Case Name: TULELAKE IRRIGATION DISTRICT v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1965-03-12
Citations: 169 Ct. Cl. 782
Docket Number: No. 445-60
Parties: TULELAKE IRRIGATION DISTRICT v. THE UNITED STATES
Judges: Before Cowest, Chief Judge, Laramore, Davis and Col-LiNS, Judges.
Reporter: United States Court of Claims Reports
Volume: 169
Pages: 782–821

Head Matter:
TULELAKE IRRIGATION DISTRICT v. THE UNITED STATES
[No. 445-60.
Decided March 12, 1965]
Alvin Landis lor the plaintiff.
Herbert Pittle, with whom was Assistant Attorney General Ramsey Ciarle, for the defendant.
Before Cowest, Chief Judge, Laramore, Davis and Col-LiNS, Judges.

Opinion:
Davis, Judge,
delivered the opinion of the court:
The major question is the interpretation of an ambiguous contract provision allocating costs for the removal of excess water from the Lower Klamath Lake Wildlife Refuge (or Area). The clause first appeared in an agreement entered into, in 1946, between the Bureau of Reclamation and the Fish and Wildlife Service of the Department of the Interior; it was incorporated by reference in a contract dated September 10, 1956, between the United States and the plaintiff. In this action, plaintiff seeks to recover alleged overpayments it made to the defendant, under this 1956 contract, for the years 1957,1958, and 1959.
In 1905 the Secretary of the Interior authorized the Klamath Project in the region where California meets Oregon. The general plan was to, reclaim certain lands by unwatering Little Klamath Lake, Goose Lake, and Tulelake. Statutory authority for the project, as well as for the disposition of the reclaimed lands under the federal reclamation laws, was given by the Congress of the United States and the Legislatures of Oregon and California.
During the course of the development and growth of the project, the Lower Klamath Lake Wildlife Kefuge and the Tulelake Wildlife Kefuge were established by Executive Orders. Within the Tulelake Wildlife Kefuge is a sump of about 13,000 acres, which has a large capacity to store water. This water has its origin in precipitation, surface runoff, uncontrolled flows from the Lost Kiver, and return flows from irrigated lands surrounding the sump. When not disposed of by re-use for irrigation or by evaporation, water from the sump is removed through Pumping Plant D, into the Tulelake Tunnel. From the tunnel, it flows into the P Canal, where part is used to irrigate 5,000 acres of adjacent land. The remaining waters are discharged from the P Canal into the Lower Klamath Lake Area] (or Wildlife Kefuge).
The Lower Klamath Lake Wildlife Kefuge or Lower Klamath Lake Area (sometimes called the "Service Area" because it is under the jurisdiction of the Fish and Wildlife Service) consists of about 29,000 acres of land and water divided into a series of ponds and irrigated areas. It derives its water from (a) the Tulelake Sump via Pumping Plant D, the Tulelake Tunnel, and the P Canal; (b) precipitation, stream flow, and drainage; (c) imports from the Ady Canal, which cai-ries water from the Klamath Kiver to the Lower Klamath Lake Area.
Prior to 1942 the Bureau of Keclamation had jurisdiction over the entire Klamath Project, with the Fish and Wildlife Service operating the refuges. In January 1942, long before the plaintiff Irrigation District came into being, the Bureau and the Service entered into an agreement which transferred jurisdiction of the Tulelake Sump and the Lower Klamath Lake Area (the Service Area) to the Fish and Wildlife Service and provided for the construction of certain water control facilities. The contract recognized the need to remove excess water from the Lower Klamath Lake Area, but provided only that the costs of such removal would be apportioned by agreement between the agencies or by the Secretary of the Interior if they failed to reach an accord.
On June 28,1946, prior to the plaintiff's organization, this agreement was modified. The provisions of the amendatory agreement covering the removal of excess water from, the Lower Klamath Lake Area were as follows:
7. The Bureau will pay all construction costs fori the pumping facilities now being erected for the removal of excess water from the Lower Klamath Lake Area.
8. The aforesaid pumping facilities will be operated by the Bureau. The Bureau may continue to pump, as provided in Article 16 of the existing agreement, excess water from the Tule Lake [Restricted. Sump into the Service's Lower Klamath area, through Tule 'Lake tunnel.
9. The Bureau will remove from the Service's Lower Klamath area all. water brought through Tule Lake tunnel which is in excess of the normal capacity of the Service Area and which it is necessary to remove in order to permit' the efficient carrying on of the Service's functions.
10. The Service will reimburse the Bureau for the cost of removing from the Service Area the first 50,000 acre-feet of such water brought through Tule Lake tunnel annually and which is determined to be in excess of the aforesaid normal capacity, and the Bureau will bear the expense of removing excess water brought through the tunnel in excess of said 50,000 acre-feet annually. [Emphasis in original.]
The channel through which excess water was removed from the Service Area was the Klamath Straits Dram; from there it was pumped through Plants E and F, after which the excess water was eventually discharged into the Klamath [River. Over the years, the Bureau billed the Fish and Wildlife Service for reimbursement under this 1946 agreement.
On September 10,1956, the plaintiff and the United States (acting through the Bureau of [Reclamation) contracted for the furnishing to the plaintiff of a water supply from the Klamath Project; for the repayment of certain construction charges by plaintiff; and for the transfer to the plaintiff of the operation and maintenance of specified works and properties useful for the delivery of water to and the protection of lands within the Irrigation District. The plaintiff was also required to reimburse the United States for the operation and maintenance costs of certain "reserved works" (facilities not transferred to plaintiff) in accordance with fixed percentages stipulated in the contract. With respect to the particular facilities involved in this case, the contract provided that the plaintiff pay:
100 per cent of the cost of operation and maintenance of the P Canal, the Klamath Straits Drain, and Pumping Plants E and F less:
^ si* ❖ # H*
(2) The share of costs assignable to the Fish and Wildlife Service pursuant to Article 10 of the Amend-atory Agreement of June 28, 1946, between the Bureau of Beclamation and the Fish and Wildlife Service [see supra].
During the negotiations which led to this contract of September 10,1956, the plaintiff was not apprized of the method of computation used by the Bureau of Beclamation in obtaining reimbursement from the Fish and Wildlife Service for the cost of eliminating excess water from Lower Klamath Lake Area. The plaintiff was simply told that the Fish and Wildlife Service paid for the removal of the first 50,000 acre-feet of excess water brought into the Service Area through the Tulelake Tunnel. Plaintiff learned the Bureau's specific method of reimbursement when it received the Bureau's statement of the actual costs of operation and maintenance and the credit against those costs assignable to the Fish and Wildlife Service. Immediately, the plaintiff protested the Bureau's computation as a violation of the contract, suggested an alternative allocation formula, and sought to recover the difference by way of offset. The Bureau refused to permit this, threatening to withhold water and, if necessary, to take over the facilities. As a result, the plaintiff was forced to pay the allegedly excessive charges under protest. This suit followed.
The theory of the 1956 contract is that plaintiff should bear all of the cost of removing water from the Lower Klamath Lake Area less the amount which the Fish and Wildlife Service was required to pay under its 1946 agreement with the Bureau of Beclamation. The plaintiff contends that, under the method of computation employed by the two agencies, the Service was not asked to pay the Bureau as much of the cost as the 1946 agreement contemplated. The plaintiff's interest is, of course, to increase the Service's share of the expense, since that portion applies as a credit against the plaintiff's own obligation.
The parties' clash over the meaning of the 1956 contract arises out of the physical fact that the Service Area (the Lower Klamath Lake Area) receives water, not only from the Tulelake Sump through Pumping Plant D and the Tule-lake Tunnel, but also from the Ady Canal and from independent precipitation, stream flow, and drainage. When water is drained off as excess from the Service Area, this excess is the commingled result of water coming from these three separate sources. In addition, some of the water pumped from the Sump through the Tunnel, which then goes into the P Canal, never reaches the Service Area (and therefore is never removed as excess) but is used to irrigate the so-called P Canal lands. The Bureau's method of allocation disregards these variations and proceeds on the assumption that the first 50,000 acre-feet of water from the Tulelake Sump (the cost of removing which, to the extent it becomes excess, is chargeable to the Fish and Wildlife Service) is ordinarily the last to be removed as excess from the Service Area. The first step in the Bureau's allocation is to measure the annual amount of water pumped from Tulelake Sump through Plant D and the Tulelake Tunnel, and then to subtract 50,000 acre-feet at once. The difference (to the extent it is removed from the Lower Klamath Lake Area) is considered the amount of water which is chargeable to the plaintiff as excess. The Fish and Wildlife Service is billed only for the cost of exporting the remaining amount of water, if any. The result is that if, after having been reduced by 50,000 acre-feet, the amount of water leaving Plant I) is equal to or greater than that ultimately exported from the Service Area,, the entire cost of removing the excess water is borne by plaintiff. See finding 33.
