Court Opinion

ID: 985010
Source: CourtListenerOpinion
Date Created: 2013-07-01 17:41:51.665275+00
Date Added: 2024-06-11T12:23:58.355209
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

TEHAMA -COLUSA CANAL                     No. 11-17199
AUTHORITY ,
              Plaintiff-Appellant,          D.C. No.
                                         1:10-cv-00712-
                  v.                       OWW-DLB

UNITED STATES DEPARTMENT OF
THE INTERIOR ; KENNETH LEE                 OPINION
SALAZAR, in his official capacity as
Secretary of the Interior; UNITED
STATES BUREAU OF RECLAMATION ;
MICHAEL L. CONNOR, in his official
capacity as the Commissioner of
Reclamation; DONALD R. GLASER,
in his official capacity as Regional
Director of the Bureau of
Reclamation for the Mid-Pacific
Region,
                 Defendants-Appellees,

SAN LUIS & DELTA MENDOTA
WATER AUTHORITY ; WESTLANDS
WATER DISTRICT ,
   Intervenor-Defendants-Appellees.

      Appeal from the United States District Court
          for the Eastern District of California
   Oliver W. Wanger, Senior District Judge, Presiding
2     T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

                  Argued and Submitted
        December 5, 2012—San Francisco, California

                           Filed July 1, 2013

Before: Stephen S. Trott and Johnnie B. Rawlinson, Circuit
    Judges, and Frederic Block, Senior District Judge.*

                    Opinion by Judge Rawlinson

                             SUMMARY**

                              Water Rights

    In this action seeking to establish priority water rights
under Central Valley Project water service contracts in the
Sacramento Valley, the panel affirmed the district court’s
summary judgment on the alternate basis that California
Water Code § 11460 does not require the Bureau of
Reclamation to provide Central Valley Project contractors
priority water rights, because contracts between the plaintiff
Tehama-Colusa Canal Authority (Canal Authority) and the
Bureau contained provisions that specifically addressed
allocation of water during shortage periods.

 *
   The Honorable Frederic Block, Senior United States District Judge for
the Eastern District of New York, sitting by designation.

  **
     This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
     T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   3

    The Canal Authority, a joint powers authority comprised
of sixteen water agency members, asserted that the Bureau’s
water shortage allocations failed to adhere to area of origin
protections as provided in California Water Code (CWC)
§§ 11460, 11463, and 11128; Reclamation Law; the Fifth
Amendment; and state law water rights. The panel held that
the renewal contracts entered into by the Canal Authority and
its members included terms and provisions outlining the
procedures to be followed in allocating water resources
during shortage periods. The panel held that the Canal
Authority and its members assented to these terms and
provisions in the renewal contracts, and brought actions in
state court to validate the renewal contracts pursuant to
California law. The Bureau’s exercise of discretion therefore
when apportioning water during shortage years in accordance
with these renewal contracts was not arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with the
law.

                              COUNSEL

Steven P. Saxton (argued), Downey Brand LLP, Sacramento,
California; Ellen Lee Trescott (argued), Adams Broadwell
Joseph & Cardozo, Sacramento, California; J. Mark Atlas,
Willows, California, for Plaintiff-Appellant.

Ignacia S. Moreno, Assistant Attorney General, Vivian H.W.
Wang (argued), David W. Gehlert, Charles R. Shockey, and
E. Ann Peterson, Assistant United States Attorneys, United
States Department of Justice, Environment & Natural
Resources Division; Amy Aufdemberge and Shelly Randel,
Of Counsel, United States Department of the Interior, Office
of the Solicitor, Washington, D.C., for Defendants-Appellees.
4    T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

Daniel J. O’Hanlon (argued), Hanspeter Walter, and Rebecca
R. Akroyd, Kronick, Moskovitz, Tiedemann & Girard,
Sacramento, California, for Intervenor Defendant-Appellees
San Luis & Delta-Mendota Water Authority and Westlands
Water District.

H. Craig Manson, General Counsel, Westlands Water
District, Fresno, California, for Intervenor Defendant-
Appellee Westlands Water District.

