On January 14, 2026, a California Court of Appeal upheld the Environmental Impact Report (EIR) certified by the City of American Canyon (American Canyon) and the accompanying water supply assessment (WSA) in City of Vallejo v. City of American Canyon. The California Environmental Quality Act (CEQA) requires a WSA to be prepared for certain large-scale development projects as part of the environmental review process to prove that adequate water supplies will be available for the project once complete. Legal challenges related to the availability of water to supply large developments are becoming increasingly common. The Vallejo case provides some new insights into the scope and details required for a valid WSA under CEQA.
The project at issue in the Vallejo case was a 2.4-million-square-foot industrial warehouse complex on 208 acres of undeveloped land in American Canyon. The neighboring City of Vallejo (Vallejo) challenged American Canyon’s certification of the EIR and approval of the proposed project, claiming American Canyon failed to disclose critical information about water supply reliability. Specifically, Vallejo argued the WSA was deficient for four reasons: (1) it failed to disclose the actual quantities of water American Canyon purchased in prior years (as opposed to the contracted maximum that it was entitled to purchase); (2) it failed to discuss “place of use” restrictions on an appropriative water right license that provided a component of the water supply upon which the WSA relied; (3) it failed to include monthly curtailment projections and analyze the risk of simultaneous curtailment of multiple water supply sources; and (4) it failed to address the existence of pending litigation between the two cities over a 1996 water agreement that allowed American Canyon to purchase 23 percent of its annual water supply from Vallejo (1966 Agreement). The court rejected each of Vallejo’s arguments.
THE GOVERNING LEGAL FRAMEWORK
California Public Resources Code section 21151.9 and Water Code sections 10910–10912 require a WSA for certain larger development projects, including: residential developments of more than 500 dwelling units; industrial parks occupying more than 40 acres or with more than 650,000 square feet of floor area; commercial office buildings employing more than 1,000 persons or with more than 250,000 square feet of floor space; hotels or motels with more than 500 rooms; and any project requiring water equivalent to or greater than a 500-unit residential project. If the project meets any of these thresholds and is subject to environmental review under CEQA, a WSA must be prepared regardless of whether an EIR, negative declaration, or mitigated negative declaration under CEQA will be required. Courts have yet to clarify whether a WSA must be prepared for a project that qualifies for an exemption from CEQA.
CEQA Guidelines section 15155 further specifies that the WSA must include (1) sufficient demand and supply information to permit the lead agency to evaluate the pros and cons of supplying needed water to the proposed project; (2) an analysis of the reasonably foreseeable environmental impacts of supplying water through all project phases; (3) an analysis of circumstances affecting the likelihood of water availability and the degree of uncertainty involved, including drought, saltwater intrusion, and regulatory or contractual curtailments; and (4) if it cannot be determined whether a particular water supply will be available, an analysis of alternative sources and a plan for acquiring additional supplies is required. The WSA must also include a discussion of whether the total water supplies determined to be available for the project during normal, single-dry, and multiple-dry water years over a 20-year period will meet the project’s anticipated water demand in addition to existing and planned future water uses.
KEY HOLDINGS
- Full Contractual Water Entitlement Amounts vs. Actual Quantities Purchased
A water supply assessment may rely on maximum contracted entitlement amounts without separately disclosing historical underuse, absent evidence that the contracted supply cannot actually be delivered.
Vallejo argued that the WSA was deficient because it identified the maximum contracted amount of water that American Canyon could purchase under the 1996 Agreement (3,206 acre-feet per year), rather than the amount that American Canyon actually purchased in recent years (approximately 2,074 acre-feet per year). Vallejo characterized the difference as evidence that the 1996 Agreement’s entitlement was speculative “paper water,” rather than a reliable source of supply. It relied on language from Vineyard Area Citizens for Responsible Growth v. City of Rancho Cordova: “[T]he future water supplies identified and analyzed must bear a likelihood of actually proving available; speculative sources and unrealistic allocations (‘paper water’) are insufficient bases for decision-making under CEQA. An EIR for a land use project must address the impacts of likely future water sources, and the EIR’s discussion must include a reasoned analysis of the circumstances affecting the likelihood of the water’s availability.” (Vineyard Area Citizens for Responsible Growth v. City of Rancho Cordova (2007) 40 Cal.4th412, 432.)
The court rejected this argument, distinguishing the facts from cases involving true “paper water” where entitlements far exceeded what could be delivered. Here, the record showed that the deliveries of Vallejo water was a reliable supply for American Canyon, and that American Canyon historically purchased less than the maximum amount for reasons of cost, not shortage. The court found no evidence of a significant difference between what was promised and what could be delivered. The WSA was not legally inadequate for failing to disclose differences between contracted amounts and amounts historically delivered.
