Citations
- 62 F. Supp. 2d 1218
Full opinion text
FINDINGS OF FACT AND CONCLUSIONS OF LAW
ALAN B. JOHNSON, Chief Judge.
I
Water is the life-blood of Wyoming and Nebraska, arid Western states. Consequently, they, like the rest of the West, were transformed by the Bureau of Reclamation’s epic water storage projects. The question raised in this ease is whether the irrigation districts of the Bureau’s North Platte River Project have priority to the use of water stored in Pathfinder Reservoir in a drought year.
The drought year in question is 1989. The water rights in question arise under contracts for water stored in reservoirs built by the federal government along the North Platte River pursuant to the Reclamation Act. The contracts are between the federal government and the plaintiff Gosh-en Irrigation District (GID) and intervening plaintiffs (collectively the government districts) on one hand and between the Bureau and the intervening defendants (the Warren Act contractors) on the other hand. The lands irrigated by the irrigation districts are in Wyoming and Nebraska. The question that divides the parties arises only in drought, or short water years because then there is not enough stored water to provide the full amount of water the federal government, through the Bureau of Reclamation (Bureau), has contracted to deliver to all the parties.
The government districts acknowledge their contracts provide that in short water years the Bureau will divide the stored water pro rata among themselves. However, they contend that the Bureau exceeded its authority and breached its contracts with them when it included Warren Act contractors in the category of districts among which the insufficient water is to be divided. According to the government districts, their rights to the stored water have priority over the rights granted to the intervening defendants pursuant to Warren Act contracts.
The Bureau, the Department of the Interior, the United States and their named officials (collectively the federal defendants) contend that the contracts for stored water, government district contracts and Warren Act contracts alike, are ambiguous and therefore must be construed according to the understanding of the parties. According to the federal defendants, the understanding of the parties is that the Warren Act defendants are part of the North Platte Project with rights to the storage water of an equal footing to the rights of the government districts. The federal defendants also contend that the Bureau has the authority to make the disputed allocation.
The Warren Act contractors echo the position of the federal defendants, and, in addition, raise the affirmative defenses of waiver, estoppel and laches.
The court finds in favor of the government districts. The contracts are not ambiguous, the contracts provide the government districts with a first right to use the storage water, the government districts did not lose their first right by operation of estoppel, waiver or laches and the Bureau violated the government districts’ contracts by the way it allocated storage water in 1989.
II Background
A brief review of the Bureau’s North Platte Project and its topography is described in the case Nebraska v. Wyoming, 325 U.S. 589, 65 S.Ct. 1332, 89 L.Ed. 1815 (1945), and is helpful as general orientation:
The North Platte River rises in Northern Colorado in the mountainous region known as North Park. It proceeds in a northerly direction on the east side of the Continental Divide, enters Wyoming west of Cheyenne, and continues in a northerly direction to the vicinity of Casper. There it turns east across the Great Plains and proceeds easterly and southerly into and across Nebraska. About 40 miles west of the Nebraska line it is joined by the Laramie River. At North Platte, Nebraska, it is joined by the South Platte, forming the Platte River. It empties into the Missouri River at Plattsmouth, near the western border of Iowa. In North Park it is a rapid mountain stream. In eastern Wyoming it gradually broadens out, losing velocity. In western and central Nebraska its channel ranges from 3000 to 6000 feet; it frequently divides into small channels; and in times of low water is lost in the deep sands of its bed. Here it is sometimes characterized as a river “two miles wide and one inch deep.”
There are six natural sections of the river basin: ... (3) Pathfinder Reservoir to Whalen, Wyoming which is 42 miles from the Nebraska line; (4) Whalen, Wyoming to the Tri-State Dam in Nebraska near the Wyoming-Nebráska line; ...
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The river basin in Colorado and Wyoming is arid, irrigation being generally indispensable to agriculture. Western Nebraska is partly arid and partly semiarid. Irrigation is indispensable to the kind of agriculture established there.
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Irrigation in the river basin began about 1865, when some projects were started in eastern Wyoming and western Nebraska. Between 1880 and 1890 irrigation began on a large scale. Until 1909 storage of water was negligible, irrigation being effected by direct diversions and use. Prior to 1909 the development in Colorado and Wyoming was relatively more rapid than in Nebraska. Since 1910 the acreage under irrigation in Colorado increased about 14 per cent, that of Wyoming 31 per cent, and that of Nebraska about 100 per cent. The large increase in Nebraska is mainly attributable to the use of storage water from the Pathfinder Reservoir.
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The Pathfinder Reservoir is part of the “North Platte Project” which followed the adoption by Congress in 1902 of the Reclamation Act. 32 Stat. 388, 43 U.S.C.A. §§ 372, 373, 381, 383, 391, et seq. Pathfinder was completed in 1913. It has a capacity of 1,015,000 acre feet, which is 79 per cent of the average annual run-off of the North Platte River at that point. Thi§ project includes an auxiliary channel reservoir called Guernsey, located above Whalen, Wyoming. Its capacity is 50,870 acre feet. The project also includes two small reservoirs in Nebraska — Lake Alice and Lake Minatare — having a capacity of 11,400 and 67,000 acre feet respectively. There are two main supply canals — Interstate and Fort Laramie — which take out from the North Platte at the Whalen diversion dam. The Interstate canal runs on the north side and the Fort Laramie on the south side of the river. Both extend far into Nebraska. Northport — a third canal — is located wholly in Nebraska. These canals and their laterals extend over 1600 miles. The project also includes a drainage system and two hydroelectric power plants. The United States contracted with landowners or irrigation districts for use of the water — selling it, as contemplated by the Reclamation Act, so as to recoup the cost of the project which was about $19,-000,000. It also entered into so-called Warren Act contracts pursuant to the Act known by that name (36 Stat. 925, 4,8 U.S.C.A. § 523 et seq.) which authorized the Secretary of the Interior to contract for the storage and delivery of any surplus water conserved by any reclamation project in excess of the requirements of the project.
