Casitas Municipal Water District v. United States

OPINION

This case is before the court following a trial held to determine the compensation, if any, owed to plaintiff under the Fifth Amendment to the United States Constitution for the taking of its property. In an earlier round of litigation in this case, the Court of Appeals for the Federal Circuit ruled that operating restrictions on plaintiffs water project imposed by the National Marine Fisheries Service (“NMFS”) pursuant to the Endangered Species Act (“ESA”), 16 U.S.C. §§ 1531M4 (2006), should be analyzed as a physical taking where plaintiff was required to reroute a portion of the water it had diverted for its own use through a fish passageway and thus return the water to the river channel. Casitas Mun. Water Dist. v. United States, 543 F.3d 1276, 1295 (Fed.Cir.2008), reh’g and reh’g en banc denied, 556 F.3d 1329 (Fed.Cir.2009). In so holding, the Federal Circuit reversed a decision by this court in which we had ruled that such a restriction on water use constituted a regulatory taking of plaintiffs property. Casitas Mun. Water Dist. v. United States, 76 Fed.Cl. 100 (2007).

The court must now address two issues: first, the nature of plaintiffs property right and the extent to which background principles of state law impose limitations on that right,2 and second, the appropriate method *446for calculating potential damages, in particular by determining the quantity and value of the water lost. The parties submitted post-trial briefs on these issues and the court heard closing arguments on July 12, 2011. We address these issues in turn below.

BACKGROUND

Plaintiff, Casitas Municipal Water District (“Casitas”), operates the Ventura River Project, a water project that provides water to residential, industz’ial, and agricultuz’al customers in Ventura County, California, a community located on the southern coast of Califozmia, approximately 60 miles noz’thwest of Los Angeles. Toward that end, plaintiff opez’ates the Robles Diversion Dam, a structure used to divert water from the Ventura River into the Robles-Casitas Canal, a 4.5 mile canal which in turn tz'anspoz’ts the water to a man-made reservoir known as Lake Casitas. Water is stored in Lake Casitas for delivezy to plaintiffs customers.

Plaintiffs diversion and use of water is governed by a license granted to it by the State Water Resouz-ees Control Boaz-d (“SWRCB” or “the Boaz’d”), the Califozmia agency responsible for the issuance of pez*mits and licenses for the appropriation of water in California. Cal. Water Code §§ 1225, 1250. In particular, plaintiffs license provides that plaintiff may divez’t up to 107,800 acre-feet of water per year from the Ventura River and other tz’ibutaz’ies and may put up to 28,500 acre-feet of water per year to beneficial use. In addition, plaintiffs operations wez’e oz’iginally govez-ned by a set of guidelines, established in 1959 (“the 1959 criteria”), which required plaintiff to bypass the fiz’st 20 cubic feet per second (“cfs”) of zdver flow for use by downstz’eam senior watez'zdghts holders before diverting any water from the Ventura River. Flows in excess of 20 cfs could be divez-ted into the RoblesCasitas Canal, subject to the pz’ovisions of plaintiffs license.3

Casitas operated under the tez’ms of its license from the completion of the water project in 1959 until the late 1990s. In August 1997, however, NMFS, a fedez’al agency, listed the west coast steelhead trout as an endangered species under the ESA, concluding in the final listing that the primazy cause of the decline of the southern California steelhead is “extensive loss of steelhead habitat due to water development, including impassable dazns and dewatezing.” 62 Fed. Reg. 43,949 (Aug. 18, 1997). As a z’esult of this listing, Casitas, its officez's, and the United States Buz’eau of Reclamation (“BOR”) (the federal agency that owns the water project) faced possible civil and cz’iminal liability if the continued operation of the water pz*oject resulted in haz-m to the steelhead trout. 16 U.S.C. §§ 1538(a)(1), 1540(a), (b).

Following the NMFS listing, plaintiff joined sevez’al other local water agencies in commissioning a study by Entz’ix, Inc., a consulting firm specializing in environmental and endangered-species issues, to identify zneasures to znitigate the impact of the water project operations on the steelhead population. The resulting repoz’t, titled “Ventuz’a River Steelhead Restoration and Recovezy Plan,” concluded in part that “[pjz’oviding access to habitats upstream of Robles Divez’sion is one of the most impoz’tant actions that can be taken to impz’ove steelhead popula*447tions in the Ventura River.” The report continued:

The best long-term passage can probably be provided by (1) constructing a fish ladder at Robles Diversion, (2) installing a fish collection/bypass facility in the canal, and (3) perhaps maintaining a low flow passage channel from the live stretch (Foster Park) to Robles Diversion to assist fish in low flow years.

