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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ ) KLAMATH IRRIGATION DISTRICT et al., ) ) Plaintiffs, ) v. ) ) UNITED STATES OF AMERICA, ) No. 01-591 L ) ) Hon. Francis M. Allegra Defendant, ) ) PACIFIC COAST FEDERATION OF ) FISHERMEN'S ASSOCIATIONS, ) ) Defendant-Intervenor. )

PLAINTIFFS' OPPOSITION TO DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AS TO PLAINTIFFS' CONTRACT CLAIMS

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TABLE OF CONTENTS

TABLE OF AUTHORITIES .............................................................................................. ii INTRODUCTION ...............................................................................................................1 FACTUAL BACKGROUND..............................................................................................5 PROCEDURAL BACKGROUND....................................................................................16 STANDARD OF REVIEW ...............................................................................................17 ARGUMENT.....................................................................................................................18 I. RECLAMATION'S VOLUNTARY REFUSAL TO SUPPLY WATER TO PLAINTIFFS IN 2001 WAS NOT A SOVEREIGN ACT......................................18 A. The Endangered Species Act Did Not Require Reclamation to Refuse to Deliver Water to Plaintiffs in 2001.....................................................................................19 B. Reclamation's Voluntary Decision to Withhold Water From Plaintiffs Was Not Supported by Sound Biological Science................................................................22 C. Compliance With the ESA Does Not Require or Authorize Reallocation of Stored Water to Instream Use ................................................................................23 D. Reclamation's Failure to Prepare For a Critically Dry Water Year, Including a Long-Term Operations Plan Created the 2001 Klamath Water Crisis ...............26 II. SINCE THE ENDANGERED SPECIES ACT DID NOT MAKE DEFENDANT'S PERFORMANCE IMPOSSIBLE, THE SOVEREIGN ACTS DOCTRINE HAS NO APPLICABILITY TO THE FACTS OF THIS CASE ...........................................29 A. The Sovereign Acts Doctrine Shields the United States from Liability Only Where Passage of a Statute (or Other Sovereign Act) Makes Performance of the Government's Contract Illegal or Impossible..................................................30 B. Defendant Fails to Demonstrate that the United States Did Not Assume the Risk of Subsequent Impossibility Under the Water Supply Contracts ............31 C. The Government's Actions Under the Endangered Species Act were Specifically Targeted at Plaintiffs' Contracts ........................................................37

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III. THE UNMISTAKABILITY DOCTRINE HAS NO APPLICATION TO THIS CLAIM FOR DAMAGES, WHICH DOES NOT IMPLICATE THE SOVEREIGN INTERESTS OF THE UNITED STATES ............................................................38 CONCLUSION..................................................................................................................42

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TABLE OF AUTHORITIES

Federal Statues Reclamation Act of 1902, 32 Stat. 388, 390 ......................................................................11 Act of Feb. 9, 1905, 33 Stat 714 ..........................................................................................5 Klamath River Basin Compact, art. XIII (B) (1), Pub. Law 85-222, 71 Stat. 497 (Aug. 30, 1957) ..................................................................................................................17 16 U.S.C. § 1536................................................................................................................24 16 U.S.C. § 1535................................................................................................................24 16 U.S.C. § 1534................................................................................................................22 16 U.S.C. § 1533................................................................................................................24 Oregon Statues Or. Gen. Laws, 1905, Ch. 228, § 2, p. 401 ..........................................................................6 Or. Gen. Laws, 1905, Ch. 5, § 1, p. 63 ................................................................................6 Or. Rev. Stat. 537.400........................................................................................................26 Federal Regulations 50 C.F.R. § 402.03 .............................................................................................................21 50 C.F.R. § 402.02 .......................................................................................................22, 25 Cases Amino Bros. Co. v. United States, 372 F.2d 485 ...............................................................42 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) ......................................................18 Arizona Cattle Growers' Ass'n v. Bureau of Land Management, 273 F.3d 1229 (9th Cir. 2001)......................................................................................................................3 Bennett v. Spear, 520 U.S. 154 (1997) ....................................................................3, 20, 27 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) ..................................................................18 Centex Corp. v. United States, 395 F.3d 1283 (Fed. Cir. 2005) .................................30, 39 Cookinham v. Lewis, 58 Or. 484, 114 P. 88 (1911) ..........................................................26

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Crown Operations Int'l v. Solutia Inc., 289 F.3d 1367 (Fed. Cir. 2002)...........................18 Day v. United States, 245 U.S. 159 (1917) .......................................................................41 Environmental Protection Information Center v. Simpson Timber Co., 255 F.3d 1073, 1080-1081 (9th Cir. 2001) ........................................................................22 Fifth Third Bank of W. Ohio v. United States, 402 F.3d 1221 (Fed. Cir. 2005) ................19 Franconia Assoc. v. United States, 61 Fed. Cl. 718 (2004).........................................30, 34 Freedman v. United States, 320 F.2d 359 (Ct. Cl. 1963) ..................................................40 Haehn Mgmt. Co. v. United States, 15 Cl. Ct. 50 (1988) ..................................................32
Hol-Gar Mfg. Corp. v. United States, 351 F.2d 972 (Ct. Cl. 1965)............................... 18

Horowitz v. United States, 267 U.S. 458 (1925)....................................................32, 33, 40 Hunt Constr. Group, Inc. v. United States, 281 F.3d 1369 (Fed. Cir. 2002).....................32 Jones v. United States, 1 Ct. Cl. 383 (1865) ......................................................................31 Kandra v. United States, 145 F.Supp.2d 1192 (D.Or. 2001).............................................29 Klamath v. United States, 69 Fed. Cl. 160 (2005) .........................................................3, 22 Klamath Irrigation District et al., v. United States, No. 01-591 L, Order, Dec. 20, 2005 (Doc. 257) ......................................................................................................................................2 Landgraf v. USI Film Products, 511 U.S. 244 (1994).......................................................21 Lynch v. United States, 292 U.S. 571 (1934)...............................................................31, 43 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986).........................18 Metric Constructors, Inc. v. Nat'l Aeronautics & Space Admin., 169 F.3d 747 (Fed. Cir. 1999)..................................................................................................................18 Mobil Oil Exploration & Producing Southeast, Inc. v. United States, 530 U.S. 604 (2000)....................................................................................................19, 38 Natural Resources Defense Council v. Houston, 146 F.3d 1118 (9th Cir. 1998)..............20 O'Neill v. United States, 231 Ct. Cl. 823 (1982) ...............................................................31

