Judge rejects bond validation for California's delta tunnel project

A California plan to build a tunnel for freshwater to bypass the Sacramento–San Joaquin River Delta has run into a legal obstacle.

A Sacramento County Superior Court judge has denied the California Department of Water Resources request to validate $16 billion in bonds to finance the Delta Conveyance Project.

The Delta tunnel project would divert water that currently flows through the environmentally fragile Delta into tunnels for export to portions of the Bay Area, south San Joaquin Valley and southern California.

The court ruled last week that DWR exceeded its authority under Section 11260 of the state water code when it adopted three bond resolutions — a general resolution and two supplemental resolutions — in August 2020 to authorize bond issuance to fund planning, design, environmental review, land acquisition, and construction of the Delta tunnel. DWR estimated the project would cost $16 billion, though an updated cost assessment has not been completed.

Florence Low / California Department of Water Resources

The court "emphasizes that its ruling on the validation issues is quite narrow," Superior Court Judge Kenneth Mennemeier said in his judgment.

The court found that the DWR's authority to issue the bonds is dependent on the Delta Program's existence as a modification of the Feather River Project unit, and that DWR lacks the authority to adopt the Delta Program as a modification of that project, which means it lacks authority to issue revenue bonds for the Delta Program, Mennemeier said in his ruling.

"DWR disagrees with the court's decision and is determining how to best move forward, including whether to appeal the decision to the Court of Appeals," said Margaret Mohr, DWR's deputy director of communications.

Mohr called the Delta Conveyance Project a critical part of California's strategy to ensure a reliable water supply for millions of Californians by modernizing the state's water infrastructure to protect against the impacts of earthquakes, climate change, and more.

"The project DWR approved in December was not the subject of the bond resolutions and was not before the court. What was before the court was a broadly defined Delta program, and the judge essentially rejected the broadness of that definition," Mohr said. "The resolutions were adopted in 2020 during the time that DWR was conducting environmental review and the department had to adopt a broad program definition that could encompass a broad range of alternatives."

"The judge has not said that DWR doesn't have the authority to build the project or borrow money to pay for it," she added.

DWR certified the final environmental review report on the Delta Conveyance Project and approved the project in December.

The tunnel project, which has been in the works for more than a decade, is unpopular among locals, farmers and fishers in the Delta, who fear the troubled landscape will further decay if less water is allowed to flow through because of a project to benefit water users in the Central Valley and Southern California.
 
The Sierra Club and the counties of San Joaquin, Contra Costa, Solano, Yolo, Butte, Plumas, and Sacramento (and their related water agencies), among other litigants, challenged what they called DWR's authority to issue an unlimited amount of bonds to finance the Delta tunnel project.

The judge ruled that "DWR exceeded its delegated authority when it adopted the bond resolutions, which purported to authorize the issuance of the Delta Program revenue bonds."

In reaching this conclusion, Mennemeier rejected DWR's claim saying the water code "does not give DWR carte blanche to do as it wishes. For DWR to act, it must have delegated authority.  Although the Legislature plainly delegated authority to DWR, it did not delegate infinite authority."

The counties and agencies (other than Sacramento), were represented by attorneys Thomas Keeling and Roger Moore, who described the ruling as "a victory for the counties and agencies, for the taxpayers, for the environment, for Delta farmers and businesses, and for common sense."

The Sierra Club California also lauded the judge's decision.

"This decision is wonderful news for residents and users of the imperiled Delta and also for the ratepayers and taxpayers who would have to pay billions of dollars for the construction of an environmentally destructive tunnel which would reduce freshwater flows through the Delta for export," Bob Wright, the Sierra Club California's general counsel, said in a statement.

Wright added that the Sierra Club would fight any attempts to appeal the ruling.