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Klamath Basin Decisions Leave Irrigators High and Dry

April 25, 2007

Two court decisions issued last month could leave farms in the Klamath Basin without water again in the event of drought. In Klamath Irrigation District v. United States, the U.S. Court of Federal Claims rejected breach of contract claims filed by irrigators for water lost due to court-ordered flows for fish listed under the Endangered Species Act (ESA).[1] In Pacific Coast Federation of Fishermen’s Associations v. U.S. Bureau of Reclamation, the Ninth Circuit Court of Appeals upheld a ruling that required the federal government to maintain minimum flows to comply with the ESA.[2] These cases are the latest in a long-standing battle for water resources in the Klamath Basin, pitting agricultural interests and irrigation districts against environmentalists, fishermen, and federal regulators seeking to protect water flows for listed fish.

Background to the Klamath Basin Lawsuits

Disputes over water use in the Klamath Basin have been front page news in the West for several years. Following a drought in 2001, the Bureau of Reclamation (“BOR”) restored full irrigation supplies to Klamath farms. A year later, 70,000 adult Chinook salmon died in the Klamath River after being trapped in warm pools caused by low flows.[3] In 2006, federal regulators shut down nearly all fishing along 700 miles of the Oregon and California coasts due to consistently declining numbers of Chinook salmon.[4] Today, some Indian tribes, fishing interests, and environmental groups want the Klamath dams removed entirely.[5]

The Reclamation Act of 1902[6] directs the Secretary of the Interior to “reclaim arid lands in certain states through irrigation projects and then open those lands to entry by homesteaders.” The Act “‘set in motion a massive program to provide federal financing, construction, and operation of water storage and distribution projects to reclaim arid lands in many Western States.’”[7] Since the late nineteenth century, extensive water reclamation and irrigation projects have been developed in the Klamath River Basin in southern Oregon and northern California — a naturally a semi-arid region. The 1905 Klamath Project was one of the first irrigation projects constructed under the Act.[8] The legislation authorizing the Project provided, among other things, that “‘the Secretary of the Interior is hereby authorized in carrying out any irrigation project … to raise or lower the level of’ the lakes and rivers of the Klamath River Basin ‘as may be necessary and to dispose of any lands which may come into the possession of the United States as a result thereof.’”[9]

BOR operates the Klamath Project to “serve and affect a number of interests,” including the supply of water to both: (1) agricultural interests in the Klamath Basin across approximately 240,000 acres of irrigable land; and (2) the Tule Lake and Lower Klamath National Wildlife Refuges.[10] Contracts between individual irrigation districts and BOR govern, in part, the distribution of Klamath Project water. These contracts set forth the districts’ priorities to water use within the Project in the event of water shortage “and the United States’ resultant liability therefor.”[11]

The Klamath Project lacks a major water storage reservoir. Upper Klamath Lake is “relatively shallow and unable to capture and store large quantities of water from spring run-off.” Therefore, BOR cannot store “enough water during wet years for use in subsequent dry years – a fact that apparently makes the Klamath Project more vulnerable to droughts.”[12] Still, BOR was generally able to supply sufficient irrigation water to Klamath Basin landowners without issue. In years of severe drought, landowners just received somewhat less water. That changed in 2001. In that year, federal agencies responsible for ESA compliance concluded that water levels in the Klamath Basin “were so low as to threaten the health and survival” of listed fish species, including the shortnose and Lost River suckerfish and coho salmon. Water forecasts predicted that the year would be “critically dry.” The National Marine Fisheries Service (NMFS) and U.S. Fish & Wildlife Service (FWS) concluded in biological assessments that operation of the Klamath Project was likely to adversely affect the three species, in violation of the ESA. NMFS and the FWS concluded in subsequent Biological Opinions (BiOps) that the Project’s operations in 2001 would jeopardize the species’ continued existence. The BiOps provided “reasonable and prudent alternatives,” as required under the ESA, to address threats to the species. One alternative was reducing the amount of water available in 2001 for irrigation in order to increase river flows and improve water quality in endangered fish habitat. BOR advised that forecasted water supplies for 2001 could not meet the needs of the BiOps’ proposed alternatives. On March 28, 2001, the Governor of Oregon issued an executive order declaring a state of “Drought Emergency” in Klamath County. BOR reduced delivery of irrigation water in 2001 to comply with the ESA. Several lawsuits followed.[13]

