Maricopa-Stanfield Irrigation & Drainage District v. United States

No. 97-16432 (147 F.3d 1168) (9th Cir. July 7, 1998)

The court holds that the federal government's reallocation of excess water to a Native American tribe did not constitute a taking of irrigation districts' water rights. A 1984 federal statute directed a permanent annual supply of water to a Native American tribe and apportioned the excess water to a state water reserve. After the districts entered into subcontracts with the state for a percentage of the excess water, a 1992 statute reallocated the excess water to a second tribe. The court first holds that the districts have standing to sue under the 1992 statute. Although Congress did not define the term "contractor" in the 1992 statute, a reasonable construction of the term would include all entities that had contracted for residual water at the time of the 1992 statute — even those who, like the districts, subsequently amended their subcontracts. Moreover, the districts have alleged an actual injury that is redressable under the 1992 statute. The 1992 statute gave the second tribe a higher priority right to a quantity of water worth more than the districts' lower priority right to the same water. And contrary to arguments by amici curiae, the uncertainty of future damages has no bearing on whether the districts have standing to assert claims for damages that they have already sustained.

The court next holds that the districts' subcontracts standing alone gave them no vested rights to the excess water allocated to the second tribe. The subcontracts did not entitle the districts to excess water, and when the subcontracts were entered, the excess water was not part of the non-Indian agricultural pool. The court then holds that the districts have no valid contractual rights to the excess water under the 1984 statute. The districts have no standing to sue for breach of the 1984 statute. The districts neither relied on nor paid valuable consideration for the excess water. Such water was a windfall to the districts. Accordingly, the districts were incidental beneficiaries of a gratuity that gave rise to no contractual rights against the United States. In addition, even if the 1984 statute entitled the districts to the excess water, the statute did not unmistakably surrender Congress' prerogative to remove the excess water from the water reserves. The districts can point to no language in the 1984 statute that would lead to the unmistakable conclusion that Congress intended their entitlement to persist for any set period. Moreover, the 1984 statute contains no unmistakable language indicating that Congress limited the Secretary of the Interior's authority to reallocate the excess water. Absent such language, Congress' intention to so limit itself is unthinkable.

Counsel for Plaintiffs
Robert S. Porter
Ellis, Baker & Porter
2111 E. Highland Ave., Ste. 355, Phoenix AZ 85016
(602) 956-8878

Counsel for Defendant
Richard G. Patrick, Ass't U.S. Attorney
U.S. Attorney's Office
4000 U.S. CtHse.
230 N. First St., Phoenix AZ 85025
(602) 514-7500

Before Goodwin and Ferguson, JJ.

[28 ELR 21467]

Pregerson, J.

Opinion

Facts and Prior Proceedings

The Colorado River and its tributaries are the major sources of water in the arid Southwest. Careful in the years of drought, the United States has established reclamation projects to channel water where it is needed most and to head off disputes among water users. But in its efforts to settle some water rights disputes, sometimes the government creates others. This case involves one such dispute. A working familiarity with the history of water rights legislation in the Southwest is essential to a full comprehension of this controversy.

Shortly after the first World War, legislators considered ways to regulate and capture for beneficial use Colorado River flood flows that annually were lost. A dam in Arizona with a canal to California was contemplated. Plans like this one worried inhabitants of the Upper Basin states (Colorado, Utah, New Mexico, and Wyoming), who knew that water rights might be lost forever to the states in the Lower Basin (Arizona, Nevada, and California) under the doctrine of prior appropriation. To forestall water rights disputes, Congress ratified the Colorado River Compact in 1922. See Act of August 19, 1921, art. 2, 43 Stat. 171, reprinted in Ariz. Rev. Stat. § 45-1311. Among other things, the Compact apportioned 7.5 million acre feet ("AF") of water annually to the states in the Lower Basin.¹

But the Compact did not apportion water among the states. The Boulder Canyon Project Act of 1928 parceled water among the Lower Basin states, allotting Arizona 2.8 million AF annually.² See 43 U.S.C. § 617 (1998). This Act also gave the Secretary of the Interior broad administrative authority over the water, including the power to apportion water within the states. See id. The Supreme Court confirmed the Lower Basin apportionment in 1963. Arizona v. California, 373 U.S. 546 (1963).

