B-125866, SEP. 4, 1956

B-125866: Sep 4, 1956

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TO THE SECRETARY OF THE INTERIOR: REFERENCE IS MADE TO LETTER OF JUNE 4. THE SUBMISSION IS THE OUTCOME OF A CONTROVERSY EXTENDING OVER A PERIOD OF YEARS BETWEEN THE BUREAU OF RECLAMATION AND SEVERAL IRRIGATION DISTRICTS IN THE KLAMATH PROJECT. THE PRACTICE WAS INITIATED BY THE BUREAU FOR THE STATED PURPOSE OF ENCOURAGING ECONOMY IN THE USE OF WATER RATHER THAN BECAUSE OF ANY SHORTAGE IN THE AVAILABLE SUPPLY. PROVISION WAS MADE FOR A CHARGE OF TWENTY-FIVE CENTS PER ACRE FOOT FOR WATER DELIVERED IN EXCESS OF THE TWO ACRE-FEET STIPULATED IN THE CONTRACTS. THE RECORD SHOWS THAT IN THE SPRING OF 1936 THE BUREAU RECOGNIZED THAT TWO ACRE-FEET WERE NOT SUFFICIENT FOR BENEFICIAL USE. IS REPORTED THAT ALL OF THE DISTRICTS EXCEPT ENTERPRISE.

B-125866, SEP. 4, 1956

TO THE SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO LETTER OF JUNE 4, 1956, WITH ENCLOSURES, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY, REQUESTING A DECISION AS TO THE PROPRIETY OF CANCELLING THE INDEBTEDNESS OF THE ENTERPRISE IRRIGATION DISTRICT IN THE AMOUNT OF $3,034.50, REPRESENTING UNPAID CHARGES FOR EXCESS WATER DELIVERED TO THE DEBTOR FOR THE YEARS 1938 THROUGH 1943 UNDER CONTRACT I1R-399 ENTERED INTO UNDER DATE OF OCTOBER 5, 1920, UNDER AUTHORITY OF THE RECLAMATION ACT OF JUNE 17, 1902, 32 STAT. 388, AS AMENDED, AND THE WARREN ACT OF FEBRUARY 21, 1911, 36 STAT. 925.

THE SUBMISSION IS THE OUTCOME OF A CONTROVERSY EXTENDING OVER A PERIOD OF YEARS BETWEEN THE BUREAU OF RECLAMATION AND SEVERAL IRRIGATION DISTRICTS IN THE KLAMATH PROJECT, INCLUDING THE ENTERPRISE DISTRICT. THE CONTROVERSY AROSE OUT OF THE PRACTICE OF THE BUREAU, INITIATED IN 1935, OF CHARGING IRRIGATION DISTRICTS EXTRA AMOUNTS FOR WATER USED IN EXCESS OF THE TWO ACRE-FEET PER ACRE OF IRRIGABLE LAND PER SEASON SPECIFIED FOR DELIVERY UNDER THE SEVERAL CONTRACTS WITH THE DISTRICTS AND INDIVIDUAL CONTRACTORS. THE PRACTICE WAS INITIATED BY THE BUREAU FOR THE STATED PURPOSE OF ENCOURAGING ECONOMY IN THE USE OF WATER RATHER THAN BECAUSE OF ANY SHORTAGE IN THE AVAILABLE SUPPLY. IN PUBLIC NOTICES ANNOUNCING THE ANNUAL OPERATION AND MAINTENANCE CHARGES FOR THE KLAMATH PROJECT ISSUED FOR THE YEARS 1935 TO 1943, PROVISION WAS MADE FOR A CHARGE OF TWENTY-FIVE CENTS PER ACRE FOOT FOR WATER DELIVERED IN EXCESS OF THE TWO ACRE-FEET STIPULATED IN THE CONTRACTS. THE RECORD SHOWS THAT IN THE SPRING OF 1936 THE BUREAU RECOGNIZED THAT TWO ACRE-FEET WERE NOT SUFFICIENT FOR BENEFICIAL USE, AND OFFERED TO MODIFY EXISTING CONTRACTS TO PERMIT A MAXIMUM DELIVERY OF 2 1/2 ACRE FEET PER IRRIGABLE ACRE IN CONSIDERATION FOR THE FURNISHING OF ANNUAL CROP RETURNS BY THE SEVERAL CONTRACTORS. IS REPORTED THAT ALL OF THE DISTRICTS EXCEPT ENTERPRISE, AND PRACTICALLY ALL OF THE INDIVIDUAL CONTRACTORS, WHILE OBJECTING TO THE EXCESS CHARGE FOR REASONS HEREINAFTER STATED, ACQUIESCED IN THE BUREAU'S PROPOSAL, AND THAT THEIR CONTRACTS WERE AMENDED AND CHARGES MADE ACCORDINGLY. IN THE CASE OF ENTERPRISE THE RECORD SHOWS THAT FOR THE YEARS 1935, 1936, AND 1937 IT WAS CHARGED AND PAID UNDER PROTEST AT THE RATE OF 25 CENTS PER ACRE FOOT FOR WATER DELIVERED IN EXCESS OF TWO ACRE-FEET. CHARGES AT THE SAME RATE TOTALING $3,034.50 FOR 1938 THROUGH 1943 ARE UNPAID AND ENTERPRISE HAS REQUESTED REFUND OF THE EXCESS CHARGES PAID FOR 1935, 1936, AND 1937.

