Thursday, August 4, 2011

KMTG Legal Alert: Sacramento Valley Farmers Have No Prior Right To Central Valley Project Water Under Area Of Origin Laws

Water users in the Sacramento Valley have no preferential right to delivery of Central Valley Project (“CVP”) water under the state’s so-called “area of origin” laws, according to the U.S. District Court in Fresno. The “area of origin” laws allow water users within an area where water originates to apply for new diversions, and to obtain priority for such diversions ahead of already existing diversions for export uses by the CVP and the State Water Project. However, this protection does not grant CVP contractors in the area of origin a right to a preferential allocation of water diverted and stored by the CVP. Instead, the Court ruled, the only preference granted by the area of origin laws applies when users in the area of origin seek a separate water right permit from the State Water Resources Control Board (“SWRCB”).

The August 2 summary judgment ruling rejects the claims of CVP contractors in the Sacramento Valley seeking higher deliveries of CVP water as against other CVP contractors in the San Joaquin Valley and San Francisco Bay Area. The Tehama Colusa Canal Authority (“TCCA”) initiated the litigation during the recent drought, during which the U.S. Bureau of Reclamation (“Bureau”) had reduced CVP water deliveries to much of the Sacramento and San Joaquin valleys. TCCA operates facilities delivering CVP water to 16 local water districts with CVP water service contracts, all of which serve primarily agricultural and some municipal users in the Sacramento Valley. TCCA claimed that reduced CVP water allocations to its members in times of water shortage, while still delivering CVP water to users in export areas, violated the area of origin protections. TCCA sought to establish an area of origin priority to CVP contract deliveries pursuant to California Water Code section 11460 et seq. By seeking a special priority to CVP contract water deliveries, TCCA’s suit threatened further reductions in CVP water deliveries to San Joaquin Valley and Bay Area users, particularly during droughts. Westlands Water District and the San Luis & Delta-Mendota Water Authority intervened in the litigation on behalf of the federal defendants.

The Court’s decision affirms the Bureau’s long-standing application of the area of origin laws. The Bureau has long recognized that these laws protect a priority for new diversions by users within the area of origin over diversions by the CVP, but the Bureau has further consistently maintained that these laws create no priority among CVP contractors to allocation of CVP water supplies. The ruling confirms the Bureau’s position that Sacramento Valley water service contractors have no priority to CVP supplies over CVP contractors located south of the Delta.

The Court’s 87-page ruling rejects all of TCCA’s claims and arguments and provides the most extensive analysis to date of the application of California’s area of origin laws to a federal water project. The Court’s ruling includes three major conclusions: (1) that the relevant federal and state statutes grant no priority to use of CVP water to TCCA’s members; (2) that TCCA’s claims for preference are contrary to the terms of the CVP water service contracts signed in 2005; and (3) that state court judgments pursuant to validation statutes and the doctrine of equitable estoppel barred the claims. Thus, the Court rejected TCCA’s claims on multiple grounds.

For a detailed discussion of the facts of this case, and the rationale behind the court's ruling, please see the full KMTG Legal Alert hereThe court's opinion may be found here.

If you have any questions concerning this topic, please contact Daniel J. O'Hanlon, Hanspeter Walter, or Rebecca R. Akroyd from our office, or the KMTG attorney with whom you normally consult.

Related story: District Court Rejects Claims to Area of Origin Priority by Tehama-Colusa Canal Authority

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