ELR Citation: ELR 20579
No(s). 91-16013 (9th Cir. Feb 2, 1970)

The court holds that a water district's Fifth Amendment vested property right to a permanent supply of water was not violated by the federal government's renewal contract imposing a surcharge to recoup operational costs and requiring an environmental impact statement (EIS) under the National Environmental Policy Act (NEPA) and consultation under the Endangered Species Act (ESA). The court first holds that the water district has a vested property right to a permanent water supply based on express provisions in its original contracts with the federal government. The court holds, however, that the recoupment of operations and maintenance expenses does not violate the water district's contractual rights under its original contracts with the government. Rather, the means by which the price of new water will be established looks retroactively at the costs of supplying the old water. Because the water district cannot be forced to pay the money in the absence of a renewal contract, it is a charge for new water calculated on the basis of old water, rather than an additional charge for the old water. Further, although Congress cannot take back a subsidy for which it has bound itself by contract, it may quit subsidizing and even tax the previously subsidized activity, once its contractual subsidy obligations end. The court next holds that the terms of the renewal contract preserve congressional authority to require a different charge for a service that is different with regard to the expense of operation and maintenance, which has the practical effect of making new water in this water district cost more than that in another district. This conclusion suggests that the parties did not intend for the water district's operation and maintenance costs to exceed that of other districts. Congress changed its policy such that the purchasers of new water will have to pay their full operation and maintenance costs, plus an increment measure by the subsidy furnished to purchasers of the old water. Next the court observes that it has no occasion to determine whether the government correctly computed the district's share of operating costs and its credits. Finally, the court holds that the renewal contract's terms providing for completion of an EIS and an ESA's consultation do not void the contract. The government can enter into a binding agreement subject to a qualified right of modification, and NEPA and the ESA were adopted after the original contract was executed and represent policies subsequently adopted. The renewal contract's provision does not state that the renewal contract terms must be identical to those in the expired contract. Moreover, §203(d) of the Reclamation Reform Act of 1982 does not prevent the imposition of these environmental regulations, because the government only seeks a term in a new contract, not an amendment to an existing contract. Finally, the court holds that the applicability of NEPA and the ESA to the water district's renewal contract is not ripe for review.

Counsel for Plaintiff-Appellant
Denslow Green
Green, Green & Rigby
219 S. "D" St, Madera CA 93638
(209) 674-5656

Counsel for Defendants-Appellees
Robert L. Klarquist
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Intervenors-Appellees
Brian E. Gray, Prof.
Hastings School of Law
200 Macallister St., San Francisco CA 94102
(415) 565-4600