The Claims Court’s Klamath Irrigation District Opinions

Based on BOR’s failure to provide water in 2001, a group of water districts and individual farmers sought compensation under the Fifth Amendment and damages for BOR’s alleged breach of contract.[14] In 2005, the Claims Court held that plaintiffs’ interests in the use of Klamath Basin water were not cognizable property interests under the Takings Clause, so plaintiffs were not entitled to compensation under the Fifth Amendment. The Court held that plaintiffs’ claims sounded, “if at all, in contract.”[15] In its March 2007 opinion, the Court denied these remaining claims, concluding that the sovereign acts doctrine provides a complete defense to plaintiffs’ breach of contract claims.[16] Specifically, the Court found that the irrigation contracts “must be read to imply that the United States reserved its ability to exercise its sovereign powers without the threat of liability for failing to deliver water.”[17]

The Sovereign Acts Doctrine

The sovereign acts doctrine “recognizes that ‘the Government-as-sovereign must remain free to exercise its powers’ and shields the United States from contract liability based upon its ‘public and general acts as a sovereign.’”[18] Both the Ninth Circuit and the Claims Court previously concluded that “the enactment and subsequent enforcement of the ESA should be viewed as sovereign acts that override … [BOR]’s obligations to provide water under various contracts.”[19] In the 2007 Klamath opinion, the Claims Court again concluded that the acts taken by BOR did not breach any of the contracts at issue under the sovereign acts doctrine.[20] The Court found that the “critical focus” under the sovereign acts analysis “must be on the extent to which the ESA compelled the agency to act. If, as concluded above, the statute left the agency with little alternative but to deny water, it makes little sense legally to focus on the individual application of the law, rather than its passage, in applying the sovereign acts doctrine.”[21] The Court also explained that, if a breach of contract occurs due to the United States’ “need to preserve the common good and the general welfare, rather than to relieve the United States of its contractual or financial responsibilities, the action should be viewed as sovereign in nature and covered by the implied contractual right of the government to meet its responsibilities to the citizenry at large, unless waived in unmistakable terms.”[22] The Court found no such unmistakable terms in any of the irrigation contracts that would preclude the government from exercising its sovereign authority. In fact, the Court found that “the water shortage clauses in most of the contracts reflect the opposite intent.” The Court concluded that sovereign acts – taken to comply with the ESA – prevented the federal defendants from performing under the contracts, so no breach occurred. The Court therefore dismissed all remaining claims for damages against the United States with prejudice.[23]

The Ninth Circuit’s Pacific Coast Federation of Fisherman’s Associations Opinions

In Pacific Coast Federation of Fisherman’s Associations v. U.S. Bureau of Reclamation, eight organizations representing environmental and fisheries interests requested injunctive relief in order to protect threatened coho salmon and habitat.[24] Plaintiffs argued that NMFS’ Klamath Irrigation Project BiOp did not adequately analyze how certain phases of its flow plan would avoid jeopardy to threatened coho salmon. The federal agencies and defendant-intervenor Klamath Water Users Association (irrigator plaintiffs) argued that the plan reflected “the agency’s best judgment in the face of scientific uncertainty and contains sufficient analysis to support the … conclusion that its proposed action will avoid jeopardy to the coho.” The district court had struck down parts of NMFS’ original plan, but upheld the short-term measures that constituted the sole issue in the 2005 appeal. The Ninth Circuit agreed with plaintiffs, concluding that the federal defendants’ short-term measures (specifically, providing only 57 percent of the total water needs of the listed fish) were arbitrary and capricious, and remanded the case to the district court for the formulation of injunctive relief.[25]

On remand, District Court Judge Saundra Armstrong agreed that, “[b]ecause the Ninth Circuit invalidated Phases I and II of the Klamath Irrigation Project [BiOp], pending reinitiation of ESA consultation and compliance with a new [BiOp], the law is clear that injunctive relief to protect the listed species should issue.”[26] Judge Armstrong therefore: (1) granted the Association’s and the Tribes’ request for an injunction; (2) ordered NMFS and BOR to reinitiate consultation on the Klamath Irrigation Project; (3) ordered NMFS to issue a new BiOp “based on the current scientific evidence and the full risks to threatened coho salmon”; and (4) ordered BOR “to limit Klamath Project irrigation deliveries if they would cause water flows in the Klamath River at and below Iron Gate Dam to fall below 100% of the Phase III flow levels specifically identified by NMFS in the [BiOp] as necessary to prevent jeopardy, … until the new consultation for the … Project is completed and reviewed by this Court.”[27]

