Property Rights and the Public Trust

J. Brewer and G.D. Libecap
Property rights and the public trust doctrine in
environmental protection and natural resource
conservation*
Jedidiah Brewer and Gary D. Libecap
†
We examine the implications of the public trust doctrine in natural resource protection
and conservation. A model of litigation and settlement among disputing parties
suggests that the public trust doctrine introduces more costs and is more time consuming
than would be the case with alternative approaches, such as the purchase of private
rights through market transactions or application of eminent domain powers to
reallocate the resource. Because the doctrine allows for uncompensated redistribution,
it is resisted by current resource owners. Furthermore, by providing open standing to
members of the public in challenging existing uses, public trust disputes encourage
excessive demands, increasing the incidence of trial over settlement. This outcome is
exacerbated if the plaintiffs derive utility from the ‘cause’ and provide litigation
services at below-market rates, leading to greater investment in litigation. The costs of
the public trust doctrine appear to have limited its application beyond the level
anticipated by proponents. We present a case study of Mono Lake, part of the well-known
1983 litigation,
National Audubon v. Superior Court
to illustrate our arguments.
Key words:
property rights, public trust doctrine, trial settlement.
More often, the situation is one in which a court seeks to deal with the
ramifications of a private property system in relation to resources which
have the element of commonality. . . . In such circumstances courts are
inclined to scrutinize with great care claims that private property rights
should be found to be superior to the claim of continued public regulatory
authority. (Sax, 1970, 562–30)
1. Introduction
In 1970, at the time of the rise of the modern environmental movement,
Professor Joseph Sax argued that the public trust doctrine could be employed
* Helpful comments were received at the Western Economics Association Meetings, Seattle,
2007 and at workshops presented at the University of Arizona and UCSB. Research support
was provided by the Earhart Foundation, International Center for Economic Research
(ICER), the Property and Environment Research Center (PERC), and National Science
Foundation Grant 0317375.
†
Gary D. Libecap (email: glibecap@bren.ucsb.edu), Bren School of Environmental Science and
Management, Economics Department, University of California, Santa Barbara, CA, USA; National
Bureau of Economic Research, USA. Jedidiah Brewer, FRMC, Inc., Bellingham, WA, USA.
2 J. Brewer and G.D. Libecap
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No claim to original US government works
as a powerful tool for ‘effective judicial intervention’ on behalf of environmental
protection and natural resource conservation.
1
His overarching concern
was that ‘diffuse public interests need protection against tightly organised
groups with clear and immediate goals.’
2
According to Sax, the judiciary
could play a vital role in directing public policy for protecting ‘resource
interests which have the quality of diffuse public uses’ and hence would be
underrepresented against the demands of more narrow private interests.
3
The courts could intervene to reorient legislatures and administrative
agencies in environmental and natural resource regulation.
4
They could
retrospectively ‘read into patents or grants implied conditions, such as
servitude in favour of the public trust.’
5
Public resources could be reallocated
from narrower to broader uses. Under those circumstances, there would
be no takings of private property improperly granted in the first place. The
article energized legal scholars to outline new applications of the doctrine
and environmental advocates to petition for judicial intervention in the name
of the public trust.
6
As a legal principle, the public trust doctrine historically had applied
narrowly to the right of the public to access navigable waterways without
being impeded by private riparian owners. Although there had been controversial,
limited extension of the doctrine in the 19th century to public
ownership of some tidelands and subsurface lakebeds, the notion that the
public had superior rights to non-navigable waters, wildlife and other
natural resources that were held in trust by the state, as suggested by
Professor Sax and others in the late 20th century, represented a profound
expansion.
7
The most celebrated incorporation of the public trust doctrine came in
1983 when the California Supreme Court in
National Audubon Society v.
1
Sax,
The Public Trust Doctrine in Natural Resources Law: Effective Judicial Intervention
,
68 M

. L. R

. 471 (1970).
2
Sax (1970, 556).
3
Sax (1970, 557).
4
Sax (1970, 558–9).
5
Sax (1970, 563).
6
Examples of the enthusiastic application of the doctrine include David Slade, Putting the
Public Trust Doctrine to Work: The Application of the Public Trust Doctrine to the Management
of Lands, Waters and Living Resources of the Coastal States (1990); Meyers, ‘Variation on a
Theme: Expanding the Public Trust Doctrine to Include Protection of Wildlife’
Issues in Legal
Scholarship
, Joseph Sax and the Public Trust (2003): Article 7. http://www.bepress.com/ils/iss4/
art7; Robert Fischman,
The National Wildlife Refuge System and the Hallmarks of Modern
Organic Legislation
, 29 Ecology L. Q. 457, 581–82 (2002); Kristen Carpenter,
A Property Rights
Approach to Sacred Sites Cases: Asserting a Place for Indians as Nonowners
, 52 UCLA L. Rev.
1061, 1120 (2005); Michael Blumm,
Public Property and the Democratization of Western Water
Law: A Modern View of the Public Trust Doctrine
, 19 Envtl. Law 573 (1989); Charles Wilkinson,
The Headwaters of the Public Trust: Some Thoughts on the Source and Scope of the Traditional
Doctrine
, 19 Envtl. Law 425 (1989).
