March 7, 2013

Bad decision for water rights

By Damien M. Schiff Senior Attorney

Last week, the Federal Circuit Court of Appeals, in Casitas Municipal Water District v. United States, dismissed as unripe the plaintiff district’s takings claim.  (PLF submitted an amicus brief supporting the district).  The case arose out of the district’s operation of the Ventura River Project.  In 2003, the National Marine Fisheries Service determined that the district’s dam along the Ventura River harmed steelhead populations protected under the Endangered Species Act.  The Service therefore issued a biological opinion that required the district to construct a fish ladder to allow the steelhead to pass the dam.  To make the ladder work required the district to let pass several thousand acre feet of water through the ladder—water that the district would otherwise be entitled to put to beneficial use.  The district therefore brought a takings claim against the feds, arguing that the fish ladder mandate had taken part of Casitas’ water right.

Although losing on summary judgment in the Court of Federal Claims, the district won a remand in the Federal Circuit, the appellate court holding that the Court of Federal Claims had erred in using a regulatory takings, as opposed to a physical takings, framework to adjudicate the takings claim.  On remand, the trial court dismissed the claim again, this time determining that no taking had yet occurred.  The trial court reasoned that, under California water law, one’s water right is limited to beneficial use, not simply storage to facilitate such use.

Thus, the central issue in the district’s appeal was whether California law recognizes a right to store water in anticipation of beneficial use.  The Federal Circuit, in an opinion authored by Judge Schall (who wrote the court’s earlier opinion holding that the district’s claim must be adjudicated according to physical takings principles), agreed with the Court of Federal Claims.  The court found California law to be clear that only the right to beneficial use is protected.  Therefore, because the district had failed to show that it had missed any deliveries to customers, its water right had not yet been taken.  The court also rejected Casitas’ “safe yield” argument, viz., in order to ensure uninterrupted water deliveries notwithstanding possible drought, etc., the district must divert and store more water than can be put to immediate beneficial use.  The court reasoned that no takings claim can be ripe unless and until Casitas can prove that deliveries have been affected.  The concept of safe yield, however, presupposes that deliveries have not yet been affected.  Hence, Casitas’ “safe yield” argument was unavailing.

Perhaps the most peculiar aspect of the court’s decision is its conclusion that, notwithstanding the government’s physical appropriation of the water to which Casitas’ right attaches, the district’s takings claim is unripe.  This is a peculiar result because, in all other applications of physical takings principles that I am aware of, the claim is always ripe the moment the government commences the physical occupation.  This peculiarity can be traced, I suspect, to the fact that water rights are usufructury, not possessory, yet physical takings principles have been developed with respect to possessory rights.

In any event, this decision could portend much havoc in California water law.  The decision means that one has no property right in water that is not being used.  One could imagine how the decision may produce a perverse “use it or lose” approach.  Given the state’s continuing concern with conservation and efficient use of this precious resource, I wouldn’t be surprised if the decision sparks a legislative response.

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