Full opinion text
MEMORANDUM OPINION AND ORDER RE: DEFENDANTS AND DEFENDANTS-IN-INTERVENTION MOTIONS TO DISMISS WANGER, District Judge. I.INTRODUCTION This case is before the court on motions of the Defendants, U.S.A., Department of the Interior, Bureau of Reclamation, U.S. Department of Commerce, National Marine Fisheries Service, Roland H. Brown, Secretary of Commerce, and Bruce Babbitt, Secretary of the Interior (“Federal Defendants”) and Defendants-in-Intervention, the National Resources Defense Council, United Anglers of California, Save San Francisco Bay Association, California Waterfowl Association, Sierra Club, Bay Institute of San Francisco, Environmental Defense Fund, California Striped Bass Association, Trout Unlimited of California, Sacramento River Council, California Sportfishing Protection Alliance, and Pacific Coast Federation of Fisherman’s Association, who represent environmental interests (the “Environmental Intervenors”), to dismiss the complaints of plaintiffs Westlands Water District, San Benito Water District, San Luis Water District and Panoche Water District (collectively “Westlands”); and Plaintiffs-in-Intervention Kern County Water Agency; the Friant Users Water Users Authority; The San Joaquin River Exchange Contractors; the Area I parties; the Stockton East Water District, the Central San Joaquin Water Conservation District, the County of San Joaquin, the City of Stockton, and the California Water Service Company. II. BACKGROUND Westlands Claims Westlands complains that the 50% allotment by the U.S. Department of the Interi- or’s Bureau of Reclamation (“Bureau”) to them in 1993 resulted from major changes in the Bureau’s operation of the Federal Central Valley Project (“CVP”) due to three events: 1. Enactment of the CVPIA, public law, 102-575, 106 stat. 4600; 2. Issuance of the Biological Opinion for the operation of the CVP and California State Water Project for the winter-run Chi-nook Salmon by the National Marine Fisheries Service (“NMFS”); and 3. Listing of the Delta smelt as a threatened species pursuant to section 4 of the Endangered Species Act (“ESA”), 16 U.S.C. § 1533. Five claims are' stated in the Westlands complaint: 1. The first alleges the Bureau’s implementation of the CVPIA and ESA impairs Westlands’ vested rights under respective water contracts, in violation of the Fifth Amendment due process clause. 2. The second alleges the Bureau violated the National Environmental Policy Act (“NEPA”), 42 U.S.C. §§ 4332, et seq., by failing to conduct an environmental review before changing operational standards and criteria to implement the CVPIA or to find no jeopardy in the ESA consultation for the Delta smelt; 3. The third alleges the Winter Run Biological Opinion (BO) issued by NMFS fails to conform to section 7 of the ESA and regulations thereunder and is arbitrary, capricious and an abuse of discretion in violation of the Administrative Procedure Act (APA); 4. The fourth alleges the NMFS and the Bureau violated NEPA by failing to conduct an environmental review before issuance of the winter-run BO and before implementing the “reasonable and prudent alternative” prescribed; and 5. The fifth alleges the Bureau’s operation of the CVP for fishery and environmental purposes constitutes a reallocation of water in deprivation of Westlands’ vested rights entitling Westlands to just compensation under the Fifth Amendment. Each District alleges it has a water service contract with the United States to receive a specified quantity of water from the San Luis Unit of the CVP. Complaint ¶ 13, 18, 20 and 22. Each contract contains a clause prohibiting disturbance of the rights to the beneficial use of water thereunder so long as the Districts meet their obligations under each contract, and a provision that if Congress amends the Federal Reclamation Law, “the United States agrees, at the option of the District,” to negotiate amendment of the contract consistent with the Amendment of Reclamation Law. Complaint ¶ 13. The contracts of San Luis and Panoche Districts also provide the: “United States agrees that it will not voluntarily and knowingly ... do anything which would limit its ability to deliver water that is available to it from the Sacramento-San Joaquin Delta to the contractor and others presently entitled thereto.” Complaint ¶¶ 20, 22. Each District claims to have fulfilled all its obligations under the contracts. Complaint ¶¶ 16, 19, 21 and 23. In February, 1989, NMFS listed the winter-run Chinook salmon as a threatened species under section 4 of the ESA. (Complaint ¶25.) On February 26, 1991, NMFS requested the Bureau formally consult under ESA section 7 to determine whether the Bureau’s operation of the CVP jeopardized the continued existence of the winter-run Chinook salmon. (Complaint ¶ 26.) Following consultation, on February 12, 1993, NMFS issued the BO, which concluded the proposed long-term operation of the CVP would likely jeopardize the continued existence of the winter-run Chinook salmon. (Complaint ¶ 30.) The BO identified a “reasonable and prudent alternative,” to avoid jeopardy to the species. (Complaint ¶ 30.) In preparing the BO, NMFS did not consider economic or environmental impacts. (Complaint ¶ 31.) The CVPIA was enacted October 30, 1992. (Complaint ¶ 27.) The CVP’s purpose and obligations are thereby modified to, among other things, require dedication annually of 800,000.00 acre feet of CVP water for fish, wildlife and habitat restoration purposes; to release not less than 340,000 acre feet per year to the Trinity River for fishery restoration, propagation and maintenance; to provide for water supplies of suitable quality to maintain and improve wetland habitat; to assess and collect annual restoration payments from the Districts, as beneficiaries of the CVP. (Complaint ¶ 28.) The United States Fish and Wildlife Service (“Service”) on March 5, 1993, listed the Delta smelt as a threatened species under ESA section 4. On April 1,1993, the Bureau requested the service formally consult under ESA section 7 on how CVP 1993 Operations Criteria and Plan (“OC”) affected the Delta smelt. (Complaint ¶ 38.) The Bureau then modified its Central Valley OC to allow the service to make a finding of no jeopardy in its Delta smelt opinion. (Complaint ¶ 38, 39, 54.) No environmental review was conducted for such modification. (Complaint ¶ 55.) On May 26, 1993, the Service issued the “Formal Consultation on CVP Operations Criteria and Plan for 1993: Effects on Delta Smelt” (Delta Smelt BO) which concluded the 1993 plan was not likely to jeopardize the continued existence of the Delta smelt. (Complaint ¶ 40.) During 1993, the Bureau issued three declarations of available CVP water supplies, finally allocating to agricultural contractors south of the Sacramento-San Joaquin Rivers Delta (“Delta”), including Districts, a 50% water supply allotment. (Complaint ¶ 32, 33, 34.) The Declaration was contingent upon the Bureau’s ability to convey water under requirements of the ESA. Although the 50% allotment was not later reduced because 1993 was not a critical dry year, Westlands was notified it should anticipate future water reductions unrelated to climatic conditions. (Complaint ¶ 35.) During 1993, sufficient water supplies existed within the CVP to fully satisfy the Districts’ respective contractual entitlements but for the complained of actions. (Complaint ¶ 42.) On May 17, 1993, the Westlands plaintiffs