Takings: Defendant's Cross Motion for Partial Summary Judgment and Opposition to Plaintiffs' Motion for Partial Summary Judgment

______________________________________ )
KLAMATH IRRIGATION DISTRICT, et al.,                 )
                                                                                        )
           Plaintiffs,                                                            )
                                                                                        )
                    v.                                                                 ) No. 01-591 L
                                                                                        )
                                                                                        ) Judge Diane Gilbert Sypolt
UNITED STATES OF AMERICA,                               )
                                                                                        )
            Defendant.                                                         )
______________________________________   )

DEFENDANT'S CROSS MOTION FOR PARTIAL SUMMARY JUDGMENT AND OPPOSITION TO PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT

TABLE OF CONTENTS

TABLE OF AUTHORITIES .......................................................................................................... iii

Index of Exhibits in Defendant’s Appendix ..................................................................................... viii

I. Introduction ............................................................................................................ 1

II. Procedural History .................................................................................................. 3

III. Factual and Statutory Background ........................................................................... 4

A. The United States Appropriated All Available Water for

the Klamath Project ................................................................................................ 4

B. The Delivery of Klamath Project Water ........................................... 8

C. Management of the Klamath Project .............................................. 10

IV. Argument .............................................................................................................. 12

A. Summary Judgment Standard ........................................................ 13

B. Whether Plaintiffs Have a Compensable Property Interest in

the Klamath Project Water is a Threshold Question ............................................... 14

C. Plaintiffs’ Rights to Receive Klamath Project Water in 2001

Were Limited by the Rights of the United States in that Water,

the Irrigation Districts’ Contracts with Reclamation, and by All

Senior Water Rights Affecting the Delivery of Project Water .................................. 15

1. Under Oregon Law, Water Rights are Usufructuary Rights 15

2. Under Oregon Law, the United States Was Authorized to and

Did Appropriate All Unappropriated Water Necessary for the

Klamath Project, and the United States’ Interest in Project

Water is a Limitation on Plaintiffs’ Right to Receive

That Water ............................................................................................... 16

3. Plaintiffs’ Beneficial Interest in the Klamath Project Water

Was in 2001 – and is Today – Defined and Limited by the

Irrigation Districts’ Contracts With Reclamation ......................................... 17

a. Plaintiffs’ Contract Rights in Water from a Federal

Reclamation Project are Distinct from Rights in

Non-Project Water ....................................................................... 18

b. Plaintiffs’ Contractual Rights to Receive Project

Water are Limited by the Terms of Their Contracts ........................ 19

4. Under the Prior Appropriation System, Plaintiffs’ Right to

Receive Klamath Project Water is Subject and Subordinate

to the Senior Water Rights of Several Tribes .............................................. 25

D. Any Claimed Interference with Plaintiffs’ Beneficial Interest is

in the Nature of a Contract Claim, Not a Fifth Amendment Takings

Claim .................................................................................................................... 27

E. The Klamath River Basin Compact, Court Decisions and Agency

Documents Relied On By Plaintiffs Do Not Support the Conclusion

that Plaintiffs Have An Absolute, Unlimited Right to Receive As Much

Water from the Klamath Project as They Can Put to a Beneficial

Use ....................................................................................................................... 31

1. The Klamath River Basin Compact ........................ 31

2. The Supreme Court Decisions Addressing Reclamation

Project Water Rights ................................................................................. 34

3. Interior Department Documents ............................. 41

F. Plaintiffs Klamath Drainage District and Klamath Hills District

Improvement Company Do Not Have “Vested” Water Rights

Under Oregon Law ............................................................................................... 45

G. If Plaintiffs Are Still Asserting a Taking of a “Vested Water Right,”

the Adjudication is Relevant and a Stay is Appropriate ........................................... 47

V. Conclusion ............................................................................................................ 48

TABLE OF AUTHORITIES

CASES

Anderson v. Liberty Lobby, Inc.,

477 U.S. 242 (1986)......................................................................................................... 13

Avenal v. United States,

100 F.3d 933 (Fed. Cir. 1996).......................................................................................... 13

Barcellos and Wolfsen, Inc. v. Westlands Water Dist.,

849 F. Supp. 717 (E.D. Cal. 1993), aff’d sub nom. O’Neill v. United States,

50 F.3d 677 (9^th Cir. 1995) ........................................................................................ 17, 40

Bd. of Regents of State Colls. v. Roth,

408 U.S. 564 (1972)......................................................................................................... 14

Buse Timber & Sales, Inc. v. United States,

45 Fed. Cl. 258 (1999)...................................................................................................... 14

California v. United States,

438 U.S. 645 (1978)..................................................................................................... 5, 19

Celotex Corp. v. Catrett,

477 U.S. 317 (1986)......................................................................................................... 13

Colorado River Water Conserv. Dist. v. United States,

424 U.S. 800 (1976)............................................................................................. 15, 16, 27

Conti v. United States,

291 F.3d 1334 (Fed. Cir. 2002)........................................................................................ 14

Croman Corp. v. United States,

49 Fed. Cl. 776 (Fed. Cl. 2001).................................................................................. 29, 30

Del Puerto Water Dist. v. U.S. Bureau of Reclamation,

271 F. Supp. 2d 1224 (E.D. Cal. 2003)............................................................................. 17

Dept. of Ecology v. Yakima Reservation Irrigation Dist.,

850 P.2d 1306 (Wash. 1993) ........................................................................................... 36

Dep’t of Ecology v. Reclamation,

827 P.2d 275 (Wash. 1992).............................................................................................. 37

Detroit Edison Co. v. United States,

56 Fed. Cl. 299 (2003)...................................................................................................... 30

Fremont-Madison Irrigation Dist. v. U.S. Dep’t of the Interior,

763 F.2d 1084 (9th Cir. 1985) ................................................................................... 28, 29

H.F. Allen Orchards v. United States,

749 F.2d 1571 (Fed. Cir. 1984)........................................................................................ 37

Hennings v. Water Resources Dep’t,

622 P.2d 333 (Or. Ct. App. 1981)...................................................................................... 9

Hughes Communications Galaxy, Inc. v. United States,

271 F.3d 1060 (Fed. Cir. 2002) ....................................................................................... 29

Ickes v. Fox,

300 U.S. 82 (1937)...................................................................................................... 34-36

Ickes v. Fox,

85 F.2d 294 (D.C. Cir. 1936)............................................................................................ 36

In Re Waters of Umatilla River,

168 Pac. 922 (Or. 1917)..................................................................................................... 6

Israel v. Morton,

549 F.2d 128 (9^th Cir. 1977) ............................................................................................ 18

Kandra v. United States,

145 F. Supp. 2d 1192 (D. Or. 2001)..................................................................... 18, 44-46

Kittitas Reclamation Dist. v. United States,

763 F.2d 1032 (9th Cir. 1985), cert. denied, 474 U.S. 1032 (1985).................................. 26

Klamath Water Users Protective Ass’n v. Patterson,

204 F.3d 1206 (9^th Cir.), opinion amended on denial of reh’g,

203 F.3d 1175 (9^th Cir. 2000), cert. denied, 531 U.S. 812 (2000)....... 7, 16, 23, 24, 26, 44

Knieper v. United States,

38 Fed. Cl. 128 (1997)...................................................................................................... 13

Lucas v. South Carolina Coastal Council,

505 U.S. 1003 (1992)....................................................................................................... 14

Lynch v. United States,

292 U.S. 571 (1934)......................................................................................................... 28

Maritrans v. United States,

342 F.3d 1344, 2003 WL 22076611 (Fed. Cir. Sept. 9, 2003) .................................. 14, 15

Nebraska v. Wyoming,

325 U.S. 589 (1945)................................................................................................... 34, 38

Nevada v. United States,

463 U.S. 110 (1983)................................................................................................... 34, 39

Orff v. United States,

CV-F-93-5327, Slip Op. 46 (E.D. Cal. 1998) .................................................................. 18

O’Neill v. United States,

50 F.3d 677 (9th Cir. 1995).................................................................................. 17, 22, 23

Pacific Coast Federation of Fishermen’s Ass’ns v. U.S. Bureau of Reclamation,

138 F. Supp. 2d 1228 (N.D. Cal. 2001)................................................................ 10, 12, 25

Parravano v. Babbitt,

70 F.3d 539 (9th Cir. 1995), cert. denied, 518 U.S. 1016 (1996)...................................... 26

Rencken v. Young,

711 P.2d 954 (Or. 1985)................................................................................................... 15

Sunrise Village Mobile Home Park, L.C. v. United States,

42 Fed. Cl. 392 (1998)...................................................................................................... 30

Sweats Fashions, Inc. v. Pannill Knitting Co.,

833 F.2d 1560 (Fed. Cir. 1987)........................................................................................ 13

Tulare Lake Basin Water Storage Dist. v. United States,

49 Fed. Cl. 313 (2001)...................................................................................................... 23

United States v. Adair,

723 F.2d 1394 (9th Cir. 1983), cert. denied sub nom Oregon v. United States,

467 U.S. 1252 (1984)....................................................................................................... 25

United States v. Alpine Land & Reservoir Co.,

697 F.2d 851 (9^th Cir.), cert. denied, 464 U.S. 863 (1983).................................................. 9

United States v. Braren,

338 F.3d 971 (9th Cir. 2003)............................................................................................ 25

United States v. Eberhardt,

789 F.2d 1354 (9th Cir. 1986).......................................................................................... 26

United States v. Willow River Co.,

324 U.S. 499 (1945)......................................................................................................... 28

Walcek v. United States,

303 F.3d 1349 (Fed. Cir. 2002)........................................................................................ 14

Wyatt v. United States,

271 F.3d 1090 (Fed. Cir. 2001), cert. denied, 122 S. Ct. 1960 (2002) ............................. 14

STATUTES

Act of February 9, 1905, ch. 567, 33 Stat. 714............................................................................ 5, 6

Hoopa-Yurok Settlement Act,

25 U.S.C. § 1300i............................................................................................................. 26

O.R.S. § 536.300(1)....................................................................................................................... 9

Reclamation Act of June 17, 1902,

32 Stat. 388, 43 U.S.C. § 371......................................................................................... 5, 8

32 Stat. 390, 43 U.S.C. § 372....................................................................................... 9, 17

Reclamation Project Act of 1939,

43 U.S.C. § 485.................................................................................................................. 8

43 U.S.C. § 485h(d) ........................................................................................................... 8

43 U.S.C. § 485(7)(a) ........................................................................................................ 8

43 U.S.C. § 485(9)(d) ........................................................................................................ 8

Warren Act of 1911,

43 U.S.C. § 524 ............................................................................................................. 8, 9

RULES

RCFC 56...................................................................................................................................... 13

REGULATIONS

53 Fed. Reg. 27130 (July 18, 1988).............................................................................................. 24

62 Fed. Reg. 24588 (May 6, 1997)............................................................................................... 24