In charging plaintiff with all the water above 50,000 acre-feet which leaves Plant D and in disregarding both the destination of that water and the other sources feeding the Service Area, the Bureau's method ignores the amount pumped through Plant D which serves the P Canal lands and never reaches the Lower Klamath Lake Area; it only indirectly takes into account the water brought into the Lower Klamath Lake Area by the Fish and Wildlife Service through the Ady Canal ; and it can be argued to by-pass the requirement of a prior determination of the amount of water which is considered by the Fish and Wildlife Service to be in excess of the Service Area's normal capacity. For these reasons, plaintiff contends that this method of allocation is improper under the contract.
The defendant does not agree that its allocation contravenes the terms or intent of the 1956 agreement, but its' primary answer is that, whatever a fresh reading of the contract might now reveal, the plaintiff Irrigation District must be held to have agreed to the Bureau's established method of apportionment. It is said, first, that actual knowledge of the manner in which the cost of removing excess water from the Service Area was allocated, from 1946 to 1956, should be imputed to the plaintiff. The Government emphasizes that an officer employed by the plaintiff at the time of the execution of its contract with the United States knew or should have known the method of allocation that had been used by the Bureau of Reclamation and the Fish and Wildlife Service over the years, and that his knowledge should be ascribed to the plaintiff. Prior to the execution of the 1956 contract, there was a protracted period of negotiation between representatives of the plaintiff and the Bureau of Reclamation. A principal deputy of the Bureau during this time was Maurice K. Strantz, who left his position with the Federal Government in August 1956 to become an employee of the plaintiff. At the time he changed jobs, negotiations had closed but the contract had not yet been formally signed. Strantz attested the contract on September 10, 1956, as Secretary of the plaintiff Irrigation District. Although he was aware that interagency allocations had been made by the Bureau and the Service pursuant to their 1946 agreement, he did not know the manner in which the allocation was computed. Even if he should have discovered the method of apportionment while he was a federal employee, such hypothetical "knowledge" cannot, in turn, be imputed to the plaintiff, because Mr. Strantz did not begin working for the Irrigation District until after the negotiation of its contract with the defendant had been fully concluded. Such double imputation of knowledge of matters relevant to a transaction, after it has been virtually completed, is clearly impermissible. Of. Restatement, Agency 2d, §277 (1958).
The defendant nest contends that plaintiff itself had constructive knowledge of the apportionment method previously in effect and, for that reason, must be deemed to have agreed to it. The method of computation now urged by defendant was consistently adhered to for ten years under the agreement between the Fish and Wildlife Service and the Bureau of Reclamation; by virtue of the relevant provision of its own contract with the United States, plaintiff was necessarily aware that an allocation had been made from 1946-1956 under the interagency agreement, and it was likely that the United States planned to continue using the same method under the 1956 contract with plaintiff. Defendant infers from these facts that plaintiff could easily have dispelled any doubts concerning the proper method of computation by making the necessary inquiries beforehand, and that any additional costs which plaintiff must bear as a result of its failure to ask are its own fault.
This argument largely ignores the circumstances surrounding the negotiation of the 1956 agreement. That contract was executed only after a prolonged discussion, during which many complex problems required the careful attention of the parties. Because their agreement was essentially the last of a series of contracts between the United States and various irrigation districts in the Klamath Project, it was necessary for the Government to recover the remainder of its operational and maintenance costs through the contract with the plaintiff. The parties thus had to keep in mind not only their own particular needs — which were complicated enough — but also the interrelationship of the contract being negotiated with prior contracts between the United States and some twenty other irrigation districts and more than one hundred individual contractors in the Klamath Project. Finding 27 (b). The clause now before the court was but one of many items with which the negotiators had to deal. In this setting, the defendant asks too much when it would require the plaintiff to have ascertained the administrative interpretation of every provision explicitly or implicitly incorporated by reference in its contract with the United States, even though these provisions appeared to be clear on their face. For this was not a situation in which the disputed provision is so patently ambiguous or confusing that the plaintiff had a duty to inquire. Cf. Jefferson Constr. Co. v. United States, 151 Ct. Cl. 75, 89-91 (1960); Ring Constr. Corp. v. United States, 142 Ct. Cl. 731, 734, 162 F. Supp. 190, 192 (1958); Consolidated Eng'r Co. v. United States, 98 Ct. Cl., 256, 280 (1943). On the contrary, the meaning of the provision allocating the cost of removing excess water from the Lower Klamath Lake Area was apparently so clear, at the time, to both parties that it was hardly even discussed. Plaintiff simply accepted the explanation, of a representative of the defendant that "the Fish and Wildlife Service took care of the first 50,000 feet of water pumped through the Tulelake Tunnel, and the Bureau paid the remainder." Tr. 112. As shown later in this opinion, the words of the 1946 pact are easily susceptible of a rational application. In these circumstances, the plaintiff cannot be bound by the information it would have obtained had it made a special inquiry as to this particular provision (15(a) (iii) (ee) (2)), any more than the defendant can be criticized for not volunteering its special knowledge of the prior administrative interpretation. We refuse to impose such an excessive burden on the plaintiff.
Since plaintiff cannot be held to have accepted defendant's prior method of allocation, we must then decide whether some general canon requires us to acquiesce in plaintiff's version, or whether we must appraise the agreement for ourselves without the help of any general rule of construction favoring one side or the other. Under the interpretation sought by the plaintiff, the Fish and Wildlife Service would be charged (and plaintiff credited) with the cost of removing (1) the first 50,000 acre-feet of excess water from the Service Area and also (2) the amount imported into the Service Area from the Ady Canal. The cost of eliminating any additional water from the Lower Klamath Lake Area would be borne by the plaintiff. The bare words of the contract do not call upon the Service to shoulder the cost of eliminating excess water derived originally from the Ady Canal, but plaintiff says that its construction of the disputed clause must nevertheless be accepted because of the principle that "if some substantive provision of a government-drawn agreement is fairly susceptible of a certain construction and the contractor actually and reasonably so construes it, in the course of bidding or performance, this is the interpretation which will be adopted — unless the parties' intention is otherwise affirmatively revealed." WPC Enterprises, Inc. v. United States, 163 Ct. Cl. 1, 6, 323 F. 2d at 876 (1963). See, also, Peter Kiewit Sons' Co. v. United States, 109 Ct. Cl. 390, 418 (1947); First-Citizens Bank & Trust Co. v. United States, 110 Ct. Cl. 280, 310, 76 F. Supp. 250, 266 (1948) ; Western Contracting Corp. v. United States, 144 Ct. Cl. 318, 326 (1958) ; W. H. Edwards Eng'r Corp. v. United States, 161 Ct. Cl. 322, 331-32 (1963); Freedman v. United States, 162 Ct. Cl. 390, 401, 320 F. 2d 359, 365 (1963). But unlike those cases, we are not dealing with a contract authored exclusively by the Government. Far from being a contract of adhesion, the 1956 agreement was virtually coauthored during a period of lengthy negotiations. Although the disputed provision, incorporated by reference from the 1946 interagency pact, was of course drawn by the defendant, it was subject to the plaintiff's scrutiny in 1956 and could have been modified at that time. Where a contract with the United States is as fully negotiated and bargained for as this one, the principle that ambiguities must be construed against the Government is in-apposite. See Deloro Smelting & Refining Co. v. United States, 161 Ct. Cl. 489, 495, 317 F. 2d 382, 386 (1963).
It follows that, since no general canon of interpretation provides a ready solution, we are to determine what method of computation is the most reasonable, in the light of the language of the contract and the circumstances of its creation. First, as we have already noted, plaintiff's suggestion that the Fish and Wildlife Service be charged with the cost of removing the water it imports into the Lower Klamath Lake Area via the Ady Canal finds no support in either the provisions of its contract with the defendant or those of the earlier interagency agreement. Although that might have been a fair bargain for the parties to make, it was not the one they made. The 1956 contract explicitly states that plaintiff is to pay "100% of the cost of operation and maintenance of the P Canal, the Klamath Straits Drain, and Pumping Plants E and F" (emphasis added.) The last three of these facilities are the sole means of removing excess water from the Service Area. There is no exception from this 100% burden for the expense of removing excess water which comes from the Ady Canal. If the Fish and Wildlife Service is to pay the cost of removing water imported into the Service Area from the Ady Canal, the sole basis would have to be the credit given plaintiff for the charges borne by that Service under the 1946 interagency agreement. But these incorporated provisions state only that the Fish and Wildlife Service is to bear the expense of removing the first 50,000 acre-feet of excess water brought through Tulelake Tunnel into the Service Area. Nothing is said about Ady Canal water, and there is no other relevant stipulation for charging expenses to the Service. Although the Bureau of Keclamation gave particular thought to whether the Service's responsibility for sharing the cost of removing excess water should include excess water contributed by the Service's operation of the Ady Canal, and this possibility was the subject of some proposals for amendment, the modification finally adopted in the 1946 agreement failed to make any provision for it. Finding 18. Since these expenses could not be billed to the Fish and Wildlife Service under the 1946 agreement, the plaintiff is likewise not entitled to have them charged to the Service under its contract. The cost of eliminating excess water originally brought into the Service Area via the Ady Canal must therefore be assumed by the Irrigation District.
