Judge Wanger Directs the Sacramento River Settlement Contractors to Submit Evidence Regarding the Nature and Quantity of Their Water Rights and Finds that the Delta Mendota Canal Unit Water Service Contracts Do Not Cause Injury to Delta Smelt

 

On November 19, 2008, Judge Oliver W. Wanger of the United States District Court, Eastern District of California issued another significant decision in Natural Resources Defense Council v. Kempthorne, Case No. 1:05-CV-01207 OWW TAG (“NRDC v. Kempthorne ”). The decision addressed the request of various environmental groups to set aside long-term water contracts that were executed in reliance on a faulty biological opinion. Judge Wanger did not set aside any contracts in his November 19 decision, but directed the parties to submit additional evidence with respect to one class of long-term water delivery contracts, the Sacramento River Settlement Contracts.

Background

In NRDC v. Kempthorne, various environmental groups brought suit against the United States Department of Interior, Bureau of Reclamation and Fish and Wildlife Service (“Federal Defendants”) and California Department of Water Resources (“DWR”), alleging that operation of the Federal Central Valley Project (“CVP”) and State Water Project (“SWP”) did not comply with the Endangered Species Act (“ESA”). Specifically, the plaintiffs argued that the Federal Defendants had not adequately analyzed the joint operating plan for the CVP and SWP in a biological opinion (“BiOp”). The plaintiffs argued that the BiOp's “no jeopardy” conclusion – that is, the determination that operation of the CVP and SWP would neither jeopardize the continued existence of Delta smelt nor cause destruction or adverse modification of the smelt's critical habitat – was arbitrary and capricious. Judge Wanger agreed with the plaintiffs' contentions and, on May 25, 2007, issued a 120-page written order in NRDC v. Kempthorne, finding the BiOp to be legally defective. Judge Wanger later remanded the BiOp to the Fish and Wildlife Service for revision consistent with his May 25 order and imposed interim remedies during the remand period.

On April 8, 2008, the plaintiffs in NRDC v. Kempthorne amended their complaint to allege that the Bureau relied on the defective BiOp to justify executing long-term water supply renewal contracts. The plaintiffs asked the court to “[e]njoin the defendants and defendant-intervenors from continuing to perform the unlawfully executed long-term water supply contracts . . . and order them to renegotiate and re-execute these renewal contracts only upon completion of a valid ESA § 7(a)(2) consultation.” (Plaintiffs' Third Supplemental Complaint at 30:3-5). The plaintiffs' claim brought into question the validity of two different types of contracts: (1) contracts between the Bureau of Reclamation and certain water right holders on the Sacramento River that represent the Bureau's recognition of these Sacramento River water rights and the agreement between the parties regarding how the Bureau would operate the CVP with respect to those rights (“Settlement Contracts”), and (2) contracts whereby the Bureau of Reclamation agreed to deliver certain amounts of water to users through the Delta-Mendota Canal under specific terms (“DMC Contracts”). After the parties briefed the issues on cross-motions for summary judgment and argued the issues in hearing, Judge Wanger addressed the plaintiffs' claims in a written decision on November 19, 2008.

The Decision

Judge Wanger determined that the plaintiffs could not challenge the DMC Contracts because the plaintiffs could not satisfy two elements necessary to demonstrate standing: causation and redressability. The DMC Contracts contain a “shortage provision” that relieves the Bureau of Reclamation from all liability associated with reducing deliveries “to meet legal obligations.” Thus, Judge Wanger found that this language allowed the Bureau of Reclamation to take any actions necessary to protect Delta smelt pursuant to the ESA, including reducing or stopping water deliveries to the DMC Contractors. Consequently, the DMC Contracts necessarily will incorporate all protective terms of the revised BiOp.

(Decision at 39:18-40:3.) In other words, the DMC Contracts could not cause any harm to the Delta smelt and, in turn, setting aside the DMC Contracts would not redress any harm to Delta smelt. Therefore, the plaintiffs lacked standing to challenge the DMC Contracts.

 

The Settlement Contracts do not contain the same shortage provisions as the DMC Contracts and, thus, the Settlement Contractors could not overcome the Plaintiffs' claim by arguing a lack of standing. The Settlement Contractors did obtain traction, however, by arguing that, pursuant to the Supreme Court's recent decision in National Association of Home Builders v. Defenders of Wildlife, 127 S.Ct. 2518, 2533 (2007), the court could not set aside the Settlement Contracts unless the Bureau of Reclamation had discretion with respect to the Settlement Contracts. Judge Wanger agreed that, to the extent that the Settlement Contractors hold senior water rights, the Settlement Contractors' rights “are beyond the reach of the ESA” because the Bureau of Reclamation must comply with state water law. (Decision at 70:1-2.)

The decision continues, however, to explain that the Settlement Contractors' water rights have never been adjudicated and the Settlement Contracts were formed “only after negotiation reflecting compromise over terms as to quantity of water to be delivered and the timing of deliveries, over which the Bureau exercised some degree of discretion.” (Decision at 69:21-24.) Therefore, Judge Wanger explained that he could not determine whether or how much discretion Reclamation had with respect to the Settlement Contracts based on information in the administrative record. Thus, Judge Wanger directed the Bureau of Reclamation and the Settlement Contractors to provide evidence on the full nature and extent of the claimed senior water rights.

(Decision at 70:12-16.)

Judge Wanger has set a scheduling conference on December 3, 2008 to discuss the upcoming proceedings in this case, in which the parties will address the amount of discretion the Bureau of Reclamation has with respect to the Settlement Contracts.

For more information, please contact the Downey Brand lawyers whose practices involve the ongoing environmental challenges to CVP and SWP operations: Kevin O'Brien, Steven Saxton, or Maya Ferry at (916) 444-1000.

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Contact us if you have questions or want more information. Please note that the information contained in this article is not intended to provide legal advice. You should consult with an attorney and not rely on any information contained herein regarding your specific situation.