The Colorado Basin Project Act was enacted in 1968 to apportion water among the regions of Arizona. See 43 U.S.C. §§ 1501-1556 (1998). This Act authorized the Secretary of the Interior to build, operate, and maintain the Central Arizona Project ("CAP"), which allo cates water reserves after other users with perfected rights take their water. See id. at § 1521. The Act also permitted the Secretary to contract for the repayment of CAP construction costs with a single political subdivision in Arizona. See id. at § 1524. In 1971, Arizona created this subdivision: the Central Arizona Water Conservation District ("CAWCD"). See Ariz. Rev. Stat. §§ 48-3701 et seq. (1985). In addition to its duty to contract with the Secretary to finance the CAP, the CAWCD was responsible for subcontracting with users to deliver CAP water and to levy a property tax that would subsidize its own operation costs as well as the CAP reimbursements to the United States.

Because the CAP allocates water reserves, the apportionment of CAP water fluctuates depending upon the availability of water in a given year. When water available from other sources is so plentiful that owners of perfected rights do not need any water from the Colorado River, the CAP diverts up to 1.5 million AF of Arizona's annual water entitlement from the river into an aqueduct for delivery to the arid regions of central and southern Arizona.³ But when the CAP was created, the Secretary was bound to respect pre-existing contractual and Indian water rights in the Colorado River. This meant that, during drought conditions, the CAP allotment of water reserves could not be filled until after pre-existing water entitlements were satisfied.⁴ The Secretary apportioned water among three classes of users. The first class of users consists of twelve Indian tribes. Collectively this class is entitled to take approximately 309,000 AF of water from the CAP. Municipal and industrial users make up the second class; this class is entitled to 640,000 AF of CAP water. The third class, which consists of non-Indian agricultural subcontractors, is entitled to a percentage of whatever residual water remains in the CAP pool after the tribal, municipal, and industrial users have taken the water allotted to them.

In November 1983, Plaintiffs — irrigation districts and municipal corporations in Arizona — each entered into a subcontract with the U.S. Department of the Interior, the Bureau of Reclamation, and the CAWCD. Pursuant to their contracts, Plaintiffs collectively were scheduled to receive forty-three percent of the CAP non-Indian agricultural water supply. For their part. Plaintiffs agreed to repay the costs involved in constructing the facilities needed to deliver their CAP water and paid twenty percent up-front.

In 1984, after the Secretary of the Interior announced his allotments and after Plaintiffs contracted for their share of the residual CAP water, Congress entered into a water-rights settlement with the Ak-Chin Tribe. See Act of Oct. 19, 1984, Pub. L. 98-530, § 2(k), 98 Stat. 2698, 2701. Therein, Congress directed the Secretary of the Interior [28 ELR 21468] annually to deliver a permanent supply of 75,000 AF of water to the Ak-Chin Indian Community,⁵ or 85,000 AF of water when sufficient water was available. Congress specified the sources and priorities of the water that the Ak-Chin would receive. First, Congress directed the Secretary to divert some 50,000 AF of Colorado River water to which the Yuma-Mesa Division had a perfected right (but had never used) to the Ak-Chin.⁶ Second, acknowledging that the Secretary already had allocated 58,300 AF of CAP water to the Ak-Chin, Congress instructed the Secretary to deliver the CAP water as needed to make up the remainder of the Ak-Chin Tribe's 75,000 to 85,000 AF water entitlement. But because the Ak-Chin Tribe was allotted 108,300 AF, this arrangement left a large quantity of excess Ak-Chin CAP water — from 23,300 to 33,300 AF — not spoken-for by contract. The terms of the Ak-Chin Settlement Act directed the Secretary of the Interior to return this excess water to the CAP. This would mean that, in a typical year, all of the excess Ak-Chin water would fall into the residual non-Indian agricultural pool because it was unspoken-for by contract with other users in the higher priority Indian or Municipal and Industrial pools.

But in the San Carlos Apache Tribe Water Rights Settlement Act of 1992, Congress provided that the 23,300 to 33,300 of excess Ak-Chin CAP water would not remain in the CAP after all, but instead would be allocated to the San Carlos Apache Tribe. See San Carlos Apache Tribe Water Rights Settlement Act of 1992, Pub. L. No. 102-575, tit. XXXVII, 106 Stat. 4740 ("SCAT Act"). Plaintiffs urged Congress to return the excess Ak-Chin water to the CAP for non-Indian agricultural use, as the Ak-Chin Settlement Act directed. Congress rejected that plea, but included in the SCAT Act a waiver of sovereign immunity for suits based on a CAP contractor's claim that the SCAT Act unlawfully deprived him of legal rights to such water.