On December 18, 1997, plaintiff submitted a grant application to the California Department of Fish and Game (“CDFG”), seeking funds to construct a fish passage facility at the Robles Diversion Dam to lessen the impact of its operations on the steelhead. In its proposal, plaintiff observed that the estimated population of steelhead spawning in the Ventura River system had declined from 4,000-5,000 in the 1940s (prior to the construction of the Robles Diversion Dam) to possibly fewer than 100 fish in the late 1990s. Plaintiff went on to explain that “[providing a fishway at the Robles Diversion Dam would restore access to [the steelheads’] habitat and would substantially increase the current population size.” In addition, plaintiff noted that CDFG itself had concluded in a February 1996 report that “[rjestoring steelhead runs in this river will be crucial to restoring southern steelhead stocks” and that recovering those stocks “will be the highest priority for [CDFG] steelhead management.”4

On December 18,' 1998, California Trout, Inc. (“Cal Trout”), a non-profit environmental group, notified plaintiff of its intention to bring suit in California district court in an attempt to enjoin Casitas and BOR from unlawfully taking, jeopardizing, and failing to conserve the steelhead trout through the operation of the Robles Diversion facility.5 Specifically, Cal Trout asserted that plaintiffs operation of the Robles Diversion Dam and its related diversion and storage facilities had “caused the take” of endangered southern California steelhead in violation of the ESA by:

1. Operating the Robles Diversion without a fish ladder or other adequate means of fish passage, thereby preventing the unimpeded upstream migration and spawning of adult steel-head;

2. Diverting waters from the Ventura River to Casitas Lake at the Robles Diversion without any fish screens to prevent the capture and entrainment of downstream migrating smolts and adults steelhead;

3. Diverting waters from the Ventura River without adequate bypass flows below the Robles Diversion Dam to: (a) prevent direct death and injury to steelhead and (b) maintain habitat adequate to prevent indirect harm and to ensure the continued survival and recovery of steelhead in the Ventura River.

In a January 11, 1999, response, Casitas requested that Cal Trout delay the filing of suit pending the completion of a Habitat Conservation Plan (“HCP”) that Casitas was developing with seven other local water agencies.6 Casitas also invited Cal Trout to *448participate in the HCP process. By letter dated January 28, 1999, Cal Trout agreed to participate in the HCP process but declined to delay litigation given “the precarious condition of the few steelhead remaining in the Ventura River and the fact that the steelhead spawning season is rapidly approaching.” Cal Trout additionally demanded that interim measures be taken at once to protect the steelhead, including the providing of permanent fish passage and the suspending of diversions until a permanent fish screen could be constructed, no later than December 31, 2000.

In a February 2, 1999, interoffice memorandum, the general manager of Casitas recommended to Casitas’s board of directors that Casitas take the following actions in response to Cal Trout’s letter: (1) avoid diversions at the Robles Diversion Dam until January 1, 2000; (2) seek a consultation with NMFS and BOR under Section 7 of the ESA;7 (3) undertake review of the project pursuant to the California Environmental Quality Act (“CEQA”) and the National Environmental Policy Act (“NEPA”); (4) develop a Request for Proposal (“RFP”) for the design and construction of a fish ladder and fish screen at the Robles Diversion Dam; and (5) continue with the HCP process.

On February 10, 1999, plaintiffs board of directors approved all but one of the general manager’s recommendations, authorizing Casitas to seek a Section 7 consultation with NMFS, undertake CEQA and NEPA review, develop an RFP for a fish ladder and screen, and continue with the HCP process. The board declined, however, to cease diversions at the Robles Diversion Dam.

Plaintiff accordingly contacted BOR to request that the agency initiate a Section 7 consultation with NMFS and further contracted with the environmental consulting firm Borcalli & Associates, Inc., to assist in the design of a fish passage facility. In addition, plaintiff notified Cal Trout of its intention to proceed immediately with the Section 7 consultation and with the design and construction of a fishway. Casitas ultimately received notice that Cal Trout would delay the filing of suit on those grounds.

