Neal v. Hunt
In Neal v. Hunt, 112 Ariz. 307, 541 P.2d 559 (1975), the Arizona Supreme Court recognized that transferring groundwater pumped from one property for use on another may "encourage the reasonable and beneficial use of this great natural resource." Id. at 313, 541 P.2d at 565.
Thus, the court held that "in dealing with percolating waters and not surface waters or subterranean streams, and absent a showing of damage to, or impairment of, the water supply of another landowner within the same groundwater basin, a landowner may mine and remove, to an outside area, subjacent water from his land." Id.
In Neal, the grantor reserved rights to groundwater associated with a ranch that he sold to another. 112 Ariz. at 309, 541 P.2d at 561.
Specifically, "Neal reserved the water rights to the ranch . . . except for enough water for the buyer to irrigate 40 acres of crops." Id.
The supreme court did not question the validity of the reservation agreement but only held that it was not binding on the eventual owner of the property because he was a "subsequent purchaser for valuable consideration without notice" of the agreement. Id. at 311, 541 P.2d at 563.