By Joe Mentor, Jr.

Introduction

In a landmark decision, the Washington Supreme Court returned to the basics of water law, ruling that “first in time” means exactly that.  In Foster v. Washington Department of Ecology, decided in October 2015, the Supreme Court rejected a Department of Ecology decision granting a new water right permit to the City of Yelm that was based on the department’s finding that “overriding considerations of the public interest” justified granting the permit.  Ecology issued the permit notwithstanding the fact that the City’s proposed water withdrawal would deplete stream flows, relying in part on out-of-kind mitigation to offset environmental impacts caused by the new withdrawal.

This article provides an analysis of the Foster decision.  The article reviews Washington case law that led to the decision, and discusses its implications for future permit decisions.  The underlying purpose for time-based priorities is to protect senior water rights from impairment by later -- and therefore junior -- water users.  The author concludes that the decision will have long-term consequences for prospective water right permit applicants, closing the door to those who try to circumvent the water code’s no-impairment standard.

Background

Washington water law, like that of all western states, is based on the doctrine of prior appropriation.  Provisions of the State’s 1917 water code – still in effect today -- establish the fundamental rule that a water right in Washington state may only be acquired “only by appropriation for a beneficial use and in the manner provided and not otherwise.”1  Significantly, the state water code also codifies the rule that the first appropriator of water is the first in right.2  The Groundwater Code of 1945 extends the application of the 1917 water code to the appropriation and beneficial use of groundwater3.  The Groundwater Code declares that the right of an appropriator of surface water rights “shall be superior to any subsequent right hereby authorized to be acquired in or to groundwater.”4

The Water Code of 1917 established a permit system as the exclusive method to appropriate surface water.  Any person or entity seeking to appropriate water for a beneficial use that is not otherwise exempt from permitting must apply to Ecology for a permit and may not use public waters until he or she has received a permit to do so.5  The Groundwater Code of 1945 extended the 1917 Code’s water right permit system to groundwater.6  The 1945 exempts groundwater withdrawals from permitting if the water use is limited to a withdrawal of 5,000 gallons per day or less for an industrial purpose, for single or group domestic use, or for irrigation of less than one half acre of lawn or noncommercial garden.7  Before issuing a water right permit, RCW 90.03.290 requires Ecology to make essentially four determinations.  Ecology must affirmatively find (1) that water is available for appropriation; (2) for a beneficial use; and that (3) an appropriation will not impair existing rights; or (4) be detrimental to the public welfare.8

In 1969, the Washington legislature added Chapter 90.22 to the state water code to protect stream flows in Washington’s surface waters.  RCW 90.22.010 authorizes the Department of Ecology to establish regulations to protect instream flows.  RCW 90.22.030 prohibits Ecology from granting a water right permit that conflicts with an instream flow regulation.  The Water Resources Act of 1971 expanded on Ecology’s authority to protect instream flows.  Specifically, the Act directed Ecology to retain base flows as necessary “to provide for preservation of wildlife, fish, scenic, aesthetic and other environmental values.”9 The 1971 Act gave Ecology the authority to “withdraw various waters of the state from additional appropriations until such data and information are available.”10  In addition, the Act authorized Ecology to close streams to further appropriation.11  In 1979, the Legislature declared that instream flows “constitute appropriations within the meaning of the [state water code] with priority dates as of the effective dates of their establishment.”12  Once established by rule, a minimum flow constitutes an existing right that may not be impaired by subsequent surface water diversions or groundwater withdrawals.13  These may include permit-exempt groundwater withdrawals.14  Withdrawals of water that would impair a minimum flow are permitted, but only where “overriding considerations of the public interest” would be served by the withdrawal.15

On numerous occasions, dating back to the territorial period, the Washington Supreme Court has invoked the prior appropriation doctrine to protect senior water rights.  In 1889, in Tenem Ditch Co. v. Thorpe,16 the Court found that the right of prior appropriation, established by local custom, “exists as the law of the land.”17  In Ellis v. Pomeroy Improvement Co.,18 the Court held that a person or entity acquired a vested water right by exercising an actual appropriation.  The Ellis court ruled that the right of a prior appropriator is superior to that of a riparian owner “on the principle alone of prior appropriation … ."19  In Geddis v. Parrish,20 the Territorial Supreme Court held that the rights of one who acquires title to land from the public domain takes title subject to the rights of a prior appropriator.21

