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Federal Government May Recoup Interest from Irrigation District in Water? April 27, 2010 by David J. Guy dguy@somachlaw.com |
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On April 20, 2010, in a potentially groundbreaking case, the federal Ninth Circuit Court of Appeals issued an opinion addressing a novel issue: whether an irrigation district that violated its decreed water rights provisions can be required to pay interest in the form of more water rather than money. (U.S. v. Bell (9th Cir., April 20, 2010, No. 05-16154, D.Nev. No. CV‑95‑00757-HDM) 2010 U.S. App. LEXIS 8148.) Background Like many watersheds in the western United States, the Truckee River has been the focus of legal wrangling since 1917. The present case goes back to 1967 when the Secretary of Interior, as part of the national environmental movement, imposed operating criteria and procedures (OCAPs) limiting diversions from the Truckee and Carson Rivers to restore fish in Pyramid Lake north of Reno. The OCAPs primarily affected the Truckee Carson Irrigation District (TCID), which operates the federal Newlands Project under a contract with the Bureau of Reclamation and has decreed water rights. After several rounds of litigation over thirty years involving the OCAPs, the federal District Court in 2003 issued a decision holding that TCID had willfully failed to comply with the OCAPs. In the remedy part of the proceedings, the United States asserted that TCID had diverted more than one million acre-feet of excess water from 1973-1988 and should repay this water to the Pyramid Lake Paiute Tribe (Tribe) for flows into Pyramid Lake, with interest. The District Court ruled that TCID had diverted excess water totaling more than 200,000 acre-feet and must repay the Tribe in water, ranging from 11,000 acre-feet in one year to 58,946 acre-feet in the peak year 1979. Furthermore, the District Court awarded post-judgment water interest and ruled TCID must repay two percent each year on the balance of water remaining to be recouped for replenishing the waters of Pyramid Lake. The Federal Appeals Court Decision In reviewing the case, The Ninth Circuit Court of Appeals did not endorse or fully reject the concept of interest being paid in water; instead, the court chose to remand the case to the District Court asking for a full explanation of its ruling. The Ninth Circuit acknowledged, “the novel issue in this appeal concerns the [District] Court’s acceptance of the concept of interest payable in water .... The judgment orders the return of water, not money, so the District Court ordered interest to be paid in water.” The Ninth Circuit found the District Court did not cite any authority for awarding water interest. Instead, it relied upon a U.S. Supreme Court decision involving an interstate dispute over the Pecos River, where it required New Mexico to provide Texas with the water it had failed to pay under the [Pecos River] compact, along with post-judgment interest should New Mexico fail to satisfy the judgment. The U.S. Supreme Court remanded the case to the Special Master for consideration of whether a monetary award would be more appropriate, but discussed water interest in a footnote. Before sending the case back, the Ninth Circuit provided the District Court with the following guidance: Because neither case authority nor statutory authority authorizes the District Court’s award of water interest, there appears to be no legal basis for an award. We do not foreclose the possibility of an equitable basis for such an award .... But we do not believe that water interest is appropriate unless there is some factual basis for awarding more water than was originally taken so as to provide complete relief. Moreover, we do not have any explanation for why the court chose to award interest at the rate of two-percent as opposed to some other amount. The [U.S.] and Tribe’s post-trial briefs before the District Court requested this rate, but they gave no reason why this particular amount was appropriate. None has been provided to us. Conclusions and Implications This case will now go back before the District Court in Reno for it to determine whether there is sufficient legal authority to support its previous decision requiring interest payable in water. The Ninth Circuit guidance will make it very challenging for the District Court to find such legal support for its decision, although the court has challenged both the District Court and the parties to find a creative solution to recoup water without violating the water rights decrees. The present case and the Truckee River deliberations for the past century highlight the challenges throughout the West for water users to meet various demands in oversubscribed water systems. The District Court, clearly frustrated by what it described as “TCID’s past record of noncompliance” and its “willfully failing to comply with the OCAPs,” sought a strong remedy by requiring interest to be paid in water from an already overtaxed river system. Water users and others interested in water allocation decisions will be watching this decision closely. The decision will dictate water allocations in the Truckee River system, and will likely shape how parties in similar proceedings across the West approach their legal strategies and settlement discussions. The Ninth Circuit decision in U.S. v Bell is available online at http://www.ca9.uscourts.gov/datastore/opinions/2010/04/20/05-16154.pdf. For more information about the decision and pending District Court proceedings, please contact David J. Guy at dguy@somachlaw.com. Somach Simmons & Dunn provides the information in its Environmental Law & Policy Alerts and on its website for informational purposes only. This general information is not a substitute for legal advice, and users should consult with legal counsel for specific advice. In addition, using this information or sending electronic mail to Somach Simmons & Dunn or its attorneys does not create an attorney-client relationship with Somach Simmons & Dunn. |
