Arizona Water Co. v. Arizona Department of Water Resources

OPINION

SULT, Presiding Judge.

¶ 1 This action for judicial review arises from a decision of the Director of the Arizona Department of Water Resources approving the conservation measures contained in the Department’s second management plan, a plan promulgated by the Department in accordance with its mandate in Arizona’s Groundwater Code to manage the extraction, distribution, and use of groundwater. See generally Arizona Revised Statutes (“A.R.S.”) §§ 45-401 to 45-724 (2003). According to appellants, the Department and its Director, the plan did not need to include conservation measures specifically applicable to “end users” of groundwater, a term that the parties use to describe the customers of municipal and private water providers.

¶ 2 Appellee Arizona Water Company held a different opinion of the Department’s statutory mandate and petitioned the superior court to review the Director’s decision. The superior court agreed with Arizona Water that the relevant Code provisions should be interpreted to require the Department to include end users in the management plan’s conservation scheme. Because the plan did not do so, the court vacated the plan, remanded the matter to the Department to draft an amended plan, and awarded Arizona Water its attorneys’ fees.

¶ 3 The Dir ector and the Department appealed the decision to this court. We agree with the superior court that the legislature intended that the Department include in its management plans conservation measures applicable to end users. However, we do not find a sufficient basis in the record to sustain the award of attorneys’ fees and remand that issue for further proceedings.

BACKGROUND

¶ 4 In 1980, the Arizona Legislature determined that the state’s groundwater supply was at such risk that state-imposed measures aimed at its preservation were necessary. A.R.S. § 45-401(A). To that end, the legislature enacted Arizona’s Groundwater Code which declared it to be the policy of the state “to conserve, protect and allocate the use of groundwater resources of the state and to provide a framework for the comprehensive management and regulation of the withdrawal, transportation, use, conservation and conveyance of rights to use the groundwater in this state.” A.R.S. § 45-401(B). The Department and its Director were assigned the principal task of implementing the comprehensive regulatory scheme set out in the Code. A.R.S. §§ 45-103(B), 45-105(B)(2).

¶ 5 Certain areas of the state were designated as active management areas, meaning that extractors, transporters, and users of groundwater were subject to special regulations. See A.R.S. § 45-402(2). These regulations, called management plans, were to include measures designed, in the case of the Tucson, Phoenix and Prescott active management areas, to decrease the mining of groundwater and achieve safe yield by the year 2025. A.R.S. § 45-562(A). Specifically, the plans were to include “a continuing mandatory conservation program for all persons withdrawing, distributing or receiving groundwater designed to achieve reductions in -withdrawals of groundwater.” A.R.S. § 45-563(A).

¶ 6 The management plans for each active management area were to cover successive ten-year periods, and the first plan for the Phoenix area was for the period 1980-1990. A.R.S. § 45-564(A). By statute, the first plan was required to include “[a] conservation program for all non-irrigation uses of groundwater.” A.R.S. § 45-564(A)(2). The users of water supplied by municipal providers, which category includes private water companies like Arizona Water, were subject to “reasonable reductions in per capita use *535and such other conservation measures as may be appropriate for individual users.” Id. Arizona Water did not challenge the first management plan.

¶7 In December 1989, pursuant to the statute governing plans for the second management period, the Director adopted a 1990-2000 plan for the Phoenix active management area. A.R.S. § 45-565. The second plan built on the goals for reduction in groundwater use outlined in the first plan and provided that cumulative to the reductions achieved during the first management period, the second plan should require “additional reasonable reductions in per capita use to those required in the first management period and use of such other conservation measures as may be appropriate for individual users.” A.R.S. § 45-565(A)(2).

