Tulare Lake Basin v. United States - 49 Fed. Cl. 313 (2001)

Rule:

Regulatory action that restrains an owner from the beneficial use of his property -- even a restraint barring all such use -- cannot become the basis of a compensable taking where the restraint that is imposed is grounded in the restrictions that background principles of the state's law of property and nuisance already place on land ownership. Restrictions on the use of property that have their source in federal law also come within this rule to the extent such restrictions do no more than mirror the results that could be reached under the state's nuisance law.

Facts:

The development of California's water system has a long and detailed history well chronicled in case law. That system, in brief, involves the transport of water from the water-rich areas in northern California to the more arid parts of the state. Various water projects or aqueduct systems have been built to facilitate that goal; two -- the Central Valley Project ("CVP") and the State Water Project ("SWP") -- are the focus of the present litigation. Although CVP is a federal project managed by the Bureau of Reclamation ("BOR") and SWP is a state project managed by the Department of Water Resources ("DWR"), the two projects share a coordinated pumping system that requires, as a practical matter, that the systems be operated in concert. That arrangement has been formalized both by statute and by subsequent agreement. In order to operate the two projects, water is diverted from the Feather and Sacramento Rivers, captured by pumping systems located at the southern edge of the Sacramento-San Joaquin Delta, and then distributed, through a series of canals, to end-users in southern California. Water that is not diverted from the Delta flows into the San Francisco Bay. Both BOR and DWR are granted water permits by the State Water Resources Control Board ("SWRCB" or "the Board") -- a state agency with the ultimate authority for controlling, appropriating, using and distributing state waters. BOR and DWR in turn contract with county water districts, conferring on them the right to withdraw or use prescribed quantities of water.

Against this backdrop of water transportation and entitlements, Congress passed the Endangered Species Act in 1973. ("ESA"). That act was designed to "halt and reverse the trend toward species extinction, whatever the cost." In fulfillment of the duties assigned to it under the ESA, the National Marine Fisheries Service initiated discussions with the federal Bureau of Reclamation and state Department of Water Resources to determine the impact of the Central Valley Project and the State Water Project on the winter-run chinook salmon. As a result of those discussions, the NMFS issued a biological opinion on February 14, 1992, concluding that the proposed operation of SWP and CVP was likely to jeopardize the continued existence of the salmon population. Included in the agency's findings was a reasonable and prudent alternative ("RPA") designed to protect the fish by restricting the time and manner of pumping water out of the Delta. As a result, water that would otherwise have been available for distribution by the water projects was made unavailable. The process was repeated the following year, with the issuance of a second biological opinion by NMFS, again finding the winter-run chinook salmon to be in jeopardy. The U.S. Fish and Wildlife Service then issued its own biological opinion -- this one identifying the delta smelt to be at risk. Following each of these later-issued opinions, RPAs were adopted that again restricted the time and manner in which water could be pumped from the Delta, thereby limiting the water otherwise available to the water distribution systems.

Recognizing that the Bureau of Reclamation and the Department of Water Resources could not comply with the RPA and still meet the salinity requirements (i.e., water quality standards) imposed on them by their permits from the State Water Resources Control Board, the Board concluded that the federal requirements under the ESA overrode the terms set forth in the permits. Thus, the Board waived the salinity standards to which the projects were subject. The RPAs were then implemented in each of the years in question, giving rise to the present claims. According to plaintiffs, the restrictions imposed by the RPAs deprived Tulare Lake Basin WSD of at least 9,770 acre-feet of water in 1992; at least 26,000 acre-feet of water in 1993, and at least 23,050 acre-feet of water in 1994. Kern County Water Agency, by contrast, is alleged to have lost a minimum of 319,420 acre-feet over that same period. They now sought Fifth Amendment compensation for their alleged loss, averring that their contractually-conferred right to the use of water was taken from them when the federal government imposed water use instructions under the ESA.

Issue:

Do the plaintiffs own the water they allegedly lost, thereby making them entitled to compensation?

Answer:

Yes.

Conclusion:

Under the terms of the water supply contracts, neither the state nor its agents may be held liable for "any damage, direct or indirect, arising from shortages in the amount of water to be made available for delivery to the Agency under this contract caused by drought, operation of area of origin statutes, or any other cause beyond its control." In the present case, the federal government enjoys no such contractual immunity from liability. This comparable term in the plaintiffs' contracts insulates DWR from liability for circumstances beyond its control; not the federal government. The inclusion of Paragraph 18(f) in the contract does not render plaintiffs' interest in the water contingent; it merely provides DWR with a defense against a breach of contract action in certain specified circumstances. With that exception, plaintiffs' contract rights are otherwise fully formed against DWR, and certainly against a third party seeking to infringe on those rights.

The State Water Resources Control Board laid down a decision D-1485 -- a comprehensive water rights scheme balancing the needs of and allocating water rights among competing users. As an initial matter, the responsibility for water allocation is vested in the State Water Resources Control Board. Once an allocation has been made -- as was done in D-1485 -- that determination defines the scope of plaintiffs' property rights, pronouncements of other agencies notwithstanding. While we accept the principle that California water policy may be ever-evolving, rights based on contracts with the state are not correspondingly self-adjusting. Rather, the promissory assurances they recite remain fixed until formally changed. In the absence of a reallocation by the State Water Resources Control Board, or a determination of illegality by the California courts, the allocation scheme imposed by D-1485 defines the scope of plaintiffs' contract rights. Further, the subsequent actions by the SWRCB were not designed to supplant the findings of D-1485. Although the Board agreed to waive salinity requirements to enable compliance with the RPA, for instance, it did not revisit the water allocations set forth in D-1485 that were established after some eleven months of hearings. And while the administrative determinations issued by the SWRCB in 1995 - the 1995 the Water Control Plan and the Water Right Decision 95-6 -- served to reallocate water allotments, they did so only after the period in dispute, and cannot therefore be construed as altering the scope of plaintiffs' contract rights for the 1992-1994 period.

In conclusion, plaintiffs' right to divert water in the manner specified by their contracts and in conformance with D-1485 continued until a determination to the contrary was made either by the SWRCB or by the California courts. As no such determination was made during the period 1992-1994, and subsequent amendments to policy cannot, for contract purposes, be made retroactive, plaintiffs were indeed entitled to the water use provided for in D-1485 and in their contracts.