[00:00:00] Speaker 01: Northern California power versus United States. [00:01:10] Speaker 00: Good morning, and may it please the court, Jeffrey Schwarz for the Northern California Power Agency. [00:01:16] Speaker 00: I'll start with something on which both sides in this case agree. [00:01:20] Speaker 00: Both sides agree that if Congress appropriates exactly $50 million each year from the restoration fund, then the CVPIA protects power contractors from having to pay disproportionate payments of restoration charges. [00:01:39] Speaker 00: In that case, both sides agree proportionality is binding. [00:01:44] Speaker 00: And that means if water and proportional power payments together add to less than the targeted amount, the remainder goes uncollected. [00:01:54] Speaker 00: That's at pages 22 to 23 of the government's brief. [00:01:57] Speaker 00: And it's in the record at document 103, ECF pages 18 to 19, and document 99, ECF page 52. [00:02:06] Speaker 00: We're here today because the government and the trial court wrongly interpret the act to require the opposite result if Congress appropriates a dollar less than $50 million each year for expenditure from the fund. [00:02:20] Speaker 00: In that case, they demote proportionality and prioritize revenue collection. [00:02:25] Speaker 00: I'll explain why that's wrong. [00:02:27] Speaker 02: Can you clarify, before you get into the meat of your argument, can you clarify for me something? [00:02:32] Speaker 02: I went back and looked at the various [00:02:34] Speaker 02: appropriations acts for the last few years. [00:02:38] Speaker 02: And the number bounces around between 50 million, 55 million on the high side to 49 million, I guess, at one point. [00:02:50] Speaker 02: 41 million at another point. [00:02:54] Speaker 02: Am I incorrect in thinking that those implicate either [00:02:59] Speaker 02: Section sentence 1 or sentence 2 of 3407 c 2 My my understanding is that every year reclamation requests is certain appropriations amount right when in Congress Has adopted it every year say 23rd sometimes it's 50 and more than 50 million sometimes is less correct My question is are we governed? [00:03:24] Speaker 02: in each year by either the first sentence that you've just identified, the two sentences, the first sentence or the second sentence? [00:03:31] Speaker 02: Or is there a single rule that applies to all of these appropriations of acts going back to, I went back to 2014 just to pick up the section of limitations. [00:03:41] Speaker 00: I think in theory you could be under either the first sentence or the second sentence. [00:03:45] Speaker 00: I think that in fact the number has not averaged exactly 50 million dollars [00:03:52] Speaker 00: in 1992 dollars. [00:03:54] Speaker 00: Remember, all of the dollar figures expressed in the statute are expressed in 1992 dollars, and that gets indexed up. [00:04:02] Speaker 02: Does all the references to 1992 dollars get indexed up? [00:04:07] Speaker 00: Almost all of them. [00:04:08] Speaker 02: Well, how about the $6 per acre foot charge? [00:04:13] Speaker 02: They do as well. [00:04:14] Speaker 02: Is that being charged at 2019 dollars, or is it being charged at $6? [00:04:21] Speaker 00: It gets indexed up. [00:04:23] Speaker 00: There are certain charges under the act that are not indexed, what the government refers to as the nondiscretionary revenues. [00:04:30] Speaker 00: Those are imposed under other sections of the CVPA, 3404, 3405, 3406. [00:04:35] Speaker 01: So just to follow up on Judge Bryson's point, so when the government alleged in its brief, because this was something that I was wondering about myself, that one of the ways in which they've tried to honor the greatest degree practicable portion [00:04:52] Speaker 01: was by always charging the $6 and the $12 for water, that isn't exactly right in that they weren't charging $6 and $12. [00:05:01] Speaker 01: They were charging whatever the inflationary rate for a given year was. [00:05:05] Speaker 01: Correct. [00:05:06] Speaker 01: Not necessarily $6. [00:05:07] Speaker 01: Maybe it was $6.50 or $6.75. [00:05:09] Speaker 01: They were just using a shorthand in that case. [00:05:12] Speaker 00: OK. [00:05:12] Speaker 00: That's my understanding. [00:05:13] Speaker 00: I think for convenience, all the parties are using the $19.92. [00:05:16] Speaker 00: All right. [00:05:17] Speaker 00: Thank you. [00:05:20] Speaker 00: So the government believes that on one hand, if Congress appropriates $50 million, then proportionality binds. [00:05:27] Speaker 00: On the other hand, they say if Congress appropriates just $1 less, then revenue collection takes priority. [00:05:34] Speaker 01: What is proportionality in this case? [00:05:37] Speaker 01: What does it refer to, proportional? [00:05:39] Speaker 01: Is there some percentage established somewhere between water and power? [00:05:43] Speaker 00: Yes. [00:05:46] Speaker 00: the share of the underlying project costs that each party is responsible for. [00:05:51] Speaker 01: Can you tell me roughly how that shakes out? [00:05:53] Speaker 00: Yes. [00:05:55] Speaker 00: Currently, it's about 25% to power and 75% to water. [00:06:00] Speaker 01: OK. [00:06:02] Speaker 01: So the underlying project costs are 25% power. [00:06:05] Speaker 01: But what percentage are the power users in the years in which you're appealing actually paying? [00:06:12] Speaker 00: So over the 10 years preceding trial, [00:06:16] Speaker 00: Reclamation charged almost twice the proportional amount so this is all You're taking these from appendix 243 is that where the numbers show up they appear there, and they also appear in Exhibit four to the amended complaint, which I don't think is in the appendix So when you say twice as much you mean 50-50 between water and power almost it was almost 48% and the that amount in dollar terms that amounts to an illegal exaction of more than 120 million dollars and [00:06:46] Speaker 01: Now, the government's effort to defend that... It's just, it's so bizarre. [00:06:50] Speaker 01: I mean, maybe this is, to some extent, Congress's fault. [00:06:54] Speaker 01: But the result of this is when one of the two resources has become scarce, water, the water people pay a disproportionately low amount for water. [00:07:06] Speaker 01: In economic terms, this seems absurd and inefficient, right? [00:07:10] Speaker 01: I mean, when there's a scarcity of a resource, you would think