dry? You mean down here? No. Never.
There's always been water there. All the old-timers I
ever talked to, there's always been water in that -- in
that area.
Q. In other words, where the water begins
perennially which we described as being around where the
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Center Well is located --
A. Mm-hm.
Q. -- from there down to the most southern border of
the farm, you've never seen that area of the river go
completely dry?
A. No. Especially down -- well, up here, like in
this area, if you have some serious pumping going on could
cause it to -- to go down, come up a little further down.
But probably below this red line which is a section line,
between Section 2 and Section 11, it -- probably from
there on, I've never seen it dry.
Q. Has the Agua Fria River been historically
measured to your knowledge?
A. There -- yeah. In -- I believe when they created
the AMA, there was a gauge put in just below -- below the
-- about a mile down river from the farm, maybe a little
more.
Q. Do you know the name of that gauge?
A. Yes, it's the Humboldt gauge.
Q. What about the Mayer gauge, have you heard of
that gauge?
A. Yes, I've heard of the Mayer gauge. I've never
been to it. It's about 20, 30 miles downstream. It 's
past several other major watersheds that come in. It's
past where Big Bug comes in. Just past Big Bug where Big
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Bug joins the Agua Fria River, just below Cordes Junction
is where the Mayer gauge is.
Q. You can take a seat.
A. Thanks.
Q. Are you familiar with the history of water and
land usage on the farm?
A. Yes.
Q. I want to show you what's been marked as
Exhibit 53, Yavapai Exhibit 53.
Mr. Young, have you seen this document
previously?
A. Yes, I have.
Q. What is it?
A. It's a narrative that we put together to try to
show that -- the legal availability of surface water on
the -- on the farm.
Q. Do you know how this document was created?
A. I do. We -- our family put together a lot of
documents that we had, we did a lot of research in
museums. My daughter, Sarah, had just gotten out of
college and so we put her to work trying to -- to work --
to put this together. And then we also went to -- Salt
River Project has a lot of, you know, vast historical
archives and we asked them to help us. And they -- Shelly
Dudley (phonetic) put together quite -- quite a document,
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helped us research, go back out of the Library of Congress
to get old deeds, original homestead deeds from that area,
in order to put this -- put this together.
Q. Is it fair to say that this document presents a
compilation of the history of availability of surface
water pertinent to Young's Farm?
A. I think it does. I would like to -- on page 3
there's a -- there's just a little thing that shows how we
helped put this together. We had a book by Daniel
Conner -- put it down to just a little bit right there.
Go down to where the quote is at the top. Up.
MR. LUTZ: Up. Up.
THE WITNESS: Right there. Yeah, where he was
with a party -- he rode with a party of Joseph Walker when
they were exploring up the Hassyumpa beaver [sic] and
trapping beaver, and he wrote a book then to follow it.
And he put this -- this -- this is just so pertinent. He
wrote: "Five of our number rode onto the Agua Fria and
encamped for the night a few hundred yards above
the Agua Fria Fall. Just above the fall, the
country is open and there was a large tract of
level, grassy soil where Linx Creek circled
around and spread over the country, and about
where it loses itself and irrigates and keeps
moist a large tract of arable land."
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And that to me, you know, really gives you
a picture of that valley in pre-development times. Shows
you what it is.
Now, on page 4 he goes on to talk about King
Woolsey (phonetic) and putting in an overshot water
wheel --
MS. KLOBAS: Objection, Your Honor.
THE WITNESS: That --
MS. KLOBAS: I have to renew my objection on the
grounds of relevance.
THE WITNESS: Oh. I get carried away.
MS. KLOBAS: And also remind everyone that as we
discussed earlier, this is really about the legal
availability and physical and continuous going forward,
and not necessarily the historic availability of the water
supply.
MS. HUDGENS: I just have two responses. Number
one is that DWR has not stipulated to the admissibility of
these documents, so part of my questioning relates to the
foundation in order to have that done. So, at this point,
I would move for the document to be admitted into
evidence, and I could move quicker if that is -- if we can
agree to the result.
(Yavapai Exhibit 53 is offered in evidence.)
HON. MIHALSKY: Your objection will go to the
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weight of the evidence.
MS. KLOBAS: I'm sorry?
HON. MIHALSKY: I know that you object based on
this relevance.
MS. KLOBAS: Yes, we do object to this document
based on relevance, and also to the testimony regarding
this document as well based on relevance and -- and also
the amount of time that we're spending on the history.
HON. MIHALSKY: And to --
MS. KLOBAS: Which I agree is interesting.
HON. MIHALSKY: It is very interesting. But to
cut to the chase here, Exhibit -- is it Y --
MR. LUTZ: 53, Your Honor.
HON. MIHALSKY: 53 is admitted for what it's
worth, which may be very little. Okay? So, it's in.