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Pacific Coast Federation of Fishermen's Ass'n v. United States Bureau of Reclamation, 138 F.Supp.2d 1228 (N.D. Cal. 2001) ..............................................................................28 Perry v. United States, 294 U.S. 330 (1935) .....................................................................42 Rio Grande Silvery Minnow v. Keys, 333 F.3d 1109 (10th Cir. 2003)..............................21 Scott Timber Co. v. United States, 40 Fed. Cl. 492 (1998) ...............................................38 Sierra Club v. Babbitt, 65 F.3d 1502 (9th Cir. 1995) .................................................20, 22 St. Louis v. United Railways Co., 210 U.S. 266 (1908).....................................................42 Temple-Inland, Inc. v. United States, Fed. Cl. 550 (259 F 004 .........................................36 Town of Port Deposit v. United States, 21 Cl. Ct. 204 (1990)...........................................32 Transatlantic Financing Corp. v. United States, 363 F.2d 312 (D.C. Cir. 1966)..............35 United States v. Winstar, 518 U.S. 839 (1996 ........................................................... passim Walcek v. United States, 44 Fed. Cl. 462 (1999) ...............................................................18 Winstar Corp. v. United States, 64 F.3d 1531 (Fed. Cir. 1995) ..................................31, 40 Yankee Atomic Elec. Co. v. United States, 112 F.3d 1569 (Fed. Cir. 1997)......................19 Secondary Authority Restatement (Second) of Contracts § 346, Comment a (1981) .........................................42 Scientific Evaluation of Biological Opinions on Endangered and Threatened Fishes in the Klamath River Basin at xvi (2002) ..............................................................................12, 23

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In their third cause of action Plaintiffs seek damages for Defendant's breach of their repayment contracts in 2001, which together cover almost the entire Klamath Project (other than those areas that receive water from the Lost River only).1 The essential quid pro quo of Plaintiffs' contracts was that the Plaintiffs would reimburse the United States for the construction costs associated with the Klamath Reclamation Project, the project water delivery facilities, and the cost of maintaining the Klamath Project facilities, in exchange for a specifically bargained for quantity of water from the Klamath Project to be used by the farmers for irrigating their land.2 Solem Decl. ¶ 4. In 2001, Defendant did not deliver this water to Plaintiffs. Defendant asserts in its motion for summary judgment, however, that even if Plaintiffs can show that in 2001 Defendant deliberately repudiated the specifically negotiated, unambiguous, express contractual commitments for which Defendant has received valuable consideration, Defendant is nonetheless shielded from liability under the sovereign acts and unmistakability doctrines. Not only do Plaintiffs disagree with Defendant's legal arguments in its motion for summary judgment, Plaintiffs also submit that the material facts on which Defendant relies for its motion are in dispute, thus making summary judgment inappropriate. INTRODUCTION On December 20, 2005, this Court entered an order requiring that "defendant shall file a motion for summary judgment concerning the application herein of the sovereign acts and/or unmistakability doctrines." Order, Dec. 20, 2005 (Doc. 257). In compliance with this order, on

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Plaintiffs are thirteen water, drainage, or irrigation districts, Van Brimmer Ditch Company, and thirteen individual water users who are third-party beneficiaries of the contracts between the water districts and the United States.

The Klamath Irrigation District and the Tule Irrigation District's water contracts specify beneficial use as the measure of the quantity of water. Other water districts, including Malin and Shasta View, measure quantities of water in acre-feet. -1-

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February 17, 2006, Defendant filed a motion seeking summary judgment in its favor on Plaintiffs' contract claims with respect to the sovereign acts and unmistakability doctrines.3 Defendant's motion elaborately describes the Endangered Species Act and its general implementation. The brief marches through pages of detail about the ESA, noting, for example, that there are 527 species listed under the ESA, including the species listed in the Klamath Basin; that Section 9 prohibits the unauthorized take of any of these species; how under Section 7 federal agencies initiate formal or informal consultations with either the Fish and Wildlife Service or the National Marine Fisheries Service; how these regulations prescribe the manner in which these consultations shall proceed; when and how consultations are required by the statute and regulations; and how Reclamation must balance its contractual duties to plaintiffs with all of its other responsibilities to the tribes, federal wildlife refuges, and to endangered species. Long on generalities and short on specifics, Defendant's motion never reaches the critical point of analyzing, as this Court ordered, "whether Plaintiffs' contract claims are legally cognizable in the face of the sovereign acts or unmistakability doctrines, that is, whether, under those doctrines, the actions taken pursuant to the Endangered Species Act (ESA) here did not give rise to breaches." Klamath v. United States, 69 Fed. Cl. 160, 163 (2005). In particular, Defendant

never describes what contractual duties it contends that it owed to Plaintiffs, how the Endangered Species Act made performance of these contractual duties impossible, nor how the thirteen contracts at issue in this case allocated the risk of such a sovereign act to either Plaintiffs or to Defendant--all essential elements of a successful sovereign acts defense. See United States v. Winstar, 518 U.S. 839, 904 (1996).

The question of whether Plaintiffs had a contractual right to receive deliveries of Klamath Project water under the circumstances of 2001 is not addressed in Defendant's brief. -2-

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Had Defendant attempted this showing, it is a certainty that this effort would have spotlighted substantial issues of fact not resolvable in a summary judgment motion. For example, as Defendant admits, the Bureau of Reclamation was not obligated to follow the recommendations put forward by FWS and NMFS in their 2001 biological opinions: "[a]fter issuance of the biological opinion, the action agency [here, the Bureau] must determine `whether and in what manner to proceed with the action in light of its section 7 obligations and the [regulatory agency's] biological opinion.'" Def.'s Memo in Support at 11 (quoting Bennett v. Spear, 520 U.S. 154, 168 (1997)). The case law confirms that the ESA does not obligate Reclamation to follow the recommendations made in a biological opinion. See Bennett, 520 U.S. at 154; Arizona Cattle Growers' Ass'n v. Bureau of Land Management, 273 F.3d 1229, 1239 (9th Cir. 2001). Reclamation itself helped cause the disastrous water year of 2001 by failing, for many years prior to 2001, to institute measures to guard against the shut-off of irrigation water in critically dry years. See Solem Decl. ¶ 6. Nor did Reclamation possess any legal right to use the water stored in Upper Klamath Lake, appropriated by the United States for irrigation purposes only, for the wholly unauthorized purpose of species protection. As subsequent peer-reviewed science commissioned by the government itself has demonstrated, the lake level and flow measures recommended by FWS and NMFS in 2001, and implemented by Reclamation, were of no benefit to the fish--and thus not required by the Endangered Species Act. See National Academies of Science, Board on Environmental Studies and Toxicology, Endangered and Threatened Fishes in the Klamath River Basin: Causes of Decline and Strategies for Recovery (2004), at 34-35 ("NRC Report"), available at http://newton.nap.edu/books/0309090970/html/. Moreover, even had Defendant demonstrated that performance were impossible, that would not satisfy Defendant's burden in this motion. For a party (including the government)