On September 1, 1999, Borcalli & Associates invited NMFS, CDFG, BOR, Casitas, Entrix, Cal Trout, the United States Fish and Wildlife Service, and the Army Corps of Engineers to participate in a Technical Advisory Group to discuss and guide the design of the fish passage facility. The resulting body met regularly over the next two years. Based on the group’s discussions, BOR submitted several draft biological assessments to NMFS proposing the construction of a fish passage facility and identifying the minimum flow requirements necessary for successful fish migration.

NMFS issued a biological opinion on March 31, 2003. The biological opinion concluded that the proposal set forth in the final biological assessment—the construction and operation of the Robles fish passage facility—would not jeopardize the continued existence of the steelhead, but might result in the incidental take of the fish. The biological opinion accordingly included an incidental take statement relieving Casitas and BOR of liability under Section 7(o )(2) of the ESA so long as those agencies implemented a set of nondiscretionary, reasonable and prudent measures designed to minimize the incidental take of the steelhead. 16 U.S.C. § 1539(a)(1)(B), (a)(2)(A).

The biological opinion additionally called for a flow regime, referred to as the Robles Operating Criteria or biological opinion criteria, that increased the amount of water to be bypassed by plaintiff during steelhead migration periods to maintain an adequate water flow in the Ventura River for fish passage to upstream spawning sites. Under the new criteria, plaintiff was required during the fish passage augmentation season (January 1 to *449June 30 each year) to maintain downstream flows at or above 50 efs during the first ten days of each migratory storm event (i.e., storms generating flows of 150 cfs or greater) and to maintain flows at 30 cfs in between storm events as long as incoming flows at the Robles Diversion Dam exceeded 30 cfs.8 The biological opinion additionally specified that operations outside the fish passage augmentation season were to revert to the historic 1959 criteria, meaning that flows of up to 20 efs would generally be released downstream.

Although this flow regime increased the amount of water plaintiff was required to bypass during certain portions of the year from 20 cfs under the 1959 criteria to 50 cfs under the biological opinion criteria (thereby limiting the amount of water plaintiff otherwise would have been permitted to divert), the biological opinion indicated as follows:

Reservoir protection measures have been developed to ensure that fish operations at the Robles facility “minimize” effects on Lake Casitas water storage during a critical long-term drought period (i.e., a drought period in which Casitas implements conservation measures as defined within them Water Efficiency and Allocation Program [WEAP]). The measures are designed to prevent storage from dropping below a critical level (17,000 [acre-feet]) and facilitate the re-filling of the reservoir should it drop to a level where increased water charges and reduced allocations are imposed upon Casitas water customers.

(Footnote omitted.) The biological opinion additionally provided that “the operations described in this section will be revisited at a time not sooner than five years after the initiation of fish passage operations.”9

On April 9, 2003, Casitas’s board of directors passed a resolution implementing the biological opinion. The resolution noted, however, that “Casitas understands that the Bureau of Reclamation will be sending Casitas a letter that requires Casitas to adhere to the provisions of the Biological Opinion” and that “Casitas is under a powerful coercive effect to move forward with the fish passage project.”

Casitas formally opened the Robles fish passage facility on December 9, 2004, to prevent fish from entering the Robles-Casitas Canal by directing them instead into a fish passageway to the Ventura River. Despite this development, Cal Trout filed a complaint with the State Water Resources Control Board on December 31, 2004, seeking to amend Casitas’s license to conform to the requirements of the biological opinion.

The SWRCB addressed Cal Trout’s complaint in a letter dated July 28, 2005. Observing that “the requirements of state law may overlap with, but are not necessarily identical to, the requirements of the Endangered Species Act, pursuant to which the Biological Opinion was issued,” the Board advised Cal Trout that it could not “ministerially amend Casitas’s license to conform to the Biological Opinion” without conducting a hearing. The SWRCB acknowledged that reconsideration of the terms of Casitas’s license “may be warranted because public trust uses do not appear’ to have been taken into account when the State Water Board first approved Casitas’s water right application” and because the Board “approved Casi*450tas’s application for a water right permit before ... Southern California steelhead trout were listed as an endangered species.” The Board noted on the other hand, however, that “the fact that Casitas is subject to other regulatory requirements for protection of steelhead trout and has stated its intention of carrying out protective measures even if the State Water Board takes no action is a relevant consideration in deciding whether the State Water Board should initiate a public trust proceeding in this case.” The Board concluded by requesting Cal Trout to “submit any existing scientific evidence that supports the fish passage, operating criteria, and other measures evaluated in the biological opinion” to assist the Board in determining whether to hold a hearing on Cal Trout’s complaint.

