THE EFFECT OF THE KLAMATH TAKINGS CASE

Laura Schroeder and Wyatt Rolfe

Presented October 17, 2005, and the fall meeting of the Oregon Water Resources Congress

I. Introduction

In the spring of 2001, streamflow forecasts for southern Oregon projected 2001 water flows in the Klamath basin into Upper Klamath Lake would be critically low. For the Bureau of Reclamation, concern arose that its 2001 operating plan for the Klamath Project would adversely affect three endangered fish species of fish that would be threatened by low flows. As required by Endangered Species Act (“ESA”), Bureau of Reclamation (“BOR”) needed to consider “reasonable and prudent alternatives” to address the threat to the three species. In April of 2001, BOR issued a revised operation plan that terminated delivery of BOR to irrigators.

Following the denial of irrigation water during the 2001 season, 13 agricultural landowners and 14 water, drainage, or irrigation districts (“KP Irrigators”) brought suit in the United States Court of Federal Claims against the United States. They alleged that the actions of BOR in 2001 resulted in a compensable “taking” of property for a public purpose under the 5th Amendment of the United States Constitution.

The irrigators’ claim relied in part upon a case called Tulare Lake Basin Water Storage District v. United States, 49 Fed. Cl. 313 (2001). In Tulare, the same Court had recently ruled that it was unconstitutional for BOR to terminate water deliveries to irrigators without paying just compensation.In late August of 2005, the Court of Federal Claims denied the takings claim asserted by the Klamath irrigators in Klamath Irrigation District, v. United States, 2005 WL 2100579 (Fed.Cl.). The Court found that their claim could only proceed upon breach of contract grounds and that Klamath Project irrigators did not hold water rights because the United States had appropriated all available Klamath Basin water in 1905.

II. The Tulare **and Klamath Opinions**

A. Tulare Lake Basin Water Storage District v. United States

In 2001, the Irrigators in the Tulare basin sued the U.S. Government after water deliveries were shut down. Under its obligations to the ESA, the BOR had determined that water needed to be left instream for the benefit of endangered fish. Irrigators in the basin alleged that the shut-down of water was unconstitutional because the government had taken their water without paying for it. The Federal Court of Claims agreed. It held that the irrigators had rights to a quantity of permitted water through their irrigation contracts. The contractual right to water equated to “property” that the government must pay for if it takes the water.

B. Klamath Irrigation District v. United States, __ Fed.Cl. __ , 2005 WL 2100579 (2005).

Similar to the Tulare case, this summer’s Klamath case involved a claim by Klamath Project irrigators that the U.S. had taken water rights in violation of the Constitution. Klamath Project irrigators claimed that they should also be compensated for BOR’s termination of water deliveries in 2001 in order to fulfill its obligations under the ESA.
Unlike Tulare, the Court of Federal Claims in Klamath ruled that a 5th Amendment taking had not occurred. The Court in Klamath reached the conclusion that irrigation contracts held by Klamath Project irrigators did not constitute “property” that the government was prohibited from taking. The conclusion was based upon factual differences between Tulare and Klamath including the following:

1) Klamath irrigators hold contracts with BOR containing provisions that absolved the government of liability during water shortages. The Tulare contracts were between irrigators and the State of California so BOR could not rely of such a provision absolving it of liability.

Many Klamath Project irrigators relinquished their vested water rights in exchange for the contractual right to receive water pursuant to the BOR project.

Oregon legislation in 1905 declared that the State would remove water from appropriation for the benefit of the United States that would file notice to appropriate water for BOR projects through final plans of the project presented to the State.

III. Did Oregon Give Away its Water?

As part of the Klamath Court’s ruling, the Court of Claims held that in 1905, all available water in the Klamath Basin was appropriated by the United States pursuant to Oregon legislation. That legislation, according to the Court, operated to give the federal government all unappropriated water in any basin as long as the United States filed its intent to appropriate the water and then presented final plans for a project within statutory guidelines. The legislative act states:

Whenever the proper officers of the United States, authorized by law to construct works for the utilization of water within this State, shall file in the office of the State Engineer a written notice that the United States intends to utilize certain specified waters, the water described in such notice and unappropriated at the time of the filing thereof shall not be subject to further appropriation under the laws of this state, but shall be deemed to have been appropriated by the United States; provided, that within a period of three years from the date of filing such notice the proper officer of the United States shall file final plans of the proposed works in the office of the State Engineer for his information; and provided further, that within four years from the date of such notice the United States shall authorized the construction of such proposed work. No adverse claims to the use of the water required in connection with such plans shall be acquired under the laws of this State except as for such amount of said waters described in such notice as may be formally released in writing by an officer of the United States thereunto duly authorized, which release shall also be filed in the office of the State Engineer.