7
See James L. Huffman,
A History of the Public Trust Doctrine: A Tilting at Modern
Myths
, Lewis and Clark School of Law, 2006 for summaries of modern public trust arguments
and criticisms of their legal precedents.
Property rights and the public trust doctrine 3
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No claim to original US government works
Superior Court
685 P.2d 709 stated that the ‘core of the public trust doctrine
is the state’s authority as sovereign to exercise a continuous supervision and
control over’ the waters of the state to protect ecological and recreational
values.
8
This ruling had the potential to greatly enlarge the coverage of the
doctrine and the role of the police power of the state in regulating allocation
and use of water and potentially, other natural resources. As a result of the
ruling, the public trust doctrine was seen as a new mechanism that could be
applied by the judicial system to force water users and the state (legislature
and administrative agencies) to directly consider the values of alternative,
often neglected water demands in allocating access and use.
Because of its recent prominence, the public trust doctrine has received
considerable attention from legal scholars, both advocates and critics.
9
Economists, however, have largely been absent in this debate, despite the
doctrine’s implications for property rights, provision of public goods,
regulation, investment, and the allocation and use of water and other natural
resources.
In this paper we analyse one aspect of the public trust doctrine – its costs
in addressing disputes over competing resource (water) values. Judicially
mandated reallocation of water and other public trust resources is one
method of reassigning use. Other methods are market exchanges, where
property rights are clearly recognised, and the use of eminent domain, where
their condemnation requires compensation. Even though we recognise that
market exchange of property rights may not always be possible, we argue that
of these three methods, judicial use of the public trust doctrine for achieving
public environmental benefits and resource conservation is likely to be the
most costly and contentious. Accordingly, alternatives should be given
careful consideration.
Our primary contribution is that we present a model to show why litigation
under the public trust doctrine is more apt to go to trial than to be settled
privately. The data are not available to directly test the hypotheses regarding
settlement vs. trial. But the model shows how emphasising the public nature
of certain natural resources increases the costs of resolving debates over
resource use and allocation.
As the model demonstrates, use of the public trust doctrine tends to be a
less effective mechanism for the efficient redistribution of property rights for
several reasons. Broad entry is invited for multiple constituents to sequentially
assert trust claims against defendants and for administrative agencies to
8
National Audubon Society v. Superior Court
, 685 P.2d. 712. See also Blumm and Schwartz
(1995) and Sax (1990, 270) for discussion of subsequent cases in California that expanded the
public trust doctrine. See also Gray (1994, 262–69). For public trust application to wildlife, see
Meyers (1989).
9
For instance, see Epstein,
The Public Trust Doctrine
, 7 C

J

411 (1987). Blumm
and Schwartz (1995), Fischman (2002), Kearney and Merrill
,
The Origins of the American
Public Trust Doctrine: What Really Happened in Illinois Central
, 71 U. C

L. R

. 799
(2004) Carpenter (2005) and Huffman (2006).
4 J. Brewer and G.D. Libecap
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No claim to original US government works
extend regulatory mandates. Accordingly, settlement agreements between
defendants and plaintiffs are difficult to reach because once they are concluded,
new plaintiffs can appear. Plaintiffs (some with below-market wages)
invest in efforts to redirect the resource toward uses they value. At the same
time, the property rights of incumbent owners as defendants are subordinated
and subject to reallocation without compensation. Accordingly, rights
holders strongly resist such efforts. The results are lengthy conflicts that raise
costs and delay resolution of important allocation questions. Furthermore,
by weakening existing property rights, public trust rulings may reduce private
incentives to invest in the conservation and wise use of the resource. Public
investment may or may not offset lost private actions.
We illustrate these points by briefly discussing the conflict over Los
Angeles’ water rights to the Mono Basin, the empirical case underlying the
Audubon
ruling. The dispute took nearly 20 years to resolve with multiple
court cases and involvement by various constituent groups and government
units. In the end, Los Angeles lost its ability to divert Mono Basin water,
which provided about 15 per cent of the city’s total water supply, without
compensation.
10
Our intention in discussing the
Audubon
case is not to assess
the resulting redistribution of property rights. Rather, our effort is to explore
the incentives that are inherent in the public trust doctrine that hinder timely
and economical dispute resolution.
We conclude with brief discussion of other public trust cases, noting that
the doctrine has been applied less than advocates had anticipated after
Audubon
. The costs associated with the doctrine appear to have limited its
application. We consider the other mechanisms for the reallocation and
management of key natural resources.
2. An overview of the public trust doctrine
The public trust doctrine asserts that the ‘public’ has the legal right to utilise
certain resources, such as tidewaters or navigable rivers without restriction by
private owners.
11
These resources are so inherently common in their nature
that their permanent assignment to exclusive, private ownership is inappropriate.
12
To insure group values are respected, the rights of the public are vested in the
state as trustee of the resource. As such, the state through its administrative
agencies has a duty to administer, protect, manage and conserve the resource.
Any existing private users have only usufruct rights that can be withdrawn
whenever the state deems that they are inconsistent with the public
10
Gary D. Libecap,
Owens Valley Revisited: A Reassessment of the West’s First Great Water
Transfer
, Palo Alto: Stanford University Press, 2007, 138.