it would drive cost up. [00:07:14] Speaker 01: But Congress has capped the cost for the water users. [00:07:17] Speaker 01: And they're making the power people, for whom there is no scarcity of resource, pay much, much, much for power than they would have otherwise. [00:07:25] Speaker 01: Does that sound about right from an economic standpoint? [00:07:28] Speaker 00: It's a bizarre. [00:07:30] Speaker 00: You're right. [00:07:31] Speaker 00: This doesn't track supply and demand. [00:07:34] Speaker 01: It makes no economic sense. [00:07:36] Speaker 01: Correct. [00:07:37] Speaker 01: It isn't rational in the economic sense of the word. [00:07:39] Speaker 00: Correct. [00:07:40] Speaker 00: There's one caveat, one clarification I would add, though. [00:07:44] Speaker 00: When there's no water, there's no water. [00:07:45] Speaker 00: But when there's no water, there's also no hydropower. [00:07:49] Speaker 00: So the government's interpretation, well, the way we interpret the statute, [00:07:53] Speaker 00: All of the limitations in subsection D work together. [00:07:56] Speaker 00: In a high water year, without limitation, I mean, without proportionality, proportionality was not in the statute, in a high water year, then the government could charge all of the $30 million to power users or to water users. [00:08:14] Speaker 00: But proportionality says no. [00:08:16] Speaker 00: Proportionality tells you how much of the $30 million goes to each group. [00:08:20] Speaker 00: We think that the statute works. [00:08:21] Speaker 01: Has there ever been a high water year? [00:08:23] Speaker 00: There are occasionally high water years. [00:08:25] Speaker 01: And when there's a high water year, does the government do it just out of curiosity on some sort of rolling basis? [00:08:30] Speaker 01: And what I mean by that is why don't they look at the 10 previous years and the way in which the power people disproportionately paid and then tax the water people to make up for that? [00:08:40] Speaker 00: Well, I agree with you. [00:08:42] Speaker 00: They interpret the statute consistently to favor water users. [00:08:45] Speaker 04: I have a few questions. [00:08:46] Speaker 04: One is, during all these drought years, the government has been trying to collect $30 million of M&R payments collectively from power and the water. [00:09:02] Speaker 04: And let's say, for purposes of my question, every year, [00:09:08] Speaker 04: is authorized in appropriations of $50 million, approximately $50 million. [00:09:13] Speaker 04: Are there ever any years where the government is or reclamations unable to hit that $50 million mark because from whatever other sources of payments they're supposed to collect from, they never add up to $20 million? [00:09:27] Speaker 04: Do you understand my question? [00:09:29] Speaker 00: I heard two different things in that question. [00:09:30] Speaker 00: I'm not sure that I quite understood it. [00:09:32] Speaker 00: Let me try. [00:09:33] Speaker 00: I believe in most years, perhaps all, [00:09:37] Speaker 00: Other revenues have not Equal to 20 million so on their interpretation. [00:09:43] Speaker 04: They're constantly trying to get to the 30 million so for several years Although there's this command at least from their point of view to to collect 50 or approximately 50 million There are several years where they don't do that even when they try to max out 3407 D payments through collecting extracting 30 million from [00:10:07] Speaker 04: That's correct. [00:10:08] Speaker 00: I think that's the typical situation. [00:10:10] Speaker 00: OK. [00:10:12] Speaker 00: The other thing I heard in your question, I just want to make sure the record is clear. [00:10:15] Speaker 00: I heard you say that if Congress appropriates $50 million, well, no, if Congress appropriates $50 million, then under the government's view, proportionality would be binding, and they would potentially collect less than $30 million. [00:10:33] Speaker 00: The way they think it works under the appropriations approach and the way we think it works under both approaches is as follows. [00:10:41] Speaker 00: In a dry year, the acre-foot caps and the ability to pay relief are what limit water's charges, and Congress limited power's charges [00:10:51] Speaker 00: by requiring them to be proportional to water. [00:10:54] Speaker 04: Power charges are tethered to what water pays. [00:10:56] Speaker 00: Correct. [00:10:56] Speaker 00: That's correct. [00:10:57] Speaker 00: And this actually is not a problem under the statute. [00:11:01] Speaker 00: First, the $30 million. [00:11:02] Speaker 00: I mean, if Congress wanted to drive collections to $50 million every year, they could have. [00:11:08] Speaker 00: They didn't need to include the cap on combined water and power charges. [00:11:13] Speaker 00: The $30 million is phrased as a cap. [00:11:16] Speaker 00: It's not a floor. [00:11:17] Speaker 00: It's not a set amount that has to be recovered every year. [00:11:21] Speaker 00: Reclamation has other appropriations that it can and does draw upon in dry years or otherwise to achieve CVE PIA purposes. [00:11:30] Speaker 00: You can see that in section 3410. [00:11:33] Speaker 00: And there is a stipulation in the record, it's not in the appendix, I believe it's stipulation 26 in document 78. [00:11:41] Speaker 00: Reclamation has actually used more than $700 million of other funding for CPI purposes. [00:11:48] Speaker 04: Do you know why Congress added in 3407D the provision to cap the amount that can be collected from water? [00:12:02] Speaker 00: Are you referring to the acre foot caps? [00:12:05] Speaker 00: Yes. [00:12:06] Speaker 00: I believe that they were worried about affordability to water, and I believe that- So why affordability for water and not for power? [00:12:13] Speaker 00: Well, they were worried about power. [00:12:15] Speaker 01: I guess if I had to choose one or the other, I choose water. [00:12:17] Speaker 01: I want my toilet to flush. [00:12:18] Speaker 01: So it doesn't make sense to me. [00:12:23] Speaker 00: I guess that's what I'm saying. [00:12:27] Speaker 00: It's affordability for water, and by virtue of proportionality, [00:12:31] Speaker 00: affordability for power, and if there's a shortfall, there are other appropriations available for CVPI purposes. [00:12:39] Speaker 02: So what explanation, if any? [00:12:44] Speaker 02: do you think there is for the difference in language