We have mentioned the Interstate, Ft. Laramie, and Northport canals which are part of the North Platte Project, the first two of which take out at the Whalen diversion dam. About a mile east of the Wyoming-Nebraska line is the TriState Dam. Just above that dam in Nebraska are the headgates of three large Nebraska canals — Tri-State, Gering, and Northport. Water for the North-port is diverted through the Tri-State headgate, Northport physically being an extension of the Tri-State canal. Another Nebraska canal is the Ramshorn which also receives its supply through Tri-State. Just above the state line is the headgate of the Mitchell canal serving Nebraska land. While these five canals are commonly referred to as the Nebraska State Line Canals, this opinion generally uses the term as excluding Northport which, as we have said, is a North Platte Project canal. There are also nine Wyoming private canals diverting below Whalen. One of these, French Canal, serves lands in both Wyoming and Nebraska. The section of the river from Whalen to the Tri-State Dam is the pivotal section of the entire river. In this short stretch of 40 odd miles is concentrated a demand for water as great as in the entire preceding 415 miles apart from the Kendrick project to which we will refer. We will return to a consideration of the problems of this pivotal section shortly.
The North Platte Project has greatly increased the water resources of the river available for irrigation. Unused and wasted water are stored and held over from one season to another. Moreover, the storage water has affected the water tables through saturation of the subsoil. This has increased the return flows available for rediversion and irrigation .... And as we have already said, the great and disproportionate increase in acreage irrigated in Nebraska since 1910 as compared with the increase in Colorado and Wyoming is largely attributable to the North Platte Project. While the North Platte Project has increased the water resources, it has complicated the problem of water administration in Wyoming and Nebraska. It has necessitated a segregation of storage and natural flow. The storage plants and diversion works are in Wyoming, although much of the beneficial use is in Nebraska. Appropriators in Nebraska are dependent on regulation and control in Wyoming.
325 U.S. at 592-598, 65 S.Ct. 1332 (footnotes omitted and underlined emphasis added). See also 6 Waters and Water Rights, Subpart A. River Basin Surveys, 151 through 182 (overview of entire Missouri River Basin which includes the North Platte River).
Ill Findings of Fact
This matter was tried to the court sitting without a jury on April 23, 24, 25, 26, and May 24, 1990. The record includes the testimony and exhibits from the July 3, 1989, hearing on the temporary restraining order.
On March 14, 1903, pursuant to the Reclamation Act of 1902, the Secretary of the Interior authorized the North Platte Project for the construction of storage dams, diversion dams, and distribution facilities on the North Platte River to reclaim certain public and private lands within the North Platte River Valley.
On December 6, 1904, the Bureau filed an application with the State of Wyoming for a permit to construct Pathfinder Reservoir. Attached to the application was a general statement describing the plan for irrigation and development within the North Platte River Valley downstream of Pathfinder Dam. The general statement described plans for a number of proposed government-constructed canals, including the Interstate Canal. Under Bureau policies, canals and other works would not be constructed until the Bureau determined their feasibility.
The Bureau started construction on Pathfinder Reservoir in 1905. The same year it began construction of the Interstate Canal. The first irrigation deliveries from the Interstate Canal were made in 1908.
In 1909, D.C. Henny, a consulting engineer, prepared a report entitled, “Report on the Irrigation Uses of Pathfinder Reservoir” for the Bureau. Ex. 67. The Hen-ny Report estimated that 600,000 acre-feet of water was the minimum amount that would be available from Pathfinder. Id. at 81.
Pathfinder’s supply of storage water was considered in excess of what was estimated to be necessary for the planned government projects under the Reclamation Act. In other projects undertaken by the Bureau during this same time, estimates also showed that some of the reservoirs and other works could store and supply more water than the Bureau estimated was the maximum amount needed to supply government project lands under the Reclamation Act. The Warren Act was enacted on February 21, 1911, to allow the sale of any such storage water in excess of what would be required by the government project lands.
The Warren Act expressly provided that the sale of stored water “in excess of the requirements of the lands to be irrigated under any project” could be sold. 43 U.S.C. § 523. However, the Warren Act required that in such a sale the Secretary of the Interior must preserve “a first right to lands and entrymen under the project.” Id.
On July 24, 1911, the Board of Engineers for the North Platte Project estimated Pathfinder’s excess of what would be required by the government project lands as follows:
The land included in the North Platte Project under the Interstate Canal will require about 200,000 acre feet of water from the Pathfinder Reservoir. Contract is now pending for the sale of rights for 40,000 acre feet more to the North Platte Valley Irrigation Company for irrigating a Carey [Act] segment above Douglas, Wyoming.
According to the best available data, it is safe to say that there will be an additional amount of stored water available each year of at least 360,000 acre feet. Of this amount 210,000 acre feet will be required for the Fort Laramie Canal project if built in accordance with the recommendation of the Amy Board, leaving 120,000 acre feet available each year, the right to which may be otherwise disposed of to existing canals which have flood rights prior to those of the Interstate Canal but which are in ordinary years short of water during the months of July, August and September.
Ex. 73 (underlined emphasis added).
The Board also recommended that an announcement of the availability of surplus storage water for sale be made as soon as possible. Id. This July 24, 1911, report was signed by the following officials of the North Platte Project: A.P. Davis, Chief Engineer; Mr. Henny, Consulting Engineer; R.F. Walter, Supervising Engineer; and Andrew Weiss, Project Engineer.
On August 4, 1911, Secretary of the Interior, Walter L. Fisher and Director of the U.S. Reclamation Service, F.H. New-ell, attended a public meeting of the North Platte Valley Water User Association and various committees representing irrigation interests of the North Platte Valley held in Mitchell, Nebraska. The existing older irrigation companies, commonly referred to as the “old ditches” were represented by F.A. Wright. Ex. 74 at 14. Persons who supported the completion of the divisions on the south side of the river spoke in favor of such completion. Id. at 8-11. Secretary Fisher inquired about public feeling on the building of the proposed projects on the south side of the river, to be served by the proposed Fort Laramie Canal. He was assured by the Chairman that public sentiment was distinctly in favor of it. Id. at 11. Mr. Wright explained that, the older irrigation project’s natural flow rights were insufficient because they were not available when water was most needed. He stated the position of the older ditch companies in the following excerpts from the meeting report. Although lengthy, it will be repeated here because the federal defendants and the intervening defendants rely heavily upon remarks attributed to the Secretary of the Interior and to Mr. Newell.