While Cal Trout’s petition was pending before the SWRCB, Casitas filed suit in this court on January 26, 2005, asserting that the United States, in imposing the biological opinion operating criteria, had breached plaintiffs contract with BOR for the construction and operation of the water project or, in the alternative, had taken plaintiffs property without compensation in violation of the Fifth Amendment.10 Plaintiff accordingly sought reimbursement of the approximately $9.5 million it had spent to construct the fish passage facility (under the contract theory) and just compensation for the water it had lost (under the takings theory).

On January 27, 2006, the SWRCB informed Cal Trout and Casitas that no hearing was necessary “at the present time” because “Casitas has stated that it intends to comply with the Biological Opinion” and no evidence exists “that the requirements of the public trust doctrine will not otherwise be met through Casitas’ compliance with the bypass flows and other provisions of the Biological Opinion.” The Board declined to dismiss the complaint, however, observing that Casitas’s lawsuit before the United States Court of Federal Claims (la, the instant suit) “creates uncertainty concerning whether Casitas will continue to operate the project in accordance with the requirements of the current Biological Opinion.” The Board therefore concluded that it would “hold the complaint in abeyance pending resolution of Casitas’ U.S. Court of Federal Claims action.”

On October 2, 2006, this court dismissed plaintiffs contract claim against the United States under the theory that even if the government had indeed breached its contract with Casitas, the sovereign acts doctrine applied, shielding the government from liability. Casitas Mun. Water Dist. v. United States, 72 Fed.Cl. 746, 755 (2006). We next turned to the question of whether the alleged taking was physical or regulatory in nature. In order to resolve that issue, defendant filed a summary judgment motion in which it accepted, for the purposes of the motion, plaintiffs characterization of its property right. Plaintiff in turn conceded that if the taking were found to be regulatory, plaintiff could not make its case.11 This court ultimately ruled in defendant’s favor, concluding that the alleged taking was regulatory because it involved the government’s restraint on an owner’s use of property rather than a government takeover of property (either by physical invasion or by directing the property’s use to its own needs). Casitas, 76 Fed. Cl. at 105-06. We accordingly dismissed plaintiffs takings claim.

On appeal, the Federal Circuit upheld our dismissal of plaintiffs contract claim, but reversed our dismissal of plaintiffs takings *451claim on the ground that the taking was physical rather than regulatory in nature. Casitas, 543 F.3d 1276. In explaining its conclusion, the Federal Circuit wrote as follows:

[T]he government admissions make clear that the United States did not just require that water be left in the river, but instead physically caused Casitas to divert water away from the Robles-Casitas Canal and towards the fish ladder. Where the government plays an active role and physically appropriates property, the per se takings analysis applies.

Id. at 1295.

Defendant moved for a rehearing and rehearing en banc but the court denied its motion. Casitas, 556 F.3d 1329. The majority explained that the case, as it had been presented on appeal, constituted a physical taking because defendant had conceded for the purposes of summary judgment “(1) that Casitas had a property right in the water diverted from the Ventura River, and (2) that the government required Casitas to build and operate the fish ladder in such a way as to permanently appropriate water in which Casitas had the conceded property right.” Id. at 1331. The court went on to point out, however, that:

[bjecause of the government’s concession, the majority did not undertake to decide if, under California Law, there can be a right to divert water. Nor did we undertake to reach a factual conclusion about whether Casitas will experience a reduction in the amount of water that it can beneficially use. These concerns and others are undoubtedly critical to the ultimate outcome of Casitas’ action, but they are not before us in this appeal.

Id. at 1331 n. 1.

It is both the quantity and the value of this water—the water the Federal Circuit held was physically appropriated by the United States—that are now the focus of plaintiffs claim.

DISCUSSION

I.

At the heart of this ease is a fundamental dispute over the nature and scope of plaintiffs property right. In the most basic terms, plaintiff believes that it is entitled to divert, store, and use water pursuant to the terms of its license and that it must be compensated for water that, as a result of the biological opinion, it was unable to divert. Defendant, by contrast, defines plaintiffs property interest more narrowly, arguing that plaintiffs only compensable right under California law is to the water it can beneficially use (and not to water it has merely diverted or stored), and only if that use complies with various state common-law doctrines. This core difference underpins the parties’ respective approaches to both liability and damages.

