The issue in this appeal is whether the Bureau of Reclamation (BOR) has discretion to reduce deliveries of available water under its contracts with irrigation districts and cities in New Mexico to comply with the Endangered Species Act, 16 U.S.C. § § 1531-1544(ESA). Roiling beneath this question is an array of interests, many represented here. Each depends on water, "the liquid that descends from the clouds as rain, forms streams, lakes and seas, issues from the ground in springs, and is a major constituent of all living matter," a definition mocked by the 2002 drought. Webster's Third International Dictionary 2591 (3d ed.1993). In a narrowly drawn order addressing carefully limited circumstances, the district court held BOR has discretion to reduce contract deliveries and restrict diversions to meet its duties under the ESA. We agree and affirm that portion of the order that remains before us.

The ESA, enacted in 1973, "represented the most comprehensive legislation for the preservation of endangered species ever enacted by any nation" by providing "a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved." Tenn. Valley Auth. v. Hill, 437 U.S. 153, 180 (1978); 16 U.S.C. § 1531(b). Under Section 7, 16 U.S.C. § 1536(a)(2), every federal agency must insure that "any action authorized, funded, or carried out by such agency ... is not likely to jeopardize the continued existence of the endangered species or threatened species." To do so, every federal agency is required to verify that its actions will not jeopardize any land-based listed species by consulting with, and obtaining the assistance of, the Secretary of Interior, acting through the Fish and Wildlife Service (FWS). 16 U.S.C. § 1536(4). Using "the best scientific and commercial data available," 16 U.S.C. § 1536(a)(2), the agency must determine if any listed species may be present in the area affected by a proposed project and must confer with the Secretary whenever an action is likely to affect such a species. 16 U.S.C. § 1536(a)(3). Upon determining a species is endangered and listing it, the Secretary must designate critical habitat "on the basis of the best scientific and commercial data available," 16 U.S.C. § 1533(b)(1)(A), and "make revisions ... after taking into consideration the economic impact, and any other relevant impact, of specifying any particular area as critical habitat." 16 U.S.C. § 1533(b)(2). Section 7, the Supreme Court has stated, "reveals a conscious decision by Congress to give endangered species priority over the 'primary missions' of federal agencies." Hill, 437 U.S. at 185.

Under the regulations accompanying an ESA listing, FWS is required to consult with the affected federal agencies, reviewing "all relevant information," 50 C.F.R. § 402.14(g)(1), to formulate a Biological Opinion (BO), a comprehensive examination of "whether the action is likely to jeopardize the continued existence of a listed species or result in the destruction or adverse modification of critical habitat." 16 U.S.C. § 1536(b)(3)(A); 50 C.F.R. § 402.02. If the BO concludes "destruction or adverse modification," 50 C.F.R. § 402.14(h)(3), FWS must "include reasonable and prudent alternatives, if any." Id. If such a reasonable and prudent alternative (RPA) results in "an incidental taking" which the FWS considers "appropriate," it must issue an Incidental Take Statement (ITS), immunizing the agency from prosecution under Section 9 of the ESA. 16 U.S.C. § 1536(o)(2), 50 C.F.R. § 402.14(i).

In the principal underlying amended complaint, non-profit environmental and conservation organizations, Defenders of Wildlife, Forest Guardians, National Audubon Society, New Mexico Audubon Council, Sierra Club, and Southwestern Environmental Center (Plaintiffs), on behalf of the Rio Grande silvery minnow (Hybognathus amarus) and the Southwestern willow flycatcher (Empisonax trailii extimus), [FN1] sued John W. Keys, III, Commissioner of the United States Bureau of Reclamation (BOR), the United States Army Corps of Engineers (Corps), and the United States Fish and Wildlife Service (FWS) (alternatively, Federal Defendants), [FN2] for actions alleged to jeopardize the silvery minnow. These federal agencies operate water diversion and storage facilities along the Middle Rio Grande, the New Mexico portion of the Rio Grande which extends from Velarde to the headwaters of the Elephant Butte Reservoir, north of Truth or Consequences, and includes the Rio Chama and Jemez River tributaries. After issuing its first order in that action on April 19, 2002 (Order I ), the district court allowed intervention by the State of New Mexico (the State), the City of Albuquerque (the City), the Middle Rio Grande Conservancy District (MRGCD), and the Rio Chama Acequia Association (RCAA) (collectively, Intervenors). In their appeals of the court's Order and Partial Final Judgment, Civ. No. 99-1320, September 23, 2002 (Order II ), now before us under Fed.R.Civ.P. 54(b), numerous parties have submitted amicus curiae briefs.

Brinkmanship precipitated either through inadvertence or design best characterizes the history of the litigation now before us. Two lines of cases converge here, one targeting the survival of the silvery minnow in its critical habitat under the ESA, the other challenging the impact of that designation on New Mexico's agricultural communities and burgeoning urban centers under the National Environmental Policy Act, 42 U.S.C. § 4321- 70d (NEPA), which requires all federal agencies to examine the environmental impact of "major Federal actions significantly affecting the quality of the human environment." 42 U.S.C. § 4332(2)(C). Although we only address the issues generated by the ESA action, our analysis resonates with issues raised by the NEPA litigation.