In 1901, in Longmire v. Smith,22 the Court clarified the rules of priority as between appropriators.  The Longmire Court held that a water right becomes vested when a valid appropriation is made.23 Consequently, the Court ruled that a water right priority is determined by the date of the appropriation.24  The Court held that a water right claim based on prior appropriation and beneficial use of water “is superior to all other claims, whether founded upon appropriation or riparian ownership,” thus , reversing a lower court decree apportioning available water between competing claimants.25 The Longmire Court held that “it is an elementary principle of the law of appropriation … that the first appropriator is entitled to the quantity of water appropriated by him, to the exclusion of subsequent claimants.”26

The Washington courts have consistently protected the rights of senior appropriators since the Supreme Court’s Longmire decision.  For example, in 1917, in Pleasant Valley Irr. & Power Co. v. Okanogan Power & Irr. Co.,27 the Washington Supreme Court confirmed the prior rights of a senior appropriator, ordering a lower court to quiet the senior appropriator’s title and to enjoin the junior appropriator from interfering with the senior’s water right.  In 1932, in State ex rel. Roseburg v. Mohar,28 the Supreme Court affirmed the right of a senior appropriation to injunctive relief against an out-of-priority water user. The Court’s Mohar decision was the last word on the subject until 1991, when the Supreme Court in Neubert v. Yakima-Tieton Irrigation District invalidated an irrigation district policy that allocated water in a manner inconsistent with the water right priorities of appropriative water rights.  The Neubert Court held that an appropriative water right under water law operates to the exclusion of subsequent claimants.29  The Court ruled that time-based priority was “an elementary principle of the law of appropriation of water,” and that the principle of prior appropriation “has been codified by RCW 90.03.010, which provides that, ‘[a]s between appropriations, the first in time shall be the first in right.’”30

In 2000, the State Supreme Court for the first time extended the principles of prior appropriation to protect instream flow water rights.  In Postema v. Pollution Control Hearings Board,31 the Washington Supreme Court upheld Ecology’s decisions rejecting over 300 groundwater permit applications across the state.  To reach this result, the Postema Court first held that the water code protects senior surface water rights from impairment caused by groundwater pumping, and that a minimum flow constitutes an appropriation of water.32   The Court found that instream flow water rights were entitled to the same protection from impairment as other senior water rights.33  Consequently, the Court ruled that a minimum flow set by rule is an existing right that may not be impaired by subsequent groundwater withdrawals.34

The Postema Court next considered the proper standard to determine impairment.  The Court rejected the PCHB’s ruling that hydraulic continuity equates to impairment as a matter of law.  Instead, the Court determined that impairment was a factual question, and that existing rights may or may not be impaired where there is hydraulic continuity depending upon the nature of the appropriation, and the source aquifer, and their relationship to each other.  Nevertheless, the Court rejected the appellants’ arguments that Ecology must show direct and measurable impact on surface water to establish impairment.  Instead, the Court found that Ecology could rely on mathematical modelling, using the best available science, to determine impairment.  Finally, the Court rejected appellants’ arguments that the effect must be significant.  The Court noted that the statutes do not authorize a de minimus impairment of an existing right.  The Court concluded instead that a groundwater withdrawal must be denied if it is established factually that the withdrawal will have any effect on the flow or level of the surface water.

In 2013, in Swinomish Indian Tribal Community v. Ecology,35 the Court extended the principles announced in its Postema decision to protect an instream flow water right from impairment caused by junior groundwater users, including those using permit-exempt wells.  In Swinomish, the Supreme Court considered objections to Ecology’s 2006 amendments to its Skagit River instream flow rule reserving water for future domestic uses that were inconsistent with previously-established minimum stream flows.  Ecology had justified its amended rule on  a provision in the Water Resources Act that allowed for water withdrawals that conflicted with base flows where “overriding considerations of the public interest” would be served by the withdrawal.36  The Swinomish court characterized the “overriding considerations” provision as a “narrow exception” to the rule of strict priority.37  Consequently, the Supreme Court rejected Ecology’s interpretation of the OCPI exception and invalidated the agency’s amendment to the instream flow rule.  The Swinomish Court characterized Ecology’s amended rule as an “end-run around the normal appropriation process that does not accord with the prior appropriation doctrine and the detailed statutes implementing the doctrine.” 38 Furthermore, the Court rejected Ecology’s attempt to aggregate future uses that cumulatively could cause impairment to the minimum stream flow, declaring that aggregation for purposes of avoiding the impairment analysis “is contrary to the basic principle of the prior appropriation doctrine that the first in time is the first in right.”39

The Foster Decision

The City of Yelm is a fast growing community near Olympia.  In 1994, the City of Yelm applied for a new water right permit to meet the needs of its growing population.  Ecology granted Yelm a new groundwater permit, even though the City’s proposed new well would have depleted stream flows in the Deschutes and Nisqually rivers and certain tributaries, and in Woodland Creek, which flows directly into Puget Sound.  Ecology justified its permit decision based on a provision in the Water Resources Act, which allows water withdrawals causing a reduction in base flows where “it is clear that overriding considerations of the public interest will be served.”