(Yavapai Exhibit 53 is admitted in evidence.)
MS. HUDGENS: Okay. While we're on the topic,
I'll lay some more foundation for the relevance of this
document and I'll try to move pretty quickly.
HON. MIHALSKY: Okay. So, are -- is the
relevance of this, are you going to argue prior
appropriation and in addition to the surface water?
MS. HUDGENS: Your Honor, the Department relied
upon this particular document in coming to its -- in
coming to a decision in the Sever and Transfer Order, it's
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specifically quoted and referenced in that order. So, for
the Department now to object on the grounds that it's not
relevant is surprising.
HON. MIHALSKY: Okay. And that's legal argument,
but it's in evidence.
MS. HUDGENS: Okay.
HON. MIHALSKY: So, do focus your time and
attention on what truly is disputed here.
Q. BY MS. HUDGENS: Mr. Young, how -- during the
time your family owned the farm, how did it supply water
to the farm?
A. We used wells alongside up through -- up through
the farm alongside the river to pump the water up onto the
fields.
Q. Why did you use wells rather than to divert the
water at stream level?
A. It -- because the river was so deep. It had been
channelized in the -- just after the turn of the century
about 1900, I think. Some cattle -- there was a drought
and the cattle were watering down at the end, and I think
some -- it's said that some cowboys blew out the dike at
the end to flush the tailings from the mine all downstream
that they were blaming for poisoning their cattle.
And right after that there were some severe
down-cutting that worked its way all the way back up the
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river and causing 20-, 30-foot banks that are there now.
Q. If we look at Exhibit 56, which is the
demonstrative that we have, Yavapai Exhibit 56, there are
a number of wells that are indicated on that picture, some
with circles and some with stars. Are those the wells
that are located on Young's Farm, the property?
A. Yes. Yes, it is.
Q. How were the wells constructed?
A. Well, there's -- there were some that were hand
dug originally, some of those hang-dug wells have been
deepened with well drill -- well rig, and any that we
constructed we used a well rig. Usually a cable tool
rather than a rotary because of all the big boulders you
would run into as you were digging the well.
Q. In Exhibit -- Yavapai Exhibit 56, some of the
wells are indicated with a circle and some of the wells
are indicated with a star. Do you know the difference
between those two designations?
A. I believe so. The ones with a circle are the
wells that the Department identified as POD wells,
identified as pumping surface water; and the -- the others
are wells they said were pumping ground water or -- I
believe, or exempt wells. Is that the difference? I
forget.
Yeah. This would -- this would be irrigation
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well, irrigation well, irrigation well, irrigation well.
And all of them, irrigation. But these are -- these are
deeper and the Department just said they were pumping --
that they were pumping ground water. And all the rest,
the others, because they were shallower, are pumping
surface water.
Q. So, the wells that have a star are the wells that
DWR determined were pumping ground water, whereas the
wells with the circles are those determined to pump
surface water?
A. Yes. Yes.
Q. Do you know the general difference between ground
water and surface water?
A. Generally I do.
Q. What's the difference?
A. Well, if you're not drinking it, it's -- it's
water. Surface water is something that's associated with
a stream that's nearby, it's the sub -- subflow. Either
in the stream or the subflow close to that stream.
Q. Let's talk about four of these wells that are
located on the southern end of the property. The first
one I want to talk about is the Center Well. Do you know
how that well was constructed?
A. That was constructed with a well rig drill and
went down, I believe, it's about 80-foot deep.
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Q. How far from the riverbank is that located?
A. Sixty, 70 feet.
Q. How many gallons per minute does that well pump?
A. That well I think we always figured that pump put
out 200 gallons a minute, yes.
Q. And how would you know that?
A. Well, it -- it runs through a gauge because we
used it for -- it runs through a meter, plus we've had
it -- we've had it tested.
Q. What about the Bagby Well, do you know when that
well was constructed?
A. No, I don't, but it's probably close to -- after
the turn of the century. Early -- one of the earliest
wells. Hand-dug well, it's 65 feet deep. And -- yes.
Q. How far from the river is that located?
A. That's probably 50, 60 feet.
Q. How many gallons does that well pump?
A. And that -- well, we have 5 -- we have a
5-horsepower pump in it and it tested at 200 gallons a
minute was all it could put out, we had a gauge on it. We
had it tested, though, and it pumped close to 400 gallons
per minute.
My father remembers when he was a kid, came up
when my uncle had it, and he was running a turbine pump
there with a -- run by a John Deere tractor with a belt,
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but it put out a huge stream of water, he claims 7-,
800 gallons a minute on that. I'm not sure. You know,
but the test -- the test came up that we had done recently
is at 400 -- about 400 gallons per minute.
Q. Is there a way to -- is there a way to make that
well pump more water?