11
David H. Getches,
Water Law in a Nut Shell
, St. Paul, West Publishing Co. 217, 224–8,
1997. See also, James L. Huffman,
A History of the Public Trust Doctrine: Tilting at Modern
Myths
, Lewis and Clark College, School of Law, 2006.
12
Common means common property as described by Ostrom (1990).
Property rights and the public trust doctrine 5
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trust.
13
Because there are no private property rights, there is no basis for
takings challenges in such reallocations. Furthermore, the legislature cannot
alienate trust resources, which must remain with the state.
14
The public trust doctrine therefore provides for a powerful regulatory and
supervisory role for the state with regard to the resources that are covered.
Therefore, extension beyond navigable waterways to include other natural
and environmental resources as envisioned by Professor Sax represents a
potentially far-reaching extension of the police powers of the state.
15
Within this context, the
Audubon
ruling in 1983 set several precedents
regarding the public trust as noted in Blumm and Schwartz (2003).
16
First, it
enlarged the geographical scope of the trust by ruling that the doctrine
applied to water diversions of tributaries adjacent to navigable waterways as
opposed to just the navigable waterways themselves. Second, the court ruled
public trust values are transient and that as values changed, the state was
obligated to reallocate the public trust resource to be consistent with those
changes. Third, use rights to trust resources, such as water, were non-vested,
subject to reallocation without compensation if they were applied in a manner
inconsistent with trust values. Fourth, the court identified a major administrative
obligation for the judiciary and state agencies in overseeing water and
other trust resources. Finally, the court affirmed a previous decision that
granted open standing to parties in public trust cases. In
Marks v. Whitney
the court ‘expressly held that any member of the general public has standing
to raise a claim of harm to the public trust.’
17
Although, the
Audubon
ruling emphasised the relevance of the public trust
doctrine as an environmental and natural resource management tool, the
case has been controversial because of its potential to undermine the existing
property rights structure.
18
Its costs in impeding dispute resolution over
public and private values in natural and environmental resources, however,
have not been addressed directly. To illustrate them, we now turn to a model
of litigation and settlement under the public trust doctrine.
13
Richard A. Simms,
A Sketch of the Aimless Jurisprudence of Western Water Law
, in
Kathleen Marion Carr and James D. Crammond, eds., Water Law: Trends, Policies, and Practice,
Chicago: American Bar Association, 321, 1995.
14
Sax (1990, 264, 269), Michael C. Blumm and Thea Schwartz,
Mono Lake and the Evolving
Public Trust in Western Water
, 37 Arizona Law Review, 709–11, 1905.
15
Huffman (2006, 73). He disputes the asserted linkage between this view of the public trust
doctrine and Roman law or English common law. See also, Kearney and Merrill
,
The Origins
of the American Public Trust Doctrine: What Really Happened in Illinois Central,
71 U. C

L. R

. 799 (2004) for arguments that proponents have misread the American legal history.
16
Blumm, Michael and Thea Schwartz. ‘Mono Lake and the Evolving Public Trust in
Western Water.’
Issues in Legal Scholarship. Joseph Sax and the Public Trust
. Article 3. 2003.
17
Marks v. Whitney
, supra, 6 Cal. 3d 251, pp. 261–62.
18
See Huffman,
A Fish out of Water: The Public Trust Doctrine in a Constitutional Democracy
,
19 E

. L

527 (1989).
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3. A model of litigation and settlement under the public trust doctrine
In this section we develop a more formal model of the incentives to settle or
go to trial in public trust litigation.
19
The model shows that use of the public
trust doctrine heightens the incentives of the respective parties to push for
trial rather than settling, all else equal.
3.1 Trial
As discussed in the preceding section, the publicness of certain resources as
proclaimed under the public trust doctrine provides for broad legal standing
for multiple constituencies. That is, any member or agency of the public
potentially can enter as plaintiff in challenging current natural and environmental
resource use. Let the number of potential plaintiffs be indexed by
i
where
i
= 1, . . . ,
n
and let
T
pi
be the subjective expected benefit to plaintiff
i
of bringing suit against a defendant. This benefit will be a function of two
factors: First, it will be increasing as the probability of winning the lawsuit
rises, where
p
denotes the plaintiff’s probability of success. Second, it will be
increasing as the expected size of the damages rises, where
D
represents the
expected size of the damages. Therefore,
T
pi
=
p
i
D
i
.
Among potential plaintiffs, the one with the maximum subjective expected
benefit of bringing suit will challenge the defendant, where the relevant plaintiff’s
subjective expected benefit is
T
p
= max
i
Tpi, where i = 1, . . . , n. There
are three determinants of Tp: First, Tp increases in the number of potential
litigants, n. Second, Tp increases in effort invested by the plaintiff, where ep is
the effort expended by the plaintiff. Hiring more qualified lawyers, soliciting
expert witnesses, or engaging in more concentrated research, makes it more
likely that the judge will side with the plaintiff and increase the expected size
of the damages awarded. Third, Tp declines with the effort expended by the
defendant, where ed denotes the effort expended by the defendant. Accordingly,
it follows that:
Tp(ep, ed, n) = maxipi(epi, ed)Di(epi, ed), (1)
where i = 1, . . . , n.
