The Oregon Supreme Court recently reversed a decision of the Oregon Court of Appeals and determined that the lease of a vested hydroelectric water right to the state for instream uses did not qualify as the “use of water under a hydroelectric water right” under Oregon Revised Statute 543A.305(3). WaterWatch v. Oregon Water Resources Department, 369 Or. 71 (2021) (hereafter referred to as Warm Springs Hydro, after intervenor respondent Warm Springs Hydro LLC). As a result of the decision, the hydroelectric water right will be subject to conversion to a permanent instream water right.

The case involved a hydroelectric water right on Rock Creek, a tributary to the Powder River. The water right was used to generate hydroelectric power at the Rock Creek project near Baker City until 1995, when the project was shut down. Beginning in 1995, the water right was temporarily leased instream under a series of instream water right leases and was not used for hydroelectric power generation. In 2015, WaterWatch petitioned the Oregon Water Resources Department challenging the Department’s approval of another instream lease renewal for the water right. WaterWatch argued the water right had converted to a permanent instream water right pursuant to ORS 543A.305(3) (the hydroelectric conversion statute). Additional analysis of the Court of Appeals’ decision is available here.

The Oregon Supreme Court considered whether the hydroelectric water right had converted to a permanent instream water right under the hydroelectric conversion statute, which states that “five years after the use of water under a hydroelectric water right ceases” the water right “shall be converted to an in-stream water right.” ORS 543A.305(3).

The Court determined that “use of water under a hydroelectric water right” refers only to beneficial uses of water for hydroelectric purposes and does not refer to any other beneficial uses of water that might occur. For example, Oregon law allows water rights to be temporarily or permanently transferred to authorize a different beneficial use than what is stated in the water right certificate.

The Oregon Water Resources Department argued that because the hydroelectric conversion statute does not say “five years after the hydroelectric use of water under a hydroelectric water right” or “five years after the use of water for hydroelectric purposes under a hydroelectric water right” the legislature did not intend the only beneficial use for a hydroelectric right to be hydroelectric uses. The Department argued by analogy that under Oregon’s forfeiture statute (ORS 540.610) water rights that are unused for five successive years are subject to forfeiture, but any kind of authorized beneficial use tolls the five-year forfeiture clock, whether or not the use falls within the use listed on the certificate. Accordingly, the Department argued the use of a hydroelectric water right for a beneficial purpose—like an instream lease—should similarly avoid converting the hydroelectric water right to a permanent instream right. The Oregon Supreme Court disagreed.

The Court’s analysis focused on language in the instream leasing statute and rules which permit the lease of a water right “for conversion to an in-stream water right.” ORS 537.348(1); OAR 690-077-0010(14). The Court determined that any water right leased under ORS 537.348 is temporarily converted to an instream water right during the lease period. Accordingly, the Court concluded that when a hydroelectric water right is leased instream for five successive years, it is converted to an instream water right and cannot be a “use of water under a hydroelectric water right.” The Court concluded that because the Rock Creek project’s water right was leased for instream purposes for successive five-year periods without ever being used for hydroelectric generation during that time, it was subject to being converted to a permanent instream right under ORS 543A.305.

The implications of this decision for water users with water rights for hydroelectric purposes is that the water right should be used for a hydroelectric purpose at least once every five years or it may be subject to conversion to a permanent instream water right. Even though instream flow leasing is a sound strategy for protecting water rights during periods of nonuse, that strategy may no longer be available to holders of hydroelectric water rights. This case could also set the stage for future litigation about the interaction between Oregon’s water rights forfeiture statute (ORS 540.610) and hydroelectric water rights, as well as takings issues. For the time being, holders of hydroelectric water rights should view this case as a reminder to be conservative in developing a strategy to protect their water rights portfolios.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.