Oregon’s water rights system is based on a system called “prior appropriation,” which is probably better understood by the classic phrase, “First come, first served.” The water rights holder with the oldest claim to the usage of water gets to use the water first, within the limits of their water right. Interesting caselaw exists on the concept establishing the rights of various users, such as the holding in Baley v. United States, where it was found that the Klamath Tribe had instream rights with a priority date of “time immemorial” for enough water to protect the culturally and spiritually important sucker fish and salmon in the Upper Klamath Lake/Upper Klamath Basin. Functionally it means that a certain portion of the water flow cannot be taken until after it gets past the Klamath Basin, because nobody else can possibly have senior rights to the water. Oregon’s system is different from east coast water rights on the riparian doctrine system; over there, each person who lives on the water system has reasonable rights to use the water. If you are selling land with water rights attached to it, it is imperative that you understand the outer limits of Oregon water law, and that you send your client to an expert whenever one is needed.
To make use of a water right in Oregon, the landowner needs to get a permit from the Oregon Water Resources Department; once the permit is obtained, it attaches to the land and transfers to whoever owns the dirt. Water rights are either (1) surface water, such as rivers, lakes, and springs, or (2) ground water, like wells. Ocean water and “navigable waterways” like the Columbia River play by somewhat different rules. Technically, if the person has surface water rights from before 1909, or ground water rights from before 1955, the rules change a little bit, so be aware that this is a broad primer on water rights, not a comprehensive explanation of the whole process.
The person who has water rights in Oregon gets to keep and use the water right based on the permit itself, which may restrict the usage to purposes like irrigation, domestic, commercial, or even storage, fish culture, and recreation. A water right permit will outline how much usage the person has [e.g. “Maximum storage volume: 9.0 acre feet per year” or “one-eightieth of one cubic foot per second per acre”], and will typically state where the point of diversion where the water is drawn, and will explain the location where the water right is attached [e.g. “1.6 acres SE ¼ NE ¼ as projected within Shellon DLC 52” from State Records of Water Right Certificates, Volume 25, page 33234]. The person with the water rights can use up to the amount stated on the water right certificate, but no more. If the water-right holder fails to use the water right for 5+ years, they lose the water right. So, if a person had access to storage of 9.0 acre feet per year, but for a decade only used 4.0 acre feet per year, they have lost the right to anything greater than 4.0 acre feet per year. The person must now apply for a new water rights permit to get back at the previously permitted 5.0 acre feet; applying for a new permit means the person is now the least senior claim to the water and there will likely be no water left to fill the new permit request. Some rivers and streams may be overdrawn, and the access to water will depend on the season [Oregon officially states that most of the surface water is fully appropriated during summer months, and they don’t make more of this stuff].
E.g. a river has a typical flow rate of 20 cubic feet of water per second, three people own water rights to it. Owner 1 has a 1975 right to use 10 cubic feet per second, Owner 2 has a 1985 right to use 8 cubic feet per second, and Owner 3 has a 2010 right to use 5 cubic feet per second. The three collectively are allowed to take 23 cubic feet per second, but the river only has 20 cf/s. In a wet year, the river may be swollen and have 25 cf/s, at which point everyone gets their fill and 2 cf/s goes sliding downstream. In a dry year, if the river only has 18 cf/s, Owner 3 may not have any rights to use the river [b/c Owner 1 gets their 10 cf/s first, then Owner 2 gets the last 8 cf/s]. Understanding the priority of water rights is radically important for owners who plan to do agriculture or ranching; importing water is expensive and the broker who states, “Oh yeah, you get five cubic feet of the stuff, you’re golden to raise that crop” may be extending themselves into a lawsuit. Violations of Oregon water law can literally result in criminal convictions.
There is a presumption of forfeiture if anyone can show that the water was not used for five or more years. There are some exceptions to the presumption of forfeiture that excuse non-use, but they are typically things like voluntary water conservation in the face of drought conditions, not forgetfulness. This “use-it-or-lose-it” standard can result in significant loss of value, and if your client is uncertain about the extent of their beneficial use, they will want to contact a specialist to establish the client’s rights or lack thereof.
A water right is something of value that usually moves with the land, like a fixture. If your client is interested in the property because of the water right, you should advise that client to seek a specialist in water rights [generally an attorney] who can provide more research and diligence. Water rights can be sold or transferred so that they no longer are a part of the property, so there is a diligence process for any water-right property. Just because it looks like it’s on a river or just because past owners farmed with the water does not mean that the present owner has control of the same amount of water. More to the point, if a water right has been lost, the only way to reestablish it in most circumstances is to get a new water rights permit, which puts the landowner at the back of the list. Many rivers, aquafers, and streams in Oregon have been fully appropriated, which means your client may be the 1oth person in line for something that only the first 3 people get. Loss of water rights can be a significant impact to value of the property, so be sure to use the diligence period to look into the water rights. If the Buyer learns that the property lacks the water rights they thought it had, the Buyer can validly terminate during the Oregon REALTORS® Forms “due diligence period” and recover their earnest money.