Jennifer L. Spaletta, Jeanne M. Zolezzi, and Natalie M.
Weber, Herum Crabtree, Stockton, California, for Amici
Curiae Stockton East Water District and Solano County
Water Agency.

Alan B. Lilly and Katrina C. Gonzales, Bartkiewicz, Kronick
& Shanahan, Sacramento, California, for Amicus Curiae
Northern California Water Association.

Robert E. Donlan and Elizabeth P. Ewens, Ellison, Schneider
& Harris L.L.P., Sacramento, California, for Amici Curiae
Alameda County Water District, Castaic Lake Water Agency,
Coachella Valley Water District, Kern County Water Agency,
Metropolitan Water District of Southern California, Mojave
Water Agency and Palmdale Water District.

Kamala D. Harris, Attorney General of California, Kathleen
A. Kenealy, Senior Assistant Deputy Attorney General,
Robert W. Byrne, Supervising Deputy Attorney General,
William Jenkins, Deputy Attorney General, San Francisco,
California, for Amici Curiae California Water Resources
Control Board and Department of Water Resources.
      T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   5

                                OPINION

RAWLINSON, Circuit Judge:

   The Tehama-Colusa Canal Authority (Canal Authority)
appeals the district court’s decision to grant summary
judgment to the Department of Interior (Interior), Bureau of
Reclamation (Bureau), San Luis & Delta-Mendota Water
Authority (San Luis), and Westlands Water Authority
(Westlands).

    We have jurisdiction pursuant to 28 U.S.C. § 1291. We
affirm the district court’s decision on the alternate basis that
California Water Code § 11460 does not require the Bureau
to provide Central Valley Project contractors priority water
rights, because contracts between the Canal Authority and the
Bureau contain provisions that specifically address allocation
of water during shortage periods.

I. BACKGROUND

     A. Procedural History1

    Canal Authority is a joint powers authority comprised of
sixteen water agency members. Canal Authority initiated this
action against Interior; the Secretary of Interior (Secretary);
the Bureau; the Bureau’s regional director of the Mid-Pacific
Region; and intervenors, San Luis and Westlands, to establish
priority water rights under Central Valley Project (CVP)
water service contracts in the Sacramento Valley.

 1
  The facts are derived largely from the district court’s thorough opinion.
See Tehama-Colusa Canal Auth. v. U.S. Dep’t of Interior, 819 F. Supp. 2d
956 (E.D. Cal. 2011).
6    T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

Specifically, Canal Authority requested a ruling limiting the
export of water south of the Sacramento-San Joaquin Delta
(Delta) until Canal Authority and its members received 100%
of the water supply referenced in their CVP contracts. Canal
Authority sought injunctive and declaratory relief.

    Canal Authority maintained that the Bureau’s water
shortage allocations failed to adhere to area of origin
protections as provided in California Water Code (CWC)
§§ 11460, 11463, and 11128; Reclamation Law; the Fifth
Amendment; and state law water rights articulated by the
United States Supreme Court in California v. United States,
438 U.S. 645 (1978).

    The defendants sought summary judgment on the bases
that Canal Authority’s APA claims were subject to the six-
year statute of limitations, and that the Canal Authority’s
interpretation of § 11460 did not grant water allocation
priority to the Canal Authority or its members. The district
court granted summary judgment for the defendants, holding
that all claims arising before February 11, 2004 were time-
barred, and that Canal Authority was not entitled to priority
water allocation under the CVP contracts. Canal Authority
filed this timely appeal.

    B. CVP Operations and Allocation of Water

   The CVP operates under a Coordinated Operating
Agreement between the Bureau and the California State
Department of Water Resources (DWR) as an integrated unit.
Contractors receiving water from the CVP do not apply for
appropriative water rights from the State Water Resources
Control Board (SWRCB), as would be required to perfect a
water right from a California water source. Rather, water
     T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   7

users contract directly with the Bureau for water allocations.
Indeed, not one of the Canal Authority’s members has ever
applied for or received a water rights permit from the
SWRCB.

    The Bureau normally allocates CVP water on a pro rata
basis, except when operational constraints or contract
provisions dictate priority allocation. In dry water years, all
CVP contractors have received less than their full contractual
complement of water. When water shortages occur,
contractors south of the Delta usually bear an increased
burden of the shortages.

