Join the US Committee on Irrigation and Drainage (USCID) on April 12th, 2023 at 11:00 AM (Pacific Time) for a webinar on How to Obtain Title Transfer for Federal Water Projects. Frank Dimick, of Dimick Water Resources Engineering, will host the 30-minute presentation and Q+A session via Zoom. Participants will also learn how the United States can gain international recognition on water projects. After, Schroeder Law Offices’ shareholder and USCID Vice President Therese Stix will give an update on USCID and share more details about the upcoming USCID Conference in October 2023. We hope to see you there!

To learn more about USCID’s mission and upcoming conference, visit their website here.

The Oregon Water Resources Department (“OWRD”) has stopped processing new groundwater applications and begun to severely limit groundwater permit extensions. This policy change places a significant burden on groundwater permittees and will directly impact agriculture in Oregon. Ultimately, OWRD’s policy change will significantly limit agricultural expansion in the state. 

In his article “Oregon Moves to Limit Groundwater Development,” Steve Shropshire cites “Draining Oregon,” the 2016 report published in The Oregonian, as the major catalyst for increased regulation. The Oregonian article covered groundwater issues in Oregon and argued that OWRD was over permitting the use of the state’s groundwater supply. Soon after The Oregonian article, OWRD updated their Integrated Water Resources Strategy to name groundwater as one of the biggest issues concerning Oregon’s water future.

Even though OWRD has not passed a rule, OWRD has ceased processing new groundwater applications and limited its issuance of groundwater permit extensions as a policy matter. OWRD has also limited the issuance of new groundwater rights in the Walla Walla, Harney, and Umatilla basins. These actions will pose a big change for agriculture in Oregon, as acquiring new groundwater rights will be much harder, if not impossible. To participate in the rule making process when that occurs, go to:  Water Resources Department: Proposed Rulemaking : Oregon Administrative Rules : State of Oregon

Stay informed on the latest groundwater issues, current events, and all things water by signing up for Schroeder Law Offices’ weekly email newsletter to the right.

The current moment presents a number of unique challenges for water sustainability, including for farmers. When farmers do not have enough water to meet the population’s need for food and goods, the results can be devastating to certain population groups. In his article There Has Never Been a More Important Time to Protect American Food Production, Dan Keppen writes that farmers are facing this water challenge right now.

Due to years-long extreme drought in the west, farmers have been struggling to make ends meet. This has led to a decrease in local agricultural production in the U.S. Unfortunately, this decline comes at a time when the world has been rocked by extreme climate events and global supply chain issues. These challenges make food more costly to produce and purchase.

What makes the situation so urgent is that the need for food is rising. A 2022 GAP Report found that 40 million people around the world experienced “emergency or catastrophic levels” of food insecurity. To meet the population’s growing needs, agricultural output will have to increase by 1.73 percent each year. Keppen writes that bringing U.S. communities the nutritious, affordable food they need will require an increase in local agricultural production.

To learn more about water use and conservation, check out Dan Keppen’s previous blog “There’s a Crisis on the Colorado River.” The article explores the challenges faced by farmers when their water access is reduced. Though reduced water access may be done in an effort to conserve, the reduction can lead to food shortages and financial insecurity for local communities. With so many interests involved, the situation in the west illustrates that a solution to water issues will have to be complex and innovative.

On October 3^rd, 2022, the Supreme Court heard the oral argument for the first case of its 2022-2023 term: Sackett v. EPA. The case calls into question the definition of “Waters of the United States” (WOTUS), as it will decide the proper test to determine which wetlands are considered WOTUS, and therefore subject to federal regulation from the Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers under the Clean Water Act.

The case originated after Michael and Chantel Sackett purchased an Idaho property near Priest Lake in 2004. After the couple began building a home on the property in 2007, the EPA informed the Sacketts that they must stop construction and apply for a permit since their land contained a wetland that was adjacent to protected waters. Since the wetland is separated from Priest Lake by a road, the Sacketts claimed that their land is not subject to the Clean Water Act’s jurisdiction and sued the EPA. What followed is a legal battle that could potentially change which wetlands are considered WOTUS going forward.

The Clean Water Act was passed in 1972 in an effort to protect waters of the United States from pollution. Since then, the extent of protections provided by the Clean Water Act has been extensively questioned and changed. These changes  have been brought about by  Supreme Court rulings, plurality and concurring opinions of Supreme Court justices, and presidential administrations, especially those of Presidents Obama, Trump and Biden. 

The basis of both the Sacketts’ and EPA’s arguments can be found in the two waters tests proposed in the 2006 Supreme Court case Rapanos v. United States. The Sacketts have relied on the plurality opinion written by late Justice Antonin Scalia to support their case, which argued that wetlands should be considered WOTUS if the adjacent channels contained a “permanent” body of water such as a river, lake, or stream. Additionally, Justice Scalia argued that a wetland can only be considered WOTUS if it featured a “continuous surface connection” with a more permanent body of water.

The EPA is relying on retired Justice Anthony Kennedy’s concurring opinion in that same 2006 case. Justice Kennedy argued that wetlands must include a “significant nexus to navigable waters.” According to this definition, a wetland does not necessarily have to be continuously connected to navigable waters in order to be protected. Instead, the wetland must have a significant effect on the “chemical, physical, and biological integrity of the Nation’s waters.”

In response to  Sackett v. EPA, many agricultural groups have shared their experiences of uncertainty and hardship brought on by the shifting definition of WOTUS over the years. The Family Farm Alliance, along with other agricultural groups, including the USA Rice and National Association of Wheat Growers and the National Corn Growers Association, submitted an amicus (“friend of the court”) brief earlier this year to voice its perspective on the matter. The brief highlights the problems farmers and ranchers have faced due to the lack of clarity regarding the Clean Water Act’s jurisdiction, which has created confusion over whether waters on their property are subject to EPA and U.S. Army Corps of Engineers regulation.

