The New Realities of ESA Restrictions On SWP and CVP Water Supplies ACWA Spring Conference

1. The New Realities of ESA Restrictions On SWP and CVP Water SuppliesACWA Spring Conference Greg Wilkinson Best Best & Krieger LLP May 11, 2011

2. Premises • The ongoing litigation involving the fishery resources of the Sacramento-San Joaquin Delta will have a major impact on future water supplies available to 2/3 of California’s population and the majority of its irrigated farmland. • The outcome of the ongoing litigation will be an important factor affecting California’s emergence from the current recession. • The ongoing litigation involving the Delta will likely change the way the federal Endangered Species Act is administered and implemented in the future.

3. The Sacramento-San Joaquin Delta • The Delta is part of the largest estuarine system on the west coast of the United States. • It is also the “Hub” of the two principal water supply projects in California – The CVP and SWP – in the sense that it serves as the transfer point for water stored in reservoirs north of the Delta for agricultural and urban water users within the Projects’ service areas.

4. The Delta Nexus • The Delta also provides habitat to a variety of aquatic species; several of which have suffered recent declines in abundance that are believed to be substantial: • Delta smelt • Longfin smelt • Winter-run salmon • Spring-run salmon • Central Valley steelhead

5. The Delta Nexus (continued) • All of these species are listed under either the federal ESA, the state ESA, or both. • There appear to be a variety of causes for the relatively recent decline in species abundance: • Toxic run-off from Delta agriculture • Ammonia discharges from Delta POTWs • Predatory non-native species • 2,200+ unscreened in-Delta agricultural diversions • Reductions in Delta in-flow from a variety of consumptive uses including the City and County of San Francisco’s Hetch-Hetchy Project, EBMUD, Modesto I.D., Turlock I.D. and many others.

6. The Delta Nexus (continued) • But, the SWP (and CVP) entrain all of the listed species and have proven to be relatively easy to regulate, and the regulators – state and federal – have a lengthy history of doing so.

7. Judicial/Regulatory Actions Affecting the SWP (and CVP) Post 2006 • The current state limitations on SWP/CVP Delta operations are set forth in D-1641, adopted by the SWRCB in 2000. • D-1641 judicially reviewed and largely affirmed by the Court of Appeal in 2006 (State Water Resources Control Board Cases, 136 Cal.App.4th 674, (so-called “Robie” decision)) • In terms of water rights aspects of SWP operations, D-1641 forms a kind of “baseline” against which subsequent regulatory and judicial actions can be measured.

8. Regulation of the SWP / CVP • And, there has been a lot of regulatory and judicial activity since the “Robie” decision came down in early 2006.

9. Judicial / Regulatory Actions Affecting the SWP (and CVP) post-2006 • Since the Robie decision, litigation and regulatory actions relating to the SWP and CVP have come in a series of waves. • The first wave consisted of cases brought by environmental organizations and commercial fishermen challenging biological opinions issued regarding SWP / CVP operations: • Natural Resources Defense Council, et al. v. Kempthorne, Case No. 1:05-CV-01207 OWW (E.D. Cal). • Pacific Coast Federation of Fisherman’s Associations, et al. v. Gutierrez, Case No. 1:06-CV-00245 OWW (E.D. Cal)

10. Effect of Regulatory / Judicial Actions • These cases resulted in an overturning of biological opinions issued by the USFWS for the Delta smelt and by the NMFS for the salmon and steelhead. • Two trials on “Interim Remedies” (operational limitations while new biological opinions developed) were subsequently conducted by Judge Oliver Wanger. • The smelt interim remedy trial resulted in substantial additional limitations being imposed on the SWP and CVP. (“Wanger Interim Remedies”) • The salmon interim remedy trial resulted in no additional limitations being imposed on the SWP or CVP.

11. Effect of Regulatory / Judicial Actions (continued) • The Wanger Delta smelt limitations were in effect for about one year and had the effect of reducing SWP deliveries through June 2008 by about 500,000 acre feet.

12. Effect of Regulatory / Judicial Actions (continued) • The second wave of actions has come in the form of new biological opinions issued by the USFWS on December 15, 2008 regarding the Delta smelt and NMFS on June 4, 2009 for the salmon, steelhead, green sturgeon and killer whales.

13. Effect of Regulatory / Judicial Actions (continued) • Unlike the prior opinions, both of these opinions are “jeopardy” opinions and include so-called “reasonable and prudent alternatives” (RPAs). • The RPAs add to the Wanger Interim Remedies and include measures (fall X-2; extended DCC closures; SJR inflow/project export ratios) never seen before. • The effect of the two new biological opinions on the SWP and CVP water deliveries is described in the following table:

14. SWP & CVP WATER DELIVERY REDUCTIONS SINCE 2007(Compared to Operations Under D1641)

15. Effect of Regulatory / Judicial Actions (continued) • To put these numbers in perspective, 1 acre foot is enough water to some 5 to 7 people for a year. • Thus, the impact of the two BiOps since their adoption has been to redirect the water from 2,200,000 to 7,400,000 people eachyear to Delta outflows for fishery purposes. • These numbers have led to the third wave of actions regarding the Delta since 2006.

16. Recent Judicial Actions • Since release of the new Delta smelt Biological Opinion on December 15, 2008, six actions were filed by water user groups, including the State Water Contractors and Metropolitan Water District and are now pending in the federal district court in Fresno. • In addition, seven cases were filed challenging the June 4, 2009 biological opinion issued by NMFS.

17. Recent Judicial Actions(continued) • All of the cases in this latest wave challenge the two new biological opinions on the ground that the regulatory agencies failed to use the “best available scientific data” in violation of Section 7(a)(2) of the ESA. For example: • The plaintiffs argue that the FWS erroneously used raw salvage numbers in evaluating the impacts of the projects on delta smelt. • Raw salvage says nothing about population level impacts and should have been normalized through the use of a cumulative salvage index and a life cycle model of population abundance.