filed their initial complaint. The following parties have since filed complaints in intervention: 1) Kern County Water Agency; 2) The Friant Users Water Users Authority; 3) The San Joaquin River Exchange Contractors; 4) The Area I parties; and the County of Fresno. A separate action was filed in the Sacramento Division of this Court by the Stockton East Water District, the Central San Joaquin Water Conservation District, the County of San Joaquin, the City of Stockton, and the California Water Service Company (collectively the “Stockton plaintiffs”). That action was transferred as a related case and consolidated for hearing with these motions. Friant Water Users Claims The Friant Water Users’s (“Friant”) complaint-in-intervention alleges claims that are substantially similar to Westlands’ Third and Fourth Claims for relief. Kern County Water Agency The Kern County Water Agency’s (“KWA”) complaint-in-intervention asserts two claims for relief. Those claims are substantially similar to the Westlands Third and Fourth Claims for Relief. KWA also alleges that the Commerce Secretary and the NMFS violated the ESA by issuing the BO and in failing to include local water agencies in efforts to resolve water resource issues in the consultation process. Complaint, at ¶ 28. Exchange Contractors Claims The San Joaquin River Exchange Contractors Water Authority (Exchange Contractors) is made up of four public and private entities, which, either directly or through a predecessor in interest, hold pre-1914 riparian water rights on the San Joaquin River, which they contracted to exchange for a water supply from the United States provided from the Sacramento-San Joaquin River Delta by means of the federal Delta-Mendota Canal. The Exchange Contractors request that judicial notice be taken that the manner in which the Bureau has operated the CVP to comply with the reasonable and prudent alternative set forth in the disputed Biological Opinion has generally impaired the Bureau’s ability to make agricultural water deliveries to its contractors south of the Delta, which will create specified adverse environmental impacts. Further, judicial notice under Federal Rule of Evidence 201(b) is requested that the Bureau’s operation of the CVP to comply with the reasonable and prudent alternative in the biological opinion has created uncertainty regarding agricultural water deliveries south of the Delta. The first request for judicial notice cannot be granted for it refers to facts reasonably in dispute. It is not disputable that uncertainty has been created by the Bureau regarding agricultural water deliveries south of the Delta. The first request for judicial notice is denied. The second request is granted. Fed.Rule of Evid. 201(b)(1) & (2). Requests for judicial notice by Friant Intervenors, the Stockton plaintiffs, federal defendants and environmental intervenors of various court and public documents are granted. Fed.Rule of Evid. 201(b)(2). The Exchange Contractors, and others, complain that the reasonable and prudent alternative directs the Bureau to make its February 15 forecast of deliverable water based upon a conservative 90% probability of exceedance. (Biological Opinion HVI-l.) The Exchange Contractors allege a 90% probability of exceedance water forecast is unnecessary and unreasonable for all but hydrologic dry water years and should not be used by the Bureau except in dry water years. Among other adverse environmental impacts described in Westlands and the Friant intervenors complaints, the Exchange Contractors allege that reductions in water allocations will result in a proliferation of new wells drilled and old wells retrofitted in areas within or immediately adjacent to Exchange Contractors’ service areas, that will result in ground water level changes and irreversible damages to ground water quality as ground water is substituted for service water reductions. The Exchange Contractors identify four levels of major federal action alleged to significantly affect the quality of the human environment: 1) The federal defendants’ consultation pursuant to the ESA, preparation of the Biological Opinion, and selection of a reasonable and prudent alternative for the long term operation of the CVP; 2) Modification of operation of the CVP to implement procedures contained within the reasonable and prudent alternative; 3) The Bureau’s modification of the operation of the CVP to implement the CVPIA by appropriation and diversion from agricultural use to environmental use of over 1.2 million acre feet of water; and 4) The February 25, 1993, issuance of “Interim Guidelines for Implementation of Water Transfers Under Title and XXXIV of Public Law 102-575.” It is alleged that no review pursuant to NEPA was conducted for any of these levels of federal action, and that no data or information base was compiled or available to federal decision-makers to consider the impact on implementation of their decisions. Area I’s Claims Area I intervenors are various landowners and water users in Area I of the Westlands Water District, which is located in the San Luis Unit of the Central Valley Project. The Area I complaint alleges that the three types of reductions implemented in the 1993 water year are not mandated by statute, i.e., the CVPIA. (Complaint ¶ 35.) The complaint alleges the government withheld 59,000 acre feet to serve Wetland habitat areas; (Complaint ¶ 30) 166,000 acre feet to protect Delta Smelt (Id.) and 225,000 acre feet to protect Sacramento River Winter Run Chinook Salmon. (Complaint ¶¶30, 35) Area I claims that the government must plead and prove compliance with the CVPIA including: 1.) Its endeavor to diversify water supply services in order to minimize possible adverse affects on CVP contractors; § 3406(d)(1); 2.) The supplementation of water deliveries under § 3406(d)(1) through voluntary measures, which do not require involuntary reallocations of project yield; 3.) Whether it entered into such agreements as may be necessary to implement the CVPIA with other appropriate parties pursuant to §§ 3408(a) and 3406(d)(1); 4.) That the wetland habitat areas specified in § 3406(d) are to be provided with CVP water; 5.) What, if any, water regulations the government has promulgated to implement the CVPIA, § 3408(a); 6.) That it has not altered the terms of any final judicial decree confirming or determining water rights, § 3408(k); 7.) Whether it obtained modification of permits and licenses of which Area I landowners are beneficiaries, § 3411(a). Area I further alleges that the dedication of 800,000 acre feet of CVP yield for fish and wildlife purposes was not mandated, was not done in compliance with, and was a violation of the CVPIA. (Complaint ¶¶ 35(f), (g), (h)). That the government has not operated the CVP in thé disputed year to meet all obligations under Federal law, state law, or “in consultation with ... affected interests,” §§ 3411(a), 3406(b); nor has the government alleged the 1993-1994 CVP yield, nor whether all 800,000 acre feet are needed for CVPIA purposes, § 3406(b)(2)(D); nor pled compliance with §§ 3408(a), (k), and 3411(a). Area I claims the government implemented a 225,000 acre feet reduction for salmon protection under the ESA, (Complaint ¶ 28, 35(e)(h)(i)); which was not “mandated,” “done in compliance with,” and was a “violation” of the ESA. Area I also claims the government violated reclamation law, § 1(a) of the San Luis Act, to