Takings Claims in the Klamath Basin

Tarlock and Doremus are co-authors of Water War in the Klamath Basin: Macho Law, Combat Biology, and Dirty Politics, published by Island Press in 2008.

Last week, the Oregon Supreme Court agreed to decide whether irrigators in the Klamath Basin "own" water delivered by the federal Klamath Reclamation Project. This latest development is one more twist in an ongoing property rights case that illustrates both how difficult it can be to determine who holds precisely what rights in western water and how property rights claims, even spurious ones, can frustrate ecosystem restoration efforts.

Usually, claims of ownership are made to recover a resource from someone else. But that's not the issue here. The United States agrees that when the Project has water available it must deliver that water to these irrigators rather than to anyone else. But the irrigators want more than that. They want the United States to pay them for having limited deliveries from the Project in the drought year of 2001 in order to protect threatened and endangered fish. Having failed so far to get that result in the federal courts, they are now using procedural maneuvering to get another bite at the apple from the Oregon courts.

We detailed the complex history of water use in the Upper Klamath Basin in our 2008 Island Press book, Water War in the Klamath Basin: Macho Law, Combat Biology, and Dirty Politics. In a nutshell, in the critically dry summer of 2001, the federal Bureau of Reclamation closed the headgates of the Klamath Project because the U.S. Fish and Wildlife Service and National Marine Fisheries Service had determined that the needs of endangered suckers in Upper Klamath Lake and threatened salmon in the Klamath River left no water available for irrigation use.

Despite virulent protests and even scattered episodes of violence, Klamath Project deliveries were reduced by 90 percent that year. By 2002, however, normal deliveries were resumed, thanks to heavier rains and the Bush administration's creative (and, the Ninth Circuit later found, illegal) interpretations of the Endangered Species Act, which put the desires of irrigators ahead of the needs of the ecosystem.

The 2001 "train wreck" spawned litigation on a variety of fronts. The irrigators went the takings route. They have long gotten the benefit of almost all the water in the basin, and have decided to stand on their claimed rights to that water even as the ground shifts from under them. Shortly after the water shut-off, they hired lawyers known for aggressive pursuit of property rights claims, and soon were claiming that the United States owed them a billion dollars (far more than any documented losses) under the Fifth Amendment for having "taken" their water in 2001. The United States Court of Claims ruled for the United States, finding that the irrigators did not have property rights that would support a takings claim, and that their contracts for water delivery were subservient to the Endangered Species Act. On appeal of the takings claim, the Federal Circuit decided that the property issue depended "upon complex issues of Oregon property law." It certified three questions to the Oregon Supreme Court, essentially requesting that the state court resolve those issues, which it has now agreed to do.

The tribes and environmental groups, which had prevailed in the lower federal court, obviously would have preferred that the state court not be dragged into this dispute. The Federal Circuit could easily have concluded (as one dissenting judge did) that the arcane questions certified were not relevant to the takings determination, or even that the plaintiffs, who began with the claim that they had property rights under federal reclamation law, should not be allowed to switch midstream to a claim of rights under state law.

The choice of the Oregon Supreme Court to consider the questions asked by the Federal Circuit should not be read as necessarily presaging a determination that the irrigators actually have state law property rights. The Oregon court may simply be showing a kind of professional courtesy to the federal court, which has after all requested its views. Or it may want to be sure that it, rather than the federal courts, has the last word on Oregon property law. That might well be a good thing from the environmentalist perspective, given the tendency of the Federal Circuit to favor broad interpretations of property rights. Indeed, preliminary indications in the ongoing state administrative adjudication of water rights in the Klamath Basin are that the United States, not the irrigators, holds the relevant state property rights.

The issue here is familiar to water lawyers. For decades, water users have tried to turn their inherently insecure rights to use water into secure, exclusive property rights like those of landowners. Courts and academics have long reminded them that water is different. Ownership simply doesn't fit the reality of water use. To control access and use, the western states "own" the water in trust for the public. Individuals such as the Klamath water users can obtain the right to use water, but never classic ownership of it.

This latest litigation twist illustrates just how complex, time-consuming, and expensive it can be to resolve these sorts of property claims, and how such claims can stand in the way of ecosystem restoration efforts. There are good reasons for guaranteeing compensation to those deprived unexpectedly of their property rights by government action. Stable property rights encourage investment, both economic and emotional, in the development of land and water resources. But at the same time, too much deference to property rights enhances the tyranny of the status quo, inhibiting the necessary evolution of rules in response to changed circumstances and changed societal goals. Ultimately, most takings plaintiffs lose on their claims that they must be compensated for the costs imposed on them by new environmental regulations, but they can often force the government into protracted, expensive litigation. The mere threat of takings litigation can chill legitimate regulatory initiatives, especially in a time of ever-shrinking government budgets.

In the end, the Oregon court's decision will not help the irrigators. Whatever word is used to describe their entitlements, the takings issue boils down to whether they were treated so unfairly as to trigger an obligation to compensate. The insistence of Klamath project irrigators that they must be paid for any change to the status quo seems particularly unjustified. Millions of dollars have been poured into the Basin since 2001, much of it going to farmers. Some water has been reallocated to environmental purposes, but only through water banks that have paid farmers for giving up their water. A recent negotiated deal on hydropower dam re-licensing on the Klamath River manages to be highly favorable to the irrigators while still calling for environmental improvement through dam removal. None of that seems to be enough, however. The irrigators continue to pursue what they see as their "rights" to their full limit. That choice is good only for lawyers, not for the environment, not for the Basin's Indian tribes, who have long been denied their much longer established rights, and not for the public fisc.

In the end, it won't even be much help to the irrigators themselves. They are unlikely to ultimately win their case. Even if they do, the courts cannot save them from the real threats to farming in the area, global economic and climatic change.

By definition, ecosystem restoration must displace the status quo to some extent. Sometimes, the losers may deserve some help in dealing with transitions. But takings litigation is too crude a tool for calibrating that help. It tells us little about the extent of the pain caused by change, the extent to which that pain is properly charged to the government or (as is clearly the case in the Klamath) has other causes, or about the appropriate way to distribute its costs.