## Facts

- The Kane County Water Conservancy District and the San Juan County Water Conservancy District held decreed water rights associated with the Green River.
- The districts leased certain rights to Blue Castle Holdings Inc. to supply water for a proposed nuclear power plant near Green River, Utah.
- The leases were contingent on the Utah State Engineer approving change applications that would move the points of diversion and change the place and nature of use to serve the power project.
- Although existing approved rights on the Green River amounted to about 1.29% of the river’s total average volume, roughly 80 protestants (including HEAL Utah and others) filed protests opposing the change applications.
- The protests asserted, among other grounds, that (a) no unappropriated water was available, (b) the proposed changes would unreasonably affect the natural stream environment, and (c) the project and applications were speculative and not economically feasible.
- After administrative proceedings, the State Engineer approved the change applications (with conditions).
- The district court affirmed the State Engineer’s approvals on judicial review.
- HEAL Utah and other protestants appealed to the Utah Court of Appeals.
- The record included evidence that Blue Castle had spent about $17.5 million on development and presented testimony supporting the feasibility of its business plan and its ability to seek the remaining capital needed for construction.

## Issues

1. Whether the State Engineer erred in determining that unappropriated water was available to support the requested changes to the Green River water rights.
2. Whether the State Engineer failed to properly evaluate or protect the natural stream environment when approving the change applications.
3. Whether the State Engineer unlawfully approved an impermissibly speculative change because the proposed nuclear project was asserted to be uncertain or not feasible.
4. What level of deference applies on judicial review of the State Engineer’s factual findings and technical determinations supporting approval.

## Decision

- The Utah Court of Appeals affirmed the district court’s order, leaving the State Engineer’s approvals in place.
- The court applied a deferential review standard to the State Engineer’s factual findings and sustained the approvals where supported by substantial evidence and within the bounds of reasonableness.
- On water availability, the court rejected the protestants’ contention that the applications necessarily failed for lack of unappropriated water, concluding the Engineer’s determination was supported by the administrative record.
- On the natural stream environment, the court held that the Engineer considered the asserted environmental concerns and did not act unlawfully in concluding the changes, as conditioned, would not cause an unreasonable effect on the river’s natural stream environment.
- On speculation and feasibility, the court concluded the Engineer could credit evidence of Blue Castle’s planning, expenditures, and feasibility testimony and could find the proposed use sufficiently real and likely to proceed to satisfy Utah’s limits on speculative water-right changes.

## Legal Principles

- A Utah water-right change application may be approved only if statutory requirements are met, including protections for existing rights and the public interest factors the Engineer must consider in change proceedings.
- The State Engineer must consider whether a proposed change would unreasonably affect the natural stream environment as part of the statutory review of change applications.
- Utah law bars water-right administration that rests on speculation; the Engineer may evaluate whether the applicant has a concrete plan and a feasible path to place water to the proposed beneficial use, based on record evidence.
- On judicial review, courts do not retry the administrative case; they give deference to the State Engineer’s technical findings and uphold the decision when supported by substantial evidence and not arbitrary or capricious.

## Conclusion

The Utah Court of Appeals affirmed the State Engineer’s conditional approval of change applications tied to the lease of Green River water rights for a proposed nuclear power plant, holding that the Engineer’s determinations on unappropriated water, the natural stream environment, and non-speculative feasibility were supported by the record and warranted deference on review.


HEAL Utah v. Kane County Water Conservancy District, 378 P.3d 1246 (2016)