A hearing on the contest case involving the parties to this litigation (Hearing Officer Panel Case No. 003) is still scheduled for April, 2004.  While the number of claims consolidated in Case No. 003 will most likely increase, defendant anticipates that the overall impact on the schedule will be minimal.  Thus, it is anticipated that there will be a decision from the Hearing Officer on Case No. 003, which involves the Klamath Project water rights, by the end of calendar year 2004. 

As to the entire adjudication, based on our knowledge of the current schedule and the cases not yet activated, defendant anticipates that a final order from the OWRD on all of the adjudication claims could be ready to file with the circuit court in calendar year 2008.  This Order of Determination is enforceable upon issuance and is in “full force and effect from the date of its entry in the records of the department, unless and until its operation shall be stayed by a stay bond as provided by ORS 539.180.”  ORS § 539.140(4); see also United States v. Oregon , 44 F.3d 758, 764 (9^th Cir. 1994).

2.   The status of water deliveries to plaintiffs and other Klamath Basin water users under operation plans for 2001, 2002, 2003 and subsequent years, and a discussion of any factors, other than compliance with the federal biological opinions, affecting water deliveries during these periods.

        Plaintiffs’ Response:  In February 2001, the U.S. Bureau of Reclamation (Reclamation) issued a biological assessment with respect to the operation of the Project, proposing to deliver water to Project irrigation and wildlife refuges, in accordance with historical practice.  However, Reclamation directed irrigation water users not to take water[1] until the Fish and Wildlife Service (FWS) and National Marine Fisheries Service (NMFS) had completed their biological opinions.  On April 6, 2001 , the NMFS and FWS issued their biological opinions with respect to the operation of the Project on coho salmon and suckers, respectively.  Each found that the proposed action of water delivery was likely to jeopardize the continued existence of the species.

The agencies, however, identified “reasonable and prudent alternatives” (RPAs) that in their opinion would avoid jeopardy.  These RPAs included that Reclamation provide mainstream Klamath River flows and Upper Klamath Lake elevations much higher than would have resulted under Reclamation’s proposed operations plan.  Reclamation concluded that, to maintain both the river flow and Upper Klamath Lake elevations identified as RPAs under the ESA would result in no water delivery to plaintiffs.  Reclamation adopted these RPAs and on April 6, 2001 , announced that there would be zero water delivered to plaintiffs from Upper Klamath Lake .  Although in late July and early August Reclamation released approximately 70,000 acre feet of water to the Project, this was too little and too late to allow plaintiffs to produce crops. Plaintiffs make no claim for water shortages in 2002.

On April 10, 2003 , Reclamation issued its 2003 operations plan, which is consistent with the federal biological opinions issued May 2002.  Under that plan, plaintiffs are expected to receive approximately 75 percent of normal water deliveries, which is not in accordance with historic deliveries which average 344,000 to 399, 000 acre-feet.  Moreover, if projected hydrologic conditions do not meet current expectations, Reclamation will most likely curtail water deliveries for 2003. 

            Defendant’s Response:  In 2001, due to severe drought conditions, Reclamation announced at the beginning of the irrigation season that no water would be available from Upper Klamath Lake and that only about 70,000 acre-feet of water would be available from Clear Lake and Gerber Reservoirs for lands on the east side of the Project.  In late July 2001, Reclamation announced the availability of an additional 70,000 to 75,000 acre-feet of irrigation water from Upper Klamath Lake .  This release provided irrigation water through late August of 2001.

In 2002, a dry water year, irrigation water was made available to plaintiffs and other Klamath Basin water users in accordance with the Klamath Project Operations Plan for 2002.   Defendant agrees with Plaintiffs that there were no water shortages in 2002.

The Klamath Project Operations Plan for this year was issued on April 10, 2003 .  See 2003 Operations Plan, Ex. 2.  The current forecast is for a dry water year.  Currently irrigation water is being delivered to Klamath Project water users in accordance with the 2003 Operations Plan and pursuant to the various contracts between them and the United States .  For planning purposes and based on the forecast, Reclamation estimates that a minimum of 299,000 acre-feet of water will be available for irrigation from Upper Klamath Lake, which is within the range of historic water deliveries for this water year type.  See 2003 Operations Plan at 1, 3-4 (Table 1 and UKL Delivery Area, paragraph 5), Ex. 2. 

The ultimate quantity of water available to Klamath Project irrigators is subject to the actual quantity of water available in the Upper Klamath Basin this year.  To help ensure water is available to address all of the needs in the Klamath Basin, Reclamation has established a “water bank” to meet the minimum Upper Klamath Lake level and Klamath River stream flow requirements contained in the 2002 biological opinions, and to provide additional water for tribal trust purposes.  This year, water will be provided to the water bank by idling approximately 16,000 acres of Klamath Project farmland, and by pumping groundwater to offset the use of surface water for irrigation on other selected lands.  Klamath Project water users are being compensated for not using Klamath Project surface water this year either through land idling or by pumping groundwater.

