Reply Brief — Kansas v. Colorado

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JAN & eo!

10 No. 105, Original

—

In The

Supreme Court of the United States

STATE OF KANSAS,

Plaintiff,

STATE OF COLORADO,

Defendant,

and

UNITED STATES OF AMERICA,

Defendant-Intervenor.

REPLY BRIEF FOR KANSAS >

OPPOSING THE EXCEPTIONS OF COLORADO

CARLA J. . VALL

Attorney General of Kansas

JOHN W. CAMPBELL

Chief Deputy Attorney General

JoHN M. Cassipy

Assistant Attorney General

LELAND E. Roirs

Special Assistant Attorney General

JOHN B. DRAPER

Counsel of Record

Special Assistant Attorney General

ANDREW S. MONTGOMERY

MontTGomery & ANDREWS, P.A.

Post Office Box 2307

Santa Fe, New Mexico 87504-2307

(505) 982-3873

January 3, 2001

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

— —

. Pl rE neem et

TABLE OF CONTENTS

Page

SUA OE ARROMNO 0 i sine i ks cde casey en eens 1

I. The Eleventh Amendment Is No Barrier to Kan-

sas’ Claims in This Proper Original Action..... 2

A. Colorado Surrendered Its Immunity to

Suit by a Sister State in the Plan of the

ee erry er ee 3

B. The Arkansas River Compact Establishes

Kansas’ Sovereign Right to Bring Suit

Against Colorado to Protect Its Own Inter-

ests, Which Include the Interests of Its

oe Serer ere Cryer er Per rh 6

C. This Court’s Eleventh Amendment Deci-

sions Establish Kansas’ Right to Bring Suit

to Protect Its Sovereign Interests......... 12

II. Prejudgment Interest Is an Essential Element

of Complete Compensation Whether or Not

the Injured Party’s Claim Is Liquidated...... 21

III. Kansas’ Compensation Should Not Be With-

held On the Theory that Colorado Breached

the Compact in Good Faith.................. 26

IV. Kansas Should Be Allowed Prejudgment Inter-

est at Rates Adequate to Compensate It for Its

BOE i chan ves Ads eed ae Bae bee Ae eae et 33

V. The Master’s Recommendation on Crop Losses

Is Reasonable and Should Be Accepted ...... 37

A. Kansas’ Evidence on Crop Losses........ 38

B. Colorado’s Evidence on Crop Losses..... 40

C. The Special Master’s Analysis of the Evi-

oe Be. Pee Cee ee TTT Tere 43

re ee Pee eee rT ee er eT ry rey 48

—————

TABLE OF AUTHORITIES

CASES

Alden v. Maine, 119 S.Ct. 2240 (1999).............. 4, 14

Alfred L. Snapp & Son v. Puerto Rico, ex rel., Barez,

G56 US. SRe UME) ccs sivinivddvenwsengaaeeoeeue 4,17

Anadarko Petroleum Corp. v. FERC, 196 F.3d 1264

(D.C. Cir. 1999), modified on other grounds, 200

F.3d 867 (D.C. Cir.) (per curiam), cert. denied,

120 SAE. ZEES (2D) ww cc ccas cieks keke ees 25, 26

Bessette v. W.B. Conkey Co., 194 U.S. 324 (1904)...... 31 !

Blatchford v. Native Village ‘of Noatak, 501 U.S. 775

(EGFR) ove sree wackis weS a oem ae een ee 4

City of Milwaukee v. Cement Division, National Gyp-

sum GCo., S15 US. 109 120i ve icsceeeee eee passim

Clark v. Barnard, 108 US. 4357 (AOG8). 6 os cass cesictnns 11

College Sav’s Bank v. Florida Prepaid Postsecondary

Educ. Expense Bd., 119 S.Ct. 2219 (1999) ........... 11

Colorado v. Kansas, 320 U.S. 383 (1943) ......... 8, 9, 18

Edelman v. Jordan, 415 U.S. 651 (1974)............... 15

Ford Motor Co. v. Department of Treasury, 323 U.S.

BOP CED) 63 ovens vn npn des ee ee ee 15

General Motors Corp. v. Devex Corp., 461 U.S. 648

i, Mpevererrorrererr. ror | 23, 25, 26, 29, 36

Georgia v. Tennessee Copper Co., 206 U.S. 230 (1907) .... 19

Gompers v. Bucks Stove & Range Co., 221 U.S. 418

CUPERD sos 0 oonsss5 950 su du beueeee eee 30, 31

lil

TABLE OF AUTHORITIES - Continued

Page

Hinderlider v. La Plata River & Cherry Creek Ditch

i Se AOE ys cas denestannecdnsdewae ne 6, 17

Idaho v. Coeur d'Alene Tribe, 521 U.S. 261 (1997)....... 4

In re Milwaukee Cheese Wis., Inc., 112 F.3d 845 (7th

od Ta ak wie hh eal oeiele nee ie 26

In re Oil Spill by the Amoco Cadiz, 954 F.2d 1279

ls ay wh oid bin ad da ews 0 OO 26, 36

Kansas v. Colorado, 206 U.S. 46 (1907).......... 4, 17, 18

Kansas v. Colorado, 475 U.S. 1079 (1986) .............. 3

Kansas v. Colorado, 514 U.S. 673 (1995) ... 11, 25, 26, 28

Maryland v. Louisiana, 451 U.S. 725 (1981) ....13, 14, 18

Maryland v. Louisiana, 452 U.S. 456 (1981) ........... 15

McComb v. Jacksonville Paper Co., 336 U.S. 187

Gee oad Seen dk d be wes neh eessees 30, 31

Nebraska v. Wyoming, 507 U.S. 584 (1993)............ 31

New Hampshire v. Louisiana, 108 U.S. 76 (1883)....... 16

North Dakota v. Minnesota, 263 U.S. 365 (1923)....... 16

Oklahoma ex rel. Johnson v. Cook, 304 U.S. 387 (1938) .... 16

Pierce v. United States, 255 U.S. 398 (1921)........... 23

EE Aa) 17

Principality of Monaco v. Mississippi, 292 U.S. 313

ee i Wy S60 GA haa KOs Ka 6 hence v0 oe 4,5

Rhode Island v. Massachusetts, 12 Pet. 657 (1838)... 4, 5, 17

Royal Indemnity Co. v. United States, 313 U.S. 289

TABLE OF AUTHORITIES - Continued

Page

Talbot v. Seeman, 1 Cranch 1 (1801)........... ol, ae 2

Texas v. New Mexico, 482 U.S. 124 (1987) ........ passim

United States v. United Mine Workers of Am., 330

Sa et COUNT io kbaknuceccedanewads ceasiwcceens oa 30

West Virginia v. United States, 479 U.S. 305 (1987)

Kiba eb dA Ee ORPROAES ERE OEE oe ae NS tees 22, 24, 26

Wyoming v. Colorado, 286 U.S. 494 (1932) .......... 6, 19

Wyoming v. Colorado, 298 U.S. 573 (1936) ............ 19

Wyoming v. Colorado, 309 U.S. 572 (1940)

LTREEREADEEEE DE MERE EOE URER A ONE 19, 20, 29, 30, 31

Wyoming v. Colorado, 259 U.S. 419, modified, 260

U.S. 1 (1922), vacated and new decree entered,

See Ms DEO COMER so cksas vekw ened beenenees ¥eewken 19

CONSTITUTIONAL PROVISIONS

U.S. Const., Art. I, § 10, cl. 3 (Compact Clause)...... 9

Sry. ON: POI: FUN ch s-cl bende ueeawewevenan sk passim

STATUTES

PUMNE TVET COURT, 06 5 e ccs dese ciccvnss passim

oe gg OT ae eee EE eT 8

SE HE br oki xi wd oO bbad ea ee Ch 8, 18

PI WHO xo uk vic cahd ens eaeeiaseey ace 1, %, We, FS, M

e icmcncs fel ge Ee TELE RE Tae FPO re LO 7

Fe DH CAND ogc hav ccs anacsewos siekaawube 28

USGS OS es se ae 22

sagt aera es taster ie 1

TABLE OF AUTHORITIES - Continued

Page

MISCELLANEOUS

D. Currie, The Constitution in Congress: The Fed-

eralist Period 1789-1801 (1997) ............sseec00. 14

J. Story, Story on the Constitution ................... 4

Restatement (Second) of Contracts (1981)............ 10

5 PINT SHO. De os inne decreas cee 4

ee ee rE rr rer yn ey i

First Report of Special Master, Kansas v. Colorado,

POO. ie, Ss SA ws kde cdunbevanyeeoreateanle. 45

Second Report of Special Master, Kansas v. Colo-

wiles, FOO. TOD, OR CENT sv hk ooce oes nsee 38

Third Report of Special Master, Kansas v. Colorado,

eS rey ry er ene passim

— ee ee . nie dae ee -

z nt ——— _—

REPLY BRIEF FOR KANSAS

OPPOSING THE EXCEPTIONS OF COLORADO

SUMMARY OF ARGUMENT

Early in its brief Colorado emphasizes that water is a

scarce resource in the West, that disputes over water have

propelled the development of new legal doctrines and

institutions, and that ongoing disputes likely will only

heighten the need for clear remedies in this field of law.

This emphasis on the importance of a clear remedy in an

interstate water dispute makes for a peculiar introduction

to a brief urging this Court to withhold a remedy for all

but a small fraction of the injury that Kansas and its

water users undisputedly suffered. In its own words,

Colorado would have this Court reject as unfair “[a]n

award of money damages that includes all losses that

have occurred as a result of Compact violations, includ-

ing losses suffered by individual water users in Kansas.”

Brief in Support of Colorado’s Exceptions to the Third

Report of the Special Master 9 (“Colo. Brief”). Kansas’

reply can be summed up in a single sentence: Kansas

should receive a complete remedy for its losses, no more

and no less.

Colorado has filed four exceptions to the Third

Report of the Special Master. The first exception opposes

the Special Master’s recommendation that the losses of

Kansas water users be accounted for in determining Kan-

sas’ damages for Colorado’s violations of the Arkansas

River Compact. Colorado overlooks the fact that in the

plan of the convention it surrendered its immunity to

proper original actions such as this one. Both this Court’s

Eleventh Amendment jurisprudence and the Arkansas

River Compact confirm that this action is proper.

Colorado raises two further exceptions, and focuses

three separate points of its brief, on the subject of pre-

judgment interest. Its several arguments are united, how-

ever, by a common premise, which is that an injured

party’s compensation should be reduced or denied where

the breaching party has acted in good faith. This premise

is contrary to the Court’s modern decisions. Full compen-

sation is not punitive; it is the fair and equitable outcome.

Because Colorado’s second and third exceptions run

afoul of this basic proposition, they should be overruled.

Colorado’s fourth exception asks the Court to delve

into the Special Master’s analysis of the evidence from

experts in the fields of engineering, economics and agron-

omy regarding crop losses caused by Colorado’s Compact

violations in canal irrigation service areas where farmers

could not replace the shortfall in surface water supplies

with groundwater because they had no wells. Colorado

asks that the mere possibilities raised by its arguments be

exalted over the solid evidence presented by the Kansas

experts. The thorough analysis performed and explained

by the Special Master should therefore be sustained.

I. THE ELEVENTH AMENDMENT IS NO BARRIER

TO KANSAS’ CLAIMS IN THIS PROPER ORIGI-

NAL ACTION.

The Special Master recommended that the Court con-

firm his ruling “that if a remedy includes money dam-

ages, the Eleventh Amendment does not preclude

damages awarded to the State of Kansas from being

based, in part, upon losses incurred by its water users.”

1 Third Report of Special Master 119 ({ 3) (“Third

Report”). Colorado excepts to this recommendation on the

ground that the Eleventh Amendment bars a state from

recovering money damages in a quasi-sovereign capacity

based on losses to its water users. Colo. Brief 10-24. Colo-

rado’s argument fails for at least three reasons: first, Colo-

rado, in the plan of the convention, surrendered its

immunity to suits such as this one between sister States;

second, the plain language of the Arkansas River Compact

establishes Kansas’ sovereign right to bring suit against

Colorado to protect its own interests, which include the

interests of its water users; and, third, the Court’s decisions

likewise establish that Kansas’ suit properly seeks to vin-

dicate its sovereign and quasi-sovereign interests rather

than the purely personal claims of its ‘citizens.

A. Colorado Surrendered Its Immunity to Suit by

a Sister State in the Plan of the Convention.

When this Court granted Kansas leave to file a com-

plaint, it implicitly determined that this is a proper origi-

nal action. Kansas v. Colorado, 475 U.S. 1079 (1986). The

Special Master considered the Court’s determination to

be dispositive of any objection based on the Eleventh

Amendment. He explained “that if the Court accepts a

case between states as one involving sovereignty or

quasi-sovereignty, it is then regarded, in law, Strictly as

state litigation, and the 11th Amendment is not a factor.”

2 Third Report, App. 36. He particularly emphasized this

Court’s pronouncement in Texas v. New Mexico, 482 U.S.

124 (1987), that “[i]n proper original actions, the Eleventh

Amendment is no barrier, for by its terms, it applies only to

suits by citizens against a State.” Id., at App. 35 (quoting

Texas v. New Mexico, 482 U.S., at 130) (Special Master’s

emphasis).

A proper suit between sister States is indeed outside

the ambit of the Eleventh Amendment. Blatchford v. Native

Village of Noatak, 501 U.S. 775, 782 (1991); Principality of

Monaco v. Mississippi, 292 U.S. 313, 328-329 (1934); Rhode

Island v. Massachusetts, 12 Pet. 657, 720 (1838). The Elev-

enth Amendment confirms the presupposition that the

States, upon entering into the Union, generally retained

the immunity to suit enjoyed by sovereigns. Alden v.

Maine, 119 S.Ct. 2240, 2246-2247 (1999). One of a few

distinct classes of cases in which the States do not retain

immunity, however, is where there has been “ ‘a surren-

der of this immunity in the plan of the convention.’ ” Id.,

at 2248 (quoting The Federalist No. 81); Idaho v. Coeur

d'Alene Tribe, 521 U.S. 261, 267 (1997). The States surren-

dered their immunity to suit by sister States in this Court

to afford an adequate means of settling their disputes

peacefully and without resort to the traditional methods

of diplomacy and war, which were deemed impracticable.

Alfred L. Snapp & Son v. Puerto Rico, ex rel., Barez, 458 U.S.

592, 601 (1982); Kansas v. Colorado, 206 U.S. 46, 97 (1907).

This Court has explained:

“The establishment of a permanent tribunal

with adequate authority to determine controver-

sies between the States, in place of an inade-

quate scheme of arbitration, was essential to the

peace of the Union. The Federalist, No. 80; Story

on the Constitution, § 1679. With respect to such

controversies, the States by the adoption of the

Constitution, acting ‘in their highest sovereign

capacity, in the convention of the people,’

~~ ee

waived their exemption from judicial power.