We are left with the divergent views of the parties as to what was meant by the clause of the interagency contract charging the Fish and Wildlife Service with "the cost of removing from the Service Area the first 50,000' acre-feet of such water brought through Tule Lake tunnel annually which is determined to be in excess of the normal capacity." Defendant contends that measurement of the first 50,000 acre-feet "brought through Tule Lake tunnel" must be at the point it reaches the tunnel, i.e. after the water leaves Pumping Plant D and before it ever enters the Lower Klamath Lake Area. Plaintiff, on the other hand, asserts that the cost of removing the first 50,000 acre-feet of water, in excess of normal capacity, from the Service Area can only be ascertained by measuring the excess water as it leaves the Service Area.
Though the point is not wholly free from doubt, we think the plaintiff's construction is the more reasonable. The disputed provision refers to the amount of water brought through Tulelake Tunnel,, but it places primary .emphasis on apportioning the cost of removing excess water from the Lower Klamath Lake Area. It should therefore be construed as referring only to water brought through the tunnel and into the Lower Klamath Lahe Area. Under the defendant's interpretation, as we have pointed out, the cost of removing the first 50,000 acre-feet from the Service Area is ascertained by using a measurement which includes water never even reaching the Service Area. This is because some of the water entering Tulelake Tunnel and the P Canal through Plant D is used for the irrigation of adjacent lands and, as a result, does not enter the Lower Klamath Lake Area. By subtracting 50,000 acre-feet from the total amount of water pumped through Plant D and charging plaintiff on the basis of the remainder, the defendant includes this, water for the "P Canal lands", which never comes into the Service Area, as part of the excess water taken from the Area — and the Irrigation District is then charged for this outside water. This method of allocation does not square with the language and purpose of the incorporated provision. That clause strongly suggests that, up to 50,000 acre-feet, water which came from Tulelake Sump should be considered the first of the excess-water removed from the Service Area.
In the discussions preceding the present litigation after the dispute arose, the defendant's representatives relied wholly on their understanding of the intention of the parties to the interagency agreement, as shown by the pre-agreement negotiations and the subsequent administrative interpretation of the agreement from 1946-1956. Defendant chose to disregard the actual language of the agreement as "the unhappy product of an uninformed scrivener" who "simply did not have an understanding of the problem sufficient to enable him to draft an accurate memorandum of the actual agreement of the parties." Finding 43. As we have held, however, knowledge of "the actual agreement of the parties" to the interagency pact may not be imputed to this plaintiff. Bather, it is the 1946 contract as written which must control, and we find the plaintiff's interpretation, in this respect, more consonant with the words the two agencies used than the looser construction urged by the defendant. The inter-agency agreement states that the Fish and Wildlife Service is to be charged "with the cost of removing from the Service Area the first 50,000 acre-feet of water brought through Tule Lake tunnel annually and which is determined to be in excess of the normal capacity." To the extent that plaintiff's position embodies that requirement, we agree. The contract requires the plaintiff to bear all the expense of removing excess water from the Lower Klamath Lake Area (including water imported from the Ady Canal) less the cost of eliminating the first 50,000 acre-feet (if that much water has come through Tulelake Tunnel during the year) which is to be charged to the Fish and Wildlife Service.
The plaintiff is entitled to recover the difference between the amount it actually paid defendant and that which it should have paid under this interpretation. Under this method of computation — which differs from those proposed by the parties — the United States has overcharged the plaintiff as follows (see finding 41 (c)):
1957 _ $4,644.84
1958 _ 17,044.39
1959 _ 312.93
$22,002.16
. Although the method of cost allocation adopted by the court may possibly not be what was subjectively contemplated by either party at the time of the execution of the 1956 contract, we think that it most accurately reflects the agreement into which they actually entered. Under the objective theory of contracts, this interpretation must prevail in the absence of some other external manifestation of a mutual understanding. Should the parties wish to amend the contract so as to better express the subjective intent of either or both, or to substitute some new formula, they are of course free to do so.
Plaintiff is entitled to recover $22,002.16, and judgment is entered to that effect.
findings of fact
The court having considered the evidence, the report of Trial Commissioner C. Murray Bernhardt, and the briefs and arguments of counsel, makes findings of fact as follows:
1. The Klamath Project, Oregon-California, was authorized on May 15, 1905, by the Secretary of the Interior pursuant to authority vested in him under the Keclamation Act of June 17, 1902 (32 Stat. 388, 43 U.S.C. 391, et seq.).
2. The general plan of the project was to store the waters of the Klamath and Lost Rivers to provide a water supply •to about 197,000 acres of land. To effectuate the plan of the project, it was necessary to unwater certain lakes, including Tulelake.
3. In 1905 tbe Legislatures of the States of California and Oregon enacted companion cession acts ceding title to the United States to the lands uncovered by the lowering of the water levels of Lower or Little Klamath Lake, Tulelake, and Goose Lake and authorized the disposition of these lands under the Federal Reclamation Laws. (Cal. Stats., 1905, p. 4, approved February 3, 1905; General Laws of Oregon, 1905, p. 63, approved January 20, 1905.)
4. In the same year Congress authorized the Secretary of the Interior to raise or lower the levels of these lakes and to dispose of the ceded lands under the Federal Keclamation Laws (Act of February 9, 1905, 33 Stat. 714, 43 U.S.C. 601).
5. During the course of the development of the Klamath Project, the Tulelake National Wildlife Kefuge and the Lower Klamath Lake Wildlife Refuge were established by various Executive Orders. These orders recited that the lands within the Refuges had been withdrawn for reclamation purposes in connection with the Klamath Project and that these lands were subject to their primary use for reclamation purposes.
6. The Tulelake National Wildlife Refuge includes a sump, called the Tulelake Restricted Sump. This sump comprises an area of about 13,000 acres and has a large water storage capacity. Water which reaches and is stored in the sump comes from the following sources: precipitation, surface runoff, uncontrolled flows from Lost River, and return flows from irrigated land within the Tulelake Irrigation District which are pumped into the sump by a series of drainage pumps.
7. Water in the Tulelake Restricted Sump is disposed of by reuse for irrigation and by evaporation. Water is also removed from the sump by pumping it out to a pumping plant known as Pumping Plant D, through a tunnel called the Tulelake Tunnel and into a canal designated the P Canal. The water in the P Canal is used to furnish an irrigation supply to about 5,000 acres of land. The remaining waters are discharged into the Lower Klamath Lake Area.
8. The water levels in the sump are established by the Secretary of the Interior through rules and regulations issued by him which provide in part that the sump is to be operated to maintain objective water levels of the Fish and Wildlife Service for wildlife refuge purposes.
9. The Lower Klamath Lake Wildlife Kefuge or Lower Klamath Lake Area, also known as the "Service Area", consists of about 29,000 acres of land and water in the former bed of Lower Klamath Lake. The area is divided into a series of ponds, irrigated areas, and occasionally dry lands separated by a series of dikes.
10. Water accruing to the Lower Klamath Lake Area derives its sources from (a) the Tulelake Sump through Pumping Plant D, Tulelake Tunnel, and the P Canal; (b) the Ady Canal, a canal from the Klamath Liver to Lower Klamath Lake; (c) precipitation, drainage, and stream flow.
11. Water imported to Lower Klamath Lake Service Area by Fish and Wildlife Service through Ady Canal derives its source from the Klamath Liver below points of diversion from the Klamath Liver.
12. Except as limited by the capacity of the Ady Canal, the amount of water entering the service area through the Ady Canal is determined by the Fish and Wildlife Service and is under the control of the Fish and Wildlife Service through its operation of the control gates located at the northwest corner of the service area where the Ady Canal empties into the service area.
13. The amount of water entering into the service area through the Ady Canal is measured by a gauge installed at the control gates.
14. Excess water from the Lower Klamath Area is disposed of through the Klamath Straits Drain and Pumping Plants E and F which lift the water to higher levels from which it eventually flows into Klamath Liver.