Plaintiff identifies the property right for which it seeks compensation as “a portion of Casitas’ water right (specifically, 3,492 acre-feet) granted by the State of California, to divert up to 107,800 acre-feet per year and put 28,500 acre-feet per year to beneficial use,” as set forth in its water license issued by the SWRCB. Plaintiffs position is grounded on the premise that the SWRCB “defines the scope of the license, and accordingly, the scope of the water right, and the State Water Board has never limited the scope of that right to require water for a fish passage. Indeed, the State Water Board has expressly refused to do so.” In the absence of such an action by the Board, plaintiff maintains that it has a right to continue to operate according to the terms of its license—a right, plaintiff contends, the federal government has now taken.

Defendant, by contrast, argues that plaintiffs property right is to the beneficial use of the water only, subject to the additional limitation that such use must not violate California’s public trust doctrine, its reasonable use doctrine, or that portion of the California Fish and Game Code—Section 5937—that requires dam owners to operate their projects in such a way as to keep downstream fish in good condition. In defendant’s view, no taking has occurred because (1) the operating restrictions have not affected Casitas’s beneficial use of the water (Casitas has thus far met all of its customers’ needs and, according to defendant, is projected to do so in *452the future), and (2) Casitas does not, in any event, have a right under California law to use water in a manner that is harmful to the fish. In the alternative, defendant argues that even if plaintiff is found to possess a compensable property right to the lost water, the amount foregone was surplus to Casitas’s water needs and is consequently of little value.

In resolving these issues, we must begin our analysis, as the Supreme Court instructs, by defining the nature of the asserted property right. Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1027, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992). In particular, the court must determine whether plaintiff in fact possesses the property right in question, ie., whether the asserted right is within the bundle of sticks comprising ownership. M & J Coal Co. v. United States, 47 F.3d 1148, 1154 (Fed.Cir.1995) (observing that the court should first inquire into the nature of the owner’s property interest “to determine whether the use interest proscribed by the governmental action was part of the owner’s title to begin with, i.e., whether [that] use interest was a ‘stick in the bundle of property rights’ acquired by the owner”) (quoting Lucas, 505 U.S. at 1027, 112 S.Ct. 2886). This is so whether the governmental action is characterized as a physical taking or a regulatory taking. John R. Sand & Gravel Co. v. United States, 60 Fed.Cl. 230, 239 (2004).

A court’s determination of which sticks are in the bundle of rights associated with a claimed property interest requires careful examination of the “existing rules or understandings” or “background principles” that define the scope of the right in question. See Lucas, 505 U.S. at 1029, 112 S.Ct. 2886; Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). As the Lucas Court explained:

Where the State seeks to sustain regulation that deprives land of all economically beneficial use, we think it may resist compensation only if the logically antecedent inquiry into the nature of the owner’s estate shows that the proscribed use interests were not part of his title to begin with. This accords, we think, with our “takings” jurisprudence, which has traditionally been guided by the understandings of our citizens regarding the content of, and the State’s power over, the “bundle of rights” that they acquire when they obtain title to property.

... We believe similar treatment must be accorded confiscatory regulations, ie., regulations that prohibit all economically beneficial use of land: Any limitation so severe cannot be newly legislated or decreed (without compensation), but must inhere in the title itself, in the restrictions that background principles of the State’s law of property and nuisance already place upon land ownership. A law or decree with such an effect must, in other words, do no more than duplicate the result that could have been achieved in the courts—by adjacent landowners (or other uniquely affected persons) under the State’s law of private nuisance, or by the State under its complementary power to abate nuisances that affect the public generally, or otherwise.

Id. at 1027, 1029, 112 S.Ct. 2886 (footnote omitted). The deteimination of whether background principles of state law inhere in a plaintiffs title and limit the uses to which the plaintiff can put its property is a multistep process. John R. Sand, 60 Fed.Cl. at 240. First, plaintiff must demonstrate that it possesses a property interest; second, defendant must identify background principles of state property or nuisance law that would limit plaintiffs proposed use of that property; and third, defendant must connect the state law to the facts of the case to demonstrate that the government’s action does no more than duplicate the result that could have been achieved in the courts under background principles of state law. Id. Only on this showing, can defendant succeed in its defense that it owes no compensation for physically taking a portion of plaintiffs water supply.