IT APPEARS THAT BY PUBLIC NOTICES ISSUED BY THE BUREAU BETWEEN 1943 AND 1948, IT WAS ANNOUNCED THAT, BECAUSE OF THE CONTROVERSY AS TO THE LEGALITY OF THE CHARGE OF 25 CENTS FOR EXCESS WATER CONTAINED IN PRIOR NOTICES, THE ADDITIONAL CHARGE WOULD BE DISCONTINUED PENDING THE OUTCOME OF THE CONTROVERSY. IT IS STATED THAT SINCE 1948 THE LANGUAGE RELATING TO CHARGES FOR ADDITIONAL WATER HAS BEEN ELIMINATED FROM PUBLIC NOTICES AND SUCH CHARGES HAVE BEEN DISCONTINUED.

BY LETTER DATED JULY 16, 1941, THE ACTING SECRETARY OF THE INTERIOR APPOINTED A COMMITTEE TO INVESTIGATE AND REPORT ON THE MATTERS IN CONTROVERSY AND TO RECOMMEND MEANS OF ADJUSTING THE DIFFERENCES. THE COMMITTEE REPORT WAS NOT INCLUDED AMONG THE ENCLOSURES FORWARDED WITH YOUR LETTER BUT WAS FORWARDED BY LETTER OF JULY 20, 1956, PURSUANT TO AN INFORMAL REQUEST. INSOFAR AS CONCERNS THE PRESENT CONTROVERSY, THE COMMITTEE'S REPORT, MADE IN 1943, RECOMMENDED THAT ENTERPRISE BE PERMITTED TO AMEND ITS CONTRACT TO CONFORM WITH THE AMENDMENTS EFFECTED WITH THE OTHER PROJECT CONTRACTORS, AND THAT THE AMOUNT PREVIOUSLY PAID BY ENTERPRISE FOR EXCESS WATER AND THE AMOUNT OF ITS UNPAID INDEBTEDNESS WHEN PAID SHOULD BE CREDITED TO THE PURCHASE OF THE ADDITIONAL 1/2 ACRE-FOOT. THE ABOVE RECOMMENDATIONS, WHICH APPARENTLY WERE NEVER PUT INTO EFFECT, WERE BASED ON THE COMMITTEE'S CONCLUSION THAT THE WATER DISTRICTS ARE BOUND BY THE TERMS OF THEIR CONTRACTS, INCLUDING THE AMOUNT OF WATER SPECIFIED FOR DELIVERY. A LENGTHY STATEMENT AS TO THE ,LEGAL ASPECTS" OF THE SITUATION WAS SUBMITTED IN SUPPORT OF SUCH CONCLUSION. WHILE IT APPEARS THAT THE CASE OF FOX V. ICKES, 137 F.2D 30, REFERRED TO IN YOUR LETTER, HAD NOT BEEN DECIDED AT THE TIME OF THE SUBMISSION OF THE COMMITTEE'S REPORT, THE COMMITTEE REFERRED TO THE PENDING APPEAL IN THAT CASE BUT CONCLUDED THAT REGARDLESS OF THE COURT'S DECISION THE DISTRICTS INVOLVED IN THE PRESENT CASE ARE BOUND BY THE TERMS OF THEIR CONTRACTS. THE COMMITTEE TOOK THE VIEW THAT THE ADDITIONAL CHARGE OF 25 CENTS PER ACRE-FOOT IS FOR THE SALE OR RENTAL OF SURPLUS WATER IN EXCESS OF THE AMOUNT PROVIDED IN THE DISTRICTS' CONTRACTS, AS AUTHORIZED BY THE WARREN ACT, AND NOT A CONSTRUCTION CHARGE SUCH AS INVOLVED IN FOX V. ICKES. THE COMMITTEE DISAGREED WITH THE BUREAU'S VIEWS THAT THE 25 CENTS CHARGE PROPERLY MAY BE REGARDED AS AN OPERATION AND MAINTENANCE COST UNDER SECTION 5 OF THE RECLAMATION EXTENSION ACT OF AUGUST 13, 1914, 38 STAT. 686, 43 U.S.C. 499.