In late 1993, Plaintiffs all had fallen into arrears on their payments to the CAWCD. Accordingly, in November 1993, the CAWCD proposed to amend Plaintiffs' subcontracts. The CAWCD proposal was simple: if Plaintiffs waived their rights to their respective percentages of the non-Indian agricultural pool, the CAWCD would forgive Plaintiffs' payment obligations and offer them subcontracts for "excess water" in the non-Indian agricultural pool.⁷ In November and December 1993, Plaintiffs accepted this proposal, waiving rights to all of the water that they were entitled under their 1983 subcontracts. In December 1993, Plaintiffs entered separate contracts with CAWCD for excess water.

On October 28, 1994, Plaintiffs filed suit against the United States in district court.⁸ In their suit, Plaintiffs contended that the SCAT Act had taken their rights to the excess Ak-Chin water without just compensation. On December 15, 1995, the parties filed cross-motions for summary judgment on the issue of liability only. The court granted Plaintiffs' motion on February 21, 1997. Pursuant to 28 U.S.C. § 1292(b), Defendant moved for certification of the court's order. The district court granted Defendant's motion, and we granted Defendant permission to appeal on July 31, 1997.

Defendant's appeal is timely. The Plaintiffs request attorneys' fees on appeal pursuant to 28 U.S.C. § 2412(d)(1). As we explain below, we reverse the district court's grant of summary judgment to the Plaintiffs, and we deny their request for fees.

Analysis

We have jurisdiction over this interlocutory appeal pursuant to 28 U.S.C. § 1292(b). We review the district court's grant of summary judgment de novo. Covey v. Hollydale Mobilehome Estates, 116 F.3d 830, 834 (9th Cir. 1997). Jurisdictional issues, including questions of standing, also are reviewed de novo. San Diego Co. Gun Rights Comm. v. Reno, 98 F.3d 1121, 1124 (9th Cir. 1996).

II.

The standing issue is raised for the first time on appeal by the amici.⁹ Generally, issues not raised in the district court cannot be asserted on appeal. Westlands Water Dist. v. Firebaugh Canal, 10 F.3d 667, 673 [24 ELR 20530] (9th Cir. 1993). But because "Article III standing is a jurisdictional prerequisite," Hickman v. Block, 81 F.3d 98, 101 (9th Cir. 1996) (citation omitted), we must consider standing whether or not the issue was raised in the district court. Firebaugh Canal, 10 F.3d at 673.

Plaintiffs bear the burden of demonstrating that they had standing to bring their action. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-61 [22 ELR 20913] (1992). To establish standing, Plaintiffs must show three things:

First, [Plaintiffs] must have suffered injury to a legally protected interest. This injury must be both concrete and particularized, and actual or imminent rather than conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of. Third, the injury must be redressable by a favorable judicial decision.

Hickman, 81 F.3d at 101 (citations and internal quotation marks omitted). Amici insist that we lack jurisdiction over this controversy because Plaintiffs have not satisfied the first criterion.¹⁰ Amici advance three arguments in support of their position that the irrigation districts have not demonstrated a particularized injury to a legally protected interest.

First, amici point out that only CAP contractors have standing to sue under the SCAT Act. The pertinent provision states:

(f) CLAIMS. — (1) The United States District Court for the District of Arizona and the United States Claims Court are authorized to hear and decide any claim brought by the [CAWCD] or other contractors of CAP water. Any such claim shall be filed within two years of the date of enactment of this Act, and shall be heard by the court on an expedited basis. If such a claim is filed and the court grants judgment for the plaintiff(s), the court shall award such relief as it deems proper, and shall award costs and attorneys' fees to the plaintiff(s). Any judgment of the court shall be subject to appeal on the same basis that other judgments of that court are subject to review under existing law.

