Tide is Turning for Property Rights

Property rights advocates have long argued that the Endangered Species Act (ESA) effectively forces a handful of property owners to provide the “public good” of species habitat at private expense. This appears to violate the Fifth Amendment’s admonition “nor shall private property be taken for public use without just compensation.” Yet courts have been exceedingly reluctant to hold that ESA-based regulations constitute uncompensated regulatory takings.

A recent decision by the U.S. Court of Appeals for the Federal Circuit indicates the tide may be turning, at least in the context of water rights. In Casitas Municipal Water District v. United States, the Federal Circuit held that requiring the diversion of water to operate a fish ladder may constitute a taking of private property for which compensation is required. This ruling could have a significant impact on water rights and species conservation efforts.

The case arose out of water-use restrictions imposed on the Ventura River Project for the benefit of the West Coast steelhead trout. The project was built in the 1950s to provide water for agricultural and other uses in Ventura County, California. Though initially financed by the federal government, the Casitas Municipal Water District agreed to repay the construction costs and assume all operation and maintenance costs, in return for a “perpetual right to use all water” made available by the project.

In 1997, the National Marine Fisheries Service (NMFS) listed the West Coast steelhead trout as an endangered species in the Ventura project’s watershed. Pursuant to this listing, the NMFS decided in 2003 that the Casitas Municipal Water District was required to build a fish ladder facility and divert water for its operation, causing a permanent reduction in the amount of water available for the water district each year. The government conceded that the water district had a valid property right in the water, causing the court to focus on whether the measures necessary to conserve the steelhead trout constituted a “taking” of private property.

The Federal Circuit held that requiring the physical diversion of water to the fish ladder amounted to a “physical taking” of water. As Judge Kimberly Moore explained, “the government did not merely require some water to remain in stream, but instead actively caused the physical diversion of water…toward the fish ladder, thus reducing Casitas’ water supply.” Such action, she explained, constituted the taking of Casitas’ water for the “public purpose” of protecting the West Coast steelhead. “When the government diverted the water to the fish ladder, it took Casitas’ water. The water, and Casitas’ right to use that water, is forever gone.”

This conclusion was important. When the government regulates private property—limiting but not eliminating its productive use—whether such action constitutes a “regulatory taking” requiring compensation is subject to a complex balancing test known as the Penn Central test. Under Penn Central, it is very difficult for landowners to show that a compensable taking has occurred. Compensation is hard to get unless the government physically takes private property for public use or otherwise eliminates all economically productive use.

Judge Moore’s opinion for the three-judge panel hearing the case was not unanimous; one judge dissented arguing that the more government-friendly Penn Central analysis should apply. The government appealed to the full court to no avail, leading some to speculate this case could head to the Supreme Court.

While the fight is not over, the water district’s attorney Roger Marzulla was right to call this a “huge victory” for property rights. Said Marzulla, “It vindicates the position Casitas has taken all along, which is that if the government needs to take water to benefit the fish, it certainly has the right to do so. It simply must pay for the water it takes.” Species conservation is an important public goal. But it is also important that the costs of saving species are fairly distributed. The Casitas decision is a small but important step toward achieving that goal.


Jonathan Adler is Professor of Law and Director of the Center for Business Law & Regulation at the Case Western Reserve University School of Law. He is a prolific scholar, publishing on such topics as regulatory takings, water marketing, fisheries management, and the judicial limits of federal environmental regulation. He is the author,...
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