Similarly, the subjective expected loss of going to trial for the defendant
is Td.
19 The model developed below is similar to that developed in Robert D. Cooter and Daniel
L. Rubinfeld, ‘Economic Analysis of Legal Disputes and Their Resolution,’ Journal of Economic
Literature, 27 (3): 1067–97, 1989. One of our primary departures from their model is that we
allow for open standing of plaintiffs.
Property rights and the public trust doctrine 7
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Td (ep, ed) = p(ep, ed)D(ep, ed).20 (2)
The plaintiff can use two types of effort: wp, standard labourers who work
for market wages and z, non-standard labourers who work for below market
wages. The latter are those who derive utility from participating in the case.21
In many environmental disputes, the defendant, with less emotional or popular
appeal, in general can use only wp.22 As a result, ep(wp, z) and ed(wd) and
the plaintiff’s and defendant’s labour costs are ctp(wp, z) and ctd(wd).
The value to the plaintiff of trial, Vtp, is the benefit less the costs incurred or
Vtp = Tp(ep(wp, z), ed(wd), n) − ctp(wp, z). (3)
The defendant’s total expected loss, Ltd, of going to trial will be the sum of
the subjective expected loss and the costs of trial or23
Ltd = Td (ep(wp, z), ed (wd)) + ctd (wd). (4)
The net value of trial, Vt, is the difference between the plaintiff’s expected
value and the defendant’s total expected loss or
Vt = Vtp − Ltd
= Tp − ctp − Td − ctd (5)
= Tp − Td − (ctp + ctd).
3.2 Settlement
Let Sp and Sd denote the plaintiff’s subjective expected benefit and the defendant’s
subjective expected loss from settlement.24 Let csp and csd be the costs incurred
by the plaintiff and defendant, respectively, of reaching a private solution.
20 With symmetric information about trial outcomes, the expected benefit to the plaintiff of
going to trial would equal the expected loss to the defendant of going to trail. It is more
flexible and realistic to relax the assumption of symmetric information and allow the expected
benefits and losses to be subjective. Consequently, in general, Tp will not equal Td.
21 These individuals are often referred to as devoted, passionate, or dedicated, and environmental
cases particularly may involve such participants.
22 We have limited the model here to only allow the plaintiff to use below-market wage
labourers. We impose the asymmetry for illustrative purposes as the asymmetry more accurately
reflects the resources available for plaintiffs and defendants to employ in environmental
disputes. The implications we derive later are not driven by the asymmetry. On the contrary, if
the defendant can also employ non-standard workers, as presumably could happen, it reduces
the defendant’s costs of trial and makes trial even more like to occur in place of settlement.
23 It is the sum because Ltd is the defendant’s total expected loss of trial.
24 Ex ante, uncertainty exists as to what the final settled amount will be. Thus in general, it
is reasonable to assume that Sp and Sd are not equal. With settlement, Sp and Sd are not a
function of effort as in litigation because neither party is attempting to persuade an outside entity
to empathize with their respective causes. In settlement, the expectation is taken with respect to
uncertainty over facts about the dispute and the subsequent bargaining outcome. In litigation, the
expectation is taken with respect to uncertainty over the facts and the third-party’s decision process.
8 J. Brewer and G.D. Libecap
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In the special case of the public trust doctrine, there are multiple potential
litigants, so that any settlement reached by the defendant with one plaintiff
may be thwarted by the entry of another plaintiff. Therefore, we can write
csd (n), where csd is increasing in n.
The net expected value of settlement to the plaintiff, Vsp, will be the subjective
expected benefit of settlement minus settlement costs, or
Vsp = Sp − csp. (6)
The net expected loss of settlement to the defendant, Lsd, will be the subjective
expected loss of settlement plus settlement costs, or
Lsd = Sd + csd(n). (7)
The net value of settlement, Vs, the difference between the net expected
value of settlement to the plaintiff and the net expected loss of settlement to
the defendant is
Vs = Vsp − Lsd
= Sp − csp − Sd − csd (8)
= Sp − Sd − (csp + csd).25
3.3 Trial and settlement together
Because trial is more costly than settlement, in natural and environmental
resource disputes we are concerned when trial will be observed. This will
occur whenever the net value of trial, Vt, is greater than the net value of
settlement, Vs, or comparing Equations (5) and (8), when
Tp − Td − (ctp + ctd) > Sp − Sd − (csp + csd)
Tp − Td − (Sp − Sd) > ctp + ctd − (csp + csd).26 (9)
3.4 Implications
Several implications emerge from this discussion regarding the settlement of
disputes under the public trust doctrine. First, because the doctrine requires
25 If we assume that there is perfect information in settlement – perhaps an assumption that
both parties know the degree of damage caused – then Sp will equal Sd. In this instance
Equation (8) simplifies and Vs = −(csp + csd(n)).
26 If we assume perfect information in settlement, then Sp will equal Sd and Equation (9)
will become Tp − Td > ctp + ctd − (csp + csd). Furthermore, if we assume perfect information in
both trial and settlement, then Equation (9) simplifies to csp + csd > ctp + ctd. This implies that
trial will occur if the total costs to trial are less than the total costs to settlement. In many
general models of litigation, it is assumed the costs of trial are greater than the cost of settlement.
