The U.S. Bureau of Reclamation (Reclamation) released three documents related to its consultation obligations under the Endangered Species Act (ESA) for its operation of the Klamath Project (Project) in south-central Oregon and northern California.  The analysis and conclusions contained in these comprehensive and technical documents significantly change Reclamation’s approach to ESA compliance when operating the Project.  The new analysis was issued in response to a November 12, 2020 letter by the Secretary of Interior calling for a review of contracts with Project water users and other legal authorities governing the Project, as well as an October 28, 2020 memorandum (October 2020 Solicitor Guidance) from the U.S. Department of Interior Office of Solicitor (Solicitor) giving preliminary guidance on questions concerning Reclamation’s authority with respect to certain components of Project operations.

“The recent history of the Klamath Project represents another example of how difficult ESA Section 7 consultations can be for large, complex water projects, constrained legally by statute, water rights, and reclamation contracts, and operationally by storage capability and dry hydrology.  Reclamation’s effort to untangle all that is a very interesting development.” – Brittany Johnson, Shareholder

Legal guidance on Project operations under the ESA had not been reviewed since the issuance of memoranda by regional solicitors in 1995 and 1997.  Since then, Oregon’s Klamath Basin Adjudication has moved forward and, in 2014, the adjudication official issued the Amended and Corrected Findings of Fact and Order of Determination (ACFFOD).  The ACFFOD determined the relative rights and priorities in the Project and the disposition of stored water from Upper Klamath Lake pursuant to Oregon law.  Case law on the scope of ESA section 7 has also evolved since 1997, including the Supreme Court’s decision in National Ass’n of Home of Builders v. Defenders of Wildlife, 551 U.S. 644 (2007) (Home Builders).  Home Builders and subsequent case law confirms that ESA section 7 applies and requires consultation by an action agency only when an agency possesses discretionary authority to act for the benefit of listed species.  District and appellate court decisions have since applied this precedent in challenges to consultations involving federal water projects and Reclamation’s water contracts.

In response to changes in Oregon’s adjudication status and based on Home Builders and its progeny, the October 2020 Solicitor Guidance concludes that the ACFFOD and the numerous contracts with Project water users likely constrain Reclamation’s discretion in Project operations, and recommends that Reclamation conduct a thorough review of its contracts to determine whether there are nondiscretionary contract terms that affect its obligation to consult under section 7.

“Climate change and the related drought continue to challenge the Klamath Basin and all water users, farmers, tribes and fish alike.  The continued need for all water users to work together to create solutions for meeting these challenges remains apparent with this new development.” – Ramsey Kropf, Shareholder

In response to this legal guidance, Reclamation performed a comprehensive review of Project operations in a decision document entitled, “Reassessment of U.S. Bureau of Reclamation Klamath Project Operations to Facilitate Compliance with Section 7(a)(2) of the Endangered Species Act” (January 2021) (Reassessment).  The Reassessment was informed by two additional legal memoranda, also dated January 2021, from the Solicitor to the Secretary on key legal questions.

One memorandum, entitled “Use of Water Previously Stored in Priority for Satisfaction of Downstream Rights,” analyzed the question whether water previously stored in priority in Upper Klamath Lake can ever be released for satisfaction of unquantified, downstream federally reserved water rights held by two tribes for their respective fisheries.  The memorandum notes that Reclamation has not received clear direction on this question because the distinct legal obligations of compliance with the ESA and compliance with tribal trust obligations have been historically conflated in the operation of the Project in court decisions and agency positions.  The conclusions in this memorandum rely on the ACFFOD, which controls the release of stored water in Upper Klamath Lake under Oregon state law.  The memorandum distinguishes between the clear direction that the ACFFOD provides on how to satisfy federally reserved rights that are quantified in the ACFFOD, and the lack of specific direction on how to satisfy unquantified downstream federally reserved instream water rights for tribal fisheries that were not raised or decided in the ACFFOD.  The memorandum concludes that a “reasonable interpretation” of unquantified federally reserved rights and any associated trust obligation is that natural flow is available for the downstream water rights and that water stored by the Project pursuant to the ACFFOD is not available for satisfaction of those rights.