that Congress used with respect to the sentence one and sentence two, where they said subject to, and then the second iteration, subject to the limitations of. [00:12:58] Speaker 02: So the government attaches significance to that. [00:13:01] Speaker 02: What do you have by way of an explanation for it? [00:13:04] Speaker 00: So there is a difference. [00:13:07] Speaker 00: Under the first sentence, they have to try to collect $50 million every year subject to subsection D. [00:13:13] Speaker 00: under the second sentence, there's a three-year rolling average on the 50-million dollar collection. [00:13:19] Speaker 00: I understand that differently. [00:13:20] Speaker 02: Why does that express itself in the form of subject to, on the one hand, and subject to the limitations of? [00:13:27] Speaker 02: Because you have to attribute what we normally attribute, whether justifiably or not, some kind of rationality to the way these statutes are crafted. [00:13:37] Speaker 02: And here, I'm not finding an explanation. [00:13:40] Speaker 02: So I'm looking to you. [00:13:41] Speaker 00: So I agree with you. [00:13:43] Speaker 00: The phrase subject to subsection D and the phrase subject to the limitations of subsection D is synonymous. [00:13:50] Speaker 00: If I'm invited to a conference and I accept subject to my availability or subject to the limitations on my availability, that's the same thing. [00:13:59] Speaker 00: The extra words have not changed. [00:14:01] Speaker 02: Well, you could say they're different. [00:14:02] Speaker 02: You could say that subject to my availability is my choice. [00:14:05] Speaker 02: Subject to my limitations on my ability are imposed externally. [00:14:10] Speaker 02: I mean, they're different words, and we have to start, at least, by trying to find an explanation. [00:14:16] Speaker 00: True, but not at the expense of distorting the plain meaning. [00:14:20] Speaker 00: C2 uses the word limitations. [00:14:24] Speaker 00: Proportionality is a limitation. [00:14:26] Speaker 00: They treat it as a limitation under the appropriations approach. [00:14:28] Speaker 00: They actually treat it as a limitation under the other approach as well. [00:14:32] Speaker 01: Let me ask you another question about that, which is, what do you think, to the greatest degree, practicable means? [00:14:39] Speaker 01: It's your view that there is an allocation for proportionality of 75-25. [00:14:43] Speaker 01: Then why wouldn't it just always be proportional, 75-25? [00:14:48] Speaker 01: When is the greatest degree practicable? [00:14:52] Speaker 01: When do you see deviation from the 25-75? [00:14:56] Speaker 01: And when will that meet the practicable? [00:14:58] Speaker 00: OK, so there are three answers to that question. [00:15:01] Speaker 00: The first one is that Congresswoman wrote the statute [00:15:04] Speaker 00: expected these charges to be calculated prospectively before the beginning of each fiscal year based on estimates of water deliveries. [00:15:12] Speaker 00: You can see that in 3407 D1. [00:15:15] Speaker 00: And estimates are never going to turn out to be exactly spot on. [00:15:19] Speaker 00: So that's one source of potential impracticability. [00:15:23] Speaker 00: Now, the government may say, ah, but when we actually apply it, we do true ups at the end of the year. [00:15:30] Speaker 00: If you apply true ups and our view of what proportionality means and that it's binding, yes, you can get to proportionality. [00:15:37] Speaker 00: That's not a problem for Congress. [00:15:39] Speaker 00: Congress said maximize proportionality. [00:15:43] Speaker 00: Do it to the greatest degree achievable, to the maximum extent practicable. [00:15:47] Speaker 00: If it is practicable, that's a good thing. [00:15:49] Speaker 00: That's what Congress would want. [00:15:50] Speaker 00: Practicable and achievable are not by any means the same. [00:15:55] Speaker 00: Achievable to the greatest degree practicable. [00:15:57] Speaker 00: Sorry, I misspoke. [00:15:59] Speaker 00: So Congress wouldn't want us to manufacture reasons to make it impracticable just to give some meaning to the words to the greatest degree of practical. [00:16:09] Speaker 00: They wanted us to maximize proportionality. [00:16:13] Speaker 00: The third answer is. [00:16:14] Speaker 04: What do you think Congress, in your view, must have realized ahead of time when it wrote that language? [00:16:23] Speaker 04: I mean, what circumstances did they envision that [00:16:28] Speaker 04: It would be impossible to make an accurate, precise, proportional arrangement between water and power. [00:16:37] Speaker 00: So as I said, if you're doing this in advance based on estimates of how much water is going to be delivered, remember, power gets allocated a lump sum dollar amount. [00:16:47] Speaker 00: And that gets told to Western. [00:16:49] Speaker 00: Western charges the power contractors. [00:16:52] Speaker 00: that gets collected regardless of how much water actually occurs during the year, regardless of how much power is produced during the year. [00:16:59] Speaker 00: The water contractors are different. [00:17:02] Speaker 00: They get charged based on what are actually delivered. [00:17:04] Speaker 00: So when you're setting charge ahead of time, you're going to make a guess as to what you think that's going to be. [00:17:10] Speaker 00: But the reality is going to turn out to be different. [00:17:12] Speaker 02: But then you said the true ups take care of it. [00:17:14] Speaker 00: That's correct. [00:17:14] Speaker 02: So that sort of filters that problem out, doesn't it? [00:17:18] Speaker 00: Yes. [00:17:18] Speaker 00: It's not clear that Congress had that in mind. [00:17:20] Speaker 00: But even under the true ups, [00:17:21] Speaker 00: There is a circumstance under which proportionality, strict proportionality, would be impracticable. [00:17:28] Speaker 00: There is one subsection D charge that the government has no discretion to reduce. [00:17:34] Speaker 00: That's the $25 per acre foot charge on certain sales and transfers. [00:17:41] Speaker 00: There's no ability to reduce that charge. [00:17:45] Speaker 00: So if there's enough of that water, [00:17:49] Speaker 00: Combining and enough of those charges in combination with other revenues that could Take care of and that could exceed 75% of the combined cap of which is now 30 million eventually later it may drop to 15 million if there's enough of