## Facts

- A public power and irrigation district operated a large surface-canal irrigation system supplying water under multiple perfected surface appropriations with priority dates from 1934 to 1964.
- Over time, seepage from the canal system formed a substantial underground water mound beneath parts of Gosper, Phelps, and Kearney Counties.
- The district filed an application with the Department of Water Resources (DWR) seeking statutory “recognition of incidental underground water storage” associated with its existing surface appropriations.
- Overlying landowners objected, asserting the mound water was “ground water” subject to their overlying-use rights under Nebraska law and arguing the incidental-storage statutes were unconstitutional and exceeded DWR’s authority.
- After an evidentiary hearing, DWR found the canal system created the mound and granted recognition of incidental underground storage linked to the surface appropriations.
- The objecting landowners appealed directly to the Nebraska Supreme Court.

## Issues

1. Whether the seepage-created underground mound constituted “ground water” owned by the public, and what legal interests overlying landowners and the canal operator held in that water.
2. Whether Neb. Rev. Stat. §§ 46-226.01 and 46-226.02 validly authorize DWR to recognize incidental underground storage associated with a perfected surface appropriation.
3. Whether the incidental-storage statutes unconstitutionally delegate legislative power by failing to supply adequate standards to guide DWR’s discretion.
4. Whether DWR’s factual findings and order granting the application were supported by sufficient evidence and were consistent with the governing statutes.

## Decision

- The Nebraska Supreme Court affirmed DWR’s order granting recognition of incidental underground water storage.
- The court held that Nebraska ground water is owned by the public, and overlying landowners hold only a right to use ground water, not ownership of the water itself.
- The court upheld §§ 46-226.01 and 46-226.02 against the delegation challenge, concluding the statutory criteria supplied adequate guidance for agency action.
- The court concluded DWR acted within its statutory authority in recognizing storage incidental to the existing surface appropriations.
- The court found the record contained sufficient evidence supporting DWR’s causation finding that seepage from the canal system formed the underground mound and supporting DWR’s application of the statutory criteria.

## Legal Principles

- Ground water, as statutorily defined, is publicly owned; an overlying landowner’s interest is a regulated right of use rather than a vested ownership interest in the corpus of the water.
- A holder of a perfected surface appropriation may obtain administrative recognition that underground water storage created by seepage is incidental to, and associated with, the exercise of that appropriation, for purposes of water-right administration.
- A legislative delegation to an agency is constitutional when the statute provides sufficiently definite criteria and factors to guide and limit the agency’s discretion.
- On review of an agency order under the water statutes, factual findings supported by the evidentiary record will be sustained, and the agency’s application of statutory criteria will be upheld when within its delegated authority.

## Conclusion

The court upheld DWR’s recognition of seepage-created underground storage as incidental to existing surface-water appropriations, reaffirmed that ground water is publicly owned with overlying users holding only use rights, and sustained the incidental-storage statutes as a constitutional, standards-based delegation of authority.


In re Application U-2, 226 Neb. 594, 413 N.W.2d 290 (Neb. 1987)