15. Prior to 1942 the Bureau of Leclamation operated and maintained all of the facilities relating to the Klamath Project. On January 8, 1942, the Bureau of Leclamation and the Fish and Wildlife Service, both agencies of the Department of the Interior, entered into an agreement which, in part, transferred jurisdiction of the Tulelake Sump and the Lower Klamath Lake Area to the Fish and Wildlife Service, provided for the construction of certain water control facilities, and apportioned between the respective agencies the costs of removal of water from Tulelake Sump to Lower Klamath as follows:
The Bureau may pump, from the Tule Lake Restricted Sump into the Service's Lower Klamath area, any and all water in excess of that required to maintain a satisfactory water surface elevation in the said Tule Lake Restricted Sump as provided in Article 9(c) hereof: Provided, That when the water capacity of the Service's Lower Klamath area is reached, consistent with the operation of the area as a wildlife refuge, as determined by mutual agreement between the Bureau and the Service, or by the Secretary of the Interior, the Bureau and the Service shall cooperate in disposing of Tule Lake waters in the area in excess of said capacity. The cost of such disposal shall be borne as mutually agreed on between the Bureau and the Service, or as directed by the Secretary.
16. That agreement resulted from investigations which made it apparent that, due to the unwatering of Tulelake Sump, increased development and greater flooding within the Klamath Drainage District and the wet winter of 1942-3 (over 100 percent above normal), immediate steps must be taken for the disposal of excess water in Lower Klamath Lake.
17. In July 1945 the Bureau of Reclamation and the Fish and Wildlife Service determined that modification of the agreement would be necessary for the purpose of delineating the responsibilities of the respective agencies in connection with the bearing of expenses for the pumping of excess water from the Fish and Wildlife Service's Lower Klamath Area. Various proposed amendments to the 1942 agreement were considered. On June 28, 1946, the agreement of January 8, 1942, between the two agencies was amended to provide as follows:
7. The Bureau will pay all construction costs for the pumping facilities now being erected for the removal •of excess water from the Lower Klamath Lake Area.
8. The aforesaid pumping facilities will be operated by the Bureau. The Bureau may continue to pump, as provided in Article 16 of the existing agreement, excess water from the Tule Lake Restricted Sump into the Service's Lower Klamath Area, through Tule Lake Tunnel.
9. The Burean will remove from the Service's Lower Klamath Area all water brought through Tule Lake Tunnel which is in excess of the normal capacity of the Service Area and which it is necessary to remove in order to permit the efficient carrying on of the Service's functions.
10. The Service will reimburse the Bureau for the cost of removing from the Service Area the first 50,000 acre feet of such water brought through Tule Lake Tunnel annually and which is determined to be in excess of the aforesaid normal capacity, and the Bureau will bear the expense of removing excess water brought through the tunnel in excess of said 50,000 acre feet annually.
18. A review of interagency correspondence in the Bureau of Reclamation in 1944 casts some light on the extent to which one issue which later precipitated the instant litigation was anticipated at the time of the ultimate interagency agreement of 1946. The references are as follows:
(a) Letter dated July 3, 1944, from District Superintendent to Bureau of Reclamation Commissioner, paragraph 5:
' 5. With reference to the meaning of paragraph 7 in the new draft of agreement, it was the intention of this office to set a definite amount of water (50,000 acre feet) that the Bureau would be permitted to deliver to the Bird Reserve on Lower Klamath Lake before becoming obligated to pay any cost toward removal of water from Lower Klamath Lalie. Whatever quantity of water we deliver from Tule Lake in addition to the estimated 50,000 acre feet, we propose to pump into Klamath River through the Modoc Extension drain at Bureau cost in case it becomes necessary to do so to hold the water level in the Bird Reserve at a satisfactory stage. If the Fish 'Wildlife Service choose to freshen up their ponds by bringing in Klamath Rimer water it with be their responsibility to pay the cost of removing a similar amount of stale water. (Emphasis supplied.)
(b) Letter dated July 28,1944, from Acting Commissioner, Bureau of Reclamation, to District Commissioner, paragraph 3:
3. We understand that your article is to supersede the proviso of article 16 of the existing agreement. If so, to avoid confusion the fact of substitution can be made clear by striking the old proviso and writing a new one in its place. In this connection, we assume that water pumped in by tbe Bureau other than from Tule Lake Bestricted Sump would also be included in determining what is excess (but see paragraph 5 of your letter of July 3). This question arises because of the possibility of the Bureau piunping from the points designated in your article 8. As to your article 8 we think that this might better be handled as an amendment to article 17 of the existing agreement.
(c) Letter dated October 4, 1944, from District Superintendent to Bureau of Beclamation Commissioner, paragraphs 9 and 12:
9. I believe that no further concessions should be granted the Fish and Wildlife Service and that the Bureau should agree to pump only the excess waters, above 50,000 acre-feet, delivered to Lower Klamath Lake from Tule Lake and that the amendment of Article 16 should read as follows:
"Whenever in any calendar year the discharge of the Bureau's Pumping Plant 'D', delivering water from Tule Lake to Lower Klamath Lake, exceeds 50,000 acre-feet, the Bureau at its own expense, will pump the excess water from said lake into the Klamath Biver on its being determined by the Service that the excess interferes with the proper operation of the area."
I believe also that reference to any other excess waters should be eliminated and the Fish and Wildlife Sendee required to assume some responsibility. It would be difficult and expensive to determine other amounts of water entering the ponded areas.
❖ ❖ *
12. I recommend that the Bureau pay the operation costs for removal of all excess over 50,000 acre-feet delivered to Lower Klamath Lake from Tule Lake, that the Klamath Drainage District pay the cost of removal of the drainage waters originating on their lands and that the Fish and Wildlife Service pay the cost of removal of all inflow above 50,000 acre-feet from Tule Lake plus inflow from the tributary drainage area and any water brought in by them for freshening up sump waters. I further recommend that if the Fish and Wildlife Service offers objection to the plan of procedure recommended herein, that the whole matter be submitted to the Secretary of the Interior for decision.
19. The term "normal capacity" used in paragraph 9 of the agreement of June 28, 1946, is not clearly defined in the record, but appears to be that amount of water which the Service considers, each, year, should be retained in the Service Area.
20. Pursuant to the agreements of January 8, 1942, and June 28. 1946, the Fish and Wildlife Service obtained jurisdiction over the operation and management of the Lower Klamath Lake National Wildlife Refuge the Lower Klamath Lake Area or "Service Area").
21. In exercising its jurisdiction over the Lower Klamath Lake Area, the Fish and Wildlife Service determines the normal water capacity of the service area for fish and wildlife purposes and the amounts of water in the service area in excess of the normal capacity and which must be removed by the Bureau of Reclamation in order to permit the Fish and Wildlife Service to carry on its functions efficiently. The determinations so made are communicated to the Bureau of Reclamation by the Fish and Wildlife Service. The Bureau operates the gates at the head of the Klamath Straits Drain and Pumping Plants E and F to remove the amount of water declared excess by the Fish and Wildlife Service.
22. Water is imported to the Service Area through the Ady Canal by the Fish and Wildlife Service. These importations of water affect the determination as to whether, at any particular time, there is in the Service Area an amount of water in excess of the normal capacity of the Service Area and which must be removed in order to permit the carrying on of the Fish and Wildlife Service functions.
23. The facilities for removal of water from Lower Klam-ath Lake are (a) a rated gate at the head of the Klamath Straits Drain Channel where the water from Lower Klamath Lake empties into the Channel, (b) Pumping Plant E and (c) Pumping Plant F.
24. Water accruing to Lower Klamath Lake from Ady Canal is measured by a gauge installed at the Ady Canal control gates.
25. The plaintiff, Tulelake Irrigation District, was organized April 11, 1952, as a corporate entity and a political subdivision of the State of California. It has jurisdiction over or comprises an area of approximately 93,000 acres within the Klamath Project.
26. Prior to January 1, 1957, the Bureau of Declamation operated and maintained all of the works and facilities of the Klamath Project except the Tulelake Sump and Lower Klamath Lake. Jurisdiction, administration, and control of the Tulelake Sump and Lower Klamath Lake had been transferred to the Fish and Wildlife Service, as noted in findings 15,17, and 20, supra.
27. (a) On September 10, 1956, the plaintiff and the defendant entered into a contract pursuant to the Federal reclamation laws and the laws of California, providing for the transfer by the United States to the plaintiff for operation and maintenance by plaintiff of numerous irrigation works, properties and lands; for the delivery of water by the United States to the plaintiff for use as a water supply; for the repayment of construction charges set forth in the contract and for the protection of the lands within the plaintiff Irrigation District. The operation and maintenance of works which were not transferred to the plaintiff within the project remained with the Bureau of Declamation. In addition to the repayment of the construction costs, the District was also required to pay the costs of operation and maintenance.