Factors other than biological opinions which could result in a reduction in the water supply available to the Klamath Project from that currently forecast could include the occurrence of a drier than forecast water year or a court injunction ordering additional releases of Klamath Project water into the Klamath River in the case of Pacific Coast Federal of Fishermen’s Associations, et al. v. U.S. Bureau of Reclamation (“PCFFA v. BOR”), No. C02-2006 SBA (N.D. Cal.).  In that case, the plaintiffs are seeking judicial review of the 2002 long-term biological opinion issued by the NMFS, arguing that the flows provided for the coho salmon in the biological opinion are too low and are not consistent with the best available science.  The plaintiffs seek an injunction against Reclamation’s operations consistent with that biological opinion.[2]  The federal defendants have moved for summary judgment, and oral argument on the motion is now scheduled for May 20, 2003 .[3]

      Project operations in future years will be guided by the long-term biological opinions, including any future amendments thereto, but actual water deliveries cannot be predicted in advance.  The actual availability of water for irrigation purposes depends on the precipitation in the Upper Klamath Basin each year.  The delivery of water for irrigation in any given year may also be affected by other factors and causes, including the water bank, the litigation identified above, the outcome of the Adjudication and tribal trust resource needs.  

3.  The status of the federal biological opinions and the Bureau of Reclamation's responses to them, including the likelihood and, if so, imminence, of any revision to the opinions as the result -of the National Academy of Science/National Research Council's interim report concluding that there is no substantial scientific evidence supporting changes in the water levels in Upper Klamath Lake to protect endangered fish species.

   Plaintiffs’ Response:  In 2002, Reclamation prepared a ten-year operations plan for 2002-2012 water deliveries stating that this plan would not jeopardize the species.  However, NMFS’s and FWS’s biological opinions found that the Reclamation’s operations plan would, in fact, jeopardize the species, and that the Klamath Project must be operated in compliance with conditions (RPAs) set forth in the federal biological opinions.  Reclamation’s 2002 and 2003 operations plans conformed to these federal biological opinions.  However, Reclamation stated: “Reclamation has serious concerns about FWS’ [and NMFS’] conclusions regarding jeopardy to the species, particularly whether there is scientific basis for those conclusions and whether the recommended alternatives go beyond what is needed to avoid jeopardy to the species.”  Ltr. from K. Rodgers, Reclamation to S. Thompson, FWS ( June 3, 2002 ), at http://www.mp.usbr.gov/mp150/envdocs/kbao/Memo‑NMFS.pdf .; Ltr. from K. Rodgers, Reclamation to R. McInnis, NMFS ( June 3, 2002 ) at http://www.mp.usbr.gov/mp150/envdocs/kbao/Memo‑FWS.pdf). 

            Defendant’s Response:  In their complaint, plaintiffs identify Reclamation’s compliance with the biological opinions issued by FWS and NMFS in 2001 as the cause of the alleged taking.  See Pls’ Amended Compl. at ¶¶ 27-30.  The 2001 NMFS biological opinion on coho salmon expired on February 28, 2002 , and the 2001 FWS biological opinion on the sucker fish expired on March 31, 2002 .  See Def.’s Motion to Stay at 6.  The scientific underpinnings of the 2001 biological opinions were the subject of much criticism.  In order to evaluate the validity of the reasonable and prudent alternatives (RPAs) of the biological opinions and address this criticism, the Departments of Commerce and Interior enlisted the assistance of the National Research Council (NRC)[4] to conduct an extensive external review of the scientific basis for the 2001 biological opinions.  NRC released its draft “Interim Report” on February 6, 2002 , concluding there was no substantial scientific basis to support changing the Klamath Project operations regime of the 1990s.

Given the impending expiration of the 2001 biological opinions, Reclamation reinitiated consultation under the provisions of the Endangered Species Act (“ESA”) with FWS and NMFS regarding proposed Klamath Project operations for the 2002-2012 time period.  See Def.’s Motion to Stay at 6.  Relying on the NRC’s conclusion that the operational practices in place between 1990 and 2000 were appropriate measures for future operations, Reclamation issued its “Final Biological Assessment: The Effects of Proposed Actions Related to Klamath Project Operation (April 1, 2002 - March 31, 2012) on Federally Listed Threatened and Endangered Species” on February 25, 2002.  In its 2002 biological assessment, Reclamation detailed the scope of its proposed long-term operations,[5] and sought a determination from FWS and NMFS as to whether its proposed operation of the Klamath Project was likely to jeopardize the continued existence of any listed species, as required under § 7 of the ESA.  The biological assessment proposed an action to provide a Klamath Project water supply while staying within the operating regime observed for the water years between 1990 and 2000.  Reclamation’s proposed action also included the use of a water bank to provide up to an additional 100,000 acre-feet of water for endangered species and tribal trust resource purposes.  Thus, the biological assessment proposed certain lake levels for Upper Klamath Lake and river flows for the Klamath River for various water year types for the period from June 1, 2002 through March 31, 2012 .  The biological assessment concluded that certain aspects of the proposed action “may affect” the threatened coho salmon and the endangered suckers, but there was no operations plan that concluded that the proposed action “would not jeopardize the species,” as plaintiffs state in their response.

On May 31, 2002, the FWS issued a final biological opinion on Reclamation’s proposed 10-year operations for the Klamath Project (June 1, 2002 through March 31, 2012) which addressed the effects of the proposed operations of the Klamath Project on the endangered Lost River sucker, endangered shortnose sucker, and threatened bald eagle.  Also on May 31, 2002 , NMFS issued a final biological opinion regarding the effects of Reclamation’s  proposed 10-year operations on the Southern Oregon/Northern California Coasts (SONCC) coho salmon.  These long-term biological opinions, which were based on new information including the preliminary conclusions reached in the interim NRC report, superseded the one-year biological opinions that were in effect for the 2001 water year and that are the basis of plaintiffs’ complaint. 