furnish irrigation water for land in the Federal San Luis Unit Service Area and the government’s mandatory obligation to sell and deliver 900,000 acre feet of water to Area I. (Complaint ¶¶ 16, 35(a) and (c).) The Area I complaint alleges various reclamation statutes obligate the government to pay for the cost of constructing water supply facilities by selling water to irrigators. (Complaint ¶¶ 14, 35(a) and (c).) Further, that irrigation users have priority over fish and wildlife uses. That Reclamation statutes are “mandatory” and require sale and delivery. (Complaint ¶¶ 15, 35(a) and (c).) See also § 3406(a)(2) fish and wildlife purposes are on an “equal priority” with irrigation purposes. San Luis Act § 1(a) makes fish and wildlife purposes “incidents” to the “principal” purpose of the Act, irrigation. Stockton Parties Claims The Stockton Parties have entered into contracts with the Bureau for water from the New Melones Dam and Reservoir (“New Melones Unit”) on the Stanislaus River. The Stockton East contract provides for the right to receive “interim” water. Complaint, at ¶ 18. Interim water is water determined to be available from the New Melones Unit which might in the future be directed to other users in the Stanislaus River basin. Id. In reliance on the Stockton East contract, Stockton East entered into a water delivery service contract with the California Water Service Company and the City of Stockton. Complaint, at ¶ 20. The Central San Joaquin Water Conservation District (“Central San Joaquin”), contract provides both an “interim” and a “firm” supply of water. Complaint, at ¶ 19. “Firm water” is to be provided as part of CVP obligations, with shortages expected in critically dry years. Id. Both Stockton East and Central San Joaquin, pursuant to obligations in their contracts with the Bureau, constructed a water conveyance system at a cost in excess of $50 million dollars. Complaint, at ¶¶23, 24. In early 1993, the Bureau and the NMFS determined that 200,000 acre feet of the 800,-000 acre feet needed for CVPIA compliance would be allocated from the New Melones Unit. Complaint, at ¶ 32. Of this amount, approximately 115,000 acre feet were to be held in storage, although some or all of the water may be spilled or lost if the 1993 winter is wet. Complaint at ¶¶ 32, 35. On June 28, 1993, the Bureau orally advised Stockton East and Central San Joaquin that it would not deliver any water during 1993. Complaint, at ¶ 37. Absent this decision, the complaint alleges that sufficient water would be available in the New Melones Unit to satisfy the Bureau’s contractual obligations to the Stockton parties. Complaint, at ¶ 39. The Stockton parties’ complaint alleges claims substantially similar to Westlands’ First, Second and Third Claims for Relief, and two additional claims, not subject of the Federal Defendants’ motions to dismiss: 1) The Third alleges that the reallocation of 200,000 acre feet outside the permit area of New Melones was contrary to CVPIA § 3410; and 2) The Fourth alleges that the government acted arbitrarily and capriciously in the reallocation decision. The following chart summarizes the parties’ claims that are the subject of these motions to dismiss: Claim for Relief Westlands, et al. Kern County Wa- San Joaquin Ex- Friant Water Area I Stockton East ter Agency, et al. change Contrae- Users Authority - Water, et al. “Takings” Claim/ Fifth Claim for 5th Amendment Relief First Claim for Fifth Claim for Relief — Sub. (i) Relief Due Proeess/5th First Claim for Amendment Relief First Claim for First Claim for Relief — Sub. (1) Relief NEPA: EIS Second Claim for req’d for compli- Relief anee with CVPIA First Claim for Relief First Claim for Second Claim for Relief — Sub. (h) Relief NEPA: EIS Fourth Claim for First Claim for First Claim for First Claim for req’d for Biologi- Relief Relief Relief Relief cal Opinion NEPA: EIS Second Claim for req’d for conduct Relief permitting “No jeopardy” finding for Delta Smelt ESA: Adequacy Third Claim for Second Claim for Second Claim for Second Claim for First Claim for of Biological Relief Relief . Relief Relief Relief (Sub. (i) & Opinion (3)) III. LEGAL STANDARD FOR A MOTION TO DISMISS A motion to dismiss for failure to state a claim under F.R.C.P. 12(b)(6) “is viewed with disfavor and is rarely granted.” Hall v. Santa Barbara, 833 F.2d 1270, 1274 (9th Cir.1986), cert, denied, 485 U.S. 940, 108 S.Ct. 1120, 99 L.Ed.2d 281 (1988) (quoting 5 C. Wright & A. Miller, Federal Practice & Procedure, Civil § 1357, at 598 (1969)). “[A] complaint should not be dismissed .for failure to state a claim unless it appears beyond a doubt that the Plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). In deciding a motion to dismiss, the court “must accept as true all material allegations in the complaint and construe them in the light most favorable to” the pláintiff. NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986). Yet, the court need not accept as true allegations that contradict facts which may be judicially noticed. Mullis v. United States Bank Ct., 828 F.2d 1385, 1388 (9th Cir.1987), cert, denied, 486 U.S. 1040, 108 S.Ct. 2031, 100 L.Ed.2d 616 (1988). For example, the court may consider matters of public record including pleadings, orders, and other papers filed with the court or records of administrative bodies. Mack v. South Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir.1986). The court need not accept conclusory allegations, nor unreasonable inferences or unwarranted deductions of fact. Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir.1981), cert, denied, 454 U.S. 1031, 102 S.Ct. 567, 70 L.Ed.2d 474 (1981). In addition, the court may disregard allegations in the complaint if contradicted by facts established by exhibits attached to the complaint. Burning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.1987). IV. DISCUSSION The Constitutional Claims The movants argue that the districts are unable to state a claim for relief, because the contracts at issue confer no vested property interest that warrants constitutional protection. Collateral Estoppel The movants argue that Westlands is collaterally estopped from asserting either a due process or a takings claim premised on a contractual relationship with the United States, by the decisions rendered in Barcellos v. Wolfsen, 849 F.Supp. 717 (1993). Movants claim those decisions determined landowners within Area I of the Westlands District had no absolute property right warranting constitutional protection to the full allotment of water under their contract with the Bureau, so that Westlands’ First and Fifth Claims cannot state claims for relief. Westlands relies on portions of the Memorandum Opinions issued in Barcellos, dated June 18, 1993: Movants pjake a number of legal challenges to these alleged acts. Many must be rejected as they are incorrectly premised on the Movants having an absolute right under the 1963 contract and/or reclamation law to a full allocation of water. These arguments are: - ... 