Mr. Wright: ... We appreciate the fact that the lands under the Government ditch should have a prior right to the reservoir. [W]e respectfully ask the opportunity to come and purchase, subject to prior rights, this reservoir right of water that may possibly be standing there and going to waste.
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THE SECRETARY: Let me see if I can get a little nearer the issue in question. What sort of contract do you want to make with the government? A contract under which by a lump sum you will purchase an interest in the surplus waters, subject to the prior right of the settlers under the government canal?
Mr. Wright: We assume that would be in the discretion of the Secretary. If the payment of a lump sum would be necessary, we would do that, of course. We would prefer it if these payments could be made in installments....
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THE SECRETARY: But even if you do fix a sum, you would recognize the right of the entrymen of the Government ditch to a prior right in the event of a shortage of water?
Mr. Wright: Yes sir.
THE SECRETARY: It would be your suggestion that you would concede that point if it were raised?
Mr. Wright: Yes, sir.
THE SECRETARY: I have heard some discussion of this matter this morning. One of the questions raised is what would be the situation of the present settlers or those coming in under the Government canal as compared with those holding land under the old ditches, if in the future there should be an actual shortage of water due to any causes, which would greatly reduce the quantity of water in the Pathfinder reservoir, and there would not be sufficient [water] for all. Under those circumstances, you recognize you would probably have to concede the prior right of those under the Government canal. This seems to be the purpose of the law.
The object you have in mind in favoring a fixed sum is that you would get a real vested right, subject to the vested right of those under the Government canal. Of course, the possibility of such an emergency arising is to some extent affected by ■ the question already raised — the construction of the canals on the other side of the river, particularly the High Line canal. The question as to what would be your position as to the priority of right in the event that the Government developed the land on that side of the river is of importance.
Mr. Wright: In regard to that I take it that the Government knows better than any one else as to what the probabilities are and as to whether they were selling us anything of value or not. If the reservoir supply of water is taken up — that is a matter that the Government would be able to determine and regulate. I would assume that the position of the Department would be not to do anything intentionally that would bring hardship upon any one.
THE SECRETARY: That is one of the serious questions on the south side. It would be a very serious thing if the government should establish a project and invite settlers to take up the lands and build their homes, and there was liability of being a shortage of water.
I must say frankly that I concur in the general proposition stated — that the existing settler on the ground, even though he may not have come in under a government canal, but coming under a private enterprise, if they are willing to do what is fair and reasonable, is entitled to a priority of right over an unknown settler who has not got here yere [sic].
(Unanimous and hearty applause).
That seems to have a struck a responsive chord. I may say in this connection that I appreciate very much the very frank and candid way in which you gentlemen are treating this matter....
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THE SECRETARY: In this matter, it will be far more appropriate that you hear from Mr. Newell. He is the fountainhead of learning and wisdom in Reclamation matters.
Mr. Newell: This is exceedingly embarrassing to a man who is learning every day some of these things....
Of course, while we have the law defining many things, it makes the Secretary of the Interior really the man who determines most of the questions of practice. His opinion guided and mould-ed by the officials of the service under him governs to a very large extent the practicability of the law.
The expression of the Secretary that the man on the ground is entitled to priority over the unknown settler who has not yet got here is to me one of the most valuable things of this visit. ■ This alone I think would pay for the trouble and expense of making the trip, because it is in full accord with the correct theory of the law, namely, that while we are to reclaim public lands, it is particularly the reclamation of arid lands. That principle we have adhered to quite closely. If we can adopt that principle un-qualifiedly we should undoubtedly be guided in distributing the water at Pathfinder otherwise that if we should give preference to the man who has yet to come on the ground. The man who has come here should have ample water not merely to plant his crops but to get the very best results out of the land which he is using. I might talk on very indefinitely. But I am here to learn and to listen to the questions you have to present.
This forenoon one of the gentlemen asked as to what the situation would be in case water supply would not be sufficient to fill the reservoir and furnish water to the old ditches along the river. I have had them in mind. What is the minimum annual storage of the Reservoir?
Mr. Weiss: It would be 600,000 acre feet.
Mr. Newell: We find that Pathfinder is safe for 600,000 acre feet. We have extreme years — and years of drought.... We would be reasonably safe in disposing of 600,000 acre feet as a minimum. Of this amount 250,000 belongs to this Project, and under the terms of the law, this project has a prior right. I think possibly it will be well to read from the so-called Warren Act:
That whenever .... preserving a first right to lands and entrymen under the project, (those words were put in by Congressman Kinkaid — I do not know just why — I suppose because you kept the wires hot and got what you wanted) is hereby authorized, upon such terms as he may determine to be just and equitable, to contract for the impounding storage, and carriage of water to an extent not exceeding such excess capacity with irrigation systems operating under the Act of August eighteenth, eighteen hundred and ninety-four, known as the Carey Act, and individuals and, corporations, associations, and irrigation districts organized for or engaged in furnishing or. in distributing water for irrigation. ...
Ex. 74 at 17-32 (underlined emphasis and footnote added)
On October 9, 1911, the North Platte Project’s Supervising Engineer Walter wrote to Chief Engineer Davis in response to inquiries on the policy for sale of Pathfinder’s surplus water. Ex. 75. Mr. Walter opposed selling any of Pathfinder’s excess water until the rights of the old ditches in Nebraska had been finally determined. Id. at 5.
However, there was pressure to go through with an immediate sale of surplus water because Tri-State (now Farmers) was in danger of financial failure due to a lawsuit between it and another private canal company. Ex. 77 (October 12, 1911, letter from Project Engineer Weiss to Supervising Engineer Walter). See also Ex. 99 p. 138 (explaining court decision in that lawsuit between non-government canal companies).
