Water, the Public Range, and the Takings Clause: Here We Go Again!

The U.S. Court of Federal Claims in Washington D.C. recently issued a remarkable opinion in a case captioned Sacramento Grazing Association, Inc. v. United States.   The court ruled that a cattle ranching corporation using U.S. Forest Service lands in New Mexico is entitled to a financial payment from the taxpayers because the agency’s efforts to control the damage the corporation’s cattle were doing to the public lands “took” private property rights in water in violation of the U.S. Constitution.

The remarkable nature of the opinion, authored by Chief Judge Susan Braden, begins with the first paragraph, which reads:  “On January 2, 2016, several dozen ranchers, who unsuccessfully attempted to find common ground with environmental groups and officials from Oregon’s Malheur National Wildlife Refuge for over a decade, decided to take up arms to protest federal policy and regulations to prioritize migrating bird water habitat, by limiting the number of cattle that historically grazed and used water in that area–decades before it was subject to federal control. In contrast, the Sacramento Grazing Association, Inc. (“SGA”) filed a complaint in the United States Court of Federal Claims for an adjudication of its right to beneficial use of stock water sources within the Sacramento Allotment of the Lincoln National Forest, New Mexico.”

For starters, Judge Braden’s description of who was involved in the takeover of the Malheur Wildlife Refuge is wildly inaccurate, as confirmed by the single news piece she cites in support of her description.   See Cranes, Curlews, And Cows—The Delicate Debate Over Oregon’s Federal Lands PBS NEWS (May 24, 2016), http://www.pbs.org/newshour/bb/cranes-curlews-and-cows-the-delicate-debate-over-oregons-federal-lands/). The PBS piece describes how Oregon ranchers in the vicinity of the Malheur Wildlife Refuges have found common cause with conservationists and government officials in finding workable compromises on how the Malheur Refuge should be managed.

But the members of the Bundy family and their allies who took over the Malheur refuge by force of arms were not part of this collaborative group and they were not even part of the community surrounding the refuge.  The Bundy family ranch, the site of an earlier standoff with federal officials, is located in Nevada!  Ironically, the takeover of the refuge by outsiders reportedly actually strengthened the resolve of the Oregon ranchers to pursue their collaborative approach.

Facts aside, what is one to make of the judge’s comparison of ranchers who sue in court and those who take over federal facilities?  Is the point that those who object to the federal government’s policies regarding the public range, but who refrain from armed conflict, are especially entitled to judicial relief?    Is the point that, if the public wants to avoid violence, it must it pay, regardless of the merits of the legal claims?

The second remarkable feature of the case is that it involves an effort to relitigate issues that have already been exhaustively litigated in a prior case, Hage v. United States, which after twenty-seven — yes, twenty-seven –years, is almost (but still not quite) complete.  The Hage case also involves a public land rancher who claimed that the U.S. Forest Service (and the Bureau of Land Management) took water rights by regulating cattle grazing on the public range.  The case was originally filed in 1991, and after two trials and several opinions, in 2010 the U.S. Court of Federal Claims (per Judge Loren Smith) issued a final judgment awarding compensation for so-called “regulatory” and “physical” takings.

The U.S. Court of Appeals for the Federal Circuit reversed that judgment in 2012, and (following further proceedings in the trial court) reaffirmed that ruling in a 2017 decision. The plaintiffs have filed a last-gasp petition for certiorari with the U.S. Supreme Court, which will almost certainly be denied; the petition is so insubstantial that the Trump Department of Justice has waived its right to file a response.

In the Hage case, Judge Smith, over the course of twenty years, explored – with a deep sympathy for the plaintiffs’ case that tested the limits of judicial propriety – every conceivable theory that might possibly support a finding of a taking. These theories included, for example, that Hage (rather than the United States) was the actual owner of the public range, that Hage had a property right in grazing permits issued by the federal agencies, and that Hage’s water and ditch rights impliedly conferred on him a property right to run cattle on federal public lands.

After twenty years of effort, Judge Smith finally determined, among other things, that Hage had suffered a taking of his water rights because the agencies had erected fencing along the borders of various stream to prevent cattle from trampling stream-side lands.  On appeal, the Federal Circuit rejected this theory, and specifically the argument that the fences resulted in a “physical taking” of his water rights.  The appeals court pointed out that Hage offered no proof that the fences blocked the flow of water or that Hage’s cattle lacked sufficient water.  In sum, the Court said, “there is no evidence that the government’s actions resulted in a taking.”   (The appeals court also rejected Judge Smith’s other takings ruling, arising from the restrictions on the maintenance of ditches, on the ground that Hage had not even applied for a permit to do maintenance work in the ditches and therefore could not claim a taking based on allegedly not receiving permission to do maintenance work.)