In the ESA litigation, we wrote in 1999, "[i]n 1991, the administrative process was set in motion to list the Rio Grande silvery minnow as an endangered species and designate its critical habitat." Forest Guardians v. Babbitt, 174 F.3d 1178, 1181 (10th Cir.1999). Although FWS listed the Rio Grande silvery minnow in 1994, Final Rule, 59 Fed.Reg. at 36988 (July 20, 1994) (to be codified at 50 C.F.R. pt. 17), the Secretary of the Interior did not concurrently designate its critical habitat, 16 U.S.C. § 1533(a)(3)(A), [FN3] instead agreeing to do so by March 1, 1995, a deadline that he later asked to extend until October 1999, because of Congress' 13-month spending moratorium from April 1995 through April 1996. Because the duty to list critical habitat arose before Congress declared the moratorium and remained unfulfilled even two and a half years after the moratorium expired, we held the Secretary violated his non-discretionary duty by failing to publish a final critical habitat designation by March 1, 1995. Id. at 1193. Though reluctant to impose the deadline plaintiffs requested, we remanded the case with the instruction the district court order the Secretary to issue the critical habitat designation "as soon as possible, without regard to the Secretary's other priorities under the ESA." Id. [FN4] In July 1999, eight years after the administrative process began, the Secretary designated 163 miles of the main stem of the Rio Grande, from Cochiti Dam to Elephant Butte Reservoir. See Final Designation, 64 Fed.Reg. at 36274-01 (July 6, 1999) (to be codified at 50 C.F.R. pt. 17).

This designation triggered a separate lawsuit by some of the parties here, who challenged its impact under NEPA and the ESA. In their consolidated action, MRGCD, the State, and environmental non-profits, Forest Guardians, Defenders of Wildlife, and Southwest Environmental Center, alleged FWS' designation was arbitrary and capricious for failing to adequately consider "to the fullest extent possible," the economic and other relevant impacts under NEPA, 42 U.S.C. § 4332; and, respectively, to reflect the "best scientific and commercial data available" under the ESA, 16 U.S.C. § 1536(c)(1).

In Middle Rio Grande Conservancy Dist. v. Babbitt, 206 F.Supp.2d 1156, 1170 (D.N.M.2000), the district court agreed the designation of the entire 163 miles of the Middle Rio Grande without adequate consideration of "the best scientific data available" or the "economic impact, and any other relevant impact" was invalid. Under ESA scrutiny, the court faulted FWS' failure to support the Final Rule on factual grounds; to scrutinize alternatives to the entire 163 miles of the Middle Rio Grande; "define with sufficient specificity what biological and physical features are essential to the survival of the silvery minnow;" and identify or justify the baseline used to determine impact. Id. at 1178-79. On NEPA grounds, the court rejected FWS' submission of a preliminary Environmental Assessment (EA), rather than the more detailed Environmental Impact Statement (EIS). [FN5] The court stated, "FWS' designation of critical habitat ignores completely the most basic reality of the Rio Grande: it is a fully appropriated river system. Rights to all of the river's surface water are legally held for a variety of beneficial uses." Id. at 1179 (emphasis in original). Indeed, FWS ignored "the probability of a vast shift in New Mexico's economy, culture, ecology and social life as wholly unremarkable." Id. at 1180.

In crafting relief at that time, the district court underscored, the "urgency of the situation and the complexity of the many interests to be reconciled require Defendants to do more than prepare an Environmental Impact Statement and issue a new final rule. Both the future of the Rio Grande silver [sic] minnow and the Middle Rio Grande Valley stand at imminent risk." Id. at 1193 (emphasis added). The court left the designation of critical habitat in place, however, while ordering FWS to issue a new rule to take effect within 120 days, ordered the Secretary to prepare an EIS, and urged his federal representatives to "fully and earnestly participate in mediation now being conducted" in a parallel action. Id. at 1193.

Although FWS proposed a new critical habitat designation on June 6, 2002, see Designation of Critical Habitat for the Rio Grande Slivery minnow, 67 Fed.Reg. 39206 (June 6, 2002) (to be codified at 50 C.F.R. pt. 17), the Secretary did not conduct an EIS, instead, appealing that portion of the court's injunction to allow FWS to reconsider whether an EIS was necessary. In Middle Rio Grande Conservancy Dist. v. Norton, 294 F.3d 1220, 1225 (10th Cir.2002), we rejected this argument, recalling that "FWS' compliance with NEPA and the ESA has been marked by massive delays and inadequate decision-making," which fully exacerbated the status of the Rio Grande silvery minnow. Id. at 1226. "These delays and irrational decisions come at the expense of the Silvery Minnow, officially endangered for nearly eight years. As FWS recognizes, damming, channelization, and the introduction of nonnative predatory fish have decimated the Silvery Minnow population [which] currently occupies only five percent of its historic range." Id. We agreed that preparation of an EIS was essential given the "overwhelming evidence that the designation will significantly affect the quality of the human environment ... [and] require pervasive changes in the distribution of Middle Rio Grande riverwater resulting in the reduction of irrigated agriculture acreage." Id. at 1227.

What "significantly" affects impact under NEPA includes a determination of "the degree to which the effect ... will be 'highly controversial.' " Id. at 1229; 40 C.F.R. § 1508.27(b)(4). Because the record fully established "the effects of water reallocation and curtailment of river maintenance are significant" and "controversial," id. at 1229, we instructed FWS and the federal agencies, especially BOR, responsible for managing and operating the dams, reservoirs and other projects slicing this span of the Middle Rio Grande, to insure "any action" proposed is "not likely to jeopardize the continued existence of any endangered species," 16 U.S.C. § 1536(a)(2), a duty, we warned, which might require reallocating the already fully appropriated waters of the Rio Grande. Id. at 1230.