3) The ESA and CVPIA are unconstitutional as applied as they violate Area I’s contract rights under the due process clause;.... (emphasis added). The September 9, 1993 Memorandum Opinion states: Assuming, arguendo, that Article 11 by its plain language is not controlling and the 1963 Contract obligates Federal Defendants to supply, without excuse, 900,000 acre-feet of water, Movant’s argument is still based on the erroneous belief that Congress may never enact laws that have the direct or indirect effect of modifying existing contracts. Movants incon~ectly contend that this modification effects a taking and violation of their due process rights.... ____ A reading of the 1963 Contract reveals no language or intent that “Congress surrendered in clear and absolute language its right” to adjust the amount of water supplied under the contract. To the contrary, Article 11 specifically allows such adjustments when shortages occur, (emphasis added). Westlands argues that the ruling on its Motion to Enforce Judgment is without preclusive effect, because it was without prejudice. The Memorandum Opinion of June 18, 1993 states, The Motion to enforce judgment is DENIED, without prejudice, pending the outcome of the Westlands’ case. Should Westlands succeed there, the Movants may renew their motion, and attempt to demonstrate that the Bureau acted in an unreasonable manner, not contemplated by the parties to the 1993 contract in curtailing their allotment of water. Collateral estoppel bars relitigation of identical issues that were resolved in a prior proceeding, even if the later suit involves a different cause of action. Fund for Animals, Inc. v. Lujan, 962 F.2d 1391, 1399 (9th Cir.1992). The doctrine is inapplicable if the issues are merely similar. Shapley v. Nevada Board of State Prison Comrs., 766 F.2d 404, 408 (9th Cir.1985). “To be ‘final’ for collateral estoppel purposes, a decision need not possess ‘finality’ in the sense of 28 U.S.C. § 1291.” Luben Industries, Inc. v. U.S., 707 F.2d 1037, 1040 (9th Cir.1983). Any prior adjudication of an issue in another action that is “sufficiently firm” can be accorded preclusive effect. Id. As stated in Comment “g” to § 13 of the Restatement of Judgments, [Preclusion should be refused if the decision was avowedly tentative. On the other hand, that the parties were fully heard, that the court supported its decision with a reasoned opinion, that the decision was subject to appeal or was in fact reviewed on appeal, are factors supporting the conclusion that the decision is final for purpose of preclusion. quoted in Luben Industries, 707 F.2d at 1040. A judgment is not final if further judicial action by the court is required to determine the matter litigated. Russell v. Commissioner, 678 F.2d 782, 786 (9th Cir.1982). As a general matter, dismissals without prejudice do not constitute a final decision. Brandenfels v. Heckler, 716 F.2d 553, 557 (9th Cir.1983) (dismissal without prejudice of administrative proceeding has no preclusive effect). An order on a post-trial motion to enforce judgment is not analogous to an order made during pre-trial stages of litigation. The Barcellos opinions left certain issues open for later resolution: 1) the validity of the allegedly applicable environmental statues: the CVPIA and section 7 of the Endangered Species Act; and 2) whether the Bureau has correctly complied with those statutes in its water allocation decisions, to make the water taking from plaintiffs neither arbitrary or capricious, or otherwise illegal. Nor did the decisions finally determine the questions presented by application of the CVPIA, the Bureau’s change of management philosophy for the CVP, and its actions to conform with alleged ESA requirements. To the extent plaintiffs’ constitutional claims are based on these grounds, collateral estoppel does not apply. Westlands and any other party to the contract at issue in Barcellos cannot relitigate that that contract provides an absolute vested contract right to water that cannot under any condition be altered by the Federal Defendants’ reasonable actions, taken pursuant to valid, subsequent legislation. That issue was resolved against them and no further judicial action is required. The parties were fully heard, and the order supported by a reasoned decision. Under Luben, the findings made there are “sufficiently firm” to be accorded preclusive effect. The post-judgment motions assumed for the purposes of decision that the Bureau was acting properly, pursuant to later valid legislation; the propriety of the Bureau’s methods of implementing its water allocation decisions was not decided. That issue as to Westlands and all other plaintiffs, is not precluded. The Westlands Complaint Westlands alleges that the Regional Director of the Bureau issued declarations of available CVP supplies for the 1993 water year, to meet the obligations of the CVPIA and the ESA. Complaint, ¶ 34. That the CVP contains adequate water supplies to comply with the contacts, “absent the Bureau’s operation of the CVP to comply with PL 102-575 and the Endangered Species Act.” Complaint, ¶ 42. Moreover: 47. The Bureau’s reduction of Westlands’, San Benito’s, San Luis’, and Panoche’s vested rights to CVP water entitlement resulting from implementation of PL 102-575 and the Endangered Species Act violates each party’s due process rights under the Fifth Amendment to the United States Constitution. 48. In addition, the Bureau’s stated intention to assess and charge Westlands, San Benito, San Luis, and Panoche restoration payments pursuant to section 3407(c) of PL 102-575 impairs each party’s vested rights under their respective water service contract in violation of the due process clause of the Fifth Amendment to the United States Constitution. These allegations, taken as true, are sufficient to give notice that the methods of CVPIA implementation are challenged as arbitrary, capricious and/or contrary to law, resulting in a due process deprivation of vested contract rights. No due process claim as to the procedural or substantive validity of the CVPIA or ESA, as enacted, is raised by Westlands or any other plaintiff; except a challenge to the restoration assessments under CVPIA § 3407(c), which was not addressed in the Barcellos post-judgment orders. That claim is not-precluded, and is adequately alleged as a due process impairment of vested contract rights. The motion to dismiss Westlands’ first claim, on the grounds of claim or issue preclusion, is denied, except for the issue of whether the Westlands and related parties’ water rights were absolutely unalterable under their contracts with the Bureau as to which the motion is granted. Area I’s Complaint Paragraph 35 alleges: (e) The Federal Defendants’ failure and refusal to sell and deliver water is neither mandated nor permitted under the ESA. (f) The Federal Defendants’ failure and refusal to sell and deliver water is neither mandated nor permitted under the CVPIA. (g) The Federal Defendants’ failure and refusal to sell and deliver water is a violation of the CVPIA §§ 3408(k), 3409 and 3411(a). (h) The Federal Defendants’ failure and refusal to sell and deliver water was not done in compliance with the ESA or CVPIA. Taken as true, these allegations provide the defendants notice of claims their actions in allocating CVP water are arbitrary, capricious and/or contrary to law. That issue was not determined in Barcellos and is not precluded. Resolution of these claims requires interpretation of contracts and the determination of factual issues concerning the Bureau’s compliance with the CVPIA and ESA, which cannot be decided on a motion to dismiss. Other Parties’ Complaints No other plaintiff was either a party, nor in privity with a party in Barcellos. Their complaints concerning different contracts are not precluded by Barcellos. Merits of the Constitutional Claims Due Process Government Contract Interpretation: Background In Lynch v. United States, 292 U.S. 571, 579, 54 S.Ct. 840, 843, 78 L.Ed. 1434 (1934), the Supreme Court held “Mights against the United States arising out of a contract with it” are property rights protected from deprivation or impairment by the Fifth Amendment Due Process Clause.” Under that protection, sovereign authority cannot be exercised to invalidate, release or extinguish contractual rights, or by acts “which without destroying [the] contracts derogatefs] from substantial contractual rights.” Thorpe v. Housing Authority of Durham, 393 U.S. 268, 279, 89 S.Ct. 518, 524, 21 L.Ed.2d 474 (1969). A Due Process violation requires: 1) cognizable property rights arising out of a contract with the government; and 2) that the government has abrogated those contractual rights. Madera Irrigation District v. Hancock, 985 F.2d 1397, 1401 (9th Cir.), cert, denied, — U.S.