    The two drought years at issue in this case are 2008 and
2009. In 2008, Canal Authority and other north-of-Delta
water service contractors received 100% of their contractual
water allocations from the Bureau.            South-of-Delta
contractors only received 50% of their allocations. In 2009,
the Governor of California declared a state of emergency
because of the drought. During that year, Canal Authority
and other north-of-Delta contractors received 40% of their
allocations, while south-of-Delta contractors received 10%.

   C. State Law Area of Origin Statutes

    The area of origin statutes, CWC §§ 11460-11465, were
enacted to alleviate the concern that construction of the CVP
would result in inadequate water supplies for local users. It
is undisputed that the Bureau’s appropriation of water for the
CVP is subject to the area of origin statutes. However, an
important distinction is that while the area of origin statutes
help to determine the total quantity of water available to the
Bureau for allocation, those statutes in no way control how
the water is allocated by the Bureau once acquired.
8          T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

         D. The Bureau’s Permits for CVP Water Supply

    In 1961, the SWRCB approved the United States’
application to appropriate Sacramento River water for the
CVP. This approval, known as Decision 990 (D-990),
recognized that one of the CVP’s principal functions was to
export water from the Sacramento River watershed into the
San Joaquin Valley.

    D-990 incorporated the SWRCB’s interpretation of the
area of origin statutes by acknowledging that the public
interest required that water originating in the Sacramento
Valley Basin be made available for use within the Basin and
the Delta before it was exported to more distant areas.
Protection of the articulated public interest was manifested by
the condition set forth in Term 22,2 which conditioned the
Bureau’s water rights permits. Term 22 established that the
Bureau’s water permits were “subject to rights initiated by
applications for use within said watershed and Delta
regardless of the date of filing said applications.” Term 22
was designed to protect appropriators of water with permits,
not contractors who obtained water through CVP contracts.

    2
        Term 22 provides in pertinent part:

              Direct diversion and storage of water under permits
              issued . . . for use beyond the Sacramento-San Joaquin
              Delta or outside the watershed of Sacramento River
              Basin shall be subject to rights initiated by applications
              for use within said watershed and Delta regardless of
              the date of filing said applications.

         (Emphasis added and footnote references omitted).
        T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   9

    The condition reflected in Term 233 addressed the use of
CVP water by water users within an area of origin. Rather
than requiring CVP water to be allocated for the benefit of
areas of origin, Term 23 granted then-current water users a
three-year window to request water service contracts from the
Bureau, which contracts would be preferred over requests
from users outside the watershed. Also included in Term 23
was a ten-year preference for then-water users to obtain a
water service contract.

    In 1978, the SWRCB modified the Bureau’s CVP permits
to require the Bureau to meet water quality standards in the
Delta and Suisun Marsh by either releasing water from
storage or curtailing diversions, so that outflow from the
Delta would be sufficient to prevent sea water from intruding
into the Delta. The California Court of Appeal affirmed the
SWRCB decision (Decision 1485), and recognized the
SWRCB’s authority to modify the Bureau’s water right
permits.

 3
     Term 23 provides in pertinent part:

           The export of stored water under permits issued
           pursuant to [a]pplications outside the watershed of
           Sacramento River Basin or beyond the Sacramento-San
           Joaquin Delta shall be subject to the reasonable
           beneficial use of said stored water within said
           watershed and D elta, both present and prospective,
           provided, however, that agreements for the use of said
           stored water are entered into with the United States
           prior to March 1, 1964, by parties currently diverting
           water from Sacramento River and/or Sacramento-San
           Joaquin Delta and prior to March 1, 1971, by parties
           not currently using water from Sacramento River and/or
           Sacramento-San Joaquin Delta.
10     T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

      E. Application of the Area of Origin Statutes by
         SWRCB

    Two Canal Authority member agencies filed a complaint
with the SWRCB in 1991 claiming preferential access to
CVP water supply under the area of origin statutes. The
SWRCB rejected the claim, finding that Canal Authority
members had no preferential access to CVP water supply
under area of origin statutes. The SWRCB interpreted CWC
§ 11460 as protecting areas of origin, but with no guarantee
that the water supply needs of the entire area of origin, or any
particular water users within the area of origin, would be met.
Rather, CWC § 11460 protected water users within the area
of origin against export appropriations. In other words, CWC
provided a guarantee that the SWRCB would not reject new
applications in the area of origin due to unavailability of
water for appropriation. Area of origin protection was
secured by filing an application with the SWRCB and
receiving a water rights permit4 with seniority vis à vis the
state Department of Resources and the Federal Bureau of
Reclamation as exporters.

