Ninth Circuit Affirms Priority of Water Rights Held by Sacramento River Settlement Contractors In the Face of Endangered Species Act Challenges

August 2012

The Ninth Circuit Court of Appeals’ recent decision in Natural Resources Defense Council v. Salazar (“NRDC v. Salazar”), which reaffirms the priority of senior water rights on the Sacramento River vis a vis the Bureau of Reclamation’s Central Valley Project, is a historic assist to water supply reliability.

The Ninth Circuit’s July 17, 2012 opinion in NRDC v. Salazar affirmed Judge Oliver Wanger’s decision in the Eastern District of California, finding that the United States Bureau of Reclamation did not violate section 7(a)(2) of the Endangered Species Act (“ESA”) by renewing 41 water supply contracts.  Of the 41 contracts at issue, 24 were renewed Sacramento River Settlement Contracts, which the Ninth Circuit held did not trigger section 7(a)(2)’s consultation requirements because the Bureau of Reclamation lacks discretion to reduce the Settlement Contractors’ diversions from the Sacramento River.

Downey Brand represented a group of fifteen Sacramento River Settlement Contractors in the appeal and in the underlying district court proceedings.

Sacramento River Settlement Contract Renewals

The Ninth Circuit opinion, which was written by Circuit Judge Procter Hug, Jr.,  explained that section 7(a)(2) of the ESA only applies to federal agency action in which there is discretionary Federal involvement or control.  The opinion held that, “[h]ere, the Bureau’s discretion is limited with regard to the Settlement Contracts so that § 7(a)(2) of the ESA is not triggered.”

In concluding that the Bureau lacked discretion over the 2005 Settlement Contract renewals, the Ninth Circuit emphasized that the Bureau’s Central Valley Project (“CVP”) water rights were subject to California water law (pursuant to section 8 of the Reclamation Act of 1902).  The Court also explained that the State Water Resources Control Board Decision 990 (“D-990”) approved the Bureau’s rights to operate the CVP only if the Bureau addressed senior water right claims, which the Bureau did through execution of the Settlement Contracts.  The Ninth Circuit also noted that section 3404(c) of the Central Valley Project Improvement Act requires renewal upon request.  And, once the parties initiated the renewal process, “Article 9(a) of the [Settlement] Contracts requires [the Bureau] to renew these contracts for the same quantity of water, the same allocation of water between base supply and project water, and the same place of use on specifically designated land as the original contracts.”  (Quoting Natural Resources Defense Council v. Kempthorne, No. 1:05-cv-1207, 2009 WL 1575208, at *2 (E.D. Cal. June 3, 2009)).  Thus, these mandatory obligations eliminated the Bureau’s discretion and, in turn, section 7(a)(2)’s consultation requirements did not apply to renewal of the 2005 Settlement Contracts.

Conclusion

The strength of Judge Hug’s opinion from the Settlement Contractors’ standpoint is its pinpoint focus on underlying water rights as the fundamental principle driving the legal analysis.  The opinion treats respect for senior water rights as an absolute prerequisite to CVP existence and operation, and it regards the contracts as interpretable only in accordance with this analytic framework.

Under the Federal Rules of Appellate Procedure, NRDC has an opportunity to request a rehearing before the three-judge panel or a rehearing en banc.

For more information, please contact Downey Brand attorneys who represented a group of the Sacramento River Settlement Contractors in NRDC v. Salazar: Steve Saxton and Kevin O’Brien at (916) 444-1000.

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.