-, 114 S.Ct. 59, 126 L.Ed.2d 29 (1993); Barcellos and Wolfsen, Inc. v. Westlands Water District, 899 F.2d 814, 821 (9th Cir.), cert, denied, 498 U.S. 998, 111 S.Ct. 555, 112 L.Ed.2d 562 (1990). Federal law controls the interpretation of a contract made under federal law when the United States is a party. U.S. v. Seckinger, 397 U.S. 203, 209-210, 90 S.Ct. 880, 884-85, 25 L.Ed.2d 224 (1970). Principles of government contract interpretation: .... compel a construction somewhat more liberal toward the government than might be appropriate were the contract a purely private transaction. They enable it to change, not just execute past policies. But too liberal an interpretation of the residual sovereign power of the government to override its contractual commitments would eviscerate the government’s power to bind itself to contracts. In addition to the moral offensiveness of allowing the government to break its promises, too liberal a construction would have the paradoxical consequence of weakening the sovereign power to implement policy. Madera Irrig. Dist., 985 F.2d at 1401. The plaintiffs argue that Seckinger, 397 U.S. at 216, 90 S.Ct. at 888, requires that where the federal government drafts the contract, “provision[s] should be construed less favorably to that party which selected the contractual language” — that is, the federal government. But the issue presented in Seckinger was not abrogation of-sovereign power to enact subsequent legislation; it was interpretation of an indemnity provision. Id. at 204, 90 S.Ct. at 881. As noted in Western Fuels-Utah, Inc. v. Lujan, 895 F.2d 780, 789 (D.C.Cir.), cert, denied 498 U.S. 811, 111 S.Ct. 47, 112 L.Ed.2d 24 (1990), courts have adopted specific rules to determine if a contract right is immune from future changes in the law. The rules of government contract interpretation for immunity from future legislation are as follows: First, invalidation of subsequent legislation under the Due Process clause is to be avoided; government contracts should be construed “to avoid foreclosing the exercise of sovereign authority.” Peterson v. United States Dept, of the Interior, 899 F.2d 799, 807 (9th Cir.), cert, denied 498 U.S. 1003, 111 S.Ct. 567, 112 L.Ed.2d 574 (1990). Legislation must be construed in a constitutional manner “if fairly possible.” Knapp v. Cardwell, 667 F.2d 1253, 1260 (9th Cir.) (quoting Crowell v. Benson, 285 U.S. 22, 62, 52 S.Ct. 285, 296, 76 L.Ed. 598 (1932), cert, denied, 459 U.S. 1055, 103 S.Ct. 473, 74 L.Ed.2d 621 (1982). Second, “governmental contracts should be interpreted against the backdrop of the legislative scheme that authorized them, and [the] interpretation of ambiguous terms or implied covenants can only be made in light of the policies underlying the controlling legislation.” Peterson, 899 F.2d at 807. Third, “[s]overeign power ‘will remain intact unless surrendered in unmistakable terms.’ ” Madera Irrig. Dist., 985 F.2d at 1401, (emphasis added), (quoting Bowen v. Public Agencies Opposed to Social Security Entrapment, All U.S. 41, 52, 106 S.Ct. 2390, 2396, 91 L.Ed.2d 35 (1986) (“Bowen”). The “unmistakable terms” requirement is based on the principle that under the usual rule, “contractual arrangements, including those to which a sovereign itself is a party, remain subject to subsequent legislation by the sovereign.” Peterson, 899 F.2d at 807, quoting Bowen, 477 U.S. at 52, 106 S.Ct. at 2397. The doctrine originated in Providence Bank v. Billings, 29 U.S. (4 Pet.) 514, 561, 7 L.Ed. 939 (1830), where Chief Justice Marshall wrote, “[B]ut as the whole community is interested in retaining [the sovereign power] undiminished; that community has a right to insist, that its abandonment ought not to be presumed, in a case in which the deliberate purpose of the state to abandon it does not appear.” Relying on Billings and its progeny, the Supreme Court has often applied its rule of construction that “nothing passes but what has been granted in clear and explicit terms; and that neither the right of taxation, nor any other power of sovereignty, will be held by this court to have been surrendered, unless such surrender has been expressed in terms too plain to be mistaken.” Jefferson Branch Bank v. Skelly, 66 U.S. (1 Black) 436, 446,17 L.Ed. 173 (1862); see also Bowen, All U.S. at 52-53,106 S.Ct. at 2396-97; Merrion v. Jicarilla Appache Tribe, 455 U.S. 130,148, 102 S.Ct. 894, 907, 71 L.Ed.2d 21 (1982). The Supreme Court has applied the “unmistakable terms” requirement less forcefully in cases where the government enacts legislation to ease its financial burdens, in contrast to those in which the government implements social policy. Compare Lynch v. United States, 292 U.S. 571, 580, 54 S.Ct. 840, 844, 78 L.Ed. 1434 (1934) (enforcing agency’s promise to provide life insurance policies to individuals who paid premiums after Congress canceled program to “lessen government expenditure”); with Bowen, All U.S. at 53, 106 S.Ct. at 2397 (That contracts be construed to avoid the exercise of sovereign power “take[s] on added force when the arrangement pursuant to which the Government is claimed to have surrendered a sovereign power is one that serves to implement a comprehensive social welfare program affecting millions of individuals throughout our Nation.”). Where the party to a government contract is an agency, the “unmistakable terms” requirement is complicated by separation of powers concerns. Neither the Supreme Court nor the Ninth Circuit has answered the question of whether an agency can immunize a party against Congress’ power to legislate. But see Madera Irrig. Dist., 985 F.2d at 1407 (Hall, J., concurring) (“It is doubtful that the Secretary of the Interior could, by contract, waive the right of Congress to pass laws”). Transohio Savings Bank v. Director, Office of the Thrift Supervision, 967 F.2d 598, 621 (D.C.Cir.1992), held that an agency is without power to cede by contract, Congress’ legislative power, unless Congress has delegated that authority to the agency in “unmistakable terms.” The court reiterated two long-standing principles of agency law: First, “It is ‘central to the real meaning of the ‘rule of law,’ [and] not particularly controversial’ that a federal agency does not have the power to act unless Congress, by statute, has empowered it to do so.” Transohio Savings, 967 F.2d at 621 (quoting Edward L. Rubin, Law and Legislation in the Administrative State, 89 Colum.L.Rev. 369, 402 (1989)). Second, agency actions beyond