In the meantime, in April 2000, Plaintiffs, here, sought a preliminary injunction to compel BOR and the Corps to initiate consultations with FWS to implement their discretionary alternatives to maintain sufficient flows in the Middle Rio Grande to avoid jeopardy to the silvery minnow based on FWS' initial studies. [FN6] On July 6, 2000, FWS initiated formal consultation with BOR and the Corps. Their consultations produced a final BO, on June 29, 2001, which found BOR's proposed actions in operating the federal water projects on the Middle Rio Grande would result in jeopardy to the silvery minnow. Plaintiffs then filed a second amended complaint adding Federal Defendants, FWS, the Secretary of the Interior, and the United States seeking review of the June 29, 2001 BO under the Administrative Procedures Act, 5 U.S.C. § 701 et seq. (APA), and alleging FWS violated the APA by issuing the BO without a reasonable and prudent alternative and failing to use the best scientific data as required by the ESA. Additionally, Plaintiffs alleged BOR and the Corps violated the ESA's procedural and substantive requirements by failing to consult fully with FWS over all their discretionary actions and by causing jeopardy and an unlawful taking of the silvery minnows under Section 7(a)(1) and Section 9 the ESA's substantive provisions.

In Order I, the district court upheld the June 29, 2002 BO after a comprehensive review of the ESA's procedural and substantive provisions and the plight of the Rio Grande silvery minnow. In its APA review, the court found the reasonable and prudent alternative, though permitting some intermittent drying of the river in the San Acacia reach, was not arbitrary and capricious. On Plaintiffs' consultation claim alleging BOR and the Corps have a duty to protect the silvery minnow more broadly, respectively, by limiting water deliveries under the Middle Rio Grande Project (MRGP) and the San Juan-Chama Project (SJCP) and altering the normal operations of Middle Rio Grande reservoir facilities, the court held, "BOR retains sufficient discretion over its river management and operations in the middle Rio Grande, specifically water deliveries under the Middle Rio Grande Project and under the San Juan- Chama Project, to require BOR to consult over those actions under Section 7(a)(2) of the ESA." That conclusion derived from the ESA definition of "agency action," which broadly embraced "any action authorized, funded, or carried out by such agency." 16 U.S.C. § 1536(a)(2); 50 C.F.R. § 402.02 (emphasis added). In resolving this "more hotly contested issue, federal agency discretion," the court looked both to the authorizing statute, the Reclamation Act, 43 U.S.C. § 372, the contracts governing BOR's allocations of water, and case law, in particular a trio of Ninth Circuit cases. Although the court found procedural violations of the consultation requirement in FWS' failure to expand the scope of consultation in a meaningful way by relying on BOR's own interpretation of its discretion, it credited FWS' "interim solution to avoid jeopardy in coordination with all the major players in the middle Rio Grande basin." Order I at 44. This solution, it remarked, was achieved after "unprecedented attempts to come to grips with all the competing interests for a very limited water supply in the middle Rio Grande basin." Id. Recognizing the circumstances were "complex, difficult to resolve, and evolving," the district court applauded the Federal Defendants for protecting the silvery minnow "without altering water deliveries to federal contractors." Id. at 44 (emphasis added). [FN7]

Five months later, piqued by BOR's failure to reinitiate consultations while delivering "nearly all" contracted water despite the severe drought in 2002, the district court chastised the Federal Defendants for asking it to uphold a jeopardy determination with no reasonable and prudent alternative. Order II at 2. Because only the Endangered Species Committee, popularly styled the "God Squad" under an amendment to the ESA, 16 U.S.C. § 1536(e), [FN8] may grant the exemption the Federal Defendants sought, the district court proceeded to address the substantive ESA issues raised by FWS' September 12, 2002 BO. The court found the best scientific data available consistently indicated the San Acacia reach of the Middle Rio Grande provided the surest possibility for the silvery minnow's survival. Nonetheless, the BO proposed targeting flows to the Albuquerque reach where the Silvery Minnow was already scarce. The court, thus, held the BO was arbitrary and capricious under the ESA's jeopardy and take provisions. [FN9] The court recognized delivering the same amount of contract water in 2003 would assure the Federal Defendants could not even meet the flow requirements set in the June 29, 2001 BO.

Despite this protracted and elaborate prelude, the district court's facilitating our review under Fed.R.Civ.P. 54(b), and the parties' assertion of jurisdiction under 28 U.S.C. § 1291, we are constrained to question whether the water level in the Rio Grande makes the issue before us justiciable. That is, under ¶ 14, [FN10] the contingency of how much water is flowing through the main stem of the Rio Grande and whether that amount satisfies the flow requirements for 2003, set either by the June 29, 2001 BO or a new BO, [FN11] appears to erode our power to decide the issue certified for review. Does this case present an actual case or controversy, ripe for review, or are we, in fact, being asked for an advisory opinion? "The case or controversy requirement of Article III admonishes federal courts to avoid 'premature adjudication' and to abstain from 'entangling themselves in abstract disagreements.' " U.S. West, Inc. v. Tristani, 182 F.3d 1202, 1208 (10th Cir.1999), quoting Keyes v. Sch. Dist. No. 1, Denver, Colo., 119 F.3d 1437, 1443 (10th Cir.1997). Although Plaintiffs questioned whether this case is ripe for review while Federal Defendants and Intervenors urge a decision on the merits, we must first assure our jurisdiction. Prairie Band of Potawatomi Indians v. Pierce, 253 F.3d 1234 1240 (10th Cir.2001).

Ripeness is "peculiarly a question of timing." Reg'l Rail Reorganization Act Cases, 419 U.S. 102, 140 (1975). While a focus on whether the issue is ripe for review is sufficient to support standing, ripeness asks whether, in fact, there "yet is any need for the court to act." 13A C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3532.1, p. 130 (1984). "A claim is not ripe for adjudication if it rests upon 'contingent future events that may not occur as anticipated or indeed may not occur at all.' " Texas v. United States, 523 U.S. 296, 300 (1998), quoting Thomas v. Union Carbide Agric. Prod. Co., 473 U.S. 568, 580-81 (1985) (internal quotations omitted).