A. Well, you can always put a bigger pump in, that's
-- that's the initial thing you do, if you pump air. You
can always deepen it some and see -- see what you find.
That's the two -- two things you usually do.
Q. Could you deepen the Bagby Well and continue to
pump surface water?
A. Well, I -- I think so, yes. I definitely think
so. I think you can deepen it quite a lot. But if you're
thinking about 120 feet, which we've been talking about as
being the bottom of the alluvium that has surface water,
you can about double that depth on that well and still be
in your surface water alluvium.
Q. What about the Hand Pump Well, when was that well
constructed?
A. I have no idea on that one. It was just -- it's
only about 20, 30 feet deep. We did look at it, it was in
the river when we purchased the river. Even when I was a
kid it was there, and I played in that river down there.
It's a hand pump, you move the handle and get some water
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after a while. But it -- that's all it was.
Q. And with respect to the Park Well, which in the
picture they look very close, how far are those wells from
one another?
A. Thirty, 40 feet probably from each other.
Q. Where is the Park Well located?
A. It's off the bank. It's in the river, down in
the river as well. The Hand Pump Well is down in the
river off the bank. The Park Well is as well. It's a
little closer over towards the bank, but that's where it
is.
Q. DWR determined that the Park Well was pumping
ground water. Do you have any reason to disagree with
that?
A. Oh. Well, it doesn't make any sense for one.
I -- I don't know why they did call -- said it wasn't
pumping surface water. That doesn't make any sense to me
because it's -- I believe it's 80-foot deep and -- yeah.
It -- it should be -- in fact, we got a letter
from ADWR that said they thought it was pumping surface
water.
Q. When was that letter?
A. When we went to drill it. I believe 19- -- no,
about 2001.
Q. And the last well I want to talk to you more
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about is the Steve Well. When was that well constructed?
A. That was constructed, I believe, 1991. Yeah,
we -- we drilled it down there for domestic water for a --
for a trailer house that was parked there.
Q. How far from the riverbank is that well?
A. That well is probably, it may be 100 to 150 feet.
Q. Do you know how deep it is?
A. Yes. I believe it's a hundred feet deep.
Q. And do you know how many gallons per minute that
well pumps?
A. Well, we only put a little, like,
quarter-horsepower motor in it. It was pumping 20 gallons
a minute for us. But we did have it tested and it's
showing somewhere between 75 and 100 gallons a minute.
It's a very small casing, I think it was a 5-inch casing,
so that would be its limitation.
Q. These four wells that we just discussed -- the
Center Well, the Bagby Well, the Hand Pump Well, and Steve
Well -- do you believe they are capable of pumping
400 gallons per minute?
A. Well, I know they could, yeah. The Bagby Well by
itself could do that.
Q. And, again, how do you know how much these wells
could pump?
A. Well, we've had them tested. As well as what
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I've seen them to do over the years.
Q. If any of the four of these wells -- the Center
Well, the Bagby Well, Hand Pump Well, and the Steve Well
-- were to go dry in the future, are any of -- is the
combination or any of the point of diversion wells located
on the north end of the property capable of replacing that
water source?
A. Well, number one, I don't think that's ever going
to happen, at least based on my experience. The -- but,
definitely. I think -- I think there's wells in the 12
wells identified as POD, point of diversion wells, I think
you can pump close to a thousand gallons a minute.
Q. We've talked about the wells pumping for
agricultural purposes. What about non-agricultural
purposes, was water pumped for anything else?
A. Well, we always had a lot of livestock on the --
on the property, it's a big deal for us. So, livestock.
And domestic use for sure.
And then in the early '50s, Iron King Mine bought
the property that I talked about earlier down below, about
60 acres there, for the purpose of pumping water up to the
Iron King Mine to process their ore with.
Q. So, it's your understanding that the Iron King
Mine owned about 60 acres located near where the Bagby
Well and Hand Pump Wells are located, that they purchased
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that property solely to pump water to their mine?
A. Yes. Completely.
Q. What else do you know about the pumping done by
Iron King Mine?
A. It was -- just seemed like a lot of water. It
was 24 hours a day, number one, all year long. I think
they started in the early '50s and stopped in '67. Right
in there is when the mine -- Iron King Mine closed and
they -- they didn't pump after that. But it was an 8-inch
line that ran from the Bagby Well, right where the Bagby
Well is. It was a huge centrifugal booster pump that they
used to kick the water on up from there to Iron King Mine.
And so, 8-inch line, I believe it was pumping 500 gallons
a minute.
Q. Did the pumping done by Iron King Mine impact the
river?
A. Yes, yeah. During that time was probably when
you would see that water coming up down toward the red
line, the section line. It didn't come up as high as it
does now.
Q. So, is it fair to say that the Iron King Mine's
pumping directly impacted the surface flow of the river?
A. That would be fair.
Q. Were you living on the farm at the time that Iron
King Mine owned that 60 acres of land?