The jurisdiction of this Court over the parties in

such cases was thus established ‘by their own

consent and delegated authority’ as a necessary

feature of the formation of a more perfect

Union.” Principality of Monaco v. Mississippi, 292

U.S. 313, 328-329 (1934) (quoting Rhode Island v.

Massachusetts, 12 Pet. 657, 720 (1838)).

By consenting to this Court’s “complete judicial power to

adjudicate disputes among them,” this Court acquired

“the capacity to provide one State a remedy for the

breach of another.” Texas v. New Mexico, 482 U.S., at 128

(citing Rhode Island v. Massachusetts, 12 Pet. at 720). And

with regard to interstate compacts, in particular, this

Court has affirmed its readiness both to rectify a breach-

ing State’s past failure to perform and to order its future

performance. Ibid.

Colorado nevertheless argues that the Eleventh

Amendment bars the damages sought by Kansas insofar

as they are based on losses to its water users. It bears

emphasizing that Kansas seeks to recover simply the

value of the waters of the Arkansas River that Colorado

has failed to deliver in breach of the Compact. That

recovery is measured in part by injury to the interests of

Kansas as a State, and in part by the income lost or cost

incurred by Kansas water users (such as lost crop yields

and increased well-pumping costs) as a result of Colo-

rado’s breach. See, e.g., 1 Third Report 36, 64. Kansas

believes that to restore that value to it is in no sense to

sanction a recovery on individual claims, but simply to

afford Kansas a complete remedy for the Compact breach.

Colorado contends, however, that to recognize such a

remedy is to allow Kansas “to present and enforce the

claims of its citizens.” Colo. Brief 13 (capitalization omit-

ted).

The Special Master properly rejected the notion that

Kansas is asserting personal, private claims of its citizens.

2 Third Report, App. 21. He noted that a State properly

represents the water claims of its people in an interstate

controversy, just as a State’s undertakings in an interstate

compact are binding on its water users. Id., at App. 32

(citing Hinderlider v. La Plata River & Cherry Creek Ditch

Co., 304 U.S. 92, 106 (1938); Wyoming v. Colorado, 286 U.S.

494, 508-509 (1932)). Both the language of the Arkansas

River Compact and this Court’s Eleventh Amendment

jurisprudence establish that Kansas has brought a proper

original action between sister States rather than the pri-

vate claims of its individual citizens.

B. The Arkansas River Compact Establishes Kan-

sas’ Sovereign Right to Bring Suit Against Col-

orado to Protect Its Own Interests, Which

Include the Interests of Its Water Users.

The Compact, which after all is a contract between

Kansas and Colorado, Texas v. New Mexico, 482 U.S., at

128, is the obvious starting point in an analysis of the

rights and duties that Kansas can enforce in this case.

Indeed, Colorado itself recognizes that the applicability

of the Eleventh Amendment should be analyzed on the

basis of the “nature and origin of the claims on which

damages are based.” Colo. Brief 23. It is curious, then,

that Colorado’s Eleventh Amendment argument hardly

mentions the Compact, the one document that directly

defines the nature and origin of Kansas’ claims. See id., at

21-22, 24.

The Compact’s plain language leaves no doubt but

that Kansas is authorized to enforce both its rights as a

State and the rights of its water users. Most explicitly,

Article VII-A provides that “[e]ach State shall be subject

to the terms of this Compact” and then adds:

“Where the name of the State or the term ‘State’

is used in this Compact these shall be construed

to include any person or entity of any nature

whatsoever using, claiming or in any manner

asserting any right to the use of the waters of

the Arkansas River under the authority of that

State.” Art. VII-A, reprinted in the Appendix to

the Brief in Support of Kansas’ Exception to the

Third Report of the Special Master, filed

November 24, 2000 (“Kan. Brief”) A-10 to A-11.

If Colorado is subject to the Compact’s terms, and

“Kansas” is construed to include all persons using, claim-

ing, or asserting the right to use waters of the Arkansas

River under Kansas’ authority, it follows that Kansas may

assert the rights of its water users as against Colorado.

If there were any doubt about the import of Article

VII-A, moreover, the compacting parties made their

intent clear in other provisions of the Compact. For exam-

ple, in the key provision that Colorado has breached,

Article IV-D, the States made the same explicit undertak-

ing to protect the interests of each State’s water users.

The provision states in part that the waters of the

Arkansas River “shall not be materially depleted in

usable quantity or availability for use to the water users in

Colorado and Kansas under this Compact” by beneficial

development or construction occurring after the Com-

pact’s execution. Art. IV-D, Kan. Brief A-5 (emphasis

added). Thus, the very standard of compliance set by the

Compact is defined in terms of detrimental effects on

water users in Kansas.

Similarly, in Article I-A, the States specified that one

of the major purposes of the Compact is to:

“Settle existing disputes and remove causes of

future controversy between the States of Colo-

rado and Kansas, and between citizens of one

and citizens of the other State, concerning the

waters of the Arkansas River and their control,

conservation and utilization for irrigation and

other beneficial purposes.” Art. I-A, Kan. Brief

A-l.

Plainly, the only enforceable means of removing

causes of controversy between the citizens of the respec-

tive States, short of involving massive classes of individ-

ual citizens, is to give effect to Article VII-A’s provision

that each State represents its citizens.

To the same effect is Article II, which recites that the

Compact is based in part on this Court’s opinion in

Colorado v. Kansas, 320 U.S. 383 (1943). Art. II, Kan. Brief

A-2. Colorado v. Kansas, was, in this Court’s words, a suit

“between Kansas or her citizens, and Colorado, or her

citizens, concerning their respective rights to the benefi-

cial use of the waters of the Arkansas River.” 320 U.S., at

384. Colorado sought, and this Court granted, an injunc-

tion barring individual water users in Kansas from pros-

ecuting claims against water users in Colorado. Id., at

388-391. Kansas counterclaimed, praying that the Court

“protect and quiet her rights and those of her citizens and

residents” to water appropriations. Id., at 388-389

(emphasis added). On the premise that Colorado was

devoting water to a beneficial use, this Court framed the

question presented as “whether, and to what extent, [Col-

orado’s] action injures [Kansas] and her citizens by depriv-

ing them of a like, or an equally valuable, beneficial use.”

320 U.S., at 393 (emphasis added). This Court elaborated

that “Kansas is not entitled to relief unless she shows

[Colorado’s practices] clearly have entailed serious dam-

age to her substantial interests and those of her citizens.”

Id., at 398 (emphasis added).

Although the Court recognized that Colorado’s water

use had increased steadily over the past several decades,

it found the evidence of injury to Kansas water users

insufficient to meet the heavy burden of justifying an

injunction against Colorado users. The Court exhorted

the States, however, to settle their differences by negotia-

tion and agreement pursuant to the Compact Clause of

the Constitution. Id., at 392, 400. The Arkansas River

Compact thus arose out of a dispute over whether Kansas

and its water users were suffering injury at the hands of

Colorado and its water users. And although this Court

rebuffed attempts by Kansas water users to intervene in

the dispute, the States continued to assert the interests of

their respective water users in both this Court and the

Compact. It is only natural, then, that the Compact’s

terms make the interests of each State inclusive of the

interests of its water users. Art. VII-A, Kan. Brief A-10 to

A-11.

Colorado brushes aside the Compact with the pat

contention that its purpose is to settle disputes between

the two States, and between the citizens of the one and

the citizens of the other State, but not between the citi-

zens of one State and the other State itself. Colo. Brief

21-22. The Compact is too broad, however, to admit of

such a distinction. The Compact expressly provides that

the term “State” includes the State’s water users. Art. VII-

A, Kan. Brief A-10 to A-11. Therefore, to settle disputes

between the two States is to settle disputes between one

State’s water users and the other State.

The Special Master observed that Kansas, as the sig-

natory to the Compact, is the only party that properly can

sue to protect the flows of the Arkansas River guaranteed

for use by Kansas water users. 2 Third Report, App. 36.

Although Colorado strangely questions why the Special

Master believed that only Kansas can do so, Colo. Brief

24, it quickly returns to its position that the Eleventh

Amendment “prevents individual water users from suing

Colorado for damages,” ibid. What Colorado fails to

address, however, is why the compacting States could

conceivably have intended to have left themselves with-

out a remedy for the enormous injury to water users that

a breach of the Compact could occasion.!

This Court said in Texas v. New Mexico:

“A court should provide a remedy if the parties

intended to make a contract and the contract’s

terms provide a sufficiently certain basis for

determining both that a breach has in fact

occurred and the nature of the remedy called

for.” 482 U.S. 124, 129 (1987) (citing Restatement

1 Colorado itself asserts that losses to individual water

users “are by far the largest losses.” Colo. Brief 38.

(Second) of Contracts § 33(2), and Comment b

(1981)).

Here, no one questions that the parties intended to make

a contract. No one questions that a breach has in fact

occurred. See Kansas v. Colorado, 514 U.S. 673 (1995). And,

as just summarized, the Arkansas River Compact’s plain

language, which specifies the intent to protect each

State’s water users from injury, makes clear that the

nature of the remedy called for in this case necessarily

accounts for injury to those same water users.

The clear import of the Compact might be under-

stood to establish the propriety of Kansas’ suit in either

of two ways. By a straightforward reading, the compact-

ing States recognized that each spoke for its water users

and would properly represent their interests in subse-

quent efforts to enforce the Compact. This was the Special

Master’s reading, which led him to conclude that Kansas

has brought a proper interstate action, pure and simple.

But if one persisted, as Colorado does, in the view that a

damages claim measured in part by losses suffered by

individual water users is effectively a personal claim of

the individuals themselves, the Compact would equally

well be understood as reflecting the compacting States’

consent to suit on such “individual claims.” A rudiment

of Eleventh Amendment jurisprudence is that “a State’s

sovereign immunity is ‘a personal privilege which it may

waive at pleasure.’” College Sav’s Bank v. Florida Prepaid

Postsecondary Educ. Expense Bd., 119 S.Ct. 2219, 2226 (1999)

(quoting Clark v. Barnard, 108 U.S. 437, 447-448 (1883)). In

short, whether Kansas’ damages claim is understood as a

claim of the State measured in part by losses to its water

users or the claims of its water users presented by Kan-

sas, the Compact plainly establishes that Kansas’ suit to

recover the amount of those losses is proper.

C. This Court’s Eleventh Amendment Decisions

Establish Kansas’ Right to Bring Suit to Protect

Its Sovereign Interests.

The conclusion that the Arkansas River Compact

authorizes Kansas’ action to enforce its water users’ inter-

ests is wholly consistent with this Court’s interpretation

of the Eleventh Amendment. The decision on point is

Texas v. New Mexico, 482 U.S., at 130-131, in which the

Court recognized that money damages may be awarded

to remedy a breach of an interstate water compact. The

Court unmistakably contemplated precisely the sort of

remedy that Kansas seeks here, that is, money damages

based at least in part on the harm suffered by individual

water users in the plaintiff State, Texas. In reaching that

conclusion, the Court addressed possible objections to a

money damages remedy. The Court noted:

“It might be said that those users who have suf-

fered the water shortages caused by New Mexico’s

underdeliveries over the years, rather than the

State, should be the recipients of damages, and

that they would be difficult if not impossible to

-identify.” Id., at 131-132 (emphasis added).

The Court observed, however, that an in-kind, water

remedy “would also likely fail to benefit all those who were

deprived in the past.” Id., at 132 (emphasis added). Sim-

ilarly, the Court took note of the suggestion that “a

money judgment might find its way into the general

coffers of the State, rather than benefit those who were

hurt.” Id., at 132, n. 7 (emphasis added). It responded,

however, that

“the basis on which Texas was permitted to

bring this original action is that enforcement of

the Compact was of such general public interest

that the sovereign State was a proper plaintiff.

See Maryland v. Louisiana, 451 U.S. 725, 735-739

(1981). It is wholly consistent with that view

that the State should recover any damages that

may be awarded, money it would be free to

spend in the way it determines is in the public

interest.” Texas v. New Mexico, 482 U.S., at 132, n.

Colorado infers from these passages that Texas could

recover damages only for its representation of a general

public interest exclusive of the interests of Texas water

users. Colo. Brief 23. This Court plainly had a different

conception of the “general public interest” in mind, how-

ever, when it addressed the need to provide a remedy on

account of “those users who have suffered the water

shortages,” “those who were deprived in the past,” and

“those who were hurt.” Kansas is seeking exactly the sort

of remedy that the Court envisioned: A remedy to the

State of Kansas measured in part by the injury to those

Kansas water users who have suffered the shortages.

Prior decisions further elaborate on the distinction

between a proper original action that is of general public

interest and an action in which a State invokes this

Court's original jurisdiction merely to advance the purely

private claims of particular individuals. For example, in

Maryland v. Louisiana, 451 U.S. 725 (1981), a constitutional

€

challenge of a state tax on natural gas uses, the Court

explained:

“A State is not permitted to enter a controversy

as a nominal party in order to forward the

claims of individual citizens. But it may act as

the representative of its citizens in original

actions where the injury alleged affects the gen-

eral population of a State in a substantial way.”

Id., at 737.

The plaintiff States alleged substantial injury to their own

proprietary interests as purchasers of natural gas, but

they also sought to remedy economic injury to individual

citizens, themselves consumers of natural gas. Id., at

737-739. As Colorado notes, the plaintiffs alleged eco-

nomic injuries of $1.5 million to the States themselves and

$120 million to individual citizens. Colo. Brief 18; see

Maryland v. Louisiana, 451 US., at 736, n. 12. This Court

observed, however, that the individuals in question were

not “a small group of citizens who are likely to challenge

the Tax directly,” but were a great number of citizens

who, due to lack of financial incentive or legal recourse,

“cannot be expected to litigate” individually. Id., at 739.

The Court concluded, “In such circumstances, exercise of

our original jurisdiction is proper.” Ibid.

Colorado would distinguish Maryland v. Louisiana,

apparently on the ground that the $120 million sought by

the plaintiff States on behalf of individual citizens took

the form of tax refunds rather than damages. Colo. Brief

18. A principal purpose of the Eleventh Amendment,

however, was to protect against “ ‘prospective raids on

state treasuries.’ ” Alden v. Maine, 119 S.Ct. 2240, 2250

(1999) (quoting D. Currie, The Constitution in Congress:

The Federalist Period 1789-1801, p- 196 (1997)). Inasmuch

as a judgment for $120 million has the same effect on a

State treasury whether denominated a refund or dam-

ages, the distinction is without significance for purposes

of the Eleventh Amendment. See Ford Motor Co. v. Depart-

ment of Treasury, 323 U.S. 459, 464 (1945) (holding that

action against state for refund of allegedly unconstitu-

tional state tax was “in essence one for the recovery of

money from the state”); see also Edelman v. Jordan, 415

U.S. 651, 668 (1974) (holding that retroactive award of

statutory benefits, although characterized as form of

“equitable restitution,” was “in practical effect indis-

tinguishable in many aspects from an award of damages

against the State”).