that water to go beyond 75% of the combined power and water cap that would that would be a source of [00:18:18] Speaker 00: disproportionality that could not be avoided. [00:18:21] Speaker 01: We have used all your rebuttal time. [00:18:22] Speaker 01: I just have one quick question. [00:18:25] Speaker 04: One last question. [00:18:26] Speaker 04: The back half of your brief makes a lot of arguments about or complaints about undercollections from water by the government. [00:18:36] Speaker 04: Hypothetically, if you were to win on your statutory construction argument, [00:18:40] Speaker 04: Would you still have those arguments? [00:18:43] Speaker 04: I mean, those arguments would tend to cut in your favor then, right? [00:18:48] Speaker 04: Because if they're under collecting from water and power payments are proportional to water payments, it's actually good for you that they under collect from water, right? [00:18:58] Speaker 04: Because if their payments go down, then proportionally your payments are also going to go down. [00:19:02] Speaker 04: You benefit from their laziness. [00:19:06] Speaker 00: retrospectively, in this one instance, yes. [00:19:08] Speaker 04: So then you would withdraw all those arguments? [00:19:10] Speaker 00: Well, you wouldn't need to reach them, because the statutory construction argument asks whether the government can impose disproportionate charges in order to make up for deficient water collections. [00:19:20] Speaker 00: If the answer to that is no, you don't need to decide whether the government minimizes those deficiencies. [00:19:26] Speaker 00: And going forward, the government actually would have an incentive, it has lacked so far, to enforce the statute equally and carefully against both water and [00:19:35] Speaker 00: power and water contractors. [00:19:37] Speaker 00: Okay, thank you, Mr. Schwartz. [00:19:38] Speaker 01: We'll restore two minutes of rebuttal time for you. [00:19:40] Speaker 01: Mr. Oliver? [00:19:41] Speaker 03: Thank you, Your Honor, and may it please the court. [00:19:46] Speaker 03: I first want to start with clarifying the two approaches that are identified in 3047C2, which the parties have described as the appropriation approach and the $50 million approach. [00:19:58] Speaker 03: I don't believe either party disputes that for the time period that governs this litigation, the $50 million approach governs. [00:20:04] Speaker 03: But let me first explain the difference between the two approaches. [00:20:07] Speaker 03: The appropriations approach, as you read the language in 3047C2, provides that the amount that reclamation is required to collect is going to equal the amount that will result in classifying during each fiscal year of an amount that can reasonably expect it to equal the amount appropriate. [00:20:24] Speaker 03: So the funding target is [00:20:28] Speaker 03: in essence, what Congress appropriates for the restoration fund subject to all of subsection D. And so that would include proportionality. [00:20:37] Speaker 03: But there's a time period that this applies to. [00:20:40] Speaker 03: Because if you continue, it says, provided that if the total amount appropriated under subsection B of this section for the fiscal year following enactment of this title does not equal $50 million on an average annual basis, then the $50 million approach applies. [00:20:54] Speaker 03: So the appropriation approach only applies from the enactment of the statute [00:20:57] Speaker 03: 1992 to 1998, there's no dispute, as the trial court found, and they don't dispute, that Congress did not, on an average annual basis, appropriate $50 million, which means, from 1998 forward to the present, going forward, so as long as this act applies, the $50 million approach governs. [00:21:16] Speaker 03: So focusing on the $50 million approach, Congress said that reclamation shot, it is required [00:21:25] Speaker 03: to collect charge $50 million, subject to the limitations in D. Now, the limitations in D are demarcated in Yoda D by the provisos, because you see in 3047. [00:21:41] Speaker 02: Well, that's the question in the case. [00:21:43] Speaker 03: Well, I'll explain why. [00:21:45] Speaker 02: That's exactly right. [00:21:45] Speaker 02: I want to hear why, because I will tell you that my first read of the statute suggests to me that it's peculiar to view [00:21:54] Speaker 02: limitations as being specifically restricted to the provisos. [00:21:59] Speaker 02: So explain to me why my first read is wrong. [00:22:01] Speaker 03: Absolutely. [00:22:02] Speaker 03: So let's first start with the sentence in 3047C2, which says that reclamation is required to collect $50 million, subject to the limitations. [00:22:11] Speaker 03: So the limitations are things that will restrain, restrict, curtail reclamation's ability to reach the $50 million. [00:22:19] Speaker 02: Except for one of the limitations, which is money that they actually are allowed to collect. [00:22:24] Speaker 03: out of the various provisions. [00:22:26] Speaker 03: Right, but the point of the limitations, what I'm saying is, what are the limitations? [00:22:31] Speaker 03: The limitations are things that somehow restrain or affect, modify, reclamation's ability to reach that $50 million target. [00:22:39] Speaker 03: So when you go to 3047D2, and folks are OK, so it begs the question, what are the limitations? [00:22:44] Speaker 03: It says in 3047D2A, again, it replicates the $15. [00:22:49] Speaker 03: So the secretary shall require CBP water and power contractors to make such additional annual payments as are necessary to gather all the other receipts. [00:22:58] Speaker 03: That's the whole restoration fund. [00:23:01] Speaker 03: required under paragraph C2. [00:23:03] Speaker 03: So that amount is the $50 million. [00:23:05] Speaker 03: Because again, we're saying the $50 million approach applies. [00:23:09] Speaker 03: So it's saying that you must collect the $50 million. [00:23:12] Speaker 03: But here's the key. [00:23:13] Speaker 03: Provided that you can't charge more than $30 million on a three-year rolling average basis, [00:23:22] Speaker 03: For M&R, the only charge that both water and power contracts fix. [00:23:25] Speaker 03: So that's one limitation. [00:23:26] Speaker 03: You can't charge 45 for purposes of getting 50. [00:23:28] Speaker 03: You're stuck with 30. [00:23:30] Speaker 03: So that's one limitation. [00:23:31] Speaker 03: You can't do more