San Carlos Apache Tribe Water Rights Settlement Act of 1992 § 3709(f)(1) (emphasis added). Amici argue that Plaintiffs relinquished their status as CAP contractors — and correspondingly, their standing to sue under the SCAT Act — when they waived all of their rights to non-Indian agricultural CAP water pursuant to the 1993 amendments to their subcontracts. This argument lacks merit. Assuming that these amendments were legal,¹¹ none of them purported to rescind or terminate Plaintiffs' subcontracts with CAWCD.¹² Although [28 ELR 21469] Congress did not define the term "contractor" in the SCAT Act, a reasonable construction of the term would include all entities that had contracted for residual CAP water at the time of the Act — even those who, like the Plaintiffs, subsequently amended (but did not rescind) their subcontracts. And even if Plaintiffs no longer have any contractual right to draw residual CAP water,¹³ that fact would bear on the assessment of damages, not to the question of liability.

Second, amici argue that Plaintiffs lack standing because they have failed to show an actual injury, maintaining that Plaintiffs have not demonstrated an actual reduction in the amount of CAP water available to them so far. This argument misconceives the nature of the damages that Plaintiffs are asserting. Plaintiffs argue that they were deprived of their rights to water, not the water itself. This is borne out by the language of the SCAT Act itself, which defines a "claim" as "a claim that the reallocation of water to the Tribe pursuant to [this] Act has unlawfully deprived the [CAWCD] or other contractors of CAP water of legal rights to such water." San Carlos Apache Tribe Water Rights Settlement Act of 1992 § 3708(f)(2) (emphasis added). Consistent with this language, the essence of Plaintiffs' action is that the SCAT Act gave the San Carlos Apache Tribe a right of first refusal to the water by moving the excess Ak-Chin water out of the CAP. Because a higher-priority right to a quantity of water is worth more than a lower-priority right to the same water (or, as Plaintiffs have alleged in this case, no right to the water at all), Plaintiffs have alleged an actual injury of the sort that the SCAT Act authorizes us to redress.

Third, amici argue that any damage that Plaintiffs may sustain in the future is "conjectural or hypothetical" because Plaintiffs' subcontracts only entitled them to an annual percentage of an uncertain amount of residual CAP water. We reject this argument, which confuses the standing principles applicable to actions seeking recovery of past damages (like this case) with the standing analysis that we would apply in an action seeking prospective relief. The uncertainty of future damages has no bearing on whether Plaintiffs have standing to assert claims for damages that they already have sustained. See Nava v. City of Dublin, 121 F.3d 453, 458 (9th Cir. 1997). Nor does the ebb and flow of the water supply or the fact that Plaintiffs' losses cannot be measured to the ultimate drop render their past damages speculative. The Supreme Court expressly has declined to hold that "the absence of specificity as to the amount of water to be taken prevents the assessment of damages." Dugan v. Rank, 372 U.S. 609, 623 (1963).¹⁴

In sum, Plaintiffs have standing to sue because they have made the jurisdictional showing required in Lujan. Accordingly, we exercise our jurisdiction and reach the merits of this case.

III. Plaintiffs' Fifth Amendment Takings Claim

Plaintiffs contend that they suffered a fifth amendment taking when Congress commanded the Secretary to reallocate the excess Ak-Chin water to the San Carlos Apache Tribe pursuant to the SCAT Act. The federal government may not deprive a person of "property without due process of law." U.S. Const. amend. V. To demonstrate a wrongful taking, Plaintiffs must show two things. First, Plaintiffs must demonstrate that they possessed a contractual right to the excess Ak-Chin water. National R.R. Passenger Corp. v. A.T. & S.F.R. Co., 470 U.S. 451, 465-66 (1985). Second, Plaintiffs must show that some government legislation, in this case the SCAT Act, effected a substantial impairment of their contractual rights. Id. at 472.

Federal law controls the interpretation of contractual agreements between the United States and private parties. United States v. Seckinger, 397 U.S. 202, 209-10 (1970). Furthermore, "governmental contracts should be interpreted against the backdrop of the legislative scheme that authorized them." Peterson v. United States Dep't of the Interior, 899 F.2d 799, 807 [20 ELR 20564] (9th Cir. 1990). Federal contract interpretation is guided by two basic principles. First, we must "construe legislation in a constitutional manner if fairly possible." Madera Irrig. Dist. v. Hancock, 985 F.2d 1397, 1401 [23 ELR 20579] (9th Cir. 1993) (citations and internal quotation marks omitted). Second, we must interpret a contract with the government to avoid foreclosing the exercise of sovereign authority, if possible. See id. We presume that sovereign power remains intact unless it is surrendered "in unmistakable terms." Id. (citations and internal quotation marks omitted).

