The Trinity River, with headwaters west of Shasta on the western slope of the Coast Range, drains into the Pacific Ocean. A dam now under construction near Lewiston will impound some three-quarters of a million acre-feet of water which, by means of a tunnel will be partially diverted into and supplement the waters of the Sacramento River lying to the east and across the mountains. The water supply facilities along the Sacramento River will regulate its flow, store surplus winter runoff for use in the Sacramento Valley, maintain navigation in the channel, protect the Sacramento-San Joaquin Delta from salt intrusion from the Pacific, provide a water supply for the Contra Costa and Delta-Mendota Canals, and generate a great deal of hydroelectric energy. The Contra Costa Canal services the south shore of Suisun Bay from Antioch to Martinez with water from the Delta for domestic, industrial, and irrigation use. The Delta-Mendota Canal transports surplus Sacramento River water to Mendota Pool on the San Joaquin River, 120 miles south of the Delta. The water is pumped from the Delta to the canal along the foothills of the Coast Range and by gravity runs to the pool at Mendota. This exchange of water replaces that which has been diverted from the San Joaquin by the dam at Friant. This dam forces the entire flow of the San Joaquin into Millerton Lake which has a capacity of 520,000 acre-feet of water. It is diverted from the lake by the Madera Canal to the north and the Friant-Kern Canal to the south. The former extends about 37 miles in length and services the Madera District, while the latter supplies water to the Ivanhoe District and others to the south. It will extend south about 160 miles to a point near Bakersfield, which sits at the foot of the Central Valley's enormous table.

The power facilities of the project will, when finally completed, have a capacity of near a billion kilowatts. Transmission lines, steam plants, and other essential facilities will be constructed so as to obtain the maximum utilization. It is estimated that through the sale of this power the United States will receive reimbursement for over half of its total reimbursable expenditures.

The over-all allocation of these enormous costs has not been definitely determined. That portion of the costs ultimately allocated to power facilities will be reimbursed at 4 percent interest, but that allocated to irrigation facilities will be reimbursed at no interest. Moreover, the Federal Government will receive no reimbursement for that portion of the cost allocated to numerous aspects of the project, such as navigation, flood control, salinity prevention, fish and wild life preservation, and recreation. The irrigators will, therefore, be chargeable with but a small fraction of the total cost of the project.

We hasten to correct any impression that lands in the Central Valley had not been reclaimed and irrigated at the inception of the project. On the contrary, since California entered the Union it has worked diligently to bring water to its arid lands. Working largely through state irrigation districts, private interests have been ingenious in constructing smaller reservoirs, tapping underground sources, and attempting to prevent saline encroachment which would destroy the soil for agricultural purposes. Water has been called "the life blood of the State." Competition for this vital natural resource has provoked such controversy that it has required amendments to the Constitution and continual legislative activity. It is not at all surprising, therefore, that in putting together the mosaic of Central Valley some

litigation would ensue. See United States v. Gerlach Live Stock Co., supra.

II. SCOPE OF THE APPEALS AND NATURE OF THE CONTRACTS

These four appeals contest the right of the United States and California to complete the venture and reap the rewards therefrom as provided by their respective laws.

It should be noted that the appeal involving the Santa Barbara County Water Agency, No. 125, does not involve the Central Valley Project, as it does not lie within that area. It concerns a project to supply water for irrigation and municipal uses along the south coastal area of Santa Barbara County. It includes a dam on the Santa Ynez River impounding water in Cachuma Reservoir. This river risés on the western slopes of the Coast Range and runs into the Pacific. The Tecolote Tunnel will deliver water across the coastal range of mountains to the Santa Barbara County Agency through the lateral distribution systems of the Goleta and Carpenteria County Water Districts. The adoption of the project by the Congress in 1948 was based on the recommendation of the State Division of Water Resources Report stating that there was "an urgent and immediate need for substantial supplementation of municipal and irrigation water supplies. * * * The City of Santa Barbara has a critical water supply at this time. *** The underground water supplies in the county water districts are being seriously overdrawn. In some localities*** wells are being damaged by salt water intrusion." While the contract is authorized under § 9 (c) of the 1939 Act,5 for our purposes it is identical to the others and will be discussed with them.

