A civil trial that began this week in a Las Vegas courtroom could hand developers more than $1.5 billion from Nevada’s state budget and permanently weaken the agency that controls the state’s water. The lead attorney for the plaintiff has ties to Governor Joe Lombardo’s campaign. The judge has not yet been asked to step aside.
A Clark County judge began hearing arguments this week in a lawsuit that water law experts say could fundamentally change how Nevada regulates water rights and cost the state treasury billions of dollars. The case involves Coyote Springs, a proposed satellite city northeast of Las Vegas that developers spent more than two decades trying to build and that the state’s water regulator, the Nevada State Engineer, repeatedly blocked on environmental and hydrological grounds.
The plaintiffs are suing the state for damages they say resulted from those water rights denials. Their legal theory is that the State Engineer’s repeated rejection of their applications constituted an improper taking of property rights, entitling them to compensation from the state. The damages sought are at least $1.5 billion. Some legal experts who have reviewed the case believe a verdict for the plaintiffs could set a precedent requiring the state to compensate any developer whose water rights application is denied, effectively turning the State Engineer’s regulatory function into a financial liability for every Nevadan every time it says no.
The conflict of interest question arrived days before the trial began. The lead attorney for the Coyote Springs plaintiffs is a former adviser to Governor Joe Lombardo’s 2022 campaign. Lombardo is the sitting governor whose administration oversees the State Engineer’s office that is the defendant in this case. Legal observers have noted that no motion to recuse the governor from any involvement in the case’s handling has been filed, and no public conflict of interest disclosure has been made by the Lombardo administration regarding its relationship to the plaintiff’s legal team.
The Coyote Springs project was one of Nevada’s most ambitious and most troubled development proposals. Developers envisioned a city of 159,000 homes northeast of Las Vegas along U.S. 93, drawing water from the same aquifer systems that supply communities across Clark and Lincoln counties. The State Engineer denied multiple water rights applications over the years, citing insufficient evidence that the groundwater could sustain the proposed development without harming existing users and ecosystems. The natural springs at Warm Springs, located near the proposed development site, are home to rare and endemic species found nowhere else in the world.
If the plaintiffs prevail, the financial exposure for Nevada taxpayers is significant. The $1.5 billion figure reflects the developers’ estimate of what their water rights would have been worth had they been granted. Legal analysts say a verdict of that size would consume a substantial portion of Nevada’s general fund reserve and could force either budget cuts or tax increases. Beyond the immediate cost, a precedent requiring the state to pay damages every time the State Engineer denies a water rights application would alter the calculus of water regulation across the entire American West.
The trial is expected to last several weeks. Whatever the judge decides, the case is widely expected to be appealed. In the meantime, the question of who controls Nevada’s water — and who pays when regulators say no — is now in a Las Vegas courtroom with no certain answer in sight.
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