CWAG 2010

1. CWAG 2010 WATER LAW CONFERENCE The Broadmoor Colorado Springs, Colorado April 29 – 30, 2010

2. Is a Requirement to Leave Water in a Stream for Endangered Species a “Physical Taking” of a Water Right?(Some thoughts on Casitas, Tulare Lakes, etc.)Joe FellerArizona State UniversityNational Wildlife FederationUniversity of Colorado

3. Three Tests for Takings of Land A government action is a compensable taking of land if: • it “denies all economically beneficial or productive use” of the land (Lucas v. South Carolina Coastal Council), or • it constitutes a “permanent physical occupation” of the land (Loretto v. Teleprompter Manhattan), or • it is deemed a taking through application of the Penn Central test, which takes into account, among other things, • the “character” of the government action, • the economic impact of the action, and • the land owner’s “reasonable investment backed expectations.”

4. Why does he focus only on “physical takings”? Because: 1. Hardly anybody ever wins on a Lucas “total deprivation”argument. • It requires virtually 100% loss of property value. • Even 90% loss has been held insufficient. 2. Hardly anybody ever wins under the Penn Central test. 3. A couple of plaintiffs have achieved at least preliminary success in claiming that an ESA-inspired restriction on water use or supply was a “physical taking.” (Tulare Lake, Casitas)

5. Why is a “physical occupation” of land a taking? Because it violates the right to exclude. Loretto: • “The power to exclude has traditionally been considered one of the most treasured strands in an owner's bundle of property rights.” 458 U.S. at 435. • Because it abrogates the right to exclude, a “permanent physical occupation” of land, no matter how small, is a taking. Id. at 435 - 436.

6. Does a water right include the right to exclude? No! A water right is “usufructary”; that is, it is a right to use, not to exclude.

7. No Right to Exclude Examples of how water rights are non-exclusive: • Others may use the water upstream, so long as it is returned to the stream. • Others may use the water downstream, when you are done with it. • Others may use the water whenever you are not using it. (Imagine applying this rule to a house!) • Another may take the water away entirely if he provides a substitute supply. (Imagine again.) • You may lose the right if you don’t use it, or if you waste it. (Imagine again.)

8. Conclusion: Because a water right does not include a right to exclude, the “physical taking” rule, which is based on the right to exclude, should not be applied to water rights. (I.e., Casitas and Tulare Lakes were wrongly decided.) Does this mean that a court should never hold that a water right has been taken? No. But it means that a takings determination should be based on a complete analysis of the circumstances (i.e., the Penn Central test) rather than a per se rule (the “physical taking” test).

9. Observations: Although the Court of Federal Claims (Tulare Lakes) and the Federal Circuit (Casitas) have applied the “physical taking” rule to regulatory restrictions on water rights, the U.S. Supreme Court has never done so. The Casitas court cited three Supreme Court cases as purportedly applying “physical taking” analysis to restrictions on water rights. These cases were decided decades before Loretto (1982) and subsequent cases drew a sharp line between “physical” and “regulatory” takings. Moreover . . .

10. International Paper Co. v. United States (1931) Did the Supreme Court apply “physical takings” analysis? • The court never referred to a “physical taking.” • The court found a taking because the United States itself invoked the power of eminent domain by “requisitioning” water. • “The Government purported to be using its power of eminent domain to acquire rights that did not belong to it.” 282 U.S. at 407 • The government “relied upon and exercised its power of eminent domain to that end; . . . purporting to act under that power and no other.” 282 U.S. at 408

11. United States v. Gerlach Live Stock Co. (1950) Did the Supreme Court apply “physical takings” analysis? • The court never referred to a “physical taking.” • The court found a taking because the United States itself explicitly invoked the power of eminent domain. “[W]hether required to do so or not, Congress elected to recognize any state-created rights and to take them under its power of eminent domain.” 339 U.S. at 739

12. Dugan v. Rank (1963) This case did not involve any regulatory restriction on water use or diversion. Rather, the government itself built a dam that dried up a stream in which the plaintiff had water rights. “Physical taking” indeed! Not applicable to ESA cases.

13. Finally , a Caution about Casitas . . . “[T]he government admissions make clear that the United States did not just require that water be left in the river, but instead physically caused Casitas to divert water away from the Robles-Casitas Canal and towards the fish ladder. Where the government plays an active role and physically appropriates property, the per se taking analysis applies.” 543 F.3d at 1295. The Casitas court placed great emphasis on this distinction, repeating it 5 times throughout the opinion. This reasoning would not apply in a case where the government just requires that water be left in a stream.

14. CWAG 2010 WATER LAW CONFERENCE The Broadmoor Colorado Springs, Colorado April 29 – 30, 2010