Colorado also notes that, when judgment was later

entered for the plaintiff States, the wrongly collected tax

revenues were ordered refunded to the taxpayers individ-

ually rather than to the States. Colo. Brief 18 (citing

Maryland v. Louisiana, 452 U.S. 456, 457 (1981)). This fact

actually cuts against Colorado’s argument because it

underscores that the Court has exercised original jurisdic-

tion over an action on behalf of individual citizens even

where it has ultimately directed that the monetary rem-

edy be paid directly to individuals themselves. Here,

Kansas seeks merely to recover damages for itself mea-

sured in part by the injury to those who were hurt, to be

spent in the way that its legislature determines is in the

public interest. See Texas v. New Mexico, 482 U.S., at 132 &

n. 7.

Colorado relies on a series of decisions in which a

plaintiff State did assert purely personal claims of specific

individuals, acting quite literally as their collecting agent.

For example, in New Hampshire v. Louisiana, 108 U.S. 76,

89 (1883), each of the two plaintiff States was “nothing

more nor less than a mere collecting agent” for a few

identified citizens who owned bonds on which suit was

brought. Although the suits were “in the names of the

States, they [were] under the actual control of individual

citizens, and [were] prosecuted and carried on altogether

by and for them.” Ibid. This Court concluded, “No one

can look at the pleadings and testimony in these cases

without being satisfied, beyond all doubt, that they were

in legal effect commenced and are now being prosecuted

by the owners of the bonds and coupons.” Ibid. Similarly,

in Oklahoma ex rel. Johnson v. Cook, 304 U.S. 387, 395-396

(1938), the plaintiff State, acting “solely for the benefit of

the depositors and creditors” of an insolvent bank, took

legal title to private claims against the bank’s share-

holders as a “mere expedient for the purpose of collec-

tion.”

And again, in North Dakota v. Minnesota, 263 U.S. 365,

375-376 (1923), the decision on which Colorado relies

most heavily, a specific group of North Dakota farm

owners were funding their State’s prosecution of the suit,

each individual claimant expected to share in any award

of damages “in proportion to the amount of his loss,” and

the Court deemed the State to be acting on behalf of the

claimants “as their trustee against a sister state” because

it was “inconceivable that North Dakota [was] prosecut-

ing this damage feature of its suit without intending to

pay over what it thus recover[ed] to those entitled.”

The Eleventh Amendment bars suits such as these

because they are brought by the State in name only; in

substance they are suits by individual citizens against a

State. Alfred L. Snapp & Son v. Puerto Rico, ex rel., Barez,

458 U.S. 592, 607 (1982). In contrast, Kansas’ suit for

breach of the Arkansas River Compact is not, as Colorado

would have it, a mere “coupling” of private claims with

the State’s claim; it is not a mere expedient for the pur-

pose of collection. As the Special Master recognized:

“Of course, this action is no mere contriv-

ance by Kansas to obtain damages for its water

users. Rather, it is the State of Kansas that seeks

damages, which it contends should be measured

in part by the losses suffered by individual

farmers.” 2 Third Report, App. 21.

The Special Master’s determination is amply supported

by the nature of the interests, both sovereign and quasi-

sovereign, that Kansas alone can petition to enforce.

First, in seeking enforcement of the Compact, Kansas

asserts the interests of a “sovereign State.” Texas v. New

Mexico, 482 U.S., at 132, n. 7. Its demand for recognition

from other sovereigns is an “easily identified” sovereign

interest. Alfred L. Snapp & Son, 458 U.S., at 601. The classic

example of one State’s demand for recognition from

another is a border dispute. Ibid.; see, e.g., Rhode Island v.

Massachusetts, 12 Pet. 657, 725 (1838). And just as a State

may demand its sister State’s recognition of rights in land

divided by a border, so Kansas may demand Colorado’s

recognition of rights in interstate waters. See Hinderlider

v. La Plata River & Cherry Creek Ditch Co., 304 U.S. 92, 106

(1938) (States’ authority to apportion waters of interstate

stream by compact, like their authority to adjust State

boundaries by compact, is “a part of the general right of

sovereignty”) (quoting Poole v. Fleeger, 11 Pet. 185, 209

(1837)); Kansas v. Colorado, 206 U.S. 46, 97 (1907); see also

Maryland v. Louisiana, 451 U.S: 725, 766 (1981) (Rehnquist,

J., dissenting) (observing that boundary disputes and dis-

putes over water rights are examples of “the prototypical

sovereign interests”).

original action” involving States’ “

Kansas’ sovereign interest in enforcing the Compact

is not a private claim of any of its citizens for the simple

reason that individual citizens have no such claim. As the

Special Master recognized, Kansas is a signatory to the

Compact, but its citizens are not. 2 Third Report, App. 36.

Indeed, Colorado itself has asserted “that ‘Kansas water

users do not have a remedy’ ” and “that there is ‘no way’

to recover their losses.’” Id., at 33 (quoting Colorado

counsel’s statements in oral argument); accord Colo. Brief

, “i

24 (asserting that individual water users’ “claims are

barred”). This is a result, moreover, that was reached at

Colorado’s behest. In the decision that Article II of the

Compact cites as one of the bases for the Compact’s

provisions, this Court enjoined Kansas water users from

maintaining suit to protect their interests in the waters of

the Arkansas River. Colorado v. Kansas, 320 U.S. 383, 388,

391 (1943); see Art. II, Kan. Brief A-2.

Second, even apart from its sovereign interests as a

party to the Compact, Kansas has quasi-sovereign inter-

ests that support the recovery that it seeks. One of the

first decisions to recognize the concept of quasi-sover-

eignty was Kansas v. Colorado, 206 U.S. 46, 99 (1907), in

which this Court, in the absence of an interstate compact,

exercised original jurisdiction over the claim that Colo-

rado had diverted excessive amounts of water from the

Arkansas River. This Court explained:

——

“In this respect [Kansas] is in no manner evad-

ing the provisions of the 11th Amendment to the

Federal Constitution. It is not acting directly

and solely for the benefit of any individual citi-

zen to protect his riparian rights. Beyond its

property rights it has an interest as a state in

this large tract of land bordering on the

Arkansas river. Its prosperity affects the general

welfare of the state. The controversy rises, there-

fore, above a mere question of local private right

and involves a matter of state interest, and must

be considered from that standpoint.” Ibid. (citing

Georgia v. Tennessee Copper Co., 206 U.S. 230

(1907)).

Contrary to Colorado’s contention that Kansas’ remedy

cannot be based on losses to its water users, this Court

took into account exactly that sort of evidence — crop

yields and levels of water use based on population in

areas abutting the Arkansas River — in determining

whether Kansas was entitled to relief. 206 U.S., at

108-113. ;

This Court reached the same result in the Laramie

River decisions.? This Court held that a State’s interests in

the apportionment of an interstate stream are “indissolu-

bly linked” with the interests of its water users. 286 U.S.,

at 509; 259 U.S., at 468. Thus, a State’s rights under an

equitable apportionment decree are based on the rights of

its water users. Ibid.; see 309 U.S., at 579-580. Here, the

Special Master reasoned that, if the interests of a State’s

2 Wyoming v. Colorado, 259 U.S. 419, modified, 260 U.S. 1

(1922), vacated and new decree entered, 353 U.S. 953 (1957);

Wyoming v. Colorado, 286 U.S. 494 (1932); Wyoming v. Colorado,

298 U.S. 573 (1936); Wyoming v. Colorado, 309 U.S. 572 (1940).

water users properly form the basis of a decree appor-

tioning water between two States, so too may they be the

measure of a claim for breach of the Compact apportion-

ing water between two States. 2 Third Report, App. 26-27,

36.

Colorado would distinguish the Laramie River deci-

sions on the ground that, although the States’ apportion-

ments “were based on use by their respective water users,

they were not the same as those individual claims.” Colo.

Brief 23-24 (emphasis in original). In fact, that formula-

tion is an apt description of Kansas’ claim for damages in

this suit — it is based in part on uses foregone or made

more expensive to its water users. Kansas’ claim is not

the same as its water users’ claims for the simple reason

that there are no such individual claims. Kansas, as a

signatory to the Compact, is the only party with a claim

for breach. Consistent with Wyoming v. Colorado, 309 U.S.,

at 575-576, Kansas seeks a determination only of the

relative rights of the two sovereign States. Cf. Colo. Brief

24. Each State should address in-state considerations

relating to a damages award - funding of the award in

the defendant State, distribution of the award in the

plaintiff State —- according to its own laws. See ibid.; Texas

v. New Mexico, 482 U.S., at 132, n. 7.

In sum, the Eleventh Amendment is no barrier in this

proper original action because Colorado surrendered its

immunity to such actions in the plan of the convention,

the plain language of the Compact authorizes a remedy

based on injury to Kansas’ water users, and Kansas’

sovereign and quasi-sovereign interests provide an addi-

tional basis for that remedy. Colorado’s first exception to

the Third Report of the Special Master should therefore

be overruled.

II. PREJUDGMENT INTEREST IS AN ESSENTIAL

ELEMENT OF COMPLETE COMPENSATION

WHETHER OR NOT THE INJURED PARTY’S

CLAIM IS LIQUIDATED.

The Special Master recommended that the Court con-

firm his ruling “that the unliquidated nature of Kansas’

claim for damages does not bar the award of prejudgment

interest.” 1 Third Report 119 ({ 4). Colorado excepts to

this recommendation, relying on what this Court has

termed “the venerable common-law rule that prejudg-

ment interest is not awarded on unliquidated claims

(those where the precise amount of damages at issue

cannot be computed),” City of Milwaukee v. Cement Divi-

sion, National Gypsum Co., 515 US. 189, 197 (1995). See

Colo. Brief 25-28.

Colorado acknowledges this Court's observation in

City of Milwaukee that “the liquidated/unliquidated dis-

tinction has faced trenchant criticism for a number of

years.” 515 U.S., at 197; see Colo. Brief 26. It might have

added that in City of Milwaukee itself this Court firmly

declined to adopt a rule based on the distinction. 515

U.S., at 197. But even while recognizing “a trend in recent

years to allow prejudgment interest on unliquidated

claims,” Colorado contends that the trend has resulted

“primarily” from legislative action. Colo. Brief 26. It sug-

gests that when Congress has decided to allow interest on

unliquidated claims, it has counterbalanced that remedy

with restrictions on liability. Id., at 26-27. It contends that

in this case, in which no statute governs the question,

interest should be denied because “there is no time lim-

itation on actions for violation of an interstate compact”

and for many years it was difficult for Colorado to detect

that it was breaching the Compact. Id., at 27-28.

In fact, Colorado’s distinction between statutory and

common-law grounds for allowing interest has fared no

better than the liquidated/unliquidated distinction. City

of Milwaukee, in which this Court most recently declined

to apply the distinction, was an admiralty case. This

Court noted that, in contrast with 28 U.S.C. § 1961, which

governs awards of postjudgment interest in most federal

court litigation, there is no comparable statute governing

the award of prejudgment interest. 515 U.S., at 194. The

Court commented:

“Far from indicating a legislative determination

that prejudgment interest should not be

awarded, however, the absence of a statute

merely indicates that the question is governed

by traditional judge-made principles.” Ibid.

The Court took the same approach in West Virginia v.

United States, 479 U.S. 305 (1987), where this Court

affirmed the award of prejudgment interest against a

State as an element of damages for breach of contract:

“ ‘In the absence of an applicable federal statute,

it is for the federal courts to determine, accord-

ing to their own criteria, the appropriate mea-

sure of damage, expressed in terms of interest,

for nonpayment of the amount found to be

due.’ ” Id., at 308-309 (quoting Royal Indemnity

Co. v. United States, 313 U.S. 289, 296 (1941)).

These decisions contradict Colorado’s suggestion that

legislative silence is an implicit endorsement of one sub-

stantive rule or another regarding prejudgment interest.

Colorado asserts that in General Motors Corp. v. Devex

Corp., 461 U.S. 648 (1983), this Court recited the common-

law rule against interest on unliquidated damages and

“would presumably have followed [that rule] in the

absence of a statutory change” in 1946. Colo. Brief a7, Ni.

7. The General Motors Corp. decision itself, however, dis-

pels the notion that this Court, in 1983, would have

endorsed the traditional rule:

“The traditional view, which treated prejudg-

ment interest as a penalty awarded on the basis

of the defendant’s conduct, has long been crit-

icized on the ground that prejudgment interest

represents ‘delay damages’ and should be

awarded as a component of full compensation.”

461 U.S., at 655, n. 10.

Indeed, in the wake of City of Milwaukee, Colorado’s view

is even more untenable since the Court has expressly

declined “to adopt” such a rule. 515 U.S., at 197.

Moreover, this Court has particular latitude in the

exercise of its original jurisdiction to fashion substantive

rules bearing on interest. Thus, in Texas v. New Mexico,

482 U.S. 124, 132, n. 8 (1987), the Court rejected the

defendant State’s argument that the Court lacked power

to allow postjudgment interest absent Statutory authority

to do so. Acknowledging the rule of Pierce v. United

States, 255 U.S. 398, 406 (1921), that postjudgment interest

may not be awarded absent statutory authority, this

Court ruled that “we are not bound by this rule in exer-

cising our original jurisdiction.” 482 U.S., at 132, n. 8.

Inasmuch as federal courts, and in particular this

Court in original actions, allow prejudgment interest

“according to their own criteria,” West Virginia v. United

States, 479 U.S., at 308, the question raised by Colorado’s

exception is whether this case presents any reason more

compelling than City of Milwaukee did for adopting a rule

barring interest on unliquidated claims. Colorado has

pointed to no such reason.

Colorado asserts its good faith, arguing that it was

ignorant that it was breaching the Compact over much of

the time that it was underdelivering water to Kansas

because depletions to usable Stateline flows were difficult

to detect and quantify. Colo. Brief 28. City of Milwaukee

holds, however, that a defendant’s good-faith dispute of

its liability has little bearing on whether to award pre-

judgment interest, because interest is awarded as an ele-

ment of full compensation, not as a penalty for bad-faith

conduct. City of Milwaukee, 515 U.S., at 197. Indeed, it was

precisely the defendant’s plea of good faith that

prompted the Court to address the common-law rule

barring interest on unliquidated claims - and to affirm its

unwillingness to adopt such a rule. [bid.