18. Recent Judicial Actions(continued) • Plaintiffs also allege that NMFS erred by imposing a 4:1 ratio on San Joaquin River flows and exports in the spring months. • While some scientific studies have found a relationship between entrainment of juvenile salmon and San Joaquin flows, no science exists that says exports and entrainment are related. • Further, plaintiffs challenge NMFS “calendar based” imposition of OMR flow limits on January 1 again because they are based on an evaluation of raw salvage and because they are applied regardless of whether juvenile salmon are being entrained – or are even migrating.

19. Recent Judicial Actions(continued) • In addition to the “best science” arguments, the BiOps are also being contested on grounds that are not typical of ESA challenges. • The cases contend the adoption and implementation of the biological opinions are “major federal actions” within the meaning of NEPA, that will adversely affect the human environment, and the massive shift of water away from human consumptive user should have been analyzed in an EIS.

20. Recent Judicial Actions(continued) • Further, because both BiOps reach “jeopardy” conclusions about the continued operations of the CVP/SWP, they include “Reasonable and Prudent Alternatives” (RPAs) that effectively re-operate the Projects to meet the needs of fish, with humans receiving the leftovers. • The ESA also requires, though, that for an RPA to be valid, it must be: • economically and technologically feasible; • consistent with the intended purpose of the Project; and • It must be within the scope of the action agency’s jurisdiction to implement. 16 U.S.C. §7150 CFR §402.02

21. Recent Judicial Actions(continued) • The FWS BiOp pays no attention to these factors and the record shows no attempt to evaluate them while the BiOp was being developed. • The NMFS Salmon BiOp shows a half-hearted attempt to look at some of the factors, but the plaintiffs consider it to be inadequate.

22. Recent Judicial Opinions • The federal court has now issued major opinions dealing with preliminary injunction and summary judgment motions brought by plaintiffs to lift the limitations restricting SWP / CVP pumping. • The Court’s most recent opinion (12/14/10) grants summary judgment overturning the smelt BiOp and remanding the opinion to the FWS. In its opinions, in addition to granting a preliminary injunction and summary judgment, the court broadly agrees with many of the “best science” claims brought by plaintiffs:

23. Recent Judicial Opinions (continued) • In issuing a Preliminary Injunction in the Salmon cases, the Court finds NMFS’ failure to normalize raw salvage numbers in developing export limitations to be a “fundamental and inexplicable error.” • In the Salmon cases, the Court also finds that restrictions on SWP Delta pumping (including the 4:1 SJR inflow / export limitation) were “not based on the best available scientific data.”

24. Recent Judicial Actions • In the smelt cases, the Court indicates the FWS’ failure to normalize salvage data for population abundance – despite repeated warnings by DWR, the SWC and FWS’ own peer reviews to do so – “raises the spectre of bad faith.” • And, in granting summary judgment against the delta smelt BiOp, the Court concludes that the FWS used “sloppy science” and developed “uni-directional prescriptions.” • It also concludes that the FWS’ decision to use raw salvage numbers is “arbitrary, capricious, and represents a failure to utilize the best available science in light of universal recognition that salvage data must be normalized.”

25. Recent Judicial Actions(continued) • In the same summary judgment decision, the Court determines that FWS’ conclusion that the projects have negatively influenced the availability of Fall habitat (X2) is “fundamentally flawed.” • This conclusion is important because the BiOp’s Fall X2 measure is very water consumptive (about 1 MAF each time it is triggered).

26. Recent Judicial Actions(continued) • Importantly, the Court has also heavily criticizes the FWS for failing to fairly and honestly evaluate the humanimpacts of its decisions. • In its preliminary rulings, the Court found it be “inequitable to put the entire burden of [other] stressors on the water supply. • The Court also found that the cases presented matters of “first impression” involving the “intersection of harm to threatened species and humans and their environment.”

27. Recent Judicial Actions(continued) • Then, in its December 2010 Decision granting summary judgment against the FWS, the Court says the following: • “The RPA actions manifestly interdict the water supply for domestic human consumption and agricultural use for over 20 million people who depend on the Projects for their water supply. “Trust us” is not acceptable. The FWS has shown no inclination to fully and honestly address water supply needs beyond the species, despite the fact that its own regulation requires such consideration.How the appropriation of water for the RPA actions, to the exclusion implementing less harmful alternatives is required for species ‘survival’ is not explained. The appropriate remedy for such failure to explain is remand to the agency.”

28. Recent Judicial Actions(continued) • Notably, the Court has also sided with the plaintiffs in ruling that the Bureau of Reclamation’s agreement to implement the BiOps is “major federal action” that triggers NEPA. • By failing to undertake any NEPA compliance prior to its decision to implement the BiOps, Reclamation violated the statute. Consolidated Delta Smelt Cases, 2009 U.S. District Lexis 105951; see also Consolidated Salmon Cases, 2010 U.S. District Lexis 9897 *18.

29. Recent Judicial Actions(continued) • In short, while the Plaintiffs did not prevail on all of their claims, the Court has made it abundantly clear that, with water in California as scarce as it now is, the days are long past when any federal agency – regulatory or not – can use bogus science to support its action • It has also left no doubt that the days are over when a federal regulatory agency can take a water-related action without regard to the human consequences.

30. Remaining Judicial Proceedings • Cross-motions for summary judgment regarding the salmonid BiOp were argued on December 16 and 17, 2010 and are awaiting decision. • The federal defendants are very unhappy with the judgment in the smelt cases and are seeking to amend it. • The environmental defendants/intervenors have already filed an appeal of the smelt cases with the Ninth Circuit.