The long-term biological opinions concluded that the actions as proposed in Reclamation’s biological assessment were likely to jeopardize the continued existence of the suckers and the SONCC coho salmon, respectively.[6]  Each biological opinion set forth RPAs designed to avoid the likelihood of jeopardizing the species.  As required by ESA regulations, Reclamation responded to the FWS and NMFS long-term biological opinions by notifying the respective agencies that it intended to follow the RPAs in the biological opinions in 2002.  In its 2003 Operations Plan for the Klamath Project, Reclamation has indicated that during 2003, it “will operate the Klamath Project consistent with the requirements of the 2002 biological opinions, including establishment/use of a water bank . . . . ”  See 2003 Operations Plan at 6, Ex. 2.  As new scientific data becomes available, such as the final report of the NRC (expected in summer 2003), reconsultation under the ESA may be required pursuant to 50 C.F.R. § 402.16, which could then lead to revisions to the long-term biological opinions.  The status of the NMFS biological opinion and Reclamation’s operations plan could also be affected by developments in the PCFFA v. BOR litigation currently pending before the U.S. District Court for the Northern District of California, which is discussed above in response to question 2.  While these developments may affect the biological opinions and/or the quantity of water released into the Klamath River , there is no current plan to revise either of the long-term biological opinions.

4.    A description of the exact type of contractual as well as non-contractual water ownership right or interest claimed, and the source of the right or interest, for each plaintiff. (The state disputes the allegation that their rights are "vested," because they are neither riparian nor finally adjudicated, the Preliminary Evaluation issued in the KB Adjudication being subject to revision and contest). How many of plaintiffs' Preliminary Evaluations are contested?

                Plaintiffs’ Response: 

(1) Water Rights: The individual plaintiffs (including all class members) hold a variety of  

water rights, including:

(a) Reclamation Act Vested Water Right Appurtenant to Their Land.  The United States initiated these rights in connection with the construction of the Klamath Project when it appropriated the water for irrigation of the lands of the Klamath Project, then confirmed these rights by patent deed to plaintiffs, which conveyed the land and the water rights appurtenant to the land to be used for beneficial use, by operation of state and federal law.  “Prior to the water code of 1909 the appropriation of water in Oregon was recognized as a method of creating a vested interest in the waters of a stream.”  Green v. Wheeler, 458 P.2d 938, 941 (1969); see also ORS 539.010 et seq.  

Under the authority of the Reclamation Act of 1902, ch. 1093 § 8, 32 Stat. 390 (codified, as amended, at 43 U.S.C. § 372 (1986 & Supp. 2001), in 1904, Reclamation issued a Notice of Appropriation for all the unappropriated (unclaimed) water rights for the Klamath Basin to be used for irrigation upon the lands situated in the Klamath Basin.  See, e.g., Notices of Water Appropriation for Lost River , December 19, 1904 , at 1-2 (“The water is to be used for irrigation . . . upon lands situated in Klamath . . . . in and upon lands situated in Klamath . . . . The water hereby appropriated is to be stored by means of a dam . . . .”); Notice of Appropriation for Klamath River, Upper Klamath Lake and tributaries filed May 19, 1905 at 41 (“It is the intention of the United States to completely utilize all the waters of the Klamath Basin . . . . the United States intends to use the above described waters in the operation of works for the utilization of water in the State of Oregon under the provisions of the . . . Reclamation Act.”), Ex. 6 to Pls.’Opp. to Def.’s Mot. to Stay.  Thereafter, in 1905, the states of Oregon and California ceded their land uncovered by the lowering or draining of the lakes in the notices of appropriation to the federal government for the purpose of aiding in the operations of irrigation and reclamation.  See 1905 Or. Laws 5; Federal Reclamation and Related Laws Annotated at Explanatory Note (Feb. 9, 1905) (quoting 1905 Cal. Stat. 4), Ex. 4 to Pls.’ Opp. to Def.’s Mot. to Stay.   

The United States then conveyed the land to individual landowners (plaintiffs’ predecessors in interest) by patent deed, which typically read:  “The United States . . . does give and grant . . . the tract above described, together with the right to the use of water from the Klamath Reclamation Project as an appurtenance to the irrigable lands in said tract . . . .”.  See U.S. Patents, attached as Ex. 3.  The Supreme Court has consistently held that such Reclamation Act water rights are owned by the landowner, as appurtenances to the land.  See, e.g., Ickes v. Fox, 300 U.S. 82, 95 (1937) (“Although the government diverted, stored and distributed he water, the contention of petitioner that thereby ownership of the water or water-rights became vested in the United States is not well-founded.  The government was and remained simply a carrier and distributor of water, with the right to receive sums stipulated . . . for the costs of construction and annual charges for operation and maintenance of the works.  As security therefore it was provided that the government should have a lien upon the lands and the water rights appurtenant thereto—a provision which itself imports that the water-rights belong to . . . the landowners.”); see also Nebraska v. Wyoming, 325 U.S. 589 (1945)(“Appropriation was made not for the use of the government, but, under the Reclamation Act, for the use of the land owners . . .the water-rights became the property of the land owners, wholly distinct from the property right of the government in the irrigation works.”); Nevada v. United States, 463 U.S. 110 (1983) (same); Reclamation Act of 1902, ch. 1093 § 8, 32 Stat. 390 (codified, as amended, at 43 U.S.C. § 372 (1986 & Supp. 2001) (“The right to the use of water under the provision of this act shall be appurtenant to the lands irrigated.”).  Moreover, Reclamation has recognized plaintiffs’ vested water rights.  See Final Biological Assessment at 4 ( Feb. 25, 2002 ) (“The beneficial interest in the project water right is in the water users who put the water to beneficial use.”), Ex. 1 to Pls.’ Opp. to Def.’s Mot. to Stay.