To decide whether to act under these uncertainties, courts take a functional approach, balancing the need for decision against the risks of decision. See New Mexicans for Bill Richardson v. Gonzales, 64 F.3d 1495, 1499 (10th Cir.1995) ("The doctrine of ripeness is intended to forestall judicial determination of disputes until the controversy is presented in clear-cut and concrete form."). The need side of the equation includes "the importance attached to the interests that may be injured, the extent of the anticipated injury, and the probability that the injury will occur." 13A C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3532.2, p. 146. The risks of deciding may include "the relationships of the federal judiciary with other branches of the federal government and with state institutions, the need to conserve judicial resources, and the risk that premature decision may be proved unwise as facts are more fully developed." Id. at 147. This equation may be expressed in terms of the "fitness of the issues for judicial decision and the hardship to the parties of withholding court considerations." Abbott Laboratories v. Gardner, 387 U.S. 136, 149 (1967).

Applying these factors to the case before us, we believe the balance tips in favor of appellate review. The importance of the interests at stake--the preservation of an endangered species, which "admits of no exception," Hill, 437 U.S. at 173, and the federal agencies' obligation to fulfil existing water contracts as well as the extent of the injury, extinction of the silvery minnow if the drought persists, unless available water is allocated, and the potential harm to water users--outweigh the risk of a premature decision. As detailed here, the factual record has been accumulated over the last twelve years. The only "facts" left to develop depend on snow pack and rain, uncertain future events whose effect will be better understood once the legal issue, presently fully developed and concrete, is resolved. "The issue presented in this case is purely legal, and will not be clarified by further factual development." Thomas v. Union Carbide Agr. Products Co., 473 U.S. 568, 581 (1985).

Importantly, resolution of the purely legal question at the heart of this appeal may permit the parties to fully address the array of long-term planning and water management issues which lurk beneath the surface of each of the issues presented here. "Rather than asking, negatively, whether denying relief would impose hardship, courts will do well to ask, in a more positive vein, whether granting relief would serve a useful purpose, or, put another way, whether the sought-after declaration would be of practical assistance in setting the underlying controversy to rest." State of R.I. v. Narragansett Indian Tribe, 19 F.3d 685, 693 (1st Cir.1994) (ripeness analysis under the Declaratory Judgment Act). Indeed, if the Federal Defendants have, in fact, reinitiated broader consultation, certainty about their discretion to reallocate water under the contracts would permit a fuller evaluation of the solutions each party seeks.

Moreover, if we dismiss this case on the basis of ripeness, we essentially wipe the slate clean leaving the parties to develop the merits anew. We, therefore, must tip the balance to conserve the already vast investment of judicial and executive agency resources. Under all of these circumstances, "delay means hardship." Shalala v. Ill. Council on Long Term Care, 529 U.S. 1, 12 (2000).

Although Plaintiffs filed the underlying action to prevent jeopardy by drying portions of the Rio Grande determined to be the critical habitat of the silvery minnow, the heart of this case devolves to the interpretation of contracts authorized by several statutes enacted to address river aggradation and flood and sediment control in the Colorado River Basin and Middle Rio Grande Valley. With the entire case before us in this interlocutory appeal, and the record fully developed, we review the contracts, statutes, and regulations de novo. Sierra Club v. Marsh, 816 F.2d 1376, 1382 (9th Cir.1987) (citations omitted).

Colorado River Storage Project Act of April 11, 1956, 43 U.S.C. § 620. [FN12] Section 620g of the Colorado River Storage Project Act directed the Secretary of the Interior:

43 U.S.C. § 620g (emphasis added). As anticipated by 43 U.S.C. § 620, which crafted the initial stage of the San Juan-Chama Project in 1956, the SJCP Act of 1962 directed the Secretary:

An amendatory contract, executed on July 6, 1965, authorized by a subsequent Act of Congress of March 26, 1964, authorized the Secretary "to make water available for a permanent pool for fish and wildlife and recreation purposes at Cochiti Reservoir from the San Juan-Chama Project." The court's decision in Jicarilla Apache Tribe v. United States, 657 F.2d 1126, 1133 (10th Cir.1981), prompted the amendment. Under this contract, the City agreed to release a portion of its San Juan-Chama Project water for the Cochiti Reservoir.

Congress approved the Middle Rio Grande Project (MRGP) under the Flood Control Acts of 1948 and 1950, 33 U.S.C. § § 701s, 701f-2, respectively, for flood control and reclamation. [FN20] Besides improving and stabilizing the economy of the Middle Rio Grande Valley, the proposal sought to rescue and rehabilitate the Middle Rio Grande Conservancy District (MRGCD), organized with private capital in 1925 as a political subdivision of the State, but floundering by the late 1940s because of its "originally unsound basis of assessment of benefits." A Plan for Development of the Middle Rio Grande Project, New Mexico, Report on the Potential Project Plan, drafted by the BOR, August 30, 1947 (MRGP Plan). To that end, the United States agreed to acquire the MRGCD's obligations and cancel all indebtedness in exchange for MRGCD's conveying and assigning "all of its property rights, including reservoirs, canals, dams, and flood-control works, together with its water rights, and including title and ownership thereto ... such property so conveyed to the United States shall be so held until Congress otherwise directs." MRGP Plan. The MRGP Plan included "fish and wildlife features" and further provided:

In general, any contract between the district and the United States should be in pursuance of the Federal reclamation laws as modified by specific direction of the Congress in pursuance of the provisions of section 9(a) of the Reclamation Project Act of 1939 [43 U.S.C. § 485].