OTHER AUTHORITIES

Filing of Claims for Water Rights in General Stream Adjudications,

97 Interior Dec. 21, 1989 WL 506913 (July 6, 1989)........................................................ 42

Decision of Comptroller General,

1956 WL 1894 (Sept. 4, 1956)......................................................................................... 41

Index of Exhibits in Defendant’s Appendix

Exhibit No.	Description	Beginning Page No.
1	Statement of Stipulated Facts Re: Claims and Contests Consolidated for Hearing in Case 003, Before Hearing Officer Panel for the State of Oregon Water Resources Dept., Aug. 4, 2003	1
2	Or. Gen. Laws, 1905, Chapter 223	149
3	Klamath Project Historic Operation (Dept. of the Interior, Bureau of Reclamation, Nov. 2000) (Excerpt) (Full copy available at http://www.usbr.gov/mp/kbao/docs/Historic%20Operation.pdf)	151
4	Drought Plan, Appendix B to Klamath Project Historic Operation	206
5	Contracts and Water Rights, Appendix C to Klamath Project Historic Operation	210
6	Excerpt from Amendatory Contract Between the United States and Klamath Irrigation District (Nov. 29, 1954) (full copy attached to Pls’ Amended Complaint as Ex. 1)	218
7	Excerpt from Contract Between the United States and the Tulelake Irrigation District (Sept. 10, 1956) (full copy attached to Pls’ Amended Complaint as Ex. 2)	222
8	Excerpt from Amendatory Contract Between the United States and Klamath Drainage District (April 28, 1943) (full copy attached to Pls’ Amended Complaint as Ex. 3)	226
9	Excerpt from Contract Between the United States and Poe Valley Improvement District (July 20, 1953) (full copy attached to Pls’ Amended Complaint as Ex. 4)	233
10	Excerpt from Contract Between United States and Sunnyside Irrigation District (Oct. 24, 1922) (full copy attached to Pls’ Amended Complaint as Ex. 5)	236
11	Excerpt from Contract Between the United States and Klamath Basin Improvement District (April 25, 1962) (full copy attached to Pls’ Amended Complaint as Ex. 6)	240
12	Excerpt from Contract Between the United States and Midland District Improvement Co. (Feb. 2, 1952) (full copy attached to Pls’ Amended Complaint as Ex. 7)	246
13	Excerpt from Contract Between United States and Malin Irrigation District (Sept. 9, 1922) (full copy attached to Pls’ Amended Complaint as Ex. 8)	249
14	Excerpt from Contract Between United States and Enterprise Irrigation District (Oct. 5, 1920) (full copy attached to Pls’ Amended Complaint as Ex. 9)	254
15	Excerpt from Contract Between United States and Pine Grove Irrigation District (Dec. 21, 1918) (full copy attached to Pls’ Amended Complaint as Ex. 10)	258
16	Excerpt from Contract Between United States and Colonial Realty Company (Oct. 20, 1936) (full copy attached to Pls’ Amended Complaint as Ex. 11)	264
17	Excerpt from Amendatory Repayment Contract Between United States and Shasta View Irrigation District (Aug. 20, 1948) (full copy attached to Pls’ Amended Complaint as Ex. 12)	269
18	Excerpt from Klamath Water Users Association’s Summary Judgment Reply Brief (as Defendant-Intervenor) in Pacific Coast Federation of Fishermen’s Associations v. United States Bureau of Reclamation, No. C-02-2006 SBA (N.D. Cal.) (March 27, 2003)	275
19	Excerpt from Klamath Water Users Association’s Cross-Motion for Summary Judgment (as Defendant-Intervenor) in Pacific Coast Federation of Fishermen’s Associations v. United States Bureau of Reclamation, No. C-02-2006 SBA (N.D. Cal.) (March 13, 2003)	280
20	Contract Between the Sunnyside Water Users Association and the Secretary of the Interior (May 7, 1906) (from Ickes v. Fox, 300 U.S. 82 (1937))	288
21	Filings of Claims for Water Rights in General Stream Adjudications, 97 Interior Dec. 21, 1989 WL 506913 (July 6, 1989)	297
22	Declaration of Cecil H. Lesley	309
23	Memorandum from District Counsel, Darwin G. Tyree, to Project Manager, Klamath Falls, Oregon, re: Certificate of Water Users’ Assocation on Water Right Applciations, Tule Lake Lands - Klamath Project (Oct. 11, 1922)	312
24	Water Rights in Oregon (May 2001) (Excerpt)	314
25	Oregon Water Resources Dept. (OWRD) Water Rights Information Query Results for Klamath Drainage District Permit No. 43334	324
26	OWRD Water Rights Information Query Results for KHID Permit No. 48435	326
27	Certificate of Water Right, issued to Murel and Barabara Long, dated March 18, 1988	328
28	State of Oregon, Press Release from Governor’s Office, “Governor Declare Drought Emergency in Klamath County,” dated March 28, 2001	330

I. Introduction

In their Complaint, both as originally filed in October 2001, and as amended in March 2003, plaintiffs allege a taking of their “appurtenant water rights.” Compl. ¶¶ 15-20; Amended Compl. ¶¶ 16-24. Plaintiffs assert that these “water rights” are “appurtenant to land, and are recognized as property under the laws of the states of Oregon and California, respectively.” Compl. ¶ 32; Amended Compl. ¶ 32.¹ When defendant moved to stay these takings claims because of the importance of the Klamath Basin Adjudication to the determination of whether plaintiffs possessed such rights at all, plaintiffs’ response continued to define their alleged property rights as water rights “vested under well-established Oregon law.” See Pls.’ Opp. to Def’s Mot. to Stay at 9 (“plaintiffs’ water rights are vested under Oregon law and do not depend upon the adjudication for recognition”); id. at 13 (“Since plaintiffs can establish that their property rights are vested under well-established Oregon law, the stream water adjudication will not divest plaintiffs of these vested rights.”).

In their present motion for partial summary judgment, plaintiffs assert that their beneficial interest in the Klamath Project water is a compensable property right upon which their Fifth Amendment takings claims can be premised. As expressed by plaintiffs in their revised memorandum, “[i]n this case, plaintiffs do not assert their claim to legal title to the Project water as they do in the Adjudication; here, plaintiffs seek just compensation for the taking of their beneficial interest in the water, a property right that entitles them to receive the Project water – or just compensation if that water is taken by defendant.” Pls.’ Mem. at 10. If the right that plaintiffs’ possess and that was allegedly taken from them in 2001 is just their “beneficial interest” in the Klamath Project water, then plaintiffs do not possess a compensable property right in the Klamath Project water upon which their Fifth Amendment takings claims can be premised.

As explained herein, there is no dispute that some water users served by the Klamath Project water have a beneficial interest in Klamath Project water.² However, the fact that some water users have a beneficial interest in Project water is not, as plaintiffs suggest, the end of the analysis. To the contrary, defining the nature of plaintiffs’ rights to or interest in receiving water from the Klamath Project, and the numerous limitations on that right or interest, requires an examination of Oregon state water law, federal reclamation law and, most importantly, the various contracts under which the water users receive water from the Klamath Project. As set forth below in Section IV.C., the scope and nature of that beneficial interest is defined and limited by: (1) the rights of the United States in the same water, and its obligations in the management of the Klamath Project; (2) the irrigation districts’ contracts with Reclamation, under which water is delivered to the individual water users or irrigators served by the Project; and (3) senior tribal fishing and water rights, the exercise of which may impact the available water supply for the Klamath Project. Moreover, for the purposes of this briefing, the Court has instructed the parties to analyze the nature of plaintiffs’ interest in the Klamath Project water assuming that the resolution of Case No. 003 in the Klamath Basin Adjudication (“Adjudication”) is adverse to plaintiffs, meaning that the State of Oregon has awarded water rights certificates to the United States for the Klamath Project water. Under this assumption, the United States has vested and determined rights to the Project water under Oregon law, and plaintiffs have only a limited beneficial interest in that water.

Given the limitations inherent in plaintiffs’ “beneficial interest,” and because that interest was created and defined by contract,³ the events of 2001 may give rise to a contract claim, but not a takings claim. Accordingly, the Court should find that plaintiffs’ beneficial interest in the Klamath Project water is, at best, a contractual right and that it is not a vested property right under Oregon law which is protected by the Fifth Amendment. Because plaintiffs cannot demonstrate a vested property interest, their motion for partial summary judgment should be denied, and defendant’s cross-motion for partial summary judgment should be granted.

II. Procedural History

Following a status conference held on May 5, 2003, the Court issued an Order setting forth the following instructions:

plaintiffs shall file a motion for summary judgment on the question of whether their water rights in the Klamath River Valley, allegedly taken by the government in 2001, are property the taking of which is compensable under the Fifth Amendment to the Constitution, notwithstanding any adverse determination, including a retroactive one, regarding the existence, extent or character of such rights by the Hearing Officer Panel in Case No. 003 of the State of Oregon’s ongoing Klamath Basin Adjudication.

Order, dated May 12, 2003, at 1. Under this hypothetical situation, the parties are to assume for the purposes of this briefing that the United States has prevailed on its claims in Case No. 003 and that the State of Oregon has awarded water rights to the United States for the Klamath Project water. The Court’s Order of May 12 was further clarified in an Order issued on August 22, 2003, which stated that,

[o]n or before September 10, 2003, plaintiffs shall file a motion for partial summary judgment as to their contention that the property rights determination in the Adjudication is irrelevant to plaintiffs’ interests here. Should plaintiffs fail to file, or not prevail on, this partial summary judgment motion, the court will stay any decision on their earlier filed motion for summary judgment, filed on July 21, 2003, until the Adjudication is concluded.

Plaintiffs filed their Revised Motion for Partial Summary Judgment on August 29, 2003.

III. Factual and Statutory Background⁴

A. The United States Appropriated All Available Water for the Klamath Project

This case involves the operation of the Klamath Project, a Federal Reclamation project authorized in 1905 by the following Act of Congress:

The Secretary of the Interior is hereby authorized in carrying out any irrigation project that may be undertaken by him under the terms and conditions of the national reclamation act and which may involve the changing of the levels of Lower or Little Klamath Lake, Tule or Rhett Lake, and Goose Lake, or any river or other body of water connected therewith, in the States of Oregon and California, to raise or lower the level of said lakes as may be necessary and to dispose of any lands which may come into the possession of the United States as a result thereof by cession of any State or otherwise under the terms and conditions of the national reclamation act.

Act of February 9, 1905, ch. 567, 33 Stat. 714.

The water rights acquired by the United States for the operation of the Klamath Project pursuant to this authority and the Reclamation Act of 1902⁵ are derived from legislation enacted by the State of Oregon on February 22, 1905, which provides in relevant part:

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 waters 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 . . . . 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. In case of failure of the United States to file such plans or authorized construction of such works within the respective periods herein provided, the waters specified in such notices, filed by the United States, shall become subject to appropriation by other parties.

Ore. Gen. Laws, 1905, Chap. 228, section 2, p. 401 (emphasis added).⁶

At the same session, the Oregon legislature enacted another statutory provision that, “for the purpose of aiding in the operations of irrigation and reclamation,” authorized Reclamation to lower the level of certain lakes within the Klamath Basin and ceded to the United States all lands thereby uncovered that had not already been disposed of by the State. See Def. Ex. 1 (KBA Facts at 45-46). Similar legislation was enacted by the California legislature on February 3, 1905, covering the Klamath Project areas in California. See id. (KBA Facts at 46-47 (Cal. Stats. 1905, p. 4)).

On May 19, 1905, pursuant to these authorizations, Reclamation filed a “Notice of Intention to Utilize All Waters of the Klamath Basin” in the Office of the State Engineer of Oregon, stating that:

Notice is hereby given that the United States intends to utilize certain specified waters, as follows, to-wit:

All of the waters of the Klamath Basin in Oregon, constituting the entire drainage basins of the Klamath River and Lost River, and all of the lakes, streams, and rivers supplying water thereto or receiving water therefrom. . . .