The Adjudication will not create or grant any water rights; it will only confirm that a water right with a pre-1909 date of appropriation exists or doesn’t exist.  Both the United States and the plaintiffs certified to the State of Oregon, under penalty of perjury, on the Adjudication claim forms that a vested right exists and that the water had been appropriated for plaintiffs’ land.  See United States ’ Adjudication Claims, attached as Ex. 4; see also ORS 539.015; Nevada Ditch Co. v. Bennett, 45 P. 472 (Or. 1896). 

(b) Permitted State Water rights.  Certain plaintiffs hold certificates to post-1909 water rights, for which the State of Oregon has issued a certificate.  See, e.g., Klamath Drainage District Permit (43334) to Appropriate the Public Waters of the State of Oregon (Sept. 5, 1978), Ex. 5.  Klamath Drainage District water certificated water was taken in 2001. These water rights are not part of the Adjudication, as the rights are already vested and determined. 

(c)  Riparian rights.  Some of the plaintiffs derive their title from predecessors who had been riparian to the Klamath River before construction of the Klamath Project.  These riparian rights are vested:

Actual application of water to beneficial use prior to February 24, 1909 , by or under authority of any riparian proprietor or the predecessors in interest of the riparian proprietor, shall be deemed to create in the riparian proprietor a vested right to the extent of the actual application to beneficial use . . . .

 

Where any riparian proprietor, or any person under authority of any riparian proprietor or the predecessor in interest of the riparian proprietor, was, on February 24, 1909, engaged in good faith in the construction of works for the application of water to a beneficial use, the right to take and use such water shall be deemed vested in the riparian proprietor . . . .

ORS 539.010 (a) & (b). Some landowners in California may also hold California riparian rights.

(d) Pre-Reclamation Project Vested Water Rights.  During the 40 years prior to the passage of the Reclamation Act in 1902, many private land owners and private companies posted notices of the appropriation of water, constructed canals, headgates, flumes and other structures for the delivery of that water from the Klamath River, Tule Lake and Lower Klamath Lake, and applied that water to beneficial use on a substantial portion of the land in the Klamath Project. These pre-Reclamation developments were incorporated in the Klamath Project in the period from 1905 to 1909. Reclamation then entered into agreements with the landowners and their representative organizations and districts for the repayment to the United States of the expansion and improved of the facilities and for the delivery of the water to the lands to which it is “appurtenant” in perpetuity. These prior appropriations are described in detail in various portions of the plaintiffs’ claims in the Adjudication. These claims are largely incorporated by reference in the claims filed by the United States for the Klamath Project in the Adjudication.  These vested pre-1909 rights cover all of the land in the Klamath Project.

(e) Lost River Decreed Water Rights.  In 1918, the Klamath County Oregon Circuit Court entered in Decree adjudicating water rights for the Lost River . The Decree adjudicated rights from Lost River and recognized certain rights on lands now owned by plaintiffs and their members. 

Since the certificated rights and Lost River rights are already determined, they are not part of the Adjudication and thus are not contested. 

All of the preliminary evaluations for plaintiffs’ claims in the Adjudication were contested.

(2) Contract Rights

The plaintiff districts, taken together, hold water delivery contracts for essentially the entire Klamath Project.  They claim that, under those contracts, the United States has a legal and non-discretionary duty to deliver Klamath Project water, in accordance with the terms of the contracts, as well as the purpose for which the water rights were appropriated and Congress authorized its construction—i.e., irrigation.  The Federal Circuit has noted that, under such Reclamation Act water delivery contracts, the individual water users are also third party beneficiaries and real parties in interest.  See H.F. Allen Orchards v. U.S. , 749 F.2d 1571 (Fed. Cir. 1984) (citations omitted):

Finally, we disagree with the Claims Court ’s determination that appellants were not correct parties to sue under the consent decree and subsequent alleged implied contracts.  It is undisputed that appellants have a property right in the water to the extent of their beneficial use thereof. The irrigation districts, which contracted with the Bureau, act as a surrogate for the aggregation of farmers. They use no water themselves.  The farmers ultimately pay for all the services which the government supplies.  It is clear that the appellants, owners of the property at issue, the water, also are intended third-party beneficiaries of the 1945 Consent Decree. Under the rules of the Claims Court “every action shall be prosecuted in the name of the real party in interest.” Here the farmers, owners of the water and beneficiaries of the irrigation projects, are the true parties in interest.

Id. at 1576. Moreover, many of the irrigation district contracts explicitly obligate Reclamation to deliver water to the individual water users.[7]  And, a few individuals also have water delivery contracts directly with Reclamation. 