A. Property or Contract Rights

"Rights against the United States arising out of a contract with it" are among the rights protected from deprivation or impairment by the Fifth Amendment. Lynch v. United States, 292 U.S. 571, 579 (1934). The irrigation districts must prove that, at the time of the alleged taking, they possessed property rights to the excess Ak-Chin water arising out of their subcontracts as amended by the Ak-Chin Settlement Act. We have recognized that "a valid contract right of an irrigation district against the United States is property protected by the Fifth Amendment." Madera, 985 F.2d at 1401. But the government may incur contractual obligations to its citizens in other ways as well. For example, the Supreme Court specifically has stated that a settlement agreement may give rise to contractual rights:

In determining whether a law tenders a contract to a citizen, it is of first importance to examine the language of the statute. If it provides for the execution of a written contract on behalf of a state, the case for an obligation binding upon the state is clear. Equally clear is the case where a statute confirms a settlement of disputed rights and defines its terms.

Dodge v. Board of Educ. of City of Chicago, 302 U.S. 74, 78 (1937) (footnotes omitted) (emphasis added); see also New Jersey v. Yard, 95 U.S. 104 (1877); New Jersey v. Wilson, 11 U.S. 164 (7 Cranch) (1812).

In this case, Plaintiffs could have secured contractual rights against the United States at either (or both) of two different times. First, Plaintiffs' 1983 subcontracts could have entitled them to their shares of any excess Ak-Chin CAP water. Second, the Ak-Chin Settlement Act could have enriched Plaintiffs' subcontracts. We consider each of these possibilities below.

1. Plaintiffs' 1983 Subcontracts

The United States argues that Plaintiffs' subcontracts — standing alone — gave them no vested rights to the excess Ak-Chin water. The district court wisely did not find that Plaintiffs' rights to the excess Ak-Chin water sprang from their 1983 subcontracts.

Plaintiffs' subcontracts with the CAWCD did not entitle them to the excess Ak-Chin water in the first place. At the time Plaintiffs signed their subcontracts, the 23,300 to 33,300 AF bundle of rights known as "excess Ak-Chin water" did not exist. See Central Arizona Project, Fed. Reg. 12446, 12447 (1983). Nor was the 23,300 to 33,300 AF of water now known as "excess Ak-Chin water" part of the non-Indian agricultural pool in 1983. As the government points out, Congress siphoned the excess Ak-Chin water from the Ak-Chin Tribe's 1983 allotment of 58,300 AF. Plaintiffs' subcontracts for residual waterfrom the non-Indian agricultural pool obviously did not entitle them to the Ak-Chin Tribe's allotment, which belonged in the Indian CAP pool. For these reasons, we hold that Plaintiffs' 1983 subcontracts gave them no vested contract rights to the excess Ak-Chin water.

2. Plaintiffs' 1983 Subcontracts and the Ak-Chin Settlement Act

The district court held that Plaintiffs' legal rights to the excess Ak-Chin water spring from their subcontracts as enlarged by the Ak-Chin Settlement Act. We repeat that the Ak-Chin Settlement Act could have obliged the government to allocate the excess Ak-Chin water to the CAP. But Plaintiffs cannot prevail on their claim unless they surmount two hurdles. First, Plaintiffs must show that they have standing to sue for breach of the Ak-Chin Settlement Act; otherwise, they [28 ELR 21470] have no legal rights under that agreement.¹⁵ Second, if Plaintiffs have standing to sue on the Ak-Chin Settlement Act, they must establish that the Act unmistakably obliged Congress to keep the excess Ak-Chin water in the CAP.

a. Standing to Sue on the Ak-Chin Settlement Act

Plaintiffs were not parties to the Ak-Chin Settlement Act. At most, Plaintiffs were third party beneficiaries of the Act, and it is unclear whether people standing in their shoes have standing to sue on a government contract. The Supreme Court has avoided deciding whether third party beneficiaries have standing to sue on a government contract. See United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 18 n.15 (1977). But see Weinfield v. United States, 8 F.3d 1415 (9th Cir. 1993).¹⁶

Assuming that third parties may sue when the government breaches a contract affecting their rights, ordinary contract law principles dictate that incidental beneficiaries do not have standing to sue on contract. See Rest. of Contracts § 133(1)(c) (1932); see also Dodge, 302 U.S. at 79 (stating that "[i]f, upon construction of a statute, it is found that the payments are gratuities, involving no agreement of the parties, the grant of them creates no vested right.") (footnote omitted).

