The Tulare case: water rights, the Endangered Species Act, and the Fifth Amendment.

• Author: Benson, Melinda Harm

The Article discusses the recent United States Court of Federal Claims' decision in Tulare Lake Basin Water Storage District v. United States. Tulare is the first published court decision holding that efforts to protect species under the Endangered Species Act constitute a taking of property in violation of the Fifth Amendment. The Article critiques the court's holding and concludes that the Tulare decision was fundamentally flawed in at least two respects. First, the court erred in finding that the Tulare plaintiffs' water contracts constituted protectable property interests given the limited, contextual nature of such rights under California water law. Second, the court improperly applied a physical--as opposed to regulatory--takings analysis, which led the court to find a taking per se. Had the court conducted the more appropriate takings analysis, it would have found that the de minimis actual impact on the plaintiffs' rights, as well as the limited nature of the plaintiffs' reasonable expectations to exercise those water rights in a manner that harmed threatened species, combine to prevent any successful compensation claim under the Fifth Amendment. For these and other reasons discussed in the Article, the Tulare decision will be of lasting significance only if the federal government falls, for political reasons, to appeal the decision.

1. INTRODUCTION

   It finally happened. For the first time, a court has held that restrictions imposed under the Endangered Species Act (ESA) (1) constituted a Fifth Amendment (2) taking of property. In Tulare Lake Basin Water Storage District v. United States (Tulare), (3) the United States Court of Federal Claims held that water users in central California suffered a physical taking of property when wildlife agencies restricted water use to protect threatened winter-run chinook salmon (Oncorhynchus tshawytsha) and delta smelt (Hyponesus transpacificous) from extinction. The restrictions took place during the 1992-1994 irrigation seasons, when the National Marine Fisheries Service (NMFS) and the United States Fish and Wildlife Service (FWS) (collectively, the Services) determined that a number of measures, including limits on the amount and rate of irrigation use, were necessary to protect the fish and their critical habitat. (4)

   The question of whether ESA restrictions might effect a Fifth Amendment taking has been the subject of intense speculation and anticipation. (5) Up to this point, such claims have been rejected based on a number of grounds, including ripeness, (6) failure to demonstrate a cognizable property interest, (7) barred by contractual agreement, (8) or simply rejected outright. (9) There is little doubt that the Tulare holding will generate an increased number of takings claims. Already, water users in the conflict-ridden Klamath Basin of southern Oregon / northern California have filed a similar lawsuit. (10)

   However, the ramifications of the Tulare decision are yet to be seen, and those seeking government compensation in exchange for species protection should not take comfort in the Tulare decision for several reasons. First and foremost, the case is not over yet. The court ruled on cross-motions for summary judgment on the issue of liability; the case is still pending on the issue of damages. Upon final judgment, the government will have the option of taking the issue before the Court of Appeals for the Federal Circuit. Whether to appeal poses a political question as much as a legal one. It was the Clinton administration that implemented the ESA protections giving rise to the facts of Tulare. (11) Whether the current administration, which has been openly hostile to the ESA, will appeal the Tulare decision remains unclear. (12)

   Next, the facts that gave rise to the Fifth Amendment taking in Tulare will be hard to replicate. The Tulare plaintiffs are state water contractors with the California Department of Water Resources (DWR). (13) For reasons that will be explained in some detail, the overwhelming majority of large water projects are federal. (14) Most federal water contracts contain provisions that anticipate the need to restrict water deliveries to protect fish and wildlife and therefore protect the federal government from constitutional takings claims. (15) For this reason, the Tulare decision is unlikely to have much influence in the federal water project context. Conversely, state water contracts and water rights such as those at issue in Tulare rarely have the level of federal involvement necessary to make a Fifth Amendment takings claim ripe for adjudication. (16) The California State Water Project (SWP) is operated in coordination with the federal Bureau of Reclamation's (BOR) Central Valley Project (CVP), and in most respects the two projects operate in concert. (17) It is this unique relationship that created the ESA restrictions at issue in Tulare. (18)