            Defendant’s Response:  With respect to the water rights alleged by plaintiffs, defendant maintains that the United States is the proper entity to hold the water rights for the Klamath Project.  Indeed, it is well established that the United States through Reclamation holds the legal title to the water rights for the Klamath Project.  Nevada v. United States, supra; Ide v. United States, 263 U.S. 497 (1924); United States v. Humboldt Lovelock Irr. Light & Power Co., 97 F.2d 38 (9^th Cir.), cert. denied, 305 U.S. 636 (1938); United States v. Tilley, 124 F.2d 850 (8^th Cir. 1942).   For a more detailed discussion of the appropriation of these water rights by the United States in 1905 and of plaintiffs’ alleged water rights, defendant respectfully refers the Court to the discussion in its opening brief in support of its motion to stay, pp. 10 - 13, and its reply brief in support of its motion to stay, pp. 1 - 6.  As discussed therein, the water users have a beneficial interest in the Klamath Project water, and the plaintiff irrigation districts have a claim to an undetermined vested right to use Klamath Project water that they have filed in the Adjudication.

The single water rights certificate referenced by plaintiffs in part (1)(b) of their response is irrelevant to this case.  Defendant did not preclude the Klamath Drainage District from exercising its rights under this certificate.  In addition, this certificated right has a priority date of 1978, making it junior to the rights claimed by the United States and by the plaintiffs, including the Klamath Drainage District, to the Klamath Project water in the Adjudication.

Plaintiffs’ discussion of riparian rights and pre-Klamath Project rights in parts (1)(c) and (1)(d) of their response is misleading.  The United States acquired all existing water rights in connection with its appropriation of water for the Klamath Project.   Accordingly, these rights are subsumed within the claims at issue in the Adjudication.   In addition, to the extent that plaintiffs are claiming to have some kind of continuing water rights that were not acquired in connection with the Klamath Project, this is an issue that has been raised in, and will be resolved by, the Adjudication.  

Defendant further notes that plaintiffs’ discussion of its rights to the waters of the Lost River is both misleading and irrelevant.  As discussed in response to Question 5, plaintiffs have not alleged a taking of any right they may have to the waters of the Lost River .  In addition, the 1918 Lost River Decree recognized but did not adjudicate the water rights claimed by the United States .  Thus, any water rights asserted by plaintiffs to Lost River water remain undetermined until properly adjudicated.  To date, no such adjudication has been initiated.

With respect to the contract rights alleged by plaintiffs, defendant does not dispute that the irrigation district plaintiffs, with the exception of the Klamath Hills District Improvement Co., have contracts directly with Reclamation for the delivery of water and other matters.  However, a majority of these contracts contain shortage provisions that limit the liability of the United States for water shortages caused by drought or other causes.  See Def.’s Reply in Support of Mot. to Stay at 5 n. 6; O’Neill v. United States , 50 F.3d 677 (9^th Cir. 1995).  In addition, because there are other districts who receive water from the Klamath Project who are not named as plaintiffs, it is inaccurate for plaintiffs to state that plaintiffs hold contracts for “essentially the entire Klamath Project.”    

Furthermore, plaintiffs assert third-party beneficiary status for those plaintiffs that do not have a contract with the Government, relying upon H.F. Allen Orchards v. United States, 749 F.2d 1571 (Fed. Cir. 1984).  That reliance is misplaced.  In H.F. Allen Orchards, the Federal Circuit determined that the appellant farmers were “intended third-party beneficiaries of the 1945 Consent Decree [entered by the United States District Court for the Eastern District of Washington].”   Id. at 1576.  In contrast, the contracts at issue in this case did not arise from a consent decree which set forth the allotment and ownership of water.  More importantly, the Federal Circuit’s finding that the farmers were intended third-party beneficiaries of the consent decree was premised upon the fact that the consent decree itself had effectuated a court order that the water users held property rights in the water.  Id. at 1575-1576.[8]  In this case, by contrast, plaintiffs’ alleged property interest or ownership of water has not been determined, is not the subject of a consent decree establishing ownership of the water, and is at issue in the Adjudication.  Therefore, the H.F. Allen Orchards case does not support plaintiffs’ alleged intended third-party beneficiary status. 

Plaintiffs have not otherwise provided a basis to claim third-party beneficiary status for all of those plaintiffs that do not have a contract with the Government.   Finally, plaintiffs have not identified those individual plaintiffs who have delivery contracts directly with Reclamation.

In response to the question of how many of plaintiffs’ Preliminary Evaluations are contested, the State of Oregon has reported that most, but not all, of the plaintiffs in the present litigation filed claims in the Adjudication (Claims Nos. 321-324).  Ltr. from W. Perry, at 2, Ex. 1.  The State further reports that all of the claims filed in the Adjudication by the Plaintiffs in this litigation were contested.  Id.    

5.   Are all of plaintiffs' rights "-undetermined vested rights"? Were any vested pre-1909? If so, were they registered? Are any of the plaintiffs’ claimants who are not required to appear in the KB Adjudication?

                Plaintiffs’ Response:  Some of the plaintiffs’ water rights are both vested and determined, and consequently are not included in the Adjudication at all.  As noted in response to Question 4, some plaintiffs hold certificated water rights, and some hold Lost River water rights which have already been adjudicated.  The holders of these rights are not required to appear in the Adjudication.  The Adjudication concerns only pre-1909 rights which have not been previously adjudicated.  The purpose of the Adjudication is to adjudicate those pre-1909 rights so that certificates can be issued, documenting rights which were vested prior to adoption of the statute (when no certificates existed).  

