Part II of this Report discusses in brief the Congressional decision to defer to states to allocate and administer water rights, and Part V discusses the Congressional decision to have federal claims to the use of water be adjudicated in proceedings that establish the validity, purpose, quantity, and relative priority of the federal water rights. Against this background, it is clear that unless Congress explicitly granted to the Forest Service the authority to use permitting authority to require bypass flows or the transfer of title to the United States, the Forest Service must respect and protect non-federal water rights in its planning and decisions, and it must attain National Forest purposes through the acquisition and exercise of federal water rights in priority.

The Organic Act does not authorize bypass flow or water right transfer requirments. The general regulatory authority granted to the Secretary of Agriculture in the 1897 Organic Act does not provide an explicit grant of authority for bypass flow or water right transfer requirements, particularly in light of the fact that the United States Supreme Court has held that in this Act "Congress authorized the national forest system principally as a means of enhancing the quantity of water that would be available to the settlers of the arid west". This leaves FLPMA and NFMA as the potential source of bypass flow authority.

However, § 701 (g) and (h) of FLPMA also provide, in relevant part, that:

§701(g) disclaims any grant of authority to "affect" existing law regarding the appropriation of water, or intent to "expand" federal authority over "water rights, water resources development or control". This prohibition clarifies that the prohibited acts are not limited to a "taking" of property under the fifth amendment. Instead, the broader prohibition--"affect"--precludes the use of FLPMA authority in any manner that would interfere with the diversion and use of water allocated to and used for non-federal purposes under state law. Likewise, the explicit disclaimer of any intent to "expand" federal authority over "water rights, water resources development or control" makes it clear that FLPMA land use authority cannot be used to control the use of water allocated to and owned by non-federal water users under state laws, or to interfere with state water allocation and administration systems. Simply put, §701(g) makes it impossible for the Forest Service to rely on FLPMA as a grant of authority for it to impose bypass flow or water right transfer requirements as a condition of land use authorizations. Finally, subsection (h) grandfathers all valid existing rights, thereby preventing the provisions of FLPMA from usurping those rights in any way.

The Senate Interior and Insular Affairs Committee Report on S. 507, which was eventually enacted as P.L. 94-579, summarized Title V of the bill concerning Valid Existing Rights by stating:

Further proof of the lack of Congressional intent to affect existing water rights and facilities, or state water allocation and administration systems is provided by §706(a) of FLPMA, which repeals the right-of-way portion only of 43 U.S.C. §661 (the 1866 Mining Law) "insofar as [it] appl[ies] to the issuance of rights-of-way over, upon, under, and through the public lands and lands in the National Forest System". This carefully worded repeal preserved the portion of the 1866 Mining Law that authorizes non-federal appropriations of water on public lands. It also concedes that the repealed provision applied to National Forest lands until October 21, 1976, which confirms that pre-FLPMA water rights and associated facilities on Forest lands are "valid existing rights" for purposes of FLPMA.

In summary, the assertion of bypass flow authority to take water from pre-FLPMA facilities and water rights is prohibited by the explicit protection for "valid existing rights". With respect to both pre and post-FLPMA water rights and facilities, the disclaimer of any intent to affect pre-existing law regarding the allocation and administration of water, combined with the preservation of the water allocation provisions of 43 U.S.C. §661, means that FLPMA land use decisions cannot be used to reallocate water from non-federal water rights to federal purposes. This does not mean that existing or future facilities cannot be subjected to terms and conditions to achieve other federal goals or requirements, and a water right does not create a right to use federal lands. The key distinction is that, absent the payment of just compensation, FLPMA land use authority cannot be used for the purpose of providing or obtaining water for federal purposes.

Congress has not enacted or authorized a federal permit system to allocate water between federal and non-federal purposes. If one assumes that existing facilities and their associated water rights are protected as "valid existing rights", the issue is how, and who, will allocate unappropriated water. If federal land management agencies had bypass flow authority, unappropriated water would be allocated by federal permit. In the context of the National Forests, this means that water would initially be allocated to or reserved from non-federal uses by the Forest Supervisor as the result of the adoption or revision of Forest Plans. However, later decisions by the District Ranger on individual permits might change any initial allocation, subject to the outcome of administrative and judicial appeals. A similar process would exist for future uses of water on public lands administered by the BLM. Disputes over the allocation of water between federal and non-federal claimants would be resolved in federal district court, and not in McCarran Amendment proceedings. Allocations of water for non-federal purposes would not be permanent, and would instead be subject to change on an on-going basis as the result of future Forest Plan revisions and individual permit decisions.

While Congress could have exercised its Property Clause and Supremacy Clause authority to create such a system for the federal allocation of water by permit, it would have had to: 1) omit §701(g) and (h) from FLPMA, 2) repeal the water allocation provisions of the 1866 Mining Law and the 1877 Desert Land Act, and 3) repeal, or at least amend, the McCarran Amendment to provide for an exclusion for FLPMA-based allocation and administration of the use of water. Congress did not take these steps for the obvious reason that it had a contrary intent - the allocation of and control over the use of water was not affected by FLPMA.