     “The SWRCB rejected [Canal Authority’s] arguments
that the CVP is required under [CWC] §§ 11460, et seq. to
supply water to meet the needs of users in the Sacramento
Valley. . . .” Tehama-Colusa Canal Auth. v. U.S. Dep’t of
Interior (Tehama), 819 F. Supp. 2d 956, 970 (E. D. Cal.
2011) (citation and internal quotation marks omitted). “On
reconsideration, the Board explained: [Canal Authority] has
been advised in the past that the appropriate way to obtain
additional service water supplies under the Watershed
Protection Act is to file applications to appropriate the

 4
     Neither Canal Authority nor its members hold such permits.
     T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   11

additional water. . . .” Id. (citation and internal quotation
marks omitted).

   F. The Disputed CVP Water Service Contracts

    CVP water is available only through a water service
contract between the water user and the Bureau. There are
three categories of contracts for the provision of CVP federal
water supply. The first category is comprised of “Exchange
Contracts” that give express contractual priority to designated
“Exchange Contractors” on the basis of their pre-1914
riparian and appropriative rights to the San Joaquin River. Id.
at 970–71. These Exchange Contractors “traded” their
preexisting water rights to the Bureau. Id. at 971. The
Bureau obtained water permits from the SWRCB that were
co-extensive with the exchanged water rights. The Bureau in
turn entered into water service contracts with the Exchange
Contractors for CVP federal water supply on a priority access
basis.

    The second category of CVP contracts encompasses
“Settlement Contracts” that grant a contractual priority to
CVP water supply through the inclusion of provisions
limiting the extent of shortage amounts. These contracts
typically arose from pre-existing water rights.

    The third category contains contracts held by CVP
contractors north-of-Delta, in-Delta, and south-of-Delta. This
category of CVP contractors, which includes Canal Authority
and most of its members, held no pre-existing water rights to
offer as consideration, and therefore receives no priority
access to CVP water supply.
12   T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

        1. Canal Authority Members’ Right to CVP
           Water under Their Water Service Contracts

    Canal Authority members executed their original CVP
water service contracts in the 1960 and 1970. All the original
Canal Authority contracts contained shortage provisions that
permitted the Bureau to apportion and reduce available water
supply in years of shortage. Before these original contracts
expired in 1995, the Bureau delivered less than 100% of
contract amounts to Canal Authority members and Westlands
in water shortage years 1977, 1990, 1991, 1992, and 1994.

    In 1992, Congress enacted the Central Valley Project
Improvement Act (CVPIA), Pub. L. No. 102-575, 106 Stat.
4706 (1992), which reallocated priorities for use of CVP
water. Among other things, the CVPIA precluded the
Secretary from entering into new CVP contracts for delivery
of CVP water for any purpose other than fish and wildlife
until certain environmental requirements were met. The
CVPIA also directed that 800,000 acre-feet of “project yield”
be immediately dedicated to the implementation of fish,
wildlife and habitat restoration purposes established by the
Act. Tehama, 819 F. Supp. at 972. The passage of the
CVPIA occurred when many CVP contracts were just about
to expire.

        2. The CVP Interim Contracts

    In 1995, Canal Authority members entered into “interim”
renewal contracts pending review and assessment of
long-term renewal contracts. Id. Interim renewal contracts
commenced in 1995 and were subsequently renewed for
periods up to two years until 2005. These interim contracts
included water shortage provisions authorizing the Bureau to
     T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   13

determine conditions of shortage and apportion the reduced
available water supply among CVP contractors. The interim
contracts did not provide for preferential water allocations
based on area of origin considerations. During the span of the
interim contracts, the Bureau reduced available water supply
among all CVP water service contractors in shortage years
1995, 1997, 1999, and 2001. The Canal Authority CVP water
service contracts included a shortage provision through 2005.