than 30. [00:23:32] Speaker 03: The other limitation is one that you talked about with my colleague, with my friend. [00:23:36] Speaker 03: Which is, you can't charge water more than $6.12 in 1992 dollars. [00:23:40] Speaker 04: $6 for agriculture, $12 for... To cut to the chase, are you going to walk us through every one of the provided forms? [00:23:48] Speaker 04: No, I'm not. [00:23:48] Speaker 03: Let me just make the larger point. [00:23:49] Speaker 03: The point is, for each of the providers, the provided is saying that you must collect 50 provided, meaning here's a limitation on it, provided you don't exceed this limit, provided you don't exceed the water limit, [00:24:01] Speaker 03: et cetera. [00:24:02] Speaker 03: All of those express. [00:24:03] Speaker 03: The point is what I'm trying to get at is what is the provided expressing? [00:24:06] Speaker 03: We must import some meaning to the providers. [00:24:10] Speaker 03: And as the case law I mentioned, provides. [00:24:12] Speaker 03: I think everyone agrees with that. [00:24:15] Speaker 04: It's about what to do about this last sentence. [00:24:17] Speaker 04: Why can't that last sentence likewise be regarded as a limitation in subsection B, even though it doesn't begin with the word provided? [00:24:26] Speaker 03: Here's why. [00:24:27] Speaker 03: Because the question is not [00:24:31] Speaker 03: whether or not the proportionality provision, which follows the five provisos, is a restriction or limitation of some sort. [00:24:40] Speaker 03: The question is, is it [00:24:43] Speaker 03: a limitation on reclamation's ability to collect $50 million. [00:24:47] Speaker 03: In other words, is it one of those, just like the $30 million limit, something you have to adhere to that. [00:24:52] Speaker 03: In some sense, it supersedes the 50. [00:24:54] Speaker 03: You can't go above 30. [00:24:55] Speaker 03: You can't go above 6 and 12 for water. [00:24:58] Speaker 03: But is proportionality the same thing? [00:24:59] Speaker 03: Do you have to first make it proportional, and then, regardless of the impact it has on the 50, because if you, given the water limits, [00:25:07] Speaker 03: Given the $30 million limit, if you're first going to say, well, what's the proportional collection? [00:25:12] Speaker 03: That's a fairly straightforward calculation. [00:25:14] Speaker 03: You can figure out what's 75 and 25 and do that. [00:25:17] Speaker 03: But if you do that, you also have to adhere to, are you going to be able to collect the 50? [00:25:23] Speaker 03: And so the point is, the limitations, the provisos are saying that these are the things that you have to adhere to first. [00:25:31] Speaker 02: Before you do what we say, which is this way suppose that the words provided that Had appeared before the sentence the amount of the mitigation and restoration payment Made by water and power shall be proportion. [00:25:46] Speaker 02: Would you agree then that? [00:25:49] Speaker 02: the proportionality requirement would be a limitation? [00:25:53] Speaker 03: If I understand your question, Your Honor, correctly, I would absolutely agree. [00:25:57] Speaker 03: Okay. [00:25:57] Speaker 03: No, I'm sorry. [00:25:58] Speaker 03: Let me finish my sentence, make sure we're connecting. [00:26:00] Speaker 03: I absolutely agree that if it said you must collect $50 million and it said instead of saying and provided further with regard to the completion percentage, but said and provided further [00:26:12] Speaker 03: that you said assess water and power. [00:26:15] Speaker 03: The amount of the mitigation and restoration payments. [00:26:17] Speaker 03: Right, right. [00:26:18] Speaker 03: That the proportionality provision is preceded by provided absolutely, because that's including among the list of things that restrict Reclamation's ability to collect 50 is proportionality, and then they're right. [00:26:27] Speaker 02: So your argument is predicated entirely on the absence of the words provided for at the beginning of that sentence. [00:26:35] Speaker 03: Yes, Your Honor, as Your Honor mentioned with my friend, [00:26:38] Speaker 03: The words matter. [00:26:39] Speaker 03: In other words, the Congress was purposeful in saying it's one sentence. [00:26:43] Speaker 03: Collect 50, provide it, provide it. [00:26:45] Speaker 03: Here are the limitations. [00:26:47] Speaker 03: And it could have. [00:26:48] Speaker 03: and provided further, you make assessments proportional between water. [00:26:52] Speaker 03: But it didn't, which means that the first thing you have to do is collect the 50, consistent with all the caveats, all the limitations, and then do everything you can to the greatest degree practicable to make it proportional. [00:27:05] Speaker 03: Now, given as a trial court found, given the fact that there's certain drought years, 2014, 2015, and throughout the time period relevant to this litigation, [00:27:14] Speaker 03: Water revenues have been depressed. [00:27:16] Speaker 03: You still have that $30 million target. [00:27:18] Speaker 03: You have to try to reach the 50 by maximizing the 30, precisely because the revenues that you just mentioned didn't materialize to the extent that Congress thought they would. [00:27:29] Speaker 04: government's collecting 30 million total from 3407D, most recent years they still haven't been able to hit the 50 million dollar target, is that right? [00:27:42] Speaker 04: That's correct. [00:27:42] Speaker 04: I don't think they've hit it in a year because [00:27:45] Speaker 04: So then Congress issues this command, thou shalt collect $50 million. [00:27:52] Speaker 04: But it hasn't been happening at all for the past decade or so. [00:27:55] Speaker 03: You're right. [00:27:56] Speaker 03: Well, Congress said, precisely in 3047D, that you must set the payment such that you can reach to $50, understanding that there is $30 million for M&R. [00:28:05] Speaker 03: So what that means, though, is given that there are these other provisions, what we call the nondiscretionary, that's the non-M&R charges. [00:28:11] Speaker 03: There are five different charges. [00:28:13] Speaker 03: Congress is assuming that maybe there's some years [00:28:15] Speaker 03: You'd have 30 million, and therefore the M&R was 20, or maybe you'd have 40, so it's 10. [00:28:20] Speaker 03: I mean, my colleague referenced D1. [00:28:22] Speaker 03: That's exactly what D1 admits is that you anticipate that you might be