BOR contends the Repayment Contracts [FN22] define their obligations under the ESA. Because the contracts do not expressly permit a reduction in deliveries of project water below their fixed amounts, BOR maintains it lacks discretion to comply with the ESA. BOR tethers this argument to 50 C.F.R. § 402.03, which states, "Section 7 and the requirements of this Part apply to all actions in which there is discretionary Federal involvement or control." Consequently, BOR lacks authority under the ESA to short its negotiated water contracts. Under this view, the Water Shortage Clause "on account of drouth or other causes," applies only to circumstances in which it is "impossible" to deliver the fixed contractual water, not to situations in which it creates the shortage for purposes of complying with the ESA. BOR contends the latter action clearly expands its existing authority, a proposition rejected by Am. Forest and Paper Ass'n v. U.S. E.P.A., 137 F.3d 291, 299 (5th Cir.1998) ("the ESA serves not as a font of new authority, but as something far more modest: a directive to agencies to channel their existing authority in a particular direction"); Platte River Whooping Crane Trust v. Fed. Energy Regulatory Comm'n, 962 F.2d 27, 34 (D.C.Cir.1992).

BOR relies on Sierra Club v. Babbitt, 65 F.3d 1502 (9th Cir.1995), both to support this argument and to contrast the contrary conclusions reached in O'Neill v. United States, 50 F.3d 677 (9th Cir.1995); Natural Res. Def. Council v. Houston, 146 F.3d 1118 (9th Cir.1998); and Klamath Water Users Protective Ass'n v. Patterson, 204 F.3d 1206 (9th Cir.2000). In Sierra Club, environmental plaintiffs sued the Secretary of the Interior to enjoin the construction of a logging road alleged to adversely impact the Northern spotted owl. 65 F.3d at 1502. The Ninth Circuit affirmed the denial of injunctive relief upon accepting the opinion of the Regional Solicitor for the Bureau of Land Management that there was no discretionary federal action to which section 7(a)(2) could apply, "based on the three specific limitations of the right-of- way agreement, the regulations, and the statute." Id. at 1509-10. Under those specific circumstances, the court held, "Congress did not intend for section 7 to apply to an agreement finalized before passage of the ESA where the federal agency currently lacks the discretion to influence private activity for the benefit of the protected species." Id. at 1511-12. Here, too, BOR asserts it retained no discretion "to change or ignore its contractual commitments" through ESA fiat expanding its authority. See also Envtl. Protection Info. Center v. Simpson Timber Co. (Epic ), 255 F.3d 1073, (9th Cir.2001) (take permit for Northern spotted owl did not reserve discretion for FSW to act to protect Coho salmon and marbled mullet later listed as protected species).

Moreover, BOR contends because the MRGP Act did not mention the use of water for fish and wildlife and the SJC Project Plan expressly excluded this use in a later report, [FN23] using the already contractually committed water is not "consistent with the scope of the Federal agency's legal authority" to constitute a reasonable and prudent alternative under the ESA. 50 C.F.R. § 402.02. A reasonable and prudent alternative must be within the agency's authority, BOR insists; otherwise, it is an unreasonable expansion of agency authority under the ESA.

50 C.F.R. § 402.02. We fully agree BOR's negotiating and executing these contracts is "agency action." Houston, 146 F.3d at 1126. Hence, the breadth of this plain language surely places the burden on BOR to show how, in carrying out the mandates of the reclamation laws through the Repayment Contracts, BOR intended to limit Congress' sovereign authority to enact subsequent legislation that figures into the interpretation of these contracts. [FN25] The question before us, then, is whether the Repayment Contracts, a watershed of numerous congressional authorizations, reserve discretion for BOR to comply with the ESA.

"Federal law controls the interpretation of a contract entered pursuant to federal law when the United States is a party." United States v. Seckinger, 397 U.S. 203, 209-10 (1970); Howard v. Group Hosp. Serv., 739 F.2d 1508, 1510-11 (10th Cir.1984) (federal law controls when outcome of suit has direct effect on the United States). The Repayment Contracts expressly rooted their authorization in the federal reclamation laws, "all as amended or supplemented."

This result is fully in line with O'Neill, Houston, and Klamath, correctly relied upon by the district court. O'Neill turned on contract interpretation, as does this case. Addressing BOR's argument that the language of the shortage clause is "broad and unambiguous and that shortage stemming from mandatory compliance with ESA and CVPIA are shortages resulting from 'any other causes,' " 50 F.3d at 682-83, the court stated, " '[a]ny other causes' is a catchall phrase that does not 'explicitly' include any particular causes." Id. at 683 (emphasis in original). The court concluded, "the contract's liability limitation is unambiguous and that an unavailability of water resulting from the mandates of valid legislation constitutes a shortage by reason of 'any other causes.' " Id. at 684. Further, the Ninth Circuit concluded "[n]othing in the [ ] contract surrenders in 'unmistakable terms' Congress's sovereign power to enact legislation. Rather, the contract was executed pursuant to the 1902 Reclamation Act and all acts amendatory or supplementary thereto." Id. at 686. There, as here, the "contract contemplates future changes in reclamation laws." Id. [FN28]

In Houston, which involved water renewal contracts to be negotiated after passage of the ESA and the CVPIA, the water districts argued BOR lacked "discretion to alter the terms of the renewal contracts, particularly the quantity of water delivered." 146 F.3d at 1125. The court rejected the Solicitor of the Interior's conclusion he lacked "discretion to change the quantity of water delivered under the contracts because the districts have 'a first right ... to a stated share or quantity of the project's available water supply.' " Id. at 1126. The court relied on O'Neill to recognize "the total amount of available project water could be reduced in order to comply with the ESA or state law." Id. The Ninth Circuit concluded when negotiating the renewal contracts, BOR has discretion to alter the key terms and "may be able to reduce the amount of water available for sale if necessary to comply with ESA." Id.

