U.S. Breached Water Contract, Court Rules

     (CN) – The Federal Circuit favored California water agencies with a decision holding the government responsible for a contract to deliver water from New Melones Lake.




     The Stockton East Water and Central San Joaquin Water Conservancy districts appealed a ruling from the Federal Claims Court that largely exonerated the Bureau of Reclamation for its failure to supply water contracted for municipal, industrial, and agricultural use from 1993 to 2004.
     The New Melones Dam created a reservoir in 1979 as part of the Central Valley Project. The controversy surrounding the dam, which flooded a stretch of whitewater, archeological sites, and the West’s deepest limestone canyon, “portended the end of the era of large dam construction,” Judge Plager wrote.
     Although the government initially prioritized consumptive uses for the water, policy shifts in the 1980s and 1990s incorporated more environmental uses.
     Congress passed the Central Valley Project Improvement Act in 1992. That action nearly quadrupled required allocations for fish, wildlife, and habitat restoration purposes.
     The federal government’s 1983 contract with the water agencies was first applied in 1993. From then until 2004, the bureau provided far less than the requested amounts, or even the minimum amounts specified in the contract. The agencies filed suit over breach of contract in 1993, later adding a takings claim.
     The Federal Circuit knocked the government’s defenses down one by one. If contracts are subject to future federal law, as the bureau claimed, they become “illusory,” the court wrote.
     And although the government claimed that state law compelled it to not provide the water by imposing conditions including for wildlife, they failed to prove this.
     The federal agency’s claim that a clause in the contract exempting it from liability due to factors beyond its control also fails because the water-use stipulation law stemmed from the same body – the United States government – that entered into the contract.
     The Washington, D.C.-based appeals court also shot down the government’s sovereign immunity defense because it was not able to prove that it was actually unable to deliver the water.
     The court did decide the government was free from liability from breach of contract in 1994 and 1995, as the best information available indicated that drought threatened the viability of power generation from the dam in those years.
     The Federal Circuit also vacated the trial court’s dismissal of the water agencies’ taking claim.

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