Government Must Compensate
for Water-Use Restrictions
Tulare Lake Basin Water Storage District v. United States, 2001 WL 474295
Roy A. Nowell, Jr., 3L
California water users (Plaintiffs) brought suit claiming that their
contractually-guaranteed water rights were taken from them when the
National Marine Fisheries Service (NMFS) imposed water-use restrictions
under the Endangered Species Act (ESA). The United States Court of Federal
Claims ruled in favor of the Plaintiffs in April, granting summary judgment
and denying NMFS motion for summary judgment. The court ruled that the
government could protect the endangered species in question, but they
had to compensate for loss of water rights to private citizens.
The NMFS determined that two endangered species of fish, the delta smelt
and winter-run Chinook salmon, faced possible extinction because of
limited water flows in California. In order to provide water to citizens,
water is diverted from the Sacramento and Feather Rivers and eventually
distributed to users through a series of canals. Water that is not diverted
flows into San Francisco Bay.
In efforts to protect the fish, the NMFS restricted water out-flows
in Californias primary water distribution system, and as a result,
a large number of citizens were denied access to the water given to
them by contract. The Bureau of Reclamation and the Department of Water
Resources contracted with county water districts to allow the districts
to use certain quantities of water. In this case, Tulare Lake Basin
Water Storage District and Kern County Water Agency have water contracts
with the Bureau and Department for an allotment of water, and the remaining
Plaintiffs have water contracts through Tulare and Kern Counties. The
Plaintiffs brought this action claiming a Fifth Amendment taking of
their private water rights.
The court first addressed the issue of whether the regulations amounted
to a taking of property without compensation, which is prohibited by
the Fifth Amendment. That Amendment states, nor shall private
property be taken for public use, without just compensation.
The purpose of the Takings Clause is to prevent individual owners of
property from bearing the entire burden that should be distributed among
the public as a whole.
2 The court stated that the NMFS
has the absolute right to protect endangered species, but considered
whether water restrictions amounted to a Fifth Amendment taking.
Plaintiffs Argument: Taking of Water Rights
As a result of the water restrictions, Tulare alleges that they lost
almost 10,000 acre-feet of water in 1992, at least 26,000 acre-feet
in 1993, and over 23,000 acre-feet in 1994. Kern County claims to have
lost at least 319,000 acre-feet during the same time span. The Plaintiffs
first urged the court to determine that a taking had in fact occurred,
and that the taking by the government was a physical taking versus a
regulatory taking. A physical taking occurs when the governments
action amounts to a physical occupation or invasion of the property
or strips the owner of possession of the property. A regulatory taking
occurs when the governments action results in a restriction on
the owners use of the property. Plaintiffs contend that a physical
taking had occurred because they held rights to a guaranteed quantity
of water, and that by stripping them of this contractual right, the
government has rendered the water contract valueless.
The NMFS offered three arguments as a defense: The restrictions on water
out-flows did not violate the contract, but rather only frustrated the
contract, using Omnia Commercial Co. v. United States as the basis for
4 In Omnia, the Supreme Court rejected the
Plaintiffs takings claim based upon the governments refusal
to fulfill obligations under a contract for steel plates.
The court held that the Fifth Amendment does not apply to situations
in which the contractual rights have merely been frustrated.
The defendant in the present case argued that, although Plaintiffs
rights were certainly injured, the contract had not been rendered valueless.
While the regulatory action interfered with the contractual expectations,
the interference cost the Plaintiffs only a fraction of the overall
value of the contract. Finally, the defendant argued the federal government
had merely imposed a limit on Plaintiffs title for which they
could not be held liable. The defendant based this argument on language
in the contract that provided immunity for the government in certain
situations. The defense argued that the Plaintiffs rights were
contingent upon the availability of water to the Department of Water
Resources, and the subsequent unavailability of the water was out of
the governments control. The court then addressed each of the
defense arguments in detail.
First, the court rejected the defendants argument under Omnia
that no taking occurred. This argument stated that the actions of the
government merely frustrated the contract. However, the court rejected
this claim by distinguishing Omnia from the present case because Omnia
involved a situation where the Plaintiff was unable to claim ownership
of the property. In the present case, the Plaintiffs can clearly claim
an interest in the water via their contracts and because they have a
property interest, the court held, a taking clearly occurred.
Once the court determined a taking had occurred, they addressed the
issue of whether a regulatory or physical taking had occurred. One situation
in which a physical taking can occur is when the government strips the
owner of possession of the property, thus rendering the property valueless.
The court determined that, by taking away the Plaintiffs rights
to use the water, a physical taking had occurred. By taking away the
Plaintiffs right to use the water, the government had in fact
rendered the right to the water valueless, therefore meeting the elements
of a physical taking.
Finally, the court addressed the issue of whether the Plaintiffs in
fact owned the property in question. The defendants raised several arguments,
including contractual limitation on Plaintiffs ownership, unreasonable
use of the water, and public nuisance. However, the court promptly discarded
each of these arguments holding: 1) no contractual limitations exist;
2) Plaintiffs use of the water is reasonable; and 3) Plaintiffs
use of the water does not constitute a public nuisance. In sum, the
court held that Plaintiffs had rights to the use of the water that was
provided for by contract.
The court plainly rejected all arguments made by the NMFS and agreed
with the Plaintiffs by concluding that a physical taking had occurred,
and that Plaintiffs were entitled to compensation for the loss of their
rights to water use. However, it must be noted that this case does not
stand for the proposition that the United States government, specifically
the NMFS, cannot take appropriate measures to protect endangered species.
The court clearly states that the government has the absolute right
to protect species under the Endangered Species Act. This case stands
for the principle that, when the government takes steps to protect an
endangered species, it cannot take away contractual rights in property
1. U.S. CONST. amend. V.
2. Armstrong v. United States, 364 U.S. 40, 49 (1960).
3. 16 U.S.C. § 1536 (a) (2) (1994).
4. Omnia Commercial Co. v. United States, 261 U.S. 502 (1923).