(b) The contract was entered into only after lengthy negotiations between the parties, since many complex problems were involved. Because the agreement was essentially the last of a series of contracts between the United States and various irrigation districts in the Klamath Project, it was necessary for the Federal Government to recover the remainder of its operational and maintenance costs through the contract with the plaintiff. Thus, the contract between the parties also had to complement prior contracts between the United States and some twenty other irrigation districts and more than one hundred individual contractors in the Klamath Project.
(c) The pertinent provisions of the contract are as follows:
CHARGES TO BE PAID BY THE DISTRICT
15. (a) On or before September 1 of each calendar year during the term of this contract, the United States shall furnish to the District an itemized estimate of all costs expected to be incurred by the United States under the provisions of this contract during the following cal endar year which are properly chargeable to the District and a statement of the differences between estimated and actual costs for the previous calendar year, with appropriate charges or credits to adjust the previous year's estimate to the total of actual costs for that previous year. The District shall pay to the United States the total of such estimated costs for the current calendar year, as adjusted by the reconciliation of actual and estimated costs for the previous calendar year. One-half (i/2) of said sum shall be paid on January 1 and one-half (14) on July 1 of each year. Each such annual estimate and statement shall list separately the following types of costs:
*
(ii) Estimated annual costs 'of any bookkeeping, accounting, engineering, legal, drafting, clerical or other technical or administrative services .
(iii) The estimated annual costs of operating and maintaining the reserved works as determined by the Secretary: Provided, That in no event will the cost for 1957 exceed Twenty-five Thousand Dollars ($25,000.00), except as provided in subdivision (a) (iii) (gg) of this article. The District shall pay no more than the following percentages of the actual or estimated cost, as the case may be, of operating and maintaining, and its obligation to pay the United States for operation and maintenance of physical works shall be restricted to, the following features:
(aa) 79.8065 percent of the cost of operation and maintenance of Clear Lake Dam and Reservoir.
(bb) 50 percent of the cost of operation and maintenance of Gerber Dam and Reservoir.
(cc) 100 percent of the cost of operation and maintenance of the Lost River Channel improvements, less the amount of the operation and maintenance payments received by the United States from Warren Act contractors whose water supply comes from the Lost River.
(dd) 85 percent of the cost of operation and maintenance of the Lost River Diversion Dam and Diversion Channel.
(ee) 100 percent of the cost of operation and maintenance of the P Canal, the Klamath Straits drain, and Pumping Plants E and F less:
(l) Any revenues received from spill water used by water users under the P Canal.
(2) The share of costs assignable to the Fish and Wildlife Service pursuant to Article 10 of the Amenda- tory agreement of June 28, 1946, between the Bureau of Declamation and the Fish and Wildlife Service.
(3) The share assignable to the Klamath Drainage District pursuant to the contract of October 11,1947.
(if) In the event the United States has any additional costs of operating the Link Diver Dam or Upper Klam-ath Lake as a result of the termination or an extension or amendment of the contract of February 24, 1917, with the Califomia-Oregon Power Company, the District shall pay a share of such costs proportionate to the amount of water received by the District from the Klamath Diver: Provided, That any such statement of costs shall indicate the manner of assigning such costs.
(gg) 100 percent of the operation and maintenance costs of any works described in subdivision (a) of Article 7 which are not transferred to the District.
$ * $ $ $
(b) The District shall pay the United States any actual costs in excess of the previous year's estimate for work performed or services furnished by the United States during that calendar year under provisions of this contract, itemized by each of the preceding subdivisions (a) (i) through (a) (vi).of this article.
(c) The District shall be credited for any amounts by which the actual costs of work performed or services furnished by the United States during the previous calendar year under provisions of this contract were less than the amounts for such work shown in the previous year's estimate, itemized by subdivisions (a) (i) through (a) (vi) of this article.
28. The Klamath Straits Drain and Pumping Plants E and F are part of the reserved works operated by the Bureau of Declamation, but plaintiff under its contract is required to assume all costs of operation less certain credits. To the extent that these works remove water from the Lower Klam-ath Lake Area, which is in excess of the needs of the Fish and Wildlife Service, they are operated primarily for the benefit of the Fish and Wildlife Service.
29. Part of the excess water exported from the Service Area was contributed by the Fish and Wildlife Service through its imports via the Ady Canal. This is not specified in the various agreements as such, but is necessarily concluded from knowledge as to sources of water in the Serv ice Area, including water passing through Tulelake Tunnel and water coming through the Ady Canal.
30. All of the water brought or flowing into the Lower Klamath Area through Pumping Plant D and Tulelake Tunnel in any one year is not necessarily excess to the needs of the Fish and Wildlife Service in the operation of the Lower Klamath Area as a refuge. Similarly, imports of water by the Fish and Wildlife Service through other sources such as the Ady Canal are not necessarily excess to the needs of the Fish and Wildlife Service but, when there is an excess over normal capacity, the waters pumped through Tulelake Tunnel and/or imported through Ady Canal or derived from other sources naturally contribute to the excess required to be pumped from the service area.
31. In billing the plaintiff for the years 1957, 1958 and and 1959, pursuant to Article 15 of the contract of September 10, 1956, (finding 27, supra), particularly with respect to the allocation of costs in paragraph (iii) (ee) of the said Article 15, the Bureau of Reclamation made no actual determinations for those years of the "normal capacity of the Service Area" as that term is used in Articles 9 and 10 of the agreement of January 8,1942 (as amended June 28,1946) between the Bureau and the Fish and Wildlife Service (finding 17, supra). Nor was such a determination made by the Bureau in allocating operation and maintenance costs to the Fish and Wildlife Service, so far as the record discloses. However, the silence in the record would justify the conclusion that there was acquiescence by both agencies in the determination used for billing purposes.
32. Each year from 1947 to 1956, the Bureau of Reclamation computed the allocation of costs for the removal of excess water from the Lower Klamath Lake Area under the interagency agreement of June 28, 1946, in the following manner: It measured the amount of water pumped through Plant I) and Tulelake Tunnel and subtracted 50,000 acre-feet. The Bureau then charged itself for the removal of the remainder as being the maximum amount of water removed from the Lower Klamath Lake Area as excess water. 'The ratio which that maximum bore to the total amount of excess water discharged from the Service Area was approximately the proportion of the cost of removal assumed by the Bureau of Eeclamation. The Fish and Wildlife Service was billed only for the proportional cost of exporting the remaining amount of water, if any. Under the agreement entered into by the plaintiff and the United States on September 10, 1956, the plaintiff in effect assumed all the charges previously borne by the Bureau of Eeclamation, and it was billed accordingly for the years 1957,1958, and 1959.
33. (a) The method of allocation used under the inter-agency agreement and now advocated by the defendant may result in plaintiff's being required to bear the entire cost of removing excess water. This will be the case in any year when, even after having been reduced by 50,000 acre-feet, the amount of water pumped through Plant D is greater than that exported from the Service Area as excess. Thus, the import of 70,000 acre-feet through Plant D and the Tulelake Tunnel and 20,000 acre-feet through the Ady Canal, coupled with the export of 20,000 acre-feet from the Service Area, would result in a cost allocation to the plaintiff of the entire 20,000 acre-feét exported.
(b) For example, in 1960 a total of 61,186 acre-feet w'as brought into the Lower Klamath Lake Area through the Tulelake Tunnel and 27,780 acre-feet were brought into Lower Klamath Lake Area through the Ady Canal. Excess water in the amount of 32,050 acre-feet was exported through the Klamath Straits Drain. Although the Ady Canal import may have contributed 27,780 acre-feet to the excess of 32,050 acre-feét, leaving a difference of 4,270 acre-feet contributed to the excess through the Tulelake Tunnel, the plaintiff Irrigation District would be charged with 11,186 acre-feet.
34. On November 13, 1956, the United States submitted to the plaintiff the estimate of operation and maintenance costs to be incurred by the United States for the calendar year 1957. These costs were paid by the District as provided in the contract.
35. On May 19, 1958, the United States submitted to the plaintiff the schedule of actual costs incurred by the United States for the calendar year 1951, which included a credit of $7,825.79 as the share of the costs assignable to the Fish and Wildlife Service under the interagency contract of June 28, 1946, as incorporated in paragraph 15(a) (iii) (ee) (2) of the contract in suit.
36. On October 4,1957, the United States submitted to the plaintiff the estimate of operation and maintenance costs expected to be incurred by the United States for the calendar year 1958.
37. On April 17,1959, the United States submitted to the plaintiff the schedule of actual costs incurred by the United States for the calendar year 1958, which included a credit of $4,152.69 as the share of costs assignable to the Fish and Wildlife Service under the interagency contract of June 28, 1946, as incorporated in the contract in suit.