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which seeks discharge of its contractual obligation must also demonstrate that the contract itself allocated responsibility for the event to the non-breaching party. Defendant here has not even attempted to do so in its motion, nor could it do so in light of the language of the contracts and the substantial body of historical events surrounding these contracts. Finally, in cases where protection of a species under the Endangered Species Act has in fact made contract performance impossible, precedent holds that it is the biological opinion and other actions taken pursuant to the ESA and not the statute itself which must be examined in the sovereign acts analysis. Applying this precedent to this case, it becomes clear that the listing of the fish is targeted at Plaintiffs' contracts, depriving the sovereign acts doctrine of any ability to shield Defendant from liability in this case. In addition, Defendant does not even attempt to analyze which party bore the contractual risk of the events of 2001.4 That the Endangered Species Act is comprehensive does not ipso facto relieve the United States of liability for a breach of contract. Finally, the government's actions under the biological opinions were specifically targeted at Plaintiffs' contracts. The motion Defendant filed, thus, falls far short of the demonstration required to grant summary judgment, particularly at this early stage in discovery and the development of factual evidence on how and why Reclamation refused to deliver water to Plaintiffs in 2001. Although Plaintiffs would like nothing better than to promptly resolve this litigation, they respectfully urge that summary judgment simply cannot be granted at this time, and that the case instead be set on a schedule to prepare it for trial on the merits.

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Because Defendant has not broached the contract interpretation issue in its motion, it would be inappropriate for Plaintiffs to launch a comprehensive analysis of their thirteen contracts here. In any case, interpretation of these contracts, bound up as it is with nearly a century of historic performance, will raise so many issues of material fact that resolution on summary judgment will be impossible. -4-

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FACTUAL BACKGROUND The Klamath Project, one of the first projects constructed under the Reclamation Act, was authorized in 1905 and, in accordance with its authorization, is limited to the irrigation and reclamation purpose of the 1902 Act. Act of Feb. 9, 1905, 33 Stat. 714 ("[T]he Secretary of the Interior is hereby authorized in carrying out any irrigation project that may be undertaken by him under the terms and conditions of the national reclamation Act and which may involve changing the levels of Lower or Little Klamath Lake . . . .") After the passage of the federal authorization for the Klamath Project, the States of Oregon and California ceded land to the United States for irrigation purposes. The Oregon statute provided that an appropriate Federal official could file with the State "a written notice that the United States intends to utilize certain specified waters . . . unappropriated at the time of the filing." Or. Gen. Laws, 1905, Ch. 228, § 2, p. 401. On May 17, 1905, the Bureau filed a notice indicating that "the United States intends to utilize . . . [a]ll of the waters of the Klamath Basin in Oregon, constituting the entire drainage basins of the Klamath river and Lost river, and all of the lakes, streams and rivers supplying water thereto or receiving water therefrom" for purposes of the "operation of works for the utilization of water . . . under the provisions of the . . . Reclamation Act." Klamath v. United States, 67 Fed. Cl. 504, 510 (2005). A second act passed by Oregon in 1905 provided that "for the purpose of aiding in the operations of irrigation and reclamation ... the United States is hereby authorized to lower the water level of" various Klamath Basin lakes. Or. Gen. Laws, 1905, ch. 5, § 1, p. 63. The Klamath Compact, enacted as Act of August 30, 1957, 71 Stat. 497, provides that There are hereby recognized vested rights to the use of waters originating in the Upper Klamath River Basin validly established and subsisting as of the effective date of this compact under the laws of the state in which the use or diversion is made, including rights to the use of waters for domestic and irrigation uses within the Klamath Project. There are also hereby recognized rights to the use of all

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waters reasonably required for domestic and irrigation uses which may hereafter be made within the Klamath Project. Act of August 30, 1957, 71 Stat. 497. These waters are stored in Upper Klamath Lake, using facilities paid for by the Klamath Project water users, who also manage and operate at their own expense the canals, pumps, and ditches through which the water is distributed. See generally Ganong Decl. Thirteen agricultural landowners and fourteen water, drainage or irrigation districts in the Klamath River Basin area of Oregon and northern California, each with a contract to receive, directly or indirectly, water from irrigation works constructed or operated by Reclamation, are Plaintiffs in this lawsuit. Although the contracts contain different provisions, each of the thirteen contracts, which were entered into between 1918 and 1956, have certain characteristics in common, as required by the Reclamation Act. Id. These include the duty of the plaintiff-districts to repay to the United States the entire cost of the Reclamation project, and the duty of the United States to supply water to Plaintiffs. Id.5 Two species of suckerfish, and coho salmon, live in the Klamath River Basin. Endemic freshwater fishes that live in the basin include the shortnose sucker (Chasmistes brevirostris) and the Lost River sucker (Deltistes luxatus). These species were listed as endangered under the Endangered Species Act in 1988. See 53 Fed. Reg. 27130-27133 (1988). Also, the genetically distinctive Southern Oregon/Northern California Coast (SONCC) coho salmon (Oncorhynchus kisutch), an evolutionary significant unit (ESU) of the coho salmon, lives in the basin. The coho salmon was listed as threatened under the ESA in 1997. See 70 Fed.Reg. 37,160, 37,193 (June 28, 2005).

