First there were the robber barons. Then the railroad barons began laying tracks across the West. Timber barons for years have speculated on Oregon’s vast forests that once seemed an inexhaustible resource. Now that logging has slowed to a trickle, will there be water barons crawling out of the woodwork to exploit what might be Oregon’s most valuable resource in an era of climate change?Jeff Ziller, a fish biologist with the Oregon Department of Fish and Wildlife, says “water rights are an interesting animal in the state of Oregon.” The water rights system in the West assumes that water needs to be used, not just enjoyed for its scenic beauty. Oregon’s water rights high point was in 1915 when a state statute withdrew from appropriation all streams that form the waterfalls of the Columbia Gorge. Since then our water rights system hasn’t leaned towards supporting beauty. Fish compete with farmers, municipalities compete with industries and water rights on a river are given out until they’re all allocated for uses from irrigation to drinking to fish habitat and recreation. 

Eugene’s water provider, the Eugene Water and Electric Board, has at least 14 water rights on the McKenzie River, most of them for uses like hydropower. EWEB has two “perfected” water rights for drinking water and would like to get the third made official before someone else, like the Willamette Water Company, gets it first. A perfected or certificated water right means the user has proven it is putting the water in the permit to beneficial use. Water law in the West operates on a “prior appropriation doctrine,” which means that the first person, or in this case municipality, to get a water right is last person to get water cut off in a time of shortage. First in time is first in right.

Michael Mattick is the watermaster for most of Lane and Linn counties through which the McKenzie River flows. He says the title “watermaster” comes from the function of “trying to settle water use disputes.” The job “historically has been to keep people from killing each other over water use,” he says.

“But I always try to downplay the aspect that people fight over water,” Mattick says. “People have disagreements, and we work them out.”

The McKenzie River’s unique geology means that when other rivers run dry due to climate change, the McKenzie will still have water. Less water, but water nonetheless. Planners don’t just strategize water for the next five years; they try to figure out how to use and preserve water for the next 20, 50 or 100 years.

The McKenzie is one of the few rivers in the West that still has open water rights. Despite water laws intended to discourage speculation on water, with changes in land use and the prospect of climate change, water has become more valuable and people are trying to figure out how to profit from it. Water-rich places like the Willamette Valley will be the locations that drought-stricken areas will look to for water. And as people move from newly arid areas to the spring-fed rivers of the Emerald Valley, some fear demand for water could boom.

Water Supply

Willamette Water Company is a small “quasi-municipal” water provider that supplies water to about 100 residential customers and 60 or so businesses and industries in Goshen, according to documents from the Oregon Public Utilities Commission. Goshen is a town of about 1,000 people just one exit south of Eugene on I-5. Willamette Water has a water right of 4 cubic feet per second (cfs), and right now, Lisa Brown, staff attorney for WaterWatch of Oregon, says the company uses .43 of that right, less than half a cubic foot; and, she says, it’s unclear where that .43 of water is being used. WaterWatch is challenging a recommendation by the Oregon Water Resources Department (WRD) to issue a draft permit for another water right for an additional 34 cfs on the McKenzie. That’s about 22 million gallons per day.

To put that into perspective, EWEB’s two perfected water rights are for 27 and for 90 cfs. That’s enough to supply Eugene, as well as let EWEB sell water to Santa Clara, River Road and, interestingly enough, to the Willamette Water Company, according to EWEB spokesman Joe Harwood.

WaterWatch of Oregon says the WRD plans to let Willamette Water Company use nearly 22 million gallons per day from the McKenzie River without any assessment of how, or even whether, it could use the water.

The Willamette Water Company applied for the 34 cfs permit in 2008, only two years after coming under new ownership. According to the application filed with the WRD, the company wants to “supply an expanded service area in Goshen and Pleasant Hill areas and to serve the cities of Creswell and Cottage Gove.” It goes on to say that those areas will have water service deficiencies due to growth within a few years, and that “much of this area is currently using contaminated ground water.” Construction would begin in 2014, with water use beginning in October 2029.

