The Real Drought Has Just Begun

We all know that development, industry and even life itself depends upon a reliable water supply. Most Californians also know that distribution issues constrain the water supplies available to the southern half of the state. Indeed, we have heard so much about the problem that most folks have tuned the issue out. It is a point of no small irony that the threat of supply constraint has become far more acute in a year of bountiful precipitation.

While nature has provided us with water, the California Legislature created new state bureaucracies and directed existing ones to take the water away, applying it to preservation and resurrection of the Sacramento?San Joaquin Delta Ecosystem, at the expense of other stakeholders. Although the legislation pays lip service to the “co?equal” goal of preserving supplies for consumptive use, water dedicated to Delta restoration flows down to the San Francisco Bay and thence to the ocean. That water is not available for “consumptive use” by farmers, homeowners or industry. As much of it has been committed to such uses in the past, there’s no way to sugarcoat the pill—we now must get by with less.

Responding to the legislative directive, the State Water Resources Control Board prepared a Draft Delta Flow Criteria Report (July 20, 2010) for the Sacramento?San Joaquin Delta Ecosystem. The Report was intended to identify the flows required to support a restoration of the Delta ecosystem without regard to the competing claims on the water required to meet that end. The Report concluded with a recommendation that an additional 5,000,000 acre feet be allowed to flow through the Delta to start healing the environmental injuries inflicted over the last one?hundred years.

While declaring a need for balance and to “ensure the reasonable protection of beneficial uses which may entail balancing of competing beneficial uses of water including municipal and industrial uses, agricultural uses and other environmental uses …,” the Report states that the goal of Delta restoration can only be achieved by allowing an amount of water to flow through the Delta roughly equivalent to all of the appropriations currently taking place.

The State Board has established a benchmark against an unattainable and utopian objective. How that could be done without significantly impairing the interests south of the Delta— while drastically curtailing vested use north of it—is left to the reader’s imagination.

One can argue that it is a good idea to start an analysis by setting a benchmark. But the numeric criteria determinations in this report must be considered in the following context:

• The flow criteria in this report do not consider any balancing of public trust resource protection with public interest needs for water.
• There is sufficient scientific information to support the need for increased flows to protect public trust resources; there is uncertainty regarding specific numeric criteria.

The reference to “public trust” in this context serves as code words for fish, i.e., salmon, Delta smelt, etc.

The Report and related actions by the Delta Water Master constitute the first salvos in what promises to be a protracted war. Interests north of the Delta from which most of the flows originate will invoke the area of origin provisions of the California Water Code, §§ 10505.5 and 11460 et seq. The first of these sections requires the State Water Resources Control Board to assure that any permit or license “… shall provide, that the application, permit, or license shall not authorize the use of any water outside of the county of origin which is necessary for the development of the county.” (Emphasis added) The section includes no criteria for determining “necessary” or “development” in context.

Sections 11460 et seq. impose a similar requirement on the Department of Water Resources (the agency responsible for running the State Water Project and other state water conduits), using different but equally vague and undefined terms.

The courts will face the burden of reconciling interpretation of the Delta protection legislation with the area?of?origin statutes. No matter how that conflict ultimately resolves itself, however, the bottom line is clear: exports south of the Delta will be reduced.Nor is that all.

The Delta Smelt litigation demonstrated the power of the Endangered Species Act to commandeer water for the benefit of species considered threatened or endangered by the authors of a biological opinion, with no countervailing demands or uses having any part in the equation. Decisions under the public trust doctrine have a similar effect and do not necessarily depend upon something even as marginally definitive as a biological opinion. In its landmark decision declaring the public trust in Mono Lake—and thus curtailing diversion of water from tributary streams—the California Supreme Court stated:

“[t]he public uses …

are sufficiently flexible to encompass changing public needs. In administering the trust the state is not burdened with an outmoded classification favoring one mode of utilization over another. [Citation] There is a growing public recognition that one of the most important public uses … is the preservation of those lands in their natural state, so that they may serve as ecological units for scientific study, as open space, and as environments which provide food and habitat for birds and marine life, and which favorably affect the scenery and climate of the area.”

National Audubon Society v. Superior Court (1983) 33 Cal.3d 419, 434?35; citing Marks v. Whitney (1971) 6 Cal.3d 251, 259? 60.

The public trust doctrine has been held to be a “background principle” of property law as applied to water rights. Thus application of it cannot be considered a “taking.” It constitutes an inherent, intrinsic limitation on water rights derived from contracts, regardless of the words in those contracts. See Lucas v. South Carolina Coastal Council (1992) 505 U.S. 1003.

Stripped to its essence, this means that parties who hold contracts for delivery of water from the State Water Project (or from agencies whose supply depends on such contracts) hold those rights subject to an unstated limitation that defies precise definition and that can be invoked pretty much at random. When you look at the picture in its totality, the rights to water that originate through the Delta are subject to an area of origin limitation, poorly defined and using general terms, but establishing a statutory priority, endangered species and public trust limitations, and the new requirement for preservation of massive instream flows to restore the ecological health of the Delta itself.

All of this portends years of litigation and regional strife. In the short term, it means that the due diligence examination to assess the availability of water for any project or development south of the Delta now requires much more investigation and critical examination than was previously thought to be the case. No longer can one rely upon a will?serve letter or a supply contract. The examiner must dig deep and consider the particular allotment of water back to its source in an attempt to gauge its vulnerability to diminution by application of generally stated principles and platitudes.

The degree of threat this structure poses for agriculture and development activities south of the Delta cannot be overstated, representing a significant constraint on all water?dependent economic activity—obviously including public and private development. Those engaged in such activities must now look well beyond the paper record to assess the degree of risk to the water supplies on which they rely that the new and preemptive supply constraints pose to their particular endeavors.

Howard Ellman is an attorney with Buchalter Nemer.