During the October 3^rd oral argument hearing for Sackett v. EPA, Justice Ketanji Brown Jackson questioned the Sacketts’ legal counsel on the  difference between “abutting and neighboring wetlands” if the goal of the Clean Water Act is to protect the nations’ waters “chemical, physical, and biological integrity.” Justice Neil Gorsuch commented on the lack of clarity in the Clean Water Act’s definition of “adjacent,” which Justice Sonia Sotomayor pointed out made some of her colleagues critical of whether the term was “precise enough.” Justice Sotomayor went on to question whether there might be “another test that could be more precise and less open-ended” than the adjacency and significant nexus tests to determine which wetlands are protected. Sackett V. EPA, 21-454 U.S. (2022)  

As of now, Sackett v. EPA is pending adjudication before the Supreme Court. Considering the scope of the case, many expect the upcoming decision to have a significant impact on both environmental interests and the agricultural industry.

To learn more about wetlands and Clean Water Act jurisdiction, check out Schroeder Law Offices’ webinar on Wetlands: Due Diligence for Ditches, Drains and Ponds. 

Laura A. Schroeder is the founding partner of Schroeder Law Offices. Long respected in the water rights arena, Laura has generously shared her valuable experiences and provided some great advice. A few questions we asked Laura:

What motivated you to practice water law and start Schroeder Law Offices?

I used to work on a farm and did work related to irrigation. From that experience, I learned the importance of water. Also, my father was a lawyer and I got Influenced by him and became a lawyer. In my early practice years, I worked in a number of law firms and practiced in different areas of law. I then realized that my passion was in water law, so I started my practice.

What is your go-to productivity trick? How do you stay motivated?

The most important thing is that I really enjoy what I do, and I like the people I work with, so I always get motivated when I work. Also, I have the habit of mediation. Meditation helps me center myself.

What do you consider the most important thing about being a good lawyer?

I find the most important thing is to be proud of your profession. I dislike jokes about lawyers because that is disrespectful.

Where can I find you on the weekend?

I love spending time with my family! Last weekend I helped with cleaning at my son’s place, and the week before that I attended my niece’s wedding. I always consider family the most important thing. When I have free time, I also help with writing family genealogy.

What is one thing you like the most about working at Schroeder Law Office?

I like it because lawyering is an intellectually challenging job. In the legal profession, the challenge you need to face constantly changes, and you need to develop new strategies based on the new challenge. Also, at Schroeder Law Offices, everyone has different perspectives on solving problems. I enjoy discussing and developing new strategies with everyone.

Do you have some advice that you can give to young lawyers and law students who are interested in water law?

Beside law school, it is important to have real-life practice experiences as much as possible, because in the legal profession you need to work with people. When I started to practice, I did clerkship with the government, worked with my father, and worked in private law firms. I learned from that experience that working with different kinds of people and lawyers is essential, because it offers you an opportunity to learn from the people you interact with. If you just focus on just one thing, you will definitely miss out on other things.

Echo Zhang is a summer law clerk at Schroeder Law Offices. As a new addition to the office, she is eager to learn everything about water law and gain the necessary skills as a practicing attorney. A few questions we asked Echo:

What brought you to Schroeder Law Offices, and what’s your experience?

I’m currently a rising 3L student at the University of Washington. Before joining Schroeder Law Offices, I had law clerk experiences at Chinese law firms specializing in commercial dispute resolution. On the other hand, I developed an interest in general environmental law and water law. Pursuing my interests, I joined the Washington Journal of Social & Environmental Justice and now serve as the Executive Managing Editor.

I first learned of Schroeder Law Offices when I browsed through its website. I was fascinated by the passion for water law shown there. I went through the educational water rights videos on the website and decided that I wanted to learn more about water law. After coming to work here, I found that everyone is excellent, and I’m eager to learn more from everyone!

What is your go-to productivity trick?

Caffeine in the morning, and music at night.

Favorite recipe?

I love cooking slow-cooked recipes, especially braised beef brisket with tomatoes.

Are you an early bird or a night owl?

Night owl. Although fresh air in the morning is great, I love the feeling of freedom at night!

Where can I find you on the weekend?

At home cooking or going to Gas Works Park with my friends to get some fresh air and admire the Seattle skyline.

Coffee or tea?

Both!

Describe your job in three words:

Fun, challenging, and supportive.

What is working at Schroeder Law Office like?

Everyone is supportive and willing to teach me new things. I’m happy to explore water law with my colleagues.

[This article was originally published in the February, 2022 Oregon Real Estate and Land Use Digest by the Section on Real Estate and Land Use, Oregon State Bar]

In Oregon, water rights must be beneficially used according to their terms at least once every five years to remain in good standing. If they are not, water rights are subject to cancellation for forfeiture. ORS 540.610. Thus, Oregon’s forfeiture statute enacts the “use it or lose it” principle that is common in Prior Appropriation water system states. Water right holders must use their water rights or risk cancellation.

In the late 1980s, the Oregon State Legislature recognized instream beneficial uses for water, allowing the State to hold or lease water rights for instream purposes such as recreation, navigation, pollution abatement, and fish and wildlife. Under ORS 537.348, water right holders may temporarily lease water rights to the State for instream purposes for up to five years, renewing such instream leases thereafter. The statute provides that water rights leased instream are “considered a beneficial use.” ORS 537.348(2). As such, the forfeiture provisions of ORS 540.610 are not triggered during the period a water right holder leases their water right instream. Many water right holders use the instream lease program to safeguard their water rights in times when such water rights might not otherwise be used once every five years. The instream lease program serves dual purposes of providing instream flows while protecting private property interests in water use.