        3. The Bureau’s Interpretation and Performance
           of Canal Authority’s Current Contracts

   In the process of discussing the renewal of long-term
contract provisions, the Bureau and Canal Authority members
debated at length the applicability of area of origin laws to the
CVP contracts and the extent of the Bureau’s authority to
reduce water deliveries in times of shortage.

    The Bureau took the position that CWC § 11460 did not
apply to the allocation and delivery of CVP water under CVP
contracts. As early as 1994, the Bureau issued an Area of
Origin Issue Paper articulating the Bureau’s position that
§ 11460 is “directed toward obtaining prior water rights, not
obtaining deliveries of water under the Project’s rights.” Id.
(citation omitted). In 1996, another Bureau draft report
confirmed that area of origin statutes in California water law
“do not guarantee that the water supply needs of an entire
area of origin, will or can be met.” Id. (citation omitted).

    The Bureau explained that area of origin statutory
provisions are not a part of the water delivery contract
between the water user and the Bureau. Instead, the area of
origin provisions are part of the water rights in the region. In
sum: “[a]rea of origin statutes do not establish any priority to
14   T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

the allocation of CVP contract water or . . . CVP water used
for implementation of the CVPIA. . . .” Id. (citation and
alterations omitted). In 2000, the Bureau reiterated: “Area of
origin/county of origin statutes do not give any CVP user a
priority over any other CVP user regarding water service
provided by CVP contracts . . . this is also the position of the
State Water Resources Control Board.” Id. at 973 (citation
and second alteration omitted). In keeping with its stated
position, the Bureau consistently rejected requests that an
area of origin provision be included in north-of-Delta CVP
contracts. Canal Authority acknowledged that “the Bureau’s
conclusions come as no surprise, as this is a restatement of
positions they [sic] have articulated on numerous occasions
in the past. . . .” Id. (citation omitted).

        4. Long-term Renewal Contracts with Shortage
           Provisions and No Priority Allocation Terms

    All Canal Authority members executed long-term CVP
water service contracts in 2005 (renewal contracts). Each
renewal contract contains shortage provisions that are
substantively identical to the shortage provision in the prior
long-term contracts under which the Bureau declared
conditions of shortage, and allocated less than full contractual
amounts to Canal Authority and its members. The renewal
contracts ensured operation of the CVP “for diversion,
storage, carriage, distribution and beneficial use, for flood
control, irrigation, municipal, domestic, industrial, fish and
wildlife mitigation, protection and restoration, generation and
distribution of electric energy, salinity control, navigation and
other beneficial uses.” Id.

   Article 12 of the renewal contracts authorized the Bureau
to determine shortages and apportion waters in times of
     T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   15

shortage without regard to area of origin. In the sixty-plus
years of the CVP’s existence and the almost forty years of
disputes with Canal Authority regarding area of origin
priority, the CVP’s practice and position have remained
constant.

        5. Validation of Renewal Contracts in State
           Court

    Article 38 of the renewal contracts provides that Canal
Authority members must each obtain a state court judgment
validating its water services contract with the Bureau. This
validation process was completed by each Canal Authority
member. The effect of the validation process was to establish
the enforceability of the renewal contracts under state law.

    Following execution and validation of the renewal
contracts, the Bureau continued to make water deliveries and
to reduce water allocations in years when shortages were
declared, as it had done under the original and interim
contracts. Invoking Article 12, the Bureau declared
conditions of shortage in 2007, 2008, and 2009. The Bureau
delivered less than full contract amounts to all CVP water
service contractors, including Canal Authority members, in
2008 and 2009. This action followed.

II. STANDARDS OF REVIEW

    We review de novo the district court’s grant of summary
judgment and the district court’s interpretation and
application of federal statutes. See San Luis & Delta-
Mendota Water Auth. v. United States, 672 F.3d 676, 699 (9th
Cir. 2012).
16   T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

    Contract interpretation is a mixed question of law and fact
that we also review de novo. See Smith v. Cent. Ariz. Water
Conservation Dist., 418 F.3d 1028, 1034 (9th Cir. 2005).
When the United States is a party to an agreement “entered
into pursuant to federal law,” that law governs interpretation
of the contract. Id. “[F]ederally-funded water reclamation
products are by nature necessarily federal, and we have
therefore consistently applied federal law to interpret
reclamation contracts . . . .” Id. (citation and internal
quotation marks omitted).