REGARDLESS OF THE BASIS FOR THE CHARGE, THE ESSENTIAL QUESTION IS WHETHER IT IS ONE WHICH MAY LEGALLY BE COLLECTED. PARAGRAPH 5 OF THE AGREEMENT OF OCTOBER 5, 1920, PROVIDES THAT "BENEFICIAL USE SHALL BE THE BASIS AND LIMIT OF ALL RIGHT ACQUIRED BY THE DISTRICT HEREUNDER.' PARAGRAPH 6, HOWEVER, STIPULATES THAT---

"IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THE AMOUNT OF WATER TO BE DELIVERED HEREUNDER SHALL BE TWO (2) ACRE FEET PER ACRE OF IRRIGABLE LAND DURING THE USUAL IRRIGATION SEASON * * * SUBJECT ALWAYS, HOWEVER, TO ALL THE TERMS AND CONDITIONS OF THIS AGREEMENT; * * *"

IT HAS BEEN THE POSITION OF THE BUREAU, WHICH WAS CONCURRED IN BY THE COMMITTEE REFERRED TO, THAT UNDER THE TERMS OF THE CONTRACT THE UNITED STATES IS OBLIGATED TO FURNISH THE DEBTOR ONLY 2 ACRE-FEET OF WATER PER ACRE OF IRRIGABLE LAND PER SEASON AT THE CONTRACT RATE, AND THAT THERE SHOULD BE NO INCREASE IN THE DUTY OF WATER WITHOUT A CORRESPONDING INCREASE IN THE CONSTRUCTION CHARGE OR WATER RIGHT CHARGE. IN OTHER WORDS, IT IS CONTENDED THAT 2 ACRE-FEET IS THE BASIS AND THE LIMIT OF THE RIGHT OF ENTERPRISE AT THE CONTRACT RATE. IT APPEARS TO BE THE CONTENTION OF THE BUREAU THAT THE RIGHT TO THE WATER WAS ACQUIRED BY THE UNITED STATES PURSUANT TO THE LAWS OF THE STATE OF OREGON, NAMELY, THE ACT OF JANUARY 20, 1905, UNDER WHICH THE UNITED STATES WAS CEDED ALL THE RIGHT, TITLE, INTEREST AND CLAIM OF THE STATE OR OREGON TO ANY LANDS RECOVERED BY THE LOWERING OF THE WATER LEVEL OR DRAINAGE OF THE LAKES INVOLVED IN THE KLAMATH PROJECT. REFERENCE IS ALSO MADE TO THE ACT OF FEBRUARY 22, 1905 (CHAP. 228 OF THE GENERAL LAWS OF OREGON OF 1905), ADJUDICATING CERTAIN WATER RIGHTS AND PROVIDING FOR THE APPROPRIATION BY THE UNITED STATES OF WATERS UNAPPROPRIATED AT THE TIME OF COMPLIANCE BY THE UNITED STATES WITH PROVISIONS OF THE STATUTE. THE STATUTE STIPULATES THAT UPON COMPLIANCE WITH THE ACT NO ADVERSE CLAIMS AGAINST THE UNITED STATES CAN BE ACQUIRED UNDER THE LAWS OF THE STATE IN THE ABSENCE OF A RELEASE BY AN OFFICER OF THE UNITED STATES FILED WITH THE STATE ENGINEER. IT IS ASSERTED THAT THE WATERS THUS FILED UPON AND APPROPRIATED BY THE UNITED STATES HAVE NOT BEEN FORMALLY OR OTHERWISE RELEASED BY THE UNITED STATES AND THAT THE GOVERNMENT'S ACTION UNDER THE ABOVE STATUTES VESTED TITLE IN THE UNITED STATES TO ALL UNAPPROPRIATED WATER. IN RE WATERS OF UMATILLA RIVER, 168R. 922 (OREGON). ALSO, THE BUREAU RELIES UPON THE PROVISIONS OF SECTION 6 OF THE RECLAMATION ACT PROVIDING THAT TITLE TO AND THE MANAGEMENT AND OPERATION OF RESERVOIRS AND WORKS NECESSARY FOR THEIR PROTECTION AND OPERATION SHALL REMAIN IN THE UNITED STATES. IT IS STATED THAT THE UNITED STATES HAS NEVER PROVIDED FOR THE TRANSFER OF TITLE TO THE RESERVOIR OR THE MAIN CANAL OF THE PROJECT OR THE TUNNEL CONNECTING SAME WITH THE RESERVOIR OR THE HEADWORKS OF THE CANAL AND TUNNEL FORMING THE OUTLET.

