583 F.3d 1344 (Fed. Cir. 2009), 2007-5142, Stockton East Water Dist. v. United States

Docket Nº:2007-5142.
Citation:583 F.3d 1344
Opinion Judge:PLAGER, Circuit Judge.
Party Name:STOCKTON EAST WATER DISTRICT, and Central San Joaquin Water Conservation District, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee. and San Joaquin County, Stockton City, and California Water Service Company, Plaintiffs,
Attorney:Jennifer L. Spaletta, Herum Crabtree Brown, of Stockton, CA, argued for plaintiffs-appellants. With her on the brief were Jeanne M. Zolezzi and Natalie M. Weber. Of counsel on the brief were Roger J. Marzulla, Nancie E. Marzulla and Gregory T. Jaeger, Mazulla & Marzulla, of Washington, DC. Kathry...
Judge Panel:Before NEWMAN, PLAGER, and GAJARSA, Circuit Judges. GAJARSA, Circuit Judge, dissents.
Case Date:September 30, 2009
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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583 F.3d 1344 (Fed. Cir. 2009)

STOCKTON EAST WATER DISTRICT, and Central San Joaquin Water Conservation District, Plaintiffs-Appellants,

and

San Joaquin County, Stockton City, and California Water Service Company, Plaintiffs,

v.

UNITED STATES, Defendant-Appellee.

No. 2007-5142.

United States Court of Appeals, Federal Circuit.

September 30, 2009

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Jennifer L. Spaletta, Herum Crabtree Brown, of Stockton, CA, argued for plaintiffs-appellants. With her on the brief were Jeanne M. Zolezzi and Natalie M. Weber. Of counsel on the brief were Roger J. Marzulla, Nancie E. Marzulla and Gregory T. Jaeger, Mazulla & Marzulla, of Washington, DC.

Kathryn E. Kovacs, Attorney, Appellate Section, Environment & Natural Resources Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were Ronald J. Tenpas, Assistant Attorney General, and Katherine J. Barton, Attorney. Of counsel was Kristine S. Tardiff, Attorney, of Concord, NH.

John D. Echeverria, Georgetown Environmental Law & Policy Institute, of Washington, DC, for amicus curiae. Of counsel on the brief was Katherine S. Poole, Natural Resources Defense Council, of Washington, DC.

Before NEWMAN, PLAGER, and GAJARSA, Circuit Judges.

PLAGER, Circuit Judge.

In the history of the western United States, the fight for water rights is a central theme. California, because a goodly part of the state shares the desert-like conditions that lie at the root of the fight, since before its founding has been one of the locales for this battle. This case is another chapter in that state's long-running history of water disputes.1

Plaintiffs Stockton East Water District (" Stockton East" ) and Central San Joaquin Water Conservation District (" Central" ) (collectively, " plaintiffs" or " the Districts" ) are water agencies organized under the laws of California for the purpose of providing water to municipal, industrial, and agricultural users.2 They allege that the United States (sometimes " Federal Government" or just " Government" ) in managing water resources in California that are under federal control has failed to provide the quantities of water that it agreed to make available. The agencies claim to have binding contracts for the water, and that the Federal Government has breached these contracts.

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The water at issue is from the New Melones Unit of the vast federal water resources project in California known as the Central Valley Project (" CVP" or " Project" ). The Project and the water resource facilities contained in it are situated wholly within the state of California, but are owned and operated by the United States through its Bureau of Reclamation (" Reclamation" ), a part of the Department of the Interior.

When Reclamation would not meet the quantity commitments in their contracts because of other demands for the water to which Reclamation gave priority, plaintiffs sued the United States in federal district court. That was in 1993, and marked the beginning of this continuing saga that has yet to see its end.

In 2007, the suit, having been transferred earlier by the district court to the United States Court of Federal Claims, was decided by that court after an eight-day trial. Subsequently, in an exhaustive 85-page opinion, the Court of Federal Claims concluded that, though the obligations for water delivery were indeed breached, certain contract provisions gave the Government the defenses it claimed. Judgment was awarded to the Government. Plaintiffs timely appealed to this court.

BACKGROUND

The historical record and procedural history of this case occupy a substantial part of the trial court's extensive opinion. See Stockton E. Water Dist. v. United States, 75 Fed.Cl. 321, 330-47 (2007). For more of the details, we refer the reader there. We recite in only summary fashion the facts necessary to place our decision in context.

