The Casitas Municipal Water District won a major battle in its case against the federal government on Thursday when an appeals court ruled the government must pay for any water it takes to help the endangered steelhead survive.

The case has ramifications far beyond Ventura's borders, calling into question how water can be used to protect endangered species.

"It's going to have nationwide implications because anytime the federal government attempts to divert water that is owned by someone else for wildlife protection purposes, it's going to face potential constitutional liability," said J. David Bremmer, a principal attorney with the Pacific Legal Foundation, a property rights group that filed a brief during the case and has been closely following it.

Casitas is still a long way from resolving its case. The district would have to prove that it — not the government — owns the water before it can be reimbursed for the water that goes down the fish ladder. The district was essentially forced to build the ladder on the Ventura River in 2005 to allow steelhead to swim around the diversion that sends water to Lake Casitas.

The federal government has several options it can take that would continue the case. But Thursday's 2-1 decision by the U.S. Court of Appeals for the Federal Circuit in Washington sent ripples beyond the Casitas' water district board.

The court ruled that when water is taken by the federal government, it must compensate for it. The government's argument was the water is not taken, but regulated.

"When the government diverted the water to the fish ladder, it took Casitas' water. The water, and Casitas' right to use that water, is forever gone," Circuit Judge Kimberly A. Moore wrote in the majority opinion.

The dissenting opinion said, "Casitas does not own the water in question because all water sources within California belong to the public."

Some are saying the decision is precedent-setting.

"The message is that the government is not going to be able to take a portion of the water supply without paying for it," said Casitas' attorney, Roger Marzulla. "This is of great interest to water districts across the West because it confirms that water rights are, in fact, valuable property rights and the government has to pay for those water rights" when it appropriates them for such purposes as fish protection.

But Russ Baggerly, a Casitas board member who has opposed the suit since it was first filed last spring, worries the decision could poke holes in the Endangered Species Act and change how water rights are dealt with.

"If it stands as good law, there isn't going to be enough money in the treasury to deal with all the takings claims all across the country," he said.

He pointed out this is the first battle Casitas has won and there are still many more legal obstacles to overcome.

Rich Handley, a board member who has sided with Baggerly, said there is more at stake here than just Casitas' water.

"There is a bigger picture here," he said, citing a lack of regulation that led to the recent financial crisis as an example. "It's a dangerous proposition as you can see when you try to remove regulations for something that has been in place for 100 years."

But the two members of the board who have been the most outspoken in pushing the government to pay for the water it takes said this is about protecting the ratepayers. They argue that if saving the fish benefits everyone, then everyone, not just the district, should share in the costs.

"We don't want to hurt the Endangered Species Act, but I don't think that the full burden should fall on all the people in one special district," said board member Bill Hicks.

"If they say we need to be saving them because it's a national treasure, then we nationally should pay for it," said board President Jim Word.

Casitas lost part of Thursday's decision over its argument that the government should pay for the installation of the ladder. The judge ruled the construction was part of "operational" and "maintenance" costs of running the diversion spelled out in an earlier contract, therefore Casitas had to pay for it.

The board almost didn't pay for the appeal, as it already spent $450,000 in fees to Marzulla to get that far. The board voted 3-2 to pay an additional $45,000 for the appeal. If it ultimately wins the case, it could pay enormous dividends.

Marzulla said Casitas is entitled to $80 million for the loss of water, but there is a long way to go and many legal arguments before that check is cut.

"No one should get that excited about this turn of events," Baggerly said. "This is far from over."