Home » Case Summaries » 1998 » Natural Resources Defense Council v. Houston


Natural Resources Defense Council v. Houston



The United States Bureau of Reclamation (the Bureau) constructed the Friant dam unit (Friant Dam) of the Central Valley Project on the San Joaquin River in California in 1944. In the late 1940s, the Bureau began entering into forty-year contracts with irrigation and water districts for the supply of water from the newly built dam. All of the contract holders had a right of renewal when their contracts expired.

In 1988, fifteen environmental groups, led by the Natural Resources Defense Council (NRDC), filed suit against the Bureau after it began negotiations for renewal of the first contract to expire. The plaintiffs’ amended complaint alleged violations of the Endangered Species Act (ESA),[2] the National Environmental Policy Act (NEPA),[3] section 8 of the Reclamation Act,[4] and section 5937 of the California Fish and Game Code.[5] In 1989, the irrigation and water districts were permitted to intervene.

The Friant Dam adversely affects the endangered Sacramento winter-run chinook salmon and other listed species in the Friant Service Area by impounding the San Joaquin’s water and diverting it to irrigation canals, leaving a long stretch of the San Joaquin dry. NRDC claimed that the Bureau had violated ESA section 7(a)(2)[6] by failing to timely consult with the National Marine Fisheries Service (NMFS) and the Fish and Wildlife Service (FWS) on the effects of the contract renewals on salmon and other protected species. The group also claimed that NMFS and FWS had violated ESA section 7(d)[7] by renewing the contracts prior to consultation, constituting an irreversible and irretrievable commitment of resources.

The Ninth Circuit first held that the contract renewals qualified as agency actions under the ESA.[8] Sierra Club v. Babbitt,[9] which prohibits application of the ESA to agency actions that involve no discretionary authority, did not save the Bureau because the federal government retained some discretionary authority during the negotiation process. The federal reclamation laws state that contracts are to be renewed “under stated terms and conditions mutually agreeable to the parties,”[10] that water rights are based on the amount of available project water,[11] and that the Secretary of the Interior has discretion to set rates to cover operation and maintenance costs.[12] Additionally, under O’Neill v. United States,[13] the Bureau retained discretion throughout the life of the contracts to ensure compliance with subsequently enacted federal law. Even though the districts had “a first right . . . to a stated share or quantity of the project’s available water supply,”[14] the Bureau had discretion to reduce the amount of water available for sale or alter other key contract terms if necessary to comply with the ESA.

After holding that the contract renewals were discretionary agency actions, the Ninth Circuit held that the Bureau had violated the procedural mandate of ESA section 7(a)(2) by failing to request formal consultation with NMFS before renewing the contracts. Once the chinook was listed, the Bureau had independently determined that the contract renewals were not likely to adversely affect the salmon. The Director of NMFS refused to concur in this determination, but stated that formal consultation was not required. The court held that the Bureau had a legal obligation to at least request formal consultation with NMFS. The Bureau had acted arbitrarily and capriciously by relying on NMFS’s assurances that consultation was not required.

The Ninth Circuit also held that the Bureau had failed to timely consult with FWS on other endangered species in the vicinity of the Friant Dam. FWS issued a “no jeopardy” Biological Opinion (BiOp) in October 1991, but by that time, ten of the Friant contracts had already been renewed. The court explained that if the BiOp had been timely, it might have allowed for more flexibility in modifying the contracts, because FWS may make nonbinding conservation recommendations even when it reaches a “no jeopardy” determination.[15] Therefore, the issuance of the BiOp had not mooted NRDC’s consultation claim.

Next, the court ruled that by renewing the contracts, the Bureau had violated ESA section 7(d). This section prohibits irreversible or irretrievable commitment of resources that have the effect of foreclosing the formulation or implementation of reasonable and prudent alternative measures that might have arisen during consultation. The allocation of water under the contract renewals clearly constituted such a commitment. A clause in each of the contracts permitting modifications to the contracts in order to comply with federal law did not save the contract renewals from violating section 7(d), because this clause limited conservation-based modifications to minor adjustments only and prohibited adjustments in the amount of water delivered.

One of the contract holders, Orange Cove Irrigation District, claimed that formal consultation was not required for its contract. The Bureau and FWS had informally consulted and mutually agreed that the Orange Cove contract was not likely to adversely affect any protected species. Both the informal consultation and the renewal of the Orange Cove contract occurred before the Chinook salmon was listed, and Orange Cove argued that no agency action had occurred after the listing to require reinitiation of consultation under the ESA. The Ninth Circuit rejected this argument by pointing to a clause in the contract that conditioned the contract’s binding effect on validation in state court. The California courts did not validate the contract until February 1990, six months after the listing of the Chinook. The Bureau’s delivery of water in the interim constituted discretionary agency action, triggering an affirmative duty for the Bureau to withdraw the Orange Cove contract and initiate consultation with NMFS.

