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May 24, 2024  |  Written by Andrew M. Hitchings, Brittany K. Johnson

Ninth Circuit Rejects ESA Challenges to 2005 Renewal of Sacramento River Settlement Contracts and Delta-Mendota Canal Contracts

On May 23, 2024, the Ninth Circuit Court of Appeals issued a 68-page decision in NRDC, et al. v. Haaland, et al. (Case No. 21-15163), which affirmed the district court’s rulings rejecting claims brought by the Natural Resources Defense Council and other environmental interest groups (collectively, “NRDC”) under the Endangered Species Act (ESA). In 2008, NRDC challenged the execution of the 2005 renewals of certain long-term water supply contracts between the Sacramento River Settlement Contractors (“SRS Contractors” or “Settlement Contractors”), the Delta-Mendota Canal Contractors, and the Bureau of Reclamation (Reclamation). Specifically, NRDC challenged the adequacy of the required ESA Section 7 consultation by and between Reclamation and the U.S. Fish and Wildlife Service (FWS) regarding alleged effects to delta smelt resulting from the renewal of such contracts (including further consultations after remand in 2015), and the Ninth Circuit affirmed the district court’s ruling that these consultations were adequate. The Ninth Circuit also affirmed the district court’s ruling dismissing a supplemental claim brought by NRDC in 2015, which alleged that Reclamation should have reinitiated its ESA consultation with the National Marine Fisheries Service (NMFS) regarding the SRS Contracts’ effects on endangered Chinook salmon based upon new information following NMFS’ issuance of a new biological opinion for long-term operations of the Central Valley Project (CVP) and CVP operations during drought conditions in 2014 and 2015.

The Ninth Circuit recounted the long history of this case, going back to the two-track consultation approach for long-term CVP operations and separate actions like specific contract renewals, the issuance of biological opinions for CVP operations in 2004, 2005, 2008, and 2009 and related litigation, NRDC’s supplemental complaint in 2008, and the preceding Ninth Circuit decision in NRDC v. Jewell, 749 F.3d 776 (9th Cir. 2014). The court also explained the background of the SRS Contracts, the Settlement Contractors’ preexisting water rights, and separate diversion facilities and noted that “Reclamation’s ability to operate the CVP therefore depends on the cooperation and agreement of these senior water-rights holders.”

Turning to the claims related to Reclamation’s consultation with FWS on potential effects to delta smelt resulting from the contract renewals, the Ninth Circuit rejected NRDC’s arguments that the consultation was inadequate for four major reasons. The Ninth Circuit found that its decision in NRDC v. Jewell did not preclude Reclamation and FWS’s reliance on the 2008 consultation for long-term CVP operations in the separate consultation on contract renewal. The court also rejected NRDC’s contentions that the 2015 consultation was not based on the best scientific and commercial data available, that FWS did not account for changed conditions since 2008, and that FWS did not consider all the effects of renewing the contracts through 2045 when the CALSIM modeling for the 2008 biological opinion only extended until 2030. On the last point, the court emphasized that the 2008 consultation on the coordinated, long-term operation of the CVP and State Water Project analyzed the full implementation of the SRS Contracts, and that the FWS concluded that operations to implement the SRS Contracts, with reasonable and prudent alternatives, would not jeopardize delta smelt. The court also rejected the derivative Section 7(a)(2) claim that Reclamation violated the ESA by relying on its 2015 consultation with FWS.

Regarding the claim that Reclamation failed to reinitiate consultation on the SRS Contracts based on new information on salmonids, the Ninth Circuit affirmed the district court’s conclusion that NRDC failed to state a claim under the relevant law. The court restated its standard on discretion under ESA Section 7(a)(2) as it applies to executed contracts: “An agency has discretion to benefit listed species where it retains authority to negotiate contract terms . . . Reclamation retained discretion under the Settlement Contracts only to the extent the contracts themselves give it the power to ‘implement measures that inure to the benefit of the protected species.’ ”

Reviewing the six different contract provisions that NRDC alleged provided such discretion, the court found that Reclamation did not retain discretion under the executed SRS Contracts to take measures that would benefit Chinook salmon like reducing water deliveries. In particular, the court found that Article 3(i) of the SRS Contracts—the liability provision, a version of which appears in reclamation contracts across the west—does not allow Reclamation to alter the SRS Contracts to benefit listed species. The court confirmed that this contract provision “is a force majeure clause that limits Reclamation’s liability for damages in the event legal obligations are imposed on Reclamation that require it to breach the Settlement Contracts by reducing the diversion of water.” Citing Supreme Court precedent, the court reiterated that complying with legal obligations is not a source of discretion under ESA Section 7(a)(2) and that Article 3(i) and the other cited contract provisions “[do] not allow Reclamation to alter the amount of water diverted at its discretion.”

Judge Ikuta authored the majority opinion, which District Judge Selna, sitting by designation, joined. Judge Gould dissented from the majority on the issues of whether FWS analyzed the full effects of the SRS Contract renewals through 2045, and whether Reclamation retained sufficient discretion under the SRS Contracts to trigger reinitiation of consultation with NMFS. Several of the Sacramento River Settlement Contractor parties in the case are represented by Somach Simmons & Dunn. For more detailed information, please see the court’s decision, available at https://cdn.ca9.uscourts.gov/datastore/opinions/2024/05/23/21-15163.pdf.

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