2009: Tough Legislative Session for Agricultural Water Users

The 2009 Oregon Legislative Session convened January 12th and adjourned sine die on June 29th. It was not a positive session for Oregon’s natural resources community generally or agricultural water users in particular. Whether the issue was dam removal, fees, or water storage, lawmakers enacted laws that will have adverse consequences for water users in both the short and long term. Yet, without Water for Life, the outcome of the session would have been much worse. Water for Life was successful in defeating a number of proposals that almost certainly would have become law in the organization’s absence. In addition, Water for Life’s efforts forced proponents of the adverse legislation that did become law to make compromises that will make the legislation more tolerable for agricultural water users. The discussion that follows highlights the more significant pieces of legislation to be considered or adopted by the 2009 Legislative Assembly.

Klamath Dam Removal

Over the course of the past three years, a number of public and private parties have participated in negotiations to resolve issues in Oregon’s Klamath Basin. These issues range from dam removal, to fish reintroduction, to water rights adjudication. The negotiations have produced an unsigned agreement known as the Klamath Basin Restoration Agreement (“KBRA”) and a signed Agreement In Principle (“AIP”). The KBRA is intended primarily to end the majority of outstanding contests in the Klamath Basin water rights adjudication. The AIP is primarily intended to result in the removal of four hydroelectric dams in the Klamath Basin.

Under the terms of the KBRA, the agreement will not move forward unless PacifiCorp agrees to remove four of its Klamath Dams. Thus, the KBRA and AIP are directly interrelated. Pursuant to the AIP, which has been signed by Oregon, California, and the United States, PacifiCorp will agree to remove its Klamath Dams, if it is provided adequate return on its investment and is absolved of all legal liability associated with the removal of the dams.

Governor Kulongoski introduced Senate Bill 76 in the opening days of the 2009 Legislative Session as a mechanism for moving the AIP forward. The measure proposed a $180 million rate increase on PacifiCorp’s Oregon electric customers to help fund part of the Klamath Dam removal efforts in accordance with the AIP.

Water for Life adamantly opposed SB 76 because of the precedent it would establish in terms of dam removal and the impact the measure will have upon Water for Life members in the Klamath Basin. Water for Life did so by arguing: (1) it does not make sense to remove hydroelectric dams at a time when both lawmakers and the public are clamoring for renewable sources of energy, (2) lawmakers should not approve SB 76 and support a plan for dam removal that will enable the KBRA to move forward when most lawmakers are wholly unfamiliar with the KBRA, (3) SB 76 does not limit the State of Oregon’s liability for environmental harm caused by dam removal, (4) the plan for dam removal is wholly contingent upon federal legislation that will create exceptions to environmental laws that would otherwise apply, (5) it has not been demonstrated that removing the Klamath dams is cheaper than relicensing, and (6) that lawmakers should wait until feasibility studies on removing the dams have been completed.

Using the foregoing arguments, and many others, Water for Life worked doggedly to persuade legislators that consideration of SB 76 should be delayed until a future legislative session. Ultimately, however, the Governor’s strong support for SB 76 prevented Water for Life from securing the votes needed to defeat the legislation and the bill became law.

Water Measurement

In every session since 2001, Senator Jackie Dingfelder has championed proposals to expand mandatory water measurement in Oregon. In keeping with this trend, Senator Dingfelder championed SB 194 to mandate the installation of measurement devices on “significant diversions” in Oregon. The bill would also have created a “measurement advisory committee,” appointed by the Oregon Water Resources Commission, to develop recommendations for further expansion of water measurement in Oregon.

Senate Bill 194 was assigned to the Senate Environment and Natural Resources Committee chaired by none other than Senator Jackie Dingfelder. Water for Life aggressively lobbied against SB 194 on the basis that mandatory measurement is not the correct approach for expanding water measurement in Oregon, particularly in light of current economic conditions. Water for Life also argued the Water Resources Department already has legal authority to require water measurement in every circumstance where it is necessary. These arguments resonated with many committee members, but not Senator Dingfelder. Ultimately, SB 194 was amended and referred to the Committee on Ways and Means, where the bill remained at the end of the 2009 Legislative Session.

Water Right Tax

Officially sponsored by Senator Jackie Dingfelder’s Committee on Environment and Natural Resources, SB 740 sought to impose a $100/year tax on water right holders in Oregon. Although the measure exempted water rights held instream from the scope of the tax, SB 740 dedicated revenue from the tax to programs associated with instream water uses.

