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By Martha O. Pagel
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Most significant waterways in Oregon are currently subject to fish listings under the federal Endangered Species Act (ESA)—with more listings anticipated. However, the ESA is a relative newcomer to the arena of water management. In Oregon and throughout the arid West, the "prior appropriation doctrine" has governed water use for more than 150 years.
At present, there is no clear guidance on how to reconcile federal regulatory requirements under the ESA with private property rights established under state water law. As a result, water users, interest groups, Indian Tribes, and public officials are blazing a trail and building new precedent on nearly a daily basis.
This article provides background on state water law and the ESA, identifies potential points of conflict and controversy between them, and describes strategies which maybe useful in: avoiding a collision between state and federal laws; increasing certainty for water users; and promoting needed stream flow restoration.
Oregon Water Law / The Prior Appropriation Doctrine
Water use in Oregon and throughout the west is built on the foundation of "prior appropriation"—a legal doctrine that emerged from the unique needs of an arid region. Designed to promote growth and development, the doctrine was based on the simple premise of first come, first served. The phrase, "first in time, first in right" is the linchpin of western water law. In its simplest, early form, the doctrine allowed any person to divert water from its natural stream channel in order to make "beneficial use." The first person to do so on any given waterway was entitled to all the water necessary for his/her own beneficial use before any subsequent users could take water for their purposes.
Before 1909, the right to use water was established merely by stepping forward to make beneficial use. In 1909, the Oregon Legislative Assembly adopted the state's first comprehensive water code, incorporating the concepts of prior appropriation and prescribing a process for applying for an obtaining water rights (see ORS Ch. 537, Ch. 539, & Ch. 541)
The process then, and now, includes two phases: (1) the water right permit and (2) the water right certificate. The permit phase represents initial approval of the water right and authorizes the holder to begin the process of developing the water right and putting the water to beneficial use. Most permits provide an initial period of up to five years for that development to occur. Once the water has been fully developed, the permit holder may obtain a certificate—i.e., the final water right. If water is not fully developed during the initial permit phase, the water right holder may apply for an "extension" of the permit, upon a showing of good cause.
Water uses developed before the 1909 code were "grandfathered-in" through a judicial process known as "adjudication." Once the rights are demonstrated through the adjudication process, a court decree is issued, directing the state to issue the appropriate certificates, with priority dates corresponding to the time when the water was first put to beneficial use.
Thus, many water uses in Oregon hold vested water rights with priority dates as early as the 1850s.
Once issued, a water right certificate—unlike most regulatory permits that are issued today—can remain valid forever, with no requirement for periodic renewal, and no changes or additions to the original terms or conditions of use. However, since its inception, the prior appropriation doctrine has included some limitations on the right to use water: the right must be exercised regularly to remain valid and becomes subject to forfeiture after five or more years of non-use; the right is limited to the amount which can be put to beneficial use without waste; and the right remains appurtenant to the land on which the beneficial use occurs. If the land is sold, the water right is automatically transferred with the property.
The holder of a water right may voluntarily initiate a change (or "transfer") in the type of use, place or use, or point of diversion (for surface water) or point of appropriation (for ground water). Under Oregon law, the transfer application must be approved unless Oregon's Water Resources Department (WRD) determines the change will result in injury to other water right holders.
A major revision of the water code in 1955 brought Oregon's first recognition of need to identify and protect minimum perennial stream flows for public purposes. Flow levels were set by administrative rules on key state waterways. However, the new law did not alter the pre-existing system of priority dates. Minimum stream flow rules applied only prospectively, affecting the state's ability to issue new water rights on a given waterway but not limiting water use under pre-existing senior rights.
The 1955 law also established a "public interest" test in connection with water right issuance. For the first time, before approving a new water right, the state was directed to determine that the proposed new use would not "impair or be detrimental to the public interest."
In 1987, the law was further amended to expressly include instream flow as a "beneficial use" of water, paving the way for issuance of instream water rights (see ORS Ch. 537.332 et seq). Three state agencies—the Departments of Fish and Wildlife, Environmental Quality, and Parks and Recreation—were authorized to apply for instream water rights in amounts needed to address public interests in fish and wildlife protection, water quality and recreation. Once issued, the instream rights are held by WRD "in trust" for the public.