The Court also made clear that the rationale for its

ruling is not confined to admiralty law. It explicitly noted

that other cases, including a contract case against a State,

have recognized the compensatory purpose of prejudg-

ment interest. Id., at 195, n. 7 (citing, among other cases,

West Virginia v. United States, 479 U.S. 305, 310-311, n. 2

(1987)). It added that a good-faith dispute as to liability,

far from a circumstance so extraordinary as to justify

withholding compensation, is common to most litigation:

“In sum, the existence of a legitimate differ-

ence of opinion on the issue of liability is merely

a characteristic of most ordinary lawsuits. It is

not an extraordinary circumstance that can jus-

tify denying prejudgment interest.” Id., at 198.

The Court concluded that “uncertainty about the outcome

of a case should not preclude an award of interest.” Id., at

197; accord Texas v. New Mexico, 482 U.S., at 129 (observ-

ing that two special masters had recognized that defen-

dant State had acted in good faith, but ruling that “good-

faith differences about the scope of contractual undertak-

ings do not relieve either party from performance”); Gen-

eral Motors Corp. v. Devex Corp., 461 U.S. 648, 655, n. 10

(1983) (recognizing criticism of traditional view treating

interest “as a penalty awarded on the basis of the defen-

dant’s conduct”); Anadarko Petroleum Corp. v. FERC, 196

F.3d 1264, 1268 (D.C. Cir. 1999), modified on other

grounds, 200 F.3d 867 (D.C. Cir.) (per curiam), cert.

denied, 120 S.Ct. 2215 (2000). Colorado has offered no

reason why its assertions of good faith should carry more

weight in this case than those of the defendants in other

recent cases.

Colorado also argues that “there is no time limitation

on actions for violation of an interstate compact,” sug-

gesting that it is unfair to award interest against a defen-

dant when much time has passed. Colo. Brief 28. Whether

in fact there is no such time limitation is debatable,

inasmuch as the Court has not ruled out the applicability

of laches as just such a limitation. See Kansas v. Colorado,

514 U.S. 673, 687-688 (1995). More to the point, however,

this Court’s decisions certainly do limit prejudgment

SS eee oe

interest where the plaintiff is responsible for “ ‘undue

delay in prosecuting the lawsuit.’ ” City of Milwaukee, 515

U.S., at 196 (quoting General Motors Corp. v. Devex Corp.,

461 U.S. 648, 657 (1983)); West Virginia v. United States, 479

U.S., at 311, n. 3. Thus, this Court’s precedents hardly

leave an unsuspecting defendant at the mercy of the

plaintiff who treats a lawsuit as an investment oppor-

tunity. When the plaintiff is not responsible for delay, on

the other hand, the passage of time is not a reason to deny

the plaintiff interest; on the contrary, it is the very reason

to award interest. Anadarko Petroleum Corp., 196 F.3d at

1268; In re Milwaukee Cheese Wis., Inc., 112 F.3d 845, 849

(7th Cir. 1997); In re Oil Spill by the Amoco Cadiz, 954 F.2d

1279, 1331, 1334 (7th Cir. 1992) (per curiam). Here, of

course, this Court has concluded that Kansas was not

guilty of inexcusable delay in bringing suit. Kansas v.

Colorado, 514 U.S. 673, 689 (1995).

In sum, the Court found no reason in City of Mil-

waukee to resurrect the distinction between liquidated and

unliquidated claims, and Colorado has presented no rea-

son for doing so here.

III. KANSAS’ COMPENSATION SHOULD NOT BE

WITHHELD ON THE THEORY THAT COLO-

RADO BREACHED THE COMPACT IN GOOD

FAITH.

As stated above, the Special Master recommended

that the Court confirm his ruling that an award of money

damages to Kansas may be based in part on losses

incurred by Kansas water users. 1 Third Report 119 ({ 3).

He further recommended that Kansas’ damages should

include prejudgment interest, “but only from 1969 to the

date of judgment,” when Colorado knew or should have

known of its breach of the Compact; and Kansas’ dam-

ages during the period 1950-1968 should be adjusted only

for inflation. 1 Third Report 107, 120 ({ 8); see id., at 103.

For the reasons stated in Kansas’ Brief in Support of

Kansas’ Exception to the Third Report of the Special

Master, filed November 24, 2000, Kansas believes pre-

judgment interest should not be limited to the period

when Colorado knew or should have known that it was

violating the Compact, but should be awarded as neces-

sary to afford Kansas full compensation.

Colorado, however, takes a position more radical

than the Special Master’s. In excepting to the Special

Master’s recommendations, it argues both that (1) pre-

judgment interest should be denied for the period

1950-1984 on account of Colorado’s uncertainty over

whether it was in breach and (2) Kansas’ damages should

be further reduced by “some fair percentage” to reflect

Colorado’s uncertainty. Colo. Brief 37. In short, Colo-

rado’s position is that it would be “fundamentally unfair”

to compensate Kansas for all of its injury. Colo. Brief 28

(capitalization omitted).

While Colorado’s argument is lengthy and elaborate,

the entire discussion rests on the Proposition that “factors

in extenuation” should be considered in determining

both the amount of Kansas’ damages and whether Kansas

should receive any prejudgment interest. Ibid. By factors

in extenuation, Colorado means its own asserted igno-

rance of its Compact violations, which it takes pains to

show by describing the difficulty of determining the

effect of groundwater well pumping on usable stateline

flows. Id., at 28-37. Simply stated, Colorado asserts that it

was acting in good faith when it breached the Compact.

This Court has previously found that the evidence of

Colorado’s Compact violations available to Kansas was

“vague and conflicting.” Kansas v. Colorado, 514 U.S. 673,

689 (1995). Colorado invokes this finding to argue that, if

the evidence of its breach was too equivocal to hold

Kansas guilty of inexcusable delay in bringing suit, then

it is likewise too equivocal to hold Colorado liable to

compensate Kansas fully for the breach. Colo. Brief 29-30,

Colorado’s entire argument is misdirected, however,

because its premise is incorrect. Although “factors in

extenuation” may be relevant to a punitive remedy, they

are not relevant to the question of whether a party should

be compensated for its injury. It is telling that Colorado’s

argument on this point fails to acknowledge this Court's

decisions in Texas v. New Mexico and City of Milwaukee.

In Texas v. New Mexico, this Court rejected New Mex-

ico’s argument that it should be relieved of the duty to

compensate for its failure “to deliver water that it, in

good faith, believed it had no obligation to refrain from

using.” 482 U.S., at 129. The Court in 1987 determined

that New Mexico had underdelivered water over the

period 1950-1983. Id., at 127-128. Until 1987, however, the

parties had remained at odds on the interpretation of

New Mexico’s obligations under the Pecos River Com-

pact, two special masters had concluded that New Mex-

ico was acting in good faith, and the Court did not take

issue with that conclusion. Id., at 129. Nevertheless, the

Court firmly held that New Mexico could not escape

liability for its past failures to perform under the Pecos

River Compact because “good-faith differences about the

scope of contractual undertakings do not relieve either

party from performance.” Id., at 129.3

In City of Milwaukee, this Court likewise rejected the

defendant's contention that its good faith should relieve

it of the duty to pay prejudgment interest. 515 U.S., at

196-197. The reason is that a defendant’s good faith is not

a consideration relevant to the allowance of compensa-

tion, relevant though it might be to the issue of whether

to impose a penalty. Id., at 197; see also General Motors

Corp. v. Devex Corp., 461 U.S. 648, 655, n. 10 (1983).

The authority on which Colorado principally relies is

Wyoming v. Colorado, 309 U.S. 572 (1940), a case in which

Colorado had violated an interstate water delivery oblig-

ation. That case actually undermines Colorado’s conten-

tion that its claims in extenuation should be considered

here. See Colo. Brief 28-29. At issue in Wyoming v. Colo-

rado, was whether Colorado should be adjudged in con-

tempt of this Court’s decree equitably apportioning the

waters of the Laramie River. The Court concluded that

° Colorado seeks to distinguish the facts of Texas v. New

Mexico in its Summary of Argument, Colo. Brief 7, although,

once having made the effort, it studiously avoids the subject in

the argument itself. In light of this Court’s 1987 opinion in Texas

v. New Mexico, however, there are no material distinctions to be

drawn. The very premise of the Court’s holding that good faith

does not relieve a party from performance is the factual

proposition that New Mexico had indeed acted in good faith

over an extended period of time. 482 U.S., at 127-129.

Colorado’s attempt to draw gradations of good faith misses the

essential point that the defendant’s state of mind is not relevant

to the determination of whether the injured party should receive

full compensation.

Colorad6 should not be adjudged in contempt because

Wyoming arguably had acquiesced in Colorado’s diver-

sion of more than its share of the river, creating “a period

of uncertainty and room for misunderstanding which

may be considered in extenuation.” 309 U.S., at 582. Colo-

rado’s claim in extenuation was properly considered,

however, not because a judgment holding it in contempt

would have been compensatory to Wyoming, but pre-

cisely because it would not, as described below. See id., at

581-582.

This Court has recognized a distinction between a

contempt citation that is remedial (or civil) in nature and

ene that is punitive (or criminal): “ ‘If it is for civil

contempt the punishment is remedial, and for the benefit

of the complainant. But if it is for criminal contempt the

sentence is punitive, to vindicate the authority of the

court.’ ” Hicks ex rel. Feiock v. Feiock, 485 U.S. 624, 631

(1988) (quoting Gompers v. Bucks Stove & Range Co., 221

U.S. 418, 441 (1911)). Because the purpose of a remedial

contempt citation is to coerce compliance or “to compen-

sate for losses or damages sustained by reason of non-

compliance,” the defendant's state of mind is not at issue.

McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949)

(“The absence of wilfulness does not relieve from civil

contempt. . . . Since the purpose is remedial, it matters

not with what intent the defendant did the prohibited

act”). In contrast, the defendant's state of mind is rele-

vant in the case of criminal contempt. United States v.

United Mine Workers of Am., 330 U.S. 258, 303 (1947) (“In

imposing a fine for criminal contempt, the trial judge may

properly take into consideration the extent of the willful

and deliberate defiance of the court’s order. . . ”).

The Court has cautioned that “[c]ontempts are nei-

ther wholly civil nor altogether criminal,” but may

“ “partake of the characteristics of both.’ ” Gompers, 221

U.S., at 441 (quoting Bessette v. W.B. Conkey Co., 194 U.S.

324, 329 (1904)). It is clear, however, that a contempt

adjudication for violation of a decree like the one in

Wyoming v. Colorado is not primarily remedial or compen-

satory in nature. The Court observed in Wyoming v. Colo-

rado that the issue of whether the plaintiff State has been

injured by a violation of the Court’s decree is irrelevant

to whether the defendant State should be adjudged in

contempt. 309 U.S., at 581 (“After great consideration, this

Court fixed the amount of water from the Laramie riv-

er... to which Colorado was entitled. . . . Colorado is

bound by the decree . . . and is not entitled to raise any

question as to injury to Wyoming .. . ”) (emphasis

added); see also Nebraska v. Wyoming, 507 U.S. 584, 592

(1993) (plaintiff State seeking enforcement of decree of

equitable apportionment “need not show injury”).

Thus, when a finding of contempt depends on the

defendant’s willful and deliberate defiance of the Court’s

authority, it is only logical to take account of an extenuat-

ing circumstance, such as the defendant’s “uncertainty”

and “misunderstanding.” Wyoming v. Colorado, 309 U.S.,

at 582. But when the matter at hand is compensation, the

defendant’s innocent intentions are irrelevant, as is its

plea that it acted in good faith. McComb, 336 U.S., at 191;

accord City of Milwaukee, 515 U.S.. at 197; Texas v. New

Mexico, 482 U.S., at 129.

Colorado cites one additional case, Talbot v. Seeman, 1

Cranch 1, 44 (1801), in support of its contention that the

Court should reduce Kansas’ damages “by some fair per-

centage” on account of Colorado’s ignorance of its

breach. Colo. Brief 37. In Talbot, the United States ship of

war the Constitution recaptured the Amelia, a vessel

owned by a citizen of Hamburg, from French captors.

Captain Talbot, who was in command of the Constitution,

brought suit for condemnation of the Amelia or for pay-

ment of salvage upon restoration to its owner. Talbot, 1

Cranch, at 27. Salvage was “a compensation for actual

service rendered to the property charged with it” and

was “demandable of right for vessels saved from pirates,

or from the enemy.” Id., at 28. The circuit court ordered

the Amelia restored to its owner without payment of

salvage on the grounds that Hamburg was not at war

with France and that the captain and crew of the Consti-

tution thus did not perform any compensable service by

recapturing a vessel from a neutral power. Id., at 3-4, 27.

This Court reversed, holding that the Amelia was recap-

tured from the French, who were in a state of partial war

with the United States, and that salvage in the amount of

one-sixth of the value of the vessel and its cargo should

therefore be paid. Id., at 44.

It is unclear what significance Colorado attributes to

the decision in Talbot. This Court did not, as Colorado

apparently would have it, reduce the compensation pay-

able to the plaintiff in response to a claim of extenuation.

On the contrary, the Court, in reversing a denial of sal-

vage, directed that Captain Talbot and his crew should

indeed be compensated for the services that they had

rendered. Id., at 44-45. In determining the amount of

salvage to be paid, the Court did not opine that full

compensation “is fundamentally unfair,” Colo. Brief 28,

but that, in the absence of an applicable statute, one-sixth

of the value of the vessel and its cargo was a just estimate

of full compensation on account of “the danger from

which the recaptured was saved, and of the risk attend-

ing the retaking of the vessel.” Talbot, 1 Cranch, at 44.4

In sum, none of the cases cited by Colorado is author-

ity for its contention that its claim of extenuation should

be considered in determining an adequate remedy for its

breach of the Compact. In the absence of such authority,

this Court should not afford Kansas less than full com-

pensation.

IV. KANSAS SHOULD BE ALLOWED PREJUDG-

MENT INTEREST AT RATES ADEQUATE TO

COMPENSATE IT FOR ITS LOSS.

The Special Master recommended that Kansas’ dam-

ages should include prejudgment interest at the cates

proposed by Kansas. 1 Third Report 107, 120 (| 8). As the

Special Master recognized, one of the determinants of an

interest rate is opportunity cost, which represents the

foregone “opportunity to invest and earn from” funds

4 The award of compensation was not necessarily identical

to what the Court might have awarded had a statute applied.