Consequently, all rights claimed in the Adjudication are undetermined vested rights, which were vested prior to 1909.  See answer 4 above.  All of the United States ’ Klamath Project claims, as well as plaintiffs’, are thus vested undetermined rights. The term “‘undetermined vested right’ means a water right claimed under 539.010 as having vested or as having been initiated before February 24, 1909, that has not been determined in an adjudication . . . nor is evidenced by a permit or certificate issued under the Water Rights Act.”  ORS 536.007 (11). 

None of plaintiffs’ rights are required to be registered.  See ORS 539.040(3)(a) (exempting Adjudication claims from registration).

            Defendant’s Response:  The State of Oregon defines “undetermined vested rights” to mean “any right to the use of waters of the State of Oregon initiated prior to February 24, 1909, under state common law or statute, or a federal reserved right which is not evidenced by any decree issued pursuant to ORS chapter 539.”  OAR 690-28-010(23).  As such, all rights claimed by plaintiffs in the Adjudication are “undetermined vested rights.”  plaintiffs claim that their alleged rights vested prior to 1909; however, this issue has not yet been determined in the Adjudication.  The Adjudication will determine whether plaintiffs’ claims “are valid and, if so, the amount and scope of the right.”  Ltr. from W. Perry at 2, Ex. 1. With respect to plaintiffs’ alleged Lost River water rights, as explained above, these rights are irrelevant and do not appear to encompass the water that plaintiffs claim in their complaint. See Complaint at ¶ 29 (“Under that Plan, plaintiffs would receive no irrigation water from Upper Klamath Lake , the Klamath River , Lake Ewauna , Tulelake and the related irrigation facilities in 2001.”).  Moreover, contrary to Plaintiffs’ assertion, these rights have not been adjudicated.

With respect to the question of registration, Oregon has a “registration” process that requires all holders of pre-1909 water rights in unadjudicated basins to register their claim of right with the State by a date certain or lose the right.  Defendant agrees that this process does not apply to the Klamath Basin .  United States v. OWRD, 44 F.3d 758, 770-71 (9^th Cir. 1994); ORS § 539.040(3)(a).

With respect to the question regarding required participation in the Adjudication, the State has indicated that “[t]o the extent that a plaintiff-claimant diverts water from, or uses water within, Oregon and claims that the right was initiated before 1909, that water user is required to make a claim in the Klamath Adjudication.”  Ltr. from W. Perry at 3, Ex. 1.  All but one of the Districts named as plaintiffs in this case, Westside Improvement District No. 4, filed joint competing claims in the Adjudication to the same water that has been claimed by the United States for the Klamath Project.[9]  These Districts claim rights to water delivered through Klamath Project facilities on behalf of themselves and their members as well as individual landowners.[10]

6.   A description of the United States' water claims in the Klamath Basin, How would plaintiffs’ water interests be affected if the United States' competing claims were decided in the government's favor in the KB Adjudication?

            Plaintiffs’ Response: Plaintiffs agree with defendant’s response below that: “[I]f Reclamation’s claim to Klamath Project water is decided in favor of Reclamation in the Adjudication, there would be no change in the way the water rights have historically been held and exercised.”  Plaintiffs and the United States claim the same Klamath Project water that was appropriated by the United States in 1904 for irrigation and reclamation purposes.  Should the State of Oregon determine that the water rights certificates are to be issued in the name of the United States , the beneficial owner would still be the plaintiffs (who put the water to beneficial use).  As Reclamation stated: “The beneficial interest in the project water right is in the water users who put the water to beneficial use.”  Final Biological Assessment at 4 ( Feb. 25, 2002 ), Ex. 1 to Pls’ Opp. to Def.’s Mot. to Stay. 

            Defendant’s Response: In 1997, the United States filed a number of claims in the Adjudication.  Several of these claims were amended in 1999.  These claims include:

· Bureau of Indian Affairs (BIA) as trustee on behalf of the Klamath Tribes: Federal Indian reserved right claims, including both consumptive-use water rights for parcels of land owned by the Tribes, with a Reservation priority date of 1864, and nonconsumptive-use water right claims on or near the former Reservation to protect the Tribes’ treaty-reserved hunting, fishing, and gathering rights with a priority date of time immemorial.  Most of the claims are for nonconsumptive uses and include: instream flows in the tributaries above Upper Klamath Lake and instream flows in the Klamath River below the Lake ; water levels in Upper Klamath Lake to protect trout and endangered suckers in the Lake ; water levels in Klamath Marsh; and seeps and springs within the boundaries of the former Reservation. 

· Bureau of Land Management: Federal reserved water right claims for instream flows in the Klamath River for the Wild and Scenic segment of the river located in Oregon, priority date of 1994, and for public water holes reserved for stockwatering by Public Water Reserve 107, priority date of 1926. 

· National Park Service: Federal reserved water right claims for Crater Lake National Park , including both consumptive uses for the Park, staff, and visitors, and nonconsumptive instream flows to preserve the Park’s natural, scenic, and historic values.

· Fish and Wildlife Service: Claims based on state law (priority date the same as the Klamath Project, 1905 or earlier), Walton rights (priority 1864), or federal reserved water rights (priority dates ranging from 1918 to 1985), as appropriate, for four refuges in the Klamath Basin, the Klamath Marsh, Upper Klamath, Lower Klamath, and Tule Lake National Wildlife Refuges.  Included in those claims are claims for wetlands and open water for the four refuges; and for cooperative and leaseland farming on the Lower Klamath and Tule Lake refuges.        