In a letter dated October 24, 1911, Chief Engineer Davis responded to Supervising Engineer Walter asserting there is not a good reason to wait to see how much water is determined to be necessary for the old ditches before announcing the sale of Pathfinder’s excess stored water. He asserts:
You seem to forget that the Departmental policy in this matter was carefully considered and decided by. Secretary Fisher last June. He decided that in handling the Pathfinder Reservoir, and in similar cases, preference should be given to lands already irrigated which require additional water supply, and that the irrigation of new lands should be secondary to their requirements.
You will see by this that it is definitely decided by the Secretary of the Interior to give preference to the wants of the old irrigated lands and to plan future projects in such manner as to utilize the surplus after the old irrigated lands desiring stored water have had their supply completed....
Ex. 78 (underlined emphasis added).
Supervising Engineer Walter and Project Engineer Weiss responded on November 1,1911, as follows:
Our main reason for assuming the attitude we held heretofore is the wording of the socalled [sic] Warren Act, approved February 12, 1911, which reads in part as follows: “That whenever in carrying out the provision of the Reclamation law, storage or carrying capacity has been or may be provided in excess of the requirements of the lands to be. irrigated under any project, the Secretary of the Interior, preserving a first right to lands and entrymen under the project, is hereby authorized ...”
We have assumed that the Fort Laramie Canal like the Third Lateral District under the Interstate Canal is a part of the North Platte Project, particularly since the Army Board has approved the building of the Fort Laramie canal and recommended that $3,000,000 be set aside for this purpose, and that water could only be sold in excess of the requirements of the project including thereby these extensions. If we are in error in our understanding of this law there is no further question in our minds as to the better wisdom of adopting the present Departmental policy of offering to sell permanent storage rights to ditches now in operation within the extent of the present apparent excess reservoir capacity.We agree that the sooner this offer is announced the earlier this period of water sales may be closed, and that in pursuance of this policy we should know the aggregate of these applications to purchase Pathfinder water before the construction of the Fort Laramie extension is authorized. As a matter of fact we favor the pursuit of this policy, providing it does not conflict with the Warren Act....
Ex. 79 (underlined emphasis in original and italics added).
On November 3, 1911, Chief Engineer Davis wrote again to Project Engineer Weiss:
Is it your idea that possibly we may decide not to sell any water rights: If so, we must get the Secretary of the Interior to reverse the ruling on this point. He has already decided that he will give preference to old water users who desire to protect their rights, rather than dedicate the Pathfinder Reservoir to new lands for which no ditches are yet built....
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It is my idea that the projects on the south side of the river should be so outlined as to, as nearly as possible, fit the water supply after the demands of all of the ditches have been met.
Ex. 80 (underlined emphasis added).
. On November 4, 1911, Chief Engineer Davis wrote to Supervising Engineer Walter:
I have your letter of November 1 in which Mr. Weiss joins you regarding the policy of selling rights in the Pathfinder Reservoir, and I note that the differences grew out of your impression that the policy I favor was contrary to the Warren Act. I have talked this matter over with Mr. Bien and he thinks there is no doubt that policy outlined is entirely legal and that the Warren Act does not intend to give future work preference over the demands of older appropriators, but merely to protect Reclamation projects which have already acquired rights....
The Secretary did make definite decision after discussion and full consideration with Mr. Newell and myself that older appropriators desiring to purchase stored waters should have the preference over any new projects. The wisdom of this is all the more apparent when we are considering such expensive projects as those on the south side of the North Platte which in my opinion should be finally modified to fit the water supply after the old rights have been satisfied.
Ex. 81 (underlined emphasis added).
Secretary of the Interior Fisher announced the Bureau’s policy for the sale of excess or surplus water from Reclamation projects in the following letter dated November 6,1911:
The Director of Reclamation Services. Sir:
I have considered the question of the disposal under Act [of] February 21, 1911 (36 Stat. 925) of surplus waters stored in Government reservoirs. Subject to the limitations imposed by said statute, such disposal should be governed by the following principles:
Water from Government reservoirs built for the irrigation of arid lands under the Reclamation Act, where any surplus is available will, as a general rule be used to supplement ■ the supply for lands already under irrigation, which supply must otherwise remain deficient, rather than used to enlarge the area of the Government project by bringing into it lands as yet not irrigated. This general principle is not to prevail over local conditions and circumstances which may make the opposite course seem wiser in any particular case, nor to be so applied as to encourage or permit the non-Government projects requesting the use of water from Government reservoirs to extend their own areas in such manner as may threaten a new deficiency in their supply. Such non-government projects should contribute to the cost of storage and delivery upon an equitable basis.
Ex. 273 (underlined emphasis added). See also Ex. 20.
This November 6, 1911, letter refers to the sale of the surplus water only and applies to all of the Bureau’s Reclamation Act projects and not just to the North Platte Project. The court finds that the November 11, 1911, letter does not set the priority to be afforded to the water rights to be sold differently from or in addition to that provided in the Warren Act. Instead, the November 11, 1911, letter announcement refers specifically to the express language of the Warren Act: “Subject to the limitations imposed by said act.” The Secretary’s public announcement does not contain any reference to the so-called policy favored by Chief Engineer Davis whereby the size of the yet-to-be developed government project would be determined by the amount of the water left after the old ditches purchased all they wanted. Instead, the Secretary’s policy is limited to the purchase of “excess water,” i.e. water in excess of that then-estimated as reserved for the entire government project.
On December 12, 1911, the Bureau issued another public letter regarding the sale of Pathfinder’s surplus, this one signed by Mr. Newell as Director
Washington D.C. December 12,1911
Office of the Director
Supervising Engineer
Reclamation Service
Denver, Colo.