The remaining appeals involve areas in the southern portion of the Central Valley Basin. The Madera District includes the Friant Dam and Millerton Lake, the sites for which the United States has purchased outright. Water rights surrounding these areas were involved in United States v. Gerlach Live Stock Co., supra, and have been acquired by the United States. These installations are, of course, vital to the operation of the project in the south of the valley. The Madera District will be furnished water from Millerton Lake by the Madera Canal. The Ivanhoe District is south of Friant and will be supplied water through the Friant-Kern Canal. It is interesting to note that irrigators in this district receive water diverted from the San Joaquin in which they never had nor were able to obtain any water right.

The contracts to which the Supreme Court of California took exception provide, in outline, that the United States will, after construction of the water supply facilities and the lateral distribution system for the irrigation districts, furnish water to the districts and the Santa Barbara County Agency for a period of 40 years. Incorporating the requirements of 8 5 of the Reclamation Act of 1902, the contract provides that project water shall not be furnished to lands in excess of 160 acres in single ownership. This limitation applies only to "project water" and previously existing water supplies are unaffected thereby. "Large landowners," i. e., those who own excess land, who wish that excess to have the benefit of project water must agree to sell their excess to other than large landowners within 10 years at a

See note 3, supra.

See note 2, supra.

price, fixed by three appraisers, which will exclude potential enhancement of the price by reason of project water being available. Large landowners electing not to sell their excess may use existing water supplies in underground sources. Moreover, if they designate which of their holdings shall be considered nonexcess, the district would furnish water to that land under the terms provided in the contracts. The repayment provisions as to the "distribution systems" require liquidation of the maximum stated expenditure of the United States by installments spread over 40 years, without interest, in accordance with § 9 (d) of the Reclamation Project Act of 1939. As to the "water supply facilities," such as the dams and reservoirs, the contracts employ the more liberal provisions of § 9 (e) of that Act. Repayment, without interest, is to be included in the charge for water sold to the districts and the agency by the United States. The contract term runs for 40 years and, using the language of § 9 (e), the water rate is calculated so as to return to the United States "revenues at least sufficient to cover an appropriate share of the annual operation and maintenance cost and an appropriate share of such fixed charges as the Secretary deems proper, due consideration being given to that part of the cost of construction of works connected with water supply and allocated to irrigation." The Congress has now supplemented these terms of the contracts by the Act of July 2, 1956, 70 Stat. 483. It provides that the districts and the agency shall be given "credit each year" for "so much of the amount paid ** * as is in excess of the share of the operation and maintenance costs of the project which the Secretary finds is properly chargeable. * The provision is retroactive and runs with the contract, and when this amount is equal to the amount owing on the total water supply expenditures allocated to irrigation, "no construction component shall be included in any charges for the furnishing of water. ***" The Act also permits renewal of the contract on terms that will reflect any "increases or decreases in construction, operation and maintenance costs and improvement in the [district's] repayment capacity." In addition, the Act provides that the districts and the agency "shall *** have a first right (to which right the rights of holders of any other type of irrigation water contract shall be subordinate) to a stated share or quantity of the project's available water supply for beneficial use on irrigable lands [within the district] and a permanent right to such share or quantity upon completion of payment of the amount" that is due on expenditures for water supply allocated to irrigation.

III. ACTION OF THE CALIFORNIA COURTS

In the confirmation suits involving the Ivanhoe District, No. 122, and of the Madera District, No. 123, the trial court found the contracts and the proceedings leading to their execution invalid. The court reasoned that § 8 of the 1902 Act required that "whenever there is a conflict between the Federal Reclamation Laws and the laws of the State, the law of California must prevail." The court also found that in the light of the origin of the Central Valley Project, the United States was trustee of an express trust of which the Ivanhoe District and others were among the beneficiaries. It concluded that all ap

7 See note 3, supra.

plications to appropriate water are included in such trust and the beneficiaries have "an incomplete, incipient and conditional right in the water applied for" which is vested and runs with the land. The excess land provision was declared invalid and unenforceable as conflicting with both state law and the Reclamation Act. Application of the excess land provision to an irrigator would, the court found, be unconstitutional.

The Albonico litigation, No. 124, was an application for a mandatory order excluding lands in excess of 320 acres owned by the Albonicos from the Madera District. The court held that the excess land provisions were unconstitutional and that if applied to the Albonicos the mandatory order should issue.

The trial court in the Santa Barbara confirmation case, No. 125, contrary to the action in the other cases, upheld the contract and granted confirmation. The court found that the Master Contract was ratified and confirmed by the Interior Department's Appropriation Act for 1950. 64 Stat. 595.

