Summary of a Recent
Judicial Development in
Environmental Law

Water Use Restrictions under the Endangered Species Act Constitute
a Taking and Require Compensation

Eric H. Foy
National AgLaw Center Research Associate

Summary of Decision

In Tulare Lake Basin Water Storage District v. United States, 49 Fed. Cl. 313 (Fed. Cl. 2001), the United States Court of Federal Claims granted the plaintiffs' motion for summary judgment, holding that the plaintiffs' contractually-conferred right to the use of water was taken when the government imposed water use restrictions under the Endangered Species Act (ESA).

Background

In California, the distribution of water involves the transport of water from the water-rich areas in northern California to the more arid parts of the state. Id. at 314. Various water projects and aqueduct systems, including the Central Valley Project (CVP) and the State Water Project (SWP), were built to facilitate that process. Id. Although the CVP was a federal project managed by the Bureau of Reclamation (BOR) and the SWP was a state project managed by the Department of Water Resources (DWR), the two projects shared a common pumping system. Id. They were operated in concert pursuant to statute and subsequent agreements. Id. at 314-15. The BOR and the DWR were granted water permits by the State Water Resources Control Board (SWRCB), and, in turn, they contracted with county water districts, conferring on the districts the right to withdraw prescribed quantities of water. Id. at 315.

The delta smelt and winter-run Chinook salmon were both determined to be in jeopardy of extinction according to the United States Fish and Wildlife Service (USFWS) and the National Marine Fisheries Service (NMFS). Id. at 314. To protect the two species of fish, the agencies restricted water out-flows in California's primary water distribution system, causing water that would otherwise have been available for distribution by California water projects to be unavailable. Id. This decision, although in harmony with the purpose of the ESA, to halt and reverse the trend toward species extinction, conflicted with California's century-old regime of private water rights. Id. Despite the conflict, the agencies believed that restricting water flow to protect the two species of fish was a reasonable and prudent alternative (RPA) to the traditional water rights program that threatened the species' existence. Id. at 315. Facing an impairment of their collective water rights, the plaintiffs, a group of California citizens, filed suit. Id. at 316.

Arguments

The plaintiffs claimed the imposition of the RPAs on their private water rights constituted an unconstitutional physical taking of their property in violation of the Fifth Amendment. Id. at 318.

Arguing against the existence of a taking, the government asserted that: (1) the implementation of the RPAs merely frustrated the purpose of the water contracts and did not effectuate a taking; (2) the criteria for a regulatory taking had not been met; and (3) the federal government cannot be held liable for a taking when it does no more than impose a limit on the plaintiffs' title that the background principles of state law would otherwise require. Id. at 316-17.

Analysis and Holdings

The government first asserted that when contract expectations were merely frustrated by lawful government action not directed against the takings claimant, no taking had occurred. Id. at 317. It argued that the RPAs were lawful government action that frustrated, rather than appropriated, the plaintiffs' water rights. Id. The court disagreed, holding that California's water distribution system conferred "on plaintiffs a right to the exclusive use of prescribed quantities of water, consistent with the terms of the permits." Id. at 318. The plaintiffs' rights to the water were superior to all other competing interests. Id.

Although the government argued that the facts of the case were more akin to a regulatory takings analysis, the court agreed with the plaintiffs that a physical takings analysis was more appropriate. Id. at 318-19. A physical taking occurs when the government's action amounts to a physical occupation or invasion of property. Id. at 318. The court held that a deprivation of water amounted to a physical taking, but the court then needed to determine whether the plaintiffs owned the water for which they sought compensation. Id. at 320. Although the plaintiffs' water rights were subject to the doctrines of reasonable use and public trust, and the SWRCB could have modified the terms of the water permits to reflect the changing needs of various water users, in the case at bar, it had not done so. Id. at 324. The government was free to take the necessary steps to preserve the fish species, but it was required to pay for the water it took. Id.

The case was decided on April 30, 2001.