Leasing water rights for instream flow uses: a survey of water transfer policy, practices, and problems in the Pacific Northwest.

• Author: Crammond, James D.
• Position: Symposium on Northwest Water Law

1. INTRODUCTION

   1. Purpose

      Water in streams, rivers, and lakes has social, economic, and environmental values that grow increasingly important as water grows more scarce. Local quality of life, cultural and historical assets, tourism dollars, real estate values, commercial ventures, water quality, species diversity and vitality, recreation, and religious values all depend on flowing rivers and healthy lakes. The declining health of the Pacific Northwest's hydrologic resources is this region's "rain forest" crisis. Many important systems have already been irretrievably lost or badly weakened; subjugating riparian ecosystems to narrow, marginally economic uses at the expense of the larger system's health is the region's equivalent of "slash and burn." The situation is improving because of a massive influx of money and resources aimed at salmon recovery, but leasing, and the power of the marketplace, can fill important gaps in underfunded, understaffed, and slow moving programs. This Article focuses on leasing water for instream-flow enhancement in dewatered basins and stream reaches.

      This Article discusses the pros and cons of leasing water rights as a strategy to improve instream flow and to identify procedures, problems, and opportunities for improvement in water right leasing.

   2. Scope and Definitions

      Idaho, Montana, Oregon, and Washington are the states that define the area referred to in this Article as the Pacific Northwest. Surface water rights are of primary interest as sources of leasable water, but the Article briefly discusses ground water, water in storage behind dams, and interbasin transfers because they are often components of a lease arrangement.

      Instream flow, for the purposes of this Article, means any nondiversionary, in-place use of water with little or no resulting consumptive use. Although the first century of prior appropriation doctrine rarely recognized any nondiversionary uses except milling and power generation as legitimate and beneficial,(1) many western states have relaxed their strict diversion requirement for water rights appropriation.(2) Most western states now recognize fish, wildlife, and recreation as beneficial uses under state law; some further recognize aesthetics and pollution abatement as beneficial uses.(3)

      For the purposes of this Article, a lease is any temporary transfer, for consideration, of actual water to instream flow. The possible permutations of transfer arrangements are limited only by the parties' imaginations. Water leasing includes private contracts, withdrawals from regional or state water "banks,"(4) and other arrangements with private, state, tribal, and federal water managers.

      Leasing implies that there is a real property res that changes hands for a term. In this respect, leasing may be an imperfect label for these transactions. Water, ultimately subject to the vagaries of the weather, is not a solid, unchanging, reliable, measurable entity like a piece of land. State property law defines water rights much differently than rights in land.(5) Water rights are usufructuary, allowing the holder to derive benefits from water that actually belongs to all people of the state; these are limited rights, as the user cannot destroy, waste, or injure the water resource.(6) To lease rights for instream flow is, in effect, to contract with a user to ensure that the right will remain unexercised. Measurement, regulation, and enforcement of the right are very important matters during negotiation and over the life of an instream flow lease.(7) Even with the uncertainty latent in water supply, lease arrangements in the Pacific Northwest have managed to put water where it is desperately needed.(8)

      Parties with the resources to affect a lease include private individuals, organizations, and public entities. In the Pacific Northwest, the general rule is that only a state agency may acquire and hold instream flow rights.(9) Only Washington has allowed permanent private ownership of in-place water rights.(10) On the mainstem of the Columbia and Snake Rivers, the federal government precludes significant participation by others; the government leases, purchases, and otherwise manipulates the hydrograph of these rivers to meet statutory obligations to fisheries, irrigators, barge traffic, and hydropower.(11) Nevertheless, there is a significant role for individuals and organizations to play in leasing water for instream flow on important tributaries.(12) This Article deals briefly with leasing to and from federal agencies but the emphasis is on leases in the tributaries, where even small temporary changes in water use can benefit fisheries, recreation, and other instream uses.