38. On August 28, 1958, the United States submitted to the plaintiff the estimate of opei'ation and maintenance costs expected to be incurred by the United States for the calendar year 1959.
89. On October 5,1960, the United States submitted to the plaintiff the schedule of actual costs incurred by the United States for the calendar year 1959, which included a credit of $6,901.60 as the share of costs assignable to the Fish and Wildlife Service under the contract of June 28, 1946, as incorporated in the contract in suit.
40. When the plaintiff first learned of the method of computation used to assign costs to the Fish and Wildlife Service, it immediately protested this method as in violation of the contract between the United States and the'District.
41. (a) The plaintiff recomputed these costs in what it considered the proper method, viz: It determined the amount of water removed from the Lower Klamath Lake Area through the Klamath Straits Drain and considered this amount as the excess water required to be removed for the benefit of the Fish 'and Wildlife Service. The plaintiff then allocated to the Fish and Wildlife Service the first 50,000 acre-feet of water discharged into the Klamath Straits Drain that was delivered to the Service Area from the Tulelake Tunnel and the P Canal. If any excess remained after the initial allocation, plaintiff also charged the Wildlife Service with the amount imported into the Service Area from the Ady Canal. Only the remainder, if any, would be chargeable to the plaintiff under its computation. In other words, the formula for determining the amount charged to the Fish and Wildlife Service (and thus credited to the plaintiff) would be roughly as follows:.
50,000 acre-feet + acre-feet imported to the Service Area from Total Cost the Ady Canal of Remov-Total acre-feet of excess'^ Excess water removed from Water the Service Area Amount Charged to = Wildlife Service
(b) On the basis of plaintiff's computation, the credit due to the plaintiff for costs assignable to the Fish and Wildlife Service woidd have been increased as follows: For the year 1957, an additional credit of $6,416.47; for the year 1958, an additional credit of $18,185.57; for the year 1959, an additional credit of $312.93.
(c) If the Fish and Wildlife Service were charged with the cost of removing the first 50,000 acre-feet of water from the Service Area via the Klamath- Straits Drain (or, if less than 50,000 acre-feet came through the Tulelake Tunnel and the P Canal during the year, that lesser amount), the computation for 1958 would be as follows:
Discharges (in acre-feet)
Pumping Plant D: 101,699
Klamath Straits Drain at State Line: 60,030
Pumping Plant E: 104,963
Pumping Plant E: 111,186
60,030 Discharge (of excess water) to Klamath Straits Drain —60,000 Contract assignment to Eish and Wildlife Service
10,030 Allocable to plaintiff
Cost Distribution
Pumping Plant E (cost of operation, $19,441.72)—
Plaintiff: X $19,441.72=$1,857.82 104, yoo
Fish and Wildlife Service: — 50,000+1,281 /10,963x $19,441.72=$9,598.60
Pumping Plant E (cost of operation, $16,349.97) —
Plaintiff: .X$16,349.97=$1,474.88 111,loo
Fish and Wildlife Service: 5°'^^'.82-X$16,349.97=$7,620.28
Klamath Straits Drain (cost of operation, $8,269.22)—
Plaintiff: $769.98
Fish and Wildlife Service: $3,978.20
Summary: $9,598.60 Pumping Plant E allocation to Wildlife Service
7,620.28 Pumping Plant F allocation to Wildlife Service
3,978.20 Klamath Straits Drain allocation to Wildlife Service
. $21,197.08 Total charges allocated to Wildlife Service under this method
—4,152.69 Total charges actually allocated to Wildlife Service
$17,044.39 Additional amount owed plaintiff for 1958
Under the above method of computation, plaintiff would also be entitled to recover $4,644.84 for 1957 and $312.93 for 1959.
42. The plaintiff's method and interpretation of the amendatory contract of June 28, 1946, are set out in a letter dated May 30, 1958, which it sent to the Regional Director, Bureau of Reclamation. It reads as follows:
Recently I met with Messrs. Bindley, Howard and Barth of your office concerning the application of certain provisions of the agreement of January'8, 1942, supplemented by the agreement effective January 1, 1946, between the Bureau of Reclamation and the Fish and Wildlife Service. In furtherance of the informal discussions which were had at that time, and previous correspondence between the District and the Bureau,. I am transmitting this letter setting out the problem dis cussed with the request that it be given study by your office and the Department, and that the present, what appears to Tulelake Irrigation District, erroneous application of the terms of the agreement be corrected.
Specifically the problem involves the application of Article 16, of the original agreement, and Articles 9 and 10 of the supplemental agreement, all of which deal with the allocation of the cost of the removal from the Fish and Wildlife Service's Lower Klamath Area of water pumped from Tule Lake [Restricted Sump into that Area. The District's concern with this problem arises by virtue of the fact that whatever portion of the cost of removal the Bureau of Reclamation is required to bear ultimately must be paid by the District.
The pertinent articles read as follows:
(Agreement of January 8, 1942)
"16. The Bureau may pump, from the Tule Lake Restricted Sump into the Service's Lower Klamath area, any and all water in excess of that required to maintain a satisfactory water surface elevation in the said Tule Lake Restricted Sump as provided in Article 9(c) hereof: Provided, That when the water capacity of the Service's Lower Klamath area is reached, consistent with the operation of the area as a wildlife refuge, as determined by mutual agreement between the Bureau and the Service, or by the Secretary of the Interior, the Bureau and the Service shall cooperate in disposing of Tule Lake waters in the area in excess of said capacity. The costs of such disposal shall be borne as mutually agreed on between the Bureau and the Service, or as directed by the Secretary."
(Agreement effective January 1, 1946)
"9. The Bureau will remove from the Service's Lower Klamath area all water brought through Tule Lake tunnel which is in excess of the normal capacity of the Service area and which it is necessary to remove in order to permit the efficient carrying on of the Service's functions.
"10. The Service will reimburse the Bureau for the cost of removing from the Service area the first 50,000 acre feet of such water brought through Tule Lake tunnel annually and which is determined to be in excess of the aforesaid normal capacity, and the Bureau will bear the expense of removing excess water brought through the tunnel in exess of said 50,000 acre feet annually."
It appears to the District that these articles provide, in essence, that: (1) the Bureau may pump water from the Restricted Sump (of necessity through Tule Lake Tunnel) into the Service's Lower Klamath Area; (2) the Bureau must remove all water brought through Tule Lake Tunnel which is in excess of the normal capacity of the Service's Area and necessary to be removed in order to permit the Service to carry on its functions; and (3) of the amount of water brought through the Tunnel annually and so removed, the Service must pay the cost of removing the first 50,000 acre feet and the Bureau (TLID) must bear the cost of all such water brought through the Tunnel and removed which is in excess of the 50,000 acre feet for which the Service is required to pay.
It is apparent from the agreement that in order to determine what each Agency is required to pay under this arrangement at least three figures must be considered. These are, first, the amount of water brought through the Tule Lake Tunnel annually; second, the total amount of water removed from the Service's Area; and third, the figure of 50,000 acre feet. Obviously, the "normal capacity" of the Service's Area has not been reached and, consequently, neither Agency has any responsibility with reference to cost unless water is being removed from the Service's Area. Likewise, the Bureau of Reclamation has no responsibility with reference to cost unless water is brought through the Tunnel in the same year in which water is removed from the Service's Area. It follows, therefore, under the express language of the agreements, that in order to determine the specific share of the cost to be borne by the Bureau, as well as the Service, that cost must be related to the cost of removal of water from the Service's Area. This is readily apparent from the language of Article 10 of the supplemental agreement which states that the Service will bear the cost of "removing from the Service Area the first 50,000 acre feet of such water brought through Tule Lake Tunnel annually and the Bureau will bear the expense of removing excess water brought through the Tunnel in excess of said 50,000 acre feet annually". (Emphasis supplied.)
It seems to us that the clear meaning of the language of the agreements would require that a computation be made of the total amount of water removed from the Service Area in any year in which water had been placed in the Service's Area through Tule Lake Tunnel. From the figure which represented the total amount of water re moved from the Service's Area would be subtracted the figure of 50,000 and that would represent the amount of water for which the Service would be required to pay the cost of removal. If the total amount of water brought through the Tule Lake Tunnel during the respective year was less than the total amount of water removed from the Service's Area, the Bureau's responsibility for all practical purposes for bearing cost would be represented by the total amount of water so brought through the Tunnel less 50,000 acre feet, and all other costs would be borne by the Service. If the total amount of water brought through the Tunnel in any year is in excess of the amount of water removed from the Service's Area the Bureau's responsibility would be for paying for the cost of removing all water from the Service's Area less 50,000 acre feet, the cost of this 50,000 acre feet being the responsibility of the Service. In no case would it appear, under the agreements, should the Bureau have to pay any portion of the cost of removal unless the Service had to pay for removing at least 50,000 acre feet.