delegated authority are ultra vires and must be invalidated by a reviewing court. Id. “Anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority.” Id. at 623 {quoting Federal Crop Ins. v. Merrill, 332 U.S. 380, 384, 68 S.Ct. 1, 3, 92 L.Ed. 10 (1947)). The court observed that, according to Peterson, 899 F.2d at 808, “In light of the fundamental principle that Congress always has the power to amend, repeal or ignore legislation passed by earlier congresses, we decline to ... require that Congress expressly recite that it reserves the right to ‘repeal, amend or alter’ legislation to preserve its fundamental right to do so.” Transohio Savings also holds: In the context of contracts entered into by administrative agencies, ... the unmistakability doctrine has two components: the contract relinquishes Congress’ power to regulate only when: 1) the agency, in the contract, has unmistakably waived Congress’ regulatory authority, and 2) Congress, in a statute, has unmistakably delegated to the agency the power to surrender Congress’ regulatory authority. Id., 967 F.2d at 621. The government agency to the disputed water contracts, the Secretary of the Interi- or, by the Bureau of Reclamation, has been delegated authority by Congress in the Act of June 17, 1902, ch. 1093, 32 Stat. 388 and Act Aug. 13, 1914 ch. 247, 38 Stat. 686, classified generally as 43 U.S.C. § 372 et seq. 43 U.S.C. § 373 provides: The Secretary of the Interior is hereby authorized to perform any and all acts and to make rules and regulations as may be necessary and proper for the purpose of carrying the provisions of this Act into full force and effect. 43 U.S.C. § 375f states: The Secretary of the Interior is authorized to perform any and all acts and to make rules and regulations necessary and proper for carrying out the purposes of this Act. 43 U.S.C. § 423e states in relevant part: ... The Secretary of the Interior is authorized in his discretion to enter into agreement with the proper authority of the State or States wherein [water] projects or divisions are located ... 16 U.S.C. § 590z-ll states: For the purpose of facilitating and simplifying the administration of the Federal reclamation laws ... the Secretary of the Interior is hereby authorized to delegate, from time to time and to the extent under such regulations as he deems proper, his powers and duties under said laws to the Commissioner of Reclamation, an Assistant Commissioner, or the officer in charge of any office, division, district, or project of the Bureau of Reclamation. This language chosen by Congress does not include an unmistakable delegation of the power to surrender Congress’ regulatory authority to enact future legislation. No party has pointed to other statutory language that is an unmistakable waiver of Congress’ sovereign authority to repeal, amend, or alter legislation applicable to the Bureau. The nature of the environmental legislation in dispute, the CVPIA, directly implicates broad questions of social policy. The CVPIA also seeks to ease federal financial burdens by shifting more costs of CVP water and its management and delivery to CVP contractors. See Central Valley Project Reform Act, H.R.Rep. No. 576, Pt. 1, 102d Cong.2d Sess. at 35 (June 16, 1992) (“House Report”); 138 Cong.Ree. § 17658, 17662 (daily ed. Oct. 8, 1992). Congress has apparently shifted priority from continued development to agricultural use of lands without natural water supplies, through the availability of federal project subsidized water, to curtailing the availability of federal project water for agricultural use to serve environmental purposes. See House Report, at 35. This necessarily leads to an analysis of the contracts to determine if the agency, expressly waived the sovereign power to regulate and if the parties allocated the risk of and liability for a change in federal water delivery priorities. Where damages for breach of contract are sought, the analysis may differ. In Hughes Communications Galaxy, Inc. v. United States, 998 F.2d 953 (Fed.Cir.1993), the court found that a government contract between a satellite manufacturer and the NASA, for the launch of commercial payloads, shifted responsibility to the government, absent other defenses, for cost of changes in launch priority and scheduling, even if caused by sovereign government action. Article IV of that contract required the government to schedule launch services according to “the United States policy governing launch assistance approved by the President of the United States on August 6, 1982.” Hughes Communications, 998 F.2d at 957. After the contract was signed, the President ordered NASA to stop launching commercial spacecraft. The court held that Article IV language “more than satisfies the ‘unmistakable terms’ requirement,” for surrender by the government of its authority to act as sovereign, rejecting the government’s argument that this reading “would have the effect of allowing NASA to contract away Congressional and Presidential power to set space policy for the entire term of the [contract].” Id. at 958. The court distinguished Bowen and Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 102 S.Ct. 894, 71 L.Ed.2d 21 (1982), stating: “The present case simply involves the question of how liability for certain contingencies was allocated by the contract____ Our conclusion does not prevent the President or Congress from implementing space policy, but does require NASA, absent the successful assertion of another defense in this case, to bear the cost of changes in launch priority and scheduling resulting from revised policy.” Id. 998 F.2d at 958-59. For that reason, NASA could be liable for damages for breach of the launch contract. The Law Applied The due process analysis first inquires whether the plaintiffs have cognizable property rights in the water contracts. Madera Irrig. Dist., 985 F.2d at 1401. Where the rights conferred in an agreement are entered “in conformity with” legislation, conferring rights coextensive with that legislation, the agreement remains subject to the legislature’s express or implied power to amend that agreement, and no proteetible property interest exists apart from that conferred by statute. Bowen, All U.S. at 53-55, 106 S.Ct. at 2397-2398; Peterson, 899 F.2d at 808. A contract executed within the agency’s authority and supported by independent consideration is protected by the fifth amendment. Lynch, 292 U.S. at 576, 54 S.Ct. at 842; Madrero, Inig. Dist., 985 F.2d at 1402. Furthermore, “the government cannot reserve to itself an unlimited right to escape its contractual obligations ‘without rendering its promises illusory and the contract void.’ ” Madera Irrig. Dist., 985 F.2d at 1405, (citing Torncello v. United States, 231 Ct.Cl. 20, 681 F.2d 756, 760 (1982)). Here, the Bureau made long term contracts with plaintiffs under a Congressional grant of authority to appropriate, allocate, manage and deliver federal water through the CVP. The Due Process analysis next asks whether the vested contract right has been abrogated; traditionally measured by the following standard: “The obligations of a contract are impaired by a law which renders them invalid, or releases or extinguishes them and ... [by laws] which without destroying contracts derogate from substantial contractual rights.” Home Building & Loan Ass’n v. Blaisdell, 290 U.S. 398, 431, 54 S.Ct. 231, 237, 78 L.Ed. 413 (1934). The abrogation of a vested right must be substantial. Barcellos and Wolfsen, 899 F.2d at 821 (“If no substantial impairment is shown, the inquiry ends.”). The plaintiffs’ complaints allege the value of water and the draconian effects a reduction of their water allocations will have. Reduction of water allocations from 50%, or in the case of the Stockton plaintiffs, 100%, of contractual water entitlements, meets the substantial impairment requirement. The Federal Defendants argue that evidence that the parties contemplated the contracts were subject to subsequent legislation is found in the contract preambles. The Stockton parties’ contracts begin: THIS CONTRACT, made this 19th day of December, 1983, in pursuance generally of the Act of June 17, 1902 (32 Stat. 388), and acts amenctatory or supplementary thereto.... WITNESSETH, That: ... The San Benito, San Luis and Panoche contracts contain substantially similar language. The CVPIA states that it was enacted as an amendment to federal reclamation law. The plaintiffs dispute the Federal Defendants’ reading of the contracts’ preambles. It cannot be said as a matter of law that the phrase “in pursuance generally” reserves the unconditional right to enact subsequent legislation, which renders the contract entirely without value under all circumstances. As a general rule, although a preamble may be useful in interpreting an ambiguous operative clause in a contract, “it cannot create any right beyond those arising from the operative terms of the document.” Abraham Zion Corp. v. Lebow, 761 F.2d 93, 103 (2d Cir.1985) (citing cases); 17A Am. Jur.2d Contracts § 392 at 417-18 (1991) (recitals indicate only the background of the contract, “they do not ordinarily form any part of the real agreement”). The interpretation offered by the government would amount to a reservation of “an unlimited right to escape its contractual obligations,” a disfavored construction which renders the government’s promises “illusory and the contract void.’” Madera Irrig. Dist, 985 F.2d at 1405. It would render superfluous the contract provisions requiring the Bureau not to use means within its control to create water shortages. A contract should be interpreted in such a way that all its parts make sense. United States v. Johnson Controls, Inc., 713 F.2d 1541, 1555 (Fed. Cir.1983). The motion to dismiss cannot be granted based on an interpretation as a matter of law that preamble language waives a due process property interest in water against any and all subsequent legislation, without taking evidence of the intent of the contracting parties. Plaintiffs argue that their water contracts contain an “unmistakable waiver” of sovereign authority. The San Benito contract provides, at ¶ 27, in relevant part: ... [I]n the event that the Congress amends the excess-lands provisions or other provisions of the Federal reclamation laws, the United States agrees, at the option of the Contractor, to negotiate amendments of the appropriate articles of this contract, all consistent ivith the provisions of such amendment. (Emphasis added) The Panoche and San Luis Districts’ contracts contain a substantially similar provision at ¶ 23. In Peterson, 899 F.2d at 812, the Ninth Circuit construed almost identical language, and rejected the argument that this provision waived sovereign authority to legislate, stating, We believe that a more reasonable interpretation of [this provision] is that it grants the Water Districts the option of renegotiating the terms of their contracts to conform to Congress’s amendments to the [amended] provisions of reclamation law. This option does not, however, give the Water Districts the right to continue to receive reclamation water under the terms of the pre-existing contracts if those terms violate the newly amended law. Although the water districts assert that the Peterson analysis is merely dicta, that court stated that this analysis was an alternative reason to support its holding. The key language is the phrase, “all consistently with,” which specifies that amendments to existing water contracts are to be consistent with any amendments to reclamation law. Even if the Peterson analysis is dicta the renegotiation provision does not unmistakably waive the Bureau’s right to act pursuant to subsequent valid legislation. To the contrary, renegotiation is to conform the contracts to subsequent amendments to reclamation law. This supports the position that the government reserved the authority to legislate about CVP water. San Benito, San Luis, and Panoche argue that “unmistakable waivers” exist in each of their contracts. The San Benito contract states: ¶ 7(a): In its operation of the Project, the United States will use all reasonable means to guard against a condition of shortage in the quantity of water available to the Contractor to this Contract. Nevertheless, if a shortage does occur during any year because of drought, or other causes which, in the opinion of the Contracting Officer, are beyond the control of the United States, no liability shall accrue against the United States, or any of its officers, agents, or employees for any damage, direct or indirect, arising therefrom. The San Luis contract and Panoche contract both contain the following identical provisions: ¶ 18(e): The United States agrees that it will not voluntarily and knowingly, by execution of new contracts establishing additional long-term contractual commitments for water from the Sacramento-San Joaquin Delta or othenvise, do anything which would limit its ability to deliver water that is available to it from the Saeramento-San Joaquin Delta to the Contractor and others presently entitled thereto. (Emphasis added.) This language gives rise to the contention that these parties intended to allocate liability for a government controlled shortage of water, without creating a specifically enforceable right in plaintiffs to compel water deliveries from the Bureau. Stockton East has a contract for an interim supply of water from the New Melones Dam; Central San Joaquin has a contract for both an interim and firm supply of water from the same facility. Both contracts contain the following provision: 9.(a) In its operation of the Project, the United States will use all reasonable means to guard against a condition of shortage in the quantity of water available to the Contractor pursuant to this contract. Nevertheless, if a shortage does occur during any year because of drought, or other causes which, in the opinion of the Contracting Officer, are beyond the control of the United States, no liability shall accrue against the United States or any of its officers, agents, or employees for any damage, direct or indirect, arising therefrom. (Emphasis added.) The plaintiffs argue that these sections constitute the United States’ promise to use all reasonable means to guard against shortage, including refraining from enacting legislation (a cause within the government’s control) that impairs the government’s duty to deliver water under the contracts. The San Luis, San Benito and Panoche districts argue in the alternative that, when read in conjunction with other contract provisions, the “beyond the control” provision should be read to preclude reductions in the water supply for any reason unrelated to water quality. There are several plausible interpretations of these contract provisions: First, the phrase could require the United States, including Congress, to “use all