      Part II explores the sources of water that could be leased for instream flow enhancement. Part III gives an overview of state, and to a lesser degree, tribal and federal agency law and practice, both in a short narrative and by a set of matrices that outline the important aspects of each state's law. Part IV discusses formation and negotiation of a lease, including valuation, with an appendix of lease types and provisions. The Article concludes with a summary of observations and recommendations for change.

2. SOURCES OF WATER

   1. Location and Type

      To improve conditions in a dewatered stream reach or lake, the first inquiry must be where the water will come from. To satisfy an instream lessee's purposes, water must have the right combination of quality, quantity, and priority, with a strategically located place of use, available at the correct time with the correct hydrographic "shape."(13) Water with the necessary characteristics can come from federal, private, or tribal rights, ground water, another watershed, or even unappropriated surplus.

      As a general rule, off-stream consumptive uses are the most effective sources for instream flow leasing because they remove water from the system (diversion) and make a part of it unavailable for instream uses (due to evapo-transpiration, evaporation, percolation, or pollution). To lease these rights is to reverse their fundamental interference with instream flow.

      Water in storage behind dams is an effective source because of its position on the stream and human control over releases. Releases from storage can influence the hydrograph of a river (the changes in its flow pattern over time) to mimic or improve natural conditions. The amount of water is often not as important as the timing of flow over a day, a season, or a year. Storage water can influence the temperature and chemical makeup of water in a stream reach, which are also important parameters for instream flow uses.

      A conceptually similar but less certain strategy is to lease storage space instead of stored water. Not all space behind a dam is consistently used or full of water. Dams often have capacity that is temporary or deemed unreliable, such as sediment storage or space allocated for buffering floods. These short-term or temporary spaces may provide a source of water for augmenting instream flow. These spaces may also provide a place to accumulate and regulate water rights leased in other areas of the watershed for later instream use.

      Ground water is a large resource with leasing potential. But problems arise because there are few strategically located productive wells, power costs are high, and prolonged pumping often interferes with the very reach of a river that a lease seeks to augment. However, for nontributary or "weakly" tributary aquifers, ground water leases could augment flows, especially in the short-term. Ground water could be an important element in an exchange situation, with instream flow lessees offering ground water to replace water diverted from surface sources. All four Northwest states treat ground water as appropriable and part of the greater hydrologic system,(14) although conjunctive management of the two regimes in the region is in its infancy.(15)

      To move water from another watershed into a stream reach is logistically and financially difficult. State water managers closely scrutinize interbasin transfers because the benefits and costs are unevenly distributed.(16) The trend in western states is to enact "area of origin" protection legislation to compensate source areas and ensure that transfers do not unduly harm the rural environment, culture, or economy.(17) More often these sources will be elements in a multi-party exchange of water rights.

      Unappropriated water, a vanishing commodity throughout the Northwest, is a possible, though very speculative, source of instream flow. Water not committed to water rights presumably already delivers instream benefits. Leases or other contractual arrangements with the state could ensure that this water stays in place. Montana, Oregon, and Washington allow municipalities and others to reserve water for future supply.(18) Such water might be leased over the near-term to improve or maintain flow conditions. States also close some river reaches to appropriation, either through legislative action or administrative decision making.(19) Leasing this water could become a means of generating revenue for state instream flow programs in other watersheds. All of these arrangements depend on water that is not appropriated or appropriable in the usual sense.

   2. Water Right Holders

      Federal agencies control the maJority of the surface water in the Northwest, both by water rights20 and diversion works. The federal presence is most notable on the mainstem of the Columbia and Snake Rivers, although there are many federal projects on important tributaries. These multiple-use projects of the U.S. Bureau of Reclamation (BOR) and U.S. Army Corps of Engineers (Corps) contribute hydropower, irrigation water, flood control, navigation flows, recreation, and fish and wildlife habitat.

      Although, historically, federal government projects emphasized power generation and irrigation, the 1980 Northwest Power Act(21) attempted to realign the priorities of...