A. The Nature of Plaintiffs Property Right

In defendant’s view, Casitas does not have an absolute, unqualified right to divert a specific quantity of water at all times, nor *453does it have a possessory right to all of the water it diverts into its canal and later stores in its reservoir. Rather, defendant argues, Casitas has a compensable property interest under California law only in the amount of water it will put to beneficial use, regardless of the amount of water it may divert or store. Defendant maintains that Casitas therefore must show that the specific amount of water allegedly taken otherwise would have been put to beneficial use—i.e., would have been delivered to Casitas’s customers. A potential, or even an actual, reduction in the amount of water stored at Lake Casitas, defendant contends, is not sufficient to establish the taking of a property right recognized under California law.

Plaintiff, by contrast, argues that it possesses a right under its water license to divert up to 107,800 acre-feet of water annually and that this right is integral to its ability to meet its customers’ needs. As a consequence, plaintiff focuses not on the effect of the operating restrictions on its beneficial use of the water, but rather on the effect of those restrictions on plaintiffs total water supply (including the water stored in Lake Casitas). The dispute between the parties, then, boils down to this: does California law recognize a right to divert independent of a right to beneficial use?

The answer, we believe, is no. Although it is true that Casitas’s license clearly permits the water district to divert water (up to 107,800 acre-feet annually) and that the safe operation of the water project requires that more water be diverted annually than can be put to beneficial use, we do not read California law as recognizing a separate, independently compensable right to divert water.12 We reach this conclusion for several reasons.

As an initial matter, it is well established under California law that all water in the state, including the water of the Ventura River, “is the property of the people of the State, but the right to the use of [that] water may be acquired by appropriation in the manner provided by law.” Cal. Water Code § 102. California law therefore does not speak in terms of the ownership of water, but only of the right to its use. Cal. Water Code § 1001 (“Nothing in this division shall be construed as giving or confirming any right, title, or interest to or in the corpus of any water.”); Allegretti & Co. v. County of Imperial, 138 Cal.App.4th 1261, 1271 n. 5, 42 Cal.Rptr.3d 122 (2006) (observing that “[w]ater rights carry no specific property right in the corpus of the water itself.”). Such rights have accordingly been described as “usufructuary,” consisting “not so much of the fluid itself as the advantage of its use.” Eddy v. Simpson, 3 Cal. 249, 252 (1853).

The focus in California water law, however, is not simply on use but on a concept referred to as beneficial use. The California Constitution sets out this principle as follows:

It is hereby declared that because of the conditions prevailing in this State the general welfare requires that the water resources of the State be put to beneficial use to the fullest extent of which they are capable, and that the waste or unreasonable use or unreasonable method of use of water be prevented, and that the conservation of such waters is to be exercised with a view to the reasonable and beneficial use thereof in the interest of the people and for the public welfare. The right to water or to the use or flow of water in or from any natural stream or water course in this State is and shall be limited to such water *454as shall be reasonably required for the beneficial use to be served, and such right does not and shall not extend to the waste or unreasonable use or unreasonable method of use or unreasonable method of diversion of water.

Cal. Const, art. 10, § 2; see also Cal. Water Code § 100 (adopting the constitutional language regarding beneficial use).

Pursuant to the terms of its license, Casitas’s water right is “limited to the amount actually beneficially used for the stated purposes [municipal, domestic, irrigation, industrial, recreational, and standby emergency uses].”13 That limitation is in keeping with California case law which recognizes the beneficial use doctrine as defining the limits of an appropriative water right. People v. Murrison, 101 Cal.App.4th 349, 363, 124 Cal.Rptr.2d 68 (2002) (“An appropriative right is limited to the amount of water the appropriator can put to a reasonable beneficial use and has put to beneficial use____”).14 Indeed, as the above-quoted language from the California Constitution makes clear, water rights are limited to the amount necessary for the beneficial use to be served. Cal. Const, art. 10, § 2 (“The right to water or to the use or flow of water in or from any natural stream or water course in this State is and shall be limited to such water as shall be reasonably required for the beneficial use to be served____”); see also Cal. Water Code § 1240 (requiring that an appropriation “must be for some useful or beneficial purpose, and when the appropriator or his successor in interest ceases to use it for such a purpose the right ceases”).

