On August 17, 2026, the Ninth Circuit Court of Appeals affirmed the District Court ruling that the United States Bureau of Reclamation (Reclamation) did not need to undertake National Environmental Policy Act (NEPA) review or Endangered Species Act (ESA) consultation before it converted Central Valley Project (CVP) water service contracts to repayment contracts pursuant to the Water Infrastructure Improvements for the Nation (WIIN) Act. Center for Biological Diversity et al. v. United States Bureau of Reclamation, No. 25-5137 (9th Cir. Aug. 17, 2026).

Passed in 2016, the WIIN Act (Pub.L. No. 114-322, 130 Stat. 1628) authorized water contractors to convert their CVP water service contracts to repayment contracts upon request and thereby change the payment structure of their contracts. Under the Reclamation Act of 1939, repayment contracts provide for the contractor to receive water in exchange for repaying the water project’s construction costs. Once those installment payments are made, the contractor only pays the costs to operate and maintain the CVP going forward and does not pay for water deliveries. Under a water service contract, the contractor receives water in exchange for an annual payment, and unlike repayment contracts, water service contracts expire at the end of their term. The WIIN Act provided for prepayment of the construction costs upon conversion to repayment contracts, thereby providing money for the federal government to fund construction projects and saving the contractors money. In 2020 and 2021, Reclamation converted 67 water service contracts into repayment contracts without conducting environmental review under NEPA or ESA consultation.

Center for Biological Diversity, et al. (CBD) sued Reclamation claiming it was required to perform NEPA review and ESA consultation before converting contracts pursuant to the WIIN Act. The District Court ordered CBD to join the water contractors that had converted their contracts. Somach Simmons & Dunn represented four water contractor clients in this case and coordinated closely with counsel for numerous other contractors.

The District Court held that NEPA review or ESA consultation was not required prior to converting water service contracts because the WIIN Act expressly deprived Reclamation of discretion to modify contractual rights other than the financial terms addressed in the WIIN Act, making it impossible for Reclamation to exercise discretion for the benefit of protected species or otherwise consider environmental effects as part of the contract conversion process. CBD appealed the decision.

The Ninth Circuit reviewed the WIIN Act anew to determine whether it allows Reclamation to consider environmental effects and take actions to protect species as part of contract conversion. NEPA requires environmental review for “major Federal actions.” 42 U.S.C. § 4332(2)(C).  It excludes “activities or decisions that are non-discretionary.” 42 U.S.C. § 4336e(10)(B)(vii). Section 7(a)(2) of the ESA requires an agency to consult with the federal fisheries agencies when the agency has “‘some discretion’ to take action for the benefit of a protected species.” NRDC v. Jewell, 749 F. 3d 776, 784 (9th Cir. 2014).

The Ninth Circuit determined that the text of the WIIN Act “commands Reclamation to convert contracts upon request and provides Reclamation discretion to change only contract terms that relate to the contract’s payment structure.” (Opinion, p. 17.)  Section 4011(a)(1) creates a mandatory duty to convert wherein it states that Reclamation “shall convert any water service contract … to allow for prepayment of the repayment contract … under mutually agreeable terms and conditions.” Section 4011(a) further provides Reclamation shall “not modify other water service … contractual rights.” WIIN Act § 4011(a)(4)(C).  The Ninth Circuit found that section 4011(a)(4)(C) barred Reclamation from changing other rights in the prior water service contracts such as the amount of water to be delivered. (Opinion, p. 19.) Thus, the WIIN Act did not allow Reclamation to consider environmental effects and take actions to protect species.

The Ninth Circuit dispensed with CBD’s other arguments. CBD argued that the phrase “mutually agreeable terms and conditions” provides Reclamation discretion to modify contract terms to protect the environment similar to the discretion that existed in NRDC v. Houston, 146 F.3d 1118 (9th Cir. 1998). At issue in Houston was the Reclamation Act’s renewal provision, which provides for renewal on mutually agreeable terms and guarantees the contractors a right to a stated share of the available water supply. There, the Ninth Circuit found that, together, these terms allowed Reclamation to reduce the total supply available while maintaining a contractor’s share, such that Reclamation had some discretion to protect the environment in doing so. Here, the WIIN Act limited Reclamation’s negotiation authority to payment related terms and prohibited modification of other contractual rights. These limitations did not exist in the Reclamation Act provision analyzed in Houston, and therefore Houston did not require that the Ninth Circuit find Reclamation had discretion here. (Opinion, pp. 21-22.)

Plaintiffs also argued that the phrase “shall … not modify other water service … contractual rights” in section 4011(a)(4)(C) refers to rights in contracts other than the converted contracts, not rights in the converted contracts, thereby leaving Reclamation discretion to modify terms in the converted contracts to protect the environment. However, the Ninth Circuit found that the modifiable rights at issue were the payment rights the WIIN Act directed Reclamation to modify in the converted contracts, and the word “other” does not modify the word “contracts,” but instead “contractual rights.” When taken together, this argument failed.  (Opinion, pp. 22‑23.)

CBD also asserted that Reclamation modified or deleted contract provisions during the conversion process that eliminated Reclamation’s obligation to conduct environmental review and consultation and therefore had discretion to modify terms other than payment provisions. The Ninth Circuit found that these revisions were consistent with an ordinary conversion of a water service contract to a repayment contract without demonstrating Reclamation had discretion to modify provisions other than payment terms. (Opinion, p. 23.)

CBD also argued that the District Court and Ninth Circuit’s reading of section 4011(a) does not comply with savings clauses in the WIIN Act. The first clause CBD points to is section 4012(a)(2), which provides that California Water Subtitle J (which includes section 4011) shall not be interpreted in a way that would modify any obligation under the Central Valley Project Improvement Act (CVPIA). However, the CVPIA’s obligation to conduct environmental review only applies to contract renewals, not conversions. Therefore, the Ninth Circuit found that this savings clause does not impose an environmental review obligation on such conversions. (Opinion, pp. 25-26.)

CBD also pointed to the ESA savings clauses in sections 4012(a)(3) and (a)(4), which provide that California Water Subtitle J shall not be interpreted to modify the ESA or the biological opinions applicable to the CVP or State Water Project, or cause adverse effects on listed species beyond those contemplated in those biological opinions. The Ninth Circuit concluded that its interpretation of section 4011(a) would not modify any obligation to consult under the ESA because no such obligation attaches to WIIN Act conversions. It further found that it is unclear whether these provisions apply to contract conversions as they appear to only apply to CVP operations and do not discuss Reclamation’s consultation obligation. (Opinion, pp. 26-27.)

The Ninth Circuit ultimately held that Reclamation was not required to conduct environmental review under NEPA or consultation under the ESA when converting water service to repayment contracts under section 4011(a) of the WIIN Act. The Ninth Circuit noted that its holding is limited and not meant to suggest that water deliveries pursuant to the converted contracts are no longer subject to environmental review. (Opinion, p. 28.)

The decision provides further guidance for evaluating whether a statute provides a federal agency discretion sufficient to act for the benefit of protected species or otherwise consider environmental effects and thereby trigger NEPA or ESA obligations.

You may obtain a full copy of the Opinion (Doc. 102-1) via the Ninth Circuit website at https://cdn.ca9.uscourts.gov/datastore/opinions/2026/08/17/25-5137.pdf.

For questions or additional information, please contact:

• Aaron A. Ferguson, aferguson@somachlaw.com

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