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A. Yes, I was.
Q. Was your family actively farming the land north
of the Iron King Mine?
A. We were very active.
Q. Was your family able to pump sufficient water for
irrigation purposes at the same time that Iron King Mine
was running its operations?
A. Yes. Sufficient water for farmers like -- too
much fun but, yeah, we had -- we had the water and we grew
alfalfa. We had a field of alfalfa and grew corn for
ancillage. We were farming our whole farm as a -- we --
we put on irrigation boots and grab a shovel and make that
water go where we needed it to.
Q. So, you were able to pump enough water for your
farm at the same time that Iron King Mine was able to pump
enough water for its mining operations?
A. Yes.
Q. Did the river ever dry out on the south end of
the farm when Iron King Mine was operating and pumping
water?
A. The river on the south end of the farm has never
dried out.
Q. Mr. Young, based on your knowledge of the water
availability and usage for the last 67 years of your life,
do you have any doubt that the point of diversion wells on
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the property could presently at least pump 400 gallons a
minute?
A. Without a doubt.
Q. Based on your knowledge and experience, do you
see a time when those -- when all of the wells would not
be able to pump 400 gallons per minute?
A. I can't imagine a time. Yeah, I can't imagine a
time that they would -- that they would have a problem
doing that.
Q. Mr. Young, you mentioned earlier that your family
sold the land known as Young Farms to Yavapai Land
Holdings in 2006. Can you tell me a little bit about that
transaction?
A. Yes, it was a fairly straightforward transaction.
We decided to sell in 2005, January 1st, 2005, made the
decision to market the farm, and Yavapai made us an offer
we couldn't refuse, and we signed the papers and sold the
land.
Q. I want to show you what's been marked as ADWR
Exhibit 6.
Mr. Young, do you recognize this document?
A. Yes, I do.
Q. Does it describe the nature of the transaction
between yourself and your family and Yavapai?
A. Yes, it does.
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Q. There are a number of individuals that are listed
on this document and I want to ask you a little bit about
who they are. There's also two entities. I'll start with
those. What is Young Acres, Inc.?
A. Young Acres, Inc., is a corporation my father
formed in the '80s, it held all of the outland assets of
the farm, it was the principal corporation.
Q. And what about Young's Farm, Inc.?
A. Young's Farm, Inc., was a corporation we formed
for the retail end of the farm up on the north end. We
purchased 6 acres up there in the late '70s to -- had a
processing, poultry processing plant. We put in -- moved
our farm produce stand up there to sell our sweet corn.
That was the focus of our -- focus of our retail end of
our business, and Young's Farm, Inc., was the corporation
that -- that handled that.
Q. Are you a principal of both of those companies?
A. Yes, I am.
Q. Are you the decision-maker for both of those
companies?
A. I am.
Q. Who is Jeannine Young?
A. She's my wife.
Q. And what about Sarah Teskey?
A. She's my daughter.
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Q. And Aaron Young?
A. And he's my son.
Q. In the bottom third of this document, there is a
section that's entitled "Reservations, Covenants, and
Notice -- Notices."
A. Yes.
Q. And it states there that the grantor which are
all of those individuals we just discussed, retained
interest in all surface water rights pertinent to the
property except for 16 and two-tenths acre feet per year
thereof. Why were surface water rights not a part of this
transaction?
A. Well, we believed surface water -- we -- we
believed that we were pumping -- that water that we were
using historically on the farm was surface water. We
believed that it was an -- an old right and -- and
therefore a very senior right in the upper Agua Fria
watershed. We believed, in fact, it's probably the oldest
and more senior right in that watershed, probably in all
of Northern Arizona. We believed that it was very, very
valuable.
But our belief was not what we needed. That
didn't -- to -- it wasn't good for the assurance for
Yavapai, they needed more assurance than just what we
believed. And so we agreed to work with them to try to
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get the assurance from the Department of Water Resources
over the next few years -- the next couple of years, the
next ten years, that to -- to give the assurance to
Yavapai that they needed to purchase that surface water
right.
Q. So, Young Acres -- Young's Farm, your wife
Jeannine, and your children Sarah and Aaron, all intended
to sell the surface water rights of the farm to Yavapai?
A. Oh, yes.
Q. And entered into a separate transaction with
respect to the sale of those rights?
A. That's correct.
Q. What was the nature of that transaction?
A. Pretty simple. That we'd work with them to try
to get -- they identified Lee Storey and Mike -- Mike
Pearce both suggested we go for sever and transfer and an
Analysis of Assured Water Supply to give -- that that
would give Yavapai the assurance they needed.
MS. KLOBAS: Objection. Your Honor, I would like
to renew the Department's objection to testimony regarding
the purchase agreement that they have refused to produce
to the Department repeatedly and, yet, they have had every
single witness they have presented testify about that
agreement.
