The Water Report Nov 2005

• Year: 2005
• Title: The Water Report
• Author: Envirotech Publications
• Description: Issue #21
• Publications - Doc Type: Other

November 15, 2005 The Water Report
Takings
State Role
ESA
Responsibility
Payment
Required
Damages
Formula
Valuation
Interest Rate
Settlement
Federal Claims
Cases
Finally, the court emphasized the role of the State in determining the allocation of use of SWP
water:
D -1485 is a comprehensive balancing of interests that recognized that while the "full protection" of
fish was perhaps possible, it was not ultimately in the public interest. The SWRCB chose not to
revisit that in -depth balancing of water needs and uses even as it reviewed the salinity standards it
had set in response to NMFS's biological opinion. We need not attempt to discern the state's
response to the threat, then, because the state has in fact spoken.
Id. at 324.
The court recognized that the federal government's decisions to divert plaintiffs' SWP water was
based on the government's concerns that the delta smelt and the winter -run Chinook salmon were in
jeopardy of extinction. Under the Endangered Species Act, the US Fish and Wildlife Service and
National Marine Fisheries Service are required to protect endangered fish and to "halt and reverse the
trend toward species extinction, whatever the cost." Id. at 315 (quoting Tennessee Valley Auth. v. Hill,
437 U.S. 154, 184 (1978)). The court did not purport to limit the government's ability to carry out its
responsibilities under the Endangered Species Act: "At issue, then, is not whether the federal
government has the authority to protect the winter -run Chinook salmon and delta smelt under the
Endangered Species Act, but whether it may impose the costs of their protection solely on plaintiffs." Id.
at 316. The court's answer to this question is clear: "The federal government is certainly free to preserve
the fish; it must simply pay for the water it takes to do so." Id. at 324.
Following a trial on damages at which both sides presented hydrologic and valuation testimony, the
court established a formula for calculating damages: "[t]he first step in calculating plaintiffs' recovery is
determining the quantity of water taken from each of the plaintiffs. That determination in turn depends
on three factors: the overall amount of pumping foregone, the portion of that loss properly attributable to
ESA restrictions, and the method by which that quantity would otherwise have been distributed." Tulare
Lake Basin Water Storage Dist. v. United States, 59 Fed. Cl. 246, 250 (2003). Following a two -week
trial, the court rejected the government's contention that the plaintiffs had actually lost no water as a
result of federal actions, and found plaintiffs' total water loss to be 307,334 AF. Adopting Plaintiffs'
valuation of approximately $68 per acre -foot for most of the water, the court awarded $14,599,164.78 as
the value of the water taken.
Finally, rejecting the government's assertion that Treasury bills provided the appropriate interest rate
to provide full compensation, the court adopted plaintiffs' contention that the interest rate should be based
on the "prudent investor rule" —how "`a reasonably prudent person' would have invested the funds to
`produce a reasonable return while maintaining safety of principal. "' Tulare Lake Basin Water Storage
Dist. v. United States, 61 Fed. Cl. 624, 627 (2004) (citations omitted). And because a reasonably prudent
investor would have diversified, the court concluded "that the best measure of compensation ... is the rate
of return achieved on plaintiffs' state - sanctioned accounts — accounts whose mix of investment
interests... provides a reasonable rate of return consistent with a high level of safety," (Id. at 628.).
Nearly $10 million in interest was awarded to the plaintiffs.
On December 21, 2004, the parties agreed to settle the case for a total payment of $16.7 million.
[See Moon, TWR #11.] The settlement allowed the government to avoid having to appeal a $26 million
judgment against the United States.
PENDING CASES
A number of other water rights compensation cases are currently pending in the Court of Federal
Claims at various stages of development. In Klamath Irrigation District v. United States, case number
01 -591L, a motion for certification for interlocutory appeal is pending before Judge Francis Allegra. In
Stockton East Water District v. United States, case number 04 -541L, the parties are currently briefing
cross motions for summary judgment with oral argument set for December 19, 2005 before Judge
Christine Miller. Initial discovery on liability closes December 31 of this year, in Casitas Municipal
Water District v. United States, 05 -168L, which is pending before Judge John Wiese, who decided Tulare
Lake. Decisions in these cases, which should be forthcoming shortly, should shed significant light on
issues of "takings" liability, damages and interest calculation. Below is a brief description of what is at
issue in each case.
Copyright© 2005 Envirotech Publications; Reproduction without permission strictly prohibited.