The Good, the Bad, and the Ugly: the First Ten Years of the Oregon Water Trust

• Jurisdiction: United States,Federal,Oregon
• Citation: Vol. 83
• Publication year: 2021

83 Nebraska L. Rev. 432. The Good, The Bad, and The Ugly: The First Ten Years of the Oregon Water Trust

432

Janet C. Neuman*

The Good, The Bad, and The Ugly:
The First Ten Years of the
Oregon Water Trust

TABLE OF CONTENTS

I. Introduction ...................................................... 433
II. The Perspective of the Oregon Water Trust ........................ 434
A. The Water Trust' Market Niche ................................. 434
B. The Legal Framework for the Trust' Operations ................. 437
C. A Decade of Deals ............................................. 439
III. The Good, The Bad, and The Ugly in Ten Years of
Buying Water for Streamflows .................................... 442
A. Overview ...................................................... 442
B. The Good ...................................................... 443
1. Meeting Water Needs Voluntarily, Without
Regulation or Litigation ................................... 443
2. Avoiding Costs of New Water Development .................... 447
3. Mitigating the Environmental Impacts of Past
Water Use Practices and Reaping the Benefits of
Restored Streamflows ....................................... 449
a. Beaver Creek ............................................ 450
b. Trout Creek Ranch ....................................... 452
c. Evans Creek ............................................. 454
d. Thompson' Mill .......................................... 455
C. The Bad ....................................................... 455

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1. Disruption of Existing Water Use Regimes ................... 456
2. Removing Water from the Land ............................... 462
3. Scrutiny of Historic Water Practices and
Existing Water Management .................................. 467
D. The Ugly ...................................................... 473
1. Noxious Weeds .............................................. 473
2. Toxic Politics ............................................. 475
a. Legislative Maneuvers ................................... 476
b. Administrative Maneuvers ................................ 479
c. Judicial Maneuvers ...................................... 482
IV. Conclusion ....................................................... 484

I. INTRODUCTION

For the past ten years, I have been privileged to be the President of the Oregon Water Trust, a nonprofit corporation that opened its doors and its pocketbook in 1994 to buy water for streamflows.(fn1) As the Trust celebrates its tenth anniversary in 2004, its portfolio contains eightyseven current water rights deals. The portfolio includes a variety of transactions, including permanent purchases of water rights, short and longterm leases, exchange and forbearance agreements, conserved water projects, and nongeneration agreements, altogether protecting a total of over 124 cubic feet per second of water in eleven basins across the state of Oregon.(fn2)

This Article offers some observations about water markets derived from the Oregon Water Trust' decade of experience. The Article discusses both the positive and negative impacts of using the market to restore instream flows. Although the impacts of water markets vary widely, depending on the type and scope of transactions and the context in which they occur, some generalizations can be made. On balance, the experience of the Oregon Water Trust demonstrates that the positive impacts exceed the negative. The use of water markets is not a panacea for all that is ailing in water law, but marketing is certainly one useful tool among many for creating an economically rational, equitable, environmentally sound, and sustainable system of water use and management.

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Part II describes the particular perspective that the Oregon Water Trust brings to the discussion of water markets, considering the types of transactions it undertakes, the legal context in which it operates, and its accomplishments to date. Part III examines "the good, the bad, and the ugly" in this particular water market, exploring both the positive and negative aspects of the Water Trust' experience.(fn3) Part IV concludes that, on balance, the good outweighs the bad. Using the market to restore instream flows has proven itself to be a fair, effective, and efficient approach that can play an important role in future water use and management.