Therefore, if perfect information exists, parties will always opt for settling the dispute instead
of going to trial.
Property rights and the public trust doctrine 9
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No claim to original US government works
no compensation to the defendant, the plaintiff will benefit more from going
to trial. A higher Tp raises Vtp and Vt. In contrast, private negotiated settlements
are not affected. Equation (9) shows that increasing Tp while holding Sp
constant, raises the relative value of trial to the plaintiff, the net value of
trial, and ultimately the likelihood of trial.
Second, trial is more likely to occur than settlement because the public
trust doctrine allows open standing for numerous plaintiffs. Equation (5)
shows that
Vt = Tp − Td − (ctp + ctd)
Vt = Tp(ep(wp, z), ed(wd), n) − Td(ep(wp, z), ed(wd)) − (ctp(wp, z) + ctd (wd)).
As the number of potential litigants, n, increases, so does the relevant plaintiff’s
subjected expected benefit of trial, Tp, and hence the value of trial, Vt.27
Furthermore, from Equations (7) and (8),
Vs = Sp − Sd − (csp + csd(n)).
Increasing n raises the costs of settlement for the defendant, implying that
the value of settlement, Vs, is decreasing in the number of potential litigants.
Third, trial is more likely when the plaintiff can invest in low-cost labour,
as is often the case in resource and environmental disputes. Returning to
Equations (5) and (9), recall that Equation (9) shows that when Vt increases
relative to Vs, trial is more likely, and recall from Equation (5) that
Vt = Tp − Td − (ctp + ctd)
Vt = Tp(ep(wp, z), ed(wd), n) − Td (ep(wp, z), ed (wd)) − (ctp(wp, z) + ctd (wd)).
Differentiating Vt with respect to both z and wp will show their relative
impacts on Vt.
The
(10)
The
(11)
The key comparison is to see how Equation (10) relates to Equation (11).
If the marginal product of labour is the same for non-standard and standard
27 Recall that Tp(ep, ed, n) = maxi pi(epi, ed)Di(epi, ed), where i = 1, . . . , n. If we array litigants
from lowest expected benefit to highest expected benefit, adding additional potential litigants
to the current pool of litigants will increase the right-hand-side of the equation above. This
implies as n increases, so does the subjective expected benefit of the relevant plaintiff.
∂
∂
∂
∂
∂
∂
∂
∂
∂
∂
∂
∂
V
z
T
e
e
z
T
e
e
z
c
z
t p
p
p d
p
p tp . = − −
∂
∂
∂
∂
∂
∂
∂
∂
∂
∂
∂
∂
V
w
T
e
e
w
T
e
e
w
c
w
t
p
p
p
p
p
d
p
p
p
tp
p
. = − −
10 J. Brewer and G.D. Libecap
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No claim to original US government works
labour, the first two terms on the right hand side of Equation (10) will be
equal to the first two terms on the right hand side of Equation (11), respectively.
Second, ( ∂ctp/ ∂z) ( ∂Vt/ ∂wp)
or that the value of trial rises when non-standard workers are used for labour
rather than standard labour.
Fourth, when more below market labour is available and when there are
more potential litigants, trial outcomes will be skewed more heavily in favour
of the plaintiff, increasing the likelihood of trial. Recall Equation (1), which
states that
Tp(ep, ed, n) = maxi pi(epi, ed)Di(epi, ed).
Expanding this equation yields,
Tp(ep(wp, z), ed (wd), n) = maxi pi(epi(wpi, zi), ed (wd))Di(epi (wpi, zi), ed (wd)). (12)
Equation (1) shows that the subjective expected benefit to the relevant
plaintiff of trial is the product of the probability the judge will side with the
plaintiff and the expected size of the damages awarded. Taking the derivative
of the left hand side of Equation (12) with respect to z yields,
(13)
The first partial derivative on the right hand side of Equation (13) is strictly
positive, as increased effort induces a greater expected benefit, and the second
derivative is strictly positive when the marginal product of labour is positive.
This indicates that the subjective expected benefit of trial to the plaintiff is
strictly increasing in the number of low-wage workers. Furthermore, by
examining the right hand side of Equation (12) the plaintiff is able to increase
both the probability of winning and the expected size of the award with more
low-cost effort, which is not available to the defendant. Furthermore, as indicated
in Equation (12) when the number of potential litigants, n, increases, both the
probability of winning the case and the expected damages rise for the plaintiff.
As outlined by the model, the public trust doctrine raises the costs of private
settlement relative to trial in natural and environmental resource disputes
making trial more likely. The goal of any reallocation mechanism should be
to redistribute resources to their highest valued uses as efficiently as possible.
In general, trial is lengthier than settlement and tends to be more costly. As
the legal system works through its process, the controversial trust resource
remains in its current use, potentially remaining suboptimally allocated.
We cannot directly test the model’s implications because of a lack of data
on settlement vs. trial, but we can illustrate how the costs of dispute resolution
are affected by examining the conflict over water for Mono Lake.