A. The Central Valley Project, New Melones, and the 1983 Contracts

The Central Valley Project is the largest federal water management project in the United States. It was built to serve the water needs in California's Central Valley Basin. Originally conceived by the State of California, the CVP was taken over by the Federal Government in 1935 and initially funded by Congress as part of the nation's effort to use public works projects to return the economy to health during the Depression.3 Congress reauthorized the CVP in 1937, assigning to the Bureau of Reclamation the tasks of constructing and operating the CVP.4 The CVP today consists of twenty dams and reservoirs, eleven power plants, over 500 miles of major canals, and numerous other facilities.5 Reclamation continues to operate the CVP under the various federal reclamation laws that have been amended and supplemented many times over the years.

The New Melones Unit of the CVP was completed in 1979 and consists of a large concrete dam on the Stanislaus River and a reservoir with a storage capacity of 2.4 million acre-feet of water.6 New Melones was the last unit of the CVP to be constructed,

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after final authorization by Congress in 1962.7 As Reclamation's history of the project explains, 8 the construction of the New Melones dam and power plant was one of the more controversial chapters in the history of the CVP. The controversy focused on the loss of a popular stretch of recreational white water, inundation of archeological sites, and flooding of the West's deepest limestone canyon. Controversy over the project lasted over a decade before the decision to proceed and provide irrigation water, flood control, and power generation occurred. The battle over construction of New Melones portended the end of the era of large dam construction.

The 1962 Act authorizing New Melones required among other things that Reclamation determine the quantity of water required to satisfy all existing and anticipated future needs within the Stanislaus River Basin.9 Also, as with every federal reclamation project, Reclamation was obligated to comply with state law in appropriating water for New Melones.10 This required Reclamation to apply for permits from the California State Water Resources Control Board (" SWRCB" ), which has the power to make decisions for the state regarding water appropriation.

In 1973, the SWRCB initially approved Reclamation's application for a permit to appropriate water from New Melones, subject to twenty-five conditions and limitations.11 Among other things, the SWRCB mandated annual releases from New Melones of 98,000 acre-feet for fishery and wildlife purposes. The SWRCB also established water quality standards and estimated that annual releases of up to 70,000 acre-feet would be necessary to meet those standards. Taking into account these state-imposed requirements, Reclamation prepared a plan for operation of New Melones. As detailed in a 1980 report, Reclamation estimated that 180,000 acre-feet of water would be available annually for agricultural and municipal and industrial uses after other anticipated needs, including state-mandated releases for fishery and wildlife purposes and water quality, were satisfied.12

Another condition attached to the SWRCB's approval of Reclamation's application prohibited full impoundment of water in the reservoir until Reclamation had firm commitments for the beneficial use of the water. In part to demonstrate such commitments, Reclamation began contract negotiations in the early 1980s with Stockton East and Central to provide the Districts with water from New Melones. These negotiations culminated in the signing by Reclamation of nearly identical contracts with Stockton East and Central (" the 1983 contracts" ). These are the contracts at issue in this case.

Article 3 of each contract specifies the maximum amount of water to be made available annually from the New Melones

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reservoir-75,000 acre-feet for Stockton East and 80,000 acre-feet for Central. Thus, Reclamation committed to provide the Districts with up to 155,000 acre-feet out of the 180,000 acre-feet per year that the 1980 report estimated would be available for consumptive uses. Article 3 also establishes for each year of the contract a minimum amount of water that Reclamation is obligated to make available, and for which the Districts must pay, beginning with the first full year after notification by Reclamation that water is available to the Districts.

As required by the 1983 contracts, the Districts constructed and installed at their own expense multi-million dollar water delivery systems to carry water from the New Melones reservoir to their facilities. In May 1988, Reclamation announced that water was available and that the initial delivery date for purposes of the contracts was January 1, 1989. This triggered the start of the annual minimum purchase and supply schedule of Article 3; however, from 1989 through 1992, the first four years after the initial delivery announcement, the Districts did not request any water from New Melones, and no water was delivered to them.

B. The Central Valley Project Improvement Act

In 1992, before the Districts ever received water from New Melones under the 1983 contracts, Congress enacted the Central Valley Project Improvement Act (" CVPIA" ).13 The purposes of the Act include the following:

(a) to protect, restore, and enhance fish, wildlife, and associated habitats in the Central Valley and Trinity River basins of California;

(b) to address impacts of the Central Valley Project on fish, wildlife and associated habitats;

....

(f) to achieve a...

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