reasonable means” to refrain from enacting legislation that interferes with the districts’ contract rights. This interpretation assumes that enacting legislation is not a cause “beyond the control” of the United States, and that the Bureau had the authority to cede that right by contract. Under this reading, the United States would not be excused from performance or damages for breach under the “no liability shall accrue” provision, because enactment of legislation was either within its control, and/or the United States was or should have been aware of existing statutory and contractual obligations under the disputed contracts. Unlike the “any cause” provision discussed in the orders in the Barcellos post-judgment motions, these provisions impose affirmative obligations on the United States not to create any shortages. Second, the provision could be read to waive the Bureau’s authority to act pursuant to valid legislation in a manner which contravenes the water districts’ rights to receive contractual allotments of water. This interpretation assumes that the Bureau was fully aware of all legal obligations when it undertook its contractual obligation to supply water, and should have anticipated that subsequent legislation may be enacted. Under this reading, the Bureau would be obligated to refrain from taking actions to create water shortages, or be liable if its failure to supply water was due to its obligation to comply with later legislation. Third, as San Benito, San Luis and Panoche argue, the contracts can be read as a whole to excuse performance where “water quality” or “water pollution” are causes of shortage. The San Luis and Panoche contracts state at ¶29: The Contractor shall, within its legal authority, comply with all applicable Federal laws, orders and regulations, and the laws of the State of California, all as administered by appropriate authorities, concerning protection of the environment and pollution of atr, streams, reservoirs, groundwater, or water courses with respect to thermal pollution or the discharge of refuse, garbage, sewage effluent, industrial waste, oil, mine tailings, mineral salts, or other pollutants. The San Benito contract states, at ¶ 7(c): If operation of the Project to meet legally required Delta water quality control standards, including Federally adopted water quality standards, causes a shortage in water supply and requires a reduction in deliveries of water to the Contractor under this agreement, such reductions will be m.ade in accordance with subdivision (b) of this article and shall not be deemed a breach thereof. Read in their entirety, these contracts could excuse the Bureau’s performance only for changes in water quality control standards. This interpretation assumes the Bureau was aware of environmental concerns when contracting, yet chose to limit excuses for performance to those listed. Where specific and general terms in a contract are in conflict, those which relate to a particular matter control over the more general language. Hughes Communications, supra, 998 F.2d at 958. Fourth, the provisions can be read to require the Bureau to use its best efforts to provide water under the contracts, subject to limitations of water availability and any changes caused by subsequent legislation. Under this interpretation, the Bureau avoids liability for water shortages caused by subsequent valid legislation. These various contractual provisions of plaintiffs’ contracts are susceptible of more than one reasonable interpretation and are therefore ambiguous. See Castenda v. Dura-Vent Corp., 648 F.2d 612, 619 (9th Cir.1981). A motion to dismiss cannot be granted against a complaint to enforce an ambiguous contract. Consul Ltd. v. Solide Enterprises, Inc., 802 F.2d 1143, 1149 (9th Cir.1986). Evidence as to the contracting parties’ intent and the circumstances under which they contracted is required to determine waiver of the sovereign power to act. “The sovereign act defense is an inherent element of every contract to which the government is a party, whether or not explicitly stated.” Hughes Communications Galaxy, Inc. v. U.S., supra, 998 F.2d at 958. The parties must be given an opportunity to fully develop the background, intent, and meaning of the disputed contracts, as the language chosen does not express allocation of risk in unambiguous terms. The motions to dismiss the due process claims must be denied, because the government’s excuse from performance without liability is not established as a matter of law by the contracts’ language. Assessments Westlands and Area I allege due process violations for the imposition of restoration payment assessments, under CVPIA § 3407(c). That section provides, in relevant part: (1) To the extent required in appropriation acts, the Secretary shall assess and collect annual mitigation and restoration payments, ... consisting of charges to direct beneficiaries of the Central Valley Project under subsection (d) of this section in order to recover a portion of all of the costs of fish, wildlife, and habitat restoration programs and projects under this title.... It is claimed the assessment violates the express terms of article 6(a) of the Westlands contract, as enforced by the 1986 Barcellos judgment. They argue that section 3408(k) prevents application of the CVPIA to the Barcellos settlement agreement and judgment. It is suggested there is no rational relationship between any burden caused by or benefit received from the assessments. The disputed Article in the Westlands Water Service Contract states, in relevant part, 6. (a) Before December 15 of each year the Contracting Officer shall notify the District in writing of the rate of payment to be made by the District for water which the District is required to accept and pay for during the ensuing year pursuant to the provisions of Article 3 hereof. The rate so announced may not be in excess of Eight Dollars ($8) per acre-foot.... Despite Area I’s attempts to distinguish its facts, the reasoning of Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 102 S.Ct. 894, 71 L.Ed.2d 21 (1982) is controlling. In Merrion, the Court held that an Indian tribe had the power to tax oil and gas production by entities leasing tribal land. The leases provided rents at the specific rate of $1.25 per acre, and a royalty of 12%% of the value of all oil and gas produced from the leased land. The Court held at 455 U.S. at 147-48, 102 S.Ct. at 907: ... [T]he absence of a reference to the tax in the leases themselves hardly impairs the Tribe’s authority to impose the tax. Contractual arrangements remain subject to subsequent legislation by the presiding sovereign. Veix. v. Sixth Ward Building and Loan Assn, of Newark, 310 U.S. 32[, 60 S.Ct. 792, 84 L.Ed. 1061] (1940) and Home Building & Loan Assn. v. Blaisdell, 290 U.S. 398[, 54 S.Ct. 231, 78 L.Ed. 413] (1934). Even where the contract at issue requires payment of a royalty for a license or franchise issued by the governmental entity, the government’s power to tax remains unless it “has been specifically surrendered in terms which admit of no other reasonable interpretation.” St. Louis Railroad v. United R. Co., 210 U.S. 266, 280[, 28 S.Ct. 630, 634, 52 L.Ed. 1054] (1908). Under Memon, the existence of fixed rates in a contract did not unmistakably waive the sovereign’s authority to impose additional charges. Additionally, the “not to exceed” provision cited by Area I is identical to