    “A written contract must be read as a whole and every
part interpreted with reference to the whole, with preference
given to reasonable interpretations . . . .” Klamath Water
User Protective Ass’n v. Patterson, 204 F.3d 1206, 1210 (9th
Cir. 2000), as amended (citation omitted). When the contract
terms are clear, the parties’ intent must be ascertained from
the contract, and the contract terms connote their ordinary
meaning. See id.

    When there is no provision for judicial review in
legislation, as with the CVPIA, we review the challenged
agency action pursuant to the Administrative Procedure Act
(APA). See San Luis & Delta-Mendota Water Auth.,
672 F.3d at 699. Pursuant to the APA, we will only set aside
an agency’s action when it is “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law . . . .”
Id. at 699–700 (citation omitted). When the agency has
articulated a rational connection between the facts and the
decision made, we will uphold the agency’s action. See id. at
700.
        T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   17

III.       DISCUSSION

       A. CWC § 11460 Does Not Compel the Bureau to
          Prioritize Allocation of Federally Appropriated
          Water to Canal Authority Members

    The renewal contracts to which Canal Authority and its
members mutually assented did not include area of origin
language or priority distribution. During negotiations, the
Bureau steadfastly rebuffed efforts to include terms that
would provide priority in shortage periods. When Canal
Authority and its members signed the renewal contracts, there
was absolutely no misunderstanding of the Bureau’s position
regarding area of origin protection, priority rights, or shortage
protection. Indeed, Canal Authority acknowledged the
Bureau’s consistent and persistent negotiating stance that area
of origin law did not afford Canal Authority and its members
priority to CVP water supply. Considering the plain language
and terms of the contracts, the Bureau did not act arbitrarily
when it rejected Canal Authority’s demand to prioritize
federally appropriated water to Canal Authority and its
members. See San Luis & Delta-Mendota Water Auth.,
672 F.3d at 700 (noting that agency action should be upheld
when the agency articulates a rational connection between its
decision and the facts).

    Of course, as with any other contract, the Bureau could
not flout the law in declining to include area of origin
provisions in the renewal contracts. See Peterson v. United
States Dep’t of Interior, 899 F.2d 799, 812 (9th Cir. 1990)
(explaining that water district contracts must conform to
governing law). Indeed, the renewal contracts contained just
such provisions.
18    T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

    However, as discussed above, CWC § 11460 has not been
interpreted so as to provide priority for Canal Authority and
its members in the realm of federally protected water. See
Tehama, 819 F. Supp. 2d at 970. Because Canal Authority
and its members hold no water permits issued by the SWCRB
that would establish priority under CWC § 11460, the
Bureau’s continued rejection of priority provisions in the
water service contracts flouted no applicable law.

     B. Canal Authority’s Water Service Contracts
        Temper Their Rights to a Full Complement of
        Contracted Water and any Claims to Priority
        Delivery of Water

    In 1993, we held that the Bureau was not bound to first
satisfy the needs of water district contractors when the San
Luis Act does not mandate it. See Westlands Water Dist. v.
Firebaugh Canal, 10 F.3d 667, 671 (9th Cir. 1993). Nothing
has changed.

