In Peterson v. Department of the Interior the Ninth Circuit held that section 203(b) of the Reclamation Reform Act of 1982 (RRA), a comprehensive amendment of the Federal Reclamation Act, did not unconstitutionally take the property of state Water Districts in California's Central Valley without due process or compensation. The court found that pre-existing water delivery contracts with the Bureau of Reclamation did not confer a constitutionally protectable right to receive federally subsidized water upon the Water Districts. In Peterson, the first ruling by any circuit court on a direct challenge to the RRA, the Ninth Circuit examined the retroactive effect of a federal statute on a pre-existing federal water delivery contract. The issues of vested rights in reclamation water, due process and taking raised by the plaintiffs in Peterson had been considered in many pre-1982 cases involving the Reclamation Act's excess lands provisions. In Peterson the Ninth Circuit relied on past Reclamation Act case law to illustrate Reclamation Act history and legislative purpose. To determine whether contract rights to receive water equalled property rights, however, the court made use of a retroactivity analysis not adopted in previous reclamation-law cases. The Ninth Circuit concluded that the Water District's contract rights were not vested property rights so that a taking analysis was not necessary. The court also found that there was a rational relationship between the provisions of the Reclamation Reform Act and the legislative purpose underlying federal reclamation law, so there was no basis for due process protection of contract rights.
Water Rights Law - Peterson v. Department of The Interior: Are Contract Rights Ever Property Rights Under the Reclamation Reform Act?, 21 Golden Gate U. L. Rev.