MS. HUDGENS: I understood the Department to have
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a standing objection. I don't have any further response.
HON. MIHALSKY: Well, there is a standing
objection. And, you know, at the same point, you know, if
I keep hearing this from all of these witnesses and we're
not going to turn it in and -- you know, I'm not real sure
what I'm going to do with it, but I recognize the standing
objection. The witness may continue for what it's worth.
Certainly that objection will go to the weight of
the evidence as far as, you know, the -- whether
self-interest may be coloring characterization. But, you
may proceed.
MS. HUDGENS: If I just may make a clarification
for the record. The document that -- what I -- what I
understand the Department to object to is the discussion
of an agreement between the parties. Evidence of the
nature of that agreement has already been admitted by --
through Mr. Pearce's testimony about his discussions with
the Department. And, so, to the extent that this is
duplicative, I understand that, but maybe the best
question that I can ask Mr. Young is in reference to Mr.
Pearce's testimony.
HON. MIHALSKY: Okay. And -- and, again, I'm --
I'm -- this is, obviously, a really hard point of
contention because it keeps coming up, and I -- I don't
fully understand the --
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MS. HUDGENS: Maybe I could take just a minute to
explain it.
HON. MIHALSKY: Well, I don't -- and I may --
probably will not fully understand it until I finish
writing my decision and it's probably not even going to
really get clear before I hear from both parties, and it
may be something that is better reserved for legal
argument.
MS. KLOBAS: And I just would like to state that
I'm not sure why Yavapai has continued to elicit testimony
regarding these agreements which we only learned today
there are actually two agreements regarding the purchase
and sale of land versus water rights, we thought there was
one purchase and sale agreement until today. But, given
the refusal to actually enter one or both agreements into
the record, yet they have repeatedly raised this issue and
requested to enter testimony into the record regarding
these agreements, I'm not sure why they continue to think
that the nature of these agreements are at all relevant to
these proceedings, yet not relevant enough to make the
agreements available.
MS. HUDGENS: Your Honor, if I may. One of the
points of testimony from Mr. Pearce that we heard today
was this idea that reflected in some of the exhibits, that
the Department had asked for the -- for a copy of this
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agreement, that Mr. Pearce said, "We're going to reserve
the copy of the agreement but this is the nature of that
agreement." In response to that, the Department itself
made a proposal and said, "Okay, if you don't want to
provide the agreement to us, that's fine, we'll make the
Sever and Transfer Order conditional upon viewing a
Quitclaim Deed from Mr. Young to Yavapai Land Holdings."
HON. MIHALSKY: Okay. And that's what your
witnesses are testifying to.
MS. HUDGENS: Exactly.
HON. MIHALSKY: And that may not be what ADWR's
witnesses testify to.
MS. HUDGENS: Correct.
HON. MIHALSKY: So, it's a standing objection.
You've raised it again.
I'll listen to it. Let's not spend a lot of time
on it. I'm not sure how central to either party's case
this issue is going to be, but I certainly am realizing it
might be very central. So, let's make our record and
focus on the important stuff and -- and I don't need
cumulative testimony as far as Mr. Young's testimony that
he understood the agreement the same way that Mr. Pearce
told him, and Mr. Pearce has already testified to what his
understanding was and what he told Mr. Young, so.
MS. HUDGENS: Okay. Your Honor, if I can just
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take a couple minutes with my colleague to consult and to
make sure I'm not asking --
HON. MIHALSKY: Sure. And I'm -- I'm really not
deciding the issues, I'm just moving the hearing along,
you know, as I suggested and trying to make a record. So,
anyway --
MS. HUDGENS: Fair enough.
HON. MIHALSKY: -- let's take a ten-minute break.
So, we'll be back on the record at 4:33.
(Recess taken from 4:23 p.m. to 4:32 p.m.)
HON. MIHALSKY: We're back on the record.
BY MS. HUDGENS:
Q. Mr. Young, when Yavapai purchased the property
from your family, did you know Yavapai intended to develop
that land?
A. Yes, I did.
Q. And you mentioned the Sever and Transfer Order.
Did Young -- did Young Acres, Inc., assist with the filing
of Application For Sever and Transfer?
A. Oh, yes.
Q. If you -- I'm going to have my colleague go to
Yavapai 17.
Mr. Young, do you recognize this document?
A. Yes. This was the decision and order for the
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sever and transfer that we've been working for about
seemed like -- well, five or six years for it.
HON. MIHALSKY: What exhibit is that?
MS. HUDGENS: Yavapai 17.
MS. KLOBAS: And, Your Honor, for the record I
think that's identical to ADWR Exhibit 35.
HON. MIHALSKY: Okay. Thank you.
Q. BY MS. HUDGENS: So, Mr. Young, did Young Acres
and Yavapai jointly apply for the sever and transfer?