Senate Bill 740 was plagued with legal problems. Under the Oregon Constitution, all measures imposing new taxes must originate in the House of Representatives, not the Senate. In addition, SB 740 contained an emergency clause that would prevent a citizen referendum upon the measure in the event the measure was passed by the Legislature. The Oregon Constitution prohibits emergency clauses from being included in legislation imposing new taxes. What is more, the measure provided the penalty for not paying the $100 annual fee would be cancellation of the water right. Under the Oregon Constitution, it does not appear a water right can be cancelled for failure to comply with a condition created after the water right is fully established and vested.

Notwithstanding the foregoing problems, SB 740 was passed out of Senator Dingfelder’s Committee on Natural Resources and Environment and sent to the Committee on Ways and Means. The bill remained in committee at the end of the session, in no small part due to the legal defects associated with the bill.

Exempt Wells & Fee Increases

As in 2007, exempts wells were again a hot topic in 2009. The first measure to address exempt wells was HB 2859, which proposed to require a permit for domestic wells appropriating more than 1,000gpd. Under existing law, no permit is required to drill a single or group domestic well, so long as the well does not appropriate more than 15,000gpd. House Bill 2859 was assigned to the House Committee on Environment and Water and was strongly opposed by Water for Life. A public hearing and a work session on HB 2859 took place and it became clear the committee would not move forward with the legislation, largely because of the arguments advanced by Water for Life and allied organizations.

When it became clear that HB 2859 would be unable to obtain the support of the House Committee on Environment and Water, the chief legislative proponent of domestic well legislation, Senator Jackie Dingfelder, developed amendments pertaining to exempt domestic wells. With the support of her committee, Senator Dingfelder subsequently inserted those amendments into a bill in her Senate committee (SB 788). The bill, as discussed later on, originally concerned a wholly different topic (water storage). The amendments removed the original provisions of the bill and replaced them with provisions requiring anyone drilling a new domestic well to provide a map to the Oregon Water Resources Department showing the exact location of the well on the tax lot. The amendments also established a $250 fee for recording the map with the Water Resources Department. The bill was then approved by the Senate Committee on Environment and Natural Resources and referred to the Committee on Ways and Means.

The Ways and Means Committee amended SB 788 to increase the exempt well fee from $250 to $300. Amendments to increase an array of departmental fees were also inserted into the bill. These fee increases followed on the heels of substantial fee increases adopted by the Legislature in 2003 and 2007. Water for Life argued the amount of the fee increases was inappropriate considering the current state of the economy. Lawmakers, however, saw it differently and concluded the fee increases were needed to address a reduction in the amount of General Fund dollars that would be dedicated to the Water Resources Department in the 2009-2011 budget. Water for Life also argued it was inappropriate to make the fee increases permanent; because, if the economy improved, then more General Fund dollars would be available for the agency and the fee increases would no longer be necessary. Lawmakers ultimately accepted this argument and inserted language into SB 788 making the fee increases automatically expire in 2013. As revised, SB 788 was approved by the Legislative Assembly and is expected to be signed by the Governor and become law.

Water Storage

Water storage was another topic that received considerable attention this session. While the idea of capturing water in winter months when water is plentiful and saving it for summer months when water is scarce would seem to be an idea that a diverse array of interests would be able to support, the water storage debate during the 2009 Legislative Session took an unfortunate direction.

Senate Bill 787 proposed the creation of a fund that would be available to private landowners and municipalities seeking to develop water storage projects. While the creation of such a fund seemed like a reasonable idea, the legislation imposed a host of one-size-fits-all requirements that would deter most potential applicants from using the program. For example, the bill would have required the installation of measurement devices before funding could be obtained, regardless of how much the installation of measurement devices would cost or whether the data collected would serve a beneficial purpose.

As originally introduced, SB 788 would similarly have provided disincentives for landowners to participate in beneficial water storage programs by erecting barriers to the development of water storage projects. Under the original version of SB 788, a person seeking to appropriate water for such a storage project would be required to pay for the Department of Fish and Wildlife to conduct studies on how the project would impact such things as “stream morphology,” “peak flows,” and “ecological flows.” Such studies would be expensive, time consuming, and subjective in nature. In addition, conducting such studies would not be practical for individuals seeking to store water under a limited license for a short period of time in conjunction with a temporary development project.

Though Water for Life succeeded in persuading lawmakers not to move forward with SB 787 or the original water storage provisions of SB 788, lawmakers ultimately incorporated these same concepts into HB 3369. Billed as a proposal to provide funding for a specific project in the Umatilla Basin, HB 3369 also established new water storage grant and loan programs that are made accessible to individuals outside the Umatilla Basin. Unfortunately, the bill established preconditions for obtaining these loans that will be difficult, if not impossible, to comply with (e.g. measurement requirements and peak/ecological flow requirements as discussed above). Worse still, HB 3369 contains a number of provisions designed to promote conservation that are fundamentally inconsistent with key tenets of Oregon water law.