over 50, and then you can reduce it to meet reports. [00:28:30] Speaker 03: Now, that's never even come close to happening, because for a variety of reasons, the nondiscretionary revenues have not emerged that Congress thought they would, thought these various things have potential to reduce water revenue. [00:28:41] Speaker 03: But for a variety of reasons they can go into, [00:28:43] Speaker 03: It did not happen and also impact by the fact that you have these droughts and so if you have droughts of water you can't charge water only so much. [00:28:50] Speaker 03: And that there and given the command to collect the 50 you have to do everything you can to reach the 50 you have to charge the 30 for them and are with the water limits that means power is going to be paying the difference between. [00:29:02] Speaker 03: the most you can charge water in that $30 million ceiling. [00:29:06] Speaker 03: And that's, given the paucity of water revenues, that is what Reclamation has been doing to try to achieve proportionality to the greatest degree practicable. [00:29:16] Speaker 01: So your view of greatest degree practicable allows for the proportion, which is supposed to be 75-25. [00:29:23] Speaker 01: That's Congress's goal, is to keep it proportional. [00:29:27] Speaker 01: A goal, but not a limitation, according to you. [00:29:29] Speaker 01: So you think that Congress, [00:29:32] Speaker 01: would have accepted that in some years, power is going to pay twice as much. [00:29:40] Speaker 01: And that would still meet whatever they meant by greatest degree practical. [00:29:45] Speaker 01: That's okay. [00:29:46] Speaker 01: Well, you think that's their intention or just a [00:29:48] Speaker 01: sort of a maybe unthought-through byproduct of those statutes they wrote. [00:29:55] Speaker 03: It's not their intention. [00:29:56] Speaker 03: I don't think, I believe that the, what's called the original congress in 92, I don't think that they anticipated that those other five non-discretionary revenues, the non-MNR would [00:30:07] Speaker 03: be so low. [00:30:08] Speaker 03: I think that they anticipated that, OK, we have $30 million ceiling for M&R. [00:30:13] Speaker 03: We have a $50 million collection target. [00:30:14] Speaker 03: Hopefully, these other revenues will be high enough so that proportionality would be achievable. [00:30:18] Speaker 03: But when they aren't there hardly at all, then you're stuck with a vehicle in which you still, reclamation is commanded to collect 50 or do everything it can to collect 50, which means they have to collect the $30 million. [00:30:29] Speaker 03: And as to your point, as we mentioned in our brief, [00:30:35] Speaker 03: This has been an issue that has percolated the Congress, right? [00:30:37] Speaker 03: I mean, we have submitted our citations to the fact that the power lobby has proposed a power cap. [00:30:46] Speaker 03: And Congress says, no. [00:30:48] Speaker 03: And we can go into what that means. [00:30:49] Speaker 03: But the point of it, the point is, as the trial court found, there are numerous protections for water written into the statute, such as ability to pay relief, such as the water limits, the 6 and the 12, that favor water. [00:31:04] Speaker 03: It's not a province of the district to correct that imbalance. [00:31:08] Speaker 03: That is how it's written into the statute. [00:31:11] Speaker 01: Is it OK? [00:31:12] Speaker 01: If you want to ask another question about construction, I can wait. [00:31:14] Speaker 01: I was going to ask about the other issues. [00:31:16] Speaker 02: Oh, well, if I could. [00:31:17] Speaker 01: Please. [00:31:18] Speaker 02: Let me see if I understand. [00:31:19] Speaker 02: And this was alluded to earlier. [00:31:21] Speaker 02: But to make sure that we're clear on this, if there's a year of extreme drought where, let's say, water only pays $1 million, [00:31:31] Speaker 02: And power gets very little power, because there's not much water coming through the hydroelectric plants. [00:31:37] Speaker 02: So it gets a limited amount of power. [00:31:40] Speaker 02: Nonetheless, power would pay $29 million in that year. [00:31:44] Speaker 02: Is that right? [00:31:45] Speaker 03: It is true that, given the requirement to collect, it's supposed to be $150 million, which means you're collecting the $30 million. [00:31:53] Speaker 03: then yes power is paying the difference between the most you can charge for water given the water limits and that 30 million dollars so power would be paying 29 million [00:32:03] Speaker 02: And water would be paying $1 million a year. [00:32:07] Speaker 03: Under that formula, that's absolutely right. [00:32:09] Speaker 03: And that's required by the statute in terms of the prior. [00:32:12] Speaker 03: I mean, the statute is juggling various priorities. [00:32:15] Speaker 02: I'm sorry, go ahead. [00:32:16] Speaker 02: We reach that conclusion based. [00:32:18] Speaker 02: We say that that's OK, because that was as close as we could get, as close as practicable. [00:32:25] Speaker 03: We reach that conclusion because the statute [00:32:30] Speaker 03: 3047D prioritizes revenue collection for the restoration fund, which is to mitigate the impacts of the Central Valley Project, over and above proportionality. [00:32:42] Speaker 03: And that would not be the case had Congress included among all of the other limitations, all the other bra-visas, proportionality, which it could have done, because words matter, but they didn't, precisely because that's how they were juggling it. [00:32:54] Speaker 03: And one last point on that front. [00:32:57] Speaker 03: Because we spent some time, or at least we did with my friend, talking about the appropriations approach where that's not the case. [00:33:03] Speaker 03: At least for the first 92 to 98, that wasn't the case because it was subject to all of D. Which means there were some, I mean we're extrapolating because there's no legislative history that were available, but there's some sense in the early stages that, okay, [00:33:17] Speaker 03: Proportionality is included, and that's something you do have to consider first. [00:33:21] Speaker 03: But if Congress is not appropriating enough money for the fund, which is because there's going to be a tension, then we're just going to require 50 in proportionality. [00:33:28] Speaker 03: It's to the greatest degree you can, but we're going to have to start getting funds to ameliorate