Court Creates Problem for Municipal Water Utilities

by Davis Wright Tremaine LLP

Municipal water rights present an anomaly under the prior appropriation doctrine, which governs water law in the West. The doctrine is predicated on the idea that the permittee will act quickly to put the water to beneficial use. However, cities apply for water rights knowing that full development won’t occur for many years, perhaps decades, when population growth generates the demand and ratepayer dollars to support water system buildout. Thus, typical construction deadlines in permits for other kinds of water rights are not attainable.

Oregon has struggled with this issue for many years, and a new decision by the Court of Appeals just complicated the plight of municipal water providers. WaterWatch v. Water Resources Dept. arises under 2005 legislation that deals with extensions of time to apply municipal water rights to beneficial use, following years of uncertainty as to the process and criteria for extensions. The statute provides that for the first extension for municipal water right permits issued before November 2, 1998, the Water Resources Department must include conditions on the “undeveloped portion” of the permit that provide for the persistence of fish species and require a Water Management and Conservation Plan. The City of Cottage Grove, like many other cities, continued development of its water works while the extension process was pending. The City asserted, and WRD confirmed, that there remained no “undeveloped portion” since the City now had the capability of using the water to the full extent authorized under the permit, and so the fish persistence and WMCP conditions did not apply.

The court disagreed and vacated Cottage Grove’s water right and remanded the case to WRD. The court first rejected WRD’s and the City’s argument that the case is moot because while the appeal period was running on WRD’s extension order, WRD issued a water right certificate. By statute, a certificate is conclusive proof of the water right and therefore the City and WRD argued there remained no issue concerning the extension order. The court held that since the certificate depended upon the validity of the extension, the fact of the certificate did not moot the case and petitioners were not barred from attacking the order granting the extension. 

The second and central holding of the case is that the “undeveloped portion” of the permit is the work remaining to be done on the water project following the previously granted extension. In Cottage Grove’s case, the last extension was in 1999. Therefore, under the remand the extension order must include conditions related to fish persistence for construction of water works since 1999. In some cities’ situation, such retroactive conditioning could entail significant expense and retrofitting.

The court’s opinion includes dicta that could also be troubling. First, the court suggests that municipal permits could be cancelled for missing construction deadlines in the permit, which we believe is incorrect. Second, the court indicated its ruling has no bearing on whether a city must cease using water developed since the previous extension and while the new extension is pending. This dicta could be instructive for those seeking to oppose municipal extensions.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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