The determination of Plaintiffs' contractual rights would require an examination of these contracts. However, these questions are beyond the scope of the present motion. -6-

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Factors thought to have contributed to the decline of the suckerfish include: degradation of spawning habitat, deterioration in the quality of water in Upper Klamath Lake, overexploitation by commercial and noncommercial fishing (now regulated), introduction of competitive or predaceous exotic species, blockage of migration routes, and entrainment of fish of all ages in water-management structures. National Academies of Science, Board on Environmental Studies and Toxicology, Scientific Evaluation of Biological Opinions on Endangered and Threatened Fishes in the Klamath River Basin: 2002 Interim Report, at 1 ("2002 Report"), available at http://newton.nap.edu/books/0309083249/html/. Factors thought to have contributed to the decline of the coho salmon include: earlier overexploitation by fishing as well as continuing degradation of tributary habitat and reduced access to spawning areas, and may also include changes in hydrologic regime, substantial warming of the main stem and tributaries, and continuing introduction of large numbers of hatchery-reared coho, which are derived only partly from native stock. Id. at 2. During 2001, a severe drought occurred in the Klamath River Basin. Id. at 3. In February 2001, Reclamation issued a proposed one-year operations plan for 2001 and a biological assessment with respect to the operation of the Klamath Project, proposing to deliver water to Klamath Project irrigators and wildlife refuges, in accordance with historical practice. See Bureau of Reclamation Biological Assessment at 6-10 (Feb. 13, 2001), attached to Def's Supp. App. at Ex. 69. Reclamation, however, directed irrigation water users not to take water until the FWS and NMFS had completed their biological opinions. Solem Decl. ¶ 7. In April 2001, the United States Fish and Wildlife Service (FWS) issued a biological opinion relating to the suckerfish (FWS BO). That BO: [S]tates that the endangered suckers would be in jeopardy under USBR'S proposed Klamath Project operations. The USFWS proposed a reasonable

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and prudent alternative (RPA) for operation of the Klamath Project. The RPA requires screening of water-management structures to prevent entrainment of suckers, adequate dam passage facilities, habitat restoration, adaptive management of water quality, interagency coordination in the development plans for operating the Klamath Project during dry years, further studies of the sucker populations, and a schedule of lake levels higher than those recommended by the USBR in its assessment. Def's Supp. App. at Ex. 70. Also in April 2001, NMFS, which assumes responsibility for the coho because it is anadromous, issued a BO relating to the coho (NMFS BO). That BO: Indicat[es] that the operation of the Klamath Project as proposed by the USBR assessment of January 2001 would leave the coho population in jeopardy. The NMFS formulated an RPA incorporating reduced rates of change in flow (ramping rates) below main-stem dams to prevent stranding of coho, interagency coordination intended to optimize use of water for multiple purposes, and minimum flows in the Klamath River main stem higher than those proposed by USBR. Id. at Ex. 71. Thus, each agency found that the proposed action of water delivery was likely to jeopardize the continued existence of the species. The RPAs recommended that Reclamation both provide greater flows of water for the Klamath River (in order to benefit Coho salmon) and maintain higher elevations in the Upper Klamath Lake (in order to protect the Lost River and Shortnose suckers). Tragically, both of these recommendations had no scientific bases, and Reclamation's adherence to them may actually have injured the fish: Water level in Upper Klamath Lake shows no relationship to water quality conditions that result in mass mortality of adult suckers or other potentially adverse water-quality conditions. In addition, water level shows no relationship to year-class strength or to abundance of fry or juveniles over the years during which standardized sampling is available. Thus, maintenance of water levels above recent historical levels in order to increase the abundance of suckers by maximizing the area of habitat where young suckers are found is not supported by the currently available evidence. Water levels lower than recent historical levels could have undocumented adverse effects and therefore are inadvisable. 2004 NRC Report at 248.

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Reclamation had many alternatives available to it that could have potentially improved water delivery, better protected the fish, and certainly avoided disastrous water years such as 2001. Among the measures which could have been taken by Reclamation prior to 2001 to avoid the complete shutdown of Klamath Project water deliveries are the following: · Institution of the Klamath Project Pilot Water Bank , which Reclamation started in 2002, including the leasing of the Barnes Ranch for water storage. This program compensates landowners for land idling and groundwater substitution and makes up to 100,000 acre feet of water available for irrigation uses. See Solem Decl. Attachment 1 (Bureau of Reclamation, 2006 Klamath Basin Pilot Water Bank Instructions). Institution of the Conservation Implementation Program (CIP), which was begun in 2002. This program is designed to implement recovery of the fish species, and is a main reasonable and prudent alternative of the current biological opinions. The concept of the CIP is to avoid jeopardy opinions by instituting a fish recovery planning program. See Solem Decl. Attachment 2 (Letter from D. Sabo to D. Solem, dated Oct. 22, 2002, regarding Klamath Basin Conservation Implementation Program). Preparation of a coho recovery plan. Incredibly, NOAA Fisheries has never prepared one, although it is required by the Endangered Species Act and, in fact, a bill has just been introduced to require its preparation. See Solem Decl. Attachment 3 (House Resolution regarding Klamath River salmon). Construction of the A-Canal fish screens to protect sucker fish from being entrained into irrigation canals. The government in fact constructed the fish screens in winter 20022003, just after the 2001 water disaster. Construction of the Link River Dam Fish passage, which was completed in winter 2005. The purpose of this facility is to enable suckers to migrate upstream to spawn. Development of the Klamath Lake Incremental Adjustment Methodology (IAM), which allows flexibility in meeting monthly levels of Upper Klamath Lake. This methodology is approved by the Fish and Wildlife Service. Commencement of Section 7 Consultations for the Rogue River Project, operated by Reclamation, did not commence until 2003. The Rogue operations impact the Klamath Project by diverting water out of the Klamath Basin. Moreover, there are many other federal projects within the Klamath basin (e.g., the Klamath Marsh Wildlife Refuge), which affect the flows of the Klamath River, and yet have never been the subject of ESA consultation. The result is that the Klamath Project bears the entire burden of mitigating for all of these other projects, which operate the same without consideration of endangered species.

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Institution of the NRCS program in 2002 for farmers, see Solem Decl. Attachment 4 (Conservation in the Klamath Basin: Partnership Accomplishments, December 2003), and Reclamation programs to provide pipe and water measuring equipment to Project districts to save water. Institution of a new review of flow studies by the National Academy of Sciences (see Solem Decl. Attachment 5, (National Academy of Sciences, Proposal 05-DELS-204-01: Further Studies on the Klamath Basin)), not to mention the Academy's 2002 report (see National Academies of Science, Board on Environmental Studies and Toxicology, Scientific Evaluation of Biological Opinions on Endangered and Threatened Fishes in the Klamath River Basin: 2002 Interim Report, at 1 ("2002 Report"), available at http://newton.nap.edu/books/0309083249/html/ examining whether the operational regime required by the 2001 biological opinions made any scientific sense, or helped the fish. Preparation of a long-term operations plan incorporating conservation, water bank, well drilling, and other measures which could have ameliorated the water shortage in 2001. The need for such a plan was expressed as early as 1992, yet Reclamation did not complete it until 2002.