ON THE OTHER HAND, ENTERPRISE CONTENDS THAT THE SECRETARY OF THE INTERIOR HAD NO AUTHORITY OF LAW FOR MAKING THE CONTRACT FOR FURNISHING A SPECIFIED AMOUNT OF WATER AT A SPECIFIC PRICE AND THAT THE GOVERNMENT IS OBLIGATED TO FURNISH ALL THE WATER THAT CAN BE BENEFICIALLY USED BY THE DEBTOR NOTWITHSTANDING THE ABOVE PROVISIONS OF PARAGRAPHS 6 AND 7 OF THE CONTRACT. IT CONTENDS THAT THE MAIN CANAL, THE RESERVOIR, AND TUNNEL CONSTRUCTED BY THE UNITED STATES ARE IMPRESSED WITH AN OBLIGATION OR LIEN OR ENCUMBRANCE REQUIRING THE WORKS TO BE USED FOR THE BENEFIT OF THE DEBTOR TO THE EXTENT NECESSARY, AND DELIVERY TO THE DEBTOR, WITHOUT ADDITIONAL CHARGE, OF ALL WATER WHICH CAN BE BENEFICIALLY USED BY IT. IT FURTHER CONTENDS THAT AT THE TIME THE CONTRACT WAS EXECUTED IT WAS THE UNDERSTANDING OF THE PARTIES THAT THE PAYMENTS PROVIDED FOR THEREUNDER WOULD COVER ALL CHARGES MADE FOR THE CARRIAGE OF WATER THAT ENTERPRISE COULD BENEFICIALLY USE, SUBJECT ONLY TO THE AVAILABLE SUPPLY. SUCH RIGHT IT ASSERTS IS PLAINLY SET FORTH IN PARAGRAPH 5 OF THE CONTRACT. ASSERTS THAT THE BUREAU'S DEMAND FOR ADDITIONAL PAYMENT FOR WATER IN EXCESS OF 2 ACRE FEET PER ANNUM IGNORES THE "BENEFICIAL USE" PROVISION OF THE CONTRACT AND THAT THE DISTRICT IS ENTITLED TO ALL THE WATER IT CAN BENEFICIALLY USE WITHOUT REGARD TO THE TWO ACRE FOOT LIMITATION. THE DEBTOR ADMITS THAT THE BUREAU HAS THE RIGHT OF ASSUMING OR FIXING THE "DUTY OF WATER" BASED ON THE AMOUNT THAT CAN BE BENEFICIALLY USED. CONTENDS, HOWEVER, THAT THE AMOUNT OF TWO ACRE-FEET ORIGINALLY FIXED IN THE CONTRACT IS EXPRESSLY SUBJECT TO THE STIPULATION IN PARAGRAPH 6 TO THE EFFECT THAT THE AMOUNT OF WATER TO BE DELIVERED WILL BE "SUBJECT ALWAYS, HOWEVER, TO ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT," AND THEREFORE TO PARAGRAPH 5. THE DEBTOR ASSERTS