    The Bureau has adhered to this interpretation of the San
Luis Act, up to and including the most recent 2005 renewal
contracts. Article 12 of those contracts provides in no
uncertain terms that Canal Authority and its members are not
entitled to the full complement of water contracted for, and
may have to endure pro rata reduction in times of shortage,
along with other CVP contractors. Article 12 expressly and
explicitly provides that in times of shortage, the Bureau may
divert water to other contractors to meet the Bureau’s overall
goal to provide water to the maximum number of users for
the greatest potential benefit. Article 12 forecloses any
persuasive argument that Canal Authority and its members
are entitled, during times of shortage, to receive the full
complement of contracted water supply. See id. at 671.
     T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   19

    We agree with the district court that Canal Authority’s
belated challenge to the shortage provisions in the renewal
contracts is unavailing. Canal Authority’s contention that no
condition of shortage can exist under the renewal contracts to
the extent water is shipped to south-of-Delta contractors is
belied by the definition of condition of shortage in the
renewal contracts themselves. The contracts define shortage
in the context of “the Project.” In turn, “the Project refers to
the entire Central Valley Project,” north and south of the
Delta. Tehama, 819 F. Supp. 2d at 991 (emphasis added).
This clear contract language controls. See Klamath Water
User Protective Ass’n, 204 F.3d at 1210. Similarly, Canal
Authority’s continued reliance on the provisions of CWC
§ 11460 is unwarranted in view of the Bureau’s and
SWCRB’s unvarying interpretations to the contrary. As the
district court noted, there is a “total absence of any language
[in the renewal contracts] granting an area of origin
preference, or that limits or abrogates the Article 12
allocation mandate . . .” Tehama, 819 F. Supp. 2d at 995.

   C. Canal Authority Is Foreclosed from Asserting
      Statutory Rights Under Area of Origin and Water
      Priority Theories

    Once the renewal contracts were finalized among the
parties, Canal Authority and its members invoked the
provisions of California Code of Civil Procedure (Cal. CCP)
§ 870 to obtain judgments validating each of the renewal
contracts under California law. See Tehama, 819 F. Supp. 2d
at 996. Each validation judgment ensured the enforceability
and validity of the renewal contracts. Each validation
judgment certified that all provisions of the renewal contract
“are lawful, valid, enforceable, and binding upon the
respective parties thereto . . . .”). Id. (citations omitted).
20      T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

Because the validation judgments became final in 2005,
Canal Authority and its members are now foreclosed from
challenging any provision of the renewal contracts. See id. at
996–97; see also Cal. CCP § 8705; Embarcadero Mun.
Improvement Dist. v. Cnty. of Santa Barbara, 88 Cal. App.
4th 781, 792 (2001) (recognizing that challenges to validated
contracts are precluded after expiration of the applicable
statute of limitations for appeal).

    The cases cited by Canal Authority to support its
argument that its challenge to Article 12 is alive and well
involved agreements or contracts that were not initially valid.
See Fontana Redev. Agency v. Torres, 153 Cal. App. 4th 902,
913 (2007) (“[T]he courts cannot validate ongoing illegality
. . . .”) (citation omitted); see also Embarcadero Mun.
Improvement Dist., 88 Cal. App. 4th at 792 (describing
challenge to expenditure not authorized by the validated

 5
     CCP § 870 provides in pertinent part:

           (a) The judgment, if no appeal is taken, or if taken and
           the judgment is affirmed, shall, notwithstanding any
           other provision of law . . . , thereupon become and
           thereafter be forever binding and conclusive, as to all
           matters therein adjudicated or which at that time could
           have been adjudicated, against the agency and against
           all other persons, and the judgment shall permanently
           enjoin the institution by any person of any action or
           proceeding raising any issue as to which the judgment
           is binding and conclusive.

           (b) Notwithstanding any other provision of law . . . , no
           appeal shall be allowed from any judgment entered
           pursuant to this chapter unless a notice of appeal is filed
           within 30 days after the notice of entry of the judgment,
           or, within 30 days after the entry of the judgment if
           there is no answering party. . . .
     T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   21

agreement); Redev. Agency of Fresno, Inc. v. Herrold, 86 Cal.
App. 3d 1024, 1029–30 (1978) (same). In contrast, the
contract provisions at issue in this case are and were at all
times valid. Canal Authority and its members voluntarily
consented to the validated contracts, and with full knowledge
of the Bureau’s interpretation and implementation of the area
of origin statutes and the shortage provisions. Canal
Authority and its members had a full and fair opportunity to
challenge any contract provision during the validation
proceeding, including whether any contract provision ran
afoul of California law. Once the contracts were validated,
the state court determination became binding upon any
subsequent action involving the same parties and the same
issue, determination of which was necessary for final
resolution of the initial action. See Cent. Ariz. Irrigation &
Drainage Dist. v. Lujan, 764 F. Supp. 582, 594–95 (D. Ariz.
1991). Because Canal Authority and its members were
parties to the validation action and because the validation
action resolved the validity of the renewal contract
provisions, they are now foreclosed from seeking to
circuitously undo the contract provisions to which they
previously acceded. See id.

