ESA reductions in reclamation water contract deliveries: a Fifth Amendment taking of property?

• Author: Grant, Douglas L.
• Position: Western Instream Flows: Fifty Years of Progress and Setbacks

Two United States Court of Federal Claims cases have given different answers to the question posed in the title of this article. One case found a per se physical taking of water users' property; the other ruled water users lacked property rights protected by the Fifth Amendment. Commentators have widely criticized the Finding of a per se physical taking.

This Article undertakes a more searching analysis of the takings question than appears in the two eases and the commentary. By untangling federalism complexities in reclamation law and focusing on longstanding state law regarding water distribution organizations, the article shows that water users supplied under Bureau of Reclamation (Bureau) contracts often will have Fifth Amendment property rights. The Article then shows why Bureau water delivery reductions made to comply with the ESA come within a gap in Supreme Court takings jurisprudence and suggests there is at least some chance the Court would treat delivery reductions as per se physical takings. Finally, the Article explains why it is unclear in many states whether nuisance law or the public trust doctrine constitute preexisting title limitations that would avoid any takings problem, and it suggests a litigation strategy for states concerned about the evolution of their nuisance or public trust law in this regard

1. INTRODUCTION II. BUREAU WATER CONTRACTS AND PROPERTY RIGHTS A. Pre-Reclamation Act Western Water Law 1. The Appurtenance Rule 2. The Relationship Between a Water Supply Entity and the Irrigators Supplied. B. Reclamation Act Section 8 1 Text and Legislative History 2. Section 8 in the Supreme Court a. Vested Rights Acquired Under State Law b. State Water Law and Federal Preemption c. Reallocation of Bureau-Controlled Water d. Types of Bureau Water Contracts i. Water Service Contracts ii. Municipal Water Contracts C. The Klamath Case 1. Judge Allegra's Opinion 2. What Judge Allegra Overlooked a. The Factual and Legal Context of the 1905 Oregon Statute b. Other Oregon Water Law D. Summary III. TAKINGS LAW AND WATER RIGHTS A. The Structure of Takings Law B. Where Bureau Water Delivery Reductions Fit in the Takings Structure 1. The Tulare Opinion and Its Critics 2. Usufructuary Rights 3. Temporary Versus Permanent Physical invasion a. The Loretto Takings Categories b. Loretto in the Lower Federal Courts c. A Closer Look at Loretto 4. Lucas and Other Supreme Court Land Use Cases IV. PREEXISTING TITLE LIMITATIONS A. Shortage Clauses in Bureau Contracts B. State Nuisance and Property Law 1. Existing Nuisance Case Law 2. Existing Property Case Law (The Public Trust Doctrine) 3. Evolution of Nuisance and Public Trust Law V. CONCLUSION I. INTRODUCTION

   The Bureau of Reclamation in the United States Department of the Interior (Bureau) operates 476 dams and 348 reservoirs in the seventeen western mainland states. (1) A primary mission of the Bureau is to deliver water from these facilities by contract to municipalities (2) and irrigation districts or similar organizations. (3) The contract water deliveries make up all or part of the supply for thirty-one million urban residents (4) and for farmers irrigating ten million acres. (5)

   Many of the Bureau's dams and reservoirs are on streams that are the habitat of fish species listed as threatened or endangered under the Endangered Species Act (ESA). (6) ESA section 7 obligates every federal agency to insure that its actions are "not likely to jeopardize the continued existence of any endangered species or threatened species." (7) To comply with this mandate, the Bureau may have to refrain from storing water in a reservoir for later delivery to contract users and instead let the water flow downstream to provide habitat for protected fish species. (8) Similarly, the Bureau may have to release water already stored to provide downstream habitat. In other circumstances, it may have to keep water in storage for species living in the reservoir rather than delivering it to contract users. In all of these situations, water that goes to species habitat will not be available for contract deliveries. (9)

   The Bureau's reduction of contract water deliveries to comply with the ESA has generated three suits against the United States by municipalities, irrigation districts, and irrigation district members to recover for a taking of their property. (10) The Takings Clause of the Fifth Amendment requires the government to pay just compensation when it takes private property for public use. (11) All three suits were filed in the United States Court of Federal Claims, the only court with jurisdiction over takings claims against the United States for more than $10,000. (12)