2. Place of Use Restrictions in Water Rights Licenses
A WSA need not analyze place of use restrictions in appropriative water rights licenses where those restrictions do not reduce the quantity of water available to the public water system as a whole, and where the restricted water source is not being used to supply the project.
Historically, Vallejo had satisfied some of its supply obligations to American Canyon using water diverted under an appropriative water right license. That license restricted deliveries to certain authorized areas, and the project site was not located within the authorized place of use. Vallejo argued the WSA violated CEQA Guidelines section 15155(f)(3) by failing to analyze this restriction as a “circumstance affecting the likelihood of the water’s availability.”
The court disagreed on two grounds. First, it reasoned that place of use restrictions commonly found in water rights permits and licenses are qualitatively different from the circumstances enumerated in section 15155(f)(3) – drought, saltwater intrusion, and regulatory curtailments – because they limit where water may be delivered within a service area, not how much water is available to the system as a whole. Second, and more decisively, the court found no prejudice because the license water at issue would not be used to supply the project. The omission of place of use restrictions from the WSA, therefore, did not impede informed decision-making or public participation.
3. Annual Projections of Curtailment Risks are Sufficient
A WSA may present curtailment risk analysis on an annual basis; CEQA does not require monthly projections. A WSA need not analyze the risk of “simultaneous curtailment” of multiple supply sources, provided it adequately discloses the relationship between supply sources with related curtailment risks.
Vallejo argued that the WSA was deficient because it failed to provide monthly curtailment projections – as one of the relevant water supplies had been curtailed to zero for five consecutive months in 2015 – and because it failed to discuss the risk of “simultaneous curtailment” of American Canyon’s imported supplies, both of which are delivered through the same aqueduct. The court rejected both arguments.
On monthly projections, it held that CEQA Guidelines section 15155(f)(3) does not require monthly curtailment analysis, and that courts may not read procedural requirements into CEQA beyond what is explicitly required. Annual analysis was within the lead agency’s reasonable discretion. On simultaneous curtailment, the court found that while the WSA did not use that precise term, it adequately disclosed that both supply sources transit the same infrastructure, are subject to the same hydrologic constraints, and that American Canyon maintained a separate emergency supply agreement with the City of Napa for contingency coverage. That level of disclosure was sufficient.
4. Pending Litigation over Water Supply Contracts
The existence of pending litigation over a water supply contract does not automatically require disclosure in a WSA. The party challenging the WSA bears the burden of demonstrating that the litigation’s outcome could undermine the water sufficiency conclusions and must include relevant information about the dispute in the administrative record.
Vallejo argued that the WSA should have disclosed ongoing litigation concerning the 1996 Agreement and its potential impact on water supply reliability. The court affirmed the trial court’s denial on evidentiary grounds: Vallejo failed to include any information about the litigation in the administrative record. Without knowing the nature or the stakes of the dispute, neither court could assess whether the litigation posed any meaningful risk to American Canyon’s water supply.
The court also confirmed that the obligation under CEQA Guidelines section 15155(f)(4) to analyze alternative water sources is only triggered when the lead agency cannot determine that a particular water supply will be available. Where the WSA supportably concludes that supplies are sufficient across normal, single-dry year, and multiple-dry year planning scenarios, the alternative supply source requirement is not triggered.
KEY TAKEAWAYS
Few published cases address the adequacy of WSAs, and the Vallejo decision offers meaningful direction on the level of detail necessary to satisfy CEQA and the Water Code. We recommend the following steps when assisting with the WSA preparation or review process for qualifying projects:
- Engage water suppliers early to identify which supply sources will serve the project, and ensure those sources and the factual bases for relying on them are well documented.
- Document the reason gaps between contracted water entitlement amounts and historical purchase volumes. WSAs should explain whether shortfalls reflect management decisions or actual supply constraints.
- Analyze curtailment risks on an annual basis across all required planning scenarios. Where supply sources share infrastructure or face common hydrologic constraints, the WSA should acknowledge that relationship and any existing contingency arrangements.
- Review applicable water rights permits and licenses for place of use restrictions early in the project review process and determine whether such restrictions would impact water supply reliability.
- Identify and evaluate any pending litigation that could impact water supplies, and consider whether and how to address those issues in the WSA before they are raised by third parties during the comment period. If the WSA is later challenged, ensure that the pleadings and related evidence for any litigation that could affect water supplies are included in the administrative record.