Most if not all of the water that Willamette Water Company supplies to Goshen comes from water supplied and treated by EWEB. Jan Wellman, director of public works in Cottage Grove, says the city used to have two separate water rights, Layng Creek and Row River. Recently, they abandoned the Layng Creek water treatment facility. The city currently has enough water rights through their Row River facility, but predicts some kind of change in the next 20 to 25 years. Wellman says Cottage Grove has had a preliminary discussion about wholesale water with Willamette Water Company.

Layli Nichols, the city finance director for Creswell, says the city currently gets its water from the Coast Fork Willamette and a few wells. It has looked into buying water wholesale and talked to EWEB, but Nichols says Creswell’s best option at the time was to perfect its own water rights.

Pleasant Hill and other rural areas get their water from wells, and private water rights on rivers.

EW was unable to find any cities outside of Goshen that have agreed to purchase water from the Willamette Water, though Creswell, Springfield and Cottage Grove have all signed a Land Use Compatibility Statement (LUC) that essentially says if Willamette Water was to supply them with water or build water infrastructure such as intakes or pipelines, it would be allowable under their land use regulations.

Joe Harwood of EWEB says that Willamette Water doesn’t have its own treatment plant. According to the LUC, it also doesn’t own the land it on which it would have to build the infrastructure in order to use the water right.

So why would a little water company from Goshen suddenly want to go big and compete with EWEB in the wholesale water business?

In August 2006 Willamette Water Company was purchased by Greg Demers. According to a December 2009 Water Utility Annual Report, the corporation has two stockholders: Greg Demers and Melvin McDougal. Greg Demers is the company’s president, and Jeff Demers is the director of operations. Willamette Water shares administration, offices and other goods and services with Frontier Resources LLC, which Oregon’s Corporation Division says is made up of Greg and Jeff Demers, as well as Ed King of King Estate Winery.

Phone calls and emails to Willamette Water were not returned before deadline.

Water Sprawl?

Melvin McDougal and Norman McDougal own a variety of companies and LLCs around Lane County, on top of other holdings across the West. A quick survey of data in the Lane County’s Assessment and Taxation Department reveals that between the McDougals and their McDougal Bros. Investments, and the Demers, as well as Greg Demers’ ATR Services and Frontier, they own about 154 properties in Lane County. That doesn’t include other LLCs like the McDougals’ Leelynn Inc., Wiley Inc. and Oregon Land Company.

If you can still call people land and timber barons in the West, the Demers and the McDougals qualify, with holdings from timberland to mills to land both rural and within the urban growth boundaries of Lane County cities.

Greg Demers, together with his son Robert, donated $195,481 to pass Measure 37 in 2004 and then promptly filed for compensation claims under the new law for $2.5 million. Measure 37, which was later modified by Measure 49, requires that the government pay landowners for the impact of environmental and land use regulations put into place since they acquired their property or that it waive the regulations.

The corporation Greg Demers was most known for prior to Frontier Resources was Pioneer Resources. That company dissolved after becoming involved in a multi-million dollar lawsuit over 360,000 acres of timberland in Oregon, Washington and California. The lawsuit was rife with allegations of kickbacks, conspiracy and slander, according to a 2002 article in The Register-Guard, written by reporter-turned-EWEB-spokesman Joe Harwood.

One of the McDougals’ companies, Lost Creek Rock Products, has been given a permit by the Oregon Department of Geology and Mineral Industries to quarry Parvin Butte just outside Dexter. Neighbors recently held a meeting with Lane County Commissioner Faye Stewart, county staff and a representative of the McDougal Bros. over concerns about this quarry. Opponents to the quarry say dynamite will be used to mine the mountain, which has already been clearcut, and that there are 54 homes, as well as the Dexter Post Office, within a 1,000 yard radius of the quarry. They also fear that once the mountain has been mined and leveled, it will eventually become a subdivision.

The McDougal Bros. were given a notice of intent to sue in 2007 by Willamette Riverkeeper for not only failing to prepare and implement a stormwater pollution control plan at one of their facilities in Goshen; they also didn’t submit water monitoring information to the Oregon Department of Environmental Quality (DEQ) from 1998 to 2006. The case was settled out of court, though later the Oregon Clean Water Action Project noted high levels of suspended solids that were above the stormwater permit’s benchmark in the runoff in 2007 and 2008.