II. THE PERSPECTIVE OF THE OREGON WATER TRUST

A. The Water Trust' Market Niche

Realtors say that the most important thing about real estate is "location, location, location." Because water and water rights are a species of real property,(fn4) transactions involving water rights take place in highly localized and individualized markets. The impacts of water markets vary widely from place to place and case to case, depending on a variety of factors, including the identity of the buyers and sellers, the purpose and scope of the transactions, and the specific geographic location. For instance, buyers and sellers can be municipal, environmental, or agricultural entities. The purpose of a transaction might be to feed a growing city or to restore streamflows in a small stream. The transaction could involve very large or very small amounts of water and could be temporary or permanent. The deal could be a complicated interstate transfer or a simpler intrabasin transaction. Each deal will be very different in character and impact. Although it is still possible to make some generalizations, the observations offered here will be more useful with a clear understanding of my perspective.

Because the observations made in this Article grow directly out of my experience with the Oregon Water Trust, they are based on the somewhat limited perspective of the Trust' activity in a particular niche market. These observations are largely based on the water market in the Pacific Northwest, and Oregon in particular. The buyers in this market are mostly nonprofit entities and governmental agencies.(fn5)

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The sellers are primarily farmers and ranchers with irrigation water rights.(fn6) The purpose of many transactions is to acquire water for instream flows to improve fish habitat and water quality.(fn7) The deals

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involve varying amounts of water, but most transactions are fairly small intrabasin transactions.(fn8)

The Oregon Water Trust is a private, nonprofit organization that was established in 1993 to use the market to restore depleted streamflows.(fn9) The Water Trust is based on the landtrust model of buying property a trust wants to protect.(fn10) The prior appropriation doctrine, followed by all of the western states, results in overappropriated streams, because the doctrine rewards the diversion and use of as much water as possible, penalizing nonuse with the possible loss of water rights.(fn11) Oregon has been a prior appropriation state since 1909, when the state' first comprehensive water code was adopted.(fn12) Although parts of western Oregon are some of the wettest spots in the continental United States, the eastern part of the state is arid.(fn13) Even in western Oregon, the precipitation is concentrated in late fall,

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winter, and spring, and the summers are very dry. As the state was settled by EuropeanAmerican farmers, ranchers, and miners in the mid to late 1800s, many streams on both sides of the state became overappropriated during the summer months when the water rights on paper exceeded the total available streamflow. Most westerners know that "overappropriation" is a euphemism for dewatered or just plain dry. An imbalance between paper water rights and wet water means that many streams are dry in the summer and some water rights go unsatisfied, even though they may have priority dates reaching back into the 1800s.(fn14)

The Water Trust attempts to remedy overappropriation by acquiring water from consumptive users willing to sell, lease, or otherwise transfer part or all of their water right. The Trust then transfers the water instream to restore or improve fish habitat and other instream uses.

B. The Legal Framework for the Trust' Operations

After the adoption of the Oregon Water Code in 1909, thousands of consumptive water rights were issued, severely depleting streamflows around the state.(fn15) Instream flow protections came later, grafted on to the prior appropriation framework that encouraged and rewarded outofstream consumptive uses. The first instream protections were enacted for the waterfalls in the Columbia River Gorge. In the early 1900s, the state legislature withdrew from appropriation several of the streams feeding the falls in order to preserve the water instream for its scenic value.(fn16) The Gorge was already becoming a popular tourist and recreation destination, and the legislature wanted to protect the streams from increasing irrigation withdrawals upstream from the Gorge' rim.(fn17)

More significant statewide protections were adopted in 1955 and 1987. By the 1950s, Oregonians were beginning to realize that decades of irrigation, dam building, and population growth threatened the health of the streams, particularly the fisheries.(fn18) The legislature

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added numerous provisions to the Water Code in 1955, including a minimumstreamflow program.(fn19) However, many streams were already overappropriated, and even in those that were not, the minimumstreamflow statute proved to be inadequate.(fn20)

Then, in 1987, Oregon distinguished itself as the first state to create actual instream water rights.(fn21) The 1987 instream water rights law paved the way for a market for instream flow restoration. The statute first, and very importantly, declared instream uses to be beneficial uses of water.(fn22) The law technically abolished minimum streamflows, but converted any such flows already established into instream water rights with a priority date equivalent to when...