THAT IT IS NOT PURCHASING WATER AND THAT ALL THE WATER IT CAN BENEFICIALLY USE WAS GRANTED TO IT BY THE OREGON STATUTES MAKING WATER APPURTENANT TO THE LAND OF THE DEBTOR WHICH RIGHT IS CLEARLY RECOGNIZED UNDER SECTION 8 OF THE RECLAMATION ACT. IT CONTENDS THE BUREAU OWNS NO WATER TO SELL AND AND THAT THE PARTIES TO THE CONTRACT NEVER INTENDED THAT THE DEBTOR WOULD PURCHASE WATER AS EVIDENCED BY THE FACT THAT THE CONTRACT IS ONE FOR "THE CARRIAGE OF WATER.' NEBRASKA V. WYOMING, 325 U.S. 589, 611. FINALLY, THE DISTRICT RELIES UPON THE CASE OF ICKES V. FOX, 300 U.S. 82, AND PARTICULARLY UPON EXPRESSIONS BY THE COURT TO THE EFFECT THAT BENEFICIAL USE IS THE BASIS, THE MEASURE AND THE LIMIT OF THE RIGHT TO THE USE OF WATER AND THAT THE UNITED STATES IS NOT THE OWNER OF THE WATER BUT IS MERELY A CARRIER. SUMMARIZING, IT IS THE POSITION OF ENTERPRISE THAT ANY LIMITATION IN ITS CONTRACT IN THE AMOUNT OF WATER LESS THAN "BENEFICIAL USE" IS WITHOUT AUTHORITY AND ILLEGAL.

IT IS STATED IN YOUR LETTER THAT THE DELAY IN TAKING ACTION ON THE GOVERNMENT'S CLAIM WAS DICTATED LARGELY BY THE PROCEEDINGS IN THE ABOVE CASE OF FOX V. ICKES. IT IS SUGGESTED THAT SINCE THE FINAL DECISION IN THAT CASE (137 F.2D 30), WHICH INVOLVED A SOMEWHAT SIMILAR CONTROVERSY INCIDENT TO THE YAKIMA PROJECT, WAS ADVERSE TO THE GOVERNMENT'S CONTENTIONS, A DECISION UNFAVORABLE TO THE UNITED STATES MIGHT RESULT IN THE EVENT OF COURT ACTION AGAINST THE DEBTOR IN THE PRESENT CASE. IT IS STATED THAT IN SUCH EVENT ALL WARREN ACT CONTRACTORS WOULD ASSERT CLAIMS-- - AGGREGATING IN EXCESS OF $4,000--- FOR REFUNDS OF PAYMENTS MADE FOR WATER DELIVERED IN EXCESS OF THE AMOUNTS STIPULATED IN THEIR CONTRACTS. IN THE CIRCUMSTANCES, CANCELLATION OF THE CHARGE AGAINST ENTERPRISE IS RECOMMENDED AS IN THE BEST INTEREST OF THE UNITED STATES.