the impact of the CBP. [00:33:33] Speaker 04: So then the phrase, to the extent practicable, for the first sentence and the second sentence of 3407C2 mean different things, because those are different contexts. [00:33:47] Speaker 04: When I say first sentence, I apologize. [00:33:49] Speaker 04: Well, I'm sorry. [00:33:50] Speaker 04: The first sentence says subject to subsection D of this section, and then the second sentence says subject to the limitations in subsection D of this section. [00:33:59] Speaker 04: And so obviously, you're making a big argument about the additional language of the limitations. [00:34:05] Speaker 04: But I think I heard you say that for the first sentence, [00:34:09] Speaker 04: then the proportionality provision applies as a constraint. [00:34:17] Speaker 04: And therefore, the language in that proportionality provision, to the extent practicable, simply means just do the best you can to be as precise as you can about proportionality. [00:34:29] Speaker 04: Whereas in the other sentence, subject to the limitations in subsection D of this section, [00:34:37] Speaker 04: the proportionality provision language of to the extent practicable really means we're going to try to keep it proportional but if we can't then we're just going to have to take it out of the height of power. [00:34:50] Speaker 03: Reclamation's hands in the second scenario are significantly constrained given the revenue target of $50 million and the $30 million for M&R and the water limit so therefore the ability to make it proportional is [00:35:02] Speaker 03: far more constrained, and therefore the grace of repractical means something different in that context. [00:35:06] Speaker 03: I mean, do what you can, but your hands are to some degree tied. [00:35:10] Speaker 03: You're tied to extra-extrogynous factors like droughts and so forth. [00:35:13] Speaker 03: The first fact, in the first, in the appropriations approach, which doesn't govern, I don't think any part of things, you know, argues that it governs, but under the appropriations approach, which again governs from 92 to 98, [00:35:26] Speaker 03: You start with proportionality, just like you start with the $30 million and the 6 and the 12. [00:35:30] Speaker 03: You can't ever exceed those. [00:35:31] Speaker 03: You have to do proportionality before you concern yourself with the collection target. [00:35:34] Speaker 04: And so in that context, to the extent practicable in the government's view means do the best you can in trying to come up with an accurate [00:35:43] Speaker 04: Proportional payment plan. [00:35:45] Speaker 03: I mean it I agree yes I mean and it's easier to do so because you know the percentages 75 and 25 therefore you Calculate it and to the degree the water limits might impact if you're off by a percentage or so that then that's the degree of practicable whereas the second approach It's you're far more constrained. [00:36:02] Speaker 03: I mean again a worst-case scenario You're wet well off just because of factors that are beyond reclamations controls with respect to droughts a positive water revenues [00:36:10] Speaker 02: But to follow up on Judge Chen's question, then, I take it that what you're saying is that the words, to the extent practicable, do not mean that you would make the collection of funds, the proportional collection of funds from power [00:36:29] Speaker 02: subservient to the goal to collect $50 million or $30 million under sentence number one. [00:36:36] Speaker 02: And then presumably the words mean the same thing in sentence number two. [00:36:39] Speaker 02: They do. [00:36:40] Speaker 02: What's doing the work is not in terms of the priority. [00:36:42] Speaker 02: It's the subject to and the subject to the limitations of. [00:36:46] Speaker 02: So the whole argument is pinned on subject to and subject to the limitations of, not as the practicability issue. [00:36:54] Speaker 03: That's right. [00:36:55] Speaker 03: I would say that the order in which you must do proportionality versus the revenue target is does not hinge on the areas of your practical hands on. [00:37:05] Speaker 03: argument that the limitations referenced in C-2 are the provisos, all of our limitations on the $50 million. [00:37:12] Speaker 01: Can I ask, I think that we've exhausted the construction issue at this point, so let me ask a last question. [00:37:20] Speaker 01: Judge Wheeler below didn't address, it seems to me in particularity, [00:37:24] Speaker 01: the arguments that were made by the plaintiff regarding non-collection. [00:37:32] Speaker 01: Suppose that the non-collection was egregious. [00:37:34] Speaker 01: Suppose that the non-collection was 75% of the amount due by the water companies and no efforts whatsoever were made for collection. [00:37:44] Speaker 01: Would we have a problem under those circumstances? [00:37:51] Speaker 03: You would have a, I mean, the answer is, I mean, there are kind of two elements to your question in terms of what the trial court did or did not address. [00:37:57] Speaker 03: But hypothetically, which is not the case, but hypothetically, if there is no effort, as you hypothetically suggest, in terms of collection, that it was we just don't care because we get it from power, then that potentially, that does implicate the grace of your practicables. [00:38:11] Speaker 03: But that's not exactly, that's not what happened. [00:38:13] Speaker 03: And also Judge Wheeler did a couple of things in regard to count two. [00:38:17] Speaker 03: One, the issue was, [00:38:20] Speaker 03: Illegal ex-action liability flows from trying to achieve proportionality, gracefully practicable. [00:38:27] Speaker 03: And he found, and his finding was not clearly erroneous, that in light of what we just mentioned, that there were many years in which achieving proportionality was not practicable, not feasible, which he's using interchangeably, I think, correctly. [00:38:43] Speaker 03: precisely because of the droughts. [00:38:44] Speaker 03: And so the reason. [00:38:45] Speaker 01: And because of the droughts, but it could have been closer achieved if collections had been made. [00:38:52] Speaker 01: So doesn't he have to at least address? [00:38:55] Speaker 01: I mean, he may dismiss that out of hand, but even if we agree with you on the statutory construction, doesn't he have to at least address whether or not proportionality could have been better achieved through more vigilant collections