Here’s the U.S. Court of Appeals for the Federal Circuit’s opinion in United Water Conservation District v. United States, No. 23-1602 (Apr. 2, 2025), which gets a bit metaphysical.

The District is responsible for a dam and canal that diverts water from the Santa Clara River in southern California. Under the authority of the Endangered Species Act, the NOAA required the District to leave more water in the river for steelhead trout habitat. Either that, or seek an incidental take permit allowing the District to “take” (i.e., kill) steelhead.

The District asserted this is a physical taking of its water rights, but the government said no, this is a regulatory taking. Why is this important? Because a physical takings claim is ripe right now, without any need to exhaust any avenues for administrative relief from the NOAA, But if this is a regulatory takings claim, it isn’t ready for judicial review until the NOAA has provided a final decision in the form of a yes or no on an incidental take permit. Which it has not done because the District hasn’t applied for an incidental take permit. The Court of Federal Claims agreed with the government, and the District appealed. 

The Federal Circuit saw the difference between physical and regulatory takings thusly:

Regulatory takings differ from physical takings in that, instead of asking “whether the government has physically taken property for itself or someone else—by whatever means,” the question is whether the government “has instead restricted a property owner’s ability to use his own property.” Id. (citing Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Plan. Agency, 535 U.S. 302, 321–23 (2002)). “While there is no ‘set formula’ for evaluating regulatory takings claims, courts typically consider whether the restriction has risen to the level of a compensable taking under the multi-factor balancing test articulated in Penn Central, 438 U.S. at 124.” Casitas I, 543 F.3d at 1289; see Tahoe-Sierra, 535 U.S. at 322 n.17 (“When, however, the owner contends a taking has occurred because a law or regulation imposes restrictions so severe that they are tantamount to a condemnation or appropriation, the predicate of a taking is not self-evident, and the analysis is more complex.”).

Slip op. at 7.

The Federal Circuit concluded that the District has a property right in the use of water it diverts. But it rejected the District’s argument that NOAA’s order to not divert as much water as it had been diverting and instead leave it in the river is the same as the government seizing the water. Not so, held the court. This is merely a restriction on the District’s use.

But what about that earlier case in which the Federal Circuit held that the government requiring another water rights owner to put water into a fish ladder was a physical taking?  See Casitas Municipal Water Dist. v. United States, 543 F.3d 1276 (Fed. Cir. (2008). Nope. The difference is that in Casitas, the water district already had diverted the water from the river into its own system and the government ordered it to redirect the already-appropriated water to the fish ladder. Whereas here, the water district was merely ordered to not divert it and leave it in the river for the fish.

The Federal Circuit also distinguished a a Supreme Court case which held that the government’s stopping the water flow to the plaintiff’s mill was a physical appropriation. By contrast, here, the government had not “completely cut off [the District’s] access to the water or cause it to return any volume of water it had previously diverted to its possession[.]” Slip op. at 10. “In fact, [the District] alleges that [NOAA], at most, required more water to stay in the Santa Clara River.” Id.

The District argued the court shouldn’t view this so hyper-technically: we had the right to X amount of water before, and due to the government’s restrictions has X-minus amount now. We think that makes a lot of sense. 

But let’s put that aside for the moment and get to what we see as the more fundamental issue. Should there be a difference between a physical claim and a regulatory claim such that they should be subject to different ripeness requirements?

The idea that there’s a meaningful (or as the Federal Circuit says, “material”) difference between a physical takings theory and a regulatory takings theory is difficult for us to wrap our mind around. There’s but a single cause of action to describe the situation where an owner claims some action by the government has the same effect on property as would an exercise of eminent domain (aka inverse condemnation, regulatory taking, de facto taking). See Yee v. City of Escondido, 503 U.S. 519, 534-35 (1992) (“Petitioners’ arguments that the ordinance constitutes a taking in two different ways, by physical occupation and by regulation, are not separate claims. They are, rather, separate arguments in support of a single claim—that the ordinance effects an unconstitutional taking.”).

Reminds us of that perhaps-apocryphal story about LBJ getting into the “wrong” helicopter. They’re all de facto takings, son. After all, in eminent domain the taking of a nonpossessory easement is treated exactly the same way as a taking of the fee simple interest.

Nonetheless, the Federal Circuit thinks there’s a big difference. But what’s the difference between having a right to divert water, and a right to water already diverted? We can’t see a whole lot. But here’s the court’s thinking:

The Supreme Court precedent that United relies upon, however, does not acknowledge any distinction between physical and regulatory takings. That is presumably because it was not until 1978, decades after the decisions in International Paper, Gerlach, and Dugan, that the Court, in Penn Central, “clarified [ ] the test for how far was ‘too far’” for a regulation to be recognized as a taking. Horne v. Dep’t of Agric., 576 U.S. 350, 360 (2015). It may also be because the alleged takings in those cases did not arise from a regulation, as it clearly does here under the ESA. Moreover, Gerlach and Dugan involve riparian water rights, not appropriative water rights as here. The difference between the two is meaningful in the context of this case because riparian rights exist by virtue of land ownership and, therefore, their acquisition by the landowner does not depend on any physical acts of diversion and beneficial use of water as is required for appropriative water rights. See Colorado, 459 U.S. at 179, n.4 (“Appropriative rights do not depend on land ownership and are acquired and maintained by actual use. Riparian rights, in contrast, originate from land ownership and remain vested even if unexercised.”). Unlike the riparian-rights holders in Gerlach and Dugan, therefore, the appropriative-rights holder here needed to have physically diverted water for its property right to vest and thus become subject to a physical taking, as in Casitas. For at least those reasons, the Supreme Court precedent and related cases United cites are consistent with our decision here.

Slip op. at 12.

United Water Conservation Dist. v. United States, No. 23-1602 (Fed. Cir. Apr. 2, 2025)

Continue Reading CAFED: Sleeping With The Fishes – Requiring Water To Stay In River Is A Regulatory, Not Physical, Taking