AT THE OUTSET, IT IS CLEAR THAT THE UNITED STATES BY FILING WITH THE STATE OF OREGON NOTICES OF INTENT TO APPROPRIATE AND THEREAFTER IMPOUNDING THE WATERS DID NOT--- AS APPEARS TO BE CONTENDED BY THE BUREAU--- BECOME THE OWNER OF THE WATER IN ITS OWN RIGHT. THAT IS RECOGNIZED IN THE RECLAMATION ACT ITSELF. HUDSPETH COUNTY CONSERV. AND REC. DIS. NO. 1 V. ROBBINS, 213 F.2D 425, CERTIORARI DENIED 348 U.S. 833.

THE DECISION OF ICKES V. FOX AND FOX V. ICKES, SUPRA, BOTH WERE RENDERED IN A SUIT BROUGHT IN THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF COLUMBIA AGAINST THE SECRETARY OF THE INTERIOR TO ENJOIN THE ENFORCEMENT OF ORDERS MADE BY HIM LIMITING THE AMOUNT OF WATER COMPLAINANTS MIGHT RECEIVE FOR IRRIGATION FROM A FEDERAL RECLAMATION PROJECT IN THE STATE OF WASHINGTON, THE LAWS OF WHICH WITH RESPECT TO WATER RIGHTS OF THE UNITED STATES ARE SIMILAR TO THE LAWS OF OREGON. RCW 90:40.010 AND FOLLOWING SECTIONS. IN ICKES V. FOX, 300 U.S. 82, THE SUPREME COURT AFFIRMED A DECISION OF THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA (ICKES V. FOX, 85 F.2D 294) WHICH UPHELD THE ACTION OF THE LOWER COURT IN DENYING A MOTION MADE BY THE SECRETARY TO DISMISS THE COMPLAINT ON THE GROUND THAT THE UNITED STATES WAS AN INDISPENSABLE PARTY TO THE SUIT. HOLDING THAT THE RIGHTS OF THE LANDOWNERS TO WATER FOR IRRIGATION WERE NOT MERE RIGHTS OF CONTRACT WITH THE GOVERNMENT, BUT VESTED PROPERTY RIGHTS, THE COURT SAID, IN PART: "* * * SUCCINCTLY STATED, THE CASE COMES TO THIS: THE UNITED STATES, UNDER THE RECLAMATION ACT, CONSTRUCTED AN IRRIGATION SYSTEM FOR THE PURPOSE OF STORING AND DISTRIBUTING WATER FOR IRRIGATION OF ARID LANDS. RESPONDENTS OWN WATER-RIGHTS UNDER THE SYSTEM FOR LANDS OF THAT KIND; AND THESE LANDS REQUIRE ARTIFICIAL IRRIGATION TO RENDER THEM PRODUCTIVE. SO FAR AS THESE RESPONDENTS ARE CONCERNED, THE GOVERNMENT DID NOT BECOME THE OWNER OF THE WATER RIGHTS, BECAUSE THOSE RIGHTS BY ACT OF CONGRESS WERE MADE "APPURTENANT TO THE LAND IRRIGATED; " AND BY A WASHINGTON STATUTE, IN FORCE AT LEAST SINCE 1917, WERE "TO BE AND REMAIN APPURTENANT TO THE LAND.' MOREOVER, BY THE CONTRACT WITH THE GOVERNMENT, IT WAS THE LANDOWNERS WHO WERE "TO INITIATE RIGHTS TO THE USE OF WATER," WHICH RIGHTS WERE TO BE AND "CONTINUE TO BE FOREVER APPURTENANT TO DESIGNATED LANDS OWNED BY SUCH SHAREHOLDERS.'