WaterWatch of Oregon v. Water Resources Department, 369 Or 71 (2021), questioned whether a hydroelectric water right could be leased instream and thereafter, once the lease(s) expired, be used again for hydroelectric or other beneficial uses of water. At issue in this case is a hydroelectric water right held by Warm Springs Hydro, LLC (“Warm Springs”). In 1995, Warm Springs’ predecessor shut down the associated hydroelectric project and began a series of instream leases from 1995 to 2020. WaterWatch of Oregon (“WaterWatch”) petitioned for judicial review of the Oregon Water Resources Department’s (“OWRD’s”) final order approving the 2015-2020 instream lease, and Warm Springs intervened.

In addition to the forfeiture provisions that are applicable to all water rights, ORS 543A.305 (enacted in 1997) applies specifically to hydroelectric water rights. The statute provides:

Five years after the use of water under a hydroelectric water right ceases, or upon expiration of a hydroelectric water right not otherwise extended or reauthorized, or at any time earlier with the written consent of the holder of the hydroelectric water right, up to the full amount of the water right associated with the hydroelectric project shall be converted to an in-stream water right, upon a finding by the Water Resources Director that the conversion will not result in injury to other existing water rights.

ORS 543A.305(3). Further, the statute specifies that the conversion to an instream water right “shall be maintained in perpetuity, in trust for the people of the State of Oregon.” ORS 543A.305(2).

Prior to this case, OWRD interpreted ORS 543A.305(3) similar to the forfeiture statute; that is, so long as a hydroelectric water right continues to be used for hydroelectric water use or another beneficial use under an instream lease, the hydroelectric water right is not subject to conversion to a permanent instream water right. WaterWatch challenged OWRD’s interpretation, arguing hydroelectric water rights are subject to conversion five years after the specific hydroelectric use of water ceases. The Marion County Circuit Court and the Oregon Court of Appeals both ruled in favor of OWRD and Warm Springs, but the Oregon Supreme Court reversed and remanded the decision on December 23, 2021.

The Oregon Supreme Court reviewed the text of the two statutes in conjunction with the context of the statutes and legislative history. The Court held “the use of water under a hydroelectric water right” means water use only for hydroelectric purposes as specified in the water right certificate, and does not include beneficial use under an instream lease. WaterWatch of Oregon, 369 Or at 88-89. The Court reasoned that once a hydroelectric water right is leased instream, the beneficial use is converted to another purpose other than hydroelectric water use. Id. at 91-94. The Court further held that “ceases” under the statute has an ordinary meaning, so Warm Springs’ water right was subject to conversion to an instream water right in the year 2000, five years after the hydroelectric project was shut down. Id. at 89-91.

The Oregon Supreme Court’s ruling will have significant impacts on hydroelectric water rights in the State. Most obviously, other hydroelectric water right holders in situations analogous to Warm Springs may face conversion of their hydroelectric water rights to permanent instream water rights. As such, property owners who believed they were appropriately safeguarding valuable water right holdings through instream leases may find themselves mistaken.

Another consequence of the Court’s decision is that instream leases over four years in length are essentially “off the table” for hydroelectric water rights. Hydroelectric water uses must resume within five years or risk conversion to permanent instream water rights. Thus, there is no incentive for hydroelectric water users to lease their water rights instream to avoid forfeiture, and, in the process, guarantee instream flows. Instead, the ruling incentivizes quick transfers to other, possibly more consumptive, water uses through the transfer process before the hydroelectric water right is converted to a permanent instream water right. ORS 543A.305(7).

Finally, conversion of appropriative water rights to instream water rights allows the State to enforce against upstream junior water users to ensure instream rights are satisfied. Conversion of large, early priority hydroelectric water rights to permanent instream purposes may have the outcome of increased regulation against other water right holders.  

The original article is available in PDF format here.

The Oregon Legislature’s short session officially begins today, February 1^st. It is anticipated that water users and water managers alike can catch their breaths somewhat during the short session, since not as many water-related bills will be considered.

The 2021 regular session was a marathon for those of us closely following or involved in water resources policy and law. In that session, efforts continued to correct the State’s questionable opinion that storage water rights cannot be modified through the transfer process. Only character of use transfers are reauthorized for the time being. Additionally, a threat to the due process rights of regulated water users was advanced. Only through great efforts was the attempt abated with some compromises of additional procedures around stays of agency orders during judicial review. Moreover, an onerous and costly water use reporting bill was proposed, despite information from the Oregon Water Resources Department that other types of data should be pursued, like additional stream gages and satellite data for evapotranspiration. The bill did not pass, but it did spur broader conversations about water management and planning that continue currently. Finally, the groundwater exemption for livestock came under attack, as proponents unsuccessfully attempted to limit the exemption to a daily maximum. In addition to these bills, many more were proposed, some of which were enacted into law.

In 2020, I began the position of Water Resources Chair for the Oregon Cattlemen’s Association. The 2021 Legislative Session was my first opportunity to participate in a large number of legislative bills on behalf of the organization. The experience certainly kept me on my toes and gave me an entirely new perspective of legislators and those who engage heavily in legislation. The bills are numerous, long, and ever-changing throughout the session. There is always too much work to be done in too little time to build consensus, draft written testimony, and testify in hearings. In 2021, we also tackled the additional hurdle of remote hearings on proposed bills due to the Covid-19 pandemic. This is to say that the 2021 legislative session was challenging, but also very exciting and rewarding. I was honored to receive an award from the Oregon Cattlemen’s Association in recognition of these efforts for “distinguished Committee leadership, responsibility, knowledge, expertise, advocacy, and tireless service to cattle producers and the Oregon Cattlemen’s Association.”

Short sessions of the Legislature in Oregon are not intended to address substantial changes in the law. Thus, it is not surprising that less water-related bills are anticipated this year. However, one priority that began receiving additional attention in 2021 is anticipated to continue at the forefront in 2022: water theft for illegal cannabis operations. Funding was provided in a special session in 2021, and numerous news articles detail the problem in the midst of the severe and continuing drought in Oregon and the West. House Bill 4061 (2022) would allow the Oregon Water Resources Department to obtain warrants to inspect private property. Additionally, the bill would require persons who both deliver water and receive water deliveries to ensure such water is from legal sources and keep records to that effect. Finally, the bill proposes to increase civil penalties for illegal water use when the crop grown is cannabis.