¶ 8 To accomplish this directive, the Department in its second plan continued its primary program for achieving reductions in groundwater usage. This program is called the “Total Gallons Per Capita Per Day” program, which the parties refer to by its acronym GPCD, and the Department established a GPCD program for each active management area. Each water system in a management area was assigned a GPCD rate, with that number representing the total gallons per day that a provider could deliver to each customer, with an additional goal of reduction in that rate as the ten-year period progressed. The actual implementation of the program is complex, and the details are not necessary for our decision. It is sufficient to note that in the second management plan, as well as in the third management plan now in effect, the entire onus of achieving reductions in groundwater usage is placed on the providers. The customers of the provider, the “end users,” are not assigned any responsibility to engage in any conservation measures. Rather, the plan assumes that in order to meet the requirements under the plan, each provider will implement and enforce conservation measures upon its customers.1

¶ 9 In January 1990, Arizona Water filed an action in superior court for judicial review of the Director’s action in approving second management plans for several of Arizona Water’s water utility companies. The gist of the complaint was that the plans were not in compliance with the Groundwater Code because they did not include conservation measures to be imposed directly on end users. The proceeding was stayed pending the Director’s administrative review of the plans, and throughout the next several years, Arizona Water and the Department settled their differences regarding all of these companies except Arizona Water’s Apache Junction water utility.

¶ 10 The Director ultimately issued a decision substantially affirming the management plan’s conservation measures, and Arizona Water filed a second complaint for judicial review in May 1999. The superior court consolidated this complaint with the earlier one and determined that it would be appropriate to involve the Arizona Corporation Commission in the proceedings because of its authority over public utilities. At the court’s instance, the Commission intervened and filed a brief asserting that although the Department had no authority to tell a water utility whom to serve or whom to terminate, the Commission saw no irreconcilable conflicts as it often successfully worked with sister state agencies when overlapping regulatory issues arose.

¶ 11 Following further proceedings, the court on February 8, 2002 entered judgment: 1) vacating the portion of the second management plan as applied to Arizona Water’s Apache Junction system because the plan failed to address water utilization by end users; 2) remanding the matter to the Department to address the deficiencies in the plan; and 3) awarding Arizona Water $137,900 in attorneys’ fees.

¶ 12 The Department timely appealed to this court. Arizona Water timely eross-ap*536pealed, challenging as insufficient the trial court’s award of attorneys’ fees.

ISSUES

¶ 13 The central issue in this appeal is whether the legislature intended that in implementing the Groundwater Code’s conservation mandate the Department should include in its management plans conservation measures to be employed by end users of groundwater. Assuming the superior court was correct on this point, the next issue is whether it properly awarded Arizona Water attorneys’ fees under A.R.S. § 12-348(A)(2)(Supp.2002). The last issue is one presented to the superior court but not decided by it; namely, whether the Department is authorized to include Central Arizona Project water used by a provider in determining that provider’s compliance with its total GPCD requirements. Although not required to address this issue, we elect to do so within our discretion because the parties have fully briefed it on appeal and a decision thereon will provide guidance in the future and preclude further litigation on the point. See Jett v. City of Tucson, 180 Ariz. 115, 123-24, 882 P.2d 426, 434-35 (1994).

ANALYSIS

Conservation Measures for End Users

¶ 14 We have already alluded to several of the statutes in the Groundwater Code wherein the legislature has indicated what it expects to accomplish via the Code and how it intends this to happen. A more detailed examination of these statutes is appropriate in order to determine if the legislature has directed the Department to include in its management plans conservation provisions directly applicable to end users, or whether, as the Department contends, the responsibility to regulate end users can be delegated to the municipal providers.

¶ 15 We begin with the opening policy statement of the legislature wherein that body declared that the Code was designed to create a framework for the “comprehensive management and regulation of the withdrawal, transportation, use, conservation and conveyance of rights to use the groundwater in this state.” AR.S. § 45-401(B). That such management and regulation must include conservation measures is indicated not only by the specific mention of conservation in the policy declaration but also by the language of A.R.S. § 45-492(A), one of the principal statutes implementing the policy. That statute conditionally grants to a municipal provider in an active management area “the right to withdraw and transport groundwater within its service area for the benefit of landowners and residents within its service area.” It further conditionally entitles “the landowners and residents ... to use the groundwater delivered.” A limiting condition imposed by the statute on the rights granted to the provider and its end users, however, is that these rights are “subject to ... (2) [cjonservation requirements developed by the director pursuant to article 9 [management plans] of this chapter.”