   The court has reached the merits in two of the cases. Different judges decided them and reached contrary conclusions. In Tulare Lake Basin Water Storage District v. United States (Tulare), (13) Judge John Paul Wiese ruled that reduced deliveries to the plaintiffs were per se physical takings of their property requiring just compensation. (14) In Klamath Irrigation Distinct v. United States (Klamath), (15) Judge Francis M. Allegra ruled that the plaintiffs had only contract rights, not property rights in water, (16) and therefore the delivery reductions could not constitute a taking of their property. (17)

   A federal study foresees more conflicts between the ESA and Bureau water contracts. (18) A former Acting Solicitor and Deputy Solicitor for the Department of the Interior predicted recently that the Supreme Court ultimately "will be compelled to address" whether delivery reductions to comply with the ESA are a taking of property under the Fifth Amendment. (19)

   This Article undertakes a more searching analysis of the takings issue than was made in the /b/are and Klamath opinions and in harshly critical commentary on Tulare (Klamath is too new to have been the subject of published commentary). Part I addresses whether municipalities and irrigation districts with Bureau contracts, or irrigation district members, have property rights in water. A former Solicitor of the Department of the Interior has observed that the legal relationship between the Bureau and contract water users is "very murky" due to "a number of layers of complexity." (20) Part II untangles the complexities that bear upon the existence of property rights. It concludes that in most, if not all, states and in most, if not all, circumstances, municipalities and irrigation districts or district members do have property rights under state law.

   Part III addresses whether contract delivery reductions are a Fifth Amendment taking of property, with a focus specifically on per se physical takings. This part explains why the takings concept is less straightforward than portrayed by the Tulare critics. To that end, it identifies weaknesses in the critics' arguments, pinpoints a gap in Supreme Court takings precedents that leaves uncertainty about whether delivery reductions are per se physical takings, and presents a hypothetical that tends to suggest they are.

   Since no one can be sure how the Supreme Court will resolve the uncertainty, however, Part IV considers whether the United States could avoid what would otherwise be per se physical takings on the ground that the property rights of municipalities and irrigation districts or district members are subject to a preexisting title limitation justifying reduced water deliveries. Part IV disputes the conventional wisdom that shortage clauses widely used in Bureau water contracts constitute such a title limitation. Part IV also shows that whether state nuisance or public trust laws constitute such title limitations is unsettled in many states, and suggests a litigation strategy for states to resolve the matter in their courts rather than wait for the Court of Federal Claims to do so.

2. BUREAU WATER CONTRACTS AND PROPERTY RIGHTS

   Section 8 of the Reclamation Act of 1902 defines federal-state relations in reclamation projects. (21) Section 8 is critical to whether municipalities and irrigation districts with Bureau contracts, or irrigation district members, have property rights under state law. The discussion below begins with some rudiments of pre-Reclamation Act western water law that provide background for interpreting section 8. It then examines section 8 in detail, drawing at times on the earlier discussion of western water law. Finally, it critiques Judge Allegra's ruling in Klamath that the plaintiff irrigation districts and district members had no property rights in Klamath Basin waters.

   1. Pre-Reclamation Act Western Water Law

      Western courts had built up a significant body of appropriation doctrine water law by the time Congress commenced the federal reclamation program in 1902. (22) Two elements of that body of law bear on what Congress likely intended in section 8. These are, first, the rule that a water right is appurtenant to the land where it is used and, second, the rules defining the relationship between a water supply entity and the irrigators receiving water from it.

      1. The Appurtenance Rule

         Appurtenance is a conveyancing concept. A deed or mortgage of land also conveys or encumbers a water right that is appurtenant to the land unless the deed or mortgage expressly provides otherwise. (23)

         Early western courts generally regarded a water right for irrigation as appurtenant to the land upon which the water was used. (24) The courts did not find appurtenance, however, unless the same person owned both the water right and the land. (25) The requirement of unitary ownership is attributable to the conveyancing role of appurtenance. (26) Under common law conveyancing, a person cannot convey something he or she does not own. (27) Since a deed or mortgage of land could not convey or encumber a water right unless the landowner also owned the water right, it would have been nonsensical for courts to find appurtenance when the land and water right were owned by different persons.

         While...