Pls. Ex. 30. See also Pls. Ex. 31-32 (postings of the 1902 notice).⁷ Through its compliance with these applicable state and federal laws, the United States “appropriated all available water rights in the Klamath River and Lost River and their tributaries in Oregon and began constructing a series of water diversion projects.”⁸ Klamath Water Users Protective Ass’n v. Patterson (“Klamath Water Users v. Patterson”), 204 F.3d 1206, 1209 (9th Cir.), opinion amended on denial of reh’g, 203 F.3d 1175 (9th Cir. 2000), cert. denied, 531 U.S. 812 (2000).

In addition, to the extent that any waters in the Klamath Basin were “unavailable” because such water already had been appropriated under state law to be used on lands identified as part of the Klamath Project, Reclamation acquired all of these “pre-Project” water rights and integrated them into the Project, thereby eliminating potential conflict between these pre-Project water rights and Project water rights.⁹ See Def. Ex. 3 (KP Historic Op. at 34) (“It was necessary to purchase these [pre-Project rights to use water] from the entities involved so that Reclamation had full control of all the rights to the use of water in the basin to facilitate Project operation.”). See also KBA Facts at 50-58 (describing Reclamation’s acquisition of water rights acquired under state law prior to the development of the Klamath Project) (Def. Ex. 1).

B. The Delivery of Klamath Project Water

As the development of the Klamath Project progressed, water became available for delivery to acreage within the Project for irrigation purposes. The delivery of Project water is governed by contracts entered into pursuant to federal law between Reclamation and various individuals and irrigation districts and other entities organized under Oregon and California law (the irrigation districts and other similar entities are collectively referred to herein as the “districts”).¹⁰ See Def. Ex. 3 (KP Historic Op. at 31-32); Def. Ex. 5 (KP Historic Op., Appx. C, pp. C-1 to C-2) (“The Klamath Project water users obtain their irrigation water supply from Project facilities pursuant to various contracts with Reclamation.”). Each of the districts then supplies irrigation water to individual users within their boundaries. All but one of the irrigation districts named as plaintiffs in this case have contracts directly with Reclamation for the delivery of Project water. See Amended Compl. Exs. 1-14. None of the individual plaintiffs named in this case have contracts with the United States for delivery of Project water, but all receive water from one of the districts with such a contract.

Under the districts’ contracts with Reclamation, the districts receive deliveries of water from the Project and in return are obligated to pay a proportionate share of the Project’s initial construction and annual operation and maintenance costs. See 43 U.S.C. § 485h(d); 43 U.S.C. § 524. See also KBA facts at 86-87; Amended Compl. Exs. 1-14.¹¹ These various contracts generally specify an acreage for which water is to be delivered, but do not specify a particular quantity of water to be delivered, relying instead on the fundamental principle of beneficial use to determine the limit of the contractual entitlement.¹² See Def. Ex. 5 (KP Historic Op., Appx. C, p. C-1); see also Section 8 of the Reclamation Act of 1902, 43 U.S.C. § 372. In addition, many of the contracts provide that the water is to be delivered only during the irrigation season, which in most of the contracts is defined as April 15 to September 30.¹³ Finally, and importantly, a majority of the contracts also contain water shortage provisions which limit the liability of the United States for water shortages under certain circumstances. See, e.g., KID Contract, Art. 26, Nov. 29, 1954 (Amended Compl., Ex. 1 at ¶ 26).

C. Management of the Klamath Project

Unlike federal reclamation projects elsewhere in the arid West, the Klamath Project does not have a major water storage reservoir backed up behind a large dam. The Upper Klamath Lake (“UKL”), which is the principal water supply feature of the Project, is relatively shallow, and its 1917 dam is too small to capture and store large quantities of spring run-off. Def. Ex. 3 (KP Historic Op. at 30); Pacific Coast Federation of Fishermen’s Ass’ns v. U.S. Bureau of Reclamation (“PCFFA v. BOR I”), 138 F. Supp. 2d 1228, 1231 (N.D. Cal. 2001). The Project thus lacks facilities to store water in wet years to meet all water needs in dry years. As a result, operation of the Klamath Project often requires Reclamation to balance numerous competing legal obligations and demands for limited Project water supply. PCFFA v. BOR I, 138 F.Supp.2d at 1231.

Reclamation’s obligations in managing and operating the Klamath Project pending completion of the Adjudication are discussed in a 1997 memorandum from two Department of the Interior Regional Solicitors’ offices. This 1997 memorandum “reaffirms long-standing positions of the United States regarding management of water projects for irrigation, wildlife protection, and Indian rights, and builds on the July 25, 1995, memorandum from the Regional Solicitor, Pacific Southwest Region, to the Regional Director, Bureau of Reclamation, Mid-Pacific Region (July 25 memorandum).” 1997 Reg. Solicitor’s Memo. at 2 (Pls. Ex. 28). The 1997 memorandum describes Reclamation’s obligations in managing and operating the Klamath Project as follows:

[p]ending completion of the adjudication, Reclamation is authorized and obligated to manage and operate the Klamath Project consistent with all of Reclamation’s responsibilities and obligations concerning senior water rights, tribal trust resources, Project water users’ contractual rights, the Endangered Species Act and other requirements mandated by law and within the authority of the Secretary. These obligations may be clarified or otherwise affected by the pending adjudication; however, Reclamation will continue to have authority to manage and operate the Project consistent with its obligations after completion of the adjudication.

Id. at 11.

Like the 1997 memorandum, the 1995 memorandum referenced therein

also discusses Reclamation’s obligations with respect to Klamath Project water users, the wildlife refuges, the tribes, and under the Endangered Species Act (“ESA”). See 1995 Reg. Solicitor’s Mem. at 7-9 (Pls. Ex. 2 at 46). With respect to the rights of the water users, the 1995 memorandum states that the users’ rights are “subject to the availability of water.” Id. at 7. The 1995 memorandum further explains that:

[w]ater would not be available, for example, due to drought, a need to forego diversions to satisfy prior existing rights, or compliance with other federal laws such as the Endangered Species Act. Water lawfully stored in the project’s reservoirs can be used for domestic and irrigation purposes to the extent the water is applied to beneficial use within the project. Reclamation cannot store or divert water for project purposes that is needed to satisfy prior existing rights.

Id. With respect to Reclamation’s obligations to the tribes, the memorandum states that “Reclamation is obligated to ensure that project operations not interfere with the Tribes’ senior water rights. This is dictated by the doctrine of prior appropriation as well as Reclamation’s trust responsibility to protect tribal trust resources.” Id. at 8.

Pending the outcome of the Adjudication, Reclamation has established a “Priority and Execution Plan for Administration of Water Rights and Water Delivery on the Klamath Project in the Event of a Drought.” See Def. Ex. 4 (Drought Plan, KP Historic Op. at Appx. B). In the event of a drought, this plan provides that the limited supply of Project water would be allocated on a priority basis according to the existing contracts:

[o]ne of the key themes in any prioritization of water rights on the Project is that [Reclamation] claim[s] a 1905 right for all Project lands regardless of the type of contract that the water users may have. However, within the Project we can prioritize use by date of contract and type of contract.

Id. (Drought Plan, p. B-1).

IV. Argument

Plaintiffs’ beneficial interest in Klamath Project water is defined and limited by the irrigation districts’ contracts with Reclamation, and is further limited by the rights of the United States in the Project water, and by the senior tribal water rights that affect operation of the Klamath Project and the availability of Project water. Because plaintiffs’ beneficial interest in the Klamath Project water is a limited contractual right, the government’s operation of the Klamath Project in 2001 might have given rise to a contract action (which the United States would contest on the merits), but plaintiffs do not have a “compensable property right” and thus their takings claims fail as a matter of law. For this reason, plaintiffs’ motion for partial summary judgment should be denied, and defendant’s cross-motion for summary judgment as to plaintiffs’ takings claims should be granted.

A. Summary Judgment Standard

Summary judgment is a “salutary method of disposition designed to secure the just, speedy and inexpensive determination of every action.” Sweats Fashions, Inc. v. Pannill Knitting Co., 833 F.2d 1560, 1562 (Fed. Cir. 1987) (internal quotation marks omitted). In this regard, the summary judgment procedure “is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed ‘to secure the just, speedy and inexpensive determination of every action.’” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1).

A party is entitled to summary judgment under RCFC 56 “when there are no genuine issues of material fact in dispute and the moving party is entitled to judgment as a matter of law.” Avenal v. United States, 100 F.3d 933, 936 (Fed. Cir. 1996). In determining whether summary judgment is appropriate, “[f]actual disputes that are irrelevant or unnecessary will not be counted.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). See also Knieper v. United States, 38 Fed. Cl. 128, 134 (1997) (“Disputes which are not outcome determinative under the governing law will not preclude the entry of summary judgment.”).

B. Whether Plaintiffs Have a Compensable Property Interest in the Klamath Project Water is a Threshold Question

In every Fifth Amendment takings case the issue of whether the plaintiff possess a compensable property interest is a threshold element of the plaintiff’s claim. See Maritrans v. United States, 342 F.3d 1344, 2003 WL 22076611, at * 4 (Fed. Cir. Sept. 9, 2003) (“First, a court must evaluate whether the claimant has established a ‘property interest’ for purposes of the Fifth Amendment.”) (citation omitted)); Buse Timber & Sales, Inc. v. United States, 45 Fed. Cl. 258, 262 (1999) (“In order to successfully bring a Fifth Amendment takings claim, plaintiff must first demonstrate the existence of a ‘legally cognizable property interest.’”). The question of whether plaintiffs have a compensable property interest regardless of the outcome of the Klamath Basin Adjudication presents “a question of law based on factual underpinnings.” Walcek v. United States, 303 F.3d 1349, 1354 (Fed. Cir. 2002) (citing Wyatt v. United States, 271 F.3d 1090, 1096 (Fed. Cir. 2001), cert. denied, 122 S. Ct. 1960 (2002)). In determining the scope and nature of a plaintiff’s alleged property interest, the Federal Circuit, following Supreme Court precedent, has repeatedly emphasized that,

[t]he Constitution neither creates nor defines the scope of property interests compensable under the Fifth Amendment. Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577 (1972). Instead, “existing rules and understandings” and “background principles” derived from an independent source, such as state, federal, or common law, define the dimensions of the requisite property rights for purposes of establishing a cognizable taking. Lucas [v. South Carolina Coastal Council, 505 U.S. 1003, 1030 (1992)].

Maritrans, 342 F.3d 1344, 2003 WL 22076611, at *5. See also Conti v. United States, 291 F.3d 1334, 1340 (Fed. Cir. 2002).

In this case, the scope and limitations of plaintiffs’ interest in Klamath Project water are defined by state water law, federal reclamation law, and the plaintiff irrigation districts’ contracts with Reclamation.¹⁴ As explained below, plaintiffs’ claimed property right – a beneficial interest in Klamath Project water – is a limited contractual right that does not rise to the level of a compensable property right which is necessary to sustain a claim for a Fifth Amendment taking.