This has not been the method actually used to date in determining the share to be paid by the Bureau (TLID). In practice, however, it appears that the 50,-000 is subtracted from the amount of water brought through the Tunnel and the remainder is then subtracted from the amount of water removed from the Service's Area. For example, if 75,000 acre feet of water are brought through the Tunnel and 60,000 acre feet are actually removed from the Service's Area, 50,000 has been subtracted from 75,000, leaving a result of 25,000. This 25,000 is then set as the Bureau's responsibility.
The 25,000 is then subtracted from the 60,000 and the remainder of 35,000 is held to be the Fish and Wildlife Service's responsibility. This assumes that all of the 75,000 acre feet brought through the Tunnel are removed from the Service's Area in computing the Bureau's responsibility but assumes that a lesser amount is removed in considering the Fish and Wildlife's responsibility. The agreements would certainly seem to indicate that if 60,000 acre feet are removed from the Service's Area and 75,000 were brought through the Tunnel the Fish and Wildlife's responsibility would be for the cost of removing 50,000, and the Bureau's responsibility would be for removing 10,000 acre feet of the water removed.
The clear wording of the agreement is that the responsibility of the Service is to bear the cost of removing from the Service's Area the first 50,000 acre feet of the water brought through the Tunnel which is in excess of the normal capacity of the Service's Area, and the Bureau is required to bear the cost of all such water brought through the Tunnel which is removed and which is in excess of the Fish and Wildlife's responsibility. It is patent that the only water which is in excess of the normal capacity is that which is removed from the Service's Area and this can be measured' only at the point of removal. It is also patent that the only water for which the Bureau has a responsibility is the amount of water brought through the Tunnel and no other. This in turn can be measured only at the point of discharge from the Tunnel into the Service's Area, i.e., at the end of the P Canal. ,
The only correct method of computing the charge to be made to the Bureau would be to take the total amount pumped from the Service's Area and subtract from that 50,000 acre feet. The difference, but not in excess of the total amount pumped through the Tunnel, and discharged into the Service's Area from the various branches of the P Canal, less 50,000 would seem most clearly to be the limit of the Bureau's responsibility.
It should be noted that it has been stated above that the points of measurement of water placed from the Tunnel into the Service's Area should be at'the end of the various branches of the P Canal. This is for the reason that water brought through the Tunnel is furnished to certain lands from the P Canal and, therefore, is not placed in the Service's Area. It also seems that some consideration should be given to the fact that there are other elements besides water brought through the Tunnel which contribute to the reaching of the normal capacity of the' Service's Area; for example, water which reaches the sump through precipitation and through the Ady Canal. Another problem which presents itself is as to what constitutes the "normal capacity" of the Service's Area. All of these latter items are not clear and complicate the problems of administration and would seem to indicate that it would be desirable to execute a new or amendatory agreement. We suggest, therefore, that consideration also be given to that possibility. Should that be done, we hope that the District will be permitted to participate in the formulation of any new arrangements. In the meantime, however, the District urges that the practice on allocation of costs be revised to conform to the provisions of the agreement.
43. On August 21, 1958, the Eegional Solicitor, Sacra- mentó Region, Department of the Interior, wrote to plaintiff as follows in reply to plaintiff's letter of May 80,1958:
The Regional Director has requested that we reply to your letter of May 30, concerning certain provisions of the memorandum of agreement entered into by the Bureau of Reclamation and the Fish and Wildlife Service, effective January 1,1946.
The concluding paragraph of your letter succinctly summarizes the elements of confusion and ambiguity involved .in the transaction, and we agree with your suggestion that .a hew agreement might be desirable. We do not, however, agree with your' further suggestion that in the interim the allocation of costs for unwater'ing the Lower Klamath Lake area should .be revised to accord with your interpretation of the current Bureau-Fish and Wildlife agreement'. Although the document unquestionably is susceptible to the construction for which you contend, it does not in fact represent the agreement of the parties or .the basis of their actions. We are not convinced that the normal rules of .contract law are applicable to a memorandum of agreement between two Federal agencies, particularly two agencies in the same department. These are not private parties dealing at arm's length. "Consideration" in the usual sense is not involved, nor is the Tulelake Irrigation District a third party beneficiary. Such memoranda are mere records of housekeeping arrangements between agencies. Resort to the courts over questions of interpretation is not involved. Moreover, the appropriate administrators .may, if they, wish, observe such agreements, ignore them, or alter them .by oral understanding or by customary practice, subject only to such regulation as the head of the department may wish to assert.
Even assuming the applicability of normal rules of contract law, it appears exceedingly doubtful that the agreement in question is so clear and unambiguous as to foreclose resort to extraneous evidence in aid of its interpretation. In this respect it is difficult to conceive of a more convincing indication of the true intentions of the parties than the adoption, at the inception of the contract, of an interpretation consistently adhered to for the succeeding 12 years. Also convincing is the record contained in Bureau files concerning this matter.
Correspondence preceding the agreement clearly shows that the Fish and Wildlife Service, as per memorandum from Dieffenbach to Wame, dated September 13, 1944, and attached proposed agreement, was contending that tbe Bureau should be responsible for the removal, at its expense, of all water in excess of 35,000 acre-feet pumped by the Bureau into the Lower Klamath area. The Bureau, on the other hand, as per memorandum of October 4, 1944, from Superintendent Hayden to the Commissioner, merely contended that the figure should be 50,000 acre-feet instead of 35,000. His specific recommendation reads as follows:
"I believe that no further concessions should be granted the Eish and Wildlife Service and that the Bureau should agree to pump only the excess waters, above 50,000 acre-feet, delivered to Lower Klamath Lake from Tule Lake and that the amendment of Article 16 should read as follows:
"Whenever in any calendar year the discharge of the Bureau's Pumping Plant 'D', delivering water from Tule Lake to Lower Klamath Lake, exceeds 50,000 acre-feet, the Bureau, at its own expense, will pump the excess water from said lake into the Klamath River on its being determined by the Service that the excess interferes with the proper operation of the area."
Actually, the only difference between the two viewpoints was that Dieffenbach contended for a 50,000 acre-foot capacity agreement, based upon the Iakisch Report allowing 85,000 for Tule Lake Sump water and the remainder for water from other sources, whereas Hayden contended that capacity should be based upon 50,000 acre-feet from Tule Lake Sump. They were in entire agreement that the Bureau should bear the expense of removing the excess.
Exactly the same pattern persists through the conclusion of the written agreement executed by Messrs. Laythe, Lineweaver, Boke, and Stephens, on July 7,1945, as the culmination of negotiations for settlement of the controversy between the agencies. Awkward phrasing in this agreement may have been the forerunner of a rearrangement of phrasing in the final agreement of 1946, which completely obfuscated the intent of the parties to the agreement. The pertinent provision of the memorandum of the agreement reached by the negotiators July 7,1945, reads as follows:
"2. The Bureau may pump, as provided in Article 16 of the original agreement, excess water from the Tule Lake Restricted Sump into the Service Lower Klamath area through the Tule Lake Tunnel. Of all water so transported annually from the Tule Lake Tunnel to the Service Lower Klamath area by the Bureau which is in excess of the normal capacity of the Service area and which it is necessary to remove in order to permit efficient operation of the Service functions, the expense will be borne as follows: The service (sic) will reimburse the Bureau for that portion of the cost of removing the first fifty thousand acre feet of such water brought through Tule Lake Tunnel which is determined to be in excess of such normal capacity, and the Bureau will bear the expense of removing all water brought through the Tunnel in excess of said fifty thousand acre feet."
The emphasis has been supplied to point out that the may in the first line indicates that the Bureau was being granted a privilege and in normal circumstances would be expected to bear the heaviest burden of the expense of the operation. The subsequent words and phrases underlined show clearly that the Fish and Wildlife Service was to be obligated only for the expense of removing that portion of the first 50,000 acre-feet pumped through the tunnel which the Fish and Wildlife Service considered in excess of the capacity of the area. This represented a compromise of the difference in opinion as to whether the 35,000 or 50,000 acre-feet in the Iakisch Beport should be adopted as the capacity of the area. The Bureau, as clearly expressed in the agreement, had the privilege of placing 50,000 acre-feet in the area from the tunnel without any obligation to pay for the removal of any of that amount. The Bureau, however, was obligated to "bear the expense of removing all water brought through the Tunnel in excess of said fifty thousand acre feet." Such was the final agreement of those who negotiated and such was the interpretation in accordance with which the parties have performed for some 12 years.