It is possible that additional water-related bills will be proposed in the 2022 regular session. For the time being, I will enjoy a little bit of a break on this front, being mindful that the 2023 regular session is just around the corner!  

(The below article is reproduced from the January, 2022 issue of Oregon Cattleman, the publication of the Oregon Cattlemen’s Association. For a PDF copy of the article, use this link.)

2021 was a terrible water year in Oregon. We experienced record high temperatures and record low precipitation, after several years of already below-average precipitation, little or no carryover water in reservoirs, historically dry soils, and severe wildfires. This year highlighted the need for additional water storage to increase water security during times of drought.

At the Oregon Cattlemen’s Association’s annual meeting, the Water Resources Committee voted to adopt a resolution promoting water infrastructure and storage to guide the organization’s priorities going forward, and the Board adopted the resolution. This policy will be especially important in coming years, as we face increasing roadblocks to achieving water storage and infrastructure goals. State water policies are oftentimes conflicting, recognizing the importance of creating additional storage, while at the same time promoting activities that foreclose opportunities for storage.

For example, Oregon’s Integrated Water Resources Strategy includes a “recommended action” to plan and prepare for drought resiliency. The Strategy also includes a “recommended action” to develop instream water protections. These two strategies are not necessarily opposed, however, when one strategy is actively pursued while the other falls by the wayside, the State’s actions do not balance both needs. Moreover, only so much water exists within water basins, and the creation of instream water rights takes that water “off the table” for purposes of increasing or creating water storage.

In 1987, the Oregon State Legislature passed the Instream Water Right Act allowing the State to convert minimum perennial instream flows to instream water rights, apply for new instream water rights, and lease or transfer existing water rights to instream uses such as recreation, pollution abatement, and fish and wildlife. Thus, instream water rights are not a new concept. However, the Oregon Department of Fish and Wildlife’s (ODFW’s) website details that the agency “re-established” its instream water rights filing program in 2016, “consistent with Oregon’s Integrated Water Resources Strategy.” Thus, we have seen in the last few years hundreds of applications for instream water rights filed by ODFW in different water basins throughout the State. ODFW’s policy stated in its administrative regulations is “to obtain an in-stream water right on every waterway exhibiting fish and wildlife values.” OAR 635-400-0005.

Unlike appropriative water rights, instream water rights are not constrained by the amount of water actually available to fulfill the instream water right. Rather, ODFW’s applications may request the amount of water ODFW determines is needed to support the fish and/or wildlife species. As such, ODFW applications regularly include requested rates that exceed available stream flows. Such applications, if approved, have the effect of precluding any new appropriative water use rights within or upstream from the stream reach designated in the application.

Moreover, once instream water rights are in place, existing water right holders lose the flexibility to transfer their points of diversion upstream. The instream water right holder (the State) must consent to the “injury” the transfer would cause. In exchange for its consent, the State typically requires mitigation by placing a portion of the transferred water rights instream. The 1987 Instream Water Right Act provided, “The establishment of an in-stream water right…shall not take away or impair any permitted, certificated or decreed right to any waters or to use of any waters vested prior to the date the in-stream water right is established…” ORS 537.334(2). In practice, however, existing water right holders lose the flexibility they might have otherwise enjoyed to modify their water rights as needed for their operations.

This is not to say that instream water rights have no place or value. The reason for outlining the increased emphasis on instream rights recently, and the effects such rights have on new and existing appropriative water rights, is to point out that we, as a State, are falling short on drought resiliency preparation efforts at the same time water resources are being irreversibly committed to instream purposes. In 2013, when the Legislature passed Senate Bill 839, establishing the Water Supply Development Fund, many hoped that the fund would be used to increase water storage throughout the State. As a whole, that fund has not created substantial new storage. The State must do better to carry forward all components of the Integrated Water Resources Strategy, including planning and preparation for drought resiliency through water storage and infrastructure improvements.

The Oregon Water Resources Department (OWRD) received a large funding package in the 2021 regular session of the Legislature. The Oregon Cattlemen’s Association joined a coalition letter to OWRD outlining recommended priorities for implementing that funding. The first priority in that letter is a request that OWRD renew its focus on increasing storage and improving disaster resiliency. Congress recently passed the Infrastructure Investment Jobs Act, and the letter further asks OWRD to develop a plan to leverage federal funds in support of these efforts.

In addition to government reprioritization and implementation of plans to prepare for droughts, individuals and groups from the agriculture community will need to lead the way and identify projects in their communities. It is possible that storage opportunities may be identified through place-based planning efforts in partnership with State agencies. Soil and water conservation districts and other local entities can also assist individuals to navigate the myriad of questions and processes involved. The Oregon Cattlemen’s Association will continue to advocate for legislation and government actions in furtherance of this goal, and assist members who are interested in exploring new or expanded water storage opportunities.

If you are interested, you might also check out Schroeder Law Offices’ free webinar about winter storage, available at: http://water-law.com/water-right-video-handbook-guide/.

Laura Schroeder and Therese Ure Stix joined Alan Schroeder in questioning agency deference in a recent op-ed piece published by the Capital Press: Commentary: Get ready for sage grouse management plan 4.0 | Columns | capitalpress.com

It is not unusual for natural resource attorneys to be on the opposing side of federal and state agency decisions.  Unlike a civil courtroom, where both sides have an even playing field, an individual on the opposite side of an agency decision plays on slanted turf.  The ball rolls more easily to the agency’s goal post.

The cause of the uneven playing field is “agency deference.”  Federal and state establish agencies assuming that such agencies have expertise in the field – for example, water rights or public grazing – that a permittee or civil judge does not have.  This assumption is based on a special set of statutes called the Administrative Procedures Act (“APA”). The APA contains “rules” by which agency decisions are challenged.  There are both state APAs and the federal APA that govern the different types of agencies.  The APA as it is written and interpreted by courts allows for “agency deference.”  For more, see the Capital Press article.

