Key Takeaways

• What Happened: A Federal District Court in California ruled as a matter of statutory interpretation that certain mandatory water contract conversions for the Central Valley Project are not subject to environmental review under the National Environmental Policy Act (NEPA) or the Endangered Species Act (ESA).
• Who Is Impacted: Water users across California, environmental consultants, and agencies.

The Center for Biological Diversity v. US Bureau of Reclamation Decision

On June 30, 2025, the United States District Court for the Eastern District of California held that the conversion of temporary to permanent contracts for the Central Valley Project (CVP) water does not require additional environmental review. The decision applies to a contract conversion process outlined in Subtitle J of the 2016 Water Infrastructure Improvements for the Nation (WIIN) Act, Pub L. No. 114-322, 130 Stat. 1628 (2016).

The federally owned and operated CVP is a massive water storage system in California that captures, stores, and distributes water from the Sacramento and San Joaquin Rivers, primarily for use in agricultural irrigation. Due to the relative scarcity of water in the West, federal and state lawmakers and agencies have directed significant attention to CVP operations and water allocations since the project’s inception in the first half of the 20th century. Because the majority of CVP construction took place before major federal natural resource and environmental protection laws were enacted in the 1970s, decades of subsequent lawsuits have sought to address the CVP’s ecological impacts on California waters and wildlife, in the context of the shifting balance of federal, state, and private water rights interests that has evolved in the wake of the Reclamation Act of 1902 and is known as “modern Reclamation law.”

In general, the Bureau of Reclamation (Reclamation) allocates CVP water by user contracts, which may subsume pre-existing water rights, and which were originally designed to repay the federal government’s construction costs. These contracts have been modified and extended over time as the Great Depression and other challenges impacting the agricultural sector rendered users unable to meet their original repayment obligations.

One of the changes allowed for the issuance of temporary “water service” contracts where users paid for water based on use, similar to a water utility. Landowners and irrigation districts objected to the new contracts because they did not guarantee users a permanent right to water or a contract renewal process, and the new contracts did not allow users to cease repaying construction costs once the government’s initial investment was fully recovered. Following a series of federal legislative efforts to address these concerns, the challenged provision of the WIIN Act allowed holders of temporary water service contracts to request that the Reclamation convert their contracts into permanent “repayment” contracts, with accelerated repayment of construction costs.

The Court agreed with Reclamation’s decision that these WIIN-mandated conversions do not trigger additional environmental review under NEPA or the ESA, despite other water contract renewals being subject to those environmental review requirements under provisions of the 1992 Central Valley Project Improvement Act (CVPIA) (see CVPIA discussion below).

Agency Discretion and NEPA/ESA Review Obligations

Section 7 of the ESA requires federal agencies to ensure that their actions, such as permit and contract approvals, are not likely to jeopardize the existence of endangered and threatened species. However, the ESA implementing regulations provide that this applies only to actions “in which there is discretionary Federal involvement or control.” 50 CFR § 402.03.

NEPA similarly requires federal agencies to assess the environmental impacts of their proposed actions as part of their decision-making process. NEPA has a similar standard, the “rule of reason”, that holds that NEPA’s environmental review requirements only apply when the agency has some control over preventing the environmental effects.

Therefore, the Court’s decision turned on whether the WIIN Act’s contract conversion process leaves the Bureau of Reclamation with any discretion to alter the contracts in an environmentally beneficial way. The Court found that the WIIN Act requires Reclamation to convert water contracts upon request, leaving the agency with no discretion to change other water service contractual rights apart from the specific financial terms allowed by the WIIN Act.

The Court distinguished these contracts from the pre-WINN contracts at issue in an earlier case, Natural Resources Defense Council v. Jewell, 749 F.3d 776, 784 (9th Cir. 2014), where the Ninth Circuit held that Reclamation had some discretion to renegotiate contract terms for the Sacramento River Settlement Contracts, and therefore environmental review of contract renewals was required. There, while the language of the original contracts prevented any changes to the water quantity and allocations, the Ninth Circuit found that Reclamation still had discretion as to whether to renew the contracts at all, as well as over other terms, such as pricing and the timing of water distribution. The court also distinguished Natural Resources Defense Council v. Houston, 146 F.3d 1118, 1125-26 (9th Cir. 1998), which held that renegotiated contracts in the Friant Unit of the CVP triggered ESA review, because Reclamation appeared to be authorized in that case to reevaluate the total available water supply.

In contrast to these earlier contract renewal cases, the WIIN Act requires Reclamation to convert the contracts to accelerated repayment contracts upon request, without giving Reclamation the ability to deny these requests or to modify contractual rights (other than those specified in the WINN Act) in the process. Therefore, the mandatory WIIN Act contract conversion process is not subject to NEPA or ESA review, as the Bureau lacks the necessary discretionary control. Moreover, by allowing users to extinguish, via the repayment contracts, their capital debt obligations to Reclamation, WIIN Act mandatory conversions would facilitate users’ escape from federal land-use restrictions and paperwork regulations under the Reclamation Reform Act of 1982 (P.L. 97–293).

Future Implications for Water Rights and Ecological Protection

The Court noted that the WIIN Act represents a monumental policy shift from earlier Reclamation law decisions that required environmental review for contract renewals with the CVP. The CVPIA modified prior CVP laws by adding mitigation, protection, and restoration of fish and wildlife as co-equal project purposes of the CVP. CVPIA § 3402. While previous laws allowed “water service” contract terms of up to 40 years, the CVPIA required these contracts to be renewed for 25 years and stated that contracts may be renewed for subsequent 25-year terms. The CVPIA imposed several conditions upon these contract renewals, including an explicit requirement for environmental review. The Court concluded that the contract conversion process under the WIIN Act is a policy shift “that Congress deliberately created by wording the WIIN Act as it did.”

The WIIN Act responded to increasing concerns about the western drought response and water scarcity by attempting to fund and facilitate additional water availability in the region. While most of the WIIN Act’s operational provisions expired at the end of 2021, the last two Congresses introduced legislation to extend Reclamation’s Subtitle J CVP contract conversion authorities into the future, and the Trump administration signaled its intention to continue to maximize water supplies coming from the CVP. On January 24, 2025, the Trump administration issued Executive Order (EO) No. 14181, Emergency Measures to Provide Water Resources in California and Improve Disaster Response in Certain Areas, following closely on the heels of a January 20 memorandum urging agency heads to “route more water from the Sacramento-San Joaquin Delta to other parts of the state.” The EO expands on this policy goal by directing agencies to ensure adequate water supplies for California and to override any activities that would “unduly burden efforts to maximize water deliveries.”

Early actions by the Trump administration and the Court’s WIIN Act interpretation signal a shift in Reclamation law and CVP governance toward prioritizing water distribution over environmental protection.