The Ninth Circuit has explained the general principle of beneficial use as follows:

The major conceptual tool for implementing beneficial use is the water duty, which is the amount of water an appropriator is entitled to use, including a margin for conveyance loss. This definition of “water duty” is often quoted:

It is that measure of water, which, by careful management and use, without wastage, is reasonably required to be applied to any given tract of land for such period of time as may be adequate to produce therefrom a maximum amount of such crops as ordinarily are grown thereon. It is not a hard and fast unit of measurement but is variable according to conditions.

United States v. Alpine Land & Reservoir Co., 697 F.2d 851, 854 (9th Cir.1983) (quoting Farmers Highline Canal & Reservoir Co. v. City of Golden, 129 Colo. 575, 272 P.2d 629, 634 (1954)); see also 62 Cal. Jur.3d Water § 323 (defining beneficial use as “the amount actually used and reasonably necessary for a useful purpose to which the water has been applied”) (relying on McKinney v. Smith, 21 Cal. 374 (1863)).

Notably for our purposes, beneficial use generally has not been found to include the diversion and storage of water. Lindblom v. Round Val. Water Co., 178 Cal. 450, 456, 173 P. 994, 997 (1918) (observing that the “[s]tor-age of water in a reservoir is not in itself a beneficial use” but is a “mere means to the end of applying the water to such use.”); Meridian, Ltd. v. San Francisco, 13 Cal.2d 424, 475-76, 90 P.2d 537, 562-63 (1939) (relying on Lindblom for same). “[T]he law only *455allows the appropriator the amount actually necessary for the useful or beneficial purpose to which he applies it,” and the inquiry is therefore “not what he had used, but how much was actually necessary.” California Pastoral Agric. Co. v. Madera Canal & Irrigation Co., 167 Cal. 78, 84, 138 P. 718, 721 (1914). As the California Supreme Court explained nearly one hundred years ago in Hufford v. Dye, 162 Cal. 147, 153, 121 P. 400, 403 (1912):

It is the well-settled law of this state that one making an appropriation of the watei's of a stream acquires no title to the waters but only a right to their beneficial use and only to the extent that they are employed for that purpose. His right is not measured by the extent of his appropriation, as stated in his notice or by his actual diversion from the stream, but by the extent to which he applies such waters for useful or beneficial purposes.

Based on these precedents, we conclude that the only compensable right under California water law is a right to beneficial use. The holder of an appropriated water right, in other words, receives nothing more than this right to beneficial use and possesses no legal entitlement to water that is diverted but never beneficially used. Indeed, by the very terms of its water license, Casitas is limited to the beneficial use of 28,500 acre-feet of water per year. Accordingly, we hold that plaintiff must demonstrate an interference with that beneficial use in order to establish a Fifth Amendment taking of its property.

B. Limitations on Plaintiff’s Property Right Under Lucas

Having determined that plaintiff possesses a property right to the beneficial use of the water identified in its water license, we turn next to the government’s Lucas defense. At issue is whether the bypass-flow provisions of the biological opinion “do no more than duplicate the result that could have been achieved in the courts” under background principles of California water law. Lucas, 505 U.S. at 1029, 112 S.Ct. 2886. The question, in other words, is whether the biological opinion’s restrictions on Casitas’s ability to divert water merely parallel and make explicit the restrictions that background principles of California water law already place upon Casitas’s exercise of its water right and which “inhere in” the water right itself. Id.

Defendant maintains that such background principles exist in the form of several doctrines fundamental to California water law that are incorporated into plaintiffs license: the public trust doctrine, the reasonable use doctrine, and California Fish and Game Code Section 5937. Under the public trust doctrine, state agencies have the responsibility to protect trust resources associated with California’s waterways, such as navigation, fisheries, recreation, ecological preservation, and related beneficial uses. National Audubon Soc’y v. Superior Court of Alpine Cnty., 33 Cal.3d 419, 425-26, 189 Cal.Rptr. 346, 658 P.2d 709, 712 (1983). Similarly, the reasonable use doctrine prohibits the waste, unreasonable use, unreasonable method of use, and unreasonable method of diversion of water. Cal. Const, art. 10, § 2; Cal. Water Code §§ 100, 275. Finally, California Fish and Game Code Section 5937 provides protection to fisheries by specifying that the owner of any dam must allow sufficient water to