C. Plaintiffs’ Rights to Receive Klamath Project Water in 2001 Were Limited by the Rights of the United States in that Water, the Irrigation Districts’ Contracts with Reclamation, and by All Senior Water Rights Affecting the Delivery of Project Water

1. Under Oregon Law, Water Rights are Usufructuary Rights

The determination of the scope and limitations of plaintiffs’ “beneficial interest” in Klamath Project water necessarily begins with the recognition that any interest plaintiffs have in Project water is subject to the public’s ultimate ownership of the water. As explained by the Oregon Supreme Court, “[a]ll water within the State of Oregon from all sources of water supply belongs to the public.” Rencken v. Young, 711 P.2d 954, 960 (Or. 1985) (citing ORS § 537.110). See also Oregon’s Amicus Curiae Brief (July 30, 2002) at 10. Although persons can acquire a right to such water under a state’s prior appropriation system, such rights are rights to the use of water, or usufructuary rights, not rights of ownership of the water itself. Rencken, 711 P.2d at 960 n. 9. Under this system, “[w]ater rights are ranked in the order that the right was acquired, and this priority schedule is used to distribute available water in times of shortage.” Tarlock, Law of Water Rights and Resources at § 5.30 (2001). See also Colorado River Water Conserv. Dist. v. United States, 424 U.S. 800, 805 (1976) (under the doctrine of prior appropriation, “[i]n periods of shortage, priority among confirmed rights is determined according to the date of initial diversion.”).

2. Under Oregon Law, the United States Was Authorized to and Did Appropriate All Unappropriated Water Necessary for the Klamath Project, and the United States’ Interest in Project Water is a Limitation on Plaintiffs’ Right to Receive That Water

As described in Section III.A., supra, in 1905, acting in accordance with applicable Oregon state law and the Reclamation Act, the United States “appropriated all available water rights in the Klamath River and Lost River and their tributaries in Oregon and began constructing a series of water diversion projects.”¹⁵ Klamath Water Users v. Patterson, 204 F.3d at 1209. In addition, even where such water was “unavailable” because it had been appropriated under state law prior to 1905, Reclamation acquired these “pre-Project” water rights and integrated them into the Project in order to facilitate the Project’s development.¹⁶

Once the United States appropriated all available waters of the Klamath River, these waters were not subject to further appropriation under Oregon law by plaintiffs or anyone else. See Def. Ex. 2. In addition, following the federal government’s appropriation of this water under state law, no adverse claims to such water could be acquired by plaintiffs unless the United States formally released such water, or a portion thereof, in writing. Id. There has been no such release in this case. Def. Ex. 22 (Declaration of Cecil H. Lesley, ¶6).

Moreover, we are assuming for the purposes of this briefing, as directed by the Court, that the water rights appropriated by the United States for the Klamath Project will be confirmed and vested in the United States through the Adjudication. Under these circumstances, any beneficial interest held by the plaintiffs to the Klamath Project water is necessarily subject to and limited by the rights of the United States in that water, and by Reclamation’s legal obligations in managing and operating that Project.

3. Plaintiffs’ Beneficial Interest in the Klamath Project Water Was in 2001 – and is Today – Defined and Limited by the Irrigation Districts’ Contracts With Reclamation

Following its appropriation of all available water in the Klamath Basin, and its acquisition of water rights previously appropriated under state law, the United States began construction of the Klamath Project. As construction progressed to a point where water could be

delivered for irrigation purposes, Reclamation entered into contracts with individual landowners, and later with the districts, for the delivery of water and the repayment of the Project construction and operation costs.

Upon the delivery of water pursuant to these contracts, and the application of that water to a beneficial use in accordance with applicable state and federal law, the landowners served by the Project acquired a beneficial interest in the Project water.¹⁷ However, as set forth below, the scope of this beneficial interest is defined and limited by the contracts entered into between the plaintiff irrigation districts and the United States, acting through Reclamation. See Barcellos and Wolfsen, Inc. v. Westlands Water Dist., 849 F. Supp. 717, 731 (E.D. Cal. 1993), aff’d sub nom. O’Neill v. United States, 50 F.3d 677 (9^th Cir. 1995) (noting that the contracts between Reclamation and the districts “define[] the extent of the water right”); Del Puerto Water Dist. v. U.S. Bureau of Reclamation, 271 F. Supp. 2d 1224, 1247 (E.D. Cal. 2003) (quoting Orff v. United States, CV-F-93-5327, Slip Op. at 46-48 (E.D. Cal. 1998) (noting that the water rights permit for Central Valley Project (“CVP”) water was issued to the United States and not to the plaintiffs, and finding that the plaintiffs’ right to CVP water “is wholly dependent on their contract with the Bureau”)); Kandra v. United States, 145 F. Supp. 2d 1192, 1196 (D. Or. 2001) (“Klamath Irrigation District and Tulelake Irrigation District have rights to receive water pursuant to their contracts with Reclamation”).

a. Plaintiffs’ Contract Rights in Water from a Federal Reclamation Project are Distinct from Rights in Non-Project Water

The contracts at issue in this case give the plaintiff irrigation districts rights to receive delivery of water made available by a federal reclamation project, or “Project water,” which – significantly for this case – is distinct from non-project water in terms of the United States’ control and interest in that water. This distinction was explained by the Ninth Circuit in the case of Israel v. Morton as follows:

a distinction must be recognized between the nature of nonproject water, such as natural-flow water, and project water, and between the manner in which rights to use of such water are obtained. Right to use natural-flow water is obtained in accordance with state law. . . . Project water, on the other hand, would not exist but for the fact that it has been developed by the United States. It is not there for the taking (by the landowner subject to state law), but for the giving by the United States. The terms upon which it can be put to use, and the manner in which rights to continued use can be acquired, are for the United States to fix.

549 F.2d 128, 132 (9^th Cir. 1977). This distinction is relevant here as well. The water at issue in this case was developed and appropriated by the United States through the federal Klamath Project. When that Project water became available for use, the United States employed contracts to define the terms of use, as contemplated by Israel v. Morton.¹⁸

Accordingly, the United States – through its appropriation of all available water in the Klamath Basin, its development of the Klamath Project, and its distribution of Project water through federal facilities pursuant to contracts with the irrigation districts – has retained a significant interest in and control over the Project water. The United States’ retention of this interest is consistent with and necessary to meet Reclamation’s responsibilities and legal obligations in managing the Klamath Project, which include Reclamation’s “responsibilities and obligations concerning senior water rights, tribal trust resources, Project water users’ contractual rights, the Endangered Species Act and other requirements mandated by law and within the authority of the Secretary.” Pls. Ex. 28 (1997 Reg. Sol. Mem. at 11). See Section IV.C.3.b. and IV.C.4., infra. Thus, as noted above, the rights of the United States in the Klamath Project water are an inherent limitation on the beneficial interests of the individual irrigators in such water.

b. Plaintiffs’ Contractual Rights to Receive Project Water are Limited by the Terms of Their Contracts

A review of the contracts between the irrigation districts and Reclamation reveals that plaintiffs’ “beneficial interest” in the Klamath Project water is not, as plaintiffs claim, an absolute and unlimited right to receive water in all circumstances and at all times.

The contracts at issue in this case are attached to plaintiffs’ Amended Complaint as Exhibits 1-14. Under these contracts, the districts receive a supply of water from the Klamath Project and, in return, are obligated to pay a proportionate share of the initial construction cost of the Project, and a proportionate share of the annual operation and maintenance costs. See Def. Ex. 1 (KBA Facts at 86-140); see also Amended Compl., Exs. 1-14. The contracts generally identify the acreage for which water is to be provided, specify the time when the water is to be delivered (usually April 15 to September 30), and employ “beneficial use” as the measure and limit of the amount of water covered by the contract. See, e.g., Amendatory Contract between U.S. and Klamath Drainage Dist. at ¶ 14(a), Apr. 28, 1943 (Amended Compl., Ex. 3); Contract Between U.S. and Sunnyside Irrigation Dist. at ¶ 5, Oct. 24, 1922 (Amended Compl., Ex. 5). See also Ex. 3 (KP Historic Op. at 31-33); Def. Ex. 5 (KP Historic Op., Appx. C, pp. C-1 to C-3).

In addition, although no mention is made of these provisions in plaintiffs’ discussion of the contracts, most of the subject contracts have “shortage provisions” that expressly limit the liability of the United States under these contracts. For example, the contract between the United States and the Klamath Irrigation District (“KID”) states:

On account of drought or other causes, there may occur at times a shortage in the quantity of water available in Project reservoirs and, while the United States will use all reasonable means to guard against such shortage, in no event shall any liability accrue against the United States or any of its officers, agents, or employees for any damage, direct or indirect, arising therefrom and the payments to the United States provided for herein shall not be reduced because of any such shortages.

KID Contract, Art. 26, Nov. 29, 1954 (Amended Compl., Ex. 1) (emphasis added) (relevant excerpt included as Def. Ex. 6). Seven of the other contracts contain either the same or a substantially similar shortage provisions.¹⁹

In addition, in the instant case, four of the irrigation districts have contracts with shortage provisions that do not contain the broad “or other causes” language. For example, the contract between the United States and the Enterprise Irrigation District states:

The United States shall not be liable for failure to supply water under this contract caused by hostile diversion, unusual drought, interruption of service made necessary by repairs, damages caused by floods, unlawful acts or unavoidable accidents.

Enterprise Irrigation Dist. Contract, Art. 10, Oct. 5, 1920 (Amended Compl., Ex. 9).²⁰ However, even these contracts place severe limitations on any right to obtain relief in the event of a water shortage. Finally, one of the plaintiff irrigation companies, Van Brimmer, has a contract with Reclamation that does not have a water shortage provision. As explained above, the United States replaced Van Brimmer’s pre-Project water supply with a Project water supply. See n.9, supra. In the contract entered into to effectuate this arrangement, Van Brimmer waived and renounced all of its riparian rights and the United States recognized that Van Brimmer has a contractual right to the perpetual use of a specified quantity of water, subject to any prior right other than one claimed by the United States.²¹

In summary, although the remaining contracts do not contain the “or other causes” language, all but the Van Brimmer contract contain express recognition that Reclamation may not be able to provide water due to drought and explicitly limit the liability of the United States for water shortages caused by “drought” or “unusual drought.” There is no dispute in this case that the Klamath Basin suffered a severe drought in 2001. Indeed, on March 28, 2001 the Governor of Oregon declared a drought emergency for the Klamath Basin. See Def. Ex. 28 (Governor’s Press Release); see also http://www.usbr.gov/mp/kbao/. Accordingly, under these remaining contracts, plaintiffs do not have an unequivocal right to receive water during a severe drought, such as the one that occurred in 2001.

The interpretation of the shortage provision found in the KID contract and the 7 other contracts discussed above is not a question of first impression. In O’Neill v. United States, 50 F.3d 677 (9^th Cir. 1995), the United States had agreed to provide water from the Central Valley Project in California (“CVP”) to an irrigation district, and the district had agreed to pay for the water, subject to a clause in the parties’ contract which stated that,

“[t]here may occur at times during any year a shortage in the quantity of water available for furnishing to the District through and by means of the Project, but in no event shall any liability accrue against the United States or any of its officers, agents, or employees for any damage, direct or indirect, arising from a shortage on account of errors in operation, drought, or any other causes.”