Dear Sir:
On November 6, 1911, the Secretary of the Interior announced his policy regarding the disposal of surplus waters stored in Government reservoirs as authorized by the Act of Febr. 21, 1911 (36 Stat., 925)
In accordance therewith and in view of the fact that the development of the North Platte Project as now contemplated will leave a surplus of water in the Pathfinder reservoir and as there are in the North Platte Valley in Nebraska certain lands already under irrigation, the water supply of which is now deficient, you are hereby authorized to announce by authority of the Secretary of the Interior that, until further notice, contracts will be made with the owners of irrigation systems in the North Platte Valley in Nebraska, under the provisions of the Act of February 21, 1911, (36 Stat., 925), for the delivery of water from Pathfinder reservoir at the point where the North Platte crosses the Nebraska state fine, to the extent of the amount available in excess of the requirements of the lands to be irrigated under the North Platte Project, at a charge of $5.00 per acre-foot, payable upon the following terms ... In addition, payment shall be made of the charges for operation and maintenance connected with the storage of the water and the care and control thereof between Pathfinder dam and the point of delivery, as assessed annually by the Secretary of the Interior. Such contracts shall incorporate the necessary requirements set forth in the said act.
In order that the requirements for the season of 1912 may be definitely provided for and in consideration of the time which will be required to formulate the contract, it is important that application shall be made on or before March 1, 1912, in order to insure delivery of such surplus water in the irrigation season of 1912.
Arrangements have been made for furnishing surplus water in Wyoming by contract with the only irrigation system thus far applying for the delivery of water in that state. Other applications in Wyoming will be considered upon substantially the same basis as herein announced.
Very respectfully,
(Sgd.) F.W. Newell,
Director [of the U.S. Reclamation Service]
Ex. 275 and Ex. 85.
This December 12, 1911, public announcement from the Secretary differs from Mr. Newell’s earlier intra-agency correspondence in that it does not incorporate Mr. Newell’s idea of limiting the scope of new projects by designing them to fit the water that would be left after the old ditches were fully supplied. Instead, the announcement expressly discusses the surplus available for purchase as that not needed for the North Platte Project as “now” contemplated for the lands “to be” irrigated.
The position of the Secretary of the Interior and of the Bureau regarding sales under the Warren Act was laid out in the letters of November 6, 1911, December 12, 1911 and February 3, 1912. Ex. 89 and 90.'
Tri-State, soon to be renamed Farmers Irrigation District, was involved in protracted negotiations with the Bureau for the purchase of stored water from before the announcement through August 1912 when Tri-State’s Warren Act contract was signed. See Ex. 1 (Tri-State’s Warren Act contract). Among matters debated during the Tri-State negotiations were the issues of any restrictions on the use of the water purchased under the Warren Act and a question of the extent of their pre-existing water rights. See Ex. 111.
The negotiations reveal that a major concern was whether the Warren Act contracts would limit the use of the purchased storage water to land that had already been irrigated, or if the Warren Act contractor could use the water for land that was “under” or “covered” by these old ditches but which had not yet been irrigated. See e.g. Exs. 88, 89, 97, 107, 118, 120, and Ex. 90 (referring to policy as set forth in Ex. 89).
In an April 27, 1912, Report, Project Engineer Weiss reported to the Consulting Board that there had been little activity in making applications for the Pathfinder water under the Warren Act “due in large measure to the restrictions which the Warren Act imposes upon these sales. These restrictions work in many cases a distinct hardship.” Ex. 98 at 127.
It was the position of Board of Consulting Engineers for the project that Warren Act contractors should be allowed to use their purchased stored water to irrigate any land in their districts, and not be limited to lands previously irrigated. Ex. 99 (May 3, 1912 Report on the Sale of Pathfinder Water by Board of Engineers). The Board of Engineers opined that such a sale of surplus water to “actual settlers” on lands reached by, but not yet irrigated under, the “old canals” “would not in any way jeopardize the water supply of the Fort Laramie Canal on the south side of the River even if it should be extended to cover an area of 125,000 acres as now appears possible.” Ex. 99 at 141.
Tri-State enlisted the support of Nebraska’s Governor and others to lobby the Secretary of the Interior to allow TriState to use its Warren Act water on lands “covered” by Tri-State, but then-unirrigat-ed. See Ex. 97.
In April 1912, the Secretary of the Interior responded to what was apparently an orchestrated campaign to soften the Bureau’s position. He began his response with the following April 8, 1912, telegram to the Governor of Nebraska:
To Hon. Chester H. Aldrich,
Governor, Lincoln, Nebraska.
Do not feel justified on present information in approving contract to sell at cost Government water for land not heretofore under irrigation when the facts concerning which are not fully before the Department. Many canals built for land speculation have been extended far beyond available water supply. Government water should be used to protect actual settlers and those waiting only on water to become such. On this principle have authorized Reclamation Service to approve pending North Platte contracts for water needed by all lands heretofore irrigated and have told applicants that contract would be extended on proper showing as to remaining lands. This has not been furnished and telegraphic insistence by them or their friends cannot be accepted as a substitute for information.
Ex. 282.
Thus, as the telegram clearly shows, the Secretary’s statements relating to the excess water being used to protect “actual settlers on the ground and those waiting to become such” relates to the debate over the old ditch companies’ desires to be able to use their Warren Act water purchases for previously unirrigated lands in their districts. See Exs. 212 and 213 for 1910 discussion of problem of settlers waiting for water.
The Secretary reiterated this response in letters to various Nebraska officials and irrigation districts, including Congressman Kinkaid on April 16, 1912: “No action has been taken with regard to the furnishing of such surplus water for use upon lands not heretofore irrigated, but applicants for the purchase of water for use upon such lands have been required to furnish information in detail with respect to such lands. Until such information is furnished no action will be taken upon the applications.” Ex. 120 (underlined emphasis added).
These communications were collected in a policy memorandum dated June 4, 1912 and entitled: “Memorandum regarding policy of the Secretary of the Interior for the disposal of surplus stored water from the Pathfinder Reservoir in regard to lands not previously irrigated.” Ex. 120 (underlined emphasis added). Significantly, the policy memorandum on the sale of water in regard to lands not previously irrigated begins with the entire text of the Secretary’s November 6, 1911, announcement.