Plaintiffs appear to be incidental beneficiaries of a settlement between a Tribe and the United States. The terms of the Ak-Chin Settlement Act express no intention to benefit Plaintiffs. Nor does the legislative history indicate that Congress meant to benefit users of the non-Indian agricultural pool — or indeed, anyone in particular — by putting the excess Ak-Chin water in the CAP. For these reasons, and because Plaintiffs have neither relied on nor paid valuable consideration for the excess Ak-Chin water, such water was a windfall to them. Accordingly, we hold that Plaintiffs were incidental beneficiaries of a gratuity that gave rise to no contractual rights against the United States.

b. Breach of the Ak-Chin Settlement Act

Yet another ground supports our decision. Even if Plaintiffs had standing to sue on the Ak-Chin Settlement Act, the Act secured them no enforceable rights unless it provided "some clear indication that the legislature intend[ed] to bind itself contractually." National R.R. Passenger Corp., 470 U.S. at 465-66. This requirement reflects the presumption that "a law is not intended to create private contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise." Dodge, 302 U.S. at 79. When determining whether a statute gives rise to a contractual obligation, we begin our inquiry by examining the language of the statute. National R.R. Passenger Corp., 470 U.S. at 466-67.

The terms of the Ak-Chin Settlement Act obliged the Secretary to allocate excess Ak-Chin water to the CAP. The relevant portion of the Act states:

The water referred to in subsection (f)(1) [i.e., permanent water supply of 50,000 AF] shall be for the exclusive use and benefit of the Ak-Chin Indian Community, except that whenever the aggregate water supply referred to in subsection (f) [i.e., the total supply of 108,300 AF] exceeds the quantity necessary to meet the obligations of the Secretary under this Act, the Secretary shall allocate on an interim basis to the Central Arizona Project any of the water referred to in subsection (f) which is not required for delivery to the Ak-Chin Indian Reservation under this Act.

§ 2(k), 98 Stat. at 2701 (emphasis added). Plaintiffs urge us to interpret this language to signify that Congress meant to give them an automatic and permanent entitlement to the excess Ak-Chin water.

We decline to do so. The excess Ak-Chin water was part of the Tribe's allocation, but by definition it was not contracted for when the Act returned it to the CAP in 1984. Within the CAP mechanism, uncontracted-for water belongs to no one user or class of users. Accordingly, the regulations state that "[a]ll water not contracted for, or contracted for but not expected to be utilized during interim periods, will be retained under jurisdiction of the Secretary." Central Arizona Project, 48 Fed. Reg. at 12447. Additionally, returning the excess Ak-Chin water to the CAP does not unmistakably or even automatically bring such water into Plaintiffs' subcontract rights to the non-Indian agricultural pool because the term "Central Arizona Project" is not synonymous with — and is substantially broader than — the term "non-Indian agricultural pool." Had Congress wished to bring the excess Ak-Chin water within Plaintiffs' subcontracts, it knew how clearly to do so. See Salt River Pima-Maricopa Indian Community Water Rights Settlement Act of 1988, Pub. L. 100-512, § 11(h) (1988) (stating that "the Secretary shall reallocate such water for non-Indian agricultural use"). For these reasons, the language of the Act does not automatically entitle Plaintiffs to the excess Ak-Chin water.

But even if the Ak-Chin Settlement Act entitled Plaintiffs to the excess Ak-Chin water, the Act did not unmistakably surrender Congress' prerogative toremove the excess Ak-Chin water from the CAP later. Absent clear language to the contrary, we presume that "contractual arrangements, including those to which a sovereign itself is party, remain subject to subsequent legislation by the sovereign." O'Neill v. United States, 50 F.3d 677, 686 [25 ELR 20873] (9th Cir. 1995) (citations and internal quotation marks omitted). We consider this presumption vital to the evolution of the Federal water rights regulatory scheme, so as to "enable it to change, not just execute past policies." Madera, 985 F.2d at 1401.