On March 22, 2007, the Ninth Circuit affirmed Judge Armstrong’s 2006 order that defined the scope of injunctive relief pending completion of a new BiOp.[28] On appeal, the irrigator plaintiffs argued that: (1) NMFS’ supplemental analysis of the effects of water shortage on listed fish eliminated the legal basis for enjoining the government’s execution of the Klamath project; and (2) injunctive relief exceeded the authority afforded to courts by the ESA. The Ninth Circuit rejected the irrigator plaintiff’s “novel interpretation of the ESA,” which the Court noted “is not shared by NMFS.” The Court described NMFS’ supplement to the invalidated flow plan as a “post-hoc rationalization” that is not permitted without reinitiation of consultation under the ESA. The Court held that “[e]njoining diversions of water to ensure that the flow limits specified by NMFS are met is an equitable remedy reasonably calculated to prevent BOR from jeopardizing coho salmon in its Klamath Project operations. Accordingly, the injunction was a valid exercise of the court’s equitable powers.”[29]

Conclusions

The case law in the Ninth Circuit is now fairly clear that courts are required to protect water flows for endangered species, even at the expense of other human users. That in itself is bad news for farmers and irrigators. Worse yet, the holding in Pacific Coast Federation precludes farmers and other irrigators from recovering damages from the federal government under a contract theory, based on the government’s compliance with the ESA.

The chief of BOR’s Klamath Basin water and lands division office recently stated that enough water should be available in 2007 to support both irrigation and salmon.[30] Still, these recent opinions offer no assurance that disputes over scarce resources in the Basin are over.

For more information on Marten Law Group’s ESA practice, contact Jessica Ferrell.

[1] Nos. 01-591, 01-5910 through 01-59125, --- Fed. Cl. ---, 2007 WL 853018 (Fed. Cl. March 16, 2007).

[2] 06-16296, 2007 WL 901580 (9th Cir. March 22, 2007). 

[3] Jeff Barnard, Court upholds water for fish before farms, AP (March 29, 2007).

[4] Id.; Federal Regulators Call for Restrictions on Pacific Coast Salmon Fishing.

[5] William Yardley, Climate Change Adds Twist to Debate Over Dams, N.Y. Times (April 23, 2007); Removal of Klamath River structures would save $114M, report says, Greenwire (March 27, 2007) (subscription required).

[6] Ch. 1093, 32 Stat. 388 (codified, as amended, at 43 U.S.C. §§ 371 et seq.).

[7] Klamath Irrigation Dist. v. United States, 67 Fed. Cl. 504, 508-09 (2005), modified by 68 Fed. Cl. 119 (2005) and certification denied by 69 Fed. Cl. 160 (2005) (quoting Orff v. United States, 545 U.S. 596 (2005)) (internal citations omitted).

[8] Id. at 509.

[9] Id. (citing Act of February 9, 1905, ch. 567, 33 Stat. 714 (codified at 43 U.S.C. § 601)).

[10] Id. (citing Pacific Coast Fed’n of Fishermen’s Ass’ns v. Bureau of Reclamation, 138 F. Supp.2d 1228, 1230 (N.D. Cal. 2001)) (internal quotations omitted).

[11] Klamath Irrigation Dist. v. United States, 2007 WL 853018, at *5.

[12] Klamath Irrigation Dist. v. United States, 67 Fed. Cl. at 509 (internal quotations omitted).

[13] Id. at 512-14 (citing cases); see also Jeff Kray, Federal Court Rejects Klamath Basin Irrigators’ Property Rights Claims Arising From 2001 Drought and Distinguishes Tulare Lake Decision.

[14] Klamath Irrigation Dist. v. United States, 67 Fed. Cl. at 506.

[15] Id. at 535-40.

[16] Klamath Irrigation Dist. v. United States, 2007 WL 853018, at *1.

[17] Id. at *5.

[18] Id. (quoting, inter alia, Yankee Atomic Elec. Co. v. United States, 112 F.3d 1569, 1575 (Fed. Cir.1997), cert. denied, 524 U.S. 951 (1998); Horowitz v. United States, 267 U.S. 458, 461 (1925)).

[19] Id. (citing cases).

[20] Id.

[21] Id. at *12.

[22] Id.

[23] Id. at *15-16.

[24] 426 F.3d 1082 (9th Cir. 2005).

[25] Id. at 1084-85, 1095.

[26] Pacific Coast Fed’n of Fisherman’s Ass’ns v. U.S. Bureau of Reclamation, No. 02-2006, 2006 WL 798920, at *1 (N.D. Cal. March 27, 2006), amended on reconsideration, No. 02-2006, 2006 WL 1469390 (N.D. Cal. May 25, 2006) (citations omitted).

[27] Id. at *6-8.

[28] Pacific Coast Fed’n of Fishermen's Ass’ns v. U.S. Bureau of Reclamation, No. 06-16296, 2007 WL 901580 (9th Cir. March 22, 2007). 

[29] Id. at *2.

[30] Jeff Barnard, Court upholds water for fish before farms, AP (March 29, 2007) (quoting Cecil Lesley).

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