"RESPONDENTS HAD MADE ALL STIPULATED PAYMENTS AND COMPLIED WITH ALL OBLIGATIONS BY WHICH THEY WERE BOUND TO THE GOVERNMENT, AND LONG PRIOR TO THE ISSUE OF THE NOTICES AND ORDERS HERE ASSAILED, HAD ACQUIRED A VESTED RIGHT TO THE PERPETUAL USE OF THE WATERS AS APPURTENANT TO THEIR LANDS. UNDER THE RECLAMATION ACT, SUPRA, AS WELL AS UNDER THE LAW OF WASHINGTON,"BENEFICIAL USE" WAS "THE BASIS, THE MEASURE, AND THE LIMIT OF THE RIGHT.' AND BY THE EXPRESS TERMS OF THE CONTRACT MADE BETWEEN THE GOVERNMENT AND THE WATER USERS ASSOCIATION IN BEHALF OF RESPONDENTS AND OTHER SHAREHOLDERS, THE DETERMINATION OF THE SECRETARY AS TO THE NUMBER OF ACRES CAPABLE OF IRRIGATION WAS "TO BE BASED UPON AND MEASURED AND LIMITED BY THE BENEFICIAL USE OF WATER.' PREDECESSORS OF PETITIONER, ACCORDINGLY, HAD DECIDED THAT 4.84 ACRE FEET OF WATER PER ANNUM PER ACRE WAS NECESSARY TO THE BENEFICIAL AND SUCCESSFUL IRRIGATION OF RESPONDENTS' LANDS; AND UPON THAT DECISION, FOR A PERIOD OF MORE THAN TWENTY YEARS PRIOR TO THE WRONGS COMPLAINED OF, THERE WAS DELIVERED TO AND USED UPON THE LANDS THAT QUANTITY OF WATER. ALTHOUGH THE GOVERNMENT DIVERTED, STORED, AND DISTRIBUTED THE WATER, THE CONTENTION OF PETITIONER THAT THEREBY OWNERSHIP OF THE WATER OR WATER-RIGHTS BECAME VESTED IN THE UNITED STATES IS NOT WELL FOUNDED. APPROPRIATION WAS MADE NOT FOR THE USE OF THE GOVERNMENT, BUT, UNDER THE RECLAMATION ACT, FOR THE USE OF THE LANDOWNERS; AND BY THE TERMS OF THE LAW AND OF THE CONTRACT ALREADY REFERRED TO, THE WATER-RIGHTS BECAME THE PROPERTY OF THE LANDOWNERS, WHOLLY DISTINCT FROM THE PROPERTY RIGHT OF THE GOVERNMENT IN THE IRRIGATION WORKS * * *.'

UPON SUBSEQUENT HEARING ON THE MERITS, THE DISTRICT COURT DISMISSED THE SUIT, APPARENTLY ON THE GROUND THAT THE SECRETARY WAS AUTHORIZED BY THE TERMS OF THE WATER-RIGHT APPLICATIONS TO DETERMINE THE AMOUNT OF WATER WHICH HE WAS OBLIGATED TO DELIVER WITHOUT EXTRA CHARGE. THIS DECISION WAS REVERSED BY THE COURT OF APPEALS IN FOX V. ICKES, 137 F.2D 30, WHICH THE SUPREME COURT DECLINED TO REVIEW. 320 U.S. 792. IN THE COURSE OF ITS OPINION THE COURT OF APPEALS MADE THE FOLLOWING STATEMENTS WHICH APPEAR TO BE RELEVANT TO THE CLAIM AGAINST THE ENTERPRISE DISTRICT:

"IN HOLDING THAT APPELLANTS' RIGHTS WERE DEPENDENT ON THE ENFORCEMENT OF CONTRACTS WITH THE UNITED STATES, WE THINK THE TRIAL COURT FAILED TO FOLLOW THE DECISION IN ICKES V. FOX, DECIDED BY THE SUPREME COURT IN A PREVIOUS APPEAL IN THESE PROCEEDINGS. * * *