One statute, applicable to salvage payable upon recapture of an

American vessel from an enemy, specified that an award of

salvage should be set at between one-eighth and one-half of the

value of the vessel and its cargo. Id., at 30, 43. This Court in no

way suggested, however, that the compensation payable to

Captain Talbot and his crew was being reduced “by some fair

percentage,” Colo. Brief 37, or that one-sixth of the value of the

Amelia and her cargo was anything less than full compensation

for the services rendered.

withheld. Id., at 91. Kansas’ economists proposed two sets

of interest rates: one used to calculate interest on losses to

water users, reflecting a relatively high opportunity cost

to farmers and other individual water users; and another

used to calculate interest on tax losses to the State of

Kansas, reflecting the State’s lower opportunity cost. See

id., at 94. The Special Master noted that Kansas’ econo-

mists had “carefully developed” the proposed rates, and

that Colorado had offered no evidence at all to controvert

them. Id., at 91. Indeed, Colorado’s response to Kansas’

proposed interest rates has been limited to argument of

counsel in post-trial briefing.

Colorado excepts to the Special Master’s recommen-

dation on the ground that any prejudgment interest

awarded to Kansas should be calculated on the basis of

the State’s lower opportunity cost rather than the oppor-

tunity cost actually incurred by its water users. Colo.

Brief 38-41. Colorado’s rationale is a reprise of its Elev-

enth Amendment argument. It reiterates that Kansas does

not legitimately represent the interests of its water users,

such that affording Kansas a recovery based in part on

losses to its water users is tantamount to allowing Kansas

“simply [to] advanc[e] individuals’ claims.” Id., at 39-40.

While acknowledging that Kansas’ water users did

indeed incur a higher opportunity cost on the foregone

use of funds owed as damages, Colorado nevertheless

argues that to provide a remedy for that higher cost

would be “punitive and unfair to Colorado.” Id., at 39.

The answer to Colorado’s Eleventh Amendment

argument remains the same. The Arkansas River Com-

pact makes clear that Kansas does properly represent the

interests of its water users, inasmuch as the term “State”

ee ee

expressly includes the State’s water users. Art. VII-A,

Kan. Brief A-10 to A-11; see Point I.B, supra. The decision

in point, Texas v. New Mexico, likewise confirms that a

State’s action to enforce the interests of “those users who

have suffered the water shortages,” or “those who were

hurt,” is “of such general public interest that the sover-

eign State [is] a proper plaintiff.” 482 U.S., at 131-132 &

n. 7.

Colorado points out, however, that, in accordance

with Texas v. New Mexico, 482 U.S., at 132, n. 7, the State of

Kansas rather than its individual water users should

recover any damages that may be awarded, to be spent as

it determines is in the public interest. Colo. Brief 39.

Colorado perceives an inconsistency in allowing a recov-

ery to the State that is based to any extent on losses to

water users. Ibid. The inconsistency disappears, however,

when one recognizes that Kansas receives a remedy, just

as it brought this action, as a representative of a general

public interest that is sufficiently broad to embrace the

interests of its water users. See Texas v. New Mexico, 482

U.S., at 131-132 & n. 7.

In another variation on the theme, Colorado protests

that, had it tendered a damages payment to Kansas at

some earlier point in this litigation, the tendered monies

would have accrued interest at rates applicable to the

State rather than to individual water users. Colo. Brief

40-41. It contends that awarding interest at the rates at

which water users actually lost use of the monies with-

held “is punitive rather than compensatory.” Id., at 41.

But Colorado’s hypothetical scenario takes for granted

that Kansas would retain the tendered monies in the state

treasury rather than distributing it to those users who

had suffered the water shortages. Had Kansas had the

opportunity to take the latter course (which it surely

could determine was in the public interest, see Texas v.

New Mexico, 482 U.S., at 132, n. 7), it could have averted

the harm to its water users, in the form of lost use of

funds, for which Colorado now seeks to escape liability.

Under such a scenario, interest would have accrued at the

very rates Kansas has proposed.

Colorado similarly asserts that it did not earn interest

at individual water users’ rates on money that will be

used to pay damages. Colo. Brief 41. It neglects to

acknowledge, however, that its own water users did

indeed accrue high rates of income from their use of

water that properly belonged to Kansas. The Special Mas-

ter excluded from evidence Kansas’ estimate of the bene-

fits that Colorado and its water users realized as a result

of breaching the Compact. 1 Third Report 2-3. He noted,

however, that “we should not be oblivious to Colorado’s

use of the water over this long period of years.” Id., at

101. The Special Master’s concern was well-founded. Col-

orado and its water users are subject to the terms of the

Compact, as are Kansas and its water users. Art. VII-A,

Kan. Brief A-10 to A-11. Thus, it is hardly punitive to

expect Colorado to make Kansas and its water users

whole, especially in view of the substantial profits that

Colorado and its water users have derived from their

breach of the Compact. See, e.g., General Motors Corp. v.

Devex Corp., 461 U.S. 648, 655 n. 10 (1983) (“A rule deny-

ing prejudgment interest not only undercompensates the

[plaintiff] but also may grant a windfall to the [defen-

dant] and create an incentive to prolong litigation”); In re

Oil Spill by the Amoco Cadiz, 954 F.2d 1279, 1332 (7th Cir.

1992) (per curiam) (“An injurer allowed to keep the

return on this money has profited by the wrong”).

V. THE MASTER’S RECOMMENDATION ON CROP

LOSSES IS REASONABLE AND SHOULD BE

ACCEPTED.

Colorado’s fourth and last exception challenges the

Special Master’s reliance on the “crop yield-

evapotranspiration relationships used by the Kansas

experts.” Colorado Exceptions 2 (| 4). Colorado’s argu-

ment in support of the exception, however, addresses the

Kansas crop yield-evapotranspiration relationships only

obliquely. Stating that it “will not trouble the Court to

review the testimony on the technical issues,” Colo. Brief

44, Colorado argues that the values reached in that anal-

ysis are simply too high when compared with the low

cost of obtaining groundwater and with other values for

water obtained from a literature review. Id., at 41-49.

Additionally, Colorado challenges the Special Master’s

reference to a value determined by a Colorado expert that

was higher than the Kansas values. Id., at 47-48. Colorado

concludes that the Special Master’s crop loss values are

“unreasonable and inequitable.” Id., at 49.

There are, in fact, as discussed below, a number of

good reasons why the Special Master reached the conclu-

sions that he did. In essence, Colorado is arguing that the

number of new large capacity wells installed over the

period 1950-1977 in the canal service areas in Kansas

should have been more than the 336 such wells actually

installed if the value of crop losses were as high as the

Kansas experts and the Special Master determined. Yet

Colorado introduced no evidence to that effect. Colorado

has simply argued the point without any basis in the

evidence. For instance, Colorado did not even attempt to

analyze how many wells should have been drilled under

its theory. And the Colorado literature review compared

the Kansas values to values derived in other studies that

the Colorado expert himself admitted were not compara- —

ble, making the comparison essentially worthless. Addi-

tionally, the value of water separately determined by a

Colorado expert and referenced by the Special Master

was developed for purposes of this case and was consid-

ered, if anything, too low in relation to what could be

expected in the Arkansas River Basin.

A. Kansas’ Evidence on Crop Losses

Three experts testified for Kansas on crop losses.

Each expert is eminent in his field. Professor Norman

Whittlesey is a recently retired professor of agricultural

economics with more than 30 years in that position and a

fellow of the American Agricultural Economics Associa-

tion. His qualifications are further summarized by the

Special Master. See 1 Third Report 14-15, n. 2. Eugene

Franzoy is an agricultural engineer with many years of

field experience in the very area of concern, crop yield

response to water consumed by the crop. Id., at 57 & n.

14; Second Report of Special Master, Kansas v. Colorado,

No. 105, Orig., 24 (1997). On rebuttal, in response to

Colorado’s criticisms, Kansas called Professor Loyd Stone

of Kansas State University. Professor Stone’s significant

qualifications are summarized by the Special Master. 1

Third Report 50, n. 11, 56. Professor Stone was described

by one Colorado expert as “a prominent soil scientist.”

Colo. Exh. 1085, at 10. Research by Professor Stone was

relied upon by Professor Whittlesey in developing the

crop yield-evapotranspiration (ET) relationships applica-

ble to this case.

In the preparation of the economic analysis, Professor

Whittlesey made a number of visits to the Arkansas River

Valley in Kansas and conducted telephone interviews

with farmers there. He determined through interviews

with farmers that the crops in the surface-water-only

areas were alfalfa, winter wheat and grain sorghum. Col-

orado did not disagree with this determination. 1 Third

Report 46. The States agreed to the amount of consump-

tive use by the crops, known as ET, for each year of

violation by Colorado. Id., at 7-9, 46; 2 Third Report, App.

86, col. v.

It is widely accepted that once the amount of evapo-

transpiration by a crop is known, the yield can be deter-

mined according to a linear relationship of the form

y=mx+b, where “y” is the yield and “x” is the amount of

water taken up, i.e., consumed, by the crop (ET). The “b”

factor is not relevant for incremental determinations of

yield response to water. The Slope “m” of the straight line

represented by this equation is the coefficient that relates

additional water consumed by the crop to additional crop

yield. The Kansas experts cited and discussed no less

than 16 texts and peer-reviewed articles in professional

journals supporting the linearity of the relationship

between crop yield and ET. 1 Third Report 47. The Kansas

experts also relied on personal research and field experi-

ence that confirmed the linearity of the relationship and

the coefficient of relationship between ET and crop yield

for each crop. Even Colorado’s expert admitted that the

linear relationship “has ‘long been understood.’ ” Ibid.

And as the Special Master explained, the exact coefficient

of relationship between yield and ET, the slope “m” of

the linear relationship, was carefully chosen for each crop

to reflect field conditions. See 1 Third Report 49-52, 56.

—— ———

B. Colorado’s Evidence on Crop Losses

Two Colorado experts attempted to directly refute

the Kansas analysis. These were Associate Professor

Dennis Wichelns who had recently become a tenured

professor of agricultural economics, see 1 Third Report

15, n. 3, and Grant Cardon, a relatively new associate

professor, see id., at 55 & n. 13. A third Colorado expert,

Richard Adams, has been a full professor of agricultural

economics for a number of years. Id., at 62 & n. 16. A

fourth Colorado expert, James Lochhead, was formerly

Director of the Colorado Natural Resources Department.

Id., at 63-64, 108, n. 29.

Colorado sought to challenge the Kansas evidence on

crop losses on a number of different legal and factual

grounds. Colorado asserted that Kansas should have

drilled even more wells than had been drilled in order to

mitigate the damages that were being sought from Colo-

rado. The Colorado evidence on mitigation was excluded

by the Special Master. 2 Third Report, App., 68-75. Pro-

fessor Wichelns, in connection with his mitigation anal-

ysis, asserted that more wells should have been drilled if

the value of the crop losses was as high as indicated by

the Kansas evidence. Professor Adams also supported

this view.

Colorado’s primary challenge to the Kansas evidence

was Professor Wichelns’ development of a series of non-

linear equations to describe the yield-ET relationship. He

decided, however, to withdraw his non-linear analysis in

the middle of cross-examination on the basis that his

“data were ‘not reliable’ for the purposes for which he

had used them.” 1 Third Report 53-54. He had, as

described by the Special Master, failed to realize the

fundamental error of using data that were clearly

unsuited for the use he was attempting to make of them.

Ibid. That is, Professor Wichelns had attempted to create a

non-linear relationship between crop yield and ET on the

basis of data from experiments where more water was

put on the crop than the crop could use. He then

attempted to apply non-linear equations that he had

developed from the excess-water data to the water-deficit

conditions of the Arkansas River Valley in Kansas. See id.,

at 53-55. This was done despite the fact that he was fully

aware of the water-deficit situation there. The States had

previously stipulated, as a basis for the work of the

economists, that there were water shortages in Kansas

every year even aside from Colorado’s Compact viola-

tions. Id., at 46; 2 Third Report, App. 86, col. k. Indeed,

Colorado counsel state in the current briefing that the

surface-water-only lands “were not just occasionally

short of water, they were water short every year.” Colo.

Brief 47, n. 14. It was therefore surprising that Professor

Wichelns would attempt to apply equations based on

excess-water data to the Arkansas River Valley in Kansas.

In the wake of the withdrawal of his primary analysis

using non-linear equations, Professor Wichelns, over

Kansas’ objection, expressed a number of new opinions

that were not included in his original expert report. 1

Third Report at 59. These opinions purported to raise

questions about the validity of the regression analyses

used by researchers in the peer-reviewed literature to

determine the linear relationship between crop yield and

ET. The Special Master described these supplemental

opinions as highly technical, but “substantively refuted

by Professor Stone.” Ibid. Colorado incorrectly suggests

that the summary dismissal of the supplemental opinions

was indicative of the Special Master’s analysis of all of

Colorado’s objections. See Colo. Brief 44. In fact, the

Special Master fully explained in his Third Report the

careful consideration given to all of Colorado’s substan-

tive objections to the Kansas evidence. 1 Third Report

45-64.

Professor Adams limited himself to providing a liter-

ature search for studies of water values that could be

compared to the value derived from the Kansas analysis.

He provided an extremely short report, Colo. Exh. 1203.

See Colo. Brief A-28 to A-39. Unfortunately, none of the

studies that he located in his literature search turned out

to be comparable to the values in the Kansas analysis. He

agreed on cross-examination that comparable values

would be higher than the values analyzed in his report.5

5 Water values differ depending on what development

costs are accounted for. There are three “time horizon”

categories recognized by agricultural economists, namely, long

run, short run, and short-short run (intraseasonal). Professor

Adams admitted that the Kansas values in this case are short-

short run values. 1 Third Report 63. The studies reviewed by

Professor Adams were either long run or short run values and

ia ee a 1 6G NR aa ees te emuIANRE 9, lai. 92 TS Riek aaah eine Ase eR oa ee etme

— —

Moreover, Professor Adams stated that the values he had

found in the literature did not represent sales of water,

that he was not “using real world exchanges of money for

water,” and that he was using “mostly computer studies”

for comparison. RT Vol. 200 at 81-84 (A-3 to A-6, infra).

C. The Special Master’s Analysis of the Evidence

on Crop Losses

The Special Master carefully described the evidence

presented by both States on crop losses and fully

explained his reasoning in resolving the evidentiary

issues. 1 Third Report 45-61. The Special Master recog-

nized the benefits of the agreement that the States had

been able to reach on underlying factual issues. The

parties were in agreement for each year 1950-1994 on the

amount of consumptive use by the crops (ET) that would

have occurred but for Colorado’s Compact violations, the

crop mixes, the crop prices, and the crop water deficits.

Id., at 46.

