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Court Sets Precedent Requiring DOI To Compensate For ESA Taking

Land Letter

In an unprecedented water rights case, a federal judge has determined the government must compensate California Central Valley farmers to the tune of $25 million for water it diverted away from farms to help downstream endangered fish in the early 1990s.

Many observers predict the decision could jeopardize the federal government's ability to protect species under the Endangered Species Act. In particular, fish recovery may become an even more expensive venture if the government must compensate farmers for any water it withholds from farms and keeps in rivers for fish.

"It could be a significant precedent," said Justice Department attorney Fred Disheroon, who argued the case on behalf of the Interior Department in the U.S. Court of Federal Claims in Washington, D.C. "It's the first time we're aware of that the federal government has been directed under the Endangered Species Act to pay claims. That alone makes it a significant case."

Unlike land and other types of property, water is traditionally owned by the state, not individuals. Water rights entitle the holder to use the water, but do not grant ownership. Moreover, water rights are highly regulated, with the state usually placing restrictions on water usage. In California, water must be used for "beneficial" purposes and users must avoid wasting water.

"The decision has the perverse effect of elevating private water rights, which have traditionally been subject to strong public controls, above any other type of property right known to the law," said John Echeverria, director of the Environmental Law and Policy Institute at the Georgetown University Law Center.

In past cases, judges have usually determined that withholding all water equates to "taking" a property, entitling the water right holder to compensation under the Fifth Amendment. In this case, Tulare Lake Basin Water Storage District, et al. v. Interior Department, the farmers got roughly 80 percent to 90 percent of their water allocation. But Judge John Wiese concluded the farmers had an absolute right to the full amount of water laid out in their contract and any amount withheld required compensation.

The attorney for the farmers, Roger Marzulla of Defenders of Property Rights, said the reduction in water may have been small but it was enough to cause some growers to lose their farms. "Some of them not only lost crops but lost their very homes and their livelihood. So it's simply a matter of fairness and justice that the court has reimbursed them for what they gave up for the benefit of the fish, that is to say for the benefit of us, the public," Marzulla said.

Critics, including the Natural Resources Defense Council, have argued that the lawsuit is about more than compensation, and it is an attack on ESA itself. The decision could set a precedent where any regulatory action requires compensation, potentially starving the already shallow coffers of the ESA program, which will operate with $140 million for fiscal year 2004.

However, the $25 million in damages will not be drawn directly from the ESA budget.

And Marzulla countered that throughout the country, billions of dollars are spent every year on endangered species protection, noting California's recently unveiled plan to spend $5 billion on coho salmon restoration. Compensating property owners should be part of the cost of doing business, he said.

Brent Graham, the general manager for the Tulare Lake water district, insisted that the case was not an attack on ESA. The plaintiffs merely wanted reimbursement of damages, he said.

"When they took the water, we weren't about to fight or challenge the Endangered Species Act. That wasn't the purpose. It was the fact that the federal government took our water, and we should be compensated for the property right they took," Graham said.

Graham said he does hope the case will improve science in endangered species decisions, in contrast to what he called the government's "loose" science in the 1990s.

"I think [the decision] will help have better science on what amount of water you really need because the government, when they take the water, is going to have an expense based on our challenge. And I think you have to have good scientific data with regards to fish ... as to how much water you really need to meet those requirements," Graham said. Timing the water releases appropriately is also important, he said, noting that the government is doing more research on both the salmon and delta smelt affected by the Central Valley Project.

The Interior and Justice departments have not decided yet whether to appeal the case to the U.S. Court of Appeals for the Federal Circuit, according to Disheroon. Disheroon said he is confident the government could win on appeal, but if they lost in federal court it would set a more binding precedent on compensation under ESA.

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Reprinted with permission.
2002 E&E Publishing, LLC



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