"A PETITION FOR REHEARING FILED IN THE SUPREME COURT BY THE SOLICITOR GENERAL MAKES IT APPARENT THAT THE PRINCIPAL ISSUE IN THIS CASE WAS BEFORE THE SUPREME COURT ON THE FORMER APPEAL. IN THAT PETITION FOR REHEARING THE SOLICITOR GENERAL POINTED OUT TO THE COURT THAT THE DECISION WOULD LEAD TO SERIOUS CONSEQUENCES IN THE ADMINISTRATION OF THE RECLAMATION FUND BECAUSE IT GAVE APPELLANTS, ON THE SOLE BASIS OF PRIOR DELIVERIES OF WATER, A VESTED RIGHT IN A LARGER AMOUNT OF WATER THAN WAS STIPULATED IN THEIR CONTRACTS. * * *

"READING THE RECLAMATION ACT IN THE LIGHT OF THE DECISION IN ICKES V. FOX, WE FIND THE SITUATION IN THIS CASE TO BE AS FOLLOWS: THE WATER RIGHTS OF APPELLANTS ARE NOT DETERMINED BY CONTRACT BUT BY BENEFICIAL USE. * *

"* * * THE SECRETARY IN THIS CASE IS NOT CLAIMING THAT NO MORE WATER THAN THE AMOUNTS DETERMINED UNDER THE NOTICE CAN BE USED BENEFICIALLY ON THE LANDS. HE IS OFFERING TO SELL MORE WATER TO THE APPELLANTS. HIS NOTICE GIVES THE WATER-USERS A CHOICE BETWEEN EXPENDING MONEY FOR ADDITIONAL LABOR OR EQUIPMENT AND RENTING ADDITIONAL WATER. THIS CONSTITUTES AN ADMISSION THAT THE ADDITIONAL WATER CAN BE USED BENEFICIALLY. UNDER THE RECLAMATION ACT THE SECRETARY WOULD HAVE NO RIGHT TO SPEND PUBLIC FUNDS AND TO SUPPLY WATER FOR A USE THAT WAS NOT BENEFICIAL.

" AN INJUNCTION SHOULD ISSUE, THEREFORE, RESTRAINING THE SECRETARY FROM IMPOSING A RENTAL CHARGE ON ANY WATER WHICH HE DETERMINES MAY BE USED ON APPELLANTS' LANDS IN ORDER TO PAY CONSTRUCTION COSTS IN THE RESERVOIR SYSTEM OF THE YAKIMA PROJECT ABOVE THE $52.00 AN ACRE SPECIFIED IN THE ORIGINAL NOTICE.

"* * * THE ORDER SHOULD, THEREFORE, RESTRAIN THE SECRETARY FROM MAKING THAT TENTATIVE DETERMINATION OF APPELLANTS' RIGHTS TO RECEIVE WATER BY CONSTRUING THEIR APPLICATIONS AS CONTRACTS WITH THE GOVERNMENT.'

WHILE IT MAY BE SHOWN THAT THERE ARE A NUMBER OF DISTINCTIONS BETWEEN THE FACTS IN THE FOX CASE AND THOSE INVOLVED IN THE CLAIM AGAINST THE ENTERPRISE DISTRICT AND THE OTHER PARTIES MENTIONED IN YOUR LETTER, IT IS AT LEAST EXTREMELY DOUBTFUL WHETHER THEY ARE SUFFICIENT TO AVOID THE APPLICATION OF THE ESSENTIAL PRINCIPLES THERE STATED. IN THE CIRCUMSTANCES, WE CONCUR IN YOUR VIEW THAT IT WOULD NOT BE IN THE INTEREST OF THE GOVERNMENT TO ATTEMPT COLLECTION BY JUDICIAL PROCEEDINGS OF THE AMOUNTS CLAIMED, AND YOU ARE THEREFORE ADVISED THAT THE CHARGES MAY BE CANCELLED.