∂
∂
∂
∂
∂
∂
T
z
T
e
e
z
p p
p
p . =
Property rights and the public trust doctrine 11
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No claim to original US government works
4. Property rights to water and the public trust ruling in Audubon
4.1 History
Between 1930 and 1940, the Los Angeles Department of Water and Power
(LADWP) acquired riparian water rights to the four tributaries that feed
Mono Lake, an alkaline and hypersaline lake situated in the eastern side of
the Sierra–Nevada mountains, roughly 300 miles north-east of the city.28 The
agency applied to the State Water Resources Control Board (SWRCB) in
1940 for permits to appropriate the water, and in 1941 finished constructing
an aqueduct and began diverting the water for urban use. In 1963, to further
augment urban supplies, construction began on a second aqueduct, which
was completed in 1970.29 While between 1940 and 1970 an average of 57 067
acre-feet was exported to Los Angeles, with new aqueduct capacity exports
increased to 100 000 acre-feet or more through 1975.30 At the time, water for
urban consumption was viewed as the highest and best use of the water.31 Indeed,
the Mono Basin alone accounted for about 15 per cent of the city’s water.32
Over time, however, these water exports had substantial adverse effects on
Mono Lake and its surrounding environment. The tributaries dried up below
the diversion points and the level of Mono Lake began to decline about 1.6
feet a year.33 Between 1941 and 1981 the lake’s level fell about 46 feet, with
one-third of that decline occurring after 1970. The surface area of Mono
Lake receded from 90 to 60 square miles, and its salinity increased from 50 to
90 g/L.34
4.2 Public trust ruling
As Mono Lake levels declined, the National Audubon Society, Friends of the
Earth, the Sierra Club, and a new coalition of environmental activists, the
Mono Lake Committee that had formed in 1978, brought suit under the public
trust doctrine in May of 1979 to curtail Los Angeles’ export of water. Referring
to Marks v. Whitney 6 Cal. 3d 251 (1971) which held that the public trust
doctrine applied not only to navigable waterways but to streams used for
recreation, wildlife habitat and ecological study, the plaintiffs charged that
Mono Lake was being harmed and that the diversion was not a reasonable
28 For discussion, see Libecap (2007, 132–7).
29 http://wsoweb.ladwp.com/Aqueduct/historyoflaa/aqueductfacts.htm
30 National Audubon v. Superior Court 33 Cal. 3d 429. See also Libecap (2007, 138).
31 ‘The use of water for domestic purposes is the highest use of water.’ Stats. 1921, ch. 329, §1,
p. 443 now codified as Water Code § 1255.
32 Jones and Stokes (1993, S-1); Dunning (1990, 20); Hart (1996, 56–8). Currently, due to
various environmental requirements, including those cited in the Mono Lake ruling, the Aqueduct
supplies only around 34 per cent. Page 3-3 2005 Urban Water Management Plan, City of
Los Angeles, DWP, http://www.ladwp.com/ladwp/cms/ladwp007157.pdf. For discussion of
Owens Valley, see Libecap (2005).
33 Kahrl (1982, 429–30).
34 Botkin et al. (1988, ix).
12 J. Brewer and G.D. Libecap
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No claim to original US government works
and beneficial use as required by the state’s appropriative water rights system. This
public trust argument posed a clear challenge to Los Angeles’ water rights.35
On 17 February 1983 in National Audubon Society v. Superior Court 33 Cal
3d 419 the California Supreme Court held that exercise of appropriative
water rights is subject to limitation by the state in order to protect public trust
values, including those of wildlife habitat: ‘Thus, the public trust is more than
an affirmation of state power to use public property for public purposes. It is
an affirmation of the duty of the state to protect the people’s common heritage
of streams, lakes, marshlands and tidelands . . .’ (33 Cal 3d 441).
According to the court, public trust regulatory responsibilities applied ex
post to existing water rights, and these rights were use rights only that could
be reconsidered in light of changing perceptions of the trust. The court
charged the SWRCB with monitoring water use and re-allocating it in a
manner consistent with the public trust: ‘Thus, the function of the Water
Board has steadily evolved from the narrow role of deciding priorities
between competing appropriators to the charge of comprehensive planning
and allocation of waters.’ (33 Cal 3d 444).
Because the ruling not only signalled the mostly uncompensated loss of
valuable water rights, but also the value of Los Angeles’ past fixed investments
in the aqueducts, dams, reservoirs and hydroelectric facilities, the LADWP
filed a petition for certiorari with the U.S. Supreme Court on the basis that
the California court misinterpreted the public trust doctrine and that the
decision deprived Los Angeles of vested property rights without due process
of law (a takings).36 The Department of Interior’s Regional Solicitor for
California supported the appeal, but it was denied,37 7 November 1983.38
35 Duane Georgeson, Chief Engineer of the Los Angeles Aqueduct, said ‘If you can overturn
that kind of right (granted by the state) in order to protect environmental values, this
could be used in varying forms against all water rights in California.’ Steve Hinderer, DWP
director of public affairs, said ‘We see the Mono Lake suit as a threat not only to 20 per cent
of Los Angeles’ water supply but also to all water rights in California.’ Los Angeles Times,
May 22, 1979, ‘DWP Sued on Mono Lake Water Issue,’ Joan Sweeney, pg. SD_A10.