In Klamath, third-party water users sought to enforce water contracts with BOR as third-party beneficiaries entitled to enforce the existing terms of contracts negotiated in 1956. 204 F.3d at 1206. Holding the water users did not have any rights to enforce the contracts other than those of "incidental beneficiaries," the court first observed that the contract "evince [d] the unmistakable intent that Reclamation controls the Dam ... and makes clear that the United States retains overall authority over decisions on use of Project waters." Id. at 1213. The responsibilities of that status included, "the authority to direct Dam operations to comply with the ESA." Id.

This conclusion not only fully reflects the terms of the Repayment Contracts but also the absence of any contractual provision specifying absolute amounts of water. Given the potential for fluctuation in the "actual available water" and "estimated firm yield," as acknowledged by BOR, and the contracts' recognition of the possible reductions in "available water," BOR's discretion to reduce contract deliveries for "other causes" to include its compliance with the ESA comports with the reality of performing the Repayment Contracts and is consonant with the analysis of United States v. Winstar Corp., 518 U.S. 839, 877 (1996).

§ 2; N.M. Stat. Ann. § § 72-1-1 [FN30], 72-12-1. [FN31] As a signatory to the Rio Grande Compact, the Colorado River Compact, and the Upper Colorado River Basin Compact, [FN32] the State sought to protect its responsibility for allocating and administering its waters and fulfil its role as parens patriae. Alleging the district court's order impairs its ability to supervise the appropriation and distribution of state waters, the State contends the court's "seizing" water from Heron Reservoir irreparably harms its citizens. This error springs from the district court's failure to recognize that SJC Project water is entirely imported from the Colorado River and has no effect on the flows of the Rio Grande. In the State's view, the lack of native water causes the harm. Thus, the causal link between trans basin water from the SJC Project and jeopardy to the silvery minnow is missing. The question, then, is not "whether imported water, the diversion and use of which in no way harms the minnow" supports injunctive relief, but whether the ESA requires BOR to expand its consultation with FWS to include seizing water from contractors, an action BOR did not propose to take. The district court's remedy, the State maintains, usurps BOR's authority, misreads the ESA, and misinterprets the Repayment Contracts and the SJCP Act.

The State's argument rests on a mistaken reading of Jicarilla Apache Tribe v. United States, 657 F.2d 1126 (10th Cir.1981), which does not broadly stand for the proposition that using SJC Project water for recreation, fish and wildlife purposes is not beneficial under the SJCP Act and state law. In deciding whether the City of Albuquerque could divert solely for recreational purposes its "excess water," most of which would evaporate in the planned reservoir storage, the court acknowledged, "[i]t generally can be said that state law governs the distribution of water from federal projects unless Congress expresses a different approach." Id. at 1133. In New Mexico, an arid state, "[w]ater conservation and preservation [are] of utmost importance. Its utilization for maximum benefits is a requirement second to none, not only for progress but for survival." Id. (citation omitted). Thus, absent a specific congressional authorization, "storage of [project] water is to be only for beneficial consumptive use." Id. at 1139. [FN34] Evaporation of 93% of the stored water, then, was not a beneficial use sanctioned by the SJCP Act.

The City contends reallocation of imported Colorado River Basin water to alleviate the effects of the drought on the silvery minnow exceeds BOR's authority under the ESA. [FN35] The error, the City maintains, derives from the district court's view the ESA overrides pre-existing contractual rights. Although the ESA contemplates BOR's entering into contracts and granting leases constitute "action" under 50 C.F.R. § 402.02(c), these pre-ESA contracts cannot trigger expanded consultation duties unrelated to the express terms of the contract. In its view, the fixed Repayment Contracts, essentially, are off-limits as a mechanism of any solution to ESA compliance. Because the ESA merely provides "directives" and does not represent any new grant of power, BOR cannot avoid jeopardy to the silvery minnow by acting outside of its agency authority. American Forest & Paper Ass'n v. EPA, 137 F.3d 291, 299 (5th Cir.1998); Platte River Whooping Crane Critical Habitat Maint. Trust v. FERC, 962 F.2d 27, 34 (D.C.Cir.1992).

The MRGCD extends 150 miles from the Cochiti Dam, south of the city of Santa Fe, to the Bosque del Apache National Wildlife Refuge, and encompasses 128,787 acres of irrigable lands, half of which are presently irrigated. The MRGCD includes six Indian pueblos, Albuquerque, and numerous towns and villages. Since its creation under the New Mexico Conservancy Act, N.M. Stat. Ann. § § 73-14-1 to 73-14-5, the MRGCD has grown from its Albuquerque Chamber of Commerce and landowner roots to become a key participant in state water management. [FN37] Presently, of its 238,000 a.f. of water, MRGCD asserts that 217,000 a.f. are native or non-project water and 20,900 a.f. are SJC Project water.