The third remarkable feature of the Sacramento Grazing case, which arises from facts that are essentially identical to those in the Hage case, is that Judge Braden’s legal analysis is so plainly mistaken.   The Fifth Amendment to the U.S. Constitution states; “nor shall private property be taken for public use, without just compensation.”   While exercises of eminent domain are the most obvious form of taking, the Supreme Court has recognized that severely burdensome restrictions on property use can also be takings.   Generally speaking, the courts analyze regulatory takings claims by examining the extent of economic harm imposed by a regulation, the degree of interference with investment-backed expectations, and the character of the government action.

At the same time, the Court has recognized that a relatively narrow set of government actions constituting “physical takings” of private property should be analyzed under a more stringent test.  Under the categorical, or per se approach applicable to physical takings, the government’s physical intrusion is deemed sufficient, by itself, to establish a taking, without regard to economic impact or other factors normally considered in a takings case.  Under this approach, for example, the government takes property in a physical sense when it builds a dam and permanently floods land behind the dam.

To support the finding of a taking in the Sacramento Grazing case, Judge Braden invoked the per se physical takings theory.  She concluded that any restriction on the plaintiff’s ability to access water at any single location within the company’s grazing allotment resulted in a taking.  Under this analysis, it was irrelevant if water flowing down the stream passed through the fences and then became available to the cows to drink downstream, or if the plaintiff’s cows never lacked for adequate water at all.  This analysis obviously flies in the face of the more sensible approach of the Federal Circuit in the Hage case, which the claims court should have followed.

While the Sacramento Grazing case involves a number of issues, the court made at least two fundamental errors.  First, the court ignored the fact that this case arises from a dispute over the use of federal public lands.   Under the Property Clause, the Supreme Court has long held, the federal government has plenary power to regulate private use of federal public lands.  To quote a landmark 1911 Court decision, “the United States can prohibit absolutely or fix the terms on which its property may be used.”  Thus, while federal land management agencies have long allowed cattle grazing on the public range, permission to do so is a privilege that the federal government can withdraw or restrict as it deems appropriate to protect the public welfare.

Accordingly, in Sacramento Grazing, the company using the public range for cattle grazing has no basis for claiming a property entitlement to use any portion of the range.  When the Forest Service decided to restrict the company’s access to portions of the public range with its cows, it was simply exercising the lawful rights of a landowner, and not impinging on any private property right.  The fact that governmental restrictions on private uses of the public lands may impair a rancher’s ability to use water rights does not result in a taking; a rancher simply has no right to occupy any portion of the public range without government permission to begin with.  As numerous courts have recognized, a public land rancher cannot use private water rights as a bootstrap to claim effective possession and control over the federal public lands themselves.

The second reason the takings ruling in Sacramento Grazing is incorrect is that the per se physical takings theory does not apply on the facts of this case.  The Supreme Court has explained that this stringent takings test applies in either one of two circumstances.   The Court has said that a per se physical taking occurs when government action results in a permanent physical occupation of private property, such as by flooding private property or granting the public an easement to cross private property.   The Court also has said that a per se physical taking occurs when the government appropriates private property, such as by forcing an owner to transfer ownership of the property to some new owner or to the government itself acting in its proprietary capacity.

Neither type of physical taking is present in this case.  In New Mexico and throughout the West, a property right in water is a usufructury interest, meaning that the right holder has a right to use the water, but does not own the water molecules themselves.  As a result, a senior water right holder has no right to physically exclude others from using her water; for example, if she decides not to use her water right for a certain period, she cannot bar a junior water right holder from using the water.   Because the holder of a water right has no right to exclude, the theory that the government can take a water interest by somehow physically occupying the interest is simply a logical nonstarter.

Nor does the theory of a physical taking by appropriation apply in these circumstances.  The government might appropriate a water right if it took some action that transferred a water right from its original owner to some new owner, for example.  But a mere limitation on the use of water, as occurred in this instance as a result of the erection of fencing, is not an appropriation.  If every restriction of private property use to protect the public welfare were regarded as an appropriation of private property, every regulatory restriction would be a per se physical taking, which very clearly is not and has never been the law.

To support her physical takings theory, Judge Braden relies on the fact that the government erected fencing around certain water sources in order to protect sensitive riparian lands.   But while a fence is a physical structure, it does not result in a physical taking, because it neither physically occupies property owned by the company (after all, the fence is on federal public land), nor result in an appropriation of private property.   As numerous Supreme Court and other appellate decisions have recognized, a mere denial of access may result in a restriction of property use, but it does not result in a “physical” taking triggering application of a per se rule.

Just as it did in the Hage case, the U.S. Court of Appeals for the Federal Circuit should make short work of the erroneous decision in Sacramento Grazing, assuming the Department of Justice files the necessary appeal.