Can the Government Take My Water Rights Via Eminent Domain?

Yes, both the North Carolina and the federal government can use the power of eminent domain to take private water rights for public use as long as fair and just compensation is paid. The taking of water rights, also called riparian rights, does not happen too often here in North Carolina where water is relatively plentiful. But, in more arid regions of the country out west, use of eminent domain to take water rights is more common.

Generally speaking, the taking of water rights is done in the same manner as taking physical land for public purposes (like expanding a road or a highway). The government agency involved:

• Makes an assessment of what resources are needed
• Evaluates where the resources are located
• Undertakes efforts to find alternative resources
• Determines if there are willing sellers
• And, in the absence of willing sellers, determines that use of the eminent domain power is necessary

The taking of riparian rights is more complex than the taking of physical land. This is because water, by its nature, is fluid and thus, can be found both above ground and underground, may be permanent or temporary, and may require extensive facilities and equipment to extract and move. For these reasons, the taking of water rights often also involves a joint taking of physical land for the placement of extraction equipment and pipelines. Further, the taking of water rights may completely destroy the use and value of the land involved, particularly for farming and ranching purposes in areas with insufficient rainfall.

Valuation of water rights is also more complex. The water itself is a commodity that makes valuing the water somewhat easier since the market provides plenty of information with respect to "unit costs" for water of various qualities and suitability (such as use for agricultural, municipal and/or drinking). The commodity value of the water that is taken is sometimes paid as just compensation, but the unit value of the water is often included in a larger valuation of the entire eminent domain taking. Other aspects of the valuation are more complicated, however. These aspects depend on facts about the reliability of the water source, its permanence, how removal of the water will impact the larger the watershed, other long-term environmental factors and the cost of equipment and facilities to extract and move the water. That is, taking water rights from one parcel of land may have larger impacts on neighboring lands. Those other landowners may also be able to demand just and fair compensation.

As noted, adverse impacts on the land where the water is located is another crucial consideration. As an example, if water rights are taken from a spring-fed lake used to irrigate a farm, taking the water rights might entirely destroy the property's value as a farm. Thus, fair and just compensation for the taking of the water rights might involve payment for the entire value of the land and farm (which would subsume the value of the water as a commodity). By contrast, if the land in question is residential, the taking of underground water (by drilling a well, for example) might not completely destroy the value of the land as a residential property. In that case, fair and just compensation would involve payment for any diminished value of the property.

Despite all of these factors, the methodologies used to establish fair and just compensation are the standard three methodologies used by appraisers: the income approach, comparable sales approach and the cost approach. Further, the specific legal standard for valuation is "fair market value." Thus, for example, in our farm example, to obtain the water rights, the government might use the power of eminent domain to simply take the entire area of land. In that hypothetical, a valuation appraiser might look at the comparable farms that have been sold recently in the neighboring areas and base valuation on those relevant comparable.

For more information, and to schedule a confidential consultation with experienced and dedicated eminent domain and condemnation attorneys in Charlotte, contact Arnold & Smith, PLLC. Use our “Contact” page or give us a call at 704-370-2828. We handle land use, zoning and condemnation legal matters in federal court, in Mecklenburg County and elsewhere in North Carolina. We have offices in Charlotte, Lake Norman, and Union County.