A. Yes. For this one.
Q. And that application was ultimately granted,
correct?
A. That was and this is the proof.
Q. Was Yavapai able to develop its land immediately
after seeking the Sever and Transfer Order?
A. After seeking it or after getting it?
Q. After obtaining it.
A. After obtaining, no, they were not. They still
needed to get an Analysis of Assured Water Supply and,
actually, a Certificate of Assured Water Supply before
they could develop, that's what I understand.
Q. Did you assist -- on behalf of Young Acres, did
you assist with the filing of the analysis for assured
water supply?
A. We did whatever we could to help with that.
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Q. To obtain the Sever and Transfer Order that we're
looking at, which is Yavapai Exhibit 17, was Young Acres
asked to prove its surface water rights including the date
the water was first put to beneficial use?
A. Yes. Yes. And that's the narrative that we
looked at earlier, that was -- that went to that.
Q. If we look at paragraph 19, which is also on
page 8, that paragraph states that the amended
application -- meaning the amended application for sever
and transfer -- is supported by documentation concerning
historical use -- water use at Young's Farm from the Agua
Fria River. And it also states there that Young Acres
submitted a document called "Young Property History of
Water and Land Usage Along the Agua Fria River," and also
submitted a narrative on the legal availability of surface
water rights pertinent to Young's Farm.
When we were talking about the narrative earlier,
which was Yavapai Exhibit 53, are those two documents the
same?
A. Yes.
Q. What about the nature of Young Acres' water use?
Was Young Acres asked to prove that its wells pumped
surface water?
A. Yes, it was.
Q. Did it do so?
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A. Yes, we believe we did.
Q. What was the effect of this particular order in
your mind?
A. Oh, it relieved my mind because we'd been working
so hard to get this approved and a decision made on it.
We'd been working and jumping through seemed like an
enormous amount of hurdles to prove all of the things that
were required on it. So, when we -- we got this, we felt
like -- we knew there were two conditions on it but they
were, to me, they were just no-brainers that, yeah, of
course we'll do those. And that that -- we didn't -- that
the rest had been decided.
Q. When you testified just a second ago that Young
Acres proved that the water withdrawn from certain wells
was surface water, is that reflected in this order?
A. Yes, it is.
Q. If we go to paragraph 22 on page 9, it states
there: "That the Department determined that certain wells
listed by Yavapai withdraw water from the flood
plain alluvium of the Agua Fria River."
Do you see that there?
A. Yes, I do.
Q. Do you know what the flood plain alluvium is?
A. Yes, I know what it's referring to.
Q. And that sentence continues that: "Those
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withdrawals have a direct and appreciable impact
on the Agua Fria River."
A. Right.
Q. Looking at that paragraph, what does that say to
you?
A. That says that those wells are pumping surface
water and, essentially, that's -- that's the bottom line.
That they have to have that direct and appreciable effect
on the river and be pumping out of the flood plain
alluvium to do so.
Q. And if we look on the same page, paragraph
number -- actually, it's page 11 -- is that the page I'm
on? Let's see.
Page 11, paragraph 13, the last sentence of
paragraph says: "The quantity of 651.36 AFY is the amount
that is available for severance and transfer
under the amended application."
And of course AFY stands for acre feet per
year, correct?
A. Correct.
Q. Do you have any doubt that 651.36 acre feet of
water is available to be pumped at Young's Farm?
A. I have no doubt. It's -- yeah, I have no doubt.
That's what -- we've historically pumped more than that.
Q. The wells that are currently on the property, are
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they capable of pumping that amount now?
A. Yes -- well, I'm not sure what the pumps on the
property are now. They were capable of doing that when I
left.
Q. If you turn to page 13, paragraph 5 states that
the order is conditional on two -- two different points,
Point A and Point B. And the first condition is that
Yavapai provide the Director with a deed whereby Young's
Farm, Inc., quitclaims its interest in surface water
rights to Yavapai. Do you see that?
A. I do.
Q. At the time that this order was issued, those
surface water rights had not yet been transferred to
Yavapai; is that right?
A. No.
Q. Why was that?
A. Well, because I had not been paid.
Q. Is there any other reason?
A. Well, they had not got the assurance from the
Department of Water Resources from an Analysis of Assured
Water Supply that they needed to feel comfortable about
buying those surface water rights.
Q. So, in order for the Quitclaim Deed to be issued
to Yavapai, Young Acres and Yavapai agreed that the
Department had to first issue an Analysis of Assured Water
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Supply?
A. Yes. That's what they felt they needed in order
to feel comfortable.
Q. If an Analysis of Assured Water Supply is issued
by the Department, is there any reason whatsoever why
Young's Farm, Inc., would not quitclaim its surface water
rights to Yavapai?
A. None. In fact, we're contractually obligated to
do that.