After finding the foregoing ESA violations, the Ninth Circuit affirmed the district court’s decision to rescind the contracts under the authority of the APA, which requires courts to set aside agency actions that are arbitrary, capricious, or not in accordance with law.[16] The Ninth Circuit held that the rescission of the contracts had been well within the discretion of the district court. While the Ninth Circuit had held in an earlier case that injunctive relief is the proper remedy for substantial procedural violations of the ESA,[17] that case did not appear to involve an irreversible and irretrievable commitment of resources. Here, by renewing the contracts, the Bureau had eliminated the opportunity to choose other courses of action. Therefore, injunctive relief would be meaningless unless the contracts were also invalidated.

The district court dismissed NRDC’s challenge under the ESA to the substantive validity of the BiOp and its claim under NEPA that the Bureau was required to conduct an environmental impact statement (EIS) on the Friant Dam. The district court reasoned that the remedy of contract rescission had afforded NRDC complete relief, thereby rendering these issues moot. Furthermore, Congress had already required the preparation of an EIS on the operations of the Friant Dam in 1992 with the passage of the Central Valley Project Improvement Act (CVPIA).[18] Accordingly, the Ninth Circuit affirmed the district court’s holding.

Finally, NRDC claimed that section 8 of the Reclamation Act required the Bureau to comply with section 5937 of the California Fish and Game Code. Under California v. United States,[19] section 8 requires the federal government to comply with state water laws unless a federal statute clearly preempts state law. NRDC argued that section 8 requires the Bureau to comply with section 5937, which requires dam owners to allow sufficient water for fish to pass through a fishway or over, around, or through the dam.[20] The district court concluded that federal law did not prima facie preempt section 5937, and the Ninth Circuit agreed. However, the district court had erred when it had determined that the section 5937 claim lacked ripeness once the contracts were rescinded. The section 5937 claim–if applicable–was directed toward the Bureau, which has an independent duty to comply with section 5937 regardless of any contractual arrangements. The Ninth Circuit reversed and remanded for a determination of whether section 5937 applies to the Friant Dam under state law. If so, the Ninth Circuit directed the lower court to determine whether section 5937 of the California Fish and Game Code is preempted by the CVPIA, which requires the Secretary to dedicate, deliver, and manage specified amounts of water in order to protect, restore, and enhance fish and wildlife.[21]

[1] For further discussion of Natural Resources Defense Council v. Houston, see Nathan Baker, Water, Water, Everywhere, and at Last a Drop for Salmon?, 29 Envtl. L. __ (1999).

[2] Endangered Species Act of 1973, 16 U.S.C. §§ 1531-1544 (1994).

[3] National Environmental Policy Act of 1969, 42 U.S.C. §§ 4321-4370d (1994 & Supp. III 1997).

[4] 43 U.S.C. § 383 (1994).

[5] Cal. Fish and Game Code § 5937 (West 1998).

[6] 16 U.S.C. § 1536(a)(2) (1994).

[7] Id. § 1536(d).

[8] See id. § 1536(a)(2).

[9] 65 F.3d 1502 (9th Cir. 1995).

[10] 43 U.S.C. § 485h-1(1) (1994).

[11] Id. § 485h-1(4).

[12] Id. § 485h(e).

[13] 50 F.3d 677 (9th Cir. 1995).

[14] 43 U.S.C. § 485h-1(4) (1994).

[15] 50 C.F.R. § 402.14(g)(6), (j) (1998).

[16] Administrative Procedure Act, 5 U.S.C. §§ 551-559, 701-706, 1305, 3105, 3344, 4301, 5335, 5372, 7521 (1994 & Supp. III 1997). The arbitrary and capricious standard is found at 5 U.S.C. § 706(2)(A) (1994).

[17] Bob Marshall Alliance v. Hodel, 852 F.2d 1223, 1230 (9th Cir. 1988).

[18] Reclamation Projects Authorization and Adjustments Act of 1992 (CVPIA), Pub. L. No. 102-575, §§ 3404(b)(1), 3409, 106 Stat. 4600, 4709, 4730.

[19] 438 U.S. 645 (1978), on remand, 521 F.Supp. 491 (E.D. Cal. 1980) and 509 F.Supp. 867 (E.D. Cal. 1981), aff’d in part, rev’d in part, 694 F.2d 1171 (9th Cir. 1982).

[20] Cal. Fish and Game Code § 5937 (West 1998).

[21] CVPIA § 3406(b)(1), 106 Stat. at 4714.

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