SEWD wins water battle in appellate court

By Craig W. Anderson

Stockton East Water District’s 16-year breach of contract battle with the U.S. Bureau of Reclamation came to an end recently when the Federal Circuit Court of Appeals ruled in the district’s favor, saying the federal government is liable for contracted water that was never fully delivered to the district.

A Bureau of Reclamation spokesman said, “The Bureau has no comment because we haven’t reviewed the decision yet.”

“This is great news for the district and Central [San Joaquin Water Conservation District], who were also part of the lawsuit,” said SEWD board president Andrew Watkins. “This decision means the bureau definitely has an incentive to ship water in the future.”

Originally, the lawsuit asked for $500 million but what the final amount will be has yet to be determined.

At the heart of the matter is the Goodwin Tunnel built for $65 million in the early 1990s to bring water to Stockton from the Stanislaus River below Goodwin Dam. The tunnel was built on the U.S. Bureau of Reclamation’s (USBR) assurances that the contracted water would be available. The USBR then cut off water for environmental and other reasons, delivering only small amounts, if any.

“They gave us excuses and didn’t fulfill the contracts,” Watkins said. “Water was available in New Melones Reservoir to meet their obligations.”

Participants in the tunnel project, including SEWD and Central San Joaquin Water Conservation District, and ag and urban users have been paying off the bonds which funded the tunnel project, all the while receiving virtually nothing for their money.

“We’re ecstatic about this decision,” said Kevin Kauffman, SEWD general manager. “It’s nice to have a victory and it will be good to have our contracts honored.”

The unfulfilled contracts are still in effect and because they have a life span of 35 years the USBR will have to honor them. There should be no confusion or delay in getting the water flowing, subject to future appeals, of course.

Kauffman said a 2007 ruling agreed with SEWD’s contention that the contracts had been breached but said the government had no liability because what caused the violations were beyond the government’s control.

However, the current ruling by the Federal Circuit Court of Appeals determined the government is liable because the water shortages were caused by government rules and regulations and not by natural causes such as drought, a dam failure, earthquake or other act of nature.

The appeals court also rejected the government’s argument that the districts had to assume the risk of water deficits.

Jennifer Spaletta, a partner with Herum/Crabtree, Attorneys in Stockton who argued the case before the appellate judges, credited them with “taking a step back and looking at the basic principles involved. They told the bureau, in effect, ‘You didn’t perform, you didn’t fulfill the contracts.’ It was a pleasure to see the court look beyond the bureau’s explanations.”

She added, “It is important to know that money wasn’t the main issue, the main issue was receiving the contracted water and halting the groundwater overdraft.”

“The Department of Justice will take a look at it [the decision] but hopefully this will get them back to the negotiating table,” Kauffman said.

With the USBR ignoring the contracts SEWD was unable to address the groundwater overdraft situation for more than a decade and the aquifer has suffered. “We couldn’t get any loans to build infrastructure and therefore lost opportunities to mitigate the overdraft situation,” Kauffman said.

Reid Roberts, attorney and Secretary/Legal Counsel for the Central San Joaquin Water Conservation District said, “Happily, this long-standing dispute appears to be nearing its end. It’s gratifying to have the appellate court agree with us regarding paragraph nine of the contracts which controls when the bureau can take water away from us such as drought.”

He said that while the Goodwin Tunnel was under construction “the USBR promised us [Central and SEWD] that any new regulations wouldn’t affect us, which, of course, they did.”

While this aspect of San Joaquin County’s water situation is moving toward resolution, other rulings and proposals could create water delivery difficulties in the immediate future. Perhaps the most threatening is the biological opinion from the National Marine Fisheries Service which says more water needs to be diverted from New Melones to protect endangered and threatened Delta fish.

“This has the potential to be troublesome and it is scheduled to be reviewed by the National Academy of Sciences,” noted Kauffman.

As far as a time frame for determining the amount of money owed SEWD and Central, or when water could begin flowing in contracted amounts through Goodwin Tunnel, “No one knows how long this will take. It may take two or three years to resolve,” he said.

Watkins said the case could be appealed to the U.S. Supreme Court or returned to the Federal Circuit Court of Appeals “with a request that the entire court rule on it.”

However, Spaletta said that for all 12 judges in the Federal Circuit Court to review the decision as a body, they all would have to agree to hearing the appeal in the first place.

As SEWD’s struggle to recover what was lost nears its conclusion, Watkins has found perhaps the greatest irony of the situation. “The miniscule amount of water we were asking for from New Melones was less than what was lost to evaporation.”