The priority date for an instream water right, like out-of-stream rights, is the date the application is filed with WRD. However, the 1987 law also allowed minimum stream flows established pursuant to the 1955 law to be converted to instream water rights with a priority date of the time of adoption of the minimum stream flow rule.
Federal Regulation Under the Endangered Species Act
With enactment of the ESA in 1973, Congress established one of the strongest regulatory directives in our country's history. The law requires protection of those species listed as "threatened" or "endangered" and includes strict enforcement provisions.
Key ESA Provisions Include
- A process for listing a plant or animal species as "endangered" if it is determined to be in danger of extinction throughout all or a significant portion of its range, or for listing as "threatened" if it is "likely to become endangered" in the foreseeable future.
- A duty for all federal agencies to ensure their actions will not jeopardize a protected species, including a process to consult with the listing agency (either the National Marine Fisheries Service (NMFS) or US Fish & Wildlife Service, depending on the species) to determine whether proposed actions are likely to result in such jeopardy.
- A strict prohibition against the "taking" of a species listed as endangered, and a process for establishing similar protection for "threatened" species by administrative regulations.
- A process to allow for the "incidental take" of a listed species under certain limited circumstances, and pursuant to an approved "Habitat Conservation Plan" designed to minimize the potential for adverse impact on a listed species.
- Strict penalties for violation of the law, including civil penalties of up to $25,000 and $50,000 for criminal violations.
- A process allowing citizen suits to compel enforcement of the Act.
Intersection of State and Federal Law
Whether and to what extent ESA will cause a change in the way water is distributed under state water law is the hot topic in water law today.
The "whether" part of the question seems most clear—the answer is "yes." The "to what extent" part offers much more room for speculation. What is abundantly clear is that water right holders no longer enjoy the level of certainty and reliability previously associated with senior water rights, and that applicants for new water rights face high hurdles in demonstrating the proposed use of water will meet federal requirements.
The issue arises in two contexts: (1) in state decision-making on requests for new water uses or for changes in existing uses; and (2) in federal enforcement actions.
State Decision-Making
Since 1955, applications for new water rights have been evaluated against the standard of whether the proposed use will "impair or be detrimental to the public interest." In recent years, the public interest evaluation has evolved to include a systematic analysis of potential impacts on fish and wildlife. With the advent of salmon listings under the ESA, state rules have been further amended to require specific ESA findings on all new water right applications. Thus, state decision-making has been clearly tied to ESA compliance.
This attempt at coordination between state and federal requirements is not just a good idea for WRD—it appears to be the law. In a recent case involving the State of Massachusetts, the federal court held a state agency may be held liable for "take" under the ESA for authorizing private actions, through state-issued permits, that could result in harm to a listed species Strahan v Cox, 127 F 3rd 155 (1st Cir 1997).
Less clear is whether WRD may be subject to similar ESA restrictions in making decisions on transfer requests. Under state law, a water right transfer is almost a matter of right—subject only to an evaluation of the potential for injury to other water rights (ORS 540.530). The wording of the controlling statute is unambiguous: the Water Resources Department shall approve the transfer unless it determines the change will result in injury. Arguably, WRD has no authority to consider any factors other than injury. The question of how this process will square up with the federal court's decision in the Massachusetts case has yet to be answered.
Permit holders requesting extension of existing permits may face even greater uncertainty with respect to ESA impacts. In contrast to the transfer process—which is statutorily limited to consideration of only injury to other water rights—the extension decision must be based on WRD's more subjective determination of "good cause." (See ORS 537.230 & 537.630) The term "good cause" is not clearly defined. However, the statutes direct WRD to consider such factors as: the cost of the appropriation; the good faith of the appropriator; the market for the water or power to be supplied; and "the present demand therefor." According to the state's Attorney General, this statutory language opens the door for WRD to consider factors such as ESA listings or other public interests in the use of water (Letter Opinion of Attorney General, June 26, 1997). Current administrative rules require WRD to consider ESA factors in making the "good cause" determination. (OAR 690-315-0040(4)(c).)