¶ 16 While this language seems a clear indication that the legislature intended the Director to create conservation requirements both for providers and end users, one could argue that subsection (2) of § 45-492(A) should be read differently. Rather than requiring the Department to directly include explicit conservation measures for end users in its management plans, the requirement that end users be “subject to” the Director’s conservation measures can be satisfied by the indirect method of requiring the provider to impose such measures on its customers. To determine whether this might be the legislature’s intended meaning, we next consider the provisions of Article 9 dealing with what matters the Director must include in management plans.

¶ 17 Article 9, A.R.S. §§ 45-561 to 45-578, is principally concerned with the successive ten-year management plans that are intended to accomplish the Code’s safe-yield goal in active management areas. For all management plans, A.R.S. § 45-563 requires “a continuing mandatory conservation program for all persons withdrawing, distributing or receiving groundwater” (emphasis added). For the first management plan, A.R.S. § 45-564(A)(2) mandated “[a] conservation program for all non-irrigation uses of groundwater” that “require[d] reasonable reductions in per capita use and such other conservation measures as may be appropriate for individ*537ual users” (emphasis added). For the second management plan, A.R.S. § 45-565(A)(2) decreed more conservation measures designed to achieve additional reductions in per capita use beyond those of the first management period and “use of such other conservation measures as may be appropriate for individual users” (emphasis added).

¶ 18 The Department asserts, and we acknowledge, that there is no specific statutory provision by which the legislature definitively ordered the Department to create and impose conservation measures for end users. However, it is difficult to read the provisions cited above and not develop a firm conviction that the legislature intended just that. Certainly, common sense dictates that if one is assigned the duty of conserving a limited resource like groundwater, one needs the authority, and must assume the corresponding responsibility, to manage the resource throughout its entire cycle, from extraction to transportation to consumption and even recharge. And if the manager is to obtain the desired conservation result, all those participating in the cycle must be managed directly in regard to them conservation responsibility, including the customer who uses the groundwater and not just the provider who extracts, transports, and delivers it to him.

¶ 19 It is crucial that legislative enactments be given a sensible construction. Lake Havasu City v. Mohave County, 138 Ariz. 552, 557, 675 P.2d 1371, 1376 (App.1983). We believe that a finding that the Code requires the Department in its management plans to include conservation measures for end users is such a construction. The Department, however, disagrees, arguing that other provisions of the Code indicate that the legislature intended that the Department impose conservation measures on providers only, leaving to those providers the duty of compelling end users to conserve. We now address the Department’s arguments, testing them sensibility quotient by examining the arguments in light of the statutory language cited in support.

¶ 20 The Department first refei’ences the notice provisions of the management plan statutes. In AR.S. § 45-564(B), dealing with the first management plan, the legislature ordered the director to “give written notice of ... (2)[t]he municipal conservation requirements included in the management plan for reductions in per capita use and for the use of appropriate conservation measures by individual users to each person who is entitled to withdraw or distribute groundwater for municipal use in the active management area” (emphasis added). This notice requirement is repeated for successive management periods, with some modifications not relevant here. See e.g., A.R.S. § 45-565(B) (second management period). According to the Department, “[i]f the legislature had intended for customers of providers to comply with GPCD requirements, it would have required [the Department] to give notice of the requirements to them and not to the providers.”

¶21 The Department conflates its obligation to craft conservation measures for end users with its obligation to give notice of those measures. What the notice provisions are intended to accomplish is to relieve the Department of the burden of identifying and giving notice to hundreds of thousands of end users of the specific conservation measures applicable to them. Instead, these provisions transfer that notice obligation to the entity better able to accomplish the task, namely the end users’ municipal provider. But requiring providers to give notice to end users of their required conservation measures is not equivalent to relieving the Department of the duty to create and impose these measures. The Department’s contrary interpretation stretches the notice provisions beyond their intended meaning and we therefore reject that reading.