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Solem Decl. ¶ 6. The choice of any or all of these alternatives could have made more water available to Plaintiffs in 2001: preparation of a long-term operations plan incorporating conservation, water bank, well drilling, and other measures which would have ameliorated the water shortage in 2001. Instead, Reclamation chose to deliver no water to plaintiffs in 2001. Reclamation adopted these RPAs and on April 6, 2001, announced that there would be no water delivered to plaintiffs from Upper Klamath Lake. As a result of the significant public outcry from Reclamation's refusal to deliver the Klamath Basin water users their irrigation water, in late July 2001, Interior Secretary Norton came out to the headgates and ordered the release of approximately 70,000 acre feet of water. Needless to say, the release of this small amount of water after the growing season was over was of no benefit to the water users. Solem Decl. ¶ 8. Throughout the 2001 irrigation season, Upper Klamath Lake contained large quantities of water that should have been released to Klamath Project water users. However, Reclamation

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maintained the Upper Klamath Lake level between 4,143.3 and 4,139.5 feet above sea level. Further, Reclamation released flows down the Klamath River as required by the NMFS biological opinion much larger than the historical practice. Had Reclamation managed Upper Klamath Lake levels and downstream flows according to historic practices, Klamath Project water users would have received sufficient water to grow their crops. Solem Decl. ¶ 9. The severe economic consequences of this change in water management led DOI to request that the National Research Council (NRC) independently review the scientific and technical validity of the government's biological opinions and their RPAs. More specifically: The cessation of water deliveries through the Klamath Project during 2001 as required by the jeopardy opinions on coho salmon and the two endangered sucker species of the Klamath River basin motivated the U.S. Department of the Interior and the U.S. Department of Commerce to seek an outside evaluation of the scientific basis of the requirements set by USFWS and NMFS for higher water levels in Upper Klamath Lake and higher main-stem flows in the Klamath River. These federal agencies therefore asked the NRC to create a committee to be charged with external, independent review of the biological opinions and assessments and of the long-term needs of the endangered and threatened fishes in the Klamath River basin. As a result of the request, the NRC formed the Committee on Endangered and Threatened Fishes in the Klamath River Basin. 2004 NRC Report at 33-34. The National Academy of Sciences appointed a committee to review the actions of Reclamation, FWS, and NMFS in the Klamath Basin. That committee produced an interim report in 2002 and a final report in 2004. The committee found in both its 2002 and 2004 reports that there was no link--neither a causal link nor even a correlation-- between increased water levels and increased survival of fish. 2002 NRC Report at 1. The interim, 2002 report focuses on the biological assessments of the USBR (2001) and the USFWS and NMFS biological opinions of 2001 regarding the effects of Klamath Project operations on the three listed fish species. Id. The committee conducted a preliminary assessment of the scientific information used by the agencies and other relevant scientific

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information, and considered the degree to which the biological opinions were supported by this information. Id. The report concluded: The committee found strong scientific support for all components of the reasonable and prudent alternatives given by USFWS in 2001 for the endangered suckers except for recommendations on maintenance of higher water levels in Upper Klamath Lake, for which the committee found no empirical support. At the same time, however, the committee found that USBR's recommendations, which could have caused mean water levels in Upper Klamath Lake to be lower than in the recent past, also were without scientific support. Thus, the committee's overall conclusion was that there was no substantial scientific evidence to support deviation from the water levels produced by operational principles that were in effect during the 1990s. Similarly, in reviewing the biological opinion of NMFS on the coho salmon, the committee concluded that all components of the reasonable and prudent alternative were supported scientifically except the one calling for higher flows in the Klamath River main stem. The committee found little scientific support for these recommendations in relation to coho salmon, nor did it find any scientific justification for the proposals of USBR, which would have allowed the river to be operated at lower mean flows than had been the case for specific categories of water availability applicable during the 1990s. The committee, in drawing conclusions for its interim report, was bound by its charge to evaluate and comment on the scientific strength of evidence underlying various proposals. Its charge kept it from weighing economic concerns or weighing the advisability of minimizing risk by using professional judgment in place of scientific evidence to support particular recommendations. As explained more fully in Chapter 9, agencies charged with ESA responsibilities can be expected to use professional judgment when no scientifically supportable basis is available for a decision, or where they judge the scientific support to be inadequate. Thus, the agencies may recommend practices for which the committee would find virtually no direct scientific support. The committee acknowledges the necessity of this practice in many situations where information is inadequate for development of scientifically rigorous decisions. 2004 NRC Report at 34-35. Committee's Report Regarding the FWS Biological Opinion Relating to Suckerfish The committee analyzed the FWS BO and the conditions relating to suckerfish. It found that suckerfish are present in Upper Klamath Lake on the north side of the Klamath River drainage, within Clear Lake, and in Gerber Reservoir on the Lost River to the southeast. 2002 NRC Report at 11. Small groups may also be present elsewhere in the Klamath River drainage

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and in Tule Lake sump. The committee found that the water quality of Upper Klamath Lake has changed substantially over the past several decades and that "[e]vidence indicates that changes in the water quality of Upper Klamath Lake have increased mass mortality among adult suckers." Id. at 12. The committee summarized the FWS BO, and its conclusions on the BO, as follows: The USFWS biological opinion states that the Klamath Project contributes directly to mortality and adverse environmental conditions for the endangered suckers. On this basis, USFWS presents a reasonable and prudent alternative (RPA) consisting, in summary, of requirements for minimum lake levels, interagency coordination and adaptive management, screening to prevent entrainment of fish, creation of improved passage facilities, steps toward improvement of habitat and water quality, and additional studies. The RPA is intended to avoid jeopardizing listed species either directly or through adverse modification of critical habitat (50 CFR 402.02). With the exception of the recommendation on lake-level maintenance, there is good scientific or technical support for all the requirements listed in the RPA. Id. at 13. The committee went on to discuss its analysis of the lake-level maintenance, explaining that "[c]ontrol of lake levels as a means of advancing the welfare of the endangered suckers raises more difficult scientific issues than the other requirements listed by the USFWS in its RPA." Id. at 16. Impairment of water quality, according to the committee, is a cause of mortality and stress for sucker populations. Id. But low water quality cannot be causally associated with low water quantity: Impairment of water quality, primarily through eutrophication of Upper Klamath Lake, is a cause of mortality and stress for sucker populations. As indicated above, the present scientific evidence for this association is credible. An essential premise of the lake-level recommendations is that the adverse water-quality conditions known to stress or kill the endangered suckers are associated with the lowest water levels within the recent historical range of levels (since 1990, when consistent documentation first began). Presumption of this connection, which is essential to the arguments for specific lake levels proposed in the RPA, is inconsistent with present information on Upper Klamath Lake. Id. at 16-17 (citation omitted).

