Eastern District of California Rejects Challenges to CVP Contract Conversions

07.24.2025

In a long-awaited matter, the Eastern District of California on June 30, 2025, issued its ruling on several environmental groups’ challenges to the conversion of water service contracts to repayment contracts under the Water Infrastructure Improvements for the Nation Act (“WIIN Act” or “Act”) (consolidated cases of Center for Biological Diversity, et al., v. U.S. Bureau of Reclamation, et al. and North Coast Rivers Alliance, et al., v. United States Department of the Interior, et al.)

In short, the Court granted summary judgment in favor of the U.S. Bureau of Reclamation (“Reclamation”) and contractors. The Court found the agency was not required to conduct environmental review under the National Environmental Policy Act (“NEPA”) or the Endangered Species Act (“ESA”) when converting contracts. The ruling completely disposes of the claims in the Center for Biological Diversity (“CBD”) case and the court indicated that two remaining claims in the North Coast Rivers Alliance (“NCRA”) case [validation judgments required, and violations of Reclamation law] will be addressed in a separate ruling.

I. Core Issue Regarding Discretion

The central question before the court was whether Reclamation had discretion to alter the terms of water contracts during their conversion under the WIIN Act in a way that could benefit the environment or protected species. The applicability of both NEPA and the ESA hinges on whether an agency has such discretion.

Plaintiffs argued that the WIIN Act’s language requiring conversions of Central Valley Project (“CVP”) water contracts provides Reclamation the necessary discretion to trigger environmental review. Defendants, Reclamation and contractors, argued that provisions in the WIIN Act eliminated this discretion, making the contract conversions a non-discretionary, mandatory act not subject to NEPA or ESA review.

II. Court’s Analysis: No Discretion

The Court found that while Section 4011(a)(1) of the WIIN Act refers to “mutually agreeable terms and conditions,” this phrase is constrained by the rest of the statute. Specifically, the Court highlighted two key limiting provisions:

Mandatory Conversion: The Act states that upon a contractor's request, the Secretary of the Interior “shall convert” the water service contracts.
No Modification of Water Rights: Crucially, Section 4011(a)(4)(C) explicitly forbids the conversion from modifying “other water service, repayment, exchange and transfer contractual rights” between the contractors and Reclamation.

The Court concluded that the prohibition on altering water service rights effectively stripped Reclamation of discretion to change essential contract terms, such as water quantities or delivery timing, for the benefit of the environment. The only negotiable terms in the contracts were those related to the financial mechanics of the accelerated repayment of project construction costs, which Congress defined in Section 4011(a)(1).

III. Savings Clauses & Public Trust Not Applicable

The plaintiffs relied heavily on the WIIN Act’s “savings clauses,” - provisions intended to prevent a new law from overriding existing laws - like the ESA and the Central Valley Project Improvement Act (“CVPIA”) to ague environmental review was required. The court rejected these and related public trust arguments raised by plaintiffs:

CVPIA Savings Clause. Plaintiffs argued that the CVPIA’s requirement for environmental review of contract renewals should apply. The Court disagreed, drawing a distinction between a contract “renewal” and a contract “conversion” to a permanent repayment contract. It found that the WIIN Act created a separate process for contract conversions not covered by the CVPIA’s renewal-specific requirements.
ESA Savings Clause. This clause states the WIIN Act shall not amend the applicability of the ESA to the “operation” of the CVP. The Court found this clause applies only to the physical operations of the water project, not the separate, mandatory administrative act of converting CVP contracts.
State Law / Public Trust. Plaintiffs contended that forgoing environmental review would prevent analysis of the contracts’ conformity with state law, specifically the public trust doctrine. The Court found this argument indirect, stating that while Reclamation must comply with state law, the failure to perform an environmental review does not in itself constitute a violation of the public trust doctrine.

IV. Conclusions and Implications

No Discretion, No Environmental Review Required. The Court concluded that the WIIN Act makes the conversion of these water contracts a mandatory, non-discretionary duty for Reclamation. Reclamation lacked the ability to modify the original water service contract terms and it had no discretion under the WIIN Act to influence the action for the benefit of protected species or the environment.
ESA and NEPA Inapplicable. Lacking discretion, the contract conversions do not qualify as a “discretionary Federal involvement or control” under the ESA and are not a “major Federal action” under NEPA. Therefore, Reclamation acted lawfully when it converted the contracts without conducting project-specific environmental review.
Congress’ Deliberate Policy Shift. The Court acknowledged the magnitude of this outcome, stating, “The Court understands why Plaintiffs appear to be flabbergasted by the result here” but that “[u]ltimately, the Court must conclude that this monumental policy shift is one that Congress deliberately created by wording the WIIN Act as it did.”

Plaintiffs have 60 days from the date of the final order to seek appellate review.