O’Neill, 50 F.3d at 682 n.2 (quoting the irrigation district contract with Reclamation at issue). Presented with the question of whether this contract required Reclamation to deliver water to the irrigation district when the water could not be delivered consistently with the ESA and the Central Valley Project Improvement Act (“CVPIA”), the Ninth Circuit held that these contracts were not immune from subsequently enacted legislation, i.e., the ESA and the CVPIA. The O’Neill court further held that the shortage provision contained in the irrigation district’s contract with Reclamation “unambiguously absolves the government from liability for its failure to deliver the full contractual amount of water where there is a shortage caused by statutory mandate.” Id. at 689. In this case, as in O’Neill, plaintiffs’ contracts with Reclamation expressly acknowledge that Klamath Project water may not be available in time of water shortage “[o]n account of drought or other causes,” which includes any shortages that may be attributable to the Reclamation’s compliance with the ESA. Accordingly, plaintiffs’ “beneficial interest” does not include the right to compensation when water cannot be delivered due to “drought or other causes.”²²

Moreover, with respect to all of the district contracts, the reasoning of O’Neill applies even in the absence of an “or other causes” clause because these contracts are subject to subsequently enacted statutes. As the Ninth Circuit stated in O’Neill, “[e]ven if the water service contract did obligate the government to supply, without exception, 900,000 acre-feet of water, the district court correctly held that area I [the irrigation district] would still not be entitled to prevail as the contract is not immune from subsequently enacted statutes.” Id. at 686. This reasoning has been applied by the Ninth Circuit in the context of the Klamath Project in Klamath Water Users v. Patterson, 204 F.3d at 1212-14. In Patterson, when presented with the Klamath Project water users’ challenge to a counterclaim, the Ninth Circuit held that the ESA applied to a contract between Reclamation and the operator of the Link River Dam, which controls the elevation of the Upper Klamath Lake. See id. at 1213-14 (“It is well settled that contractual arrangements can be altered by subsequent Congressional legislation.”). The Ninth Circuit also held that Reclamation had the authority to direct dam operations to comply with the ESA and to fulfill tribal water rights, and that these rights “override” or “take precedence” over the rights of the irrigators to receive Project water.

In sum, during this period of water shortage experienced in the Klamath Basin in 2001, Reclamation was obligated to manage and operate the Klamath Project, as best it could, pursuant to its contracts for water delivery and in a manner that fulfilled its other legal responsibilities, including obligations to protect species listed as threatened or endangered under the ESA.²³

Simply stated, as a matter of law, the liability of the United States is expressly limited under its contracts with the irrigation districts in times of shortage such as occurred during the severe drought in 2001. Because plaintiffs’ beneficial interest in the Klamath Project water, as defined and limited by these contracts, did not give plaintiffs the paramount right to receive Project water without regard to these limitations, plaintiffs do not have a compensable property right in the Project water.

E. The Klamath River Basin Compact, Court Decisions and Agency Documents Relied On By Plaintiffs Do Not Support the Conclusion that Plaintiffs Have An Absolute, Unlimited Right to Receive As Much Water from the Klamath Project as They Can Put to a Beneficial Use

In support of their contention that they have an absolute, unlimited right to receive as much irrigation water from the Klamath Project as they can put to beneficial use in any given year, plaintiffs rely on selective portions from the Klamath River Basin Compact, from a series of Supreme Court and other judicial decisions, and from several documents and memoranda from the Department of the Interior. These decisions and documents, when read in their entirety and applied to the specific facts of this case, do not support plaintiffs’ position.

1. The Klamath River Basin Compact

Plaintiffs contend that, by virtue of its 1957 consent to the Klamath River Basin Compact (“Compact”), the United States “recognized and agreed to be bound by the vested property rights of plaintiffs.” Pls.’ Mem at 27. Plaintiffs’ reliance on the Compact for this proposition is misplaced.

The Compact is a 1957 agreement entered into between the states of Oregon and California, and ratified by the United States Congress. Pls. Ex. 1, pp. 30-33. The “major purposes” of the Compact are, inter alia,

To facilitate and promote the orderly, integrated and comprehensive development, use, conservation and control [of the water resources of the Klamath River Basin] for various purposes, including, among others: the use of water for domestic purposes; the development of lands by irrigation and other means; the protection and enhancement of fish, wildlife and recreational resources; the use of water for industrial purposes and hydroelectric power production; and the use and control of water for navigation and flood prevention.

Id. at 33 (Compact, Art. I).

The first substantive article in the Compact, Article III, is captioned “Distribution and Use of Water.” Id. at 34. Under Article III, the Compact distinguishes between water rights established before the Compact, and rights that might be established to any unappropriated waters originating within the Upper Klamath River Basin after the effective date of the Compact.²⁹ With respect to pre-Compact water rights, Article III states that,

[t]here are hereby recognized vested rights to the use of waters originating in the Upper Klamath River Basin validly established and subsisting as of the effective date of this compact under the laws of the state in which the use or diversion is made, including rights to the use of waters for domestic and irrigation uses within the Klamath Project. There are also hereby recognized rights to the use of all waters reasonably required for domestic and irrigation uses which may hereafter be made within the Klamath Project.

Id. at 34 (Compact, Art. III.A.). Although this provision recognizes “vested” water rights that were “validly established and subsisting” under applicable state law as of the effective date of the Compact, it does not further define such rights nor does it attempt to identify who holds such rights. Instead, the question of who has such rights turns on the interpretation of state law as applied to the facts surrounding settlement of the Klamath Basin and development of the Klamath Project. Accordingly, plaintiffs’ assertion that the federal government’s consent to this Compact constitutes a recognition that they have “vested property rights” is premised on a misconstruction or misunderstanding of the Compact.

Plaintiffs further assert that “Congress went on to confirm that plaintiffs’ Klamath Project water rights are property, and to reaffirm defendant’s duty to pay just compensation for those rights.” Pls.’ Mem. at 27. Again, plaintiffs’ overly broad interpretation of the Compact is belied by a full examination of this provision, read in context of the entire Compact.

In support of their assertion, plaintiffs cite and quote from the following portion of Article XIII(B)(2): “[t]he United States shall not, without payment of just compensation, impair any rights to the use of water for use (a) [domestic use] or (b) [irrigation use] within the Upper Klamath River Basin by the exercise of any powers or rights to use or control water. . . .”³⁰ See Pls.’ Mem. at 27. First of all, this provision at least implicitly recognizes that the United States has some powers or rights to use or control water within the Klamath Basin. Moreover, plaintiffs’ analysis fails to note that this provision also expressly states that “the exercise of powers and rights by the United States shall be limited under this paragraph 2 only as against rights to the use of water for use (a) or (b) within the Upper Klamath River Basin which are acquired as provided in subdivision B of Article III after the effective date of this compact. . . .” Compact, Art. XIII(B)(2) (Pls. Ex. 1, p. 40). Thus, this section only applies to rights acquired after the effective date of the compact (1957) and in accordance with state procedures outlined in Article III.B. It does not reference or apply to the “vested rights” described in Article III.A., which is relied on by plaintiffs as a basis for their right. Therefore, even assuming plaintiffs have a vested pre-Compact water right under state law, the just compensation provision of the Compact does not apply to those rights.

There are at least two other significant substantive articles in the Compact that plaintiffs fail to mention or discuss. First, the Compact expressly acknowledges the existence and status of Indian water rights, and provides that nothing in the Compact shall be deemed to affect adversely such rights. Compact, Art. X (Pls. Ex. 1, p. 38). The tribal water rights that affect the operation of the Klamath Project and that are senior to the Project water rights (including any rights held by plaintiffs) are discussed in more detail in Section IV.C.4. of this brief. Second, the Compact also expressly recognizes federal rights in and to the waters of the Klamath River Basin, stating that nothing in the Compact shall be deemed to, inter alia,

impair or affect any rights, powers or jurisdictions of the United States, its agencies or those acting by or under its authority, in, over and to the waters of the Klamath River Basin, nor to impair or affect the capacity of the United States, its agencies or those acting by or under its authority in any manner whatsoever, except as otherwise provided by the federal legislation enacted for the implementation of this compact as specified in Article XIII.

Compact, Art. XI (Pls. Ex. 1, p. 38).

In sum, there is no basis for finding that Congress’ ratification of the Klamath River Basin Compact constituted a recognition that the plaintiffs in this case have valid vested rights to receive Klamath Project water, or that these rights are a property right the taking of which would require the payment of compensation under the Fifth Amendment.

2. The Supreme Court Decisions Addressing Reclamation Project Water Rights

Plaintiffs argue, citing Ickes v. Fox, 300 U.S. 82 (1937), Nebraska v. Wyoming, 325 U.S. 589 (1945), and Nevada v. United States, 463 U.S. 110 (1983), that the landowners within the Klamath Project own water rights appurtenant to their land that are compensable property interests, notwithstanding the fact that the water rights for the Klamath Project under Oregon state law are presumed to have been awarded to the United States, in accordance with the Court’s Orders of May 12 and August 22, 2003. See Pls.’ Mem. at 20-24. However, the factual circumstances presented in Ickes, Nebraska and Nevada – where the individual water users did have a water right issued in their own name from the state or directly from the United States – are distinguishable from the factual circumstances surrounding the ownership of water rights in the Klamath Project.³¹ With respect to the Klamath Project, as of 2001, no water rights have been awarded to the individual users for Project water as part of the Adjudication because the Adjudication is not complete.³² Moreover, under the Court’s Orders of May 12 and August 22, 2003, the parties are to assume, for the purposes of this briefing, that when Oregon does issue water rights, its Final Findings of Fact and Order of Determination in the Adjudication will award the Project water right to the United States. None of the cases relied upon by plaintiffs involved such circumstances.

In Ickes, landowners within the Yakima Project in the state of Washington brought suit challenging a Department of the Interior order limiting their water rights to a certain amount of water per acre and seeking a rental charge for additional water. See Ickes, 300 U.S. at 92-93. The issue before the Court was whether the United States was an indispensable party such that the suit should be dismissed for failure to join the United States. See id. at 96. The Court determined that the United States was not an indispensable party and affirmed the denial of the United States’ motion to dismiss. See id. at 96-97. In so doing, the Court, in dicta, described the nature of the landowners’ water rights in the Yakima Project in relation to the rights of the United States. As the Court explained, the landowners within the Yakima Project were required by their contracts with Reclamation to initiate water rights under state law before construction of the Project began. See Ickes, 300 U.S. at 89; see also Ickes v. Fox, 85 F.2d 294, 298 (D.C. Cir. 1936), aff’d, 300 U.S. 82 (1937). By contrast, in the Klamath Project, it was the United States that made the initial appropriation under then existing state law. See discussion supra §§ III.A. and IV.C.2 (describing United States’ appropriation under Oregon law).³³

Moreover, the Court in Ickes, as cited in plaintiffs’ memorandum, noted that the water rights became the property of the landowners “by the terms of the law and of the contracts already referred to. . . .” See Pls.’ Mem. at 21 (quoting Ickes, 300 U.S. at 94). The landowners had fulfilled the obligation set forth in their contracts to “‘initiate rights to the use of water’” prior to the case coming before the Court and “had acquired a vested right to perpetual use of the waters appurtenant to their lands.” Ickes, 300 U.S. at 94 (quoting from the May 7, 1906, contract between Sunnyside Water Users Association and the U.S. Department of the Interior).³⁴ By contrast, the Klamath Project contracts between Reclamation and the irrigation districts – which are markedly different from the Yakima Project contracts at issue in Ickes – did not require the districts to “initiate rights.” Compare Def. Ex. 20 with Amended Compl., Exs. 1-14. Instead, the United States acted under state law to appropriate all available waters for the Klamath Project and then, following construction of the Project, contracted for the delivery of water. In this regard, the acquisition of water rights for the Klamath Project and the use of contracts to control use of that water is more akin to the situation presented in Dep’t of Ecology v. Reclamation, 827 P.2d 275 (Wash. 1992), which involved the Columbia River Project. In that case, the court stated,

[w]e also find it highly significant that under Washington's statutes the decisions regarding distribution of water within a federal irrigation project do not belong to the State. Rather, they are to be made by the Secretary of the Interior through the Secretary's representatives: the United States Bureau of Reclamation and, by contract, the irrigation districts. These decisions are to be made according to the federal laws, federal regulations and the contracts between the irrigation districts and the federal government. See RCW 87.03.115 (water obtained by irrigation districts from federal projects is to be distributed according to federal statutes, regulations and the repayment contracts); RCW 89.12.040 (the Secretary of the Interior administers the federal reclamation laws and provides water delivery). If the Department begins granting appropriation rights in WSRF water within the project's boundaries, it will in effect be overruling the federal project's distribution decisions. This it lacks authority to do.