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The committee also found that many factors may contribute to low water quality. First, population densities of algae may deteriorate water quality. Id. at 17. But, "[n]o relationship between lake levels and population densities of algae (as shown by chlorophyll) is evident, however, in the 9-year water-quality monitoring record that has been fully analyzed. Thus, the idea of relieving eutrophication through phosphorus dilution caused by higher lake levels is not consistent with the irregular relationship between chlorophyll and lake level." Id. Extremes of dissolved oxygen or pH also may contribute to low water quality. But again, [L]ake level fails to show any quantifiable association with extremes of dissolved oxygen or pH. For example, the most extreme pH conditions recorded for the lake over the past 10 years occurred in 1995 and 1996, which were years of intermediate water level, and not in 1992 and 1994, when water levels were lowest. (These two years had the lowest recorded water levels since 1950.) Furthermore, a substantial mass mortality occurred in 1971, the year of highest recorded water levels since 1950, and within the last ten years, mortality of adults was highest in 1995, 1996, and 1997, none of which were years of low water level. Id. (citations omitted). The committee went so far as to suggest that low water levels might actually help the fish, observing that "[t]he absence of notable adult mortality in any year of low water during the 1990s might in fact suggest an association the reverse of the one postulated in the biological opinion, although the evidence is statistically inconclusive." Id. And, it noted that FWS itself had never found a connection between mass mortality of suckerfish and lake levels. See id. The committee noted that higher water levels might have been justified if they indicated an increased survival rate in young suckerfish. But it found no such connection: Higher water levels could reduce the likelihood that spawning areas around the lake would be dewatered and could be favorable to fry or juveniles. Abundance of juvenile suckers has been monitored since 1991 on the basis of seining. This information, which must be used cautiously because it is not quantitative, indicates low abundances of juveniles in the drought years 1992 and 1994 but not in drought year 1991. Abundances also were low in nondrought years 1997 and 1998. Simon et al. have reported generally declining abundance during the non-drought interval 1995­1998. They have also

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shown that the abundance of age 1+ suckers consistently has been very low, suggesting a bottleneck at this life stage, but interpretation of the data is complicated by very low efficiency for catching fish older than one year. Overall, the study of young fish shows no clear pattern associated with lake level. Id. (citations omitted). Thus, the committee concluded that "the presumed causal connections between lake levels and recruitment of the sucker populations in Upper Klamath Lake do not have strong scientific support at present." Id. at 18. The committee suggested that suckerfish mortality could have several causes--among them water column stability interacting with sudden weather events. See id. at 19. But low water levels were not among them: "Despite a monitoring record of substantial length, there is no clear evidence of a connection between the lake levels and the welfare of the two sucker species in Upper Klamath Lake." Id. Committee Report Regarding the NMFS Biological Opinion Relating to Coho Salmon In its analysis of the NMFS BO, the committee observed that "[t]he reduction in stocks of native coho salmon in the Klamath River Basin has been caused by multiple interactive factors." Id. at 22. The committee described the NMFS BO as follows: The biological opinion issued by the NMFS for the Klamath Basin coho salmon states that the Klamath Project harms coho in the Klamath main stem. The NMFS presents an RPA with three components: (1) higher monthly minimum flows for the main stem of the Klamath River for April through November as a means of maximizing habitat space in the main stem and suppressing maximum water temperatures, (2) suppression of ramping rates below Iron Gate Dam, and (3) coordination involving other agencies. Id. at 23 (citation omitted). The committee observed that the NMFS RPA proposed flows were well above historical operating conditions, and that the proposed low-flow limits on the Klamath River "might not benefit the coho population significantly." Id. This was so because "[a]lthough the provision of additional flow seems intuitively to be a prudent measure for

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expanding habitat, the total habitat expansion that is possible with the limited water available in dry years is not demonstrably important to maintenance of the population." Id. Thus, factors other than dry-year low flows, in the opinion of the committee, limited the survival and maintenance of the coho. See id. Indeed, the committee concluded that higher flows between July and September might even disadvantage the coho population if the source for those flows were warmer than the water to which they were added. Id. at 23-24. The committee concluded: Progressive depletion of flows in the Klamath River main stem would at some point be detrimental to coho salmon through stranding or predation losses. Thus, incremental depletions beyond those reflected in the recent historical record could be accomplished only with increased risk to coho salmon. At the same time, the available information provides little support for benefits presumed to occur through the increase of flows beyond those of the past decade. While single-year or multiple-year averages of low-flow extremes beyond those presently reflected in the record cannot be supported, there also is presently little evidence of a scientific nature that increased low flows will improve the welfare of the coho salmon. Modeling of temperature and habitat might be useful, but convincing evidence of a relation between the welfare of the coho and environmental conditions must be drawn to some extent from direct observation. Id. at 25. PROCEDURAL BACKGROUND On October 11, 2001, Plaintiffs filed this lawsuit, seeking just compensation for the taking of their property rights in Klamath Project water under the Fifth Amendment, and for impairment of their vested rights to the use of water under the Klamath Compact. Klamath River Basin Compact, art. XIII(B)(1), Pub. Law 85-222, 71 Stat. 497 (Aug. 30, 1957). On March 24, 2003, Plaintiffs filed an amended complaint adding a breach of contract count. On August 31, 2005, this Court issued its decision on partial summary judgment, determining that Plaintiffs lack any constitutionally protected property right under the Fifth Amendment, and any vested right to the use of water as defined in the Klamath Compact. On

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December 20, 2005, the Court denied Plaintiffs' motion to certify that decision to the Federal Circuit Court of Appeals for review. Now pending for review by this Court is Defendant's motion for summary judgment on the question of whether the sovereign acts and unmistakability doctrines shield it from liability for the breach of Plaintiffs' water delivery contracts filed on February 17, 2006. STANDARD OF REVIEW Summary judgment is not appropriate where there are disputes over facts that might affect the outcome of the suit under governing law. RCFC 56 (c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Thus, summary judgment will not be granted if "the dispute about a material fact is `genuine.'" Id. A genuine issue of material fact exists when a rational trier-of-fact could only arrive at more than one reasonable conclusion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); see also Walcek v. United States, 44 Fed. Cl. 462, 465 (1999) ("[S]ummary judgment will not be granted if `the dispute about a material fact is genuine, that is, if the evidence is such that a reasonable [trier of fact] could return a verdict for the nonmoving party.'") (quoting Liberty Lobby, 477 U.S. at 248). "The moving party in a summary judgment motion has the burden to show `that there is an absence of evidence to support the non-moving party's case.'" Crown Operations Int'l v. Solutia Inc., 289 F.3d 1367, 1377 (Fed. Cir. 2002) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). The benefit of all reasonable presumptions and inferences runs to the party opposing summary judgment. Matsushita Elec. Indus., 475 U.S. at 587-88. The facts surrounding the creation and performance of a contract are relevant to its interpretation. "This court adheres to the principle that `the language of a contract must be given that meaning that would be derived from the contract by a reasonably intelligent person