Or. Gen. Laws, 1905, Chap. 228, §2, p. 401-402 (emphasis added).

The Klamath Court found that when the United States notified Oregon of its intent to build the Klamath Project, the State of Oregon removed the requested water from appropriation, giving it to the United States for the Klamath Project. Its reasoning was based upon a 1917 case called In re Waters of the Umatilla River. In that case, the Oregon Supreme Court had arrived at the same conclusion within another irrigation project. In re Waters of the Umatilla River, 168 P. 922, 925 (Or. 1917). Further, in Umatilla, the Oregon Supreme Court held that pursuant to the 1905 legislation, United States claims to unappropriated water remained vested “regardless of diligence of the United States in matters not specified in the statute, and regardless of the amount of water required to irrigate the land served by the government ditches.” Klamath, 2005 WL 2100579, 17-18 (Fed.Cl.) (citing In re Waters of the Umatilla, 172 P. 97, 100 (1918)). In effect, the Klamath Court intimated that any United States appropriations made pursuant to Oregon’s 1905 Act and the Reclamation Act remain vested with the United States indefinitely even if the United States never used the water.

The Klamath Court’s interpretation of Oregon’s 1905 Act is at odds with a subsequent Oregon Attorney General Opinion issued in 1950. In contrast, the 1950 A.G. Opinion concluded that the United States could only acquire the unappropriated water of the Klamath Basin reasonably necessary for the Project and only to the extent the United States put those waters to “beneficial use.” Attempts by the KP irrigators to persuade the Court to adapt the A.G. Opinion were rebuffed.

IV. If Oregon gave away its water, what does that mean for the Klamath Adjudication?

Should the Klamath opinion be found to be a correct assessment of Oregon water law, the Oregon’s water regime within any BOR project basin will be in question as the United States would perpetually hold a vested right to the amount of water requested by the United States pursuant under the 1905 law. In the case of the Klamath Basin, this is an undeterminable and fluctuating amount of water dependant upon annual precipitation. The existence of such a variable naturally reduces the ability to confidently quantify or define competing water interests in the Basin. This uncertainty spreads beyond irrigators within the project and would have its most profound impact upon junior non-project irrigators.

Non-Project Irrigators – Affirmation of the Klamath ruling would operate primarily to the detriment of junior (post-1905) non-project irrigators in the Klamath basin.

1. If Oregon’s 1905 law withdrew all available Klamath basin water from appropriation indefinitely and for the benefit of the United States, all Klamath basin water permits and issued by the state after 1905 would be ineffective to support water use since the 1905 law would have left nothing more to appropriate. Taking this reasoning farther, jurisdiction of the remaining unappropriated waters may have past to the United States leaving nothing for the State. Under this reasoning, the Oregon Water Resources Department has no jurisdiction to issue water permits for water already belonging to the United States. Under such a holding, non-project irrigators must demonstrate that their right became vested prior to the 1905 withdrawal.

2. Should somehow post-1905, non-project water permits in the Klamath basin remain valid, they would nevertheless be subordinate to all BOR obligations.

Interior Solicitor Opinions provide in essence that water available to the Klamath Project is to be allocated considering the following legal priority: (1) ESA-listed species; (2) trust responsibilities to tribes determined by Interior to have instream reserved rights; (3) Klamath Project irrigation; and (4) Klamath Project wildlife refuges. See Paul S. Simmons, Klamath Basin: Endangered Species Issues and Other Water Management Issues, ALI-ABA Conference on September 18-19, 2003.

If the U.S. controls all Basin water as in the Klamath opinion, it will allocate project water according to the above obligations and priorities. These obligations though are not static. Like water availability from year to year, they may expand or contract. Any expansion will be at the expense of those non-project irrigators holding post-1905 rights or permits. This regime potentially could produce the following results:

New BOR project water development. Should BOR continue to develop land through the use of Project Water, it will be post-1905 non-project irrigators that lose water first. This creates a anomaly in Oregon water law. Although land would be reclaimed for the first time, the Bureau’s 1905 priority could displace an upstream non-project irrigator even though the Bureau did not beneficially apply water to land until sometime after 2005.

New and expanded ESA obligations based upon further scientific studies, listings, or legislation. Any water designated toward expanded ESA obligations (or any other new Congressional legislation) would come first at the expense of post 1905 non-project irrigators. Under the Klamath holding, events such as those in 2001 could have a drastically different outcome. Post 1905 non-project irrigators would be shut-down, whatever water remained after ESA obligations were met would flow to KP irrigators benefiting from the senior 1905 right held by BOR.

However, since the Oregon Supreme Court limited the appropriations of the BOR in Umatilla at the time of the adjudication, allowing continued development during the adjudication process seems at odds with that case.

Outside the Project