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San Luis v. United States of

March 2, 2012


Appeal from the United States District Court for the Eastern District of California Oliver W. Wanger, United States District Judge, Presiding D.C. No. CV 97-06140-

The opinion of the court was delivered by: Wu, District Judge:



Argued and Submitted March 15, 2011-Davis, California

Before: William A. Fletcher and Milan D. Smith, Jr., Circuit Judges, and George H. Wu, District Judge.*fn1

Opinion by Judge Wu; Partial Concurrence and Partial Dissent by Judge M. Smith


"One of the most contentious issues in the western United States is the management of water resources." Westlands Water Dist. v. U.S. Dep't of Interior, 337 F.3d 1092, 1100 (9th Cir. 2003) ("Westlands Water Dist. I").

This appeal arises from a long-running conflict which has devolved to the present remaining dispute as to the classification of approximately 9,000 acre feet ("AF") of water released between June 17 through 24 of 2004 from the Nimbus and New Melones reservoirs ("latter June 2004 releases") within California's Central Valley Project (the "CVP" or "Project") by Defendant-Appellee United States Department of the Interior ("Interior"), acting through the United States Bureau of Reclamation (the "Bureau") (collectively, "Federal Defendants" or "Federal Appellees"). Plaintiff-Appellants San Luis & Delta-Mendota Water Authority ("San Luis") and West-lands Water District ("Westlands") (collectively, "Water Agencies" or "Appellants") contend that Interior abused its discretion in failing to apply the latter June 2004 releases against the 800,000 AF of CVP yield especially designated for fish, wildlife, and habitat restoration under section 3406(b)(2) of the Central Valley Project Improvement Act ("CVPIA"), Pub. L. No. 102-575, 106 Stat. 4600, 4715-16 (1992) ("section (b)(2)" or "(b)(2)").

We have jurisdiction pursuant to 28 U.S.C. § 1291. Because we find that the Water Agencies have standing and the accounting which Interior conducted for the latter June 2004 releases did not constitute an abuse of discretion, we AFFIRM the district court's orders granting summary judgment in favor of the Federal Appellees and against Appellants.*fn2


A. The Central Valley Project

The CVP is the nation's largest federal water management project. Central Delta Water Agency v. Bureau of Reclamation, 452 F.3d 1021, 1023 (9th Cir. 2006) ("Central Delta II"); Orff v. United States, 358 F.3d 1137, 1141 (9th Cir. 2004). The Central Valley of California extends 450 miles south beginning at the Sacramento Valley, which contains the Sacramento River and its tributaries, and is 100 miles wide on average. Dugan v. Rank, 372 U.S. 609, 612 (1963). The Sacramento River runs southward from the Valley's northern edge, through the City of Sacramento, and then onward to the San Francisco Bay and into the Pacific Ocean. Id. The southern portion of the Central Valley includes the San Joaquin River, which runs from the Sierra Nevada northeast of Fresno, west to Mendota, and then northwest to join the Sacramento River at the Sacramento-San Joaquin Delta. Id. The San Francisco Bay/Sacramento-San Joaquin River Delta Estuary ("Bay-Delta") lies at the convergence of the Sacramento, San Joaquin, and other rivers, and forms the centerpiece of a massive and fragile ecosystem.

One of the initial goals of the CVP was to provide for the transportation of "surplus" waters within the Sacramento Valley to the San Joaquin River and to permit "the waters of the latter river to be diverted to new areas for irrigation and other needs."*fn3 Id. "To accomplish the project's purposes, CVP's construction includes a series of many dams, reservoirs, hydropower generating stations, canals, electrical transmission lines, and other infrastructure." Westlands Water Dist. I, 337 F.3d at 1095-96 (citing United States v. Gerlach Live Stock Co., 339 U.S. 725, 733 (1950)). The 22 reservoirs within the CVP have a total capacity of approximately 11 million AF, of which 7 million AF is released in an average year. SeeCALIFORNIA DEPARTMENT OF WATER RESOURCES, CALIFORNIA STATE WATER PROJECT AND THE CENTRAL VALLEY PROJECT, ("CDWR Website") (last visited January 30, 2012). "The CVP supplies two hundred water districts, providing water for about thirty million people, irrigating California's most productive agricultural region and generating electricity at nine power-plants." Westlands Water Dist. v. U.S. Dep't of Interior, 376 F.3d 853, 861 (9th Cir. 2004).