In

The Supreme Court of California, by a 4-3 vote, reversed the trial court judgment validating the contract in No. 125, the Santa Barbara case, and affirmed each of the other judgments. The principal opinion was in the Ivanhoe case to which we confine our discussion. The majority agreed with the trial court that § 8 of the 1902 Act required the application of state law. It found that the excess lands provision was inapplicable and improper under state law, and that the contract was therefore invalid. This conclusion was posited on a trust theory of California water law which placed a trust on the State and the irrigation districts for the benefit of water users. administering this trust the United States, the majority held, stood in the shoes of the State. The § 9 (e) provisions of the contract was found invalid on the grounds that no provision was made for repayment of a stated amount within 40 years or for transfer of title to the distribution system to the respective districts after payment thereof, and that no permanent right to receive water was vested in the respective districts and their members. The court appears to have reached this conclusion by finding that the contract created a "debtor-creditor" relationship and that the United States was acting as a public utility without conforming to state law.

IV. THE JURISDICTIONAL QUESTION

We first face the dual aspects of the jurisdictional question: has California's Supreme Court held a federal statute unconstitutional, and does its decision rest on an adequate state ground? Flourney v. Wiener, 321 U. S. 253, 262.

As we read the reasons, heretofore mentioned, upon which the Supreme Court of California invalidated the contracts, we conclude that they rest upon neither ground. As to the rights and duties of the United States under the contracts, these are matters of federal law on which this Court has final word, Clearfield Trust Co. v. United States, 318 U. S. 363. Our construction of the contract might dispel any features thereof found offensive. The other ground, namely, the 160-acre limitation, alone requires further consideration.

Appellants claim that California's Supreme Court has held unconstitutional the federal statutes, § 5 of the Reclamation Act of 1902, as

re-enacted in § 46 of the Omnibus Adjustment Act of 1926, relating to the 160-acre limitation. It appears to us, however, that the opinion actually turned upon the court's interpretation of § 8 of the 1902 Act. In effect, the court held that this section overrides all other sections of the Act, requiring that it be construed as not affecting state laws "relating to the control, appropriation, use or distribution of water used in irrigation." Turning to state law, the court by applying a "trust theory" held that the Federal Government could acquire no title to appropriative water rights free of a trust in the State of California for the benefit of the people of the State. This "limited measure of control" of the appropriative water, the court said, 47 Cal. 2d, at 620, prevented the imposition of the 160-acre limitation because the beneficiaries of the trust, namely, the people of the State and particularly those in the districts involved, would be deprived by the acreage limitation of a right to the use of the water in the district. We think it plain that this was a construction of federal law and not a holding of unconstitutionality. This, of course, provides no basis for an appeal, but the importance of the case, as we earlier noted, requires that certiorari be granted.

We deem it equally clear that the judgments do not rest on an adequate state ground. The construction the opinion gave to § 8 of the 1902 Act nullified the specific mandate of § 5, as well as its re-enactment in the 1926 Act, and even though in the doing a state law may have been called into the play, this would not immunize it from this Court's review. Basically it is the interpretation of the Federal Act that opens the door to the application of the state law and leads to the striking down of the contracts made by the Secretary.

Nor would the suggestion that state law prevented the water districts and agencies of the State from entering into the contracts change this conclusion. We need not determine whether a State could in that manner frustrate the consummation of a federal project constructed at its own behest. The fact remains that the state law was, in fact, invoked only by the interpretation the court gave § 8.

V. APPLICATION OF THE RECLAMATION LAWS TO THE CONTRACTS

At the outset we set aside as not necessary to decision here the question of title to or vested rights in unappropriated water. Cf. Nebraska v. Wyoming, 325 U. S. 589, 611-616. If the rights held by the United States are insufficient, then it must acquire those necessary to carry on the project, United States v. Gerlach Live Stock Co., supra, at 739, paying just compensation therefor, either through condemnation or, if already taken, through action of the owners in the courts. As we see it, the authority to impose the conditions of the contracts here comes from the power of the Congress to condition the use of federal funds, works, and projects on compliance with reasonable requirements. And, again, if the enforcement of those conditions impairs any compensable property rights, then recourse for just compensation is open in the courts.

As we have noted, the Supreme Court of California first concluded that the provisions of § 8 of the 1902 Act as to the application of state law were absolute and controlled all provisions of the Act as well as other reclamation statutes having to do with "the control, appropriation, use, or distribution of water used in irrigation, or any vested