ESA Enforcement and Existing Water Rights
Equally problematic questions arise in the context of ESA enforcement actions against existing water right holders. Indeed, this is an area of heated public debate and intense negotiations.
Until recently, enforcement actions related to water use were few and far between, focusing on obvious instances of "take" resulting from unscreened diversions or inadequate fish passage. However, the listing agencies are now turning their attention toward the consequences of water withdrawals.
Last summer's experience in the Klamath Basin brought national media attention to the issue when the federal Bureau of Reclamation determined virtually all of the stored water in Klamath Lake should be managed for fish protection purposes instead of irrigation. In that case, a federal district court agreed with the Bureau's conclusion that its primary obligation under the law was compliance with the ESA, notwithstanding federal authorizing legislation that established the Klamath Project exclusively for irrigation purposes, and longstanding contracts with local irrigators. Kandra v. United States, 145 F.Supp.2d 1192 (D.Or. 2001).
In contrast, however, in the face of similar drought conditions and concerns about possible energy shortages, another federal agency, the Bonneville Power Administration, determined it was unable to deliver requested flows for fish under the ESA, because of the overriding authority of its authorizing legislation to provide regional power. Clearly, the federal government does not speak with one voice on the issue of whether and how the ESA operates to trump specific Congressional authorization and the core functions of federal agencies.
In the Klamath and BPA examples, federal agencies were called upon to make water management decisions relating to federal water projects, for which there was a clear consultation requirement pursuant to Section 7 of the ESA. For the most part, federal ESA enforcement action relating to the impact of water diversions has been tied to the operation of such federal water projects subject to consultation.
An important departure from that general approach occurred in early 2000, in Oregon's portion of the Walla Walla River Basin. In that case, the U.S. Fish and Wildlife Service gave notice of potential ESA violations to a group of irrigation districts as a result of their long-standing exercise of valid state water rights. The districts' historic diversion practices—authorized under their water rights—had the effect of dewatering the river during critical periods for the bull trout, a listed species.
The districts were warned of the potential for enforcement action unless they made substantial changes in their water management practices. In this situation, the irrigation districts were able to reach a negotiated agreement with the US Fish & Wildlife Service and other interested parties to avoid immediate enforcement action by initiating short-term stream flow restoration efforts and agreeing to develop a long-term conservation plan.
The Walla Walla example illustrates many of the unanswered questions associated with federal enforcement action, and underscores the need for an improved approach to coordinated state and federal decision-making. So far, the federal agencies have moved slowly into the territory of enforcement actions based on reduced stream flows. And with good reason. Legal questions abound:
Assuming "take" of the species can be demonstrated, which water user on any given stream system is responsible? Can the listing agency proceed against any single water user without joining all other users? Where stream flows are reduced, but not fully appropriated, will the listing agency be able to prove "take"? Should such action be contingent on the listing agency first identifying stream flow levels necessary for survival of the species? If enforcement action is taken, should it be taken against the largest water user? The most junior? The least efficient? The most downstream? The most upstream?
Assuming enforcement action is taken, will such action, alone, result in any benefit to the fish? Even if NMFS is successful in curtailing water use in order to protect a listed species, can the water be protected from diversion by other water right holders?
And, a critical question on the minds of water right holders, will federal enforcement action against "take" of a listed species result in the "taking" of a private property right without just compensation? A decision in April, 2001, by the U.S. Court of Claims held, for the first time, that irrigators may be entitled to compensation when federal project water deliveries are withheld for ESA purposes.
In that case, irrigators held state rights for water to be delivered under contract from the federal project.. Tulare Lake Water Basin v. United States, No. 98-101L (U.S. Ct. Claims, Apr.30, 2001). In the Tulare Lake case, however, the ruling was quite narrow, based in large part on the wording of the contract between the water users and the United States. Numerous legal questions remain about whether and to what extent water users may be entitled to compensation in the absence of such federal contracts.
Avoiding a Collision: Practical Strategies for Demonstrating ESA Compliance
Until the above questions relating to enforcement authority and compensation are answered, any federal enforcement action will carry a high potential for lengthy, multi-party litigation. In the meantime, negotiated settlements appear to be a more effective course for achieving shared objectives of restoring stream flows needed to protect listed fish, while providing for reasonable economic use.