The CVP is operated by the Bureau. Westlands Water Dist. I, 337 F.3d at 1096. The Bureau's control of the CVP water is subject to a plethora of federal statutes and regulations governing many areas including, but not limited to: (1) the release of the CVP yield (see, e.g., section 3406 of the CVPIA), (2) water quality (see, e.g., the Clean Water Act, 33 U.S.C. § 1321), and (3) the impact of the releases on the environment and wildlife (see, e.g., San Luis & Delta-Mendota Water Auth. v. Salazar, 638 F.3d 1163, 1171 (9th Cir. 2011) ("The 'no-jeopardy' provision in [the Endangered Species Act, 16 U.S.C. § 1536(a)(2)] requires an agency to ensure that any action it takes 'is not likely to jeopardize the continued existence of any endangered or threatened species.' [footnote omitted.]"). Additionally, the Bureau has entered into over 250 long-term contracts for the delivery of CVP water to various agricultural, industrial, and commercial entities in addition to municipal water agencies. See State Water Res. Control Bd. Cases, 136 Cal. App. 4th 674, 692 (2006).

Also within the Central Valley is the California State Water Project ("SWP"), which includes storage facilities/reservoirs (holding 5.8 million AF of water and annually delivering an average of 3 million AF), hydroelectric power plants, and about 700 miles of open canals and pipelines. See CDWR Website. The SWP is the largest state-built water project in the country and is managed by the California Department of Water Resources ("CDWR"). Pac. Coast Fed'n of Fisher-men's Ass'ns v. Gutierrez, 606 F. Supp. 2d 1122, 1128 (E.D. Cal. 2008). The CVP and SWP share certain facilities and, for over thirty years, have operated in an increasingly coordinated manner pursuant to various agreements between the Bureau and the CDWR.*fn4 Id.; see also Natural Res. Def. Council v. Kempthorne, 506 F. Supp. 2d 322, 330 (E.D. Cal. 2007).

As described in State Water Res. Control Bd., 182 Cal. App. 3d at 97:

The [Sacramento-San Joaquin] Delta serves as a conduit for the transfer of water by the statewide water projects. Both the CVP and the SWP divert water from the rivers that flow into the Delta and store the water in reservoirs. Quantities of this stored water are periodically released into the Delta. Pumps situated at the southern edge of the Delta eventually lift the water into canals for transport south to the farmers of the Central Valley and the municipalities of Southern California. Water which is neither stored nor exported south passes through the Delta where it is used by local farmers, industries and municipalities. The excess flows out into the San Francisco Bay.

The construction and operation of the CVP, along with other stressors, has had a devastating effect upon California's native fish populations, including, in particular, its native salmon. See In re Bay-Delta Programmatic Envtl. Impact Report Coordinated Proceedings, 43 Cal. 4th at 1156. Anadromous fish, such as salmon, are particularly sensitive to changes in flow patterns, salinity, temperature and other conditions in and upstream of the Bay-Delta estuary. See generally Pac. Coast Fed'n of Fishermen's Ass'ns, 606 F. Supp. 2d at 1218-23. Most of California's salmon face serious risk of extinction.*fn5 Id. at 1250-53.


The CVPIA, enacted by Congress in 1992, amended the CVP's authorizing legislation and elevated "mitigation, protection, and restoration of fish and wildlife" to Project purposes on par with irrigation. See CVPIA § 3406(a)(1)-(2), 106 Stat. at 4714; see also O'Neill v. United States, 50 F.3d 677, 686 (9th Cir. 1995) ("CVPIA marks a shift in reclamation law modifying the priority of water uses."). The overall purposes of the CVPIA are:

(a) to protect, restore, and enhance fish, wildlife, and associated habitats in the Central Valley and Trinity River basins of California;

(b) to address impacts of the Central Valley Project on fish, wildlife and associated habitats;

(c) to improve the operational flexibility of the Central Valley Project;

(d) to increase water-related benefits provided by the Central Valley Project to the State of California through expanded use of voluntary water transfers and improved water conservation;

(e) to contribute to the State of California's interim and long-term efforts to protect the San Francisco Bay/Sacramento-San Joaquin Delta Estuary;

(f) to achieve a reasonable balance among competing demands for use of Central Valley Project water, including the requirements of fish and wild-life, agricultural, municipal and industrial and power contractors.

