Ownership, Control, and Regulation of Project Water Rights

Shasta Dam, California. Courtesy of DOI.

NRS | Federal Lands | Water Rights Reclamation | A Short History

Supreme Court Decisions

Another recurring dispute involves ownership, control, and regulation of project water rights.  It is clear that the United States retains title to project water facilities, such as project dams and reservoirs.  However, there has been much litigation over who owns project water rights – e.g., the United States or project beneficiaries – and what are the incidents of such ownership. 

Building on its earlier decisions of Ickes v. Fox, 300 U.S. 82 (1937) and Nebraska v. Wyoming, 325 U.S. 589 (1945), the Supreme Court turned to this issue in Nevada v. United States, 463 U.S. 110 (1983).  There, the Court ruled that, under Nevada law, the beneficial interest in project water rights is held by and appurtenant to the lands of project water users, and the United States’ interest in project water did not allow it to reallocate these waters for the use and benefit of the Pyramid Lake Paiute Tribe of Indians.

However, this ruling was hardly the end of the story.  Indeed, this tension between the interests of water users in project water rights and the retained interest of the United States in these rights – as well as its regulatory authority over their exercise – has resulted in much subsequent litigation – often handled by NRS attorneys in the Sacramento field office.  In many of these cases, the issue of title is not determinative, but rather the rights of the parties are determined by the contracts between the parties, the overlying requirements of federal law such as the Endangered Species Act, and other factors. 

Truckee Carson Litigation

Truckee River, California. Courtesy of DOI.One example of such litigation arose out of Interior’s adoption in 1973 of operating criteria limiting diversions from the Truckee River for the Newlands Project.  These criteria sought to stem the declining water levels in Pyramid Lake and the corresponding decline in native fish in the Lake that are of great importance to Pyramid Lake Paiute Tribe.  The Truckee Carson Irrigation District, which had operated the project under contract with Interior since 1926, challenged the operating criteria and Interior’s termination of the District’s contract for failure to adhere to the criteria.

In Truckee Carson Irrigation District v. Department of Interior, 742 F.2d 527 (9th Cir. 1984), the Ninth Circuit affirmed the district court’s ruling upholding the termination of the contract and the validity of the operating criteria.  Specifically, the Ninth Circuit affirmed the holding that the District had no water rights, but only rights to manage the Project under contract with Interior. 

Subsequent litigation has involved the United States' efforts to pursue recoupment of the diversions made by the District in violation of the operating criteria in effect from 1973 until 1987. Following a four week bench trial in 2002, the district court issued judgment against the District and directed it to repay the Truckee River 197,152 acre feet of water over twenty years. In 2010, the Ninth Circuit affirmed the district court's ruling on liability, but remanded to the district court to recalculate the amount of water that the  District was required to repay without adjustments that had lowered the amount under the original  judgment. Remand proceedings, to recalculate the amount of water owed to the Truckee River, are  pending. The case represented one of the first uses of a restitutionary remedy in the context of water rights and federal Indian trust responsibilities.

Central Valley Project Litigation

Another case concerning the extent to which contractual rights to receive deliveries of water from federal reclamation projects were subject to, and could be limited by, other legal responsibilities of the Secretary of the Interior involved California’s Central Valley Project (CVP).  In the early 1990s, Reclamation’s ability to deliver contract amounts of water within the CVP were tested by the combined effects of a six-year drought in California, the listings of the winter run Chinook salmon and delta smelt under the Endangered Species Act, and the 1992 enactment of the Central Valley Project Improvement Act (CVPIA).  This far-reaching reform statute placed the needs of the environment on par with agriculture with respect to CVP water. 

Chinook salmon. Courtesy of USGS.In 1993, Reclamation reduced Westlands Water District’s allocation to 50% of its contractual amount, citing the need to comply with biological opinions on the winter-run chinook salmon and the delta smelt, as well as provisions of the newly enacted CVPIA, which required 800,000 acre feet of CVP yield to be set aside for fish and wildlife purposes.  Westlands sued, seeking to enforce a 1986 stipulated judgment that had required the United States to perform Westlands’ 1963 contract. 