Read together, the entire series of communications from the Secretary of the Interior on the subject of surplus stored water in regard to lands not previously irrigated makes it clear that what he was referring to when he spoke, and later wrote, of “actual settlers on the ground” were persons who under the old ditches had already irrigated their lands but needed a seasonal supplement. Similarly, when he spoke of “those waiting for water to become such” he was referring to settlers who had actually purchased farms in the old ditch districts with the hope of eventually having government water.
This was the understanding of the Bureau during its negotiations for the Warren Act contracts involved in this case as is evidenced by Director of Reclamation Newell’s March 19, 1912 letter explaining his understanding of the Secretary of the Interior’s and the Bureau of Reclamation’s policy in a letter to Chief Engineer Davis:
Mr. C.N. Wright, President of TriState Canal Company has been to see Secretary Adams with reference to purchasing water under the terms of the Warren act. He has found that the form of the contract presented to him narrowly limits the water which may be purchased and that, therefore, he is unable to negotiate for a loan needed by his company.
The clause which Mr. Wright finds to interfere with his plan was prepared by Secretary Fisher with an understanding with Senator Warren by' which he would not sell to the lands in Nebraska the waters which Senator Warren claimed were needed elsewhere.
[T]he details have been discussed between Secretary Fisher and First Assistant Secretary Adams, and he is not willing to recede from the position taken, although he might possibly modify it in individual cases.
The general theory is that water may be sold to individuals who have gone on in good faith attempting to develop their farms, who have built their lateral ditches or have paid for a water right which turns out to be inadequate. These men should be assisted, if possible, by selling the necessary amount of water needed for the cultivation of their fields.
On the other hand, the Secretary is not at all concerned to help out the canal companies who have built or propose to build canals and laterals to cover lands which have not yet been developed in whole or part by individuals, that is to say, the Secretary is not trying to make a profit for these canal companies or to save them from an unprofitable investment.
In the case of the individual farmer who has purchased land and water rights, it is presumable that he did not have and could not obtain full information, but in the case of a canal company selling water, there is every reason to assume that the men investing in or controlling the company are of sufficient intelligence to know the risks which have been assumed.
The general principles having been laid down by the Secretary in his letters of November 6, December 12, and February 3, 1912, it is now necessary for a determination in the field to be made as to the exact areas to which water may be sold. I told Secretary Adams that it is proposed to have a board meeting in the near future to consider the entire North Platte situation and make recommendations. It is presumed that this board will review the facts now available of total water supply, the legal rights which attach to it, so far as known, the amount needed for the completion of certain important essentials of our plans, and that then the question will be taken up of the disposal of the residual water which may be available.
In recommending the disposal of this, we should take into account the applications made for it, and apply the principles laid down as noted above, and make a list or describe in general terms the lands for which the stored water may be sold under the terms of the Warren Act.
As I understand the matter there are three or more classes of lands to be considered:
1. Those which have an adequate supply ...
2. Those lands which have a partial supply. These are the ones which presumably are of most concern to us to ascertain as far as practicable what is the present supply and how'much water should be sold to them.
3. The lands which are now under canals or laterals but which have never made application for water or have had it only on a rental basis. According to the strict interpretation of the principles laid down, we cannot sell water to these lands, but there may be some special consideration to be given to them, and recommendations from you, based on the ameliorating facts, may be considered.
4. Lands to which canals have not yet been extended, but where it is desired to build laterals largely on a speculative or commercial basis. Here we cannot consider the disposal of water unless possibly it might turn out that we have an actual excess above all other needs.
In the above, I have tried to outline my understanding of the ideas of the Department. I wish that you would take this up in connection with the principles laid down and see whether I have made myself clear or whether there are other considerations which must be taken into account, calling my attention to these, so that I can take them up with the Department for further instructions
Ex. 89 (March 19, 1912, letter to Chief Engineer Davis, with copies to Supervising Engineer Walter and Project Engineer Weiss) See also Ex. 222 (Supervising Engineer to Chief Engineer Davis stating his understanding that telegrams of April 8 and 13, 1912 modified the previous strict policy against selling stored water to “such lands as had heretofore irrigated and were under completed irrigation systems.”).
Thus, the policy favoring “the existing settler on the ground” was the Interior Department’s attempt to avoid Reclamation Act water’s being used by the private ditch companies to extend water to lands in support of private land speculation. Similarly, the phrase “local conditions and circumstances which may make the opposite course seem wiser in any particular case allowing an opposite course” in the Interior Secretary’s November 6, 1911, announcement refers to the possibility of Warren Act water’s being used for previously unirrigated old ditch lands. This is why the local conditions exception is coupled in the same sentence with the caution that the old ditch companies would not be encouraged or permitted to use the water to extend their own areas in such a manner as to threaten a new deficiency. Thus, contrary to the positions of the defendants, the Interior Secretary’s public statements regarding his “settlers on the ground” policy does not relate to the question of the relative priority between the government districts and the Warren Act contractors. Instead, the “settlers on the ground” policy relates solely to the issue of the Warren Act contractors’ ability to use their purchased storage water within their own districts for lands previously unirrigated.
Each of the Warren Act Districts entered into a contract or contracts with the United States through the Department of the Interior, United States Reclamation Service, now known as the Bureau of Reclamation, (the Bureau) for the use of the excess storage capacity in the Pathfinder Reservoir, pursuant to section 1 of the Warren Act, 43 U.S.C. § 523.
At the time the Warren Act contractors entered into their contracts with the Bureau, they also held various appropriated rights to the natural flow of the North Platte River as of the dates that follow:
Farmers 1887 and 1902
Chimney Rock 1890
Gering 1897
Lingle 1901
Intervening defendant Chimney Rock Irrigation District is the successor in interest to the Chimney Rock Irrigation Canal and Water Power Company, one of the original Warren Act contractors. As noted above, Farmers Irrigation District is the successor in interest to Tri-State Irrigation, signer of the first North Platte Project Warren Act contract.