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acquainted with the contemporaneous circumstances.'" Metric Constructors, Inc. v. Nat'l Aeronautics & Space Admin., 169 F.3d 747, 752 (Fed. Cir. 1999) (quoting Hol-Gar Mfg. Corp. v. United States, 351 F.2d 972, 975 (Ct. Cl. 1965)). Although "context alone does not create a presumption in favor of any particular outcome, context is relevant to the problem of contract interpretation." Fifth Third Bank of W. Ohio v. United States, 402 F.3d 1221, 1233 (Fed. Cir. 2005). The determination of whether the government is acting as a private contractor and not as a sovereign, in which case the sovereign acts doctrine would not be applicable is inherently factintense, and therefore must be determined by a "case-specific inquiry." Yankee Atomic Elec. Co. v. United States, 112 F.3d 1569, 1575 (Fed. Cir. 1997). Defendant bears the burden of showing that performance under the contracts was impossible because of the ESA. Mobil Oil Exploration & Producing Southeast, Inc. v. United States, 530 U.S. 604, 619 (2000). Because Defendant cannot meet its burdens of proof in this case, Defendant's motion for summary judgment should be denied. ARGUMENT I. RECLAMATION'S VOLUNTARY REFUSAL TO SUPPLY WATER TO PLAINTIFFS IN 2001 WAS NOT A SOVEREIGN ACT. Defendant's motion completely misses the mark, for it was not the Endangered Species Act of 1973 but the operational decision of Reclamation in 2001 which breached the contracts at issue in this case. Nothing in the Endangered Species Act prohibited Reclamation from delivering water to Plaintiffs in 2001, nor does the science even support Reclamation's stated rationale for withholding Plaintiffs' contractual water entitlement (protection of the fish). Moreover, it was Reclamation's own failure to develop a long-term plan for operating the Klamath Project which led to the 2001 water crisis--a tragedy which could have been avoided

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by Reclamation. As the United States told the Supreme Court in attempting to defeat Klamath farmers' standing to challenge a 1992 biological opinion, "If the petitioners have suffered injury," the Government contends, "the proximate cause of their harm is an (as yet unidentified) decision by the Bureau regarding the volume of water allocated to petitioners, not the biological opinion itself." Brief of Respondent at 22, Bennett v. Spear, 520 U.S. 154 (1997). This 2001 decision by the Bureau regarding the volume of water allocated to Plaintiffs is not a sovereign act but a breach of contract, for which the United States is liable. A. The Endangered Species Act Did Not Require Reclamation to Refuse to Deliver Water to Plaintiffs in 2001. Nothing in the Endangered Species Act obligated Reclamation to consult on whether or not to perform its existing contractual obligations to Plaintiffs. A government agency is not required to consult with respect to binding contracts it has already entered into before passage of the Endangered Species Act. Sierra Club v. Babbitt, 65 F.3d 1502, 1509 (9th Cir. 1995) ("[W]e conclude that where, as here, the federal agency lacks the discretion to influence the private action, consultation would be a meaningless exercise; the agency simply does not possess the ability to implement measures that inure to the benefit of the protected species."); see also 1995 Regional Solicitor's Opinion ("Reclamation has an obligation to deliver water to the project water users in accordance with the project water rights and the contracts between Reclamation and the water user (which may be through a water district) subject to the availability of water . . . . Reclamation is not free to disregard these rights, and its discretion to determine the necessary means to protect and fulfill each of these rights is limited.") To be sure, after the passage of the ESA, the execution or renewal of a contract such as those at issue here would require consultation under Section 7 of the ESA. See Natural Resources Defense Council v. Houston, 146 F.3d 1118, 1126 (9th Cir. 1998) (holding that

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Reclamation must consult on contract renewals where it retains discretion to take actions to protect endangered species from jeopardy). However, nothing in the ESA suggests an exception to the longstanding "presumption against retroactive legislation." Landgraf v. USI Film Products, 511 U.S. 244, 265 (1994). Absent an explicit directive that the ESA apply retroactively, a federal agency's duty under Section 7(a)(2) to ensure that its "actions" do not jeopardize an endangered species is limited to "actions" taken after the passage of the ESA. Put another way, the time to determine the effect of a contract on endangered species is before, and not after, entering into it.6 Moreover, because a reduction in contract deliveries below what is required to be delivered to contractors and use of that water for endangered species is not within Reclamation's discretion, it could not form the basis for any "reasonable and prudent alternatives" (RPAs), because "alternative actions" that can form the basis of RPAs must be actions in which there is

The government made this precise argument to the Tenth Circuit in Rio Grande Silvery Minnow v. Keys, 333 F.3d 1109 (10th Cir. 2003), stating: Under 50 C.F.R. § 402.03, "Section 7 and the requirements of this part apply to all actions in which there is discretionary Federal involvement or control." Once a federal agency has entered into a commitment to do a particular thing at a particular time, the physical execution of that commitment will not be regarded as a federal "action" for purposes of Section 7 unless Reclamation has retained discretion to alter its performance for the benefit of endangered species. Under that reasoning, Reclamation's delivery of water to commercial users pursuant to contract is not a federal "agency action" for Section 7 purposes because Reclamation had previously relinquished any discretion it might have had to use the water for endangered species. If the delivery of water to contractors is not a federal "agency action," it does not violate Section 7(a)(2)'s substantive requirement, even if the consequence is jeopardy to the species. Our argument thus is not that Reclamation's contractual commitments somehow override its obligation to comply with the ESA or excuse the agency's non-compliance. Rather, the argument is that the existence of a binding contract helps to define what Reclamation's ESA obligations are. Brief of Federal Appellants, 2002 WL 32879498 *25-26 (November 20, 2002). - 20 -