The Special Master then reviewed the evidence on

the linearity of the relationship between crop yield and

ET, analyzing the equation and the values used in the

equation for each of the three crops, namely, alfalfa, win-

ter wheat and grain sorghum. He noted that the value of

the slope of that relationship for each crop was adjusted

to make it applicable to field conditions. He reviewed

therefore not comparable to the values that are relevant in this

case. Ibid. Long run values are lower than short run values, and

short run values are lower than short-short run values. See Kan.

Exh. 1070 (A-8, infra); RT Vol. 203 at 103-108 (Prof. Whittlesey)

(A-20 to A-26, infra).

Colorado’s alternate approach using non-linear equa- |

tions, which was ultimately withdrawn. He also analyzed

in detail the Colorado objections to the Kansas analysis,

pointing out the indicia of reliability associated with the A

Kansas analysis and the lack of foundation for the claim

by Colorado that the otherwise linear relationship

becomes non-linear under field conditions. Id., at 56 (not-

ing that neither Colorado expert could cite a single jour-

nal article to support Colorado’s position). He also

considered other objections to the linearity of the rela-

tionship. Id., at.57-59.

Most importantly for the objections that Colorado

continues to press at this stage of the proceedings, the

Special Master analyzed the argument by the Colorado

experts that more wells should have been drilled if the

crop loss values were as high as the Kansas analysis

showed. The Master, relying on testimony responding to

the Colorado position by Professor Peter Barry, Kansas’

“preeminent” expert on agricultural finance, 1 Third

Report 40-41 & n. 8, pointed to a number of reasons,

unrelated to crop values, why such wells would not have

been drilled, id., at 60-61, drawing into question the val-

idity of the Colorado comparison of groundwater costs

and crop losses.

The Special Master also addressed the claim by Pro-

fessor Adams that his literature review had shown the

Kansas values to be too high. Of great significance to the

Special Master’s analysis, and properly so, was Professor

Adams’ acknowledgment on cross-examination “that the

literature values he reported were not ‘comparable to the

values that are relevant in this case.’ ” Id., at 63. Colorado

challenges the Special Master’s statement by asserting

that Professor Adams testified “that whether the ‘intra-

seasonal’ values would be higher was an empirical ques-

tion. RT. Vol. 200 at 121-122 (Colo. App., Item No. 5).”

4 Colo. Brief 47 (footnote omitted). Colorado fails to point

out, however, that when Professor Adams returned to the

stand on sur-rebuttal, he clarified that “conceptually I

would agree that the intraseasonal would be higher than

the short run, which would be higher than the long run,”

but that he didn’t know how much higher. RT Vol. 208 at

98-99 (A-10 to A-11, infra).

Colorado also asserts that the comparison by Pro-

fessor Adams was appropriate because the studies in the

literature that he had found “were based on well water,

which would be higher than the value of unregulated

surface water in Kansas.” Colo. Brief 47 (emphasis

added). First, Professor Adams was uncertain of the

extent to which the studies he had found involved

groundwater. See Colo. Brief A-79. Second, the surface

water in Kansas is highly regulated through storage in

John Martin Reservoir and release to the Kansas canals on

demand. 1 First Report of Special Master, Kansas v. Colo-

rado, No. 104, Orig., 45-47. The lead Kansas economist,

Professor Whittlesey, also testified that the values that

Professor Adams sought to compare to the Kansas values

were not comparable and would be expected to be lower

than the Kansas values. RT Vol. 203 at 103-108 (A-20 to

A-26, infra).

The Special Master also considered a value for water

that was determined by the Colorado expert James

Lochhead on the basis of a land-fallowing project in the

Palo Verde Irrigation District in California, which was

conducted to provide water to the Metropolitan Water

District of California. The value as determined by Mr.

Lochhead was higher than the Kansas value. Moreover,

Mr. Lochhead confirmed a memorandum that he had

written for purposes of this case in which he had identi-

fied the higher value and commented that even it might

not be as high as one would expect in the Arkansas Basin:

“Assuming similar program costs, the cost of water in the

Arkansas Basin may be higher, since growing season and

annual consumptive use per acre are less.” RT. Vol. 211, at

95-96 (A-25 to A-26, infra). Mr. Lochhead’s analysis was

based on an actual sale of water; it was a real world

exchange of money for water.

Colorado criticizes the Special Master’s reliance on

Mr. Lochhead’s analysis, contending that the price

involved was for municipal rather than agricultural use

Colo. Brief 47-48. As support for this allegation, Colorado

cites the testimony of Professor Adams which is reprinted

in the Appendix to the Colorado Brief. A review of that

transcript, however, reveals that there is no support for

Colorado’s distinction between water uses. The transcript

does not even mention the transaction referred to in the

text of the Colorado Brief.© Indeed, Professor Adams

6 The cited testimony includes Professor Adams’

acknowledgment that his values were not comparable to the

Kansas values and a discussion of a different report of actual

transactions introduced by Kansas that Professor Adams had

not considered in his analysis and that the Kansas expert,

Professor Whittlesey, had indicated would be comparable. The

value shown under those conditions per acre-foot was

$100-$175, versus the value of $109 per acre-foot in the Kansas

analysis. See Colo. Brief A-72 to A-76. In this regard, it is

significant that Professor Adams withdrew from consideration

one of the principal reports on which he was relying, which he

never testified on the transaction for which Colorado

cites his testimony.

In sum, the Special Master thoroughly addressed

each of the Colorado criticisms of the work of the Kansas

experts. In each instance, he found the Colorado criti-

cisms unfounded and unpersuasive. Colorado’s current

attempt to resurrect some of those criticisms is similarly

unavailing. On the basis of the Special Master’s thorough

and well-explained analysis of the agricultural, engineer-

ing and economic testimony on crop losses, the Court

should approve the Special Master’s recommendation on

crop losses and overrule Colorado’s exception.

himself had authored. He withdrew it on cross-examination,

admitting that it contained errors. See RT Vol. 208 at 99-106

(A-11 to A-18, infra).

CONCLUSION

The Exceptions of the State of Colorado to the Third

Report of the Special Master should be overruled.

Respectfully submitted,

Cara J. STOVALL

Attorney General of Kansas

JOHN W. CAMPBELL

Senior Deputy Attorney General

JoHN M. Cassipy

Assistant Attorney General

LELAND E. Ro rs

Special Assistant Attorney General

JOHN B. Draper

Counsel of Record

Special Assistant Attorney General

ANDREW S. MONTGOMERY

Montcomery & ANDREwS, P.A.

Post Office Box 2307

Santa Fe, New Mexico 87504-2307

(505) 982-3873 :

A-1

APPENDIX

TABLE OF CONTENTS

Page

Item 1 Trial Transcript of Proceedings, Vol. 200

at 81-84: Direct Examination of Richard

Si Rs Sines Ne eUadcinsaeny eee cee A-1

item 2 Kansas Exhibit 1070........ 5. .6005cccccccs A-5

Item 3 Trial Transcript of Proceedings, Vol. 208,

at 98-106: Cross Examination of Richard

Se I thik Sake ac wocus coke tt A-6

Item 4 Trial Transcript of Proceedings, Vol. 203

at 103-108: Direct Examination of Nor-

ee ie a A-15

Item 5 Trial Transcript of Proceedings, Vol. 211

at 95-96: Cross Examination of James S.

PI Get eta ee ca to A-22

Appendix Item 1

Excerpt from

RT Vol. 200

December 21, 1999

Direct Examination of Richard M. Adams

A-3

Direct Examination of Richard M. Adams

[RT Vol 200, Pages 81-84]

NOW, I ALSO LOOKED AT - AS I MENT IONED, I

LOOKED AT OTHER STUDIES BESIDES THE ONES

REPORTED HERE, AND THOSE ARE DISCUSSED IN

THE TEXT OF MY REPORT WHERE I MENT ION SOME

STUDIES THAT HAVE LOOKED AT, FOR EXAMPLE,

LEASING OF WATER INTRASEASONALLY.

ONE OF THE STUDIES WE WERE DOING IN THE

DESCHUTES RIVER BASIN - AS A PART OF THAT

STUDY, ONE OF MY COLLEAGUES LOOKED AT HOW

MUCH WE COULD LEASE WATER FROM FARMERS

WHO GREW SOMEWHAT LOW-VALUE CROPS. AND

THIS WOULD BE COMPARABLE TO THE RENTING

THE WATER FROM THEM WITHIN A SEASON, WHICH

IS SOMEWHAT COMPARABLE TO A SITUATION

WHERE FARMERS MAY HAVE THE CROPS IN THE

GROUND BUT THEN THEY’RE OFFERED THE OPPOR-

TUNITY TO LEASE IT. SO THEY RENT THEIR WATER

OUT.

AND IN THOSE STUDIES THEY FOUND — AND I

SHOULD ACTUALLY SAY THESE ARE MODELS.

THEY’RE NOT ACTUAL SITES, BUT THE MODEL

EXERCISED SUGGESTED THAT SUBSTANTIAL

AMOUNTS OF WATER COULD BE AVAILABLE FROM

FARMERS AT $30.00 AN ACRE FOOT, MEANING THEY

WOULD HAVE AN INCENTIVE TO GIVE UP THEIR

WATER AND TAKE THAT MONEY AND FORGET

A-4

ABOUT FARMING IN THAT PARTICULAR YEAR.

SPECIAL MASTER: DO ANY OF THE STUDIES

THAT YOU HAVE ON TABLE 1 REPRESENT SALES OF

WATER?

THE WITNESS: NO, THEY DO NOT, YOUR

HONOR, AND THAT’S A VERY GOOD POINT. WHAT

WE’RE TALKING ABOUT IN THESE TABLES ARE

ECONOMISTS’ ESTIMATES, USING THOSE TECH-

NIQUES THAT I DESCRIBED EARLIER WHERE ECON-

OMISTS TRY TO IMPUTE OR IMPLY A VALUE. AND

IT’S THE SAME THING THAT’S BEING DONE IN THIS

CASE. WE’RE NOT USING REAL WORLD EXCHANGES

OF MONEY FOR WATER IN THAT SENSE.

BUT THERE IS EVIDENCE ON WHAT PEOPLE ARE

WILLING TO PAY FOR WATER IN SIMILAR SITUA-

TIONS SUCH AS THIS. AND THAT IS RELATED TO MY

SECOND LINE OF INQUIRY IN TERMS OF COMMON

SENSE AND WHAT THE REAL WORLD, PERFIAPS,

MIGHT SUGGEST IS A REASONABLE VALUE FOR THIS

AREA.

SPECIAL MASTER: BEFORE WE LEAVE YOUR

FIRST LINE OF REASONING HERE, CAN YOU TELL

ME HOW ANY OF THESE STUDIES WERE DONE, THE

WHEAT STUDY OR THE SORGHUM ONE OR THE

ALFALFA ONE?

THE WITNESS: YES. THESE ARE DONE PRI-

MARILY WITH TWO DIFFERENT TECHNIQUES. THE

WHEAT ONE, FOR EXAMPLE, WAS DONE WITH ONE

OF THESE LINEAR PROGRAMMING TYPE OF MODELS

A-5

IN WHICH THEY CONSTRUCT A MODEL, IF YOU

WILL, OF FARMING IN THE REGION, AND IN THAT

MODEL THEY INCLUDE THE CROPS THAT COULD BE

GROWN, THE YIELDS THAT COULD BE REALIZED,

THE AMOUNT OF WATER AVAILABLE.

THE WAY THE ECONOMISTS THEN USE THE

MODEL IS TO SEE WHAT HAPPENS AS WE PRICE

WATER AT DIFFERENT LEVELS AND WHICH CROPS

FALL OUT. SO WHEN THE CROP FALLS OUT, MEAN-

ING IT’S NO LONGER PRODUCED IN THE MODEL, IT

MEANS THAT THAT CROP CAN NO LONGER AFFORD

TO PAY FOR THAT WATER. THE FARMER WOULD

NOT GROW THAT CROP AS THE PRICE OF WATER IS

INCREASED. AND THAT’S A FAIRLY COMMON TECH-

NIQUE. IN FACT, I THINK THE BULK OF THESE

STUDIES FALL WITHIN THAT GENERAL HEADING OF

USING VARIOUS FORMS OF LINEAR PROGRAMMING.

THERE ARE EARLIER STUDIES —- AND I’M NOT

SURE IF ANY OF THESE ARE OF THAT NATURE -

THAT WOULD HAVE USED SIMPLE BUDGETING.

THEY WOULD SAY A CROP GENERATES $200 IN REV-

ENUE, AND IT GENERATES $30.00 IN PROFIT, AND IT

TOOK TWO ACRE FEET OF WATER TO GROW THE

CROP. THEREFORE, THE RETURNS TO THE WATER

MIGHT BE $15.00 AN ACRE FOOT.

BUT MOST OF THESE STUDIES - AND I WOULD

HAVE TO GO BACK AND [LOOK] AT THEM AGAIN -

AND I DO HAVE THEM ALL AVAILABLE. BUT IF I

RECALL, THE BULK OF THESE ARE LINEAR PRO-

GRAMMING TYPE STUDIES.

A-6

SPECIAL MASTER: WELL, LET ME SEE IF I

CAN PUT THIS IN LAWYER KIND OF LANGUAGE. IS

IT AS SIMPLE AS SAYING, THEN, THAT THESE

STUDIES REPRESENT I GUESS, MOSTLY COMPUTER

STUDIES, BUT

STUDIES, ANYWAY, WHERE THE AUTHOR IS LOOK-

ING AT THE POINT AT WHICH WATER IS SIMPLY TOO

EXPENSIVE AND YOU WOULDN'T FARM IF YOU HAD

TO PAY MORE THAN SOME FIGURE FOR WATER?

THE WITNESS: I THINK THAT’S A VERY

GOOD WAY OF PUTTING IT, YOUR HONOR. WHAT

WE FIND IS THAT THE LOW-VALUE CROPS DROP

OUT FIRST. SO IF WE WERE MODELING A FARMER’S

BEHAVIOR - JUST ONE FARMER - AND THIS FARMER

COULD GROW ANYTHING FROM AVOCADOS TO

WHEAT - AND WE KNOW THAT AVOCADOS OR CAR-

ROTS ARE A HIGH-VALUE CROP - THE NORMAL

ECONOMIC REACTION WOULD BE AS WATER GOES

UP IN PRICE, I'M GOING TO STOP GROWING THE

WHEAT BECAUSE I CANNOT MAKE ANY MONEY

GROWING WHEAT AT THAT PRICE. BUT I WOULD

CONTINUE TO GROW SUGARBEETS, AND IF WATER

GOT MORE EXPENSIVE AND I STOPPED GROWING

SUGARBEETS, THEN I WOULD ONLY GROW COTTON.

AND IF THAT WATER GOT PROGRESSIVELY MORE

EXPENSIVE, THEN I WOULD HOPE TO BE ABLE TO

GROW AVOCADOS OR ORANGES IF I HAD A CLI-

MATE THAT WOULD ALLOW THAT. BUT THAT’S THE

GENERAL LOGIC THAT APPLIES HERE, AS YOU HAVE

CORRECTLY STATED.