Schroeder Law Offices is often involved in hearings before administrative law judges. The firm has extensive experience in this realm. Recent and pertinent educational videos are found in the Water Rights Video Handbook or Guide.

Trading Water as a Commodity

Unappropriated water has long been considered a public resource. It is subject to private ownership rights and development, to be sure. But the law generally treats water differently compared to commodities like consumer goods or other natural resources like lumber. The UN recognized water’s essential role in the public commons in Resolution 64/292. It declared a “human right to water” and acknowledged “clean drinking water and sanitation as a human right that is essential for the full enjoyment of life and all human rights.” However, recent developments in water markets could signal a shift in long-held perspectives. In early December, California water futures contracts began trading on stock exchanges for the first time ever, bringing water in line with other commodities like gold and oil.

At its most basic level, a futures contract is an agreement to buy or sell a commodity at a future date. The price and amount is set at the time of the contract. This gives cost certainty to buyers in volatile markets, but also invites outside speculation. The water futures here are tied to the Nasdaq Veles California Water Index, which tracks the spot market for water in California. The index has doubled in value over the past year. Tying futures contracts to the index allows buyers to “lock in” a price long before they will actually purchase water.

Pros and Cons

Proponents of the venture claim that the futures will add price certainty and transparency to the traditional spot water markets. Spot markets typically bring high prices and uncertainty for water users in dry times. Farmers, municipalities, manufacturers, and energy producers can look to the futures market for data on current and past prices. They can use that information to make informed decisions about what future prices might look like in dry times down the road. This allows water users to enter into futures contracts to offset the higher cost of water in the future.

However, some detractors fear placing water futures on the open market undermines water’s value as a basic human right. Pedro Arrojo-Agudo, a UN expert on water, worries that the futures market poses a risk to individual water users. This is because “large agricultural and industrial players and large-scale utilities are the ones who can buy, marginalizing and impacting the vulnerable sector of the economy such as small-scale farmers.” Additionally, trading futures on stock exchanges invites speculation from outside investors like hedge funds and banks. Speculation could lead to bubbles like we saw in 2008 with the housing and food markets. After all, western states that regulate water under the Prior Appropriation Doctrine prohibit water speculation. This fear may be far from realization, though. Analysts believe that water is currently too abundant worldwide to become a highly sought after commodity on global financial markets.

Looking Forward

Though brand new, California’s water futures trading represents an interesting experiment in water market innovation. Currently, spot water markets are the dominant avenue to buy and sell water. Some entities, like the Western Water Market, are trying to make the process easier. These futures are another step in that direction. In Schroeder Law Office’s webinar, “Buying and Selling Water Rights,” we noted the difficulties in developing water markets. For example, water isn’t fungible, water rights include specific conditions and restrictions, and the transfer process is often lengthy, limited in allowable scope, and expensive. On top of that, scarcity issues abound. Although the new water futures trading will not solve those particular problems, it is worth keeping an eye on. Water futures may successfully help California water users better manage prices. If so, futures trading could spread throughout other western states.

Stay tuned to Schroeder Law Offices’ Water Law Blog for more water news!

This blog was drafted with assistance from law clerk Drew Hancherick, a student at Lewis & Clark Law School.

This post is one of a series highlighting the ways in which water users have adapted to life in the time of COVID-19.

Todd Nash is a rancher, Wallowa County Commissioner, and President Elect for the Oregon Cattlemen’s Association. He and his wife, Angie, own Nash Natural Beef. They run primarily an angus cow-calf operation in eastern Oregon, also raising a few bulls. They raise high quality natural beef (no antibiotics or hormones) in Wallowa County. Their cattle is grain finished in a custom yard in Vale, Oregon. The majority of Nash’s cattle go through the feed yard before harvest. Then, they become part of Painted Hills Natural Beef for sale in restaurants and high-end supermarkets. This year, however, COVID-19 created a disruption in the meat distribution chain. This caused Nash to change their business model to focus on direct customer sales.

Disruption to the Meat Distribution Chain

The COVID-19 virus created a meat processing bottleneck. Some of the larger packing plants shut down or slowed down due to sick employees. Nash received information in early 2020 that he should try to sell cattle on his own due to this challenge. The concept of direct customer sales was not totally foreign to Nash. They had done something similar in 2008 during the economic recession. This year, they shared their plans to take whole and half beef orders on Facebook. They worked directly with three local processors: Boston Beef House in Ontario, Hines Meat Company in La Grande, and Valley Meat Service in Wallowa. Customers paid only $2.50 per pound hanging weight, as well as the butchering fees. Most of the other sales Nash saw were over $3.00 per pound. This allowed customers to buy Nash Natural Beef at very affordable prices.

Nash was humbled and overwhelmed by the enthusiastic response they received from customers both near and far. They sold out their entire fat cattle crop in May. The animals were harvested in June and July. Customers were able to pick up their beef directly from the nearest of the three processors, rather than delivering the beef as they had done in 2008. Customer reviews were also spectacular. Nash Natural Beef has always focused on genetics and DNA markers for tenderness and marbling. They take a lot of pride in the product they raise. It was very rewarding for Nash to have a direct connection with Nash Natural Beef’s customers and to share in their enjoyment of Nash’s high-quality beef.

A Growing Need for Small Processors

Nash says that 2020 has really highlighted our vulnerabilities from concentrating U.S. food systems, and the need for small processing facilities throughout Oregon. In general, livestock producers in Oregon must sell their meat using United States Department of Agriculture (“USDA”) inspected facilities. It is very expensive for small processors to become USDA certified and hire additional staff. Additionally, staffing can be difficult in the meat processing industry. This results in a lot of meat being processed in large, out-of-state facilities. An exception to this rule is called “custom-exempt” processing. This allows non-USDA, state-licensed facilities to slaughter and process livestock for the exclusive use of livestock owners, their family, and nonpaying guests. As such, persons can purchase live animals for processing at “custom-exempt” facilities. However, “custom-exempt” sales are usually limited to whole or half beef sales due to the need to purchase the live animal. This excludes the ability to buy and sell small quantities and specific cuts.