¶22 Another argument advanced by the Department derives from A.R.S. § 45-565.01 creating a non-per-capita conservation program for municipal providers. This type of program is a different approach from the per-capita method of groundwater mining reduction and is available to a provider who cannot effectively employ the per-capita approach to achieve conservation goals.

¶23 Subsection (E)(1) of A.R.S. § 45-565.01 permits the Director to approve a provider’s application to use a non per-capita conservation program only if “[t]he municipal provider agrees in writing to implement spe*538ciñe conservation programs that will result in achieving water use efficiency in the municipal provider’s service area equivalent to the water use efficiency that was assumed by the director in establishing the municipal provider’s per capita conservation requirements pursuant to § 45-565____” The Department argues that this provision shows that with respect to the per-capita programs, “the legislature intended the Director to assume a level of water use efficiency in a provider’s GPCD requirement, but not require the provider to implement any specific measures.”

¶24 We do not follow the Department’s logic in connecting A.R.S. § 45-565.01 requiring providers to implement conservation measures in non-per-capita programs to provisions in the per-capita statutes that require, the Department to create conservation measures for end users. We first note that there is no indication in the language of A.R.S. § 45-565.01 that the Department is relieved from creating the conservation measures that the provider will be required to implement. Thus, the statute seems irrelevant to the issue before us, namely, upon whom is the responsibility placed for crafting conservation measures.

¶ 25 We next note that simply because a municipal provider seeking to change to a non-per-capita program must agree to implement specific conservation measures, it does not follow that the Department did not have a prior responsibility to create and impose end-user conservation measures in that provider’s prior per-capita program. The Department’s assertion is not a eommonsense construction of A.R.S. § 45-565.01 but instead a strained interpretation that the statutory language cannot support. In any event, the connection between A.R.S. § 45-565.01 and the statutes relating to per-capita programs, if any, is much too tenuous to warrant finding a legislative intent different from the aims we have discerned in the per-capita statutes.

¶ 26 As courts often observe, a legislature speaks its intent primarily through the language it employs in its enactments. State v. Williams, 175 Ariz. 98, 100, 854 P.2d 131, 133 (1993). When we are called upon to ascertain that intent, we naturally look to that language. Id. We have done so here, and, while we must agree with the Department that the legislature did not expressly order inclusion of end-user conservation measures in the Department’s management plans, that the legislature nevertheless so intended is the most reasonable conclusion to be drawn from its language. If the legislature’s aim of creating a comprehensive management and regulation framework for all phases of the groundwater cycle is to be met, the entity charged with doing the managing and regulating, the Department, must meet its responsibility. We therefore affirm the superior court and direct that the Department and its Director return to the management plan drawing board and devise appropriate conservation measures for its management plan that include end users.

¶27 The Department has included other arguments related to this issue in its reply brief, apparently in response to its perception that Arizona Water is arguing in this appeal that not only must the Department include end users in the management plans but also that the Department has no authority to impose any conservation requirements directly on providers. We do not address these additional arguments because we do not read Arizona Water’s response as asserting that providers should not be made subject to conservation measures promulgated by the Department in its management plans. We acknowledge that our dissenting colleague believes the issue is raised by Arizona Water and proceeds to analyze it, concluding that the legislature clearly intended that providers are to be included in the conservation measures required in management plans. Infra, ¶¶ 60-73. We treat Arizona Water’s failure to raise the issue properly in this appeal as essentially a concession of this point. We note, however, that if we believed Arizona Water had properly raised the issue, we would respond to Arizona Water’s contention precisely as has our dissenting colleague.

¶ 28 We also do not address Arizona Water’s contention that imposition of conservation requirements somehow conflicts with a provider’s obligations to the Arizona Corporation Commission as a regulated water utility. The Commission has intervened in this matter and filed separate briefs. In response to Arizona Water’s suggestion that *539satisfying its conservation obligations under a management plan could cause it to violate its public utility obligation to serve all customers on demand, the Commission informs us that it often reconciles its jurisdiction with that of sister state agencies and “there is nothing to prevent Arizona Water from asking the Commission to allow it to curtail service in appropriate circumstances.”

Attorneys’ Fees

¶ 29 Our next issue is the trial court’s award of attorneys’ fees to Arizona Water, an award we review for an abuse of discretion. City of Tempe v. Outdoor Systems, Inc., 201 Ariz. 106, 113, ¶ 31, 32 P.3d 31, 38 (App.2001). The award was made pursuant to A.R.S. § 12-348(A)(2) which permits a court to grant fees and other expenses to a party that “prevails by an adjudication on the merits in ... [a] court proceeding to review a state agency decision.” Subsection (E)(2) of the statute directs that the fee award is to be calculated at $75 per hour “unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceeding involved, justifies a higher fee.”

¶30 The parties have presented two discrete issues under this heading. The Department first argues that Arizona Water was not the prevailing party below, a contention we dispose of summarily. A “prevailing party” under A.R.S. § 12-348 is one who “prevails by an adjudication on the merits.” Corley v. Arizona Board of Pardons & Paroles, 160 Ariz. 611, 614, 775 P.2d 539, 542 (App.1989). Here, Arizona Water brought suit against the Department on the basis that the groundwater conservation requirements in the second management plan were contrary to law because they failed to account for end users as required by the Code. This was the only substantive issue decided by the trial court, and that court agreed with Arizona Water. In the superior court then, Arizona Water was clearly a prevailing party by an adjudication on the merits.

¶ 31 The next issue is more troublesome. The trial court exceeded the $75 hourly rate called for by the statute, justifying its decision on the basis that “there has been a great deal of inflation since 1981” and “specialized knowledge and expertise was brought to bear on behalf of the Plaintiff to a very substantial extent in this action.” The court did not, however, award Arizona Water fees at the rate the company requested, which was the prevailing rate for the company’s attorneys that ranged from $105 to $290 hourly. Rather, without specifying a rate or making any reference to the 1056 hours of attorney work claimed in the fee application, the court gave Arizona Water $137,900 of the $202,000 it had sought.

¶ 32 The Department urges that the trial court should not have exceeded the statutory cap. Arizona Water counters that the court should have employed the prevailing hourly rate of Arizona Water’s attorneys. We do not agree with either position, but neither can we agree with the trial court because the record is such that we cannot effectively review the award under the applicable statute.

¶33 We first observe that A.R.S. § 12-348(E)(2) sets a presumptive hourly rate but offers the benefit of an increased rate provided the requisite showing can be made. It is generally held that a person seeking a benefit granted by a statute has the burden of proving he is entitled to that benefit. Harvest v. Craig, 195 Ariz. 521, 524, ¶ 15, 990 P.2d 1080, 1083 (App.1999). Thus, Arizona Water was required to prove it came within the exception to the $75 per hour cap.

¶ 34 The important questions are what must an applicant prove and how must he prove it. As we read the statute, the applicant must prove an increase in the cost of living or a special factor. Because this provision is in the disjunctive, proving either will suffice.

¶ 35 Proving the rate of increase in the cost of living seems a relatively straightforward assignment that, once accomplished, would permit establishing justification for a higher hourly rate through appropriate calculations. However, the actual increases and their effect on the statutory hourly rate must be demonstrated by acceptable evidence. It is not enough simply to opine that “there has been a great deal of inflation.” When there is no acceptable evidence establishing the *540actual cost of living increases, and the effect of such increases on the statutory hourly rate, a trial court is not permitted to increase an award based on the cost of living factor.