Yelm developed a mitigation plan for the proposed well to support Ecology’s permit decision.  The mitigation plan included plans to retire existing irrigation water rights and an aquifer recharge project, often referred to as “in-kind” mitigation.  Even so, the permit would deplete stream flows during months outside the irrigation season.  To offset this impact, the mitigation plan included variety of habitat improvements, often referred to as “out-of-kind” mitigation.  The City intended for its proposed habitat improvements to address “habitat limiting factors” for fish and wildlife resources in the affected watersheds.  Ecology concluded that the ecological benefits to fish and wildlife would offset the impacts of predicted flow depletions, and issued Yelm a new water right permit.

Sara Foster is the owner of a nearby groundwater well.  Ms. Foster appealed Ecology’s decision to the State Pollution Control Hearings Board (PCHB).  For the most part, the PCHB ruled in Ecology’s favor, and affirmed the agency’s permit decision.  Foster then appealed the PCHB’s decision to Thurston County Superior Court.  The Superior Court affirmed the PCHB’s decision.  Foster’s appeal was pending before the Thurston County Superior Court when the State Supreme Court decided Swinomish Indian Tribal Community v. Ecology.  The Supreme Court granted direct review in light of its Swinomish decision.

In Foster v. Ecology, the Washington Supreme Court ruled that Ecology exceeded its authority by approving Yelm’s water permit under the narrow OCPI exception.  Consequently, the Court reversed the superior court and PCHB decisions affirming Ecology’s approval of the Yelm permit.  The Court held that a “withdrawal” of water for purposes of statute allowing water use that impairs a minimum flow establish by rule is not synonymous with the term “appropriation.”  Consequently, the court ruled that the OCPI exception does not authorize a permanent appropriation of a legal water right that would cause permanent impairment of minimum flows.* 12.  Instead, any impairment of minimum flows otherwise authorized by the statute must be temporary.* 15.

The Foster court reiterated that the OCPI exception is not an alternative method for appropriating water.  Application of the OCPI exception to authorize a permanent water withdrawal – using out-of-kind mitigation to produce an ecological benefit to offset impairment of an instream flow water right – “makes the sort of end-run around the appropriations process that we expressly rejected in Swinomish.”* 16.  The Court concluded by reaffirming its Swinomish decision, specifically that the OCPI exception does not authorize an end-run around the appropriation process or the prior appropriation doctrine.* 18.  According to the Foster Court, minimum flows established by administrative rule “function in most respects as any other water appropriation.”

Finally, the Foster Court rejected the argument that Yelm’s mitigation plan would mitigate the impairment by undertaking other actions to improve aquatic resource habitat that would create a net ecological benefit, despite the net depletion of stream flow.  The Court reasoned that a mitigation plan that relies on out-of-kind habitat improvements does not mitigate the injury that occurs when a junior water right holder impairs a senior water right.  According to the Foster Court, “[t]he water code …  is concerned with the legal injury caused by impairment of senior water rights and does not turn on notions of ‘ecological’ injury.”* 17.  The Court concluded that a water user cannot “mitigate” by way of ecological benefit the legal injury to a senior water right caused by a new water withdrawal.* 18.

Analysis

In Postema, Swinomish and Foster, the Washington Supreme Court invoked the prior appropriations doctrine to protect instream flows from further depletion by consumptive water users.  The Court justified its rulings in these three cases on the basis that an instream flow, once established by regulation, becomes an appropriative water right under Washington law.  As such, the Court extended to instream flow water rights the same protections provided under the law to other appropriative water rights.  These decisions were entirely predictable after the Legislature adopted 90.22 RCW.  Significantly, the cases also provide more protection for senior appropriative water rights, regardless of their purpose of use, provided that the Supreme Court extends to other appropriative water rights the same protections as its decisions provide for instream flow water rights.  After all, as the old saying goes, “what is good for the goose is good for the gander.”

Assuming the Supreme Court remains consistent in its analysis, the Foster decision will have significant consequences for Ecology water rights permitting.  By focusing on the basic rules of Western water law, the Supreme Court’s opinion, although relatively brief, offers a “teaching moment.”  The key rulings from the case provide several important lessons for practioners.

Lesson 1: “OCPI” exception is not an alternative to the traditional permitting process.

First, the Foster court made clear that the so-called “OCPI” exception is not an alternative to the traditional permitting process.  The Court already made clear in Swinomish that the OCPI exception cannot be used as an “end run” around the statutory permitting process.  The Foster Court made this decision unequivocal by interpreting the word “withdrawal” to exclude permanent appropriations of water.  After Foster, the OCPI exception can only be used to support a temporary withdrawal of water, not a permanent appropriation for a new beneficial use of water.