Several mechanisms exist under state and federal law for conducting such negotiations and obtaining reasonable certainty from enforcement actions:
Section 10 – Incidental Take Permits / Habitat Conservation Plans
Under Section 10 of the ESA, any person may apply for an Incidental Take Permit (ITP) in connection with development of a Habitat Conservation Plan (HCP). The HCP provides a vehicle for describing actions such as those undertaken in the Walla Walla, for protecting and restoring flows needed for the species. This approach also offers the flexibility to include multiple parties and address multiple species. Based on experience to date, however, the process for developing and receiving approval of an HCP has been lengthy and expensive for applicants.
Section 7 Consultation and Biological Opinion
When a federal "nexus" exists, water users may be able to obtain federal sign-off on ESA compliance through the Section 7 consultation process. This approach is available only to water projects with a connection to federal agency actions, such as irrigation projects operated by the Bureau of Reclamation, or projects requiring in-water permits from the US Army Corps of Engineers. The Section 7 consultation process may offer a faster, clearer path for demonstrating compliance than the HCP/ITP process under Section 10.
Administrative Settlement
A third option, used in the Walla Walla example, is that of administrative settlement in the face of threatened enforcement action. Of key interest in this example is the fact that no formal litigation was required in order for the "parties" to reach a negotiated "settlement." The agreement among is contractual in nature and clearly is not binding on others, leaving the parties open to possible future citizen suit action by those not involved in the process. On the other hand, the process is comparatively simple, fast, and flexible making it an attractive option despite its lower level of certainty. In the Walla Walla example, the irrigation districts minimized their exposure to such future litigation by inviting environmental groups and the affected Indian Tribes to participate in the process.
Court-Approved Settlement
The option of court-sanctioned settlement exists when formal enforcement action is initiated by the listing agency or by citizen suits. A recent example in Oregon is the Grants Pass Irrigation District. In that case, NMFS filed suit against the district for "take" of listed coho salmon as a result of the district's operation of its diversion structure, the Savage Rapids Dam. NMFS cited the district for inadequate fish passage and fish screening. For several years, judicial proceedings were delayed pending settlement negotiations. An agreement was finally reached last summer. In this case, WRD, though not a party in the federal action, participated in settlement discussions in order to help assure that any settlement agreement would be consistent under state water law, and to facilitate simultaneous settlement of state litigation.
Section 4(D) Rules – "Limits" on Take
A relatively new and potentially promising mechanism for recognizing negotiated settlements may be found in Section 4(d) of the ESA—the process for adopting administrative regulations for protecting and conserving listed species. Regulations adopted by NMFS in July, 2000 provide guidance on actions to avoid "take" for 14 species of salmon in the Pacific Northwest.
The 4(d) rules include the concept of "limits," a term used by NMFS to describe categories of actions which have been pre-approved as not resulting in take. The list of 13 "limits" in the NMFS regulations run the gamut from actions authorized under an Incidental Take Permit and Habitat Conservation Plan to road maintenance conducted under pre-approved guidelines submitted by Oregon's Department of Transportation, to urban development activities meeting established NMFS standards
Although the authority of NMFS to authorize such "limits" was the subject of much debate during the federal rulemaking process, NMFS adopted the concept in its final version of the rules. In so doing, NMFS has created an opportunity for virtually any type of resource management activities to receive pre-approval through the rulemaking process. For water users, it opens the door to development of water management plans, rotation agreements, or other mitigation strategies which could restore stream flows during critical time periods, while still allowing reasonable economic use.
Conclusion
The intersection of state water law and the ESA raises numerous questions for water users, the general public and public officials. It is currently unclear whether and to what extent the federal listing agencies will be able to compel changes in state-authorized water use and distribution though ESA enforcement actions. Years of litigation may be required to determine the final answers to complex legal questions.
In the meantime, affected parties may be able to reduce exposure to ESA liability, and thereby increase certainty in water deliveries, by employing a variety of strategies for reaching negotiated agreements with the listing agencies. A key factor for the success of any of these approaches to negotiated settlement will be a clear understanding of both ESA and state water law requirements.
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