Id. at 281 (footnote omitted).
Therefore, because the water rights at issue in Ickes were acquired in a different manner and pursuant to different contracts than in this case, Ickes does not establish that plaintiffs’ interest in this case is a property right for Fifth Amendment purposes.³⁵

In Nebraska v. Wyoming, a case involving the relative rights of the waters of the North Platte River, individual landowners had contracted with Reclamation for a supply of water. Those contracts were subsequently assumed by the irrigation districts. Nebraska and Wyoming authorities then provided certificates to the landowners upon receiving proof of beneficial use from the irrigation districts, and named as appropriators the individual landowners, all prior to construction of the Project. See Nebraska, 325 U.S. at 613-14. In the Klamath Project, by contrast, no certificates have been issued by the State of Oregon for the pre-1909 water rights and any claims of such rights are still unadjudicated (although, for purposes of this motion, the parties are to assume that the Project water rights are awarded to the United States). In addition, unlike in Nebraska, the initial appropriation for the Klamath Project was made by the United States in accordance with Oregon law, as described above. While plaintiffs have filed claims in the Adjudication in which they argue that they can establish a valid appropriation, this is an issue to be determined in the Adjudication. See Def.’s Reply to Mot. to Stay at 4. As with Ickes, Nebraska is inapplicable to the factual circumstances of the Klamath Project.

In Nevada v. United States, which involved the Newlands Reclamation Project and the Orr Ditch Decree on the Truckee River, the United States sought to reallocate water rights for the benefit of the Pyramid Lake Indian Reservation after those rights had been adjudicated and a decree had been issued by the court confirming water rights for the Project and for the Reservation. See Nevada, 463 U.S. at 113. The United States, or the Truckee-Carson Irrigation District on behalf of the United States, had already issued water right contracts to individual irrigators out of the block of water appropriated for use in the Newlands Project, and many of these individual irrigators had already put Project water received pursuant to these water right contracts to beneficial use on their lands. Under these circumstances, the Court held that the Orr Ditch Decree was res judicata as to the claims of the United States on behalf of the Newlands Project and the Tribe.

While in certain instances, water right applications, similar to those issued for the Newlands Project at issue in Nevada, were filed by individual water users within the Klamath Project, no water right was ever granted or transferred to the Klamath Project water users. Moreover, unlike in Nevada where the rights of the United States for the Newlands Project were decreed in a federal court proceeding, the Klamath Project rights are currently the subject of an ongoing state stream adjudication. See 1997 Reg. Sol. Mem. at 8 (distinguishing the holding of Nevada in the context of the Klamath Project) (Pls. Ex. 28).

In addition, there are several overarching differences which distinguish these cases from the instant case. First, as previously discussed, unlike the reclamation projects at issue in the cases cited by plaintiffs, in the case of the Klamath Project, the State of Oregon had passed a specific statute, Oregon Act of Feb. 22, 1905, title 43, c. 228 section 2 L.O.L. section 6588, which provided that when the United States filed a written notice of its intent to appropriate waters for a Reclamation project, “the waters described in such notice and unappropriated at the date of 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. . . .” Def. Ex. 2. As the initial appropriator of Klamath Project water, and through the acquisition of the existing pre-Project appropriations, the United States retains control of the Klamath Project waters by virtue of its operation of the Project, subject to the terms of its contracts with the various irrigation districts and landowners and its other legal obligations. Second, none of these cases involved a Fifth Amendment takings claim or the question of whether the water rights at issue rose to the level of a compensable property interest for Fifth Amendment purposes. Third, none of these cases specifically addressed the issue of the interplay between project operations and existing senior water rights or the ESA. Finally, none of these cases addressed the shortage provisions at issue in the Klamath Project contracts that place limitations on plaintiffs’ interest, including limitations due to drought and legal obligations such as the ESA. See Barcellos and Wolfsen, 849 F. Supp. at 731 (noting the limitations of Ickes in the context of shortage provisions in CVP contracts).

In sum, plaintiffs’ argument that these cases support their position must be rejected because none of these decisions stands for the proposition that a “beneficial interest” is a compensable property interest for Fifth Amendment purposes, and each case involved different factual circumstances and different reclamation contracts than are at issue with respect to the Klamath Project. Plaintiffs’ suggestion that the Supreme Court has already determined that the beneficial interest here in Klamath Project water is a property right, see Pls.’ Mem. at 19, rings hollow given that the Supreme Court has never considered the question.

3. Interior Department Documents

Plaintiffs next argue that certain Interior Department documents provide a basis for a determination that the beneficial interest of the water users in the Klamath Project is a compensable property interest for purposes of the Fifth Amendment. See Pls.’ Mem. at 24-27.

First, plaintiffs cite to a 1956 decision of the Comptroller General which presented the question whether Reclamation could impose additional charges on Klamath Project irrigation districts for water used in excess of the amount specified in their contracts. See Decision of Comptroller General, 1956 WL 1894 (Sept. 4, 1956) (cited in Pls.’ Mem. at 25). In this opinion, the Comptroller General, relying on the then-recent decision in Ickes v. Fox, determined that Reclamation could not impose additional charges for water delivered under its contracts with the irrigation districts exceeding two-acre feet when the record established that this quantity was not sufficient for beneficial use. 1956 WL 1894, *1. The conclusion that “beneficial use” is the measure of the irrigation districts’ contractual right to receive Project water is unremarkable and undisputed in this case. The real question presented here – and the one that is not addressed in the 1956 Comptroller General opinion – is whether this contractual right is subject to other limitations.

Next, plaintiffs cite to a 1989 opinion of the Solicitor of the U.S. Department of the Interior. See Pls.’ Mem. at 14-18, 25-26. The opinion, titled “Filing of Claims for Water Rights in General Stream Adjudications,” was written for the purpose of “address[ing] the question of what obligations, if any, the United States has to file water right claims on behalf of reclamation project water users in state court general stream adjudications.” 97 Interior Dec. 21, 1989 WL 506913 (July 6, 1989). The portion of the opinion cited by plaintiffs merely describes and quotes from the U.S. Supreme Court’s decisions in Ickes v. Fox, Nebraska v. Wyoming, and Nevada v. United States, all of which have been discussed above. Plaintiffs do not provide any explanation of how this opinion further supports their position with respect to this case. Moreover, in at least one instance, plaintiffs quote certain portions of the opinion without quoting a footnote that is relevant to the question before the Court. See Pls.’ Mem. at 17. Specifically, the opinion contains a footnote omitted by plaintiffs that references the Ickes, Nebraska and Nevada cases and states that “[h]owever, none of the cases discussed herein should be read to restrict the right of the Secretary to enforce Federal reclamation or other applicable law with respect to project water users.” See 97 Interior Dec. at 27 n.5, 1989 WL 506913, **6 n.5. The footnote indicates, as explained above, that none of the cases addressed the interplay between project operations and Reclamation’s compliance with other legal obligations, such as the ESA and its tribal trust responsibilities. The opinion also explains that the water users must establish their beneficial use of the water in order to protect their rights. See id. at 32. As stated previously, the water users’ beneficial interest is currently defined by the irrigation district contracts with Reclamation and the users’ ability to establish the ultimate nature and extent of their beneficial use of Project water is currently at issue in the Adjudication. Like the cases, this opinion does not address the Klamath Project in particular or the nature of the ownership of water rights in the Klamath Project.³⁶

Plaintiffs next cite to a 1995 memorandum from the Regional Solicitor for the Pacific Southwest Region to support their argument. See Pls.’ Mem. at 26. Again, plaintiffs selectively quote from the 1995 memorandum and thus do not provide a complete characterization of this document. While plaintiffs do not focus on these points, the 1995 memorandum generally describes the rights of the water users, the National Wildlife Refuges, and the Klamath, Yurok, and Hoopa Tribes, and addresses Reclamation’s obligations with respect to the Klamath Project. In particular, it describes the water users’ rights as derived from the irrigation district contracts with Reclamation. See 1995 Reg. Sol. Mem. at 1 (Pls. Ex. 2, p. 40) (“The Klamath Project water users obtain their supply of water for irrigation purposes from the project facilities pursuant to various contracts with Reclamation. . . .”). In addition, the 1995 memorandum discusses how Reclamation’s obligations are affected by senior tribal water rights and the ESA. See id. at 8-9 (Pls. Ex. 2 at 47-48). Specifically, plaintiffs cite to a portion of the memo which states that “Reclamation has an obligation to deliver water to the project water users in accordance with the project water rights and the contracts between Reclamation and the water user (which may be through a water district) subject to the availability of water.” 1995 Reg. Sol. Mem. at 7 (Pls. Ex. 2) (emphasis added). The memorandum goes on to state (in a portion not quoted by plaintiffs) that:

Pls. Ex. 2 at 46.³⁷

Therefore, as explained in the 1995 memorandum, Reclamation’s obligations to the water users are defined by contract and by the Project water rights, held in the name of the United States, and those obligations are subject to the availability of water. In addition to the 1995 memorandum cited by plaintiffs here, there is also a 1997 Regional Solicitor’s memorandum regarding the Adjudication that is discussed supra in Section III.C., and is discussed by plaintiffs in their Memorandum at 3. As previously discussed, the 1997 memorandum details Reclamation’s responsibilities and obligations to manage the Klamath Project in a manner that is consistent with “senior water rights, tribal trust resources, Project water users’ contractual rights, the Endangered Species Act and other requirements mandated by law and within the authority of the Secretary.” 1997 Reg. Sol. Mem. at 11 (Pls. Ex. 28). Together, these memoranda confirm that plaintiffs’ interests are limited and contractual in nature and thus do not rise to the level of a compensable property interest that is sufficient to support a Fifth Amendment takings claim.

The final Interior Department document cited by plaintiffs in support of their argument is the Final Biological Assessment issued by Reclamation on February 25, 2002. See Pls.’ Mem. at 27. Again, plaintiffs selectively quote from the document and, by doing so, paint an incomplete picture. As noted above, defendant does not dispute that some of the water users have a “beneficial interest” in the Klamath Project water, and the portion of the Biological Assessment relied upon by plaintiffs makes that point. However, plaintiffs neglect to note that the Biological Assessment also notes caselaw discussing certain limitations on plaintiffs’ beneficial interest relating to compliance with the ESA and tribal trust responsibilities. See Feb. 25, 2002 Biological Assessment at 4 (citing Klamath Water Users v. Patterson, 204 F.3d 1206 (9^th Cir. 2000), and Kandra v. United States, 145 F. Supp. 2d 1192 (D. Or. 2001)).