The district court denied relief to Westlands, and the Ninth Circuit affirmed on appeal in O’Neill v. United States, 50 F.3d 677 (9th Cir. 1995), in part, on the grounds that Reclamation’s reductions in water deliveries to satisfy its legal obligations, including those imposed by the Endangered Species Act and CVPIA, were authorized by the so-called “shortage” provisions in the 1963 contract.  These provisions relieved the United States from liability for non-delivery of water on account of drought or “other causes.”

Klamath Project Litigation

A similar situation arose in the late 1990s over the operation and delivery of water from the Klamath Project, a federal reclamation project at the southern end of the Klamath River along the Oregon and California border.  At that time, Reclamation’s operation of the project was increasingly constrained by Endangered Species Act and tribal trust considerations, with there being little water available in project storage and federally-listed endangered species present both above and below the project. 

This precarious situation was compounded by recurring disputes along the Klamath River and its tributaries among Indian tribes, environmentalists, farmers (including those within the Klamath Project) and national wildlife refuges, all of whom competed for scarce water resources in this over-allocated basin. 

Matters were brought to a head in 1997, when Reclamation sought to renegotiate a contract with PacifiCorp, which contract governed operations of Link River Dam, the facility that regulated flows in the Klamath River and diversions to the Project.  Project water users brought suit, challenging the proposed allocation under the contract on the grounds that the decision violated the National Environmental Policy Act (“NEPA”) and the proposed contract renewal on the grounds that the water users’ consent was required as third-party beneficiaries. 

In Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d 1206 (9th Cir. 1999), the Ninth Circuit upheld the district court’s denial of the water users’ claims.  Specifically, the Court ruled that plaintiffs lacked standing to pursue their NEPA challenge and they were incidental third party beneficiaries with no enforceable rights under the contract.  In addition, the Court ruled the Link River Dam operations were subject to the requirements of the Endangered Species Act and Interior’s trust obligations to the Klamath Tribes, both of which took precedence over the rights of the water users to receive water deliveries under repayment contracts with the Bureau of Reclamation. 

Subsequently, the district court in Kandra v. United States, 145 F. Supp. 2d 1192 (D. Or. 2001), relied heavily on Patterson in denying injunctive relief to project water users who challenged Reclamation’s decision in 2001 – for the first time in project history – to withhold all water deliveries to the project that year in response to historic drought conditions and in order to meet the agency’s tribal trust and Endangered Species Act obligations.  This ruling, which followed civil unrest in which demonstrators sought to forcibly open project headgates, is particularly noteworthy because the court denied the requested injunctive relief, even though it found that Reclamation’s water allocation decision for 2001 would likely cause severe, and possibly irreparable, harm to Project farmers. 

San Joaquin River Settlement 

San Joaquin River, California. Courtesy of NPS.A final, noteworthy chapter in these recurring – and often highly charged – disputes over project water deliveries involves the successful collaborative agreements with stakeholders that have sometimes evolved out of initially contentious litigation.  One such success story involves the operation of the Friant Dam on the San Joaquin River east of Fresno. 

In Natural Resources Defense Counsel v. Houston, 146 F.3d 1118 (9th Cir. 1998), the Ninth Circuit ruled that the renewal of contracts for the delivery of project water to several irrigation districts – with its resulting diversions that dried up several miles of the historic river channel for much of the year – constituted agency action that required consultation under Section 7 of the Endangered Species Act.  This ruling led to the San Joaquin River Settlement, approved by the district court in October 2006 between plaintiffs, the United States, and the Friant Water Users authority.  This agreement, which is one of the largest river restoration settlements ever negotiated by the United States, provides a framework for the restoration of California’s second-longest river, the reintroduction of salmonids, and the long-term protection of agriculture on the east side of the San Joaquin Valley.


Updated May 13, 2015

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