Agency ruled liable for breaching water delivery contracts

by MATEUSZ PERKOWSKI,  Capital Press October 8, 2009

A group of California irrigators and other water users will be able to seek damages from the federal government for withholding water due to environmental restrictions.

A federal appeals court has decided the U.S. Bureau of Reclamation is liable for breaching contracts with the Stockton East Water District and Central San Joaquin Water Conservation District.

The ruling reverses a lower court's decision, which found that environmental laws allowed the agency to violate water delivery contracts with the districts.

"We hope the decision shakes things up at the Bureau of Reclamation and makes them take our contract seriously," said Jennifer Spaletta, an attorney representing the water users. "Money was always a second priority."

The districts originally sought $500 million in damages, but that is expected to be re-evaluated, she said.

Aspects of the water delivery contracts were unique in this case, but some policy issues may apply to other irrigation disputes in the U.S., she said.

How that plays out will depend on lower courts' interpretation of the opinion, Spaletta said. "It really remains to be seen if the decision has a precedential effect for others."

The U.S. Justice Department, which represented the bureau in this case, cannot comment on the ruling's potential consequences, said spokesman Andrew Ames. As for the possibility of an appeal to the U.S. Supreme Court, it's too early to make a decision, he said.

"In that it's just come down, we're still reviewing it and no determination has been made as to our next step," Ames said.

The lawsuit stems from the bureau's construction of the New Melones dam on the Stanislaus River, which was authorized by Congress in 1962 and finished in 1979.

The 2.4 million acre foot dam was controversial from the start, as it flooded several archeological, geological and recreational sites.

In 1983, the two districts contracted with the bureau to deliver water to their irrigation facilities, after which they built a $65 million delivery system.

The districts had not yet asked for water from the agency in 1992, when Congress passed the Central Valley Project Improvement Act. The law required irrigation projects to release large amounts of water for fish and wildlife habitat.

The districts did not ask for deliveries until 1993 because time was needed for permitting and construction, Spaletta said.

Due to provisions in the new law, the bureau did not deliver the water requested by the districts. That prompted them to sue, alleging the government took their water rights without just compensation.

In later years, the bureau failed to deliver the contracted amounts of water. The suit dragged on for more than a decade, and the districts also alleged the bureau had violated its contractual obligations.

"This area has been paying for the bonds on the conveyance facility and has never received the benefits of the contract," Spaletta said.

In 2006, a federal judge agreed the bureau had breached its contracts with the districts, but found that environmental laws permitted that.

Specifically, provisions in the contracts allowed the bureau to withhold deliveries due to water shortages or other conditions beyond the government's control, the judge ruled.

The judge also dismissed the districts' claim that the bureau violated their constitutional rights by taking private property -- in this case, water -- without just compensation.

The districts appealed the ruling, and on Sept. 30, a three-judge panel from the U.S. Court of Appeals for the Federal Circuit reversed the decision.

Although the contracts did allow the bureau to withhold water due to events beyond its control, those provisions only pertain to droughts, earthquakes, sabotage or similar circumstances, the appeals court ruled in a 2-1 majority opinion.

"By contrast, changes in law, or changes in government policy, or changes in management practices brought about by the government's changes in law or policy, are all causes within the control of the United States," the opinion said. The government owes damages for failing to deliver enough water to the districts during several years, excluding those years when shortages were beyond their control, according to the decision.

The case has been sent back to the lower court to determine the amount of damages.

The appeals court also ruled the districts' constitutional claims should not have been dismissed, which opens the way for them to sue for insufficient water deliveries during other years.

Staff writer Mateusz Perkowski is based in Salem, Ore. E-mail: mperkowski@capitalpress.com.