The McDougals also own the popular Belknap Hot Springs Resort, with a very small water right dating back to 1933 to bring hot water to the swimming pool. They and the Demers have several small water rights in the Willamette Basin from the Middle Fork Willamette to Camas Swale for uses from recreation to livestock to irrigation.

The Demers have had run-ins with the DEQ as well; one of their corporations, Kinzua Resources, was dissolved in June 2010. In August it was fined $25,075 by the DEQ for failing to provide evidence of financial assurance for closure and post-closure maintenance of its Pilot Rock Sawmill Wood Waste Landfill.

The overall picture that one gets of the Demers and the McDougals is that they are skilled at speculating on and developing land and resources. Keeping those lands and resources clean however, may not be one of their strong points.

When Willamette Water applied for its 34 cfs permit, it said the water was for “municipal use.”  But the Water Resources Department deemed the company a “quasi-municipal water source.”

Lisa Brown of WaterWatch says a quasi-municipal source is a privately owned company, not a public utility, and it serves places like mobile home parks, homeowners associations and other developments.

Quasi-municipal sources, says watermaster Mattick, “generally don’t get all the breaks” a municipal source like EWEB does. Quasi-municipal sources function like municipal sources in that they can supply water for residential, business and firefighting purposes in a community, but where a municipality can sit on a water right once it’s been certificated, a quasi-municipal source can’t. Use it or lose it applies to a private user of a water right and to a quasi-municipal source. The quasi source can ask for extensions in its permit while it tries to develop its water right. Mattick says that, once it gets certificated, companies such as Willamette Water, if they “don’t use the water for the purpose identified in the certificate, they could lose some of it for non-use.”

Water to Veneta

Lane County doesn’t have a regional water plan, and it looks like cities around Eugene, from Cottage Grove to the south  and Veneta to the west, think they might need a lot more water in the near future. But conservationists and slow-growth proponents say there’s a difference between the amount of water a city needs and supplying water to encourage urban sprawl. Jan Wilson of the Western Environmental Law Center says Veneta can’t grow as an urban area for reasons ranging from its location out West 11th Avenue to the lack of jobs. She adds that cities and counties tend to plan for growth but not for the reality that some small rural communities are shrinking and that the projected population increases are not accurate.

Veneta wants to buy 8 million gallons of water a month from EWEB and bring it out to the city through a 10-mile, $17 million pipeline that would be built through federal grants and loans. Ric Ingham, Veneta’s city administrator, says all Veneta’s water comes from wells. Despite the city’s proximity to Fern Ridge Reservoir, it wouldn’t be able to use that water, which is managed by the U.S. Army Corps of Engineers, without a series of congressional actions. Not to mention, he adds, the difficulties of turning the “muddy muck” into drinkable water.

Ingham says the Oregon Water Resources Department put limitations on where some of the city’s wells could be located because of underground connections to surface water, further restricting its water access. Ingham says the Veneta needs to have a plan in place because “we’re required by state law to have a 20 year viable source for drinking water.”

Wilson says all the possible ways Veneta could get water — a pipeline from EWEB, new groundwater wells, petitioning the federal government for water from Fern Ridge would be so expensive that it will double their residents’ water rates and make their system development charges the highest in the state. In a recent email to Lane County Commissioners Faye Stewart, Rob Handy and Pete Sorenson, Wilson warned of the shrinking city scenario and wrote that Lane County needs to ensure that “we’re not going to keep throwing good infrastructure money after bad.”

EWEB made a deal with Veneta to sell the water. Eugene is now in a legal dispute with EWEB over whether the publicly owned utility could make that deal without the city’s authorization. A Lane County Circuit Court judge ruled in October that EWEB does have the authority to approve water sales outside the city limits. The case has now gone to the State Court of Appeals, which could take a year to rule. Veneta has asked the Eugene City Council to approve a resolution supporting the sale before Veneta starts on the pipeline project, which has to be completed by 2015 in order to use the stimulus funds.

The Eugene City Council is having a hearing Dec. 13 to gather public comments about the sale. Harwood says, “The contract that the EWEB board signed with Veneta is limited duration. In times of a shortage or drought Eugene customers would have first priority,” and, he says, Veneta must always maintain a secondary source of water.

