U.S. to Pay $16 Million in Water Rights Case

The Bush administration announced Tuesday that it has agreed to pay $16.7 million to a group of Central Valley farmers and irrigation districts whose water deliveries were cut to protect endangered fish.

State officials had strongly urged the administration not to settle the farmers’ claims, arguing that such a precedent could make it prohibitively expensive to protect endangered species.

But the payment was immediately hailed as a significant victory by property rights advocates and critics of the Endangered Species Act.

“This is a very strong precedent,” said Brian Kennedy, a spokesman for the House Resources Committee, which is headed by one of the act’s most vocal detractors, Richard W. Pombo (R-Tracy). “This should really fire a shot across the bow of federal regulators, reminding them that their actions have consequences and their actions cost money.”

The U.S. Department of Justice settled the case despite widespread warnings that it would lead to a flood of similar claims. The California attorney general’s office, the Schwarzenegger administration and attorneys for the National Oceanic and Atmospheric Administration all wrote the Justice Department in the last year, asking the Bush administration to appeal a U.S. Court of Claims ruling in favor of the farmers.

Justice officials had little comment on their decision not to heed those recommendations. “This settlement is the result of careful and deliberate negotiations between the parties,” said department spokesman Blain Rethmeier.

The Claims Court ruling came in a lawsuit filed by Roger Marzulla, a former Justice Department official in the Reagan administration who is pursuing similar claims in three other cases. Although the settlement contains language stating that it establishes no legal precedent, Marzulla said the case “establishes the fundamental principal that the government is free to protect the fish; it simply has to pay for the water it takes to do so.

“The federal government,” he added, “has recognized it can’t come on like a bull in a china shop and seize all the water it wishes without paying for it.”

Calling the ruling “ill-conceived and poorly reasoned,” state Chief Deputy Atty. Gen. Richard Frank said the Bush administration’s decision to settle the case was disappointing. “I’m not going to say it will produce a sea change in federal law and policy, but it will generate additional claims and controversy.”

In a statement, Sen. Dianne Feinstein (D-Calif.) said the settlement was a “mistake that will establish a precedent that could require the public to pay tens of millions of dollars to water users in many cases where even a small portion of their anticipated deliveries are needed to protect endangered salmon or other fish.”

The case grew out of a drought in the early 1990s, when the State Water Project reduced deliveries to irrigation contractors to aid two fish species protected by the federal Endangered Species Act, the delta smelt and the Chinook salmon.

Marzulla, a leader in the property rights movement, argued that the farmers had a property right to the water and that when federal environmental protections forced a reduction in deliveries, that amounted to a taking under the U.S. Constitution. U.S. Claims Court Judge John Paul Wiese agreed, awarding the plaintiffs $14 million, plus attorneys fees and interest. Attorneys in the case expected that to total $26 million.

The settlement leaves it up to plaintiffs and attorneys to decide how to divvy up the $16.7 million. The plaintiffs include the Kern County Water Agency, several farm operations and the Tulare Lake Basin Water Storage District, which serves mega-farmer J.G. Boswell.

Sue Ellen Wooldridge, solicitor for the U.S. Interior Department, which oversees the Endangered Species Act, said she didn’t think the case would have a broad effect because federal water contracts have shortage provisions that effectively insulate them from takings claims.

“I think the ramifications are limited,” she said. “The federal contracts contain the shortage provisions which the courts have interpreted as allowing [the U.S. Bureau of Reclamation] to protect the species without causing a taking.”

In urging an appeal of Wiese’s decision, state officials said it undermined state law by finding that the end user of the water, the irrigation districts, held a property right to the water. Under California law, they said, the Department of Water Resources holds the rights to the water it diverts for farm and municipal use.

Environmentalists condemned the settlement, saying it amounted to an invitation for more claims.

“By settling rather than fighting this case, the Bush administration is simply encouraging more of these legal attacks against our water quality laws and other public safeguards,” said Hal Candee, senior attorney for the Natural Resources Defense Council. “That hurts the taxpayers as well as the environment.”

Marzulla has filed similar takings claims for $1 billion in the Klamath Basin, where fish protections forced irrigation cutbacks on the Oregon-California border, and for the city of Stockton and irrigators who lost deliveries from the New Melones Dam in the Central Valley. He said he is preparing another case in Ventura County.

“I think it is helpful to have this case resolved so we can pursue resolution of the other cases,” Marzulla said.

Interior Secretary Gale Norton previously served as a legal advisor to a property rights group founded by Marzulla’s wife, Nancie. But Marzulla said Norton recused herself from the Tulare case and played no role in it. “She has had nothing to do with the prosecution of the Tulare case,” he said.