On May 23, 2024, the Ninth Circuit Court of Appeals issued a published opinion in Natural Resources Defense Council et al. v. Debra Haaland et al. (Case No. 21-15163) (“NRDC v. Haaland”) rejecting the plaintiffs’ challenges to the federal environmental review of certain long-term water supply contracts for the Central Valley Project (“CVP”). Specifically, the Ninth Circuit held that the Bureau of Reclamation (“Reclamation”), Fish & Wildlife Service (“FWS”), and National Marine Fisheries Service (“NMFS”) complied with the Endangered Species Act (“ESA”) in evaluating the effects of executing and implementing these contracts on listed species. The opinion is the latest development in a nearly 20-year-old case that is in its second round of review by the Ninth Circuit.

Sacramento River Settlement Contracts

The Sacramento River Settlement Contractors (“Settlement Contractors”) are agricultural, municipal, and industrial water users who hold senior water rights to the Sacramento River. Downey Brand represents a large group of Settlement Contractors in this case.

In 1964, the Settlement Contractors or their predecessors signed 40-year contracts with Reclamation to resolve protests against Reclamation’s construction and operation of the CVP. The contracts, known as “SRS Contracts,” enable Reclamation to operate the CVP in exchange for providing the Settlement Contractors with a stable supply of water. The Settlement Contractors negotiated and executed renewed SRS Contracts with Reclamation in 2005 for another forty-year term.

The SRS Contracts represent stability to Sacramento River and CVP operations. The first time this case went before the Ninth Circuit, the court noted how the SRS Contracts avoid a monstrous water right lawsuit between the Settlement Contractors, Reclamation, and other water users who depend on the Sacramento River. Writing for the majority in NRDC v. Haaland, Judge Ikuta affirmed the importance of the SRS Contracts, stating: “Reclamation’s ability to operate the CVP therefore depends on the cooperation and agreement of these senior water-right holders.”

Ninth Circuit’s Opinion

In its opinion, the Ninth Circuit explains the complex factual and procedural history of the case from its inception in 2005 through the present, including the prior appeals to the Ninth Circuit and the litany of biological opinions for the CVP. The Ninth Circuit then turns to the merits of NRDC’s appeal, and the 2-1 majority opinion rejects all of NRDC’s contentions.

NRDC appealed two separate orders issued by Senior Judge Lawrence O’Neill of the Eastern District of California. First, NRDC appealed Judge O’Neill’s order granting judgment against NRDC on its claims challenging the validity of the ESA consultation on the renewals of the SRS Contracts and contracts between Reclamation and the Delta-Mendota Canal Contractors, (“DMC Contracts”). NRDC specifically alleged that Reclamation and FWS did not adequately consult on the effects of renewing the SRS and DMC Contracts on delta smelt. The district court upheld Reclamation and FWS’ consultations, holding that FWS was not precluded from relying on its prior biological opinion in its informal consultation. Instead, FWS properly considered the prior biological opinion and complied with ESA’s consultation requirements.

The Ninth Circuit agreed and held that FWS and Reclamation properly consulted on the effects of renewing the SRS and DMC Contracts on delta smelt. In rejecting all of NRDC’s arguments, the Ninth Circuit affirmed Reclamation and FWS’ practice of conducting a “two-track” consultation process, where the agencies first consulted on systemwide operations and then consulted informally on specific aspects of CVP operations, like the contract renewals. The Ninth Circuit found that FWS’ letters of concurrence, the result of the informal consultations, adequately considered all aspects of the contract renewals and complied with the ESA’s consultation requirements.

Second, NRDC also appealed Judge O’Neill’s order dismissing NRDC’s fifth claim for relief that Reclamation violated its duty under the ESA to reinitiate consultation with NMFS over the implementation of the SRS Contracts. NRDC argued that Reclamation retained “some discretion” from the terms of the SRS Contracts such that Reclamation could modify how it implemented the contract for the benefit of listed Chinook salmon. To the contrary, the district court found that none of the terms in the SRS Contracts allowed Reclamation to modify how it performed its obligations in the contracts. Reclamation, therefore, did not have the necessary discretion to require further ESA consultation.

The Ninth Circuit affirmed the district court’s decision. It interpreted the language of the SRS Contracts and held that none of the six contract provisions NRDC pointed to allowed Reclamation to unilaterally change its obligations under the contracts in ways that could the benefit of the species. Additionally, the Ninth Circuit rejected NRDC’s new arguments that state law, including the reasonable use and public trust doctrines, provided Reclamation with discretion to modify the contracts.

Downey Brand attorney Meredith E. Nikkel argued the case on behalf of the Settlement Contractors before the three-judge panel of the Ninth Circuit on March 31, 2023. Judge Ikuta authored the majority opinion, and she was joined by Judge Selna, a district court judge sitting by designation. Judge Gould authored a separate opinion, concurring in part and dissenting in part.

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