By Dan Bacher

Seven California counties – in coalition with environmental groups, fishing associations and the Winnemem Wintu Tribe – won their second big victory against the Newsom Administration and California Department of Water Resources when it comes to financing the proposed $20 billion Delta Conveyance Project, also known as “the Delta Tunnel.”

The Court of Appeal for the Third Appellate District just upheld a Sacramento County judge’s decision in 2024 that state authorities have an invalid bond plan to fund the highly embattled project. Specifically, the appellate court agreed with the original judge that the state Department of Water Resources, or DWR, lacks the authority to issue revenue bonds to pay for the massive tunnel that would benefit central and southern California Ag interests and a handful of Newsom mega-donors.

Sacramento, Yolo, San Joaquin, Solano, Contra Costa, Butte and Plumas counties were major litigants against DWR in the case.

In affirming the trial court’s decision, the Court of Appeal detailed that “the Delta Program’s scope is so opaque and ill-defined as to afford DWR nearly unlimited discretion to specify the facilities for which the bonds will be issued,” and, in effect, “the Bond Resolutions would give DWR authority to issue an unlimited amount of bonds to finance the work.”

In a statement, attorneys Thomas Keeling and Roger Moore, who represented the counties, laid out their thoughts on the decision.

“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,” the attorneys said, adding that the counties and their related water agencies had “challenged DWR’s authority to issue an uncapped amount of bonds.”

Keeling and Moore also noted that “a diverse array of other agencies and groups also opposed DWR, including certain state water contractors and environmental, taxpayer, fisheries, and tribal organizations,” all of whom were relieved when the Sacramento court had “entered judgment against DWR, rejecting DWR’s claim to almost unlimited authority in such matters.”

Finding that DWR exceeded its delegated authority, the court ruled that the Water Code “does not give DWR carte blanche to do as it wishes.”

Additionally, the appellate court 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 court found that 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.

Newsom, DWR and the Metropolitan Water District of Southern California argue that the Delta Tunnel is “an essential climate adaptation strategy” and a project that “protects against future water supply losses caused by climate change, sea level rise, and earthquakes.” DWR says that it will also help “ensure that the [state water project] can capture, move and store water to make the most of big, but infrequent, storm events.”

The growing alliance of environmental groups, indigenous tribes, local governments and fishing associations that oppose the project argue that it will collapse wild salmon populations, harm wildlife, destroy generational farms, trigger widespread eminent domain seizures near historic towns and kill off most local businesses from Freeport to Rio Vista through years and years of construction impacts.

The Somach Simmons & Dunn law firm agrees with the critics and praised the appellate court’s decision. Its attorneys Aaron A. Ferguson, Kelley M. Taber and Michelle E. Chester wrote in a statement, “This is a welcome legal victory … DWR must now find alternative means to fund its proposed Delta Conveyance Project, estimated to cost anywhere from $20 to $100 billion.”

The conservation group Restore the Delta, one of the many groups opposed to the Delta Tunnel and a party to the lawsuit, was thankful the appellate court rejected “a blank check for a multibillion-dollar project that would be shouldered by California ratepayers and cause irreversible harm to Delta ecosystems and communities.”

Attorney Osha Meserve, who has long represented Delta farmers and property owners when it comes to the economic damage the tunnel would bring to their region, thinks both courts saw the facts for what they are.   

“The court’s opinion shows that the Governor’s Delta Tunnel deal is far from fully baked, and will likely die in 2026,” Meserve predicted. “If the Governor really wants to foist the cost of this project on Californians, he’ll need to convince the Legislature to add the Delta Tunnel as a new unit of the State Water Project. But I don’t think the legislators will be in a hurry to stick their necks out on this contentious issue.”