CVPIA § 3402, 106 Stat. at 4706; Central Delta II, 452 F.3d at 1023-24.

Section 3406 of the CVPIA deals with "fish, wildlife and habitat restoration." 106 Stat. at 4714. Section 3406(b) states that the Secretary of the Interior ("Secretary") "shall operate the Central Valley Project to meet all obligations under State and Federal law, including but not limited to the Federal Endangered Species Act, 16 U.S.C. § 1531, et seq., and all decisions of the California State Water Resources Control Board establishing conditions on applicable licenses and permits for the project." Id.

The Secretary is further charged in section 3406(b)(1) with developing and implementing, within three years of the CVPIA's enactment, "a program which makes all reasonable efforts to ensure that, by the year 2002, natural production of anadromous fish in Central Valley rivers and streams will be sustainable, on a long-term basis, at levels not less than twice the average levels attained during the period of 1967-1991 . . . ."*fn6 Id. Section 3403(a) defines "anadromous fish" as "those stocks of salmon (including steelhead), striped bass, sturgeon, and American shad that ascend the Sacramento and San Joaquin rivers and their tributaries and the Sacramento-San Joaquin Delta to reproduce after maturing in San Francisco Bay or the Pacific Ocean."*fn7 Id. at 4707.

Section 3406(b)(1)(B) of the CVPIA states that:

As needed to achieve the goals of this [anadromous fish doubling] program, the Secretary is authorized and directed to modify Central Valley Project operations to provide flows of suitable quality, quantity, and timing to protect all life stages of anadromous fish, except that such flows shall be provided [1] from the quantity of water dedicated to fish, wildlife, and habitat restoration purposes under paragraph (2) of this subsection [§ 3406(b)(2)]; [2] from the water supplies acquired pursuant to paragraph (3) of this subsection [§ 3406(b)(3)]; and [3] from other sources which do not conflict with fulfillment of the Secretary's remaining contractual obligations to provide Central Valley Project water for other authorized purposes.

Id. at 4715. Section 3406(b)(2) provides in part that the Secretary shall: upon enactment of this title[,] dedicate and manage annually eight hundred thousand acre-feet of Central Valley Project yield for [1] the primary purpose of implementing the fish, wildlife, and habitat restoration purposes and measures authorized by this title;

[2] to assist the State of California in its efforts to protect the waters of the San Francisco Bay/Sacramento-San Joaquin Delta Estuary; and [3] to help meet such obligations as may be legally imposed upon the Central Valley Project under State or Federal law following the date of enactment of this title, including but not limited to additional obligations under the Federal Endangered Species Act.

Id. at 4715-16;*fn8 see also Central Delta I, 306 F.3d at 945; Central Delta II, 452 F.3d at 1024. Section 3406(b)(3) directs the Secretary to develop and implement a program "for the acquisition of a water supply to supplement the quantity of water dedicated to fish and wildlife purposes under [§ 3406(b)(2)]" which utilizes "the following options: improvements in or modifications of the operations of the project; water banking; conservation; [water] transfers; conjunctive use; and temporary and permanent land fallowing, including purchase, lease, and option of water, water rights, and associated agricultural land." 106 Stat. at 4716.

C. Outflow Requirements and Objectives

To understand the present dispute, some familiarity is required as to the "outflow" provisions for certain portions of the CVP waterways enacted in part pursuant to the Clean Water Act. As observed in PUD No. 1 of Jefferson Cnty. v. Wash. Dep't of Ecology, 511 U.S. 700, 704 (1994):

[T]he complex statutory and regulatory scheme that governs our Nation's waters [commonly known as the Clean Water Act, 33 U.S.C. §§ 1251 et seq.] . . . implicates both federal and state administrative responsibilities. . . . . . . Section 303 of the Act . . . requires each State, subject to federal approval, to institute comprehensive water quality standards establishing water quality goals for all intrastate waters. §§ 1311(b)(1)(C), 1313. . . .

A state water quality standard "shall consist of the designated uses of the navigable waters involved and the water quality criteria for such waters based upon such uses." 33 U.S.C. § 1313 (c)(2)(A).

In 1978, the California State Water Resources Control Board ("SWRCB") adopted the "Water Quality Control Plan for the Sacramento-San Joaquin Delta and Suisun Marsh" (the "1978 Plan") that established new water quality standards for salinity control and for fish and wildlife protection in the Delta, which took into account the combined massive effects of the CVP and SWP.*fn9 See State Water Res. Control Bd., 182 Cal. App. 3d at 97-98. As part of that plan, the SWRCB modified the appropriation permits held by the Bureau and the CDWR to require the CVP and the SWP to release more water into the Delta (via flows) and to curtail their exports of water from the Delta (by means of pumping or diversions) as necessary to maintain the water quality standards under the plan. Id. at 119. In 1986, certain of those water quality standards were deemed invalid by a California Court of Appeal, inter alia, because the SWRCB: (1) improperly considered the protection of purportedly vested water rights in its formulation of the standards, and (2) failed to include in its analysis all sources of water quality degradation such as upstream diverters and polluters. Id. at 117-18. In December 1994, "[i]n order to provide ecosystem protection for the Bay-Delta Estuary," various representatives from California state and federal agencies (including the Secretary of the Interior, the Administrator of the Environment Protection Agency, and the Secretary of the California Resources Agency) plus certain interested parties (such as Plaintiff-Appellee Bay Institute of San Francisco, Appellant San Luis, and the Environmental Defense Fund) entered into a compact entitled "Principles for Agreement on Bay-Delta Standards between the State of California and the Federal Government" ("Bay-Delta Accord"), available at SFBayDeltaAgreement.pdf (last visited January 30, 2012). Bay-Delta Accord at 1, 4-5. That agreement contained detailed interim measures for environmental protection and water quality standards for the Bay-Delta.*fn10 See In Re Bay- One of the major purposes of the projects was containment of maximum salinity intrusion into the Delta. By storing waters during periods of heavy flow and releasing water during times of low flow, the freshwater barrier could be maintained at a constant level.

The primary purpose underlying the 1978 Plan "was salinity control in order to protect consumptive uses (agricultural, industrial and municipal) of the Delta waters." Id. at 115.

Delta Programmatic Envtl. Impact Report Coordinated Proceedings, 43 Cal. 4th at 1156. Included therein were water outflow provisions, a new salinity standard, and a spring "pulse flow" requirement on the San Joaquin River at Vernalis.*fn11

See Central Valley Water Agency v. United States, 327 F. Supp. 2d 1180, 1194 (E.D. Cal. 2004). The Bay-Delta Accord also contained language that "[a]ll CVP water provided pursuant to these Principles shall be credited toward the CVP obligation under Section 3406(b)(2) of the Central Valley Project Improvement Act to provide 800,000 acre feet of project yield for specified purposes." Bay-Delta Accord at 3.

In May 1995, the SWRCB adopted the "Water Quality Control Plan for the San Francisco Bay/Sacramento-San Joaquin Delta Estuary, 95-1 WR" ("1995 WQCP"), available at bay_delta/ wq_control_plans/1995wqcp/docs/1995wqcpb.pdf (last visited January 30, 2012). The 1995 WQCP covered certain measures included in the Bay-Delta Accord and provided for the Delta outflow and Vernalis flow objectives that are involved in this case. The 1995 WQCP also identified seventeen "beneficial uses" of CVP/SWP water.*fn12 Those utilizations were, in turn, placed into three general categories: (1) "municipal and industrial beneficial uses," (2) "agricultural beneficial uses" and (3) "fish and wildlife beneficial uses" and water quality objectives were then established for each category. See 1995 WQCP at 14-15. Certain water quality criteria/objectives overlap two or more of the designated categories. For example, prevention of salinity intrusion is an element as to all three categories. 1995 WQCP at 14.

Water quality objectives for fish and wildlife beneficial uses are set out in Table 3 of the 1995 WQCP. Those requirements cover: (1) "Delta outflow objectives . . . included for the protection of estuarine habitat for anadromous fishes and other estuarine-dependent species"; (2) "Sacramento and San Joaquin river flow objectives . . . included to provide attraction and transport flows and suitable habitat for various life stages of aquatic organisms, including Delta smelt and chinook salmon"; and (3) "[o]bjectives for export limits . . . included to protect the habitat of estuarine-dependent species by reducing the entrainment of various life stages by the major export pumps in the southern Delta."*fn13 1995 WQCP at

(Text continued on page 2289)

In the 1995 [WQCP], the [SWRCB] explained that "Delta outflow objectives are included for the protection of estuarine habitat for anadromous fishes and other estuarine-dependent species." The parameter for those objectives was the net Delta outflow index (outflow index). The outflow index was a number representing the net amount of water flowing out of the Delta, which was to be calculated by taking the amount of water flowing into the Delta and subtracting from that figure the amount of water being consumed in the Delta and the amount of water being exported from the Delta. For example, every year in September, the [1995 WQCP] required a minimum monthly average outflow index of 3,000 cubic feet per second (cfs) of water to be flowing out of the Delta to protect estuarine habitat within the Delta. ([1995 WQCP], pp. 15, 19, 25.)

15. The water quality objectives delineated in Table 3 are established "for the reasonable protection" of the enumerated beneficial uses 11 through 17 which cover uses of water that support: (1) warm or cold "water ecosystems including, but not limited to, preservation or enhancement of aquatic habitats, vegetation, fish or wildlife, including invertebrates"; (2) habitats necessary for reproduction, early development, migration and/or other temporary activities of aquatic organisms including, but not limited to, anadromous fish; and (3) estuarine ecosystems for fish, shellfish, invertebrates, amphibians, reptiles, mammals, and waterfowl, including habitats for rare, threatened or endangered plant or animal species. 1995 WQCP at 12-13, 15. Additionally, the water quality objectives in Table 3 also provide protection for certain beneficial uses that do not involve fish, wildlife, and habitat restoration such as "[u]ses of water for shipping, travel, or other transportation by private, military, or commercial vessels." Id.

As to Delta outflow and designated river flows, the 1995 WQCP observed that:

Unlike water quality objectives for parameters such as dissolved oxygen, temperature, and toxic chemicals, which have threshold levels beyond which adverse impacts to the beneficial uses occur, there are no defined threshold conditions that can be used to set objectives for flows and project operations. Instead, the available information indicates that a continuum of protection exists. Higher flows and

The [1995 WQCP] also included a narrative objective for the protection of salmon, which provided: "Water quality conditions shall be maintained, together with [other] measures in the watershed, sufficient to achieve a doubling of natural production of chinook salmon from the average production of 1967-1991, consistent with the provisions of State and federal law." ([1995 WQCP], p. 18, table 3.) lower exports provide greater protection for the bulk of estuarine resources up to the limit of unimpaired conditions. Therefore, these objectives must be set based on a subjective determination of the reasonable needs of all of the consumptive and non-consumptive demands on the waters of the Estuary.

1995 WQCP at 14-15. The 1995 WQCP also contained the following concession regarding salmon protection and the CVPIA's anadromous fish doubling goal: "It is uncertain whether implementation of the numeric objectives in this plan alone will result in achieving the narrative objective for salmon protection." 1995 WQCP at 28.

In response to petitions from the CDWR and the Bureau "to change points of diversion of the Central Valley Project (CVP) and the State Water Project (SWP) in the southern Delta" and "to change the use and purpose of use of the CVP," the SWRCB in March 2000 issued the "Revised Water Right Decision 1641." See In the Matter of: Implementation of Water Quality Objectives for the San Francisco Bay/Sacramento -- San Joaquin Delta Estuary, available at http://www.waterrights. ("D-1641"). As explained therein:

Currently, the authorized places of use in the [Bureau's] water right permits do not all cover the same area. Because the [Bureau] commingles its water from several large reservoirs and diversion works, and because separate permits for these facilities have different requirements, the [Bureau] finds it impractical and infeasible to ensure that water appropriated under a specific permit is delivered only to lands within the place of use specified in the permit. Accordingly, the [Bureau's] practice is to deliver water from any source to any location within its service area without ensuring that water appropri- ated under a specific permit is delivered only to places specified in the permit . . . . To the extent that the [Bureau] delivers water to places outside a permitted place of use, however, it is operating inconsistently with the terms and conditions of the permit.

D-1641 at 119. The SWRCB approved the consolidation of CVP permit places of use to remedy the Bureau's prior potentially "inconsistent" practice. D-1641 at 119-21.

Additionally, the D-1641 approved, for a period of twelve years, conducting the Vernalis Adaptive Management Plan ("VAMP"), an experimental program to determine the relative impact of changes in flow and export limitations in the San Joaquin River on chinook salmon. See D-1641 at 2, 17. The VAMP provides for certain target flows at the Vernalis gage on the San Joaquin River during a 31-day period in April-May and a concomitant potential reduction in SWP and CVP water exports depending upon the amount of available water due to hydrological conditions. Id. at 19-20.

A number of challenges were raised to the D-1641. In 2006, on appeal of consolidated cases challenging its adoption, a California Court of Appeal held, inter alia, that in adopting portions of the D-1641 the SWRCB erred because it "was not entitled to implement alternate flow objectives agreed to by various interested parties in lieu of the flow objectives actually provided for in the [1995 WQCP] . . . . [and it] failed to adequately implement certain salinity objectives in the [1995 WQCP] and failed to implement the minimum flows necessary to achieve the narrative objective for salmon protection in the [1995 WQCP]." State Water Res. Control Bd. Cases, 136 Cal. App. 4th at 690. One of the specific holdings was that "by failing to implement all of the Vernalis flow objectives while the San Joaquin River Agreement is in effect, the [SWRCB] 'fail[ed] to establish the minimum flows necessary to achieve the salmon-doubling standard.' " Id. at 777.

D. Previous Challenges in This Litigation to Interior's Implementation of CVPIA § 3406(b)(2)

Water allocations under the CVPIA have generated approximately 13 years of protracted litigation in this case, addressing four sequential administrative decisions regarding the implementation of section 3406(b)(2). The case began as a challenge by San Luis to Interior's "Administrative Proposal on Management of Section 3406(b)(2) Water" ("Administrative Proposal"), issued in November 1997, and was later consolidated with a separate challenge brought by various environmental interests, including Plaintiff-Appellees the Bay Institute of San Francisco and others ("Environmental Parties"). The district court issued an April 9, 1999 order granting a partial judgment finding that the Administrative Proposal was deficient. After remand to the agency, Interior released its October 5, 1999 "Decision on Implementation of Section 3406(b)(2) of the Central Valley Project Improvement Act" ("1999 Decision"), setting forth the manner in which it would calculate CVP yield in accordance with the CVPIA and how it would account for (and manage) the use of the 800,000 AF of dedicated yield.

On November 16, 1999, San Luis filed a First Amended Complaint challenging the 1999 Decision. A Second Amended Complaint adding Plaintiff-Appellant Westlands (and updating the challenge to the 1999 Decision) was filed on April 5, 2001. Therein, the Appellants argued that the Federal Defendants were required to credit against the 800,000 AF allocation of CVP yield all water used to satisfy any requirements under either the 1995 WQCP or the Endangered Species Act ("ESA"), 16 U.S.C. §§ 1531 et seq. The district court agreed, writing in its October 19, 2001 Memorandum Decision that "if it were left to Interior's 'discretion' whether or not to count CVP yield used for such (b)(2) purposes, the annual 800 TAF [thousand acre feet] cap would be illusory." See San Luis & Delta-Mendota Water Auth. v. U.S. Dep't of Interior, 236 F.R.D. 491, 494 (E.D. Cal. 2006). In particular, the district court held that "[a]s a matter of law, [the statutory] language is not ambiguous - water used to meet WQCP or post-CVPIA ESA requirements is an additional (b)(2) purpose and must be charged against the 800 TAF (b)(2) mandate if so used." Id. The district court's March 20, 2002 partial judgment certified the (b)(2) accounting issues for appeal pursuant to Fed. R. Civ. P. 54(b). Both the Water Agencies and the Environmental Parties appealed.

During the pendency of that appeal, Interior issued a "final agency action" entitled "Decision on Implementation of Section 3406(b)(2) of the Central Valley Project Improvement Act - May 9, 2003" ("May 2003 Decision") which set out "the calculation of CVP yield . . . , the method of accounting for use of (b)(2) water, and procedures for management and accountability for the dedicated (b)(2) water." The May 2003 Decision incorporated the parts of the district court's ruling regarding the mandatory treatment of water uses under the 1995 WQCP and/or post-CVPIA ESA requirements as chargeable against the dedicated (b)(2) yield.*fn14

On June 3, 2003, we issued a memorandum opinion in Bay Institute of San Francisco v. United States, 66 Fed. Appx. 734 (9th Cir. 2003), affirming in part and reversing in part the district court's March 2002 partial judgment. In particular, we overruled the district court's decision regarding Interior's lack of discretion in accounting for water used for any (b)(2) purpose (such as for 1995 WQCP or post-CVPIA ESA requirements) against the 800,000 AF of Project yield.*fn15