by the government? [00:39:08] Speaker 01: Or maybe there should have been some reduction due to the government's non-collection. [00:39:14] Speaker 01: Why should power have to pay for the amount that's actually owed by the water people but not being collected? [00:39:20] Speaker 03: Understood. [00:39:20] Speaker 01: I'm just saying shouldn't he have to address it? [00:39:23] Speaker 01: I don't see it addressed anywhere in his opinion. [00:39:25] Speaker 03: In terms of the so-called lack of enforcement, he does have a paragraph where he addresses [00:39:35] Speaker 03: their argument that there was a lack of enforcement and that the practices didn't work better in theory versus practice. [00:39:41] Speaker 03: And he also heard evidence that reclamation from 93 to 2015 collected 99.8% of M&R payments as well. [00:39:51] Speaker 03: At the end of the day, he concluded that the practices did not constitute the legal exaction. [00:39:56] Speaker 03: And I believe that's premised upon his conclusion that ultimately, [00:40:00] Speaker 03: In terms of achieving proportionality, the reason it wasn't proportional, even close proportional, was not because there were isolated payments here and there that were parked in the wrong account, which eventually were credited, which means proportionality, its net. [00:40:14] Speaker 03: But rather, because of the severe droughts and severe depression to water revenues, which impacted it, which created that delta that was disgusting. [00:40:21] Speaker 01: I understand that the drought is the elephant in the room and the [00:40:28] Speaker 01: Non-collections are de minimis by comparison in terms of, to the extent they drive a lack of proportionality, but they would have improved upon proportionality. [00:40:37] Speaker 01: I'm just concerned that I didn't see him even address that issue and that maybe it's not a matter of reversing and saying that there hasn't been proportionality, but maybe that issue would have to be vacated for the trial court to clearly address it in the first instance. [00:40:55] Speaker 01: Maybe. [00:40:56] Speaker 03: Maybe. [00:40:57] Speaker 01: All right. [00:40:58] Speaker 01: OK. [00:40:58] Speaker 01: We're good. [00:40:59] Speaker 01: Thank you so much, Mr. Oliver. [00:41:01] Speaker 01: Mr. Schwartz will give you two minutes of rebuttal time. [00:41:12] Speaker 00: Thank you, Your Honor. [00:41:14] Speaker 00: The government's argument is self-defeating. [00:41:17] Speaker 00: On one hand, they tell you Congress didn't anticipate low water years or didn't anticipate situations in which the nondiscretionary revenues wouldn't materialize. [00:41:27] Speaker 00: On the other hand, they tell you, we know what Congress would want. [00:41:31] Speaker 00: We know Congress would want you to collect the $30 million, even if that means dramatically disproportionate payments. [00:41:40] Speaker 00: Their argument's self-defeating in another way, too. [00:41:43] Speaker 01: Well, it doesn't say we know what Congress would want, as though he's sitting around with a Ouija board. [00:41:47] Speaker 01: It's the language of the statute. [00:41:49] Speaker 01: It says 30 million. [00:41:51] Speaker 00: As a cap, not a floor. [00:41:53] Speaker 00: Their argument's self-defeating in another way. [00:41:56] Speaker 00: They tell you proportionality is not one of the limitations, but the provisos are. [00:42:02] Speaker 00: But without proportionality, none of the water-specific provisos, not acre foot caps, not ability to pay relief, [00:42:11] Speaker 00: they can't affect total collections at all. [00:42:13] Speaker 00: And the reason is that because under their theory, power always pays the difference. [00:42:18] Speaker 00: Power will always make up the difference. [00:42:21] Speaker 00: On their theory, there's only one limitation on collection of the $50 million. [00:42:28] Speaker 00: That's the $30 million combined cap on power and water collections. [00:42:33] Speaker 00: And yeah, there are two provisos. [00:42:35] Speaker 00: But they apply sequentially, not simultaneously. [00:42:38] Speaker 00: So they make up one limitation. [00:42:39] Speaker 00: So first it's 30 million. [00:42:41] Speaker 00: Eventually, when they complete certain projects, it will become 15. [00:42:44] Speaker 00: But the cap on combined water and power collections, in their view, is the only limitation on reaching 50 million. [00:42:50] Speaker 00: But C2 says subject to limitations, plural. [00:42:57] Speaker 00: So at the end of the day, we believe the Congress understood that during droughts, [00:43:06] Speaker 00: Water doesn't get the benefit of the project, and neither does power. [00:43:10] Speaker 00: Power doesn't get the hydropower. [00:43:12] Speaker 00: And we think that Congress wanted equal parallel protections for water and power. [00:43:19] Speaker 01: And why wouldn't they put caps in for power? [00:43:21] Speaker 00: The proportionality provision functions that way and piggybacks on the water caps. [00:43:28] Speaker 01: Well, if that were true, then why would they say to the greatest degree, practicable, as opposed to just saying in the same proportion? [00:43:34] Speaker 00: We've covered that before. [00:43:36] Speaker 00: Congress expected these provisions to be implemented prospectively based on estimates. [00:43:41] Speaker 00: And the $25 per acre-foot charge on certain M&I transfers theoretically could drive the water collections beyond their proportional amount. [00:43:51] Speaker 00: Let me say one last thing. [00:43:56] Speaker 00: It's undisputed that Congress commanded, I mean they say shall, commanded reclamation to achieve [00:44:04] Speaker 00: proportionality to the greatest degree practicable. [00:44:06] Speaker 00: That's proportional to the benefits to be derived from the project. [00:44:12] Speaker 00: The government's interpretation not only fails to adopt what we think the statute requires, which is a protection for power in the instance [00:44:23] Speaker 00: They're not getting a benefit from the project their interpretation goes to the other extreme because it takes The deficient water collections the absolute water collections and makes power pay for them So power has to pay the most in the years when they get the least and that's the opposite of proportionality Okay, mr. Schwartz. [00:44:42] Speaker 01: We have your argument. [00:44:43] Speaker 01: Thank both counsel the case is taken under submission and