Takings and the ESA: Casitas Municipal Water District v. United States (Fed. Cir.)
Casitas Municipal Water District v. United States, Case No. 2007-5153 (Fed. Cir. Sept. 25, 2008)
SUMMARY: Casitas Municipal Water District (Casitas) appeals the judgment of the United States Court of Federal Claims granting summary judgment in favor of the government holding that there was no governmental breach of contract and no compensable taking under the Fifth Amendment… we affirm the district court’s grant of summary judgment in favor of the government with respect to Casitas’ breach of contract claim and reverse the district court’s grant of partial summary judgment in favor of the government with respect to a taking under the Fifth Amendment. We remand for further proceedings consistent with this opinion.
Depending on the outcome of the Federal Court of Claim proceedings, the U.S. government may be compelled to compensate the Casitas Municipal Water District for the water "diverted" away from the Robles Diversion Dam fish ladder, a structure substantially modified in 2003 by Wood Rogers to benefit steelhead rainbow trout. Photo from Wood Rogers Inc.com
KEITHINKING: This decision could have significant implications for ESA implementation on the West Coast. Although clearly dependent upon the specific terms of the water rights and contracts in place, the ruling suggests that a biological opinion that includes measures altering water use rights to benefit listed species can create a compensable taking, requiring the government to pay for the lost water rights. In other words, for federal agencies, ESA implementation may soon become much more expensive. See Ventura County Star news coverage, and excerpts below.
FACTUAL BACKGROUND: Congress authorized the construction of the Ventura River Project (Project) on March 1, 1956. Pub. L. No. 423, 70 Stat. 32 (1956). The Project provides the water supply for farmland irrigation and municipal, domestic, and industrial uses in Ventura County, California.
On March 7, 1956, the United States and Casitas entered into a contract providing for the construction of the Project by the United States in exchange for a commitment by Casitas to repay the construction costs over a forty-year period… the contract provided in Article 4 that Casitas “shall have the perpetual right to use all water that becomes available through the construction and operation of the Project.”
In August, 1997, almost forty years after the construction of the project, the National Marine Fisheries Service (NMFS) listed the West Coast steelhead trout as an endangered species in the Project watershed. Section 9 of the Endangered Species Act (ESA) makes it illegal to “take” any species listed as endangered under the Act.3 16 U.S.C. § 1538. To avoid ESA section 9 liability, the Bureau of Reclamation (BOR) sought a biological opinion by the NMFS (BiOp) pursuant to section 7 of the ESA. Id. § 1536(a)(2). For the purposes of this appeal, the government concedes that the BOR’s May 2, 2003 directive advising Casitas that it was obligated to comply with the requirement of the BiOp compelled Casitas to: (1) construct a fish ladder facility… and (2) divert water from the Project to the fish ladder, resulting in a permanent loss to Casitas of a certain amount of water per year… Casitas filed suit against the government alleging that these actions constituted a breach of contract and a compensable Fifth Amendment taking of its water.
PROCEDURAL HISTORY: On October 2, 2006, the trial court granted summary judgment on the contract claims in favor of the United States. See Casitas Mun. Water Dist. v. United States, 72 Fed. Cl. 746 (2006) (Casitas I). Relying principally upon the Supreme Court’s decision in Nampa & Meridian Irrigation District v. Bond, 268 U.S. 50 (1925), the trial court ruled that the costs associated with the construction of the fish ladder facility, more than forty years after the Project’s initiation, were in the nature of operation and maintenance costs and, thus, not reimbursable under the repayment contract. Casitas I, 72 Fed. Cl. at 751. The trial court held that even if Article 4 of the contract was breached by the government, the sovereign acts doctrine applied, shielding the government from liability. Id. at 755.
On March 29, 2007, the trial court granted the government’s partial summary judgment motion and held that the regulatory takings standard applied to Casitas’ claim rather than the physical takings standard. Casitas Mun. Water Dist. v. United States, 76 Fed. Cl. 100, 105-06 (2007) (Casitas II). While the court recognized that a prior trial court decision—Tulare Lake Basin Water Storage District v. United States, 49 Fed. Cl. 313 (2001), rendered by Judge Wiese who also presided in this case—held that a deprivation of water amounts to a physical taking under somewhat similar circumstances, the court concluded that the Supreme Court’s intervening decision Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), clarified takings law so as to require a different result. Casitas II, 49 Fed. Cl. at 106. On August 2, 2007, in response to Casitas’ concession that it could not prevail under the regulatory takings framework laid out in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), the trial court dismissed the complaint and entered final judgment for the United States. Casitas appealed.
RULING ON APPEAL: The Federal Circuit upheld the Federal Court of Claims, and its reasoning, on the contract claims, but reversed and remanded the decision on the takings claims, the analysis begins by noting the “trilogy of Supreme Court cases involving water rights provides guidance on the demarcation between regulatory and physical takings analysis with respect to these rights.”