Nash gave an interview for the Oregon Cattlemen’s Association earlier this year on the topic of the PRIME Act (Processing Revival and Intrastate Meat Exemption Act). The Act, cosponsored by Oregon Congressman Greg Walden, would expand the exemption for state-licensed “custom-exempt” facilities. The Act would allow meat distribution to household consumers within the State, as well as restaurants, hotels, boarding houses, grocery stores, or other establishments in the State that are involved in the preparation of meals sold directly to consumers or offer meat and meat food product for sale directly to consumers in the State. Nash says that the PRIME Act would help keep beef produced in Oregon in the State. It would provide more economic opportunities for Oregon’s rural communities. And it would allow consumers to trace where their meat is being raised and processed. Nash has seen first-hand that customers really appreciate knowing how and where their meat is raised and having a direct connection with their rancher.

Better Days Ahead

Post-COVID, Nash is looking forward to a better market and higher cattle prices. He has worked through the challenges that have come with COVID-19, and is optimistic that better days are ahead. He thinks that Nash Natural Beef will continue doing direct customer sales in the future. They have already received orders for next year, and cattle will be ready in May or June of 2021. Contact Nash Natural Beef directly for more information! Additionally, the Oregon Cattlemen’s Association started a directory of members who are willing to sell beef cattle directly to customers.

When asked whether he enjoys being a rancher, Nash explains that if he did anything else, anywhere else, ranching in Wallowa County is what he would want to do on vacation. Nash enjoys the independence of raising his own cattle, and the comradery that is shared with other ranchers. There is always something to do every day and a reason to get out of bed. Although COVID-19 has been difficult, he is looking forward to having a closer relationship with customers going forward. He is hopeful that a fix to current federal laws will create more opportunities for small, local producers to provide Oregon residents with the wonderful beef that is raised in-State.

Stay tuned to Schroeder Law Offices’ Water Law Blog for more news and stories!

Attorney Sarah Liljefelt is honored to be serving as the Oregon Cattlemen’s Association’s Water Resources Committee Chair. She started this role at the beginning of 2020. Sarah has been an OCA member for many years. She is also very involved with the Oregon CattleWomen. With the Oregon CattleWomen, she served as a former Vice President and is the current Legislative Committee Chair.

In her new role, Sarah is using her water law expertise to represent OCA’s members’ interests alongside staff and leadership. She is closely following the Governor’s proposed 100 Year Water Vision to ensure agriculture infrastructure is adequately included. This is necessary to support a resilient agricultural sector and food and fiber supply in the future. She also drafted comments to proposed agency actions involving water quality. That effort includes comments to the Oregon Department of Agriculture’s proposed changes to Water Quality Area Management Plans. Similarly, she drafted comments to the Oregon Department of Environmental Quality’s draft 2018-2020 Integrated Report.

As related to water litigation and legislation, Sarah is providing recommendations to OCA regarding involvement in current water resources cases that may impact Oregon water users for many years to come. She also prepared written testimony and appeared at the State Legislature in Salem to testify on water bills that would negatively impact Oregon water users. For a summary of the water bills of concern in the 2020 short session of the Legislature, see OCA’s article here.

Sarah is committed to representing the interests of water users in the West. She is excited to use her knowledge and experience to help OCA’s members navigate the many water resources challenges they face in order to support the cattle industry.

National Ag Day is March 24, 2020. It’s a special day to recognize and celebrate the contributions of agriculture. We should all “thank a farmer” at every meal and every time we get dressed. Therefore, National Ag Day is an organized effort to do just that. See the Agriculture Council of America’s website for more details: https://www.agday.org/.

Especially today, the agricultural community is showing its every-day-grit. It does so by continuing its important calling of feeding and clothing the world in the face of the current COVID-19 outbreak. Today, children in rural families are home due to school closures. They are working alongside their parents to provide food and fiber for the other 99% of the population. Safety requires shutting down many industries to avoid spreading the virus. However, the agricultural and trucking sectors are working as hard as ever to ensure the rest of us have what we need to weather the storm. Planting, harvesting, milking, and calving do not stop in the face of a pandemic.

COVID-19 Restrictions Exclude Agriculture

Oregon Governor Kate Brown issued an executive order on March 17th prohibiting gatherings over 25 people. Certain organizations (like farmers markets) didn’t know whether they would need to shut down operations as a result of the order. Consequently the Oregon Department of Agriculture issued guidance on March 20th. This guidance identified farmers, ranchers, food processors, farm workers, truckers, and service suppliers as “essential services” that are not required to shut down in response to the Governor’s order.

Schroeder Law Offices extends a giant “THANK YOU!” to the agriculture community. Agriculture is the backbone of the Nation on National Ag Day, during times of illness, and every day! It is truly our pleasure to provide water rights support to the agriculture community on National Ag Day and always.

Photo: The children of Bingham Beef in North Powder, Oregon, hearing “another job” during their extended “spring break.” Photo credit: Carly Carlson.

More and more in Oregon, hopeful groundwater use applicants are finding that proposed uses of groundwater are denied by the Oregon Water Resources Department due to the agency’s finding of hydraulic connection with surface water sources and the potential for groundwater use to cause substantial interference with existing surface water rights. When the agency makes such findings, the Department looks at whether surface water is available to support the proposed new groundwater use, and, in most cases, it is not – either the administrative basin rules prohibit the new use, or surface water availability data shows that surface water is not available. In short, the proposed groundwater source is too connected to surface water for the agency to approve the application.