¶ 36 We caution, however, that simply proving cost of living increases does not necessarily entitle an applicant to a higher rate. Under the statute, the award of a higher rate is still a discretionary decision by the trial court. The court must therefore consider other relevant factors that could be implicated in a decision to award fees, including, without limitation, the quality of the representation and the difficulty of the work. Moreover, the court should consider those factors in light of the policy of A.R.S. § 12-348 itself which is to reduce, but not necessarily eliminate, the resource disparity between private parties and the government and thereby dimmish the economic deterrent to litigating with the government.

¶ 37 The successful applicant is likely to be the one who proves both cost of living increases and a special factor. What, then, is a special factor? We turn to that question.

¶ 38 We begin by explaining what a special factor is not. Possessing “specialized knowledge and expertise,” the trial court’s basis for its award, is simply too common an attribute to be useful in identifying litigation deserving of an amplified award. We must remember that A.R.S. § 12-348 covers a great variety of litigation and includes areas of the law in which there could be numerous individuals with specialized knowledge and expertise. Categorizing that attribute as a special factor could make amplified awards the rule rather than the exception.

¶ 39 The single example of a special factor given by the statute must serve for now as the measuring stick by which applicants are judged. That example, “the limited availability of qualified attorneys for the proceeding involved,” focuses on the number of qualified attorneys there are in the state who could litigate the matter at issue. Obviously, the fewer such attorneys there are, the more likely an amplified award will be merited, but it is impossible to reduce this to a formula with absolute numbers. What clearly is necessary, however, is that there be some actual evidence of available qualified attorneys presented to the trial court so that it can exercise a reasoned discretion in determining whether this factor has been proven.

¶ 40 The statutory example also takes into account the type of litigation being prosecuted. One would assume that in areas of the law where there is a large client base, there will be a substantially greater number of attorneys qualified to litigate. Where the area is more arcane, there will likely be only a few.

¶ 41 As for what other special factors there may be, we hesitate to comment beyond the illustration provided by the statute. This is an area that is best developed on a case-by-case basis. What we do hold is that the applicant for an amplified award has the burden of proving entitlement thereto. And he must do so by presenting actual evidence upon which the trial court can base such an award. Assumptions and speculation will not suffice.

¶ 42 In this ease, we assume the trial court used the concept of “inflation” as a synonym for cost of living. The court was correct to regard this as a factor that might justify an amplified award, but there was no acceptable evidence of what the increases in the cost of living had been since 1981, the year A.R.S. § 12-348 was first enacted, and how those increases affected the statutory rate. What the record shows is that counsel for the parties each presented a cost of living increase analysis in their pleadings, but they differed significantly as to the result to be reached. Essentially, a disputed issue of fact was presented that should not have been resolved simply on the basis of the pleadings. The parties should have been required to present some evidence from which the trial court could have judged how the increases should amplify the hourly fee beyond the statutory presumption of $75. Without such evidence, and a factual resolution by the trial court, we have no basis to determine whether the court’s award was warranted by “inflation.”

¶ 43 As for any other special factor, the record contains nothing upon which a finding meeting the statutory criterion could be based. The only evidence presented was an affidavit of Arizona Water’s counsel outlining his qualifications and those of his colleagues. *541While this may suffice to show they were “qualified” attorneys, it tells us nothing about the statewide pool of available attorneys who could effectively handle groundwater litigation.

¶ 44 In short, the record before us cannot support the attorneys’ fee award made by the trial court. We must therefore vacate that award and remand this matter to give Arizona Water the opportunity to properly prove entitlement to an amplified fee. Because we are remanding this issue, we comment on an additional argument made by Arizona Water.

¶ 45 Arizona Water asserts that assuming it qualifies for an amplified fee, the trial court should be directed to base its award on Arizona Water’s customary hourly fee. Relying on Schweiger v. China Doll Restaurant, Inc., 138 Ariz. 183, 673 P.2d 927 (App.1983), Arizona Water asserts that an appropriate hourly fee in public-rights litigation should mirror “the reasonable hourly rate prevailing in the community for similar work.” Id. at 187, 673 P.2d at 931. Atizona Water argues that its fee calculations did just that and it should therefore have been awarded the full amount requested.