In sum, the various documents and decisions which plaintiffs rely on by pulling limited “sound bites” therefrom do not, upon closer scrutiny, support plaintiffs’ contention that their beneficial interest in the Klamath Project water is more than a limited contractual right.

F. Plaintiffs Klamath Drainage District and Klamath Hills District Improvement Company Do Not Have “Vested” Water Rights Under Oregon Law

Plaintiffs next argue that the Klamath Drainage District (“KDD”) and the Klamath Hills District Improvement Company (“KHDIC”) hold water right permits that evidence their ownership of a “vested and determined water right” under Oregon law. See Pls.’ Mem. at 28; Pls.’ Proposed Findings of Fact Nos. 14-15.

There is no dispute that KDD holds a permit to appropriate water from the Klamath River that was issued by the State of Oregon. See Pls. Ex. 10, pp. 89-90. However, the priority date of this permit is April 25, 1977, meaning that any rights granted by this permit are junior to both the tribal water rights discussed in Section IV.C.4., supra, and to the Project water rights presumably held by the United States. See Pls. Ex. 10, p. 89. In addition, KDD’s rights under this permit are not “perfected” under Oregon law until the state issues a water rights certificate, which the state has not done. See Def.’s Resp. to Pls.’ Proposed Fact No. 14. Finally, the rights granted by this permit limits KDD’s use of water from the Klamath River to the “time between October 1 and March 1.” (Pls. Ex. 10, p. 89). Accordingly, KDD had no right under this permit to receive water during the April to September irrigation season when the alleged taking in 2001 occurred. Amended Compl. ¶ 29.

KHDIC also has a permit from the State of Oregon to appropriate water from the Klamath River. Pls. Ex. 19, pp. 120-24. The priority date of the right granted to KHDIC by this permit is October 10, 1983, making this “right” subordinate to both the senior tribal water rights and the senior Project rights that are at issue in the Adjudication and presumably held by the United States in this briefing. Id., p. 123. In addition, KHDIC’s rights under this permit are not yet “perfected” under state law because Oregon has not yet issued a water rights certificate to KHDIC. See Def’s Resp. to Pls. Proposed Fact No. 15. Accordingly, KHDIC does not have a “vested and determined water right” under state law, but instead has only a permit right that is severely limited by its late priority date. In years when there is a water shortage, all senior water rights must be satisfied before KHDIC has the right to divert and use any water under this permit, including the senior tribal water rights and the Project water rights.³⁸ Additionally, these state issued permits doe not give KDD or KHDIC any contractual or other right to receive Klamath Project water.

The undersigned certifies that on this 3^rd day of October 2003 a true and correct copy of the foregoing Defendant’s Cross Motion for Partial Summary Judgment and Opposition to Plaintiffs’ Motion for Partial Summary Judgment was sent by electronic mail and by first class U.S. mail, postage prepaid to the following:

¹In their Complaint, plaintiffs allege a taking in 2001 and in all future years. For the purposes of their current motion, plaintiffs expressly “limit their argument to water losses occurring in 2001.” Pls. Mem. at 10 n.7. In addition, defendant notes that plaintiffs did state in the Joint Report filed by the parties on April 24, 2003, that they “make no claim for water shortages in 2002.” Joint Report, p. 4. Although plaintiffs state in their Revised Memorandum that they do not believe their future claims should be stayed, Pls. Mem. at 4, defendant has not moved for a stay of such claims but has instead moved to dismiss plaintiffs’ claims as to future years because those claims are not ripe. See Def.’s Mot. to Stay and for Partial Dismissal at 32-35.

²The beneficial interest is held by the individual water users who put the water to beneficial use and not by the irrigation districts.

³Beyond the terms of the irrigation districts’ contracts with the United States, upon which plaintiffs’ interest was based in 2001, any determination of the nature of plaintiffs’ beneficial interest must await the outcome of the Adjudication. The Court’s order requires the parties to assume a determination adverse to the plaintiffs in Case No. 003. Such a determination in Case No. 003 would result in a finding that the water rights are awarded to the United States. However, this hypothetical determination does not address the issue of how the existence, extent or character of plaintiffs’ rights would be affected by an adverse determination in the Adjudication as a whole. For example, the assumption does not take into account the fact that there are parties to the Adjudication with priority dates senior to the earliest date of priority for the Klamath Project water rights. See Ex. 14 to Def.’s Reply Brief in Support of Mot. to Stay (Declaration of David W. Harder). Therefore, whether the United States or plaintiffs prevail in Case No. 003, there are parties to the adjudication with priority dates that precede plaintiffs’ first-claimed date of priority, thus impacting the scope and nature of plaintiffs’ claimed “water rights.” In addition, the ultimate determination regarding the quantification of water rights has a potential to further adversely impact plaintiffs’ claims.

⁴On August 4, 2003, the claimants in Case 003 of the Klamath Basin Adjudication – which includes all but one of the irrigation district plaintiffs in this action – filed a Statement of Stipulated Facts Re: Claims and Contests Consolidated for Hearing in Case 003. Although this Statement of Stipulated Facts is subject to comment by the other parties to Case 003 and must be approved by the Administrative Law Judge, defendant has relied on these stipulations for the purposes of preparing this factual background because the parties to this action have stipulated to these facts. The Statement of Stipulated Facts (hereinafter “KBA Facts”) is included in Defendant’s Appendix as Exhibit 1.

⁵The Reclamation Act of June 17, 1902, 32 Stat. 388, 43 U.S.C. § 371, et seq. (“Reclamation Act”) provided general authorization and guidance for the construction of federal reclamation projects. Under Section 8 of the 1902 Reclamation Act, the United States is required to comply with state law regarding the appropriation of water for project purposes except when state law is inconsistent with clear congressional directives. See California v. United States, 438 U.S. 645, 668 (1978).

⁶A copy of this statute is included in Defendant’s Appendix as Exhibit 2. The attached exhibit is a 1920 version of the statute which, while numbered differently, appears to be unchanged from the statute in effect in 1905. The text of the statute is also set forth in In Re Waters of Umatilla River, 168 Pac. 922, 925 (Or. 1917). In that case, the Oregon Supreme Court held that when the United States complied with the procedure as established by the Oregon in this statute, the United States thereby obtained “title to all the then unappropriated water” of the Umatilla River with priority dating from the date notice was filed. Id. This 1905 statute was repealed by Oregon House Bill 224, approved April 13, 1953.

⁷Similar postings were made in California for the waters originating in California. See Def. Ex. 5 (Klamath Project Historic Operation (“KP Historic Op.”) at C-6).

⁸The construction of the Klamath Project is described in the KBA Facts at pp. 78-86 (Def. Ex. 1).

⁹Prior to the development of the Klamath Project, three tribes in the Klamath River basin had acquired treaty-based or otherwise federally reserved fishing and water rights. These reserved rights, which are discussed infra in Section IV.C.4., were not acquired by Reclamation and the operation of the Klamath Project is subject to these pre-existing rights.

The only pre-Project water rights that had been appropriated under state law and that Reclamation did not acquire outright were those held by the Van Brimmer Brothers. See Def. Ex. 1 (KBA Facts at 60-61). In 1909, the Van Brimmers’ transferred their existing water rights (as then held by the Van Brimmer Ditch Company) in exchange for a perpetual right – established by contract – to the annual delivery of 50 cfs of water from the Klamath Project. Id.

¹⁰The authority for these contracts comes from the Reclamation Act of June 17, 1902, 32 Stat. 388, 43 U.S.C. § 371, et seq., as amended and supplemented, including the Reclamation Project Act of 1939, 43 U.S.C. § 485, et seq., Section 2 of the Warren Act, approved by Congress on February 21, 1911, 43 U.S.C. § 524, and special legislation pursuant to Section 7(a) of the Reclamation Project Act of 1939.

¹¹Reclamation entered into contracts with plaintiff Klamath Irrigation District pursuant to Section 9(d) of the Reclamation Act of 1939, 43 U.S.C. § 485h(d), and with plaintiff Tulelake Irrigation District under Section 7 of that Act. See Def. Ex. 5 (KP Historic Op., Appx. C, p. C-1). Reclamation entered into contracts with plaintiffs Klamath Drainage District, Sunnyside Irrigation District, Klamath Basin Improvement District, Malin Irrigation District, Westside Improvement District No. 4 (Colonial Realty Co.), Shasta View Irrigation District, Poe Valley Improvement District, Midland District Improvement Co., Enterprise Irrigation District, and Pine Grove Irrigation District pursuant to Section 2 of the Warren Act of 1911, 43 U.S.C. § 524. See Def. Ex. 4-5 (KP Historic Op. at B-2 to B-3, C-2). Copies of these contracts are attached to Plaintiffs’ Amended Complaint as Exhibits 1–14. These contracts are also described in some detail in the KBA Facts at 87-140 (Def. Ex. 1).

¹²The concept of beneficial use has been described by the Ninth Circuit as follows:

[t]he major conceptual tool for implementing beneficial use is the water duty, which is the amount of water an appropriator is entitled to use, including a margin for conveyance loss. This definition of ‘water duty’ is often quoted: ‘[i]t is that measure of water, which by careful management and use, without wastage, is reasonably required to be applied to any given tract of land for such period of time as may be adequate to produce therefrom a maximum amount of such crops as ordinarily are grown thereon. It is not a hard and fast unit of measurement, but is variable according to conditions.’

United States v. Alpine Land & Reservoir Co., 697 F.2d 851, 854 (9th Cir.), cert. denied, 464 U.S. 863 (1983) (citations omitted). The Alpine court also explained that beneficial use cannot include “waste” and that the use cannot be “unreasonable.” Id.

The Oregon Water Code does not specifically define beneficial use, but declares certain uses as beneficial, including “uses of water for domestic, municipal, irrigation, power development, industrial, mining, recreation, wildlife, and fish life uses and for pollution abatement. . . .” O.R.S. § 536.300(1). In addition, Oregon case law provides that “unreasonable waste of all or part of the water constitutes ‘non-beneficial use.’” Hennings v. Water Resources Dep’t, 622 P.2d 333, 334 (Or. Ct. App. 1981) (citations omitted).

¹³For example, paragraph 14(a) of the contract between Klamath Drainage District and the United States (Amended Compl., Ex. 3), states that:

[t]he United States agrees that . . . it will deliver to the District during the irrigation season of each year . . . a supply of water out of storage in Upper Klamath Lake and from the natural flow of the Klamath River. For the purposes of this contract, the irrigation season is the period from April 15 to September 30, inclusive, of each year. The amount of water to be delivered in any season shall not be in excess of the amount that can be used beneficially for the irrigation of lands in the District in cultivation that season, and in no event to exceed the amount that can be used beneficially for 27,500 acres of irrigable lands within the District boundaries.

¹⁴Plaintiffs state that “[t]he determination of whether a right is ‘property’ within the meaning of the Fifth Amendment is an issue of federal, not state law.” See Pls. Mem. at 18. In doing so, plaintiffs improperly characterize the inquiry as one based on federal constitutional law rather than focusing on the role of state law and the contracts in defining their beneficial interest. See, e.g., Maritrans, 342 F.3d 1344, 2003 WL 2207661, at *5.

¹⁵Reclamation also made similar filings pursuant to the Reclamation Act and under California state law for water rights for the Klamath Project in California. These rights are not involved in this case since plaintiffs are alleging a loss of water from Upper Klamath Lake in Oregon.