EXCERPT RE: INTERNATIONAL PAPER: In International Paper Co. v. United States, 282 U.S. 399 (1931), the United States, during World War I, issued a requisition order for all of the hydroelectric power of the Niagara Falls Power Company (Niagara Power). Id. at 405. At the time that the United States’ order was issued, Niagara Power leased a portion of its water to International Paper Company (International Paper), which diverted the water via a canal to its mill. Id. at 404-05. In response to the United States’ direction to “cut off the water being taken” by International Paper to increase power production, Niagara Power terminated the diversion of water to International Paper. Id. at 405-06. This termination resulted in International Paper being unable to operate its mill for nearly nine months. Id. The United States did not take over the operations of either Niagara Power or International Paper, nor did it physically direct the flow of the water. Instead, the United States caused Niagara Power to stop International Paper from diverting water to its mill so that the water would instead be available for third party use—“private companies for work deemed more useful [by the government] than the manufacture of paper.” Id. at 404. This third party use served a public purpose of supplying power for the war effort. The Supreme Court found that the government directly appropriated water that International Paper had a right to use.
EXCERPT RE: GERLACH. In United States v. Gerlach Live Stock Co., 339 U.S. 725 (1950), the claimants held riparian water rights for irrigation of their grasslands by natural seasonal overflow of the San Joaquin River, id. at 729-30. The BOR built Friant Dam, a part of the Central Valley Project, upstream from the claimants’ land. Id. at 730, 734. The Friant Dam was built to store high stage river flows which then were “diverted . . . through a system of canals and sold to irrigate more than a million acres of land.” Id. at 729. As a result, “a dry river bed” was left downstream of the dam, and the overflow irrigation of the claimants’ lands virtually ceased. Id. at 729-30. Thus, the United States caused water to be physically diverted away from the claimants for third party use—delivery under water contracts. The Friant Dam served a public purpose of “mak[ing] water available where it would be of the greatest service.” Id. at 728. The Supreme Court analyzed the government’s action as a physical taking.
EXCERPT RE: DUGAN. Dugan v. Rank, 372 U.S. 609 (1963), similarly involved claims arising out of the United States’ physical diversion of water for third party use, by the Friant Dam. In Dugan, landowners along the San Joaquin River, owning riparian and other water rights in the river, alleged that the BOR’s storage of water upstream behind Friant Dam left insufficient water in the river to supply their water rights. Id. at 614, 616. The Supreme Court agreed, and analyzed the government’s physical appropriation of water as a physical taking.
EXCERPT RE: TAHOE-SIERRA. In Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), the Supreme Court considered a taking claim involving the application of a 32-month moratorium on land development. The Court held that such a temporary moratorium did not constitute a per se taking because at the end of the moratorium the owner regained use of the land.
CONCLUSION: The government also argues that, in contrast to the trilogy of Supreme Court cases, here, the United States did not appropriate the water for its own use or for use by a third party. We find this argument unpersuasive. The government, by passing the ESA, has recognized the importance of protecting endangered species. In fact, the purpose of the ESA is express in the statute itself. 16 U.S.C. § 1531(a)-(c). Specifically, Congress found that “species of fish . . . have been so depleted in numbers that they are in danger of or threatened with extinction” and that “these species of fish . . . are of esthetic, ecological, educational, historical, recreational, and scientific value to the Nation and its people.” Id. § 1531(a)(2)-(3). Congress also found that “encouraging . . . interested parties . . . to develop and maintain conservation programs . . . is a key to meeting the Nation’s international commitments and to better safeguarding, for the benefit of all citizens, the Nation’s heritage in fish . . . .” Id. § 1531(a)(5). In light of these findings, there is little doubt that the preservation of the habitat of an endangered species is for government and third party use—the public—which serves a public purpose. Cf. Kelo v. City of New London, 545 U.S. 469, 485 (2005) (upholding government use of eminent domain to acquire land for transfer to private parties when it serves a broadly defined public purpose like economic development). When the government forces Casitas to divert water away from the Robles-Casitas Canal to the fish ladder for the public purpose of protecting the West Coast Steelhead trout, this is a governmental use of the water. The fact that the government did not itself divert the water is of no import. The government admits that Casitas was forced by the BOR adoption of the BiOp to build the fish ladder and divert the water. If this water was not diverted for a public use, namely protection of the endangered fish, what use was it diverted for?…
In this case, in contrast, the water that is diverted away from the Robles-Diversion Canal is permanently gone. Casitas will never, at the end of any period of time, be able to get that water back. The character of the government action was a physical diversion for a public use—the protection of an endangered species. The government-caused diversion to the fish ladder has permanently taken that water away from Casitas. This is not temporary, and it does not leave the right in the same state it was before the government action. The water, and Casitas’ right to use that water, is forever gone. Unlike Tahoe-Sierra, the government, in this case, directly appropriated Casitas’ water for its own use—for the preservation of an endangered species. The government requirement that Casitas build the fish ladder and divert water to it should be analyzed under the physical takings rubric.