¶ 46 China Doll itself answers this contention negatively. The China Doll court was careful to explain that the method of fee ascertainment it espoused was simply not applicable when the award was based on “statutes limiting or restricting the amount of fees which may be awarded.” Id. at 186, 673 P.2d at 930. The court cited as an example the very statute with which we deal in this litigation.2 Id. Thus, we conclude that an A.R.S. § 12-348 award is not subject to the China Doll “community hourly rate,” nor can that rate be considered a “special factor” as that term is used in the statute.

Central Arizona Project Water

¶47 The last issue is whether the Groundwater Code permits the Department to count a municipal provider’s Central Arizona Project (“CAP”) water as part of its overall water supply in determining that provider’s compliance with the Total GPCD program. We conclude that our prior case of Arizona Municipal Water Users Association v. Arizona Department of Water Resources, 181 Ariz. 136, 888 P.2d 1323 (App.1994) controls the disposition of this issue, and that disposition is the Department can include CAP water in determining a provider’s compliance.

¶ 48 In Water Users, the court faced the same issue as we do here except that the water source involved was recovered effluent rather than CAP water. Rather than duplicate the analysis of Water Users in this opinion, we simply set forth the court’s explanation of the issue and thereafter adopt its reasoning and conclusion. We begin with the issue statement of the case:

According to a groundwater management plan authorized by statute, the Department establishes a municipal water provider’s total gallons per capita per day (“GPCD”) requirement. This GPCD requirement limits the total amount of water that such provider is legally entitled to “withdraw, divert or receive” during the year. In simple terms, if the total amount of water used by a municipal provider from all sources, including groundwater, exceeds the provider’s GPCD requirement, the provider is out of compliance with the management plan to the extent that groundwater usage makes up the excess. Although the management plan includes water from all sources in determining whether a municipal provider has exceeded its GPCD requirement, groundwater usage is counted last. According to the management plan:
This is consistent with the intent of the Groundwater Code that other available sources of water be used before groundwater is used. It also allows the Department to. determine whether, and to what extent, the provider has failed to reasonably reduce its per capita use of groundwater. If the total amount of water used by the provider during the year exceeds the amount of water reasonably necessary for its use, as reflected in its total GPCD requirement, the provider has failed to conserve the groundwater included in the excess, [citation omitted]
*542The basic question for decision is whether, in calculating if a municipal provider of groundwater is in compliance with the limitations for groundwater usage that have been placed upon it by the Department, recovered effluent is to be included or excluded from consideration. If recovered effluent is excluded from the calculation, a municipal provider may use more groundwater in meeting its requirements and still remain in compliance with the plan.

181 Ariz. at 137, 888 P.2d at 1324. Substituting “CAP water” for “recovered effluent” in this issue statement suffices to correctly state our issue.

¶ 49 The Water Users court agreed with the Department that it was authorized to include recovered effluent because the Groundwater Code “(1) requires the Department to establish groundwater conservation measures and to make reasonable reductions in the per capita use of groundwater supplied by large municipal water providers, and (2) [the Code] indicates a legislative intention that the Department count water used from all sources in determining municipal compliance with the groundwater conservation measures.” Id. at 141-42, 888 P.2d at 1328-29. The court’s primary support for the latter conclusion stemmed from its interpretation of A.R.S. §§ 45-565(A)(2) and 45-561(11), which together require reduction in “municipal uses” of “water,” which the court construed to refer to all sources of water except those specifically excluded. 181 Ariz. at 142-43, 888 P.2d at 1329-30. Thus, the Department had “the authority to count water used from sources other than groundwater in determining municipal compliance with groundwater conservation requirements.” Id. at 142, 888 P.2d at 1329.

