Builders and developers should be aware of the potential asset they may have in water rights acquired with lands purchased for future development—such rights may be a valueable commodity as water markets emerge.
For large-scale development outside established urban areas, water rights are most certainly part of the picture—no project checklist would be complete without assuring an adequate supply of water to the site for both construction and long-term use. For smaller projects, builders and developers may be less familiar with the potential pitfalls associated with water supply and water rights. This article is intended to provide a basic survival guide for dealing with water issues in Oregon; many of the same principles apply in Washington, Idaho and throughout the West.
The basic rule of water law is that a water right is required for almost all types of water use—whether the water comes from a surface source (such as a stream or river) or from ground water through a well. A water right authorizes use of a certain amount of water, for a specific purpose (such as domestic, irrigation, commercial, industrial or municipal), in a particular location. In addition, the water right includes a "priority date" relative to other water rights that have already been issued for use of the same source of water. The priority date is a key part of water law, reflecting the concept "first in time, first in right." In times of shortage, water is distributed on the basis of priority dates, from the most senior to the most junior. There is no proportional distribution during drought; the most senior rights are entitled to take all of the water authorized for their use before anyone else receives water.
Conditions of Water Right
Once issued, the water right can last forever, so long as water is regularly used in accordance with the terms and conditions of the water right. Many water rights in the state have priority dates in the mid- to late-1800s, and they remain valid today. Fully developed and vested water rights are "appurtenant" to the land, and treated as a property right under the law. However, if the water right is not used for a period of five or more years, it may be subject to forfeiture and cancellation.
Most development within Oregon's urban growth boundaries is served by a municipal water provider—such as a city or water district—which holds the water right. If the building site is within a municipal service district, you're home free. If the site is not served by a municipal provider, it will be up to the landowner or developer to obtain any water rights that will be required.
In Oregon, water rights are issued by the Water Resources Department, in Salem. The process requires approximately six to nine months, if all goes smoothly. But it is not unusual for the water rights process to require a year or longer when complications arise due to resource concerns or when protests are filed by "interested parties."
Today, most rural residential, industrial and recreational/resort development is served by ground water. In many parts of the state, surface water is simply not available—because it has already been appropriated to other users, or is now protected for fish and wildlife, or public recreational purposes. Ground water is generally more accessible, and requires little or no treatment when used as a source of drinking water.
Water Right Exemption
In Oregon, Washington and Idaho, state laws include general water right exemptions for certain low-volume ground water uses, including single-family domestic wells. In Oregon, a single well may provide the domestic water for up to 15 homes under a general exemption. The law allows up to 15,000 gallons per day for such use. That's the good news for residential developers. The bad news is that the exemption does not extend to water needed for lawn and garden use. It makes no sense, but it's the law—a single exempt well can be used to serve up to 15 homes, but the combined amount of lawn and garden use cannot exceed one-half acre! A word to the wise in rural residential development: apply for ground water rights to include both domestic and landscape irrigation. Even though the water right would not be required for domestic use, a water right in hand can be a long-term asset and will provide added insurance against future law changes.
Oregon's ground water exemptions also apply to commercial and industrial use, for up to 5,000 gallons per day. This provision is useful to ensure access to water for site development and construction purposes. Keep in mind that if construction water is to be pumped from a nearby stream or river, there is no similar exemption, and a temporary water right (known as a "limited license") must be obtained.
Another important consideration is that the ground water exemptions are useful only where there is ground water available for the new use. In most parts of Oregon, ground water is available, so long as the well is deep enough. However, even in western Oregon, there are dry pockets where ground water supplies are dwindling. The Water Resources Department has already declared "critical ground water areas" in a number of locations throughout the State, including the Cooper-Bull Mountain area and several sites up the Columbia Gorge, including The Dalles, Butter Creek and Stage Gulch areas. In addition, the State has identified "ground water limited areas," where only exempt uses are allowed. These include high growth areas such as Sherwood, Dammasch, Wilsonville, Parrett Mountain and the Stayton-Sublimity area. Other areas are currently under study and limited to only exempt use, irrigation and fire protection. These include the Chehalem Mountain area, South Salem Hills and Eola Hills. Ground water users in these areas frequently report dry wells, or are forced to deepen their wells.
Water Rights Transfer
When water rights are needed for projects in these dry areas, a possible option is to acquire existing water rights through a process known as a "transfer." Subject to certain requirements, the transfer process allows a water right to be moved to a new location and changed to a different type of use. Such rights can be made available for transfer when farmlands with irrigation water rights are acquired for residential or commercial development in the urbanizing areas served by a municipal provider. Where the water rights will no longer be needed for their original irrigation purposes, they can be "transferred" to another type of use or to another location. As water supplies become more scarce, and the regulatory hurdles for obtaining new water rights become more difficult, the value of existing water rights will increase significantly.
Those who have acquired such farmlands for future development should be aware of the potential value of water rights that will no longer be needed for irrigation purposes. Water marketing is slowly emerging as big business in Oregon and throughout the west.
Where water is provided through a municipal system, builders and developers need not worry about water rights. When such service is not available, careful attention should be paid in acquiring land for development, and in advising landowners preparing for new construction. Where ground water is available, exemptions to the state water laws will generally provide sufficient water for a single family home. Small subdivisions, however, should be careful to obtain water rights to allow for lawn and garden irrigation. And, builders and developers should be aware of the potential asset they may have in water rights acquired with lands purchased for future development—such rights may be a valueable commodity as water markets emerge.