Except where noted the Warren Act contracts are, in relevant part, similar to each other and contain the following provisions, taken from Gering’s contract:
THIS AGREEMENT, made and entered into this 17th day of January, 1913, in pursuance of the Act of Congress of June 17, 1902, (32 Stat., 388), known as the Reclamation Act, and acts supplementary thereto and amendatory thereof, and in particular Section 1, of the Act of Congress approved February 21, 1911, (36 Stat., 925), known as the “Warren Act,” by and between the United States of America, acting in this behalf by Samuel Adams, First Asst., Secretary of the Interior, hereinafter styled the “Secretary,” thereunto duly authorized, and the Gering Irrigation District, a public corporation organized under the laws of the State of Nebraska, .... hereinafter styled the “District,”
WITNESSETH:
WHEREAS, in carrying out the provisions of the said Reclamation Act, the Secretary, being authorized by the said Warren Act, deems it advantageous upon the terms herein agreed upon to dispose of surplus storage rights in reservoirs constructed or to be constructed by the United States, under the provisions of the Reclamation Act in the basin of the North Platte River, and
Whereas, the United States has completed a reservoir on the North Platte River, known as the Pathfinder Reservoir, from which certain surplus storage waters are available for disposal under the terms of the Warren Act, and
Whereas, the District has constructed and operated a canal and distribution system for the irrigation of the lands of said District from the natural flow of the North Platte River and has perfected a right to the use of a portion of said natural flow, the said portion being insufficient for the proper irrigation of the said lands during the middle and latter part of the irrigation season, and WHEREAS, the District is desirous of perfecting its water supply by arranging with the Secretary for the use of a portion of the said surplus storage waters,
NOW, THEREFORE for and in consideration of the mutual' and dependent stipulations herein contained the parties hereto do covenant and agree as follows:
ARTICLE 1: The United States will impound, and store water in the Pathfinder Reservoir, or elsewhere and release the same into the North Platte River at such times and in sufficient quantities to deliver, and does hereby agree to deliver at the Wyoming-Nebraska State Line for the use of said District an amount of water which will....
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ARTICLE 6. In consideration of said delivery of water the District agrees to pay to the United States the sum of One Hundred Thousand Dollars, ($100,000) in installments as follows:
ARTICLE 7. In addition to the amounts above specified the District agrees to pay to the United States one-twentieth part of such amounts as shall be fixed by the Secretary as total operation and maintenance charges in connection with the storage works from which said stored water may be supplied: ... Such operation and maintenance charges shall be payable in advance on April 1 for the current year.
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ARTICLE 9. The United States shall not be liable for failure to supply water under this contract caused by hostile diversion, unusual drough [sic], interruption of service made necessary by repairs, damages caused by floods, unlawful acts or unavoidable accidents. ‡ ‡ ‡ ‡
ARTICLE 11. It is further understood that the water users under projects of the United States Reclamation Service dependent for storage upon the said storage works shall be prior to the District and to water users therein in right to the use of stored waters from the said storage works in accordance with Article 1 of the Warren Act.
Ex. 7 (underlined emphasis added).
In addition to the same provisions above, the Tri-State/Farmers’ Warren Act contract, the oldest Warren Act contract at issue, also provides:
ARTICLE XIII — It is understood that the Secretary shall provide for the irrigation from the Pathfinder Reservoir of no greater area of land in the aggregate than can in his opinion be furnished with an adequate supply of water in all years of ordinary runoff.
Ex. 1; see also Ex. 137 at A307444 (adding this article to proposed contract).
The Tri-State/Farmer’s contract also provides:
The delivery of the water supply provided for in this contract will be accepted by the Company as in full satisfaction of all its rights to the water of the North Platte River, both natural flow and surplus storage from the Pathfinder Reservoir ...
Ex. 1 at 8, Art. XI.
On May 10,1922, Lingle and the Bureau entered into a contract amending its July 1, 1915, Warren Act contract and its March 9, 1917, Warren Act contract to purchase additional stored water. Ex. 19. This May 10, 1922, contract is titled “Contract between the United States of America and Lingle Water Users’ Association for Purchase of Permanent Storage Rights in Pathfinder Reservoir Under Warren Act.” Id. (underlined emphasis added). It is the only Warren Act contract so titled. The provisions in Articles 16 and 18 of the May 10, 1922, contract are identical to the provisions of Articles 9 and 11 quoted above from Gering’s Warren Act contract. There is no mention of “permanent” water in the body of Lingle’s May 10, 1922 contract, nor is there any definition of the term.
On May 15,1924, Lingle and the Bureau entered into another contract to purchase additional stored water titled “Contract dated May 15, 1924 for 133 Additional Acre Feet of Water between United States of America and Lingle Water Users Association.” Ex. 20. The May 15, 1924 contract contained the same clauses relative to no liability for the United States for the failure to provide water due to unusual drought and for a prior right for water users under projects of the Bureau as are contained in all of the other Warren Act contracts at issue.
Each of the Warren Act contracts provide for a specific quantity of water to be delivered. None of the Warren Act contracts provide authority for the Bureau or the Secretary to pro rate the contractual water or otherwise expressly provide for how Pathfinder Reservoir water would be, or could be, allocated during periods of shortage.
In a December 1914 Report, the Board of Engineers noted that a then-recent Nebraska Supreme Court case was, in effect, “a revival of an old [water] right” not previously taken into consideration in calculating available water. Ex. 170 at 2. The demands of that prior right, plus heavier than anticipated irrigation demands, resulted in the Board’s opinion that there was less water available than previously thought and a suggestion that the Ft. Laramie division be reduced in acreage. Id. at 7. The Board also noted there would not be enough stored water to consider a Goshen Park unit, which unit had been estimated to be significantly more expensive than the Ft. Laramie unit. Id. at 8. As a result, the Board recommended that no more “surplus” water be sold to private ditches. Id. at 10.
