On December 31, 2025, the Court of Appeal for the Third Appellate District affirmed a trial court decision against the State Department of Water Resources (DWR), which sought to validate bond resolutions and revenue pledges to finance DWR’s controversial Delta Tunnel project known as the Delta Conveyance Project (DCP). The DCP, like its failed predecessors, would divert water from the Sacramento River by way of massive intakes near the town of Hood in the Sacramento-San Joaquin Delta, for export chiefly to portions of the South San Joaquin Valley and Southern California. DWR’s own preliminary estimate of DCP costs was over $20 billion, and other expert analyses cited by critics have put the DCP’s estimated costs at as much as three to five times higher.
In 2020, the Counties of San Joaquin, Contra Costa, Solano, Yolo, Butte, Plumas, and Sacramento, and related water agencies, challenged DWR’s authority to issue an uncapped amount of bonds to finance water conveyance facilities proposed for approval as part of what DWR called the “Delta Program”. A diverse array of other agencies and groups also opposed DWR, including certain state water contractors and environmental, taxpayer, fisheries, and tribal organizations. In January 2024, the Sacramento County Superior Court entered judgment against DWR, rejecting DWR’s claim to almost unlimited authority in such matters. Finding DWR exceeded its delegated authority, the Court ruled that the Water Code “does not give DWR carte blanche to do as it wishes.”
DWR and several contractors appealed. The Court of Appeal unanimously affirmed the trial court’s judgment, holding that even when DWR’s cited statutory powers are liberally construed, “DWR lacks the authority to approve a new State Water Project ‘unit’ under the guise of a ‘further modification’ of the Feather River Project.”
The Counties and their agencies, other than Sacramento, were represented by attorneys Roger Moore and Thomas Keeling, who described the Court’s Opinion as “a victory for common sense, a victory for California ratepayers, a victory for the environment, and a resounding rejection of an egregious overreach by DWR and other Delta Tunnel proponents.” They praised the Opinion’s cogent analysis, which sharply criticized the appellants’ arguments unsuccessfully seeking to place DWR’s Delta conveyance bond resolutions within its lawful authority. For example:
- Applying standard principles of statutory construction to Water Code 11260—the key provision from the Central Valley Project Act (CVPA) through which DWR claimed eligibility of its Delta conveyance for revenue bonds—the Opinion found that DWR’s amorphous, conveyance-based “Delta Program” failed as a “further modification thereof” of the Feather River Project, which the Legislature had designated decades ago as a covered unit of the CVPA. The Court of Appeal agreed with the trial court that DWR’s “program” was “untethered” to that project’s “objectives, purposes, and effects.”
- Concluding that the scope of DWR’s “Delta Program” was too “vague and uncertain” to support a validation judgment, the Opinion found the scope of that program “so opaque and ill-defined as to afford DWR nearly unlimited discretion to specify the facilities for which the bonds will be issued.” This was particularly worrisome due to the “unlimited amount of bonds” DWR’s resolutions would give DWR authority to issue.
- Rejecting appellants’ attempt to truncate the “purposes and objectives” of the Feather River Project to a single primary purpose concerning the movement of water from northern to southern California, the Opinion found that the parties opposing validation had the “better argument”: that the purpose was “also to stabilize and preserve the Delta estuary by boosting ‘through Delta’ flows” to control salinity, protect fish
and wildlife, as well as to “firm” the supply of surplus water available for export.
- Addressing appellants’ reliance other sources, ranging from general statements in its resolutions to an assortment of extrinsic evidence, the Opinion found that none of these removed the core problems that DWR’s resolutions exceeded its delegated authority and defined a program incapable of validation.
- The Opinion agreed with the Counties and other opponents about further risks from validating DWR’s “problematic” definition of revenue and pledges of revenues to be paid by State Water Contractors. The “contentious” and unsettled issue of whether DWR even has the authority to charge contractors for Delta conveyance costs is an “integral component” of DWR’s proposed bond financing. Removing that issue for separate consideration in “piecemeal fashion” would be at odds with validation law.
The court of appeal Opinion marks yet another major setback for this beleaguered megaproject, which still lacks an approved funding mechanism or any firm commitment of funding from the State Water Contractors. The Opinion indicates that among other obstacles to validity, action by the Legislature would likely be needed before bonds could be legally issued by DWR for the DCP.
Opinion available here.
Somach Simmons & Dunn Alert here.
Contacts:
Thomas Keeling tkeeling@freemanfirm.com
Roger Moore rbm@landwater.com