· Bureau of Reclamation: State-law based water right claims for all Klamath Project uses, for a total of about 218,000 acres of land, with a priority date of 1905; alternatively, about 15,000 acres may have a pre-1905 priority date based on historic development.  In addition to Klamath River water, the Klamath Project and the refuges also use water from the Lost River Basin .  Although non-federal, non-Klamath Project water rights to the Lost River basin were adjudicated in 1918, the Klamath County Circuit Court recently ruled, pursuant to a federal motion, that the Lost River adjudication was not determinative of the federal water rights.   

If Reclamation’s claim to Klamath Project water is decided in favor of Reclamation in the Adjudication, there would be no change in the way the water rights have historically been held and exercised.  Plaintiffs’ water interests would be, as they always have been, as described in the contracts they entered into with Reclamation.  The exercise of these rights would be pursuant to the certificates the state would issue to Reclamation based on the decree issued by the state court as part of the adjudication process.  Reclamation would then deliver Klamath Project water to the Klamath Project water users in accordance with the contracts when such rights have priority under the adjudication decree.  Because the United States remains the owner and title holder of the Klamath Project water storage and delivery facilities, whether the water right was in the name of Reclamation or the water users, operation of the Klamath Project to store and deliver water would still be subject to other laws, such as the Endangered Species Act, and to tribal water rights that are senior to the Klamath Project water rights.  See Def’s Mot. to Stay at 6-7 (discussing tribal water rights).

Defendant agrees that the landowners who receive irrigation water from the Klamath Project have a beneficial interest in the Klamath Project water. However, to determine whether this beneficial interest rises to the level of a compensable property interest under Oregon law, plaintiffs must first prove the claims that they have filed in the pending Adjudication.  Defendant disagrees with plaintiffs’ assertion that they would be the “owner” of the water right if the State of Oregon issues water rights certificates to the United States for the Klamath Project water.

7.   A description of the capacity (with relation to the water interest as well as to the claim against the government - contract right (direct or third-party), individual right, right based on District right or claim, claim of District based on individual right(s), Compact right, etc.) in which each plaintiff (whether personally or in a representative capacity) is bringing its/his/her claim in this court.

Plaintiffs’ Response: Plaintiff irrigation districts, which are quasi-municipal entities under Oregon and California law, assert the water rights claims described in response to Question 4, supra, on their own behalf and on behalf of their individual water users.  They do so in their representative capacity. They also sue for breach of contract on their own behalf, and as trustees of their water users as third party beneficiaries.  See ORS 545.225 (1)(b) & (2) (“The Board of Directors may . . . institute and maintain all actions and proceedings, suits in law or in equity necessary or proper in order to fully carry out the Irrigation District law, or to enforce, maintain, protect or preserve rights, privileges, and immunities created by the Irrigation District Law, or acquired in pursuance of the Irrigation District Law.”); see also Smith v. Enterprise Irr. Dist., 85 P. 1021 (1939) (“The relationship between an irrigation district and its constituent landowners as to the water rights and other property of such district is that of trustee and cestuis que trustent.”); Cal. Water Code§§ 22075, 22654 (“A district may commence, maintain, . . . any action or proceeding involving or affecting the ownership or use of waters or water rights within the district used or useful for any purpose of the district or of benefit to any land.”); Cal. Water Code § 43700 (“A district may commence and maintain any actions and proceedings to carry out its purposes or protect its interests and may defend in any action or proceeding brought against it.”); Central Delta Water Agency v. State Water Resources Control Board, 17 Cal. App. 4th 621, 630 (1993) (“Where a water district or agency is expressly authorized under its enabling statute to sue on behalf of its constituent water users, it may do so even without naming any of those users as party plaintiffs.”). 

                Individual plaintiffs sue on their own behalf, and as representatives of the class of all water users entitled to receive water from the Klamath Project, with respect to all three causes of action.  The Federal Circuit has recognized their status as third party beneficiaries.  See H.F. Allen Orchards v. U.S. , supra.

            Defendant’s Response:  Plaintiffs assert that the irrigation district plaintiffs bring their water rights claims on their own behalf and on behalf of their individual water users in their representative capacity.   Plaintiffs assert that they bring their breach of contract claims on their own behalf, and as trustees of their water users as third party beneficiaries.  However, the capacity in which each plaintiff appears in this Court remains far from clear.

With respect to the irrigation district plaintiffs’ ability to bring takings and breach of contract claims in a representative capacity, the statute cited by Plaintiffs, ORS § 545.225, allows districts to pursue actions to enforce rights under the Irrigation District Law, but the Irrigation District Law only extends to water rights attached to irrigation works, see ORS § 545.239(1), and the districts do not own the primary irrigation works for diversion of water.  Moreover, plaintiffs have not demonstrated that the statutes cited afford them representational standing to assert Fifth Amendment takings claims or breach of contract claims, particularly when the nature of the rights claimed, whether they be property rights or contract rights, are unique to the right or contract holder.  Indeed, only those individuals or entities that possess an ownership interest in property can assert a takings claim and receive compensation.  See Wyatt v. United States , 271 F.3d 1090, 1096-97 (Fed. Cir. 2001).  The U.S. Supreme Court has made clear that associational or representational standing is not appropriate when “both the fact and extent of injury would require individualized proof.” Warth v. Seldin, 422 U.S. 490, 515-16 (1975) (finding that a home builders association did not have standing on behalf of its members to assert claims for money damages); Rent Stabilization Assoc. of the City of New York v. Dinkins, 5 F.3d 591, 596-97 (2^nd Cir. 1993) (declining to allow representational standing in a takings case due to the ad hoc factual inquiries involved).[11]  The ability of the irrigation districts to bring takings claims on behalf of the individual water users may also be precluded by the Anti-Assignment Act, which prohibits the “transfer or assignment of any part of a claim against the United States Government or of an interest in the claim . . . .”  31 U.S.C. § 3727(a)(1).  

