Ranch wins legal battle over Oregon water storage rights transfers

The Oregon Court of Appeals has determined state regulators are authorized to transfer water storage rights under certain circumstances, effectively overturning a government policy established five years ago.

The appellate court has affirmed that the Oregon Water Resources Department must process an application to move a reservoir’s point of diversion near Mitchell, Ore. The ruling means OWRD must again consider similar applications from other irrigators as well.

The reservoir’s owner, Bridge Creek Ranch, is “grateful” for the decision, which will not only allow the company to finish needed upgrades but will hopefully help other irrigators and water users in Oregon, said Mike Pati, property manager for the Papé machinery company, which owns the ranch.

“The previous status quo deterred or deferred other projects across the state that are beneficial,” Pati said. “We’re pleased to play a role in allowing these projects to move forward statewide.”

Bridge Creek Ranch wanted to remove its outdated water intake on federal land and replace it with a modern, environmentally-friendly structure on its own property a quarter-mile away.

The OWRD refused to process the application because in 2018, the agency decided it lacks the power to transfer any storage water rights under state law.

That interpretation of Oregon water law meant that irrigators could not move either storage reservoirs or the points of diversion from which they draw water.

Bridge Creek Ranch challenged the OWRD’s policy in 2022 and won a legal victory earlier this year, when a judge in Marion County Circuit Court disagreed with the agency’s interpretation.

While the judge ordered OWRD to process Bridge Creek Ranch’s application, the state government challenged the ruling before the Oregon Court of Appeals.

The appellate court has now upheld the previous ruling, which means it applies not only to the ranch’s Painted Hills Reservoir but other water storage facilities across the state.

However, the Court of Appeals arrived at its conclusion “based on slightly different reasoning from that of the trial court.”

The appellate court was asked to decide whether storage was an actual water “use” subject to transfer, as only water “uses” can be transferred under amendments to Oregon law passed in 1995.

The OWRD refused to consider Bridge Creek Ranch’s application and similar proposals because the agency did not believe storage to be a form of water use.

Water rights for actual uses, such as irrigation, are “perfected” separately from storage rights, according to the agency.

To move a reservoir, the applicant cannot transfer the storage right but must instead apply for a new water right at a different location, the agency said.

However, an irrigator would then lose the “priority date” of the original storage right and become more vulnerable to being “regulated off” by senior users.

Older water rights are more valuable under the “prior appropriations doctrine” of Western water law and irrigators are loath to give them up.

Bridge Creek Ranch was joined by agriculture groups and other water users in opposing the OWRD’s interpretation of the law.

According to the ranch, storage is a water use and must be “proved up” just like other water rights, with the purpose of creating a water supply.

Though secondary water rights are needed to use that supply for irrigation, that doesn’t mean storage itself is not a water use, the ranch said.

Court’s reasoning

The Court of Appeals ultimately didn’t entirely agree with either OWRD or Bridge Creek Ranch’s interpretation of the law.

Citing legal precedent from 1911, the appellate court said that “in and of itself,” storage isn’t a water use, since “a beneficial use of stored water is established not through the primary permit for storage but through the secondary permit.”

That did not end the appellate court’s analysis, though, because the primary and secondary permits are “inextricably linked.”

“The holder of the storage certificate and the holder of the certificate for use of the water together create the appropriation and the beneficial use,” the appellate ruling said. Even though storage alone isn’t a “use” under the law, the storage right can still be transferred in context of the secondary permit that allows for irrigation or another use.

“Together, the two certificates refer to a beneficial use of the water and, hence, to a water use subject to transfer,” the appellate court said.

Decision closely watched

The court’s decision on Bridge Creek Ranch’s transfer application was watched closely by the agriculture industry, environmental advocates as well as municipalities and water utilities.

Representatives of the farm industry and other water users supported the ranch’s legal arguments. They claimed OWRD’s policy hindered upgrades to reservoirs and their points of diversion — such as removing dams from stream channels to improve fish migration.

Environmental advocates supported the OWRD’s interpretation, arguing it prevented harmful impacts from moving reservoirs to new locations.

If such transfers were allowed, reservoirs could bypass protective regulations that ordinarily apply to new storage facilities, according to environmental advocates.

For example, they feared off-channel reservoirs could be moved on-channel to block fish passage.

Nuances in the appellate ruling could still complicate transfers of storage rights under circumstances different from those faced by the Painted Hills Reservoir, which worries water users and provides environmental advocates some solace.

For example, not every reservoir has secondary rights that fully allow the use of its storage water rights for irrigation or another purpose, which could potentially hinder some transfers.

WaterWatch of Oregon, an environmental nonprofit, is still reviewing the appellate ruling’s broader implications for changing the place of water appropriation.

However, the organization is pleased the appellate court did distinguish between storage rights and other types of water rights in terms of transfers that could affect reservoir location, said Brian Posewitz, the group’s staff attorney.

“We hope that will prevent dams and reservoirs at new locations without adequate review,” Posewitz said.

By showing that a point of appropriation for storage water rights can be changed with a transfer, “the case illustrates the need for more robust review of water-right transfers generally, and especially the need for better environmental review,” he said.

Before the lawsuit, lawmakers tried to solve the dilemma but the farm industry and other water users were unable to agree with environmental groups about how much regulatory scrutiny such transfers should receive.

Without a legislative solution in sight, the Bridge Creek Ranch case was considered an appropriate legal vehicle to resolve the dilemma.

The OWRD doesn’t plan to challenge the appellate court’s decision, said Danielle Gonzalez, the agency’s policy section manager. The ruling has established certificated water storage is a use subject to transfer, the agency said.

“The decision provides necessary clarity on our authority to consider a change in the point of diversion for certificated storage rights and ensures it can be consistently applied to all new applications statewide,” she said.