36 LADWP was supported in appealing to the U.S. Supreme Court by the Metropolitan
Water District of California, the Association of California Water Agencies, and the states of
Idaho and Wyoming, all of which filed friends-of-the-court briefs. These entities were similarly
worried that the California Supreme Court ruling could have a potentially serious effect on
water law in California or even throughout the West. Los Angeles Times, November 8, 1983,
‘Supreme Court Declines Mono Lake Hearing,’ Jim Mann, pg. 1.
37 The U.S. Supreme Court denied LADWP’s request for a hearing because it felt the case
presented no constitutional concerns; rather the case was based solely on issues of California
water law. It decided federal judges should generally ‘defer to the courts of California on questions
of water law that affect only California water users.’ Despite refusing to hear the case,
U.S. Department of Justice officials criticized the California Supreme Court ruling calling it ‘a
significant and unwelcome development in the contours of California water law.’ The federal
court also said it ‘shares [Los Angeles’] concern that the California court’s decision creates the
potential for disruption of what were justifiably thought to settled water rights.’ Los Angeles
Times, November 8, 1983, ‘Supreme Court Declines Mono Lake Hearing,’ Jim Mann, pg. 1.
38 Conway (1984, footnote 108). City of Los Angeles Department of Water and Power v.
National Audubon Society et al. No. 83–300, 464 U.S. 977, November 7, 1983.
Property rights and the public trust doctrine 13
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The public trust ruling in 1983, however, did not resolve the conflict over
Mono water. Various parties claimed standing in the debate, including
environmental and sports groups, as well as state and federal agencies. It
took over a decade of a complex series of subsequent court rulings, appeals
and case consolidations before the SWRCB published a final Environmental
Impact Report in September 1994, which called for a target lake level of
6392.6 feet.39 To achieve this level, there could be no water diversions by the
LADWP from the Mono Basin until the lake reached 6377 feet. After that
various benchmarks were set allowing for small diversions. Once the lake
level reached the objective, Los Angeles would be allowed to export only
about one-third the amount it had diverted in the early 1970s.40
In the end, it took nearly 20 years from the initial effort to reduce
diversions from the Mono Basin until the SWRCB handed down its final
decision. All the while, Mono Lake’s environment continued to worsen,
streams remained dry, and riparian and aquatic habitats remained
unrestored.
4.3 The Mono Lake case’s relationship to the model
A natural question to ask is why the Mono Lake case took so long to
resolve? As the model indicates, a major reason settlement was not reached
was the expansive nature of the dispute. Open standing for plaintiffs, as
provided in the Audubon decision, essentially made the Mono Basin water a
common pool. Accordingly, the conflict exhibited many of the difficulties
characterised by common-pool resources with multiple entrants. Each new
plaintiff brought new demands on the defendant.
Table 1 describes some of the organisations involved and their, respectively,
desired lake levels. Progressively higher levels required greater limits on Los
Angeles’ diversions.
As can occur with common pool resources and as the model implies, each
of the claimants had an incentive to overstate its true demands in order to
receive a more favourable allocation. Table 1 shows that in general there was
a progressive rise in water level demands. Each successive recommendation
created momentum for both new and existing parties to augment their
claims.
Indeed, there was a gradual increase in demands to limit Los Angeles’
rights. In March 1983, just after the initial public trust ruling, Sanford
Wohlgemuth, Conservation Chairman of the Los Angeles Audubon Society
wrote to the Los Angeles Times,
39 For a more comprehensive summary of the various legal conflicts and events that
occurred after the Audubon decision see John Hart, Storm Over Mono: The Mono Lake Battle
and the California Water Future, University of California Press, 1996.
40 Pages 3–5 to 3–7, 2005 Urban Water Management Plan, City of Los Angeles, DWP,
http://www.ladwp.com/ladwp/cms/ladwp007157.pdf.
14 J. Brewer and G.D. Libecap
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‘The DWP [LADWP] is saying that, in order to fill Mono Lake to 10
per cent above its present level, all water from the area will have to be
cut off for 15 years. No one is asking for that. We all realise the necessity
of maintaining this water source for the city. We are simply asking for a
fair share of the water to save the lake and eventually restore its former
health. By reducing diversions by, say, 20 per cent, Los Angeles will
have its water and Mono Lake will begin to resume its original size
and beauty.’41
Even as late as November 1984, David Gaines, head of the Mono Lake
Committee stated that ‘We’re not advocating a cutoff of Mono Basin water
to Los Angeles. And we’re not interested in returning Mono Lake to its pristine
state. We just want more water for the lake in wet years, when water for LA
is available elsewhere.’42 But as predicted by our model, these demands would
soon be raised by other parties.43 In the end, the final ruling was skewed
against Los Angeles.44
An additional reason why the case took so long to resolve was the nonvested
nature of property rights under the public trust doctrine. In 1993, the
41 Los Angeles Times, March 8, 1983, ‘Letters to The Times: Court’s Decision on Mono
Lake,’ pg. C4.