    Canal Authority and its members rely on SWRCB Cases,
136 Cal. App. 4th 674 (2006), to support their argument that
area of origin statutes provide priority water appropriation
rights. Canal Authority quotes the following language from
Justice Robie’s opinion:

        To the extent section 11460 reserves an
        inchoate priority for the beneficial use of
        water within its area of origin, we see no
        reason why that priority cannot be asserted by
        someone who has (or seeks) a contract with
22   T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

        the Bureau for the use of that water. (See
        Robie & Kletzing, Area of Origin
        Statutes—the California Experience (1979) 15
        Idaho L. Rev. 419, 436–438 [discussing right
        of area of origin users to contract with
        Department for SWP water].) This does not
        mean a user within the area of origin can
        compel the Bureau to deliver a greater
        quantity of water than the user is otherwise
        entitled [to] under the contract. It simply
        means the Bureau cannot reduce that user’s
        contractual allotment of water to supply water
        for uses outside the area of origin, absent
        some other legal basis for doing so that
        trumps section 11460.

Id. at 758 (brackets in the original).

    We agree with the district court that Canal Authority’s
reliance on the quoted language is misplaced. See Tehama,
819 F. Supp. 2d at 984. The rationale espoused in SWRCB
Cases was tempered by the reasoning in El Dorado Irrigation
District v. SWRCB, 142 Cal. App. 4th 937 (2006). Only a
few months after penning the SWRCB Cases decision, Justice
Robie opined in El Dorado Irrigation District that, although
a plaintiff may be entitled to assert priority rights, the plaintiff
had no rights regarding water that was previously diverted
and properly stored for future use. See id. at 976; see also
Tehama, 819 F. Supp. 2d at 983. Justice Robie clarified that
§ 11460 does not purport to limit in any way the Bureau’s
authority to allocate water that was previously diverted and
stored in accordance with approved CVP procedures. See El
Dorado Irrigation District, 142 Cal. App. 4th at 974–75.
Water users simply cannot assert any superior right to that
      T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R   23

stored water under area of origin principles. Rather, water
rights to previously diverted and stored water are governed by
water permits and water contracts. See id. at 975–76. In any
event, as the district court noted, the decision in SWRCB
Cases lacks persuasive power because: (1) CVP contracts
were not at issue in that proceeding; (2) there was no
comprehensive discussion of the CVP project; and (3) the
proposed interpretation of § 11460 by Canal Authority and its
members would nullify explicit provisions of the renewal
contracts. See Tehama, 819 F. Supp. 2d at 984–85. The
Bureau clearly and consistently articulated the rationale for
its stated position regarding allocation of CVP water during
shortage periods. Its subsequent allocation of water during
shortage periods in accordance with its stated position was
not an abuse of discretion, unreasonable, or contrary to
applicable law. See San Luis & Delta-Mendota Water Auth.,
672 F.3d at 699–700 (setting standard of review).

IV.      CONCLUSION

    The district court properly determined that CWC § 11460
does not bestow priority water rights upon Canal Authority
and its members. The renewal contracts entered into by the
Canal Authority and its members included terms and
provisions outlining the procedures to be followed in
allocating water resources during shortage periods. The
Canal Authority and its members assented to these terms and
provisions in the renewal contracts, and brought actions in
state court to validate the renewal contracts pursuant to
California law. The Bureau’s exercise of discretion when
apportioning water during shortage years in accordance with
these renewal contracts was not “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with the
law.” 5 U.S.C. § 706(2)(A); see also San Luis & Delta-
24   T EH AM A -C OLUSA C AN AL A U TH . V . U.S. D EP ’T O F I N TERIO R

Mendota Water Auth., 672 F.3d at 715 (upholding Bureau’s
discretionary decision against a similar challenge).

     AFFIRMED.