MS. KLOBAS: Objection, Your Honor. Renewing the
continued objection to that.
THE WITNESS: I shouldn't have said that.
Q. BY MS. HUDGENS: Is there any --
HON. MIHALSKY: Noted. Go ahead.
Q. BY MS. HUDGENS: Is there any reason why any of
the other individuals that we talked about earlier,
including Jeannine Young, Aaron Young, and Sarah Teskey,
why they would not agree to quitclaim surface water rights
to Yavapai upon the issuance of an analysis for assured
water supply?
A. No. All the other entities have already
quitclaimed their rights to Young Acres and it's recorded.
Q. We're here today because the Department denied
Yavapai's Application for Analysis of Assured Water
Supply. What was your reaction when you found out that
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decision?
A. I was frustrated as I felt deceived. I felt -- I
couldn't believe -- I could not believe that we'd worked
this long, 10 years, with -- with the Department, with
three different Directors, with the -- with the staff,
that we'd jumped through so many hoops and we got Maricopa
Water District to agree, we got Arizona Game & Fish to
agree to withdraw their objections. We did -- it just
took -- taken so much and we felt so confident in our
trust towards ADWR after we received this sever and
transfer, that we felt we were going to be able to
complete it.
I didn't see the -- I knew the difference of
opinion on the subflow, so -- that they didn't -- they
didn't feel it was there after their model, you know,
70-something years out showed that it might be dry for a
while based on ground water pumping throughout the AMA,
when we were talking about surface water here.
So much didn't make sense to me. I mean, I'm not
a hydrologist and I'm not a lawyer, I just -- as I
understood things, it seemed very clear. And I knew the
water was there, I knew it'd always been there. And I
knew that -- that, you know, that I just did not see
why -- and I knew that we'd legally -- we proved it was
legally ours by going back and finding all the deeds and
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homesteads and the Department had concurred with all of
that. So, it was very upsetting and it still is.
Q. So, when you saw that -- or, heard that the
Department had determined that 651.36 acre feet a year of
water was not going to be physically or continuously
available in the future for in the next hundred years,
what was your reaction to that?
A. Again, just I -- well, number -- I couldn't
believe I was talking to some of the same people that
we've been talking to the last 15 years, you know that
those were the people deciding this after the -- after the
amount of work and effort and compromises that -- that we
felt we had done to bring it along this far. And I -- I
just was convinced it was a personal -- it was a
private-property right that I had -- we had perfected;
that we willing to sell them, we had a willing buyer,
and -- I was -- I was being damaged.
Q. Is there any doubt in your mind knowing your
history with the farm and your family's history before you
with the farm, that this water would be available over the
next 100 years?
A. No. No doubt in my mind. We're -- we're at the
bottom of the bathtub in -- in that aquifer, in that -- in
that upper Agua Fria basin. Water has always been there.
And I guess -- I guess if Prescott Valley and the cones of
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depression that they're developing up there, I guess at
some time those could do some serious damage by drawing
that surface water out towards those cones of depression
that -- that they're doing.
But I just feel like surface water rights
either -- either are a valuable resource and they -- they
should be first -- first in time, first in right, and that
that just should upheld unless somebody wants to change
the law. It just doesn't seem fair and correct.
Q. You just mentioned that you had made more than
one compromise. Can you describe what compromises that
you had made over the process?
A. One of the biggest -- big one was going to the
water management plan, second water management plan that
reduced our acre feet per year from what historically we'd
been using on -- on the farm. And then the other one,
there was a hundred acre feet that we were claiming per
year that we were claiming for livestock, domestic use,
and -- but the Department kept saying, "Well, we know some
of this is ground water that you're pumping and how are
you going to prove which is which and how much of it is
that?" And by -- I just felt like we had agreed or that,
well, by going to this lesser amount of water, we were
addressing that issue and -- and -- so that we wouldn't
have to do that. And we just wanted to move it along.
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Q. So, another way of saying that is that you
believe that the amount of water quantified in the Sever
and Transfer Order of 651.36 per year is below the amount
of water that Young's Farm had -- amount of surface water
that Young's Farm had historically been pumping on that
land?
A. Yes.
Q. Mr. Young, do you feel that ADWR has reduced your
proven water right and is now preventing you from the
benefit of even that reduced right?
MS. KLOBAS: Objection, Your Honor. This appears
to be testimony related to the constitutional issues that
were precluded for purposes of this hearing.
HON. MIHALSKY: Sustained.
Q. BY MS. HUDGENS: Were there any other compromises
that you made with respect to, for example, the wells that
were considered to have -- considered and determined by
the Department as pumping ground water versus surface
water?
A. Well, it -- I felt like all the wells were
pumping surface water. But that was -- but, you know, we
felt like identifying those wells was a good way, again,
yes, I compromised, I wasn't going to stand on principle
that, you know, I couldn't prove.