For example, HB 3369 is that it is inconsistent with Oregon’s Instream Water Rights Act, codified at ORS 537.332. The issue arises from provisions of HB 3369 providing that 25% or more of the “new” water from a water storage project must be “legally protected” and actually dedicated to instream use. This language departs from the Instream Water Rights Act in that it does not limit the quantity of water that is protected instream to the amount of water necessary to support the instream use. Under Oregon’s Instream Water Right Act, three state agencies are entitled to request instream water rights for specific purposes. The amount of water these agencies are entitled to request is limited to the amount of water “necessary” to support the specified instream use. The absence of any type of “necessity” limitation in HB 3369 is likely to result in water being committed to instream use even when instream use is not the highest and best use of water. This will result in an inefficient and suboptimal allocation of water resources.

House Bill 3369 also departs from the Instream Water Rights Act by legally protecting water instream without regard to priority date. Under the Instream Water Rights Act, instream water rights are imbued with the same characteristics as any other water right and assigned a priority date and regulated in accordance with the doctrine of prior appropriation. HB 3369, by contrast, appears to contemplate a new type of instream right that is “legally protected” in a manner that ensures the water associated with the right is actually dedicated to instream use. In effect, this creates a new type of water right that has “super priority” over all other rights on a stream or basin.

The apparent super priority that is to be granted to “legally protected” instream rights created in accordance with the provisions of HB 3369 is inconsistent with the doctrine of prior appropriation. Under the doctrine of prior appropriation, whether water allocated under an instream right actually remains instream depends on whether there are more senior users on the stream entitled to receive the water. Creating instream rights that are “legally protected” instream regardless of priority date will result in situations where more senior water right holders are divested of water they should be entitled to receive under the doctrine of prior appropriation.

The idea of promoting water use efficiency and dedicating a portion of the “new” water to instream use is not a unique concept. Oregon’s conserved water statutes have allocated a percentage of “new” conserved water instream consistently with the Instream Water Rights Act and the doctrine of prior appropriation for many years. Proponents of HB 3369 could have obviated the problems discussed above by mirroring the language of the conserved water statutes, which are structured so as to avoid these problems. However, HB 3369 passed through the Legislative Assembly without these concerns being addressed.

Beyond the provisions of HB 3369 relating directly to water storage, Water for Life opposed HB 3369 because of provisions included in the bill calling for the development of a state water resources strategy. The provisions of HB 3369 relating to the development of a statewide water resources strategy are not good for agriculture. Under the bill, the state water resources strategy is to be developed by the Oregon Water Resources Commission in close conjunction with Oregon Department of Environmental Quality and the Oregon Department of Fish and Wildlife. The strategy is to focus upon such matters as “ecosystem services,” “water quality,” “challenges presented by climate change,” and “land use”. It is clear from reading the measure that it is not calling for a strategy focused on meeting the water supply needs of agriculture and average Oregonians. Instead, the bill is designed to give environmental agencies greater control over the state’s water resources policy and to focus Oregon water policy on issues that are antithetical to agriculture and business production.

Water for Life’s chief ally in opposing HB 3369 was the Water Resources Congress and their members. While Water for Life and the Water Resources Congress have repeatedly been legislative adversaries on issues such as water rights ownership, Water for Life and the Water Resources Congress (OWRC) were the only two agricultural organizations to actively oppose HB 3369. By working together, Water for Life and the OWRC came very close to defeating HB 3369; however, the measure ultimately was approved by the Assembly and is now awaiting the Governor’s signature.

Note Regarding Water Resources Department Budget

As discussed above in relation to SB 788, the Legislative Assembly dramatically increased almost every fee that is assessed by the Water Resources Department. The goal of the fee increases was to cover 50% of the cost associated with “services” the Department offers through fees. The fee increases contained in SB 788 and related legislation followed on the heels of similar fee increases in 2003 and 2007.

Though much has been said about the state of the Oregon Water Resources Department’s budget over the course of the past six or seven months, it is important for Water for Life members to have the facts concerning the Department’s budget. The fact that Water for Life members should be aware of is that despite the incessant talk of the Department’s dire financial straights, the Department’s total budget has increased by 22.04% since the 2005-2007 biennium! The Department’s budget has experienced this dramatic growth primarily as a result of a 151.30% increase in so-called “other funds,” which are dollars that accrue to the agency from sources other than the general fund (e.g. fees paid by water users). Thus, despite all the talk about the Department’s budget facing draconian cuts, the fact is that the Department’s total budget is 22.04% larger than it was during the 2005-2007 biennium. This is important information to bear in mind when considering whether the substantial fee increases imposed by the 2009 Legislative Assembly are warranted.