Legal Developments

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by Larry MacDonnell

Colorado Water
With the Colorado Supreme Court in its summer schedule, only one water opinion was issued since our last column. This decision, Ready Mixed Concrete Company v. Farmers Reservoir and Irrigation Company, involved an application to change an existing decreed water right to augmentation use. Pointing to language in the 1918 decree stating the right to be “independent” of other priorities, applicants characterized the water as “developed” and therefore not part of the tributary stream system. The Court, however, determined the water to be seepage captured by the ditch and thus “salvage” water that is part of the stream.

Federal Reclamation Law
In Orff v. United States, the U.S. Supreme Court held that sovereign immunity prevented water users in the Westlands Water District of California from suing the U.S. for breach of contract by not delivering water from the Central Valley Project in the early 1990s. Plaintiffs argued that a provision in the 1982 Reclamation Reform Act authorizing joinder of the U.S. in suits to adjudicate the contractual rights of a contracting entity constituted a waiver of sovereign authority for the dispute at issue in the case. The Court rejected this interpretation of the provision, finding only permission to “join” the U.S. in certain circumstances, not to sue the U.S. itself.

Klamath Irrigation District v. U.S., a Court of Federal Claims decision in August, involved a claim for compensation for the taking of property resulting from the failure of the U.S. Bureau of Reclamation (BOR) to deliver water in 2001 in order to meet obligations under the Endangered Species Act (ESA). The Court decided the plaintiffs’ interests depend not on property rights to water but on the contracts under which BOR delivers the water; thus they must seek relief for breach of contract. In dicta, the Court suggested that a 2001 claims court decision, Tulare Lake Basin Water Storage District v. U.S., finding a taking of contractually-conferred water rights had occurred under similar circumstances in the Central Valley of California, was wrongly decided. Thus we now have sharply conflicting holdings by two claims court judges respecting the nature of the interest held by a BOR project water user and whether curtailment of water deliveries to meet the requirements of the ESA constitutes a constitutionally-prohibited taking.

Endangered Species
In the ongoing struggle to find an accommodation between operation of the dams on the Snake and Columbia Rivers and protection of salmon and steelhead populations, the 9th Circuit Court of Appeals in late July upheld Judge Redden’s order for summertime releases of water to facilitate passage of juveniles through several spillways. The release order followed his determination in late May that the biological opinion governing planned dam operations for 2005 was invalid. NOAA had asserted in the opinion that effects of the dams’ existence need not be considered in evaluating jeopardy, only the much more limited effects of the Corps’ discretionary actions in operating the dams. Judge Redden rejected this approach as inconsistent with the protective intention of the ESA.

In contrast, Corps of Engineers’ plans for operation of dams on the Missouri received approval in August from the 8th Circuit Court of Appeals. In addition to the long-standing dispute between upper and lower basin states respecting releases of water from upstream storage to maintain navigation uses of the river, a dispute exacerbated in recent years by persistent drought, river management is complicated by the presence of three listed species. The U.S. Fish and Wildlife Service has concluded that a more “natural” hydrograph, with high spring and low summer flows, is needed to avoid further jeopardizing the existence of these species. The Court upheld the 2004 Master Manual in which the Corps set forth a long-term plan for dam operations intended to balance these various interests.

In National Wildlife Federation v. Norton, the same federal judge who originally rejected a habitat conservation plan for development in the Sacramento area several years ago approved a revised version in September. The plan, prepared by the City of Sacramento and nearby Sutter County in the Natomas Basin, anticipates development of over 15,500 acres in the 53,000 acre basin. Of particular interest is the court’s discussion of whether the plan’s mitigation — permanent protection and management of 8,750 acres — meets the “maximum extent practicable” standard of the ESA. The court found persuasive that the lands protected would be high quality habitat compared to the lands to be developed and would be permanently managed for species benefit. Also important was the cost of these lands and the burden the development fees necessary for their purchase will place on the cost of housing.

Clean Water Act
In U.S. v. Gerke Excavating, Inc., the 7th Circuit Court of Appeals upheld the reach of the Clean Water Act to “waters of the U.S.” found in wetlands connected to navigable waters through a ditch and two non-navigable streams. The Court emphasized that the reach of the Interstate Commerce Clause is not dependent on whether the regulation protects navigability but whether the activity regulated affects interstate commerce.

In August, EPA issued guidance to its regional administrators that a “national pollutant discharge elimination system” permit is not required for water facilities that merely serve to connect water from one drainage to water from another. The issue had arisen in South Florida Water Management District v. Miccosukee Tribe of Indians, but had been left unresolved by the U.S. Supreme Court in its 2004 opinion. EPA intends to initiate a rulemaking process on this matter in the near future.

Constitutional Takings
In Lingle, Governor of Hawaii v. Chevron U.S.A., Inc., the U.S. Supreme Court concluded that a standard articulated in a 1980 regulatory takings case should not be used to evaluate whether a takings has occurred. In Agins v. City of Tiburon, the Supreme Court had stated that a government regulation of private property constitutes a takings if it does not “substantially advance legitimate state interests.” Such an inquiry, however, the Court now says, is more in the nature of assessing the regulation’s validity; takings, by contrast, is concerned with the severity of the burden imposed on the property owner. In a helpful classification of takings cases, Justice O’Connor distinguishes “physical” takings, total takings, Penn Central takings, and land-use exactions. Some clarity is finally beginning to emerge in this complicated area of law.

The Michigan Court of Appeals issued an opinion in July that provides an unusually clear statement of the law in a Penn Central type takings case. In K&K Construction, Inc. v. Michigan Department of Environmental Quality, the Court faced a challenge to the application of Michigan’s wetland protection law to development of certain property. In particular, was the property owner entitled to compensation because denial of a permit to fill wetlands precluded planned development of the property? Finding that the regulations apply equally to similarly situated property owners, that other valuable uses of the property remain, and that the developers acquired the property with knowledge of its development limitations, the Court denied compensation.