Plaintiffs have not rebutted this presumption. They can point to no language in the Ak-Chin Settlement Act that would lead to the unmistakable conclusion that Congress intended their entitlement — if they had any — to persist for any set period, let alone in perpetuity. For example, the term "on an interim basis" is antithetical to Plaintiffs' claim of a permanent entitlement to the excess Ak-Chin water.¹⁷ Had Congress intended to give Plaintiffs a permanent entitlement to the excess Ak-Chin water, one would expect it to use words like "permanent" or even "exclusive," as it did when granting perpetual water sources to the Ak-Chin and the San Carlos Apache tribes. Here Congress used no such language.

Furthermore, any congressional waiver of its right to reallocate the excess Ak-Chin water would be a hollow promise as long as the Secretary retained his usual discretion to reallocate that water. Yet the Ak-Chin Settlement Act contains no language limiting the Secretary's plenary power to reallocate the excess Ak-Chin water.¹⁸ Quite to the contrary, the terms of the settlement are subject to the proviso that "[n]othing in this Act shall be construed to enlarge or diminish the authority of the Secretary with regard to the Colorado River." § 8, 98 Stat. at 2705. Thus, the Act contains no unmistakable language indicating that Congress limited the Secretary's authority to reallocate the excess Ak-Chin water. Absent such language, Congress' intention to so limit itself is unthinkable, rather than unmistakable.

Finally, the terms of Plaintiffs' subcontracts and CAWCD's master contract with the United States show that the parties anticipated legal changes and agreed to limit the government's liability for shortages, whatever their cause. In circumstances such as these, we have [28 ELR 21471] held that water reclamation contracts are not immune from subsequent statutory modifications. See O'Neill, 50 F.3d at 686 (finding that Congress had not unmistakably waived its right to amend the amount of water it was obligated to deliver pursuant to water service contracts where "[t]he contract contemplates future changes in reclamation laws . . . and . . . limits the government's liability for shortages due to any causes").

In sum, Plaintiffs are incidental beneficiaries who lack contract rights under the Ak-Chin Settlement Act. Furthermore, the clear language of the Ak-Chin Settlement Act reflects no unmistakable congressional intention to confer upon Plaintiffs any contractual rights against the United States, let alone a permanent entitlement. For these reasons, we conclude that Plaintiffs' subcontracts — either standing alone, or as enlarged by the Ak-Chin Settlement Act — gave them no valid contractual rights in the excess Ak-Chin water.¹⁹

Conclusion

For the foregoing reasons, we reverse the district court's grant of summary judgment to Plaintiffs. Plaintiffs' motion for attorneys' fees on appeal is denied.

REVERSED.

1. The Compact guaranteed an equal amount of water to the Upper Basin states. The Upper Basin water supply is not at issue in this lawsuit.

2. California received 4.4 million AF annually, and Nevada annually was entitled to 300,000 AF. Neither of these water apportionments are at issue in this suit.

3. The other 1.3 million AF of water is reserved for diversion into Western Arizona. This water is not at issue in this lawsuit.

4. In a dry year, other users' entitlements take precedence over the CAP. First, water is diverted to make up the 4.4 million AF of water guaranteed to California by the Boulder Canyon Project Act. Next, users with present perfected water rights in Nevada and elsewhere in Arizona would take water before the CAP. Finally, users in Arizona and Nevada whose water rights antedated the Colorado Basin Project Act would have priority over the CAP.

5. The Ak-Chin Community is an Executive Order reservation located approximately 30 miles south of Phoenix, Arizona.

6. Plaintiffs insist that the Secretary had included this 50,000 AF of Yuma-Mesa Division water in the CAP in the 1983 allotment figure (of 1.5 million AF). For that reason, Plaintiffs urge us to recognize that they have a property interest in the Yuma-Mesa Division water. We need not and do not decide whether the Secretary diverted this water into the CAP, although the district court so assumed. Even if the irrigation districts once held an interest in this water, their interest was extinguished in the Ak-Chin Settlement Act, which did not waive sovereign immunity.

7. This is an even lower-priority subpool that consists of whatever water remains after the subcontractors of the non-Indian agricultural pool have taken the percentage of water to which they are entitled.

8. Neither the Ak-Chin nor the San Carlos Apache Tribe is involved in this controversy. Because Plaintiffs are seeking damages rather than injunctive relief, the outcome of this case will have no effect on the rights secured to those tribes in their respective settlements with the United States.