   Finally, and most importantly, the Tulare decision is fundamentally flawed in at least two respects. First, the Tulare court abdicated its judicial responsibility by failing to determine the nature of the property interest at issue in the case. This led the court, to assume wrongly that the plaintiffs' water contracts were compensable property interests under the Fifth Amendment. The Tulare decision involves the issue of water as property. Unlike land, which can be privately owned, water is a public resource. And while private property rights in water have long been recognized (including for takings purposes), (19) water rights are subject to special limitations based on their quasi-public status. These limitations include the rule of reasonable use and the public trust doctrine, which under California law have had a large role in reallocating water for the protection of fish and wildlife. For these reasons, water rights are fragile; they exist only insofar as the water user exercises them in accordance with the doctrine of reasonable use, which in turn requires a comparative assessment of the value of competing demands for the water. (20) In short, there is a far broader authority to alter water rights than to adjust rights in other types of property under the Fifth Amendment. (21) The Tulare court's refusal to address these intricacies caused it to conclude erroneously that the Tulare plaintiffs had a protectable property interest.

   Second, the Tulare court erred in its constitutional analysis. The court held that the government's actions constituted a physical taking of property, as opposed to a regulatory taking, a determination that led the court to conclude there was a per se or categorical taking. By defining the restrictions as physical in nature, the Tulare court erroneously focused on the result of the government action rather than the character of the action itself. (22) This approach ignores the purpose of, and the reason for, regulatory takings jurisprudence. The government effects a physical taking only where it requires landowners to submit to some type of permanent physical occupation or acquisition of their land. (23) Regulatory takings, on the other hand, occur when the government prevents a property owner from making a particular use of his or her property. (24) Because the government action in Tulare involved a restriction of the plaintiffs' use rather than an acquisition or occupation of property, it was a regulatory action, not a physical one. (25)

   Had the court conducted the more appropriate regulatory takings analysis, it would have been forced to address the fact that, despite all the rhetoric, the actual impacts on the Tulare plaintiffs resulting from the water restrictions were minimal. On average, water supplies were reduced by less than three percent. (26) This de minimis impact, when combined with the plaintiffs' lack of reasonable expectations of a specific quantity of water under California water law, prevents a successful regulatory takings claim.

   This Article will explore each of these areas of law in some detail. Part II begins with an account of the underlying facts of the Tulare decision and the court's reasoning in the case. Part III outlines the basic tenets of California water law, including the role of the courts in defining the principles of reasonable use and public trust, and concludes that the Tulare court failed to acknowledge its proper role in addressing these issues. It then goes on to address the nature and scope of the reasonable use and public trust doctrines and argues that, had the court applied state law, it would have found that the plaintiffs had no constitutional right to water deliveries that threatened listed fish species.

   Part IV focuses on the constitutional question and the physical versus regulatory character of the taking found in Tulare. After providing a brief history of the Takings Clause and the distinction courts have drawn between physical and regulatory takings, it discusses the current legal tests established by the United States Supreme Court for each type of taking. Part IV then applies this law to the facts of Tulare and explains why a physical takings analysis is inappropriate. Finally, Part IV argues that, even applying a regulatory takings analysis, the facts of Tulare do not support a conclusion that a Fifth Amendment taking occurred.

2. THE FEDERAL CLAIMS COURT'S DECISION IN TULARE

   1. The Facts

      The Tulare Lake Basin is located in California's Central Valley, the most agriculturally productive region in the world. (27) The Central Valley is the source of forty-five percent of the nation's fruit and vegetables. (28) Its warm, dry summers and mild winters create an ideal climate for agriculture --except for the absence of water. This arid region receives almost no precipitation in the summer months, and some areas receive as little as six inches of rainfall per year. (29) It comes as no surprise, therefore, that the Central Valley is also home to the nation's largest and most elaborate water supply...