Tag: Department of Water Resources

COURT REJECTS DWR BOND VALIDATION FOR DELTA PROGRAM, HOLDING AGENCY EXCEEDED STATUTORY AUTHORITY

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In Department of Water Resources v. Metropolitan Water Dist. (2025) 117 Cal.App.5th 751, the Third District Court of Appeal affirmed the trial court’s decision that the Department of Water Resources (DWR) exceeded its statutory authority by issuing revenue bonds for the “Delta Program.”

Key Takeaway

  • Statutory authority for public financing must be clearly defined. The court held that DWR could not validate revenue bonds for the Delta Program because the program was defined too broadly to qualify as a “further modification” of the Feather River Project under Water Code section 11260.

Background

DWR operates the State Water Project, a statewide system of reservoirs, canals, and pumping facilities that deliver water from Northern California to water contractors throughout the state. The State Water Project was authorized by the Legislature in the 1950s, including the Feather River Project, which, under Water Code section 11260, authorizes DWR to construct, operate, and modify.

As part of the State Water Project, DWR has proposed the Delta Conveyance Project, a tunnel conveyance system intended to transport water through the Sacramento-San Joaquin Delta. In 2020, DWR adopted resolutions authorizing issuance of “Delta Program Revenue Bonds” to finance environmental review and planning, and—if approved—construction of water conveyance facilities associated with the “Delta Program.”

To confirm the legality of its public financing commitment, DWR filed a validation action on August 6, 2020, seeking judicial approval of the bond resolutions. DWR took the position that the Delta Program qualified as a “further modification” of the Feather River Project under Water Code section 11260. Various parties appeared both in support of and in opposition to validation, and opponents also filed a separate CEQA action that was consolidated with the validation proceeding. The trial court rejected the CEQA claims but concluded DWR exceeded its statutory authority in adopting the bond resolutions and therefore denied validation.

Appellate Decision

The Third District Court of Appeal considered whether the Delta Program, as defined in the Bond Resolutions, qualifies as a “further modification” of the Feather River Project within DWR’s statutory authority under Water Code section 11260. DWR argued that the Delta Program constituted an authorized modification because facilities conveying water in, about, and through the Delta would serve the purpose of the Feather River Project. Opponents countered that the Delta Program was too broadly defined to support validation and was not limited to facilities consistent with the Feather River Project.

The court agreed with the opponents, concluding that DWR’s definition of the Delta Program exceeded the scope of its authority under section 11260. The court found the Delta Program’s definition overly broad because it imposed no meaningful limits on the facilities that could be financed, the direction or use of the water, or the purpose of the program. As a result, the court observed that the bond resolutions would grant DWR “nearly unlimited discretion to specify the facilities for which the bonds will be issued.” The mere fact that a Delta Program facility would “convey water in, about, and through the Delta area” was insufficient to demonstrate a connection to the Feather River Project.

The court further reasoned that validating the bonds could effectively expand DWR’s discretion to define revenue sources for repayment or resolve whether DWR may charge state water contractors for Delta Program capital costs—issues beyond the scope of the validation proceeding. Because DWR failed to show that the Delta Program fell within its delegated authority, the court affirmed the denial of validation. Having resolved the case on that ground, the court declined to address the remaining claims, including those related to CEQA.

­ – Hannah Rider & Nina Berglund

THIRD DISTRICT OVERTURNS DENIAL OF ATTORNEYS’ FEES MOTION UNDER “CATALYST” THEORY, HOLDS TRIAL COURT MUST CONSIDER WHETHER PLAINTIFFS’ LAWSUITS WERE A SUBSTANTIAL FACTOR IN GOVERNOR’S DECISION NOT TO MOVE FORWARD WITH “WATERFIX” PROJECT

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In Department of Water Resources Environmental Impact Cases (2022) 79 Cal.App.5th 556, the Third District Court of Appeal found that the trial court did not apply the correct legal standard in rejecting plaintiffs’ motions for attorney fees following litigation challenging California’s WaterFix project under CEQA and other laws. Plaintiffs relied on the state’s private attorney general statute (Code of Civil Procedure § 1021.5), asserting that they were successful parties under a “catalyst” theory because the litigation motivated the Department of Water Resources (DWR) to rescind the project approvals and decertify the EIR. The trial court denied the motions, finding that although plaintiffs achieved the primary objectives of their litigation, this was caused by a directive from Governor Newsom, not their lawsuits. The appellate court, however, found that it was error to treat the Governor’s directive as an “external, superseding cause” of DWR’s decision. Instead, the trial court should have considered whether plaintiffs’ lawsuit was a substantial factor in the Governor’s decision to change course regarding the WaterFix project. The court therefore reversed and remanded the matter for redetermination.