But an enigma exists in Oregon water law where the same source of groundwater is not connected enough to surface water to allow a surface-water-to-groundwater transfer. Transfers allow water right holders to change the terms of their water use rights. In some cases, surface water right holders may wish to change their surface water points of diversion to groundwater wells. That type of change is authorized under Oregon law, but the administrative rules impose certain distance and connectivity requirements. First, the well cannot be more than 500 feet from the authorized point of diversion, or else a geology report must accompany the application to attest to the connection between the sources of water. Second, the proposed groundwater use must affect the surface water source “similarly,” meaning the use of groundwater would result in stream depletion of at least 50 percent of the rate of appropriations within 10 days of pumping. The Oregon Water Resources Departments uses stream depletion modeling to determine if this factor is met.

It is often difficult for water users to predict whether their proposed use of groundwater will affect the surface water source similarly, especially because the Oregon Water Resources Department is far from consistent when it comes to its application of various models. However, in our experience, certain factors heavily affect the outcome of surface-water-to-groundwater transfers. For example, is the well existing or proposed? If the well is existing, the source aquifer for the groundwater use is certain, whereas the Department may make assumptions related to proposed wells. Applicants often do not include a certain depth figure for a proposed well in their transfer application because their well driller will need to make that determination during the drilling process. If the majority of the wells in the area of the proposed well are drilled into a confined aquifer, the Department is likely to assume that the proposed well will be similarly constructed in order to be productive, and may deny the application on the basis that the source of groundwater pumped from the proposed well will not be connected enough to the surface water source. Thus, the proposed source of groundwater should be unconfined, and the proposed well should be drilled extremely close to the authorized point of diversion to allow the applicant the best chance of success.

All too often, we talk to water users who were advised by other consultants that surface-water-to-groundwater transfers are automatically approved so long as the proposed well will be within 500 feet of the authorized surface water point of diversion. That is not the case! It can be difficult to get the Oregon Water Resources Department’s approval on these types of transfers, and therefore it is very important to understand the factors that affect the agency’s decision and the water user’s options.

Stay tuned to Schroeder Law Offices’ Water Law Blog for more water news that may affect you!

Schroeder Law Offices is pleased to announce that Attorney/Partner Sarah Liljefelt accepted the position of Water Resources Committee Chair for the Oregon Cattlemen’s Association, beginning in the coming year. Sarah has been a member of the Oregon Cattlemen’s Association for many years, and has been very active with the Oregon CattleWomen as Vice President and Legislative Committee Chair. She is excited to use her Oregon water resources knowledge to support and defend the Oregon Cattlemen’s Association’s water interests in the years to come.

Sarah’s new position was announced earlier this week when she presented at the Oregon Cattlemen’s Association’s Mid-Year Conference in Canyonville, Oregon. Sarah provided an update on the Klamath River Basin Adjudication and conjunctive surface water/groundwater management in the Klamath Basin. Some of the other highlights from the conference included an update of Western Resources Legal Center’s recent victories by Executive Director Caroline Lobdell (Sarah is a former WRLC law clerk), and a trip to Melrose Vineyards (https://www.melrosevineyards.com/) with the Oregon Cattlewomen – beautiful location, friendly staff, and great food and wine!

A lot has changed since 1909, when Oregon enacted its Water Code and the water use permit system began. Obtaining a water use permit can be a lengthy and detailed process. If you’re not careful you can limit the flexibility of your water permit through self-imposed conditions without realizing it.

For example, Schroeder Law Offices recently represented a business that stated on its groundwater permit application that it planned to use drip irrigation. The business did not plan to exclusively use drip, but drip was one form of irrigation used for part of its operation. As a result, the Oregon Water Resources Department (OWRD) proposed to impose a condition in the Proposed Final Order (PFO) that the business would be limited exclusively to drip irrigation. This would have significantly reduced the business’s flexibility and the marketability of its property in the future. However, our office was able to successfully remove the proposed condition from the water use permit that was issued.

This example provides an important reminder to very carefully prepare water use permit applications, and closely review OWRD’s initial reviews, proposed orders, and final orders/permits. Otherwise, water users may be subject to unnecessarily restricting permit conditions. Water use professionals, such as attorneys or consultants, can provide assistance to prepare permit applications and review OWRD documentation regarding the applications. Water use application forms are available on OWRD’s website, https://www.oregon.gov/OWRD/pages/index.aspx. For more information about water right processing see: http://www.water-law.com/water-rights-articles/get-an-oregon-water-right/.

Stay tuned to Schroeder Law Offices’ Water Law Blog for more news that may affect you!

This article was drafted with the assistance of Law Clerk Nathan Klinger, a student at Willamette Law School.

Attorney Sarah Liljefelt presented at Halfmoon’s Water Laws and Regulations seminar on June 7^th on the topic of Oregon Groundwater, teaching a group of engineers about groundwater ownership, regulation, and acquisition of groundwater use rights in Oregon. This week, on June 28^th, Sarah will present at the Oregon State Bar Environmental & Natural Resources Section’s “brownbag” continuing legal education seminar on the topic of groundwater regulation in the Klamath Basin in Oregon. Her co-presenter is Lisa Brown of WaterWatch, who will speak about groundwater in Harney County. If you are interested in attending, please visit the Section’s Events page or Schroeder Law Offices’ Coming Events page for more information. Sarah’s presentation materials are available on the Section’s Events page.

Stay tuned to Schroeder Law Offices’ Water Law Blog for more news!

Water use conditions in the Klamath Basin continue to worsen in 2018. On March 8, 2018, a water “call” was made in the Klamath Basin, and the Oregon Water Resources Department (“OWRD”) began the validation process for shutting off junior water users. Within the week, on March 13^th, Governor Kate Brown declared a drought in Klamath County, Oregon, the first drought declaration since 2015, coming much sooner than hoped or predicted.

