By Dr. Doug Whitsett
Presented at the June 8, 2004
Property & Environmental Research Center Conference; 'Resolving Conflicts in the Klamath Basin through Markets and Property Rights' at Running Y Resort

According to assessor records in Klamath County, the water right appurtenant to irrigated agricultural land represents more than 95% of the value of that land. The right is purchased with the land, sold with the land, mortgaged with the land, and taxed with the land. It is a very valuable property right. Any reduction of irrigation water delivery negatively impacts the value of that land.

From a lay perspective, a water right is somewhat analogous to both an easement and to a mineral right.

Like an easement, it confers the right to use a certain amount of water, for a specified beneficial purpose, from a specific source, at a specific site, at a specified maximum rate of use, at a specified time, without waste, and without injury to other priority water right holders.

Like a mineral right, it allows for the partial or total consumptive use of the water up to the duty of the water right. Further, if the water right is separated from the land, the water, like oil or like gold, may be exported from the land for a profit. However, like the consumptive use of a mineral right, the land is devalued for that purpose forever.

The first people to put water to beneficial use developed ownership in a right to use the water for that purpose. A priority date of that ownership of use was established by the first such beneficial use.

The priority date was dependent upon continuous use of the water for the same purpose.

A change in beneficial use required either a change in date of priority, or a legal certification of the change in use.

Oregon statutes declare that all of the surface and ground water in Oregon is owned by the State. This applies to water on or under federal, state, tribal, or private land.

When an irrigation water right is transferred to beneficial in-stream use, the State owns that increased flow of water in the stream. In essence, the water is returned to the commons.

In the past, lack of water distribution infrastructure often prevented the most efficient use of the water for irrigation.

Both the State and landowners ceded water rights to be held in trust by the Bureau of Reclamation for more efficient irrigation use, but significantly, not to a different use. In purpose, the water rights were pooled to promote more efficient distribution and application of irrigation water.

The Federal government then built irrigation projects to efficiently distribute available water for irrigation purposes. In the case of the Klamath Project, this efficiency is near 95%.

Water rights were redistributed to be appurtenant to the expanded acreages made possible to irrigate by the federal project. The federal government neither owned the water or the water right. The state owned the water and the owner of the land owned the water right.

This concept was affirmed by the U.S. Supreme Court in

Nevada v. U.S. where the court stated that the water right is owned by the owner of the land to which that water right is appurtenant, and further, that the federal ownership of the water is nominal at best (meaning in name only).

This Congressional Act did not change the beneficial use nor the concept of water right ownership being appurtenant to the irrigated land: rather, it only facilitated the more beneficial distribution of the water for irrigation.

These landowners were then responsible to pay the Federal government back for the construction costs of the project. This repayment was completed by the Klamath project irrigators.

When the Tribes of the Klamath Basin and the federal government established a treaty in 1864 the Tribes reserved certain lands as well as certain rights to hunt, fish, and gather. The federal government holds those rights in trust and is obligated by the treaty to maintain the resources that allow the Tribes to exercise those reserved rights.

The federal courts have determined that those reserved rights include an in-stream water right with a priority date of "time immemorial" sufficient to support the retained rights to hunt, fish, and gather as they were being exercised at the time of final termination.

The federal courts have further ruled that when the federal government purchased the Tribal lands, the Tribes retained ownership of the water rights that support their reserved rights to hunt, fish and gather.

The state of Oregon retains the authority to quantify those in-stream water rights. In the Oregon adjudication proceedings the Tribes have claimed in-stream flows at or near flood stage in most Upper Klamath Lake tributaries as well as the water in Upper Klamath Lake at near full reservoir. A significant disparity appears to exist between these Tribal claims and the suggested quantity of the right affirmed by the Ninth Circuit court of Appeals.

These Congressional Acts have been interpreted by the courts to allow the Federal government authority to change the beneficial use of water for the greater good of the public, or to support Tribal trust obligations.

This interpretation allows the federal government to reallocate the use of water stored for irrigation to a different beneficial purpose by regulatory fiat.

Biological Opinions that require maintaining elevated Upper Klamath Lake levels prevent water stored for irrigation from being delivered to irrigators.

Additional biological opinions that require elevated down stream Klamath River flows also prevent water stored for irrigation from being delivered to irrigators.

These changes of beneficial use are denying owners of irrigated land delivery of the water that is legally appurtenant to that irrigated land, thereby abrogating their water rights.

Creating uncertainty about future water deliveries for irrigation also negatively impacts the value of the land. Both potential buyers and potential lenders are concerned about unstable land values.

Potential operation-loan lenders are also concerned about water delivery certainty from season to season.

This uncertainty tends to limit potential buyers to government and Non Government Organizations that do not intend to use the lands for agricultural production.

This set of government created circumstances effectively produces a pool of willing sellers to a restricted pool of buyers effectively destroying the free market value of that land by artificially limiting the value of the land.

The federal government undoubtedly possesses the authority to reallocate the water for the greater public benefit. However, with that authority comes the obligation to pay the rightful owners of the water rights fair compensation for the water use that was confiscated.

This obligation for compensation is currently being tested in the U.S. Federal Court of Claims.

Economic factors will force incremental change in the beneficial use of this scarce commodity. Those who own the use of the water will be positioned to make substantial profits in water marketing.

The unfairness in this process is that the current owners of the use of the water are being manipulated to give up that ownership preventing them from participating in these future profits.

Our preferred solution is to devise the processes necessary to allow for the marketing of water, but not for the sale of the water right. Any change in beneficial use must be carefully crafted to avoid injury to all other holders of water rights.

As long as the water right remains appurtenant to the land, the value of that land will increase incrementally with the value of the water, regardless of where the water is actually put to beneficial use.

The current requirement for the water to be put to beneficial use on the land each five years will prevent long term leasing, thus allowing for an adjustment to market value each five years. The beneficial use clause only requires that the infrastructure for water delivery be maintained, and that a portion of the water be used at least once each five years.

Income derived from marketing a portion of the water right duty may be sufficient to finance the more efficient application of the remaining water to the land, thereby preserving our farming communities.

In our mind, separating a water right from the land and selling it is somewhat analogous to clear cutting a forest without replanting---only much worse. Once the water right is sold, both the productivity and the value of the land are effectively diminished for all future generations.

How dare we assume that right!

Actions initiated with good intentions too often result in unintended consequences. For example:

1. The removal of stream meanders was used extensively as a means to make streams flow faster thereby preventing them from heating, and it worked. Unfortunately, it also caused increased rates of stream bed erosion that led to down-cutting of the stream bed with a concurrent lowering of the soil water profile adjacent to the stream which in turn caused the riparian vegetation to die for lack of water.
2. Suppression of "normal" decadal fire cycles has led to juniper encroachment which has resulted in virtually fire proof juniper forests. This unchecked juniper growth is a major cause of the measurable reduction in surface water flows in the basin.
3. Setting aside wilderness areas specifically to be left unmanaged has resulted in unmanageable wildfires that have incinerated the forests set aside for our progeny.
4. Re-establishing wetlands for wildlife and fishery habitat has caused a huge increase in basin wide evapo-transpiration that has resulted in measurable reductions in in-stream flow.
5. Replacing flood irrigation in river valleys with more efficient sprinkler irrigation has resulted in measurable decreases in river flow. The increased production from more efficient irrigation results in significant increases in evapo-transpiration. The "more efficient" application of irrigation water also significantly decreases recharge of soil waterprofiles.

These examples of unintended consequences of good intentioned action underscores the need to adopt change incrementally and to carefully monitor the results of that change both for efficacy and for unwanted responses.