The second memorandum, entitled “Analysis of Klamath Project contracts to determine discretionary authority in accordance with the November 12, 2020 Letter of the Secretary of Interior,” analyzed the degree of discretionary authority retained by Reclamation in its contracts with Project water users.  There are over 150 perpetual contracts, executed between 1908 and 1972, between Reclamation and irrigation districts and individual landowners in the Klamath Project, covering approximately 204,000 irrigable acres.  There are also temporary water contracts.  In sum, the memorandum focuses on six types of contract clauses that could be sources of discretionary authority.  It concludes that in each case, Reclamation’s discretion under each contract provision is limited.  As such, the Solicitor found that the Klamath Project contracts do not provide sufficient discretionary authority to trigger the application of ESA section 7 consultation on the operation of the Project to satisfy these contracts.

Both memoranda inform the Reassessment document.  The Reassessment is modeled on a similar approach taken by the U.S. Army Corps of Engineers (Corps) in 2014 for its Middle Rio Grande operations (based on 2013 legal guidance from the Corps’ general counsel) and upheld in 2020 by the Tenth Circuit Court of Appeals.

The Reassessment first recounts the long consultation history for the Project, which incorporates the agency’s and other stakeholders’ assumptions that a basinwide settlement—the Klamath Basin Restoration Agreement (KBRA)—would be the applicable operating regime.  The KBRA expired in January 2016 when Congress failed to authorize the settlement by enacting the required legislation.  The conclusion of this section offers a telling summary of the status of Project operations under the current ESA framework in the hydrologically challenging 2020 water year:  “The practical result for 2020 was that Reclamation made 155,000 [acre-feet (AF)] of water available from Upper Klamath Lake for irrigation purposes within the Project during the spring-summer season (approximately one-third the historical demand), while simultaneously releasing approximately 407,000 AF to the Klamath River to achieve designated flows at Iron Gate Dam, amidst inflows to the lake of approximately 360,000 AF.”

The Reassessment then evaluates Reclamation’s authorities governing the Project and its water rights, including the 1905 congressional authorization for the Project under the Reclamation Act of 1902, and the ACFFOD.  Notably, and unlike other reclamation projects with updated congressional authorizations, the Klamath Project is authorized only for the purposes of the 1902 Reclamation Act, i.e., the reclamation and irrigation of agricultural land.  The Reassessment then breaks down Project operations into 13 discrete actions, such as the decision to store or bypass tributary inflow into Upper Klamath Lake, and the release of stored water from Upper Klamath Lake.  The analysis of these discrete operational actions is, again, informed by the ACFFOD, with one key finding of the ACFFOD being that there is a difference in the right to store water, which is held by the United States, and the legal interest in the water rights for the Project for applying water, both stored and live flow, to beneficial use, which is held by landowners and districts.  The Reassessment finds that there is some discretion in aspects of Project operations that could benefit listed species, and thus Reclamation must consult on those actions.  However, Reclamation outlines the limitations of its authority—both legally and operationally—in exercising that discretion.  These limitations include the inability to release stored water in Upper Klamath Lake otherwise required for beneficial use by Project beneficiaries for instream flows in the Klamath River, the inability of Reclamation to guarantee Upper Klamath Lake levels to absolute fixed surface elevations, the inability to make absolute commitments on minimum flows in the Klamath River as opposed to target flows, and the role of Reclamation in exercising federal reserved water rights for national wildlife refuges held by the U.S. Fish and Wildlife Service (USFWS).

Both the legal conclusions in the Solicitor guidance and the analysis in the Reassessment represent updated and clarified positions from Reclamation after years of attempts to implement iterative approaches, compromises, and agency-negotiated outcomes, without acknowledging the ACFFOD’s effect or the distinct legal authorities related to the ESA and water rights.  This has helped spawn multiple lawsuits from different stakeholders challenging each consultation (or lack of reinitiation of consultation) on operations attempted by the agencies since 2000.  Reclamation currently operates the Project according to joint non-jeopardy biological opinions issued by the USFWS and the National Marine Fisheries Service (NMFS) in March 2019, further modified by a stipulation entered in the District Court for the Northern District of California in March 2020.  Reclamation had already reinitiated consultation due to the discovery of erroneous technical data in November 2019.  The new framework laid out in the Reassessment will shape the biological assessment that Reclamation produces in that reinitiated consultation, and the scope of the agency action on which USFWS and NMFS are asked to consult.

Somach Simmons & Dunn represents the Klamath Water Users Association (KWUA).  KWUA’s press release on the new framework for consultations on Project operations is available here.

For more information on this development, please contact Brittany K. Johnson (bjohnson@somachlaw.com) in our Sacramento office, or Ramsey L. Kropf (rkropf@somachlaw.com) in our Boulder office.

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