The confusion inherent in the phrasing of this article of the agreement, and . which was compounded in the final instrument of 1946, lies in the placement of the phrase "for that portion of." The provision would have been clearer had that phrase been placed after the word "removing", thus:
"The Service will reimburse the Bureau the cost of removing that portion of the first fifty thousand acre feet of such water brought through Tule Lake Tunnel which is determined to be in excess of such normal capacity, and the Bureau will bear the expense of removing all water brought through the Tunnel in excess of said fifty thousand acre feet."
The version of the agreement appearing in the document signed by the heads of the agencies and approved by an Assistant Secretary of the Interior June 28,1946, obviously is the unhappy product of an uninformed scrivener. The formula set forth in articles 9 and 10 is unworkable and ambiguous because it does not take into consideration water entering Lower Klamath Lake from sources other than the tunnel and it fails to define "normal capacity of the area" or provide a formula for its determination. The agreement refers only to water entering Lower Klamath Lake from the tunnel and it is impossible to determine whether reference to water in excess of the capacity of the area means the gross capacity of the area or its capacity to utilize water from the tunnel in addition to the water that enters the area from other sources.
Further evidence that the final product was prepared by someone unfamiliar with the problem appears from the fact that in the 1946 agreement almost exactly the same language is used as was used in the 1945 agreement of tiie negotiators. It was rearranged, however, in such a manner as to convey an entirely different meaning. There can be no doubt but that this was accidental, upon a review of the history of the entire transaction.
The correspondence and proposed drafts of amenda-tory agreements preceding the 1946 agreement all are completely consistent. Only the final document is incongruous. For example, in a draft of agreement submitted to the Commissioner of Reclamation by Superintendent Hayden by letter of May 10, 1944, the following language is used:
"7. The Bureau will, at its own expense, pump water from the Lower Klamath Lake into Klamath River each year to the extent that water delivered by the Bureau into Lower Klamath Lake Bird Refuge exceeds 50,000 acre-feet per annum, provided such excess water interferes with the proper operation of the bird refuge."
Superintendent Hayden commented upon this draft in a letter of July 3, 1944, to the Commissioner, as follows:
"5. With reference to the meaning of paragraph 1 in the new draft of agreement, it was the intention of this office to set a definite amount of water (50,000 acre feet) that the Bureau would be permitted to deliver to the Bird Reserve on Lower Klamath Lake before becoming-obligated to pay any cost toward removal of water from Lower Klamath Lake. Whatever quantity of water we deliver from Tule Lake in addition to the estimated 50,000 acre feet, we propose to pump into Klamath River through the Modoc Extension drain at' Bureau cost in case it becomes necessary to do so to bold the water level in the Bird Reserve at a satisfactory stage. ."
"6. The Bureau takes no responsibility of removal of any water from Lower Klamath Lake until the 50,000 acre feet mentioned in the Iakisah (sic) Report of 1938 has been delivered to the Lower Klamath Lake Bird Reserve."
On July 28, 1944, Acting Commissioner Warne submitted a revised draft to Superintendent Hayden, in which the provision in question was revised to read as follows:
"Whenever in any calendar year the Bureau pumps into the Service's Lower Klamath area, either from the Tule Lake Restricted Sump or from other sources, a volume of water in excess of 50,000 acre feet the Bureau, at is (sic) own expense, will pump the excess water from the area into the Klamath River on its being determined by the Service that the excess interferes with the proper operation of the area."
This revised Washington office draft was sent to the Director of the Fish and Wildlife Service, who replied by letter of September 13, 1944, submitting a further revision. This, as previously mentioned, reduced to 35,000 acre-feet the amount of water the Bureau could place in Lower Klamath Lake without obligation to remove. This was followed by the previously mentioned letter of October 4, 1944, from Hayden to the Commissioner in which the former contended for retention of the capacity figure of 50,000 acre-feet.
This impasse resulted in the previously mentioned meeting of July 1, 1945, attended by representatives of the Bureau and the Fish and Wildlife Service. This obviously was intended as a final meeting between Regional and Washington representatives of both agencies to settle the problem once and for all.
In the light of the foregoing history of the transaction, it is inconceivable to us that the Fish and Wildlife Service suddenly, and without any record of dissent, agreed to an arrangement that would shift the major expense of the unwatering program from the Bureau to the Fish and Wildlife Service. On the contrary, it is apparent that the person who drafted the final document and the letter of September 11, 1945, transmitting it from Acting Regional Director Calland to the Commissioner, simply did not have an understanding of the problem sufficient to enable him to draft an accurate memorandum of the actual agreement of the parties. Bureau files indicate that the final draft was sent to Washington for execution without benefit of review by the Klamath Project office. The letter of transmittal contains a self-contradictory and otherwise erroneous recitation purporting to represent the agreement arrived at by the negotiators in Klamath Falls. The statements in the letter, however, are completely inconsistent with the attached memorandum of the agreement arrived at in the July 7, 1945, meeting in Klamath Falls, which the letter states is the basis of the final draft transmitted for execution. Irrespective of the cause or causes of the error, we are of the opinion that it was sufficient to vitiate completely the purported "agreement" of 1946.
Copies of the pertinent documents and correspondence mentioned herein are enclosed.
44. Subsequently, legal representatives of the parties conferred on December 22, 1958, but were unable to reach an agreement either then or in subsequent correspondence.
45. For the years 1958, 1959, and 1960 the plaintiff sought to offset the credits against the estimates of costs submitted, but the United States refused to accept such offsets. Under threat by the United States that it would cut off the water supply and take over the facilities, the plaintiff paid the alleged excess charges under protest.
46. The contract between the plaintiff and the defendant was executed after lengthy negotiations between representatives of the plaintiff and the Bureau of Reclamation. A principal negotiator for the Bureau of Reclamation was Maurice K. Strantz, who was employed by the Bureau from 1950-1956. After negotiations had closed, but before the contract was actually executed, Mr. Strantz left the Bureau to enter the employ of the plaintiff. Mr. Strantz attested the contract on 'September 10, 1956, as Secretary of the plaintiff. Although he was aware that interagency allocations were made by the Bureau of Reclamation and the Fish and Wildlife Service pursuant to their amendatory agreement of June 28,1946, Mr. Strantz did not know the maimer in which the allocations were computed.
CONCLUSION OF LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is entitled to recover and it is there fore adjudged and ordered that it recover of and from the United States the sum of twenty-two thousand and two dollars and sixteen cents ($22,002.16).
The court is indebted to Trial Commissioner C. Murray Bernhardt, from whose opinion we borrow substantially although we arrive at some conclusions different from his.
The Fish and Wildlife Service, not the Bureau of Eeclamation, brings water into the Service Area through the Ady Canal.
The amount of excess water resulting from Ady Canal imports is deemed by the Bureau to be that which remains unaccounted for after reducing the total amount removed by the maximum derived from Tulelake (which is the amount of water pumped through Plant D less 50,000 acre-feet). See finding 32.
Defendant emphasizes that for the first few weeks during which Strantz was working for the plaintiff in August 1956, he remained an employee of the Bureau of Reclamation as well, since he was being paid for his accrued annual leave. Defendant does not urge this asserted "conflict of interest" as a bar to recovery, but it does argue the "conflict of interest" as an additional reason to impute knowledge of the method of interagency allocation to plaintiff. Aside from general doubts as to the interrelationship of conflicts of interest and imputed knowledge, we note that Strantz was only technically in the employ of the Bureau of Reclamation while he was on terminal leave. Such a technicality forms a wholly insufficient basis for the suggested imputation.
In Peter Kiewit Sons' Co. v. United States, supra, the. parties did negotiate concerning the price term of the contract, but all the.other terms, including the specifications and other details of performance, were drawn by the Government.
As has been previously noted, the P Canal brings water to the Lower Klamath Lake Wildlife Refuge or Area, and also carries water to irrigate the "P Canal lands" outside the Area.
The 1946 agreement did not precisely define the water "which is determined to he in excess of the aforesaid normal capacity", but we thint that the parties to the 1956 contract have understood, correctly, that the water annually removed through the Klamath Straits Drain constitutes such "excess". In effect, the Kish and Wildlife Service has determined that that amount of water is - "in excess of the normal capacity of the Service" and should be "remove [d] in order to permit the efficient carrying on of the Service's functions."
Although many other figures entered into the computation, the respective proportions of the total cost borne by the Bureau of'Reclamation and the Fish and Wildlife Service were calculated in the manner described.
The difference between this method of allocation and the one advanced by the plaintiff is that in the latter the Pish and Wildlife Service is also charged with the cost of removing the water imported into the Service Area via the Ady Canal.
The 1,821 acre-feet of water included in this computation, as well as in the one immediately beneath it, is an undisputed figure representing water which drains into the Klamath Straits from the north. Both parties agree that it should be charged to the Eish and Wildlife Service in this manner.