Los Banos, CA (January 8, 2025) — The conclusion of a federal water-rights lawsuit involving Friant Dam left in place long-standing rules governing how Central Valley Project water is distributed, including established delivery priorities affecting farming operations around Los Banos. The case arose from reduced water deliveries during the 2014 drought and centered on how federal water contracts operate when supplies are limited.
The dispute focused on agreements known as exchange contracts, held by farming entities in and around Los Banos that historically possessed senior rights to divert water from the San Joaquin River. Under those contracts, the Exchange Contractors agreed to forego direct river diversions in return for replacement water delivered through the Central Valley Project from sources north of the Sacramento–San Joaquin Delta.
Those exchange contracts were executed before construction of the Friant Division and establish a priority structure for water deliveries within the Central Valley Project. Under that structure, the federal government is required to meet its contractual obligations to Exchange Contractors before delivering water to Friant Division contractors.
After the 2014 drought, Friant water districts and growers filed suit, arguing that reduced deliveries violated their contractual rights and constituted a compensable taking. The Exchange Contractors supported the federal government’s position, asserting that their contracts entitled them to priority deliveries and that Friant Division contracts expressly allow for shortages during drought conditions.
The United States Court of Federal Claims ruled that Exchange Contractors hold superior contractual claims to Central Valley Project water compared to Friant Division contractors. The court further found that Friant contractors do not own the water itself and that their contracts permit reduced or zero allocations when water supplies are insufficient or senior obligations must be satisfied. That ruling was later upheld on appeal.
When the Supreme Court of the United States declined to review the case, the lower court decisions remained in effect, bringing the litigation to a close. As a result, the courts’ findings stand without further review.
The decisions leave existing water-delivery arrangements unchanged for Los Banos-area Exchange Contractors and Friant Division users, confirming that water allocations during drought years are governed by federal contracts and hydrologic conditions, rather than ownership claims or entitlement to compensation.