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discretionary Federal involvement or control. 50 C.F.R. § 402.03. RPAs are defined as "alternative actions identified during consultation" that are within the agency's authority, consistent with the purpose of the proposed action, and economically feasible. 50 C.F.R. § 402.02. The use of project water for endangered species is not an "alternative action" for Section 7 purposes because in signing the water delivery contracts, Reclamation relinquished any discretion it might have had to use for endangered species purposes the water that it is required to release from storage for contracting parties. Cf. Environmental Protection Information Center v. Simpson Timber Co., 255 F.3d 1073, 1080-1081 (9th Cir. 2001) (where FWS did not retain discretionary control in permit documents to enable it to impose new requirements to protect endangered species, FWS has no such power); Sierra Club, 65 F.3d at 1509 (where BLM did not retain discretion to affect timber company's action in right of way agreement, BLM could not take any action to protect spotted owl from effects of agreement). Finally, nothing in the Endangered Species Act obligated Reclamation in 2001 to convert Klamath Project water rights, which were authorized by the State and appropriated by the Secretary for reclamation purposes, to fish protection purposes instead. As this Court has noted, the Secretary obtained Klamath Project water rights "for purposes of the `operation of works for the utilization of water . . . under the provisions of the . . . Reclamation Act.'" Klamath, 67 Fed. Cl. at 510. As the United States itself described its water right in the Adjudication, "[t]he purposes for which water is used and claimed, as stated in the May 17, 1905 `Notice of Intention to Utilize all Waters of the Klamath Basin,' are those provided for by the . . . Reclamation Act, as amended and supplemented, including irrigation, reclamation, domestic and other authorized uses." Pls.' Ex. 29. To be sure, the Endangered Species Act authorizes the purchase of water for endangered species. 16 U.S.C. § 1534 (stating that "to conserve fish . . . which are listed as

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endangered or threatened species . . . the appropriate Secretary . . . is authorized to acquire . . . waters, or interest therein"). But nothing in the statute purports to override the limitations on use of water imposed by the State of Oregon. Cf. 32 Stat. 388, 390 ("[N]othing in this Act shall be construed as affecting or intended to affect or to in any way interfere with the laws of any State . . . relating to the control, appropriation, use, or distribution of water . . . .") B. Reclamation's Voluntary Decision to Withhold Water From Plaintiffs Was Not Supported by Sound Biological Science. As late as February 13, 2001, Reclamation intended to deliver irrigation water to Plaintiffs: "Reclamation proposes continuing operation of the Klamath Project to supply water to project users." Def.'s Ex. 69 at § 2.0. "Reclamation's proposed action calls for continued diversion of water for irrigation from Upper Klamath Lake through the A-Canal, Klamath River through the Lost River Diversion Channel, the Lost River and also from Tule Lake to Lower Klamath Lake via Pumping Plant D." Id. at § 3.0. On April 7, 2001, Reclamation did an abrupt about-face, deciding instead that "only limited deliveries of Project water will be made for irrigation." Def.'s Ex. 61 at 2. However, while that decision was purportedly made for the protection of endangered fish, as the National Research Council concluded, this decision did not help the fish. The NRC Report,7 released in February 2002, concluded that Extensive field data on the fish and environmental conditions in Upper Klamath Lake do not provide scientific support for the underlying premise of the RPA that higher lake levels will help maintain or lead to the recovery of [the shortnose and Lost River suckers] . . . [Moreover,] [t]he committee does not find scientific
7

The NRC Report was the result of the Department of the Interior and Department of Commerce's request "for the National Research Council to form the Committee on Endangered and Threatened Fishes in the Klamath River Basin, whose charge is to conduct an external review of the scientific basis for the biological opinions that resulted in changes of water management for year 2001." National Research Council, Scientific Evaluation of Biological Opinions on Endangered and Threatened Fishes in the Klamath River Basin at xvi (2002). - 22 -

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support for the proposed minimum flows as a means of enhancing the maintenance and recovery of the coho population. National Research Council, Scientific Evaluation of Biological Opinions on Endangered and Threatened Fishes in the Klamath River Basin at 26-27 (2002). The Endangered Species Act specifically requires that decisions be made based on the "best scientific and commercial data available." 16 U.S.C. § 1536. As the NRC Report concludes, "the available information provides little support for benefits presumed to occur through the increase of flows beyond those of the last decade"; thus, the best scientific and commercial data did not require that Reclamation withhold Plaintiffs' water in 2001--and thus neither did the Endangered Species Act. C. Compliance With the ESA Does Not Require or Authorize Reallocation of Stored Water to Instream Use.

Section 7(a)(2) of the ESA, 16 U.S.C. § 1536(a), does not compel or authorize the release of stored water from Upper Klamath Lake, water that in 2001 could have been used for performance of the contracts at issue. Rather than creating an affirmative duty to protect species, section 7(a)(2) is a limitation on certain actions that could harm species. The ESA consists of a combination of provisions to promote protection and recovery of threatened and endangered species. Under section 4(f) of the ESA, the U.S. Fish and Wildlife Service must "develop and implement" recovery plans. 16 U.S.C. § 1533(f). Section 6 authorizes cooperative agreements with states for species conservation. 16 U.S.C. § 1535. Section 7 requires that agencies exercise their existing authorities to further conservation purposes and establishes a limitation, under section 7(a)(2), on certain actions. 16 U.S.C. § 1536(a). Defendant's assertion that the ESA made performance of the contracts impossible effectively shoehorns all of these authorities and responsibilities as a single, affirmative duty to do anything necessary to create favorable conditions for listed species, no matter what. This is not what section 7 provides. - 23 -

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Section 7(a)(2) requires that Reclamation "insure that any action authorized, funded, or carried out" by the agency "is not likely to jeopardize the continued existence" of the species. 16 U.S.C. § 1536(a)(2). Plainly, this provision focuses only on Reclamation's actions. It does not require Reclamation to protect a species from natural stream conditions. Thus, because Reclamation is not required to enhance natural flows, Reclamation does not harm the fish by using stored water, even if the natural flow is less than what the fish require, as long as the water was stored at a time when the fish did not require it. For this reason, the use of stored water does not change baseline flows,8 and cannot violate Reclamation's obligation to avoid jeopardy.9 Consequently, the use of stored water for ESA purposes was discretionary and, therefore, may not be the basis of an impossibility defense. See 1995 Regional Solicitor's Opinion ("Water lawfully stored in the project's reservoirs can be used for domestic and irrigation purposes to the extent the water is applied to beneficial use within the project.") The use of previously stored water does not have negative effects on the fish. When water flows into Upper Klamath Lake, Reclamation has three choices: 1) it may let the water Reclamation 2002 Biological As