EWEB argues that if it doesn’t sell the water — wholesale water sales account for 7.5 percent of the 10.4 billion gallons per year EWEB delivers.— it could lose Eugene’s ability to secure water for the future. The utility wants to perfect its third water right for 183 cfs. It first applied for that right in 1961 and has received extensions on the permit ever since. Harwood says, “Keep in mind we employ a full-time long-range water planner and one of his jobs is to make sure that EWEB customers have clean water going out 100, 200 years.”

He says on the third unperfected water right, “Population growth didn’t go up as much as planners had forecast. We’re looking at our two perfected water rights and looking 100 to 200 years into the future and looking at all the people and organizations that have applied.”

Wilson, who is representing Friends of Eugene in the Eugene-EWEB dispute, says, “EWEB wants to perfect its right before Willamette Water Company.” Eugene City Councilors are scheduled to vote on the resolution on Jan. 24, though the legal case between Eugene and EWEB will not have been resolved by then.

Water for the Fishes

The Oregon Department of Fish and Wildlife is less concerned with how much water Lane County needs for drinking and watering its lawns, and more concerned with how much water endangered species need to survive. ODFW has recommended that EWEB’s unperfected permit and the Willamette Water Company’s new permit have a bypass requirement added to them that requires 2,000 cfs of water to be flowing down the river past the point of intake. That means that if the water in the McKenzie gets too low to support threatened species like Oregon chub in what ODFW fish biologist Jeff Ziller calls “ephemeral” habitats, then whoever is drawing the water must reduce intake.

Ziller says the sort of habitat needed by chub, like oxbows, tends to be cut off in the summer, when flows are low. There are only 20 known naturally occurring populations of the fish.

Oregon has a perennial flow law dating back to the 1950s that allows Oregon’s Water Resources Commission to set minimum streamflows and approve instream water rights for fish protection and to minimize pollution. In the 1980s the Oregon Legislature supplemented the perennial flow law with the Instream Water Right Act, which allows the DEQ, Parks and Recreation Department and ODFW essentially to apply for a right to keep water in the river for habitat, recreation, navigation and to mitigate pollution.

ODFW has not filed an application for an instream right for 2,000 cfs. Though, according to Mattick it “has taken this position that 2,000 cfs should be a bypass flow on both the (EWEB) extension proposal and Willamette Water Company’s pending new application.”

He says, “Because the McKenzie is essential salmon habitat for a couple of listed species, spring Chinook and Oregon chub, we require that ODFW evaluate the new application and we accept their comments and typically their expertise on fish habitat requirements.”

Instream water rights operate on the same oldest-first system as all the other water rights, so if ODFW were to go through what Mattick calls the “onerous” process of applying for another instream water right, the fish would have a lower priority than another right that got certificated first, like one by EWEB or the Willamette Water Company.

ODFW does have two instream water rights on the river dating back to the 1960s. Ziller says, one at the I-5 bridge in Eugene for 1,025 cfs and one at Vida for 1,400 cfs, and those have a 1962 priority date, just after EWEB applied for its non-certificated right. The agency also applied for water rights in 1964 for an additional 700 cfs at I-5 and enough cfs to bring Vida up to 1,980 cfs. Those added permits would come from water stored in the dams, and  bring the waterflow almost up to the 2,000 cfs the fish need. But he says, “Those are still in the system for a variety of legal reasons.” The bottom line, he says, “is we applied for the water rights a long time ago.”

EWEB initially might have preferred not to have had the 2,000 cfs bypass restriction on its unperfected permit, but it has had what Brown calls “a change of heart.” It still wants the water for Eugene, and to sell to other cities — and some say encourage unsustainable sprawl — but it’s willing to leave some for the fishes too. The Willamette Water Company has not had a change of heart, and is involved in an upcoming contested case hearing with ODFW.

In the battle for the McKenzie River’s spring-fed water, it’s not who or what needs it most that takes priority; it’s who get the rights first. Brown of WaterWatch says “If the chub need 2,000, the chub need 2,000.”

Shannon Finnell and Alex Zielinski contributed to this story.

Coming up Dec. 23, look for Part II “Cry Me a River: The McKenzie River and drinking water in the face of climate change.”

Also see “Small Town Strip Mine” as part of this series, Mayhem on the McKenzie.