¶ 50 Arizona Water argues that permitting the Department to count CAP water amounts to regulation of the use of such water, a violation of both federal law and A.R.S. § 45-107 which grants the Department an advisory, not a regulatory, role with respect to those who contract for CAP water. To this assertion we give the same response as did Water Users to the contention in that case that the Department was attempting to regulate effluent, a source that admittedly the Department had no authority to control. Water Users pointed out that even assuming the Department was including “effluent,” as opposed to the entirely different source called “recovered effluent,” counting effluent in a provider’s total GPCD obligation did not regulate effluent because non-compliance with the GPCD was measured not by how much effluent was used but “only to the extent which groundwater use exceeds a provider’s total GPCD requirement.” Id. at 141, 888 P.2d at 1328. “Accordingly, the Department regulate[d] only groundwater usage.” Id.

¶ 51 Arizona Water also seeks to distinguish Water Users based on that case’s description of recovered effluent as essentially groundwater.3 According to Arizona Water, this demonstrates that Water Users reached the conclusions it did because it viewed its case as dealing strictly with groundwater and thus its “findings do not apply to this case.” This is so, Arizona Water reasons, because CAP water is surface water that never enters the groundwater table.

¶ 52 We do not read Water Users’ equating of recovered effluent to groundwater as anything more than a makeweight argument that was unnecessary to its conclusion that the Department was authorized to count all sources of water in determining a provider’s total GPCD requirement. As such, the comment was dictum. See Creach v. Angulo, 186 Ariz. 548, 552, 925 P.2d 689, 693 (App.1996) (that which is unnecessary to a court’s decision is dictum). The heart of Water Users is its acknowledgment that the Department is operating under a legislative mandate to reduce per capita use of groundwater. 181 Ariz. at 143, 888 P.2d at 1330. The Department’s response to this mandate is a GPCD requirement based on total water use that requires that “surface water and recovered effluent,” as well as groundwater, be counted. Id. “Otherwise, the GPCD requirement would be distorted and the statutory mandate of reasonable reductions in the per capita use of groundwater could not be *543achieved.” Id. Water Users is directly on point and compels our conclusion that the Department may count CAP water in establishing a municipal provider’s total GPCD requirement.4

CONCLUSION

¶ 53 For the reasons set forth above, we affirm the trial court’s judgment that the groundwater conservation measures in the second management period are inadequate because they fail to address water utilization by end users. We vacate the trial court’s award of $137,900 in attorneys’ fees to Arizona Water and remand that issue to the trial court for further proceedings consistent with this opinion. Finally, we find that the Department is permitted to count CAP water in determining a municipal provider’s compliance with the Total GPCD Program.

¶ 54 Arizona Water has requested attorneys’ fees on appeal pursuant to A.R.S. § 12-348(E)(2). Arizona Water has prevailed on one issue, lost on another, and failed for now to successfully defend or increase the attorneys’ fee award issued by the trial court. In these circumstances, Arizona Water cannot fairly be said to be the prevailing party on appeal, and we therefore decline to make an award.

CONCURRING: LAWRENCE F. WINTHROP, Judge.

. Although the second management plan has expired, the issue before this court is not moot because the municipal conservation requirements for the third management plan now in effect largely mirror the requirements challenged in the current litigation. Arizona Water has filed an action for review of the conservation requirements in the third management plan, which case is currently pending in Maricopa County Superi- or Court (Case No. CV2000-001700).

. A.R.S. § 12-348(D)(2), now (E)(2).

. "Recovered effluent" is defined in the second management plan as "effluent that has been stored pursuant to an underground storage and recovery permit and recovered outside the area of hydrologic impact."

. Arizona Water has raised another issue not decided by the trial court, namely whether its GPCD requirements ought to be increased to account for the increase in demand by nonresidential users in its Apache Junction system. We do not address this issue as counsel for Arizona Water informed us at oral argument that the facts underlying this issue may change if we affirm the trial court’s conclusion that the Department must include end users in its conservation measures.