Nonetheless, to fortify its substantive arguments here, MRGCD filed a cross claim to quiet title to MRG Project works under 28 U.S.C. § 2409a(b). [FN38] Correctly, the district court did not resolve the claim which will remain pending until the "conclusion of any appeal therefrom, and sixty days." When it is properly before the district court, that claim will, no doubt, be resolved by reviewing the federal reclamation legislation authorizing the MRG Project and the 1951 Repayment Contract which provided:

Absent the quiet title claim, our resolution of MRGCD's appeal must remain focused on BOR's obligations under the ESA as a consequence of its water resource development whether that water is native or imported. [FN39] That BOR neither owns nor holds rights to native waters, has no reservoirs on the Middle Rio Grande, or "has neither purchased nor appropriated any water for delivery to Middle Valley farmers," is not determinative of BOR's obligation to consult with FWS and comply with the ESA. BOR's retaining authority to manage MRGCD and SJCP works triggers its ESA obligations. Klamath Water Users, 204 F.3d at 1213. [FN40]

The non-liability provisions in these contracts, common in water agreements, see Benson, Whose Water Is It?, 16 Va. Envt'l L.J. at 394, are exculpatory. Their purpose is to "hold[ ] the United States harmless from liability for damages arising by reason of shortages in irrigation water resulting from distribution or any other causes." Orchards v. United States, 4 Cl.Ct. 601, 612 (1984). They are defensive in nature, and to interpret them as affirmative grants of discretion to enforce the ESA and reduce contract deliveries in the absence of a shortage does violence to their language and intent.

However, this court has recognized that the "recreation and fish and wildlife benefits" are incidental benefits of the SJC project, not primary purposes. Jicarilla Apache Tribe v. United States, 657 F.2d 1126, 1139 (10th Cir.1981). [FN5] Though the court finds it significant that the contract recognizes this fish and wildlife use, the next sentence of the provision suggests that the provision inures to the benefit, not the detriment of, the City: "The supply to be available for water users of the City, and the costs payable by the City for a municipal water supply reflect apportionment among these purposes and regulation of releases." ¶ 18h, VI Aplt. (COA) App. 1193; see also ¶ 12h, IV Aplt. (MRGCD) App. 903 (similar provision in the MRGCD SJC contract). The general purpose language about "fish and wildlife benefits" really says nothing about how water will be furnished for any of the mentioned uses-for that, one must read the balance of the contract. It certainly does not suggest that the quantities contracted for will be reduced for unstated fish and wildlife benefits, and, as discussed in the next section, nor does any statute fill that gap.

The City suggests that the "Other Uses" provision was prompted by the Fish and Wildlife Coordination Act ("FWCA") of 1958, Pub.L. No. 85-624, 72 Stat. 563. See 16 U.S.C. § § 661-666(c) (current version). This court relies upon the FWCA as another source of authority for the district court's order requiring consultation and an RPA. Ct. Op. at 48-49 (relying upon § § 662(a) & (c)). The FWCA "requires federal agencies to consult with the USFWS and to develop some plan for the mitigation of losses to fish and wildlife populations that might result from proposed agency actions although the USFWS has no authority to require the agency to adopt its recommendations." Texas Comm. on Natural Res. v. Marsh, 736 F.2d 262, 267 (5th Cir.1984); see also id. at 268 (noting that FWCA compliance can be challenged in a NEPA action, though no private right of action exists), on reh'g, 741 F.2d 823 (5th Cir.1984); Zabel v. Tabb, 430 F.2d 199, 209-10 (5th Cir.1970). The consultation and reporting requirements generally apply to the planning and construction stages of a project. S.Rep. No. 85-1981 (1958), reprinted in 1958 U.S.C.C.A.N. 3446. Moreover, use of the water for wildlife conservation purposes would require a general plan approved jointly by the federal agency exercising primary administration, the Secretary of the Interior and the head of the state wildlife agency. 16 U.S.C. § 663(b). The report supporting approval of the SJC project indicates that New Mexico stated its intention not to use project water for fish and wildlife purposes. Coordinated Report on the San Juan-Chama Project, H. Doc. No. 86-424, xxx, 19, reprinted in V Aplt. (COA) App. 746, 771.

Although a provision of the FWCA allows a federal agency to modify the operation of water-control projects to conserve wildlife, by its terms the provision applies to projects "the construction of which has not been substantially completed" on the date of the FWCA's enactment and the purpose of the modification must be "to accommodate the means and measures for such conservation of wildlife resources as an integral part of such projects." 16 U.S.C. § 662(c). Of course, this project is completed, and it is doubtful that providing water to an endangered species in times of drought could be characterized as an integral part of the SJC project. Regardless, such a general directive simply does not address the BOR's authority to reallocate project water to benefit wildlife when the project water is committed by contract.

The court also relies upon the Reclamation States Emergency Drought Relief Act ("RSEDRA") of 1992 which allows the Secretary of the Interior to make water from federal reclamation projects available "for the purposes of protecting or restoring fish and wildlife resources." 43 U.S.C. § 2212(d). The fact that the governor of New Mexico declared a drought and requested relief under the Act in no way alters contractual responsibilities. Section 2211(a) provides that "[c]onsistent with existing contractual arrangements and applicable State and Federal law, and without further authorization, the Secretary is authorized to undertake construction, management, and conservation activities that will minimize, or can be expected to have an effect in minimizing, losses and damages resulting from drought conditions." (emphasis supplied). Although the Secretary is authorized to consider temporary operational changes to mitigate fish and wildlife losses, the Secretary must act in a manner "consistent with the Secretary's other obligations" 43 U.S.C. § 2242, which surely includes honoring contractual obligations. Although it is argued that the ESA is another obligation imposed upon the Secretary, as discussed previously the ESA obligation is dependent upon discretion which is lacking here. The RSEDRA, while allowing the Secretary to benefit fish and wildlife in times of drought through voluntary transfers or allocation of uncommitted water supplies, does not alter existing contractual rights of the City or the MRGCD. [FN6] In fact, the intent of the provision to benefit fish and wildlife was to allow the Secretary to respond "in the same manner as he could respond to communities and individuals." S. Rep. 102-185, 12, reprinted in 1992 U.S.C.C.A.N. 55, 62. No one suggests that the Secretary could unilaterally reallocate contract water from one community or individual to another under the authority of the RSEDRA.