* + *

A-7

Appendix Item 2

Kansas Exhibit 1070

A-8

KANSAS EXHIBIT 1070

Time Horizon

Long Run

Short Run

Short/Short Run

Definition

Net of development &

crop production costs

Net only of variable

costs of production

Net of marginal

irrigation and harvest

costs

Value

Water

Lowest

Middle

Highest

Appendix Item 3

Excerpt from

RT Vol. 208

January 20, 2000

Cross Examination of Richard M. Adams

A-10

Cross Examination of Richard M. Adams

RT Vol. 208 at 98-106

* * +

Q. IT’S ALSO YOUR TESTIMONY, IS IT NOT,

THAT THE AMOUNT BY WHICH THE INTRASEASO-

NAL VALUES WILL BE HIGHER THAN THE SHORT-

RUN VALUES IS NOT KNOWN?

A. I BELIEVE I STATED IT WAS AN EMPIRICAL

QUESTION

AS TO WHETHER THE VALUE WOULD BE X DOLLARS

OR Y DOLLARS HIGHER.

Q. BUT IT WOULD BE HIGHER, WOULDN'T IT?

A. IT COULD BE, OR THEY COULD POSSIBLY BE

THE SAME, BUT THEY WOULD PROBABLY BE

HIGHER, AND I BELIEVE I TESTIFIED TO THAT

UNDER CROSS WHEN WE HAD THE - WHEN I WAS

FIRST ADMONISHED BY THE MASTER FOR NOT PAY-

ING ATTENTION TO HIM. I DON’T RECALL EXACTLY

WHAT THE VISUAL WAS, BUT WE HAD A VISUAL UP

THERE, AND I THINK WE TALKED ABOUT THIS. AND

I DID STATE THAT CONCEPTUALLY I WOULD AGREE

THAT THE INTRASEASONAL WOULD BE HIGHER

THAN THE SHORT RUN, WHICH WOULD BE HIGHER

THAN THE LONG RUN.

SPECIAL MASTER: I DON’T ADMONISH WIT-

NESSES. I JUST REQUESTED THAT YOU TURN

AROUND.

THE WITNESS: I’M SORRY.

A-11

MR. DRAPER: AND THE EXHIBIT, FOR THE

RECORD, THAT WE WERE TALKING ABOUT AT THAT

TIME IS PLAINTIFF’S EXHIBIT 1070, THE ONE THAT

COMPARED THE LONG RUN AND SHORT RUN AND ;

SHORT-SHORT RUN.

Q. NOW, ONE OF THE SOURCES THAT YOU ARE

RELYING UPON FOR THE COMPARISONS THAT YOU

ARE TESTIFYING TODAY TO IS THE PAPER THAT YOU

DID WITH MR. CHO; ISN’T THAT RIGHT?

A. THAT IS ONE OF THEM THAT'S IN HERE. AS I

STATED EARLIER, I AM NOT TYING THIS COMPARI-

SON TO ANY

100

SPECIFIC VALUE IN THE LITERATURE, RATHER, I

WAS LOOKING AT THESE VALUES FROM VARIOUS

STUDIES AS AN INDICATOR OF THE RANGE OF

VALUES THAT ONE MIGHT EXPECT FOR THESE

TYPES OF CROPS.

Q. AND THAT IS ONE OF THE SOURCES THAT,

AGAIN, IS NOT AN INTRASEASONAL OR SHORT-

SHORT-RUN STUDY; CORRECT?

A. IT’S A SHORT-RUN SITUATION REFLECTING

AN AREA WHERE FARMERS ARE SOMEWHAT

WATER-SHORT.

Q. DO YOU HAVE A COPY OF YOUR REPORT?

IT’S PLAINTIFF’S EXHIBIT 1018 [Richard M. Adams &

Seong Hoon Cho paper].

A. NO, I DO NOT.

A-12

Q. (COUNSEL HANDS DOCUMENT TO WIT-

NESS.)

A. THANK YOU.

Q. YOU MADE AN ANALYSIS THAT’S REPORTED

IN THIS JOURNAL ARTICLE OF WATER VALUES; ISN’T

THAT RIGHT?

A. THE PURPOSE OF THE PAPER WAS NOT TO

ESTIMATE WATER VALUE BUT, RATHER, IT WAS TO

TALK ABOUT CHANGES IN FARM PROFITS UNDER

DIFFERENT LAKE LEVELS FOR KLAMATH LAKE,

OREGON, BUT ONE CAN DERIVE WATER VALUES

FROM THE ASSESSMENT, BUT THAT WAS NOT NEC-

ESSARILY THE PRIMARY PURPOSE. IT WAS TO LOOK

AT THE TRADE-OFF BETWEEN WATER FOR ENDAN-

GERED SPECIES AND AGRICULTURE.

Q. BUT YOU DID DETERMINE THE WATER

VALUES IN THE COURSE OF YOUR STUDY, DIDN’T

YOU?

A. THAT IS CORRECT. THERE ARE SOME WATER

VALUES

101

REPORTED IN THIS STUDY.

Q. YOU LOOKED AT FOUR DIFFERENT KINDS

OF FARMING OPERATIONS, DIDN’T YOU?

A. I DID - OR WE DID, ACTUALLY.

Q. IF WE LOOK AT TABLE 7, WHICH IS ON PAGE

2746, YOU -

A. YES, SIR.

A-13

Q. - SET OUT IN TABLE 7 THE CROP MIX AND

THE CROPPED ACRES, IRRIGATION TECHNIQUES,

AND OTHER INFORMATION REGARDING EACH

FARM MODEL; ISN’T THAT RIGHT?

A. YES, THAT’S TRUE.

Q. I THINK YOU’VE TESTIFIED EARLIER THAT

EITHER MODELS II OR III WOULD BE THE ONES

THAT WOULD BE CLOSEST TO THE CROP MIX THAT

WE ARE DEALING WITH IN THIS CASE; ISN’T THAT

RIGHT?

A. I THINK NO. 3 WOULD BE CLOSER.

Q. ALL RIGHT. LET’S TURN OVER, THEN, TO) -

THE NEXT PAGE, WHICH IS TABLE 8.

A. NOW, I SHOULD POINT OUT THERE’S AN

ERROR IN THIS TABLE.

Q. OH, WHERE IS THAT?

A. IT’S IN COLUMN 3, FARM MODEL III.

Q. AND WHERE DOES THE ERROR APPEAR?

A. WELL, THE ERROR APPEARS - IF YOU START

CALCULATING INCREMENTAL CHANGES IN WATER

AND THE CORRESPONDING CHANGES IN PROFITS,

THERE’S AN ANOMALOUS RESULT THAT I SHOULD

HAVE CAUGHT, AND

102

I’M EMBARRASSED TO SAY THAT I HAVE AN ERROR

IN ONE OF MY PAPERS. BUT IF YOU LOOK AT THE

CHANGE IN THE VALUE OF WATER ACROSS INCRE-

MENTS, IT GOES FROM $11 FOR ONE VERY SMé..L

AMOUNT OF WATER, AND IT JUMPS TO 200, AND

A-14

THEN IT DROPS TO 160, AND THEN FOR THE MOST

SEVERE REDUCTION, IT FALLS BACK TO 97.

AS AN ECONOMIST I WOULD KNOW - I SHOULD

HAVE CHECKED THIS, BUT YOU NEVER EXPECT TO

SEE AN UPWARD-SLOPING DEMAND CURVE FOR A

DRY DEMAND, AND THAT’S BASICALLY WHAT THIS

WOULD IMPLY, IS THAT SOMEHOW AT A CERTAIN

RANGE, THERE’S AN UPWARD-SLOPING DEMAND

CURVE.

AND IN GOING BACK AND LOOKING AT THE

SOLUTION PROCEDURE, THE LINEAR PROGRAM-

MING MODEL, WHAT HAPPENED ON THAT PARTIC-

ULAR PIVOT POINT, THERE WAS SUCH A SMALL

AMOUNT OF WATER TAKEN AWAY, THE MODEL

BASICALLY HICCUPPED. SO THOSE ANALYSES OF

THE MARGINAL VALUE OF WATER FOR THOSE LAST

THREE OR FOUR - PARTICULARLY THE ONE THAT

GOES UP - THE TWO THAT GO UP ARE ANOMALOUS

RESULTS AND WOULD VIOLATE ECONOMIC

ASSUMPTIONS.

SPECIAL MASTER: ARE YOU TALKING

ABOUT TABLE 7, PROFESSOR?

THE WITNESS: TABLE 8, I BELIEVE, YOUR

HONOR. HE WAS ASKING ABOUT TABLE 8. AND THE

REFERENCE, YOUR HONOR, IS TO THIS COLUMN

103

JUST UNDER “FARM MODEL III.” AND ONE WAY

THAT A PERSON COULD TEASE OUT SOME MARGI-

NAL VALUES FOR WATER WOULD BE TO CHANGE

THE PROFITS ALONG WITH THE CHANGE IN WATER.

A-15

NOW, THE LEFT-HAND SIDE OF THAT TABLE

REPORTS DIFFERENT. LAKE LEVELS, AND IT ALSO

SHOWS THE CORRESPONDING CHANGE IN WATER

AVAILABILITY IN THE NEXT COLUMN. SO YOU CAN

DO A CALCULATION BY SEEING HOW MUCH WATER

WAS TAKEN AWAY FROM THE FARMS AND CALCU-

LATING THE CHANGES IN PROFITS.

AND WHAT YOU SEE IS OVER IN THE FIRST

FOUR OR FIVE CHANGES, IF YOU WERE TO CALCU-

LATE THIS, THESE WATER VALUES AND MARGINAL

VALUE OF WATER IS ABOUT $15 TO $20 A FOOT.

THEN IT SUDDENLY JUMPS TO 200. THEN IT FALLS

TO 160, AND THEN IT FALLS FURTHER TO 97.

ECONOMIC THEORY SAYS THAT THIS VALUE

SHOULD BE GOING UP CONSTANTLY AS WE REDUCE

THE RESOURCE OF INTEREST HERE, WHICH IN THIS

CASE IS WATER. SO AGAIN, IT’S AN EMBARRASS-

MENT THAT THE ONE ARTICLE THAT MADE IT

BEFORE THE SUPREME COURT IS IN ERROR.

BY MR. DRAPER:

Q. WELL, YOU’RE NOT ALONE, IF THAT’S ANY

COMFORT. LET’S TAKE A LOOK AT THE NO. 2

MODEL, WHICH IS RELATIVELY CLOSE. IT’S HAY

AND PASTURE WITH FLOOD IRRIGATION.

A. THAT’S REALLY NOT CLOSE.

104

Q. MY RECOLLECTION WAS THAT EITHER

MODEL II OR MODEL III WERE THE ONES THAT YOU

CONSIDERED CLOSE TO OUR SITUATION HERE.

A-16

A. I DON’T BELIEVE I STATED THAT. I

THOUGHT I WAS STATING MODEL III. MODEL II

DOES NOT HAVE ANY CROP COMPARABLE TO

WHEAT OR GRAIN SORGHUM IN THIS MIX.

Q. OKAY.

A. AGAIN, I THINK NO. 3 IS THE ONE THAT

WOULD BE COMPARABLE. IT HAS BARLEY, WHICH IS

A LITTLE MORE PROFITABLE, PERHAPS, THAN

GRAIN SORGHUM. IT HAS WHEAT. IT HAS ALFALFA.

AND IT ALSO HAS [sic] TO LOWER VALUE CROPS. I

DON’T BELIEVE - AT LEAST IN MY OPINION, I DON’T

CONSIDER II TO BE COMPARABLE.

Q. OKAY. LET’S TURN OVER, THEN, TO TABLE

10, WHICH IS ON THE SECOND TO LAST PAGE. IT’S

PAGE NO. 2748. DO YOU SEE TABLE 10?

A. YES, SIR, I DO.

Q. THERE YOU LIST “MARGINAL WATER VALUE

FOR MODELED FARMS UNDER DIFFERENT WATER

SUPPLIES”; RIGHT?

A. CORRECT.

Q. SO WE CAN COMPARE THE VALUE OF

WATER THAT YOU FOUND ASSOCIATED WITH EACH

OF THE DIFFERENT FARMING MODELS, CAN’T WE?

A. WE CAN. BUT, AGAIN, FARM MODEL III,

THAT CALCULATION IS NOT CORRECT.

SPECIAL MASTER: IS IT GOING TO BE

105

HIGHER OR LOWER?

A-17

THE WITNESS: IT WOULD BE LOWER.

SPECIAL MASTER: CAN YOU ESTIMATE BY

WHAT PERCENTAGE? IS IT GOING TO BE A DOLLAR

OR TWO OFF?

THE WITNESS: ACTUALLY, I DID THE CAL-

CULATION. I BELIEVE IT COMES OUT TO BE - IF WE

LOOK AT THE BASE CASE, 2.69, AND WE LOOK AT

EVEN THE MOST EXTREME CASE, WHICH IS 1.69, IF

WE TAKE AN ACRE FOOT AWAY FROM THAT FARM, I

BELIEVE THE VALUE COMES OUT TO BE EITHER $56

OR $65 RATHER THAN 80. I DON’T HAVE MY CALCU-

LATOR HERE, YOUR HONOR, BUT I DID CHECK THAT

WHEN I DISCOVERED THIS OTHER ERROR.

SPECIAL MASTER: SO 80 IS GOING TO BE

APPROXIMATELY WHAT THAT IS?

THE WITNESS: IT’S EITHER 56 OR 65, I

BELIEVE, IN THAT RANGE.

BY MR. DRAPER:

Q. SO IT’S STILL HIGHER THAN THE MODEL II?

A. IT IS. BUT I - AND HAVING DISCOVERED

THIS ERROR IN FARM MODEL III, I'M UNCOMFORT-

ABLE WITH THIS TABLE. AGAIN, THAT’S WHY I

TRIED NOT TO PIN ANY OF THESE - TO PIN MY

ASSESSMENT OF THE REASONABLENESS OF THE

KANSAS ESTIMATES ON ANY PARTICULAR EMPIRI-

CAL STUDY.

EMPIRICAL STUDIES DO, UNFORTUNATELY,

HAVE ERRORS THAT DON’T GET CAUGHT IN THE

REVIEW

A-18

106

PROCESS. THAT’S WHY I THINK IT’S IMPORTANT

THAT WE LOOK AT A RANGE OF STUDIES AND A

RANGE OF VALUES TO UNDERSTAND WHAT THE

LIKELY VALUE OF WATER WOULD BE.

