Water and money: the Supreme Court on remedies in interstate water cases

Last week, the U.S. Supreme Court issued its decision in Kansas v. Nebraska, a dispute over the waters of the Republican River. The Republican flows from Nebraska into Kansas, and for most of the last 17 years the two states have been fighting over whether Nebraska is taking more than its legal share of the water. (Kind of fitting, I think, that these two red states are squabbling over whether they are getting enough of the Republican.) By the time this case reached the Supreme Court, the parties had accepted that Nebraska took too much water in 2005-06; the key issues were about remedies for Nebraska’s excessive use, and what the Court said on those issues is potentially important for future interstate water cases.

First, a bit of context. This case dealt with the Republican River Compact, an interstate agreement involving Kansas, Nebraska, and Colorado (where the river originates). Interstate compacts are negotiated deals by which two or more states agree on the allocation or management of a water body that they share. There are more than two dozen such compacts, mostly in the West, and each one is unique. Under the U.S. Constitution, however, no compact can take effect until Congress has ratified it, making it the law of the land. Thus, every compact is both a contract and a federal law; in the new Supreme Court decision, Justice Kagan’s majority opinion tends to emphasize the “federal law” aspect of the compact, while Justice Thomas’ dissent stresses the “contract” aspect. Compacts are typically enforced in cases before the Supreme Court, and often there are intense legal and technical disputes over whether a compact has been violated. The new opinion does not address such “liability” questions–but its reference to the Court’s “capacity to prevent one state from taking advantage of another” might suggest that where a compact is unclear, the Court will interpret it based partly on the Court’s sense of what is fair to all the affected states.

Nebraska and Kansas had settled an earlier lawsuit over the compact in 2002, agreeing on a complex technical methodology for quantifying Nebraska’s obligations to Kansas and determining whether they were being met. The day of reckoning for the upstream state arrived in 2005-06, which was a drought period in that area. Nebraska delivered about 70,000 acre-feet less than it should have, and when the case reached the Supreme Court the parties had accepted that number, and also Kansas’ resulting losses of $3.7 million. Nebraska agreed to pay that amount, but Kansas asked for further relief in the form of additional payments and an injunction that would impose future obligations on Nebraska. The Supreme Court held that further relief was appropriate, largely because Nebraska–which has always been very reluctant to regulate pumping–had to know that its efforts to reduce water use were too little and too late to achieve compliance by 2005-06. The Court concluded that “Nebraska recklessly gambled with Kansas’s rights, consciously disregarding a substantial probability that its action would deprive Kansas of the water to which it was entitled.”

The Court agreed that Nebraska should have to pay more than Kansas’ losses of $3.7 million, in part because Nebraska had made far more money than that by keeping the extra water for itself. The Court noted that “the higher value of water on Nebraska’s farmland than on Kansas’s means that Nebraska can take water that under the Compact should go to Kansas, pay Kansas actual damages, and still come out ahead.” Unwilling to leave those incentives in place, the Court ordered Nebraska to pay an additional $1.8 million, despite a conclusion that Nebraska’s benefit was probably far greater than that. Three justices dissented on that remedy, arguing that the Court should not have ordered the extra payment at all. But all nine justices rejected the other relief that Kansas requested: an injunction governing Nebraska’s future conduct. On this point the Court said little, but it concluded that there was adequate assurance of Nebraska complying in the future, now that the state had imposed stronger legal controls on pumping.

What does this case (which involved additional issues that I haven’t addressed here) mean for other ongoing or potential disputes over compliance with an interstate water compact? I see three key lessons. First, the Court expects states to “take the medicine” by restricting or reducing their water uses as needed to meet their compact obligations, even when the medicine tastes bad to the states and their water users (and even in times of drought). Second, the Court will use its broad and flexible remedial powers to discourage states from taking the easy way out of these disputes, i.e., allowing ongoing overuse of water and simply paying compensation. Third, injunctive relief will be hard to get even when a state has knowingly violated a compact, as the Court is far more comfortable ordering payments to address violations. And because the Court ordered Nebraska to pay only part of the money it made from using too much, the new decision may not be enough to convince other states that they should take expensive, unpopular steps to reach compliance.