In April, OWRD began regulating off water users in the Klamath Basin. On April 13, the Oregon Water Resources Commission approved temporary emergency rules granting a preference to water rights for human consumption and stock watering in Klamath County. The rules allow certain water users with water rights for human consumption and stock watering to continue using surface water for such uses despite OWRD’s regulation off of water use rights. Exempt uses of groundwater, including domestic and stock uses, may also continue despite OWRD’s regulation. The Commission passed similar temporary rules granting the same preferences during the last drought period.

Also in April, Klamath Project water users found themselves unable to begin irrigating due to a federal court injunction. The Hoopa Valley and Yurok Tribes in northern California previously brought suit against the Bureau of Reclamation and National Marine Fisheries Service in federal court, alleging mismanagement of the Klamath River below the four major dams lead to an outbreak of C. shasta, a parasite that infects juvenile Coho salmon. The court entered an injunction requiring 50,000 acre feet of water stored in Upper Klamath Lake to flush and dilute the parasite until most of the salmon have migrated to the ocean, usually occurring after the beginning of June. Irrigators and irrigation districts petitioned the court to lift the injunction, but the court declined to do so in 2018. For more information, see May 1 article from the Capital Press, Judge upholds Klamath River Injunction.

In May, the Klamath Irrigation District brought suit against OWRD, seeking to compel the agency to take exclusive charge of Upper Klamath Lake to distribute water according to the district’s water use rights determined by the agency in the Klamath Basin Adjudication. The district alleges that it disagrees with the Bureau of Reclamation and PacifiCorps as to the proper distribution of water, and those entities are releasing without valid water use rights, causing injury to the district and its patrons. 

Also in May, the Klamath Tribes filed suit in federal court in northern California against the Bureau of Reclamation, US Fish & Wildlife Service, and National Marine Fisheries Service, alleging violations of the Endangered Species Act and National Environmental Protection Act by failing to maintain appropriate elevations in Upper Klamath Lake. The Tribes seek declaration of the alleged violations, an injunction against further jeopardy and habitat modification, and for the agencies to reinitiate consultation resulting in a new biological opinion.

Finally, on April 27, 2018, the Klamath County Circuit Court issued a Case Management Order in the Klamath Adjudication, outlining a schedule for hearing the first substantive exceptions filed with the court since the judicial phase of the adjudication began in 2013. First the court will decide exceptions made against federally reserved water claims, excluding Tribal claims. Next, the court will decide exceptions against Walton and Klamath Termination Act claims. Third, the court will decide exceptions to Tribal claims. Numerous exceptions have been filed with the court, alleging OWRD awarded too much water to these claims, ignoring the pertinent legal standards for deciding these claims, to the detriment of other Klamath Basin water users. A decision on the first group of exceptions is not anticipated until 2019.

The Upper Klamath Basin Comprehensive Agreement was terminated on December 28, 2017. The agreement called for retirement of irrigation rights to increase stream flows into Upper Klamath Lake by 30,000 acre feet per year. This “retirement” (or cancellation) of water use rights, which was negotiated largely in the absence of upper basin irrigators, was viewed unfavorably by many of the affected irrigators, and was ultimately not funded by Congress. Discussions about alternative agreements continue to this date.

Overall, the return of drought conditions, coupled with fish disease and five years of merely procedural rulings in the Klamath Basin Adjudication, have left water users in the Klamath Basin in serious trouble.

Stay tuned to Schroeder Law Offices‘ Water Law Blog for more water news!

On February 1, 2018, the Ninth Circuit Court of Appeals upheld the “groundwater conduit theory,” whereby a discharge of pollutants into groundwater that is fairly traceable to a navigable surface water is the functional equivalent of a discharge directly into the navigable water body for the purpose of regulation under the Clean Water Act. This argument has been proffered many times in the past, but prior to this case this theory had, at best, narrow and limited success. The full Ninth Circuit case is available here.

The case involved the County of Maui, Hawaii and its wastewater treatment plant. The plant uses four wells as its primary means of disposing effluent into groundwater and the Pacific Ocean. The County injects three to five million gallons of treated wastewater per day into its wells, and, according to the County’s expert, when the County injects 2.8 million gallons of effluent per day, the amount of effluent that reaches the ocean is 3,456 gallons per meter of coastline per day. The Court stated this is “roughly the equivalent of installing a permanently-running garden hose at every meter along the 800 meters of coastline.”

Discharges of pollutants may be authorized by permit under the Clean Water Act’s National Pollutant Discharge Elimination System (“NPDES”). Jurisdiction under the Clean Water Act requires three things: 1) addition of a pollutant 2) to a navigable water 3) from a point source. This case focuses on the third requirement. Clean Water Act cases hold that a point source is a discernible, confined, and discrete conveyance, which in a lot of cases really means a pipe, ditch, or canal.

Wells do not directly connect to navigable water (in this case, the Pacific Ocean). Instead, the water injected into wells must travel through groundwater to reach the ocean. In 2013, the EPA, Army Corps of Engineers, Hawaii Department of Health, and University of Hawaii conducted what is called a “tracer dye study.” Essentially, they put dye into the wells and then monitored the ocean for the dye. At its conclusion, the study found a hydraulic connection between two of the wells and the ocean.

The Ninth Circuit concluded that point source discharges that travel indirectly through groundwater to a navigable water, is a violation of the Clean Water Act if the discharger does not have a permit. The Court reasoned that “this case is about preventing the County from doing indirectly what it cannot do directly.” Since the County could not build a waste pipe that emptied directly into the ocean without a permit, it could do so indirectly through its wells to avoid the requirements of the Clean Water Act. 

There are currently cases before the Fourth and Sixth Circuits which also implicate the groundwater conduit theory. If the holding by the Ninth Circuit is adopted by other Circuits, it will represent a change for the NPDES permitting program and regulation under the Clean Water Act. On the other hand, if a split develops in the Circuits, it may lead to litigation in the United States Supreme Court.

Stay tuned to Schroeder Law Offices’ Water Law Blog for more water news!

This article was drafted with the assistance of Law Clerk Derek Gauthier, a student at Lewis & Clark Law School.