With respect to the individual Plaintiffs’ alleged status as third party beneficiaries, as explained in response to Question 4 above, Plaintiffs’ assertion of third-party beneficiary status rests solely upon their misplaced reliance upon H.F. Allen Orchards v. United States, 749 F.2d 1571, 1576 (Fed. Cir. 1984).  Plaintiffs have not otherwise provided a basis to claim third-party beneficiary status for all of those plaintiffs that do not have a contract with the government.

    As to whether any of plaintiffs’ claims should proceed as a class action, defendant respectfully refers the Court to Defendants’ Response to Plaintiffs’ Motion for Class Certification with respect to the takings and Klamath Basin Compact claims, and to Defendant’s Response to Plaintiffs’ Supplemental Filing with respect to the breach of contract claims.

8.   Plaintiffs' explanation as to how they would be able to demonstrate causation or damages amounts, given the apparently relative nature of claims to irrigation water in a river system, prior to a final decision in the KB Adjudication.

            Plaintiffs’ Response: Plaintiffs believe that proof of causation for 2001 is relatively straightforward.  Reclamation controls the release of water into the irrigation canals.  In early 2001, Reclamation published an operations plan describing the water deliveries it intended to make for the year, taking into account all factors such as available water and non-endangered species claims upon that water.  Had FWS and NMFS not issued their biological opinions, Reclamation would have delivered water in accordance with this operations plan.  In short, the sole cause of non-delivery of water to plaintiffs in 2001 was the operation of the Endangered Species Act.

            Nothing in the Adjudication process affected 2001 deliveries.

            Defendant’s Response: Plaintiffs have not explained how they would demonstrate damages amounts, and their explanation of how they would prove causation is overly simplified and ignores the tribal water rights that affect the allocation of water in the Klamath Basin .  As noted in Defendant’s Motion to Stay at 7, the Klamath, Yurok, and Hoopa Valley Tribes each hold treaty-based or otherwise federally reserved fishing and water rights that are senior to the water rights claimed in the Adjudication by Reclamation and by the plaintiffs for the Klamath Project water.  The precise quantification of the Klamath Tribes’ water rights, which would likely affect the water level that must be maintained in Upper Klamath Lake, and thus would likely affect the quantity of water available for irrigation, will be determined in the Adjudication.[12]          

9.   The effect, if any, of the breach of contract claims added by the amended complaint on the motion to stay.

            Plaintiffs’ Response: Plaintiffs agree with defendant that the breach of contract claim need not be stayed and further, plaintiffs believe that there are no grounds for staying the breach of contract claim.  Plaintiffs’ claim for breach of their water delivery contracts is independent of their taking and Compact claims.  Even if plaintiffs had no water rights, they would still have their contract claims.  Consequently, the Adjudication is irrelevant to this claim and there is no reason to stay the contract claims. 

            Defendant’s Response:  Defendant’s Motion to Stay, which encompasses all of the claims included in plaintiffs’ original complaint, has been fully briefed and is unaffected by the breach of contract claims recently pled by plaintiffs in their Amended Complaint.  Defendant currently does not intend to seek a stay of the breach of contract claims.  Although a complete resolution of the breach of contract claims may not be possible without the determination as to the relative priority of the Klamath Project water rights that will come from the Adjudication, the breach of contract claims do not raise the threshold question of ownership of the property that is at issue in the Adjudication and affects plaintiffs’ other claims.  Accordingly, a complete stay of the breach of contract claims is not necessary at this time, but defendant reserves the right to seek a stay of this litigation as to such claims at a later date, if necessary to preserve additional defenses that may be available.  Defendant submits that further proceedings as to the breach of contract claims, including the question of class certification, should move forward in accordance with the Rules of the United States Court of Federal Claims and this Court’s Special Procedures Order, dated October 23, 2001 . 

10.    Other matters, at the option of the parties.

Plaintiffs agree with the Court that an evidentiary hearing on state law and procedures regarding the formation and adjudication of water rights should be held, and suggest the following schedule: (a) 30 days prior to the hearing, both sides shall exchange lists of witnesses and exhibits; (b) All witnesses shall be made available for deposition not less than 10 days prior to the hearing; and, (c) All objections to witnesses or exhibits shall be filed not less than 5 days prior to the hearing.

             Defendant’s Response: Defendant does not understand the Court to have determined that an evidentiary hearing on Oregon state law is required in this case.  Defendant submits that the determination of whether such a hearing is necessary should be made after the hearing scheduled for May 5, 2003 .

Dated: April 24, 2003                                                    Respectfully submitted,

                                                                                    ________________________           

                                                                                    Roger J. Marzulla

                                                                                    Nancie G. Marzulla

                                                                                    MARZULLA & MARZULLA

1350 Connecticut Ave., N.W.

                                                                                    Suite 410

                                                                                    Washington , DC   20036

                                                                                    202-822-6760

                                                                                    202-822-6774 (fax)