¹⁶As noted supra, the only non-reserved pre-Project water rights that Reclamation did not acquire outright were those held by the Van Brimmer Brothers.

¹⁷As the Reclamation Act provides, “[t]he right to the use of water acquired under the provisions of this Act shall be appurtenant to the land irrigated, and beneficial use shall be the basis, measure, and limit of the right.” Recl. Act, § 8, 32 Stat. 390 (43 U.S.C. § 372).

¹⁸In the control, appropriation, distribution, and use of Project water, the United States must comply with state law to the extent it is not inconsistent with Congressional directives. California v. United States, 438 U.S. 645, 668-69 (1978).

¹⁹The seven other districts that have contracts with Reclamation containing similar shortage provisions are Tulelake Irrigation Dist. (Art. 26) (1956-A), Klamath Drainage Dist. (Art. 24 modified) (1917:1943-B), Sunnyside Irrigation District (Art. 9) (1922-B), Klamath Basin Improvement Dis. (Art. 4 modified) (1962-B), Malin Irrigation Dist. (Art. 11) (1922-B), Westside Improvement Dist. No. 4 (Colonial Realty Co.) (Art. 13) (1936-B), and Shasta View Irrigation Dist. (Art. 18 modified) (1922:1948-B). See Def. Exs. 7-8, 10-11, 13, 16-17 (excerpts from these contracts); see also Amended Compl. Exs. 2, 3, 5, 6, 8, 11, and 12 (full contracts).

²⁰The three other districts with contracts containing similar language are: Poe Valley Improvement Dist. (Art. 11) (1953-B), Midland Dist. Improvement Co. (Art. 5) (1952-B), and Pine Grove Irrigation Dist. (Art. 10) (1918-B). See Def. Exs. 9, 12 and 15; see also Amended Compl., Exs. 4, 7, and 10. The Poe Valley and Midland contracts do not include the word “unusual” before “drought.”

²¹The other contractual documents referenced by plaintiffs are certain water rights applications filed by landowners or homesteaders with Reclamation. The “Application for Permanent Water Right,” Form A, attached to Plaintiffs’ Memorandum at Ex. 4, is an example of the applications filed by homesteaders within what is now Tulelake Irrigation District. This Form A application includes a similar shortage provision which includes the “other cause” language. In addition, the “Water-Right Application for Lands in Private Ownership,” Form B, attached to Plaintiffs’ Memorandum at Ex. 5, is an example of the applications filed by existing landowners within the Project. This Form B application limits the applicants’ water supply to that which is “actually available.” As described in the 1995 Regional Solicitor’s Memo (Pls. Ex. 2), water may not be “available” for delivery to Project water users if necessary to comply with the ESA or other legal obligations.

²²In Tulare Lake Basin Water Storage Dist. v. United States, 49 Fed. Cl. 313 (2001), the court found O’Neill to be inapplicable because the contracts at issue in that case were between the State of California and the plaintiff irrigation districts, and thus only limited the liability of the State and not that of the United States. However, in this case, as in O’Neill, the contracts are between the plaintiff irrigation districts and Reclamation. Therefore, O’Neill is applicable to the facts of this case.

²³Species listed under the ESA in the Klamath Basin include the threatened Southern Oregon/Notheren California coho salmon, 62 Fed. Reg. 24588 (May 6, 1997), and the endangered Lost River and shortnose suckers, 53 Fed. Reg. 27130 (July 18, 1988).

²⁴The precise quantification of the Klamath Tribes’ water rights will be initially determined in the Adjudication. Accordingly, Federal Indian reserved water right claims have been filed in the Adjudication both by the Klamath Tribes and by the United States on behalf of the Klamath Tribes. These claims include: the right to instream flows in the tributaries above Upper Klamath Lake (“UKL”) and instream flows in the Klamath River below UKL; water levels in UKL to protect trout and the endangered sucker fish in the Lake; water levels in the Klamath Marsh; and seeps and springs within the boundaries of the former Klamath Reservation. See, e.g., Def’s Reply to Mot. to Stay, Ex. 14, Attachment 2 (BIA’s claim to water from UKL).

²⁵In the fall of 2002, a coalition of environmental groups and the Yurok and Hoopa Valley Tribes challenged the National Marine Fisheries Service’s 10-year biological opinion issued on May 31, 2002, relating to Reclamation’s management of the Klamath Project for the period 2002-2012. See Pacific Coast Federation of Fishermen’s Ass’ns v. Bureau of Reclamation (“PCFFA v. BOR II”), Civ. No. C02-2006 SBA (N.D. Cal.). The Klamath Water Users Association (“KWUA”), in which a majority if not all of the plaintiff districts in this case are members, and Tulelake Irrigation District, a named plaintiff in this case, intervened in the case as defendants.

In briefing the question of whether Reclamation’s alleged failure to provide adequate flows in 2002 resulted in a violation of the federal government’s tribal trust obligations, and on the particular issue of whether the Tribes were seeking a quantification of their water rights, KWUA recognized that “[t]o the extent the Yurok and Hoopa Valley Tribes obtain from this Court ‘a determination of the amounts of water necessary’ to support their fishing rights, the amount of water remaining for other Klamath basin claimants will be correspondingly less.” KWUA Reply Brief filed in PCFFA v. BOR, dated March 27, 2003, at 16 (Def. Ex. 18). In its briefing, KWUA also argued that the court should not attempt to quantify tribal water rights, because any ruling on the relative water rights in the basin could affect other users in the basin and “threaten[] the Oregon state adjudication.” Id. at 17. KWUA urged the court to apply the doctrine set forth in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), to decline to exercise jurisdiction over the Tribes’ claims in deference to the ongoing Adjudication in Oregon. See KWUA’s Cross-Mot. for Summary Judg., dated March 13, 2003, at 16-19 (Def. Ex. 19). Thus, the plaintiffs in this case have recognized both the seniority of tribal water rights in the Basin and the importance of deference to the ongoing Adjudication in Oregon.

²⁶There are also other claimants in the Adjudication who may have priority dates senior to the Project water rights claimed by Reclamation and by plaintiffs. If these claims are determined to be valid, they would be a further limitation on plaintiffs’ beneficial interest in the Project water. See Ex. 14 to Def’s Reply Brief in Support of Mot. to Stay at ¶¶ 6-9 (Declaration of David W. Harder).

²⁷On March 24, 2003, plaintiffs filed an amended complaint in which they added breach of contract claims based on the same events that gave rise to their takings claims. Defendant did not oppose plaintiffs’ motion for leave to file an amended complaint and have noted on several occasions in this litigation that to the extent that the plaintiff districts’ claims are premised on their contracts with Reclamation for the delivery of Project water, their claims are in the nature of claims for breach of contract. See, e.g., Joint Preliminary Status Report at 6, Def.’s Mot. to Stay at 13 n.16. Defendant has noted above that the named individual plaintiffs do not have contracts directly with Reclamation. Therefore, defendant does not concede here that the Court has jurisdiction over contract claims of the individual plaintiffs, or over the claims of the irrigation district without a contract with the United States. See (Corrected) Suppl. Joint Status Report at 2 (filed Sept. 16, 2003).

²⁸Even if this Court determines that plaintiffs may proceed with their Fifth Amendment takings claim, the takings claim should be viewed “as an alternative to [their] breach of contract claim, and not as a mechanism by which plaintiff may obtain remedies unavailable to it under the [contract].” Detroit Edison Co., 56 Fed. Cl. at 303 (internal citation omitted).

²⁹The only named plaintiffs who arguably have what might be characterized as a post-Compact water right are Klamath Drainage District and Klamath Hills District Improvement Company, which have post-Compact water rights permits from the State of Oregon to use water from the Klamath River. These permits are discussed in Section IV.F. of this brief.

³⁰ “Use (a)” refers to domestic use, see Article III(B)(1)(a), and “use (b)” refers to irrigation use, see Article III(B)(1)(b).

³¹ The United States explained the inapplicability of these cases to the Klamath Project in its filings in the Adjudication. See Ex. 12 to Def’s Mot. to Stay at 5-7.

³² As discussed infra at Section IV.F., Klamath Hills District Improvement Company and Klamath Drainage District have water rights permits issued by the state, but the rights associated with these permits are junior to the rights of the Klamath Project water currently at issue in the Adjudication.

³³Plaintiffs suggest that, at the time of Ickes, a water rights adjudication was then underway in Washington State, and that the Court nonetheless “flatly rejected the United States’ claim that plaintiffs lacked any right in the project water. . . .” See Pls.’ Mem. at 21. Contrary to plaintiffs’ suggestion, there was not an adjudication underway in the Yakima River Basin at the time the Court issued its decision. In 1939, after the 1937 decision in Ickes v. Fox, the United States and two irrigation districts filed a lawsuit to determine the costs that might be due to the United States from certain irrigation districts in the Yakima Valley. See Dept. of Ecology v. Yakima Reservation Irrigation Dist., 850 P.2d 1306, 1313 (Wash. 1993) (describing the history of water rights in the Yakima River Basin). The defendants cross-claimed seeking an adjudication of water rights to the Yakima River. Id. A consent decree was signed in 1945. See id. In 1977, the State of Washington initiated a McCarran adjudication to determine the rights of the Yakima River Basin. See id. at 1309.

³⁴A copy of the irrigation district contract at issue in the Ickes case is included in Defendant’s Appendix as Exhibit 20.

³⁵Plaintiffs also rely on the Federal Circuit’s decision in H.F. Allen Orchards v. United States, 749 F.2d 1571 (Fed. Cir. 1984), in support of their argument that plaintiffs’ beneficial interest rises to the level of a compensable property interest for Fifth Amendment purposes. See Pls.’ Mem. at 24. Like Ickes, H.F. Allen Orchards involved the Yakima Project, a different Reclamation project with different contracts. 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]” in a suit in which the farmers sought damages from Reclamation for the alleged breach of a contract obligation to furnish accurate water supply predictions. Id. at 1576. This finding 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 1575-76. In this case, by contrast, plaintiffs’ alleged property interest or ownership of water has not yet been determined, is not the subject of a consent decree establishing ownership of the water, is at issue in the Adjudication, and for purposes of this briefing, is assumed to have failed in the Adjudication. Therefore, the H.F. Allen Orchards case does not support plaintiffs’ argument that the beneficial interest of the water users rises to the level of a compensable property interest.

³⁶ Plaintiffs’ memorandum appears to have misquoted from the 1989 opinion, thus suggesting that the opinion does discuss the Klamath Project, see Pls.’ Mem. at 18 (“Reclamation’s claim in the Klamath basin adjudication is thus not predicated upon a right to seize Klamath Project water”). However, defendant has not found such a quotation in the opinion.

³⁷The 1995 memorandum also notes that none of the rights discussed therein (including the tribal rights, the Project rights and the water users’ contractual rights) have been quantified, thus demonstrating that a determination as to quantity in the Adjudication is certainly relevant to the scope and nature of the relative rights in the Klamath Basin. See Pls. Ex. 2 at 40, 48.

³⁸Plaintiffs’ Proposed Finding of Fact No. 15 also makes reference to a second permit with a priority date of October 3, 1977, that was issued to Murel and Barbara Long. Although the Longs are not named plaintiffs in this case, and plaintiffs do not expressly refer to the Long’s permit or to the water rights certificate issued to the Longs by the State in their brief, defendant has discussed the Longs’ limited water rights in its response to Plaintiffs’ Proposed Finding of Fact No. 15.