There are no provisions in NFMA that provide any specific authority for bypass flow requirements. In fact, a review of the legislative history of NFMA reveals that the bypass flow issue was not even considered. Accordingly, NFMA merely establishes a framework for implementing the management purposes established under the Organic Administration Act and MUSYA, does not delegate to the Forest Service the authority to impose bypass flow conditions, and explicitly requires that "valid existing rights" be protected.

The current Secretary of Agriculture and Assistant Secretary of Agriculture have testified before Congress on the protections for water rights and water facilities that exist under federal laws governing the management of National Forests:

Constitutional Issues. In addition, the constitutional underpinning for the attempts by the Forest Service to require permit applicants to transfer water and water rights has not been established. To the extent that such authority is allegedly grounded in the Property Clause, U.S. Constitution, Art. IV, 3, cl. 2, "determinations under the Property Clause are entrusted primarily to the judgment of Congress." Thus, the lack of specific direction to the Forest Service to require water or water rights in exchange for permits fairly implies that Congress has not attempted to stretch the Property Clause this far. This interpretation is bolstered by the lack of express authority and the protections of valid existing rights, water rights, and water allocation systems in the land management acts that apply to the National Forests.

It is true that Congress can reach beyond federal land boundaries under the Property Clause to regulate activity for the protection of federal property. However, that is different from attempts to require the transfer of materials or title to the property in question. The "furthest reaches of the power granted by the Property Clause have not yet been definitively resolved." The Supreme Court made this statement in response to a request that it articulate the limits of the Property Clause over private property. In the Kleppe decision, the Court specifically refused that task. It did, however, make it clear that any attempted expansion of Property Clause authority must be grounded in specific direction from Congress. Implication will not suffice. Thus, the key element which was present in Kleppe - an explict Congressional exercise of Property Clause authority - is missing in the case of federal attempts to impose bypass flow or water rights transfer requirements as a condition of federal land use authorizations.

The "implied-reservation-of-water doctrine" - so-called in United States v. New Mexico, is also no help to the Forest Service. To the contrary, that doctrine supports the ability of the United States to reserve water to its own expressly reserved uses, not regulate or acquire the water resources of others. Indeed, the doctrine, as interpreted by the Supreme Court, may provide significant impediments to Forest Service acquisition of water and water rights. Non-reserved water and water rights, such as for stock watering, are intended "to be allocated among private appropriators under state law".

Other limitations may exist as well. The Forest Service develops management plans pursuant to the National Forest Management Act of 1976. These plans are asserted by the Forest Service to support its argument that it can require changes in use and/or transfer of water rights. The Property Clause, as evidenced in delegated authority from Congress, is the basis for these planning efforts. While there is no Property Clause delegation of authority to the Forest Service for the imposition of bypass flow requirements or the forced transfer of water rights, even if such authority were to exist, it would have limits. Management plan provisions impacting non-federal water uses or water rights would be an exercise of authority "analogous to the police power of the several States. . . ". Thus, such provisions would carry with them incidences of zoning or regulatory decisions. The constitutional limits on such authority would be apparent, such as the need to protect previously vested rights.

The constitutional limits on impacting private property rights are grounded in the Takings Clause of the Fifth Amendment to the U.S. Constitution. One of the principal purposes of the Takings Clause is "to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Such limits may be easier to find in the examples of Forest Service controversies because they typically involve the renewal of a permit for an existing activity, not new or expanded facilities or uses. Thus, a court might easily find that "the property sought has little or no relationship to the benefit." This "taking" analysis has two parts.

First, any required change in water use or water right transfer would have to pass the "essential nexus" test. Curing impacts of past allocation decisions by forcing a specific permittee to effect the cure smacks of requiring that permittee "to bear public burdens". Even more problematic is the requirement to transfer a water right, especially where the water use by the permittee will continue or substantially continue unabated. In this circumstance, the transfer requirement could easily be characterized as "an out-and-out plan of extortion".

Second, the water or water right requirement would have to pass the "rough proportionality" test. Since these cases normally turn on comparing some new development to the exaction of conditions, this test could also provide considerable limitations. As to a water right transfer, it is difficult to describe how continued use of National Forest land relates to having to transfer a water right to the Forest Service. No additional burden is placed on the National Forest, and no Forest purpose, other than bureaucratic control (a Forest Service purpose), is achieved.

Finally, application of Dolan to this process would require the Forest Service to shoulder the burden of proof that its requirement was not simply a regulatory taking. The Forest Service would have to show that its "adjudicative decision" relating to this specific property right as a condition for a specific permit met the required tests.

Faced with this uncertain legal foundation, the Forest Service must heed the cautionary advice of Justice Holmes: