Valid State Purpose (Conserving Drinking Water) Did Not Relieve State of Liability Re: Breach of an Agreement to Provide a Certain Amount of Water to a Hydroelectric Power Provider

The Third Department determined that a contract with a hydroelectric power provider requiring a certain amount of water to be released from a reservoir was unambiguous and therefore must be enforced.  The amount of water released was less than called for in the contract due to a drought and concerns about the drinking water supply:

The parties to the agreement intended to resolve a dispute after defendants took claimant’s predecessor’s land in eminent domain.  Claimant’s predecessor wanted to ensure that sufficient water would reach its hydroelectric generation facility and accepted a considerably smaller amount of money than it sought, in exchange for the rights associated with the water release rates from the reservoir.  These rights would be far less valuable if defendants could deviate from the operating diagram’s release rates, and avoid liability in doing so, as long as defendants supported their actions with any State purpose. Pursuant to the agreement, defendants could only avoid liability if they deviated from the operating diagram’s release rates for a State canal use or purpose.  Because defendants altered the release rate for the purpose of preserving safe drinking water during a drought – a legitimate public and State purpose (see ECL 15-0105 [5]) – and not for a canal-related purpose, defendants are liable for breaching the contract… .  Erie Boulevard Hydropower v State, 516510, 3rd Dept 1-9-14