Q. ARE YOU WITHDRAWING YOUR ENDORSE-

MENT OF THIS [EXHIBIT] FOR PURPOSE[S] OF THIS

CASE?

A. I THINK, GIVEN MY UNCERTAINTY ABOUT

THESE NUMBERS AND GIVEN THAT I HAVE OTHER

ESTIMATES IN THIS TABLE, I WOULD CHOOSE TO

WITHDRAW THIS.

Q. ALL RIGHT. WELL, THAT WILL SAVE US A

GOOD BIT OF TIME. IN FACT, I THINK WITH THAT, I

AM FINISHED. NO MORE QUESTIONS.

REDIRECT EXAMINATION

BY MR. ROBBINS:

Q. WITHOUT RELIANCE ON THE ADAMS AND

CHO PAPER, DO YOU FEEL THAT YOUR OPINION IS

WEAKENED OR CHANGED IN ANY WAY?

A. ABSOLUTELY NOT.

Q. THANK YOU.

I HAVE NO OTHER QUESTIONS, YOUR HONOR.

* * *

A-19

Appendix Item 4

Excerpt from

RT Vol. 203

January 12, 2000

Direct Examination of Norman K. Whittlesey

A-20

Direct Examination of Norman K. Whittlesey

[RT Vol. 200 at 103-108]

103

* * *

Q. NOW, THE EVALUATION BY RICHARD M.

ADAMS, IS THAT DEFENDANT’S EXHIBIT 1203?

A. YES.

Q. AND IN PLAINTIFF’S EXHIBIT 1017, DID YOU

MAKE AN ANALYSIS OF PROFESSOR ADAMS’ WORK?

A. YES, I DID.

Q. HOW DID YOU GO ABOUT DOING THAT?

A. WELL, PROFESSOR ADAMS’ APPROACH TO

HIS REPORT WAS TO COLLECT VALUES OF WATER

FROM PUBLISHED LITERATURE OVER SOME HIS-

TORIC PERIODS AND FROM VARIOUS REGIONS OF

THE WESTERN UNITED STATES.

Q. HE DID A LITERATURE REVIEW?

A. IN ESSENCE, THAT WAS HIS REPORT. IT WAS

A LITERATURE REVIEW INTENDED TO COMPARE

WATER VALUES FROM THE PUBLISHED LITERATURE

WITH THOSE WHICH HE DEVELOPED FROM THE

MEASURE OF KANSAS DAMAGES FOR CROP LOSS

FROM THE KANSAS REPORT.

Q. NOW, IN THE CROSS-EXAMINATION OF PRO-

FESSOR ADAMS, HE AND I DEVELOPED WHAT IS

MARKED AS PLAINTIFF’S EXHIBIT 1070. DO YOU

HAVE THAT?

A. YES, I DO.

A-21

Q. WHAT IS THE RELEVANCE OF PLAINTIFF’S

104

EXHIBIT 1070 TO THE ANALYSIS IN PROFESSOR

ADAMS’ REPORT?

A. IN A VERY ABSTRACT SENSE, WHAT IS

SHOWN IN EXHIBIT 1070 IS AT LEAST THREE POSSI-

BLE MEASURES OF WATER VALUE THAT CAN BE

DERIVED BASED ON, IN THIS CASE, THE DEFINITION

OF TIME HORIZON, LONG RUN AND SHORT RUN

AND WHAT'S CALLED A SHORT-SHORT RUN IN THIS

CASE AND WHAT I REFERRED TO IN MY REPORT AS

AN INTRASEASONAL SITUATION.

IN GENERAL, THE DEFINITION OF “LONG RUN”

IN ECONOMICS IS THAT ALL COSTS ARE VARIABLE.

SO WE’RE STARTING FROM A POSITION IN WHICH

THERE ARE NO INVESTMENTS AND MAKING OR

COLLECTING INFORMATION OR MAKING AN ANAL-

YSIS ABOUT A DECISION, IN THIS CASE, PERHAPS

REGARDING WHETHER TO IRRIGATE OR DEVELOP

IRRIGATION.

AND SO IN SUCH A SITUATION, IF ONE IS CON-

SIDERING THE POSSIBILITY OF DEVELOPING A NEW

IRRIGATION PROJECT IN THE DESERT, LET’S SAY,

WHERE THERE’S NO CROPLAND AND NOTHING

THERE THAT WE CAN, SAY, DRILL-WELLS AND

START IRRIGATING, WE HAVE TO CONSIDER AS THE

RETURNS TO THE WATER, OR THE NET VALUE OF

THE WATER, NOT ONLY ALL OF THE COSTS OF PRO-

DUCTION - THE USUAL VARIABLE COSTS OF FERTIL-

IZER AND MACHINERY AND SEED AND SO ON - BUT

. e

A-22

ALL THE FIXED COSTS OF THE DEPRECIATION AND

CAPITAL ASSOCIATED WITH MACHINERY AND IN

ADDITION TO THE COST OF

105

OBTAINING THE WATER.

NOW, THERE’S A COUPLE OF WAYS ONE CAN DO

THAT. BUT NEVERTHELESS, WHAT WE’RE TALKING

ABOUT IN THE LONG RUN IS A VALUE OF WATER

THAT IS NET OF TOTAL COSTS, FIXED AND VARI-

ABLE COSTS. AND BECAUSE WE ARE ACCOUNTING

FOR WHAT SHOULD BE ALL COSTS IN THAT SET-

TING, WE WOULD EXPECT THE VALUE OF WATER TO

BE LOWEST OF THOSE POSSIBILITIES THAT EXIST.

THE NEXT AND WHAT I CALL SHORT RUN AND

WHAT IS LABELED AS SHORT RUN IN THIS CASE IS

NORMALLY THAT WHICH IS OBSERVED IN THE LIT-

ERATURE AS DEVELOPED BY AN ECONOMIST WITH

BUDGET STUDIES OR LINEAR PROGRAMMING OR

NONLINEAR PROGRAMMING IN WHICH THE VARI-

ABLE COSTS OF PRODUCTION OF CROPS.ARE PART

OF THE ANALYSIS AND HENCE BECOME SUB-

TRACTED FROM THE GROSS VALUE OF WATER FOR

CROP PRODUCTION. AND IN THAT SENSE, WE GET

WHAT IS LABELED AS A MIDDLE VALUE OF WATER

OR SOMETHING THAT WOULD BE BETWEEN THE

LOWEST AND THE HIGHEST.

THE SHORT-SHORT RUN, OR WHAT MIGHT BE

VIEWED AND WHAT I TERM THE INTRASEASONAL

SETTING, IS THAT OF - LET ME BACK UP AND SAY

ONE MORE THING ABOUT THE SHORT RUN JUST SO

A-23

IT’S CLEAR. AND THAT IS THAT IN GENERAL WHAT

THAT IMPLIES IS THAT THE QUANTITY OF THE

WATER AVAILABLE TO THE FARM IS KNOWN AT THE

BEGINNING :

106

OF THE SEASON SO THAT ALL DECISIONS ABOUT

INPUT COSTS ARE ABSOLUTELY KNOWN AND THAT

ONE CAN THEN OPTIMIZE, IN ECONOMIST’S TERMS,

THE USE OF THAT WATER IN DERIVING THE HIGH-

EST POSSIBLE VALUE IN CROP PRODUCTION.

AND THE SHORT-SHORT RUN, OR THE INTRA-

SEASONAL CASE, WE ARE TALKING ABOUT THE

CONDITIONS THAT EXISTED IN WESTERN KANSAS

IN THE DITCH SERVICE AREA WHERE CROPS WERE

ESTABLISHED, CROPS WHICH WERE DROUGHT TOL-

ERANT IN LARGE PART - WHEAT, SORGHUM, AND

ALFALFA - BUT WOULD ALWAYS RESPOND TO

WATER. AND WE’RE DESCRIBING THE INCREMENT

OF YIELD THAT WOULD HAVE BEEN ACHIEVED IF

THE WATER WERE APPLIED TO THESE GROWING

CROPS.

SO WE ARE NOT CONCERNED ABOUT THE

EFFECTS OF THE VARIABLE OR THE FIXED COSTS

BECAUSE THE CROP IS ALREADY THERE. THE ONLY

MARGINAL COSTS THAT BECOME RELEVANT AT

THIS POINT ARE THOSE ASSOCIATED WITH THE

APPLICATION OF THE ADDITIONAL WATER, OR THE

IRRIGATION COST, AND THE ACCOUNTING FOR THE

HARVEST OF THE ADDITIONAL CROP. SO IN THIS

CASE, WE ARE GOING TO SUBTRACT FROM GROSS

A-24

REVENUE ONLY THE MARGINAL COSTS ASSOCI-

ATED WITH THAT INCREMENT OF WATER AND PRO-

DUCTION. AND IN THIS CASE, WE WOULD GET THE

HIGHEST VALUE OF WATER IN THE RANGE OF THE

THREE THAT WE DESCRIBED HERE.

107

Q. IN MAKING COMPARISONS WITH REGARD

TO WATER VALUES, IS IT IMPORTANT TO KNOW

WHICH TIME HORIZON YOU’RE DEALING WITH IN

EACH CASE?

A. YES, IT IS. AND IT WOULDN’T, FOR EXAM-

PLE, BE APPROPRIATE TO USE A LITERATURE VALUE

FOR A SHORT-RUN OR A LONG-RUN CONDITION OR

SET OF ASSUMPTIONS AND THEN SAY THAT THAT

COMPARES TO THE INTRASEASONAL VALUE THAT

WE ARE ASSESSING IN THIS CASE.

THE INTRASEASONAL VALUE IS NOT UNLIKE - I

BELIEVE I HEARD THE LANGUAGE IN THE COURT

HERE AT SOME POINT IN REVIEW OF SOME ARTICLE

ABOUT WATER VALUE IN CALIFORNIA THAT WAS

NEEDED TO FINISH THE CROP, AND IT HAD A VERY

HIGH VALUE. I DON’T REMEMBER WHICH IRRIGA-

TION WE WERE TALKING ABOUT OR WHO WAS

TALKING ABOUT IT. BUT THAT’S THE NATURE OF

WHAT WE’RE TALKING ABOUT HERE IS GETTING

MORE OUT OF THE EXISTING CROP.

Q. DID YOU ANALYZE PROFESSOR ADAMS’

REPORT, DEFENDANT’S EXHIBIT 1203, TO DETER-

MINE WHETHER ANY OF THE VALUES THAT HE

REPORTED THERE WERE COMPARABLE TO THE

A-25

INTRASEASONAL VALUES THAT WE ARE DEALING

WITH IN THIS CASE?

A. YES, I DID.

Q. LET ME ASK YOU TO TURN TO TABLE 1 IN

DEFENDANT’S EXHIBIT 1203. THAT’S JUST AFTER

PAGE 9.

SPECIAL MASTER: TABLE 3?

MR. DRAPER: TABLE 1.

108

Q. DOES THIS TABLE SHOW SOME OF THE

SOURCES THAT PROFESSOR ADAMS COLLECTED?

A. YES, IT DOES.

Q. DID YOU DETERMINE WHETHER ANY OF

THE SOURCES CITED FOR THE WATER VALUES ASSO-

CIATED WITH WHEAT, GRAIN SORGHUM, OR

ALFALFA - DID YOU DETERMINE WHETHER ANY OF

THOSE WERE COMPARABLE TO THE INTRASEASO-

NAL TIME HORIZON THAT WE’RE DEALING WITH IN

THIS CASE? |

A. YES. 1 DID REVIEW ALL OF THE LITERATURE

THAT IS REPRESENTED BY THE CROPS AND THEIR

RESPECTIVE VALUES IN THAT TABLE. AND IN ALL

CASES BUT ONE, THE VALUES WERE REPRESENTA-

TIVE OF WHAT I WOULD DESCRIBE AS SHORT RUN

WITH ONLY ONE - AND THEN A - ACTUALLY, LET’S

SEE. LET ME BE SURE I DON’T MISSPEAK. YEAH,

THAT’S TRUE. AND THEN THE ONE VALUE -

THERE’S ONE SET OF VALUES OR ONE REFERENCE

FROM WASHINGTON STATE UNIVERSITY THAT

A-26

RELATED TO AN IRRIGATION DEVELOPMENT PRO-

JECT IN SOME NONIRRIGATED PARTS OF THE STATE

THAT WOULD HAVE TO BE DESCRIBED AS A LONG-

RUN VALUE.

SO IN SUMMARY, ALL OF THE VALUES IN THE

TOP HALF OF THIS TABLE RELATING TO WHEAT

AND SORGHUM AND ALFALFA ARE OF A NATURE

WHICH WOULD NOT BE DIRECTLY COMPARABLE TO

THOSE BEING DETERMINED OR THE TYPE OF ANAL-

YSIS BEING CARRIED OUT IN THE KANSAS CASE.

A-27

Appendix Item 5

Excerpt from RT Vol. 211

January 25, 2000

Cross Examination of James S. Lochhead

A-28

Cross Examination of James S. Lochhead

[RT Vol. 211 at 95-96]

* * *

Q. I'D LIKE TO SHOW YOU WHAT WE’VE

MARKED AS PLAINTIFF’S EXHIBIT 1089. THIS IS A

MEMORANDUM WRITTEN BY YOU, IS IT NOT?

A. YES, IT 5S.

Q. THIS WAS WRITTEN IN CONNECTION WITH

YOUR ANALYSIS FOR PURPOSES OF THIS CASE?

A. THAT’S CORRECT.

Q. WOULD YOU READ THE SECOND PARA-

GRAPH OF THE MEMORANDUM, PLEASE.

A. THE SECOND NUMBEP*,D PARAGRAPH OR

SECOND OVERALL?

Q. THE SECOND PARAGRAPH ON PAGE 1.

A. “THE PVID PROGRAM IS GENERALLY

REPORTED AS BEING SUCCESSFUL FROM AN

ADMINISTRATIVE, FINANCIAL, AND ECONOMIC

STANDPOINT. MWD PAID A TOTAL OF $26.6 MILLION

FOR 185,978 ACRE-FEET OF WATER OVER A TWO

YEAR PERIOD, OR $143 PER ACRE-FOOT OF WATER

PER YEAR. ASSUMING SIMILAR PROGRAM COSTS,

THE COST OF WATER IN THE ARKANSAS BASIN MAY

HIGHER, SINCE GROWING SEASON AND ANNUAL

CONSUMPTIVE USE PER ACRE ARE LESS.”

A-29

Q. DID YOU DO ANY FURTHER INVESTIGATION

OF THE PRICE ASPECT OF THE WATER BANK?

A. NO. AND, IN FACT, I REALLY DIDN’T DO

ANY INVESTIGATION OF THE PRICE ASPECT OF THE

WATER BANK.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.