Republican Basin augmentation project-property tax issue could go to high court

Republican Basin augmentation project-property tax issue could go to high court

    • By LORI POTTER
      Hub Staff Writer
      Sep 26, 2017KEARNEY — The Nebraska Supreme Court may consider a dispute next year involving two Republican Basin streamflow augmentation projects and property taxes.A ruling also might impact broader groundwater issues.The projects to aid Nebraska’s efforts to ensure adequate Republican River water flows into Kansas for Republican River Compact compliance were discussed Monday at the Nebraska Association of Resources Districts Conference in Kearney by Upper Republican Natural Resources District General Manager Jasper Fanning of Imperial and Lincoln attorney Don Blankenau.The projects — Rock Creek in Dundy County and the Nebraska Cooperative Republican Platte Enhancement (NCORPE) project in southern Lincoln County — have repurposed groundwater use from irrigated crop production to streamflow augmentation.NCORPE partners the Upper, Middle and Lower Republican, and Twin Platte NRDs purchased a 19,200-acre farm from a hedge fund and returned the crop acres to grasslands. Seventy-five percent of the groundwater is earmarked for use in the Republican Basin and is transported down Medicine Creek. The other 25 percent is available for the Platte River.The Rock Creek project is owned and operated by Fanning’s URNRD.

Jasper Fanning                           Don Blankenau

  Jasper Fanning                               Don Blankenau

  • “These (farms) were not popular when they were developed,” he said. “They were breaking up sandhills and putting pivots on every corner.”NCORPE water has been pumped each of the past four years. Fanning said that without it the alternative for compact compliance would be that “a whole bunch of folks would not have been able to irrigate.”Growing cooperation between Kansas and Nebraska has been another project benefit.Fanning said Kansas can’t store all the water required by the compact for its Bostwick Irrigation District at the times when it is available. The Nebraska projects allow more Kansas water to be stored in Harlan County Lake until it’s needed.Kansas officials are looking more closely at how much water irrigators can actually use. Fanning said compact water not needed in Kansas in the past year was allowed to stay in the lake without Nebraska being penalized for a delivery shortfall.“So far, the agreements that have been negotiated and implemented have saved the three (Republican Basin) NRDs water and money for water they didn’t need to pump. As we move forward, I think it’s going to be better for users on both sides of the state line,” he said.Other augmentation project issues are within Nebraska’s borders.A Lincoln County landowner’s lawsuit challenged NCORPE on such issues as the partners’ authority to use eminent domain, whether the project has a public or private purpose and the legality of transferring groundwater off overlying land.In April, the Nebraska Supreme Court upheld a decision by the Lincoln County District Court to dismiss that lawsuit.Blankenau said the “layers of law” governing groundwater start with a 1933 common law that says property rights include access to the water underground.The next level includes laws giving the state and NRDs authority to limit water use with measures such as certifying irrigated acres and allocating irrigation water.A big issue for critics of the augmentation projects is that property values declined when irrigated crop production was retired and the acres were returned to less valuable grassland.Blankenau said that because augmentation water used for compact compliance allows producers who might otherwise have been shut down to continue irrigating, the projects serve a public purpose by greatly limiting overall tax base depletions.The “rub” is that public bodies are prohibited by state law from paying property taxes on public purpose projects. That is a concern for counties where the projects are located.Blankenau said the NRDs protested property taxes assessed on the augmentation projects to initiate the steps required for a Nebraska Supreme Court ruling on the issue.When the protests were denied by the counties, the issue advanced to Nebraska’s Tax Equalization and Revenue Commission. “It’s a complex issue for TERC,” Blankenau said, which usually handles disputes about property values, not NRD land ownership and groundwater-related issues.TERC ruled in favor of the NRDs’ tax exemptions and the counties appealed to the Nebraska Court of Appeals.Blankenau expects the Supreme Court to take the case after briefs and court records are filed by the end of this year. That could allow arguments before the Supreme Court in March and a decision by next summer.He said the NRDs paid property taxes on the projects in Dundy and Lincoln counties. The money is being held by the counties until the court decides whether it must be returned.What the justices say about the many issues involved will determine what the case might mean for other water projects, Blankenau said.Also pending is an augmentation-related bill introduced in the Nebraska Legislature this year by state Sen. Mike Groene of North Platte.The statement of intent for LB218 says it would establish procedures for acquiring or using land to pump groundwater to augment water supplies for interstate compact compliance. Proposed procedures include requiring a public hearing on such projects every five years and requiring them to sell the land at fair market value without water rights.

    lori.potter@kearneyhub.com