On December 17, 2003, the Bureau's Regional Director and the United States Fish and Wildlife Service's ("USFWS") California/Nevada Operations Manager issued a joint memorandum on "Guidance for Implementation of Section 3406(b)(2) of the CVPIA" ("2003 Guidance Memo") which was intended to "supplement[ ] the May 9, 2003 Decision, in light of the June 3, 2003 Ninth Circuit Ruling." The Guidance Memo noted that:

The May 9, 2003 Decision specifically provides for a target of up to 200,000 acre-feet of use in the October through January period, primarily for high priority fish and wildlife uses. Moreover, actions taken pursuant to the 1995 Water Quality Control Plan and State Water Resources Control Board Decision D-1641 ("the 1995 WQCP") involve the dedication and management of Central Valley Project yield for long-term fishery beneficial use and protection. Such actions are not taken to help meet agricultural or municipal and industrial water quality standards that are set forth in the 1995 WQCP. Most of the fishery beneficial uses and objectives under the 1995 WQCP and in Reclamation's water rights permits help fulfill the fish, wildlife, and habitat restoration purposes and measures authorized by Section 3406(b). Consistent with the June 3, 2003 Ninth Circuit decision, much of the (b)(2) water that is dedicated and managed annually to help meet fishery beneficial use and protection objectives of the 1995 WQCP serves Section 3406(b)(2)'s "primary purpose" of fish, wildlife, and habitat restoration.

Also, under the 2003 Guidance Memo, the agencies agreed to start each year "with targets of up to 300,000 acre feet of (b)(2) water annually for high priority fish and wildlife actions" and "up to 500,000 acre-feet of (b)(2) water annually to help meet WQCP and ESA obligations." However, the agencies recognized that "[t]his guidance does not establish caps but assures that priority actions are carefully weighed against the standards in the WQCP designed for fish and wild-life benefits." Further, the 2003 Guidance Memo provided that "if the projected and/or realized WQCP/ESA costs for the accounting year exceed the 500,000 acre-feet of (b)(2) water, the [USFWS] and [the Bureau] will confer to determine the best course of action."

On January 23, 2004, we issued an amended decision in Bay Institute of San Francisco v. United States, 87 Fed. Appx. 637 (9th Cir. 2004) ("Bay Institute").*fn16 On the issue of Interior's discretion not to charge CVP yield used for secondary (b)(2) purposes against the 800,000 AF account, we stated:

The district court erred in concluding that Interior lacks discretion to refrain from crediting the amount of Project yield actually used for any (b)(2) purpose against the designated 800,000 acre feet of Project yield. To hold otherwise would defeat the primary purpose for which the 800,000 acre feet were designated - fish, wildlife, and habitat restoration. Section 3406(b)(2) provides that the "primary purpose" to which the 800,000 acre feet should be dedicated is the implementation of "fish, wildlife, and habitat restoration purposes authorized by this title . . . [sic]" Section 3406(b)(2) also provides that the 800,000 acre feet may be used to "help" meet obligations under the Endangered Species Act and to "assist" in meeting water quality standards. If Interior were required to deduct some or all the water it uses for water quality and Endangered Species Act purposes from the (b)(2) dedication, the water needed for implementation of the Improvement Act's restoration mandate could be relegated to a secondary role, or perhaps no role at all. Such a scenario would directly conflict with the Interior's mandate to give effect to the hierarchy of purposes established in Section 3406(b)(2).

Id. at 639-40. Interior reviewed and considered our amended decision when undertaking subsequent (b)(2) actions, but made no changes to its 2003 Guidance Memo or other policy documents. See SL&DM Water Auth. I, 637 F. Supp. 2d at 783.

E. The 2004 (b)(2) Accounting

Interior set the CVP (b)(2) accounting year to run from October 1 through September 30 because that time frame is consistent with the life cycle of most salmon and steelhead that spawn in the Central Valley rivers. See May 2003 Decision at 4. Typically, the fall and early winter are spawning periods for those anadromous fish whose eggs hatch in approximately two months. Id. After hatching, the salmonid fry spend their early life stages in nearby rearing habitats. During April through June, ...

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