BACKGROUND

In 2013, DWR issued a draft EIR for the Bay Delta Conservation Plan project under CEQA. The plan aimed to improve California’s water supply infrastructure by constructing two 35-mile-long tunnels that would convey fresh water from the Sacramento River to pumping stations in the southern Sacramento–San Joaquin Delta. In 2015, DWR replaced that plan with the WaterFix project, which differed from the original in that it decoupled the habitat conservation component from the water conveyance elements. On July 21, 2017, DWR certified a final EIR, adopted findings, a statement of overriding considerations, and a mitigation monitoring and reporting plan, and approved the WaterFix project.

Numerous plaintiffs filed petitions for writ of mandates challenging the WaterFix project and EIR. The lawsuits sought to compel DWR to rescind the WaterFix approvals, decertify the EIR, and suspend development pending compliance with applicable laws. Plaintiffs alleged a variety of violations under CEQA, as well as under the Sacramento–San Joaquin Delta Reform Act of 2009, the public trust doctrine, and the California Endangered Species Act. Plaintiffs’ lawsuits were coordinated for trial.

In November 2018, Governor-elect Newsom expressed doubt over whether the WaterFix project could overcome its various legal challenges, and officially voiced his opposition to the project (as Governor) three months later. On April 29, 2019, he issued Executive Order No. N-10-19, which established his new “water resilience portfolio” policy and encouraged DWR to “inventory and assess” the “[c]urrent planning to modernize conveyance through the Bay Delta with a new single tunnel project.” Less than one week later, as litigation was ongoing, DWR decertified the WaterFix EIR, vacated its findings, and rescinded the project’s approvals. Consequently, the coordinated cases were voluntarily dismissed.

After the cases were dismissed, plaintiffs filed motions for attorneys’ fees, asserting that they were “successful” parties under the catalyst theory because the litigation motivated DWR to voluntarily provide the relief sought (namely, rescission of the project approvals, decertification of the EIR, and dismissal of the validation action). DWR opposed the motions, arguing that the decision to rescind project approval was based on the Governor’s Executive Order, not the litigation.

The trial court denied plaintiffs’ motions, agreeing that the relief was caused by the Governor’s directive rather than the lawsuits. Plaintiffs appealed.

COURT OF APPEAL’S DECISION

The court of appeal agreed with plaintiffs that the trial court erred in treating Governor Newsom’s policy directive as an external, superseding cause of DWR’s actions. Although, as an agency within the executive branch, DWR was required to implement the Governor’s decision to shift from two tunnels to one, that did not mean that there was no connection between the lawsuits and the rescission of the WaterFix approvals and decertification of the EIR. Instead, the trial court should have asked whether the litigation was “a substantial factor” in the Governor’s decision.

The court suggested plaintiffs had presented evidence that the Governor’s decision was at least in part influenced by their lawsuits, such as his November 2018 statement that “‘I think if we walk down the path of two tunnels, we’re in litigation and no project.’” Plaintiffs also presented statements made by DWR’s director that the previous proposal might not have fully acknowledged and mitigated for impacts. The court of appeal held that, regardless of whether this evidence was sufficient to establish a causal relationship between the litigation and the Governor’s opposition to the WaterFix project, the trial court erred in refusing to consider this evidence.

The court of appeal also found error in the trial court’s refusal to consider plaintiffs’ argument that the chronology of events could raise an inference of causation, which it had rejected because EIR decertification was “expected.” The appellate court explained that even if the underlying project is abandoned or withdrawn, nothing in CEQA requires the lead agency to decertify that project’s EIR. Only when the previous environmental document is “wholly irrelevant” must the agency start anew. Further, nothing in the Governor’s Executive Order compelled DWR’s decertification and rescission, as it merely directed the agency to “inventory and assess”  the current plan “to modernize conveyance through the Bay Delta with a new single tunnel project.” Finally, in the wake of the Governor’s announced opposition, DWR’s attorneys advised the court that DWR could still proceed under CEQA using a supplemental or subsequent EIR—obviously contrary to the contention of inevitable decertification. Thus, because DWR’s decision to abandon the project was independently made, there was “a legitimate question as to why it made that choice.” And because the plaintiffs had properly relied on the chronology of events to raise an inference that the lawsuits had substantially motivated DWR’s decision, the burden had shifted to DWR to rebut that inference. The trial court’s refusal to consider plaintiff’s evidence was thus a prejudicial abuse of discretion.

—Griffin Williams