Q. Is it your understanding, Mr. Young, that ADWR
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used historical water data to predict the future
availability of water?
A. I'm not sure what was in that model. I mean,
I'm -- it's -- yeah, it's above my pay grade.
Q. Mr. Young, did you rely on the Sever and Transfer
Order?
A. Tremendously. After we got that I slept much
better for a while, yeah.
Q. If the analysis is not issued, will you be
prevented from selling the surface water rights to
Yavapai?
MS. KLOBAS: Objection, Your Honor, on the same
basis that this appears to be related to the
constitutional taking.
MS. HUDGENS: If I may, it's actually related to
the condition in the Sever and Transfer Order to which Mr.
Young was a party.
HON. MIHALSKY: The condition?
MS. HUDGENS: There's -- there's two condition.
HON. MIHALSKY: Yes, the Quitclaim Deed and the
assured water supply.
MS. HUDGENS: Correct. So, if one is not issued,
the other can't happen, that's the question that I'm
asking.
HON. MIHALSKY: Yeah, but why do I need his
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testimony on that? It does seem like it's going to some
kind of an injury that may not be at issue here other than
just the -- whether the condition has been met.
MS. HUDGENS: Okay. I'll move on, then.
HON. MIHALSKY: Okay.
Q. BY MS. HUDGENS: Did you ever have a problem, Mr.
Young, with any of the wells pumping water regularly?
A. Some of the hand-dug wells were only down 30,
40 feet, we wanted to be able to get more water out of
those, so we deepened them -- several of them -- down to a
hundred feet or so, so we could put in a submersible
bigger pump. That's the only issue we've ever had.
The water -- water table there, the water has
always been 30 to 40 feet depending on where you are in
the valley. Water has always been in the river there or
coming up in the bottom third of the farm and running out
of the farm. So, no.
Q. Were -- was the maintenance that you just
described on the wells, did that occur before the Sever
and Transfer Order?
A. Oh, yes. Some of those occurred, you know, 30 --
30 years ago, 40 years ago.
Q. So, if there were any issues with the wells that
you've had over a period of time, it wasn't that the wells
could not pump water, it was purely mechanical or other
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maintenance issues?
A. That's -- that's correct.
Q. Did any of the wells go dry on the property
during your lifetime?
A. No.
Q. One last question with respect to the -- to the
farm. When we broke it down into thirds, the second
third, I just want to clarify, that second third of the
river, would you describe that as intermittent -- having
intermittent flows from the river?
A. Yes. The water -- water would run there
sometimes for a week or two, three, but -- depending on
the storms and the weather patterns, but then they would
go dry as well for periods of time. So, intermittent
would -- yes.
MS. HUDGENS: No further questions.
HON. MIHALSKY: Okay. We are going to adjourn
for today.
MS. KLOBAS: Your Honor, actually, I can keep
this really brief so Mr. Young does not have to testify
again.
HON. MIHALSKY: Okay then.
MS. KLOBAS: Okay.
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CROSS-EXAMINATION
BY MS. KLOBAS:
Q. Good afternoon, Mr. Young. Thank you for your
patience with me in terms of my objections and my
additional questions.
I just have one question for you, and I'm going
to go back to Yavapai Exhibit 17, which is also ADWR
Exhibit 35, and I am turning to page 12 of that exhibit,
and I'm going to read to you from paragraph 4. Let's see.
And I'm actually going to start at the second sentence
which is going to go over into the next page, page 13 as
well.
"These wells shall be the new points of diversion
and any proposed change to these new points of
diversion shall be subject to the Director's
prior written approval. In order to obtain this
approval, Yavapai must provide documentation to
the Director's satisfaction which establishes
that the proposed points of diversion would be
diverting appropriable surface water. Absent the
Director's prior written approval, the new points
of diversion may not be changed."
Did I read that correctly, Mr. Young?
A. I believe so, yes.
MS. KLOBAS: Thank you very much. No further
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questions.
HON. MIHALSKY: Do you have any redirect?
MS. HUDGENS: Just one minute, Your Honor.
No further questions.
HON. MIHALSKY: Okay. Then we will adjourn.
We'll see you all here at 1:00, more likely than not.
(Whereupon the proceedings stand at recess at
4:57 p.m. until November 15, 2016.)
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PERFECTA REPORTING
224
C E R T I F I C A T E
I, Angela Furniss Miller, Certified Reporter, do
hereby certify that the foregoing pages numbered 1 through
223, inclusive, constitute a full and accurate printed
record of my stenographic notes taken at said time and
place, all done to the best of my skill and ability.
DATED, at LITCHFIELD PARK, Arizona, this 28th
day of November, 2016.
________________________________Angela Furniss Miller, RPR, CRCertified Reporter (AZ50127)