42 Los Angeles Times, November 30, 1984, ‘Fate of Rush Creek Trout is at Stake in Court
Fight,’ Earl Gustkey, pg. E1.
43 This is especially true of the application of the public trust doctrine to the tributary trout
streams in Cal Trout I and Cal Trout II. In these cases, new plaintiffs, California fishing groups
joined the Mono Lake Committee in seeking additional constraints on Los Angeles. See Los
Angeles Times, August 15, 1986, ‘Mono Lake Group Wins Round, Slows Diversion of Creek,’
Ronald B. Taylor, pg. 3.
44 John Hart described the ultimate decision by the SWRCB as ‘more favourable to the lake
than any of the [environmentalists] could have dreamed.’ John Hart, Storm Over Mono: The
Mono Lake Battle and the California Water Future, University of California Press, 1996, p. 3.
Table 1 Advocates and desired lake levels
Year Organisation
Preferred lake level
(feet above sea level)
1978 Mono Lake Committee 6378
1979 Inter-Agency Task Force 6388
1979 Mono Lake Committee 6388
1988 Community and Organisation Institute 6382
1988 U.S. Forest Service 6377–6390
1993 U.S. Fish and Wildlife Service 6390
1993 State Lands Commission 6390
1993 Department of Parks and Recreation 6390
1993 U.S. Forest Service 6390
1993 Great Basin Unified Air Pollution Control District 6392
1993 CA Department of Fish and Game 6405
1993 Mono Lake Committee 6390–6405
1994 State Water Resources Control Board Final Decision 6392.6
Property rights and the public trust doctrine 15
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No claim to original US government works
LADWP predicted that the long-term costs of replacing Mono water could
be $1 billion.45 This figure did not include the costs of stranded, nondeployable
capital in water export and hydro-electric generation.46 Because so
much was at stake in the reallocation of the water without compensation, the
LADWP invested in efforts to advance its respective position in the all-ornothing
battle over rights to water.
5. Concluding remarks
In 1970, Professor Joseph Sax argued that the public trust doctrine could be
used to reallocate resources on behalf of environmental protection and natural
resource conservation. A test case for his arguments arose with the filing of
the National Audubon case. As described above, however, it turned out to be
extremely contentious and costly to resolve. The costs may have limited the
application of the public trust beyond what had been envisioned by its promoters
following the Audubon ruling in 1983.
Indeed, a Lexus/Nexus search of public trust litigation for the period 1985
through 2004 reveals 32 court cases in 12 western states with three-fourths of
them in California, Colorado and Idaho. In general, the rulings have held
that state responsibilities under the public trust doctrine may extend to
maintenance of stream flow and water levels in rivers and natural lakes,
including groundwater systems linked to them in order to guard for health,
amenity values, and fish and wildlife habitat.47 Even so, the range of the
issues addressed by the courts seems to be quite narrow. It does not involve
the broad sweep of possibilities for extending the doctrine to curtail private
appropriative water rights, to manage wildlife or to administer the federal
lands as has been proposed.
An alternative approach for addressing conflicting public and private values as
occurred in the Mono Lake case is a market-related response. In the case at
hand, rather than rejecting Los Angeles’ water rights under public trust
claims, state and federal agencies might have purchased water to restore
Mono Lake’s level to address public concerns. Where narrower private interests
are involved, such as with individual stream fisheries, private fishing
groups could have bought or leased water from Los Angeles. Organisations,
such as the Oregon and Montana Water Trusts, regularly secure water from
farmers in those states to maintain riparian habitats for fish and other species.48
45 Hart (1996, 162).
46 In 1991, LADWP estimated that it had spent approximately $12 million for outside lawyers
and consultants since 1979. John Hart, Storm Over Mono: The Mono Lake Battle and the
California Water Future, University of California Press, 1996, p. 176.
47 Shokal v. Dunn, 109 Idaho 330, 707 P.2d 441, 1985; Mineral County v. State of Nevada,
117 Nev 235, 20 P.3d. 800, 2001; Golden Feather Community Ass’n v. Termalito Irrigation District,
199 Cal. App. 3rd 402, 244 Cal Rptr. 830, 1988.
48 See http://www.owt.org/. Libecap (2005, 19–23) describes some of the transaction costs of
such exchanges, including bilateral monopoly, valuation and third-party effects.
16 J. Brewer and G.D. Libecap
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Reliance on market transactions would have the advantages of producing
more information about the relative values of water for current and proposed
uses and of reducing the conflict associated with uncompensated reallocations.
Extreme demands encouraged by open standing under the public trust would
have been tempered by the requirement to purchase. Where no voluntary
agreements on water transfers for public environmental or recreational uses
are forthcoming due to bilateral monopoly conditions, eminent domain with
compensation could be used for government acquisition of water.49
All in all, the public trust doctrine appears not to have been an efficient
vehicle for timely protection of Mono Lake and its tributaries. This is an
important point because rising environmental and recreation demands for
water relative to traditional uses suggest that there will be many similar
reallocation efforts.50 Climate change and the likelihood of greater drought
conditions in the south-west will only exacerbate the problem. The model
and case presented here suggest that a broad array of options should be
considered for the speedy and low cost resolution of these conflicting
demands for the West’s scarcest resource.
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