9. The amici are the Salt River Project Agricultural Improvement and Power District and the Salt River Valley Water User's Association. The District is a political subdivision of Arizona. The Association is an Arizona corporation. Both were parties to the SCAT Act. See San Carlos Apache Tribe Water Rights Settlement Act of 1992, Pub. L. No. 102-575, § 3705(a), (c), 106 Stat. 4740, 4744-45 (1992).

10. Amici do not contest that there was a causal connection between the alleged taking and Plaintiffs' damages. Nor do they argue that these damages cannot be redressed by this court.

11. There is some question whether these modifications were legal. Unless and until the Secretary approves the Letter Agreement, the [Plaintiffs'] receipt of CAP water may still be governed solely by the Subcontract[s]. If these modifications legally were infirm, then the Plaintiffs' subcontracts — and their standing to sue under the SCAT Act — unquestionably would remain intact.

12. Quite to the contrary, the terms of the amendments made clear that the parties did not intend to extinguish Plaintiffs' rights to seek redress for any taking that the SCAT Act effectuated. Although the intention of the parties is not dispositive of the issue of standing because the parties may not confer Article III jurisdiction on this court, each of the Plaintiffs signed CAWCD proposals which stated: "Nothing herein is intended to require or imply that [Plaintiffs have] waived any rights or claims which [they] may have against the United States pursuant to § 3708(f) of the [SCAT Act]."

13. This question remains in dispute. When CAWCD proposed amendments to Plaintiffs' subcontracts, it offered each Plaintiff the opportunity to lease rights to the "excess water" pool. If Plaintiffs executed these separate contracts, then their diminished water rights are at even greater jeopardy from the SCAT Act because this excess water pool is an even lower priority subpool of the non-Indian agricultural supply.

14. The Court noted further that although "the Government did not announce that it was taking water rights to a specified number of 'gallons' or, for that matter, 'inches' of water, we do not think that this quantitative uncertainty precludes ascertainment of the value of the taking." Id.

15. Whether Plaintiffs are among the parties who can assert rights under the Ak-Chin Settlement Act is a distinct question from that answered in the earlier standing analysis, which considered whether this court has jurisdiction to hear Plaintiffs' claims under the SCAT Act.

16. In Weinfield, we concluded that no contract existed between a serviceman's widow and the United States, which had offset her Social Security benefits against her death benefits annuity. Because we reached the merits of the case, we held implicitly that a third party beneficiary to a military death-benefits plan had standing to bring a claim against the United States. Thus, third party beneficiaries may have standing to assert takings claims under certain circumstances.

17. Plaintiffs argue that the term "interim basis" merely reflects the contingent nature of such water in the CAP. Admittedly, the CAP regulations use this same phrase. See Central Arizona Project, 48 Fed. Reg. at 12449 (stating that "the Secretary of the Interior will retain the right to contract for water on an interim basis where water allottees are not utilizing the full CAP allotment as provided herein"). But it seems likely that the same phrase was used in two different senses.

As it is used in the regulations, the term "interim basis" contemplates temporarily contracting water among user classes. Congress' use of the term in the Ak-Chin Settlement Act is different. There, the operative terms were not CAP user classes but CAP and non-CAP (or permanent) uses. Read in that context, allocating the excess Ak-Chin water "to the Central Arizona Project on an interim basis" contemplates removing that water from the CAP at some future time.

18. The legislative scheme has given the Secretary broad plenary power over the 15 million AF of water in the Colorado River basin. See Chemehuevi Tribe of Indians v. FPC, 420 U.S. 395, 420-21 n.26 [5 ELR 20224] (1975). For instance, the Boulder Canyon Project Act authorized the Secretary of the Interior "to . . . allocate thewater among users within each State" by making contracts. Arizona v. California, 373 U.S. at 579; see 43 U.S.C. § 617(d). Even the term "CAP" incorporates the Secretary's authority to determine whether and how much water is "available" to Plaintiffs, whose contracts entitle them to "available CAP water supplies." See Central Arizona Project, Fed. Reg. at 12449.

19. Because the language of the Ak-Chin Settlement Act did not unmistakably entitle Plaintiffs to the excess Ak-Chin water, we need not and do not consider whether the SCAT Act substantially impaired their rights. See Barcellos and Wolfsen v. Westlands Water Dist., 899 F.2d 814, 821 [20 ELR 20672] (9th Cir. 1990) (stating that plaintiffs who establish government interference with a contract right cannot recover unless they show that that interference effected a "substantial impairment" of the contractual right).