Nor does the Colorado River Storage Project Act, specifically 43 U.S.C. § 620g, which authorizes the Secretary "to investigate, plan, construct, operate and maintain ... facilities to mitigate losses of, and improve conditions for, the propagation of fish and wildlife," invest the BOR with necessary discretion. Like similar language in the FWCA and the RSEDRA, this authority does not include the power to reallocate available water committed by contract.

Both the district court and this court rely upon a trio of Ninth Circuit cases that are readily distinguishable, though we are not bound to follow them. In O'Neill v. United States, 50 F.3d 677 (9th Cir.1995), the Ninth Circuit upheld a district court determination that a long-term water service contract did not obligate the government to comply with its full contractual commitments when the water could not be delivered consistently with the requirements of the ESA and the Central Valley Project Improvement Act ("CVPIA"). Id. at 680. The CVPIA, enacted in 1992, constituted a shift in reclamation law subsequent to the contracts, and specifically required the BOR to provide 800,000 acre-feet of project water for fish and wildlife and habitat restoration and compliance with future obligations under the ESA. Id. at 686, 689 n.7; Reclamation Projects Authorization and Adjustment Act of 1992, Pub.L. No. 102-575, § 3406(b)(2), 106 Stat. 4600, 4715-16. In response to the argument that the government would be liable for its failure to deliver the water to contractors, the court held that the "contract's liability limitation is unambiguous and that an unavailability of water resulting from the mandates of valid legislation constitutes a shortage by reason of 'any other causes.' " O'Neill, 50 F.3d at 684. Not surprisingly, the court also held that the contract was subject to future changes in reclamation law:

In Natural Res. Def. Council v. Houston, 146 F.3d 1118 (9th Cir.1998), the Ninth Circuit again considered contract renewals pursuant to the CVPIA. The court held that contract renewals are plainly "agency action" under the ESA and that the BOR had discretion to reduce the amount of available project water to comply with the ESA or state law. Id. at 1125-26. As previously discussed, this case does not involve contract renewals. Subsequently, the Ninth Circuit has made clear that Houston turns on the discretionary nature of contract renewal terms, not on a freestanding right of the BOR to amend the contracts at any time to further the goals of the ESA. Simpson Timber Co., 255 F.3d at 1082.

Finally, in Klamath Water Users Protective Ass'n. v. Patterson, 204 F.3d 1206 (9th Cir.1999), the court held that various water users were not third- party beneficiaries of a 1956 contract between the BOR and a power company that operated a BOR project. Id. at 1211. The BOR established a new interim operating plan altering water flow levels to which the power company eventually agreed. Id. at 1209. The new plan was motivated not only by the ESA, but also by the necessity of compliance with various tribal fishing and water treaty rights. Id. The court held that the ESA, though passed subsequent to the contract, applied "as long as the federal agency retains some measure of control over the activity.... Therefore, when an agency, such as [the Bureau of] Reclamation, decides to take action, the ESA generally applies to the contract." Id. at 1213 (citations omitted). Central to the Ninth Circuit's holding were provisions indicating that "the United States retains overall authority over decisions on use of Project water," including a provision that the power company's decisions could be overridden by the BOR. Id. Accordingly, the court, interpreting but one of a multitude of Klamath project contracts, held "that [the Bureau of ] Reclamation has the authority to direct [project] operations to comply with the ESA." Id. As discussed above, the BOR simply has not retained the same measure of discretion when it comes to abrogating the contractual obligations at issue here; rather, it has provided the City and the MRGCD a quantifiable right to delivery of available water.

This case has enormous significance. Although the contracts at issue establish certain bilateral rights and duties, the court's interpretation renders the contracts somewhat illusory because the BOR will have discretion to modify those rights and duties, thereby rendering uncertain the parties' settled contractual expectations. In the end, the court concludes that it is the government's "authority to manage MRGCD and SJCP works" that triggers the ESA obligations to consult and presumably reallocate water. [FN8] Ct. Op. at 54. This is in considerable tension with Supreme Court authority (and the Reclamation Act, 43 U.S.C. § § 372, 383) recognizing that the federal government generally must respect state-law water rights and lacks any inherent water right in water originating in or flowing through federal property. [FN9] See United States v. New Mexico, 438 U.S. 696, 716-18 (1978); California v. United States, 438 U.S. 645, 665 (1977); Ickes v. Fox, 300 U.S. 82, 94- 95 (1937); United States v. City of Las Cruces, 289 F.3d 1170, 1176 (10th Cir.2002); Holguin v. Elephant Butte Irrigation Dist., 575 P.2d 88, 91-92 (N.M.1977); Middle Rio Grande Water Users Ass'n v. Middle Rio Grande Conservancy Dist., 258 P.2d 391, 398 (N.M.1953). Under the court's reasoning the ESA, like Frankenstein, despite the good intentions of its creators, has become a monster. The ESA was never meant to allow the federal government, on behalf of endangered species, to overturn this established precedent. The BOR merely operates the works; it lacks any reserved or acquired water right (let alone with priority) that would allow it unilaterally to take and use the water for the sole benefit of an endangered species. See Nevada v. United States, 463 U.S. 110, 126 (1983). It matters not that reclamation projects are heavily subsidized or viewed as a bad bargain by some; the government is not free to breach those contracts. The court's alternative holding, that this practice can be justified by the ESA (as incorporated into the contracts via the doctrine of unmistakable terms) regardless of whether the contracts confer discretion, is unprecedented. I would vacate the district court's injunction with directions to remand this matter to the FWS for further ESA consultations in view of what I believe to be the properly limited scope of the BOR's discretion.