However, a later, March 10, 1915, Report of the Board of Engineers estimated that there was sufficient water for the planned Laramie Canal and the Bridgeport District. Ex. 176. The 1915 report concurred with the 1914 report that there was insufficient supply for the Goshen Park High Line project and concurred that those lands should be restored to entry. The 1915 report, like the majority of the Bureau’s contemporaneous records, distinguishes the lands using water purchased under the Warren Act “Contract Canals” from the lands of the North Platte Project, whether already developed “North Platte Project” or soon to be developed “New Land.” Id. at 306. The 1915 report tentatively concluded that there “may still remain a small margin for permanent disposal to private canal companies under the Warren Act. It is evident, however, that great caution must be exercised [and] that it may be wise to discontinue sales until the areas above mentioned shall have been more closely determined, and until more data accumulates as to increased return flow.” Id. at 307.
After the Warren Act contracts at issue in this case were signed, the Bureau approved the Ft. Laramie division and the Northport division of the North Platte Project. The Gering-Ft. Laramie canal was constructed south of the North Platte River and was completed about 1920.
Goshen Hole High Line, a project originally planned in 1903-09, was not constructed because the topography would have made irrigation expensive and therefore impracticable. Ex. 232 at 3 and 6 (February 11, 1915 letter from District Counsel of Interior’s Chief Counsel stating there had been no possibility of constructing Goshen Hole unit since the Board of Army Engineers 1910 report, which did not approve its construction). See also Ex. 201 (1905 report noting that Goshen Hole project will be expensive and may not be feasible); Ex. 211 at 28-29 (1910 Army Board report). In addition, the Bureaus’ actions in selling “excess” water before accurate data was compiled and before resolution of all disputes over claimed North Platte River appropriations were settled made the construction of an expensive project like Goshen Hole even more impracticable. The decision not to go ahead with Goshen Hole was not popular in Wyoming because of the perception that Wyoming water should be used to develop Wyoming lands instead of diverted to divisions lying inside of Nebraska’s borders. See Ex. 278 (April 22, 1911 letter from Senator Warren to Secretary of Interior asking for information on Goshen Park units) and Ex. 279 (Secretary’s noncommittal May 2, 1911, reply questioning whether there was enough water due to the amounts to be purchased under the Warren Act) and Ex. 180 (July 9, 1914 letter from Walter to Newell explaining numerous Wyoming residents disappointed that government did not build Goshen Park canal which would have irrigated more land in Wyoming than the Fort Laramie unit).
In 1922, the Bureau held a drawing at Torrington, Wyoming, to determine who would be allowed to make entry on government lands in the Ft. Laramie division. See Ex. 285 (July 14, 1921, Order announcing Ft. Laramie lands available for entry).
In 1926, irrigation districts were formed to contract with the United States on behalf of the landowners, creating rights and obligations as government districts under the North Platte Project pursuant to the Reclamation Act.
On November 24, 1926, plaintiff GID, an irrigation district organized under the laws of the state of Wyoming and based in Torrington, Goshen County, Wyoming, entered into a contract with the United States, under which GID agreed to operate and maintain certain North Platte Project works and to collect money from landowners to repay the United States for the cost of the project. Complaint Ex. 1. The other government districts also entered into contracts with the Bureau in 1926. Northport’s 1926 contract modified but otherwise retained its February 24, 1919 contract with the Bureau. Ex. 16. Gering and Ft. Laramie’s 1926 contract modified but otherwise retained its May 25, 1920 contract with the Bureau. Ex. 10. Pathfinder’s first contract with the government was in 1906. Ex. 68. Except where noted, GID’s 1926 contract is representative of the contracts of the other government districts. GID’s 1926 Contract provides:
United States to Store Water for [GID]
4. The United States will store for the irrigation of [GID’s] lands in the Pathfinder reservoir or elsewhere and [GID] shall have a perpetual right to the annual combined supply of said stored water together with the natural flow of the North Platte River, as the same may be augmented by precipitation, percolation, seepage, return flow, developed and undeveloped waters, in the quantity annually needed for the irrigation of [GID’s] lands, not, however, to exceed the quantity that can be beneficially used thereon, not to exceed one cubic foot per second for each seventy acres of land; and in the event that the available water supply from the North Platte Project in any year shall be reduced as the result of natural conditions to a quantity less than is necessary for the adequate irrigation of all lands of said project, [GID], which is hereby recognized as a part of the North Platte project, shall be entitled to its own proportionate part, as determined by the relation between the irrigated area of [GID’s lands] and the irrigable area of the entire North Platte project, and [GID] shall accept such proportionate part in full satisfaction of its claim for water during such period of shortage. The United States claims all waste, seepage, spring and percolation water arising within [GID’s lands] and proposes to use such water upon lands in connection with the said project or water from the works thereof, and [GID] concedes such right and concurs in the said plan.
Water for Nebraska Lands
9. [GID] will carry for the United States in the transferred works (as hereinafter defined), such waters as the United States will furnish and require for the irrigation of the lands of the Fort Laramie Division of the North Platte project of the Bureau of Reclamation lying east of the Wyoming-Nebraska State line, as now constructed and will deliver the same to the United States at said State line in the main canal and laterals as now constructed: Provided, however, that [GID] shall not be required to deliver to the United States hereunder an amount of water in excess of the equitable and ratable proportion of water to which such lands in Nebraska are entitled from the whole amount then available for delivery to the entire Fort Laramie Division, nor at a rate in excess of the equitable and ratable share of such Nebraska lands in the then available carrying capacity of the Fort Laramie canal. The decision of the Secretary as to the amount of water available, an equitable division thereof, and the division of available carrying capacity, shall be binding on all parties in interest.
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Carrying out Obligations of Contract
17. The District shall perform and carry out in accordance with their true intent and meaning and to the satisfaction of the Secretary, all obligations imposed upon the United States in all contracts of whatever kind, affecting the Wyoming portion of said Fort Laramie Division non> in force, and shall not attempt in any manner to change the terms of said contracts. Insofar as is permitted by law and if not otherwise herein provided, the District shall have all rights and privileges in and under all such contracts as the United States noto has or ivould have if this contract were not in effect.
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Claims and Complaints of Incorrect Distribution of Water
29. The United States and its agents in charge of the reserved works will use their best efforts and best judgment to deliver and turn out for the several parties entitled to receive water from said works their correct and proper share of t