Lesson 2: Every water user must avoid impairment.

Next, the Foster Court made clear that every water user must avoid impairment.  As the Foster court stated, “our State’s long-established ‘prior appropriation’ and ‘first in time, first in right’ approach to water law, … does not permit any impairment, even a de minimis impairment, of a senior water right.”40

Lesson 3: Out-of-kind mitigation does not offset diminution of limited water

Third, the Foster Court concluded that out-of-kind mitigation does not offset diminution of limited water.  According to the Foster Court, “[t]he water code …  is concerned with the legal injury caused by impairment of senior water rights and does not turn on notions of ‘ecological’ injury.”* 17.  Instead, a prospective water user must offset its new water use by preventing flow depletions not just by preventing ecological harm or providing a countervailing ecological benefit.* 18.

Conclusion

The Foster decision closes the door to efforts to circumvent the plain wording of the water code that the first water user in time is the first in right.  It doesn’t matter what the new use might be, nor does it matter how Ecology – or a local permitting agency – tries to authorize a new water use.  Those with settled expectations based on compliance with the water law are entitled to rely on those expectations.  This is true regardless of the purpose of use for water, so long as it is declared to be a beneficial use under the water law.

Citations

[1] RCW 90.03.010 (emphasis added).
[2] Postema v. Pollution Control Hearings Board, 142 Wn. 2d 68, 79-80, 11 P. 3d 726 (2000).
[3] RCW 90.44.020.
[4] RCW 90.44.030.  The State Water Resources Act of 1971 also declares that in the utilization and management of waters of the State “full recognition shall be given … to the natural interrelationships of surface and groundwaters.”  RCW 90.54.020.  Although not yet ruling directly on the matter, the State Supreme Court has suggested that RCW 90.44.130 explicitly prohibits a permit-exempt use from impairing senior water rights.  See Five Corners Family Farmers v. State, 173 Wn. 2d 296, 311 n. 3, 268 P. 3d 892 (2011).
[5] RCW 90.03.250.  Surface water rights that predate the 1917 Water Code are not subject to permit requirements but are subject to other provisions of the Water Code.  Dep’t of Ecology v. Acquavella, 177 Wn.2d 299, 296 P.3d 835 (2013).
[6] RCW 90.44.020.
[7] RCW 90.44.050.
[8] See, e.g., Swinomish Indian Tribal Cmty v. Dep’t of Ecology, 178 Wn.2d 571, 589, 311 P.3d 6 (2013); Postema v. Pollution Control Hearings Bd., 142 Wn.2d 68, 79, 11 P.3d 726 (2000); Hillis v. Dep’t of Ecology, 131 Wn.2d 373, 384, 932 P.2d 139 (1997); Stempel v. Dep’t of Water Res., 82 Wn.2d 109, 115, 508 P.2d 166 (1973).
[9] RCW 90.54.020(3)(a).
[10] RCW 90.54.050(2).
[11] Postema, 142 Wn.2d at 95.
[12] RCW 90.03.345.
[13] Postema, 142 Wn.2d at 81.
[14] See AGO 2009 No. 6, p. 12.  RCW 90.54.050 applies to permit-exempt withdrawals as well as permitted withdrawals because “exempt withdrawals are only exempted from the requirements of obtaining a permit; they are not made exempt from other laws governing groundwater rights.”  AGO 2009 No. 6, p. 13.
[15] RCW 90.54.020.
[16] Tenem Ditch Co. v. Thorpe, 1 Wn. 566, 20 P. 588 (1889).
[17] Tenem Ditch Co., 1 Wn. at 569.
[18] Ellis v. Pomeroy Improvement Co., 1 Wn. 572, 21 P. 27 (1889).
[19] Ellis, 1 Wn. at 578.
[20] Geddis v. Parrish, 1 Wn. 587, 21 P. 314 (1889).
[21] Geddis v. Parrish, 1 Wn. 587, 21 P. 314 (1889).
[22] Longmire v. Smith, 26 Wn. 439, 447, 67 P. 246 (1901).
[23] Id.
[24] Id., at 448.
[25] Id., at 446.
[26] Id., at 447.
[27] Pleasant Valley Irr. & Power Co. v. Okanogan Power & Irr. Co., 98 Wn. 401, 167 P. 1122 (1917).
[28] State ex. Rel. Roseburg v. Mohar, 169 Wn. 368, 375, 13 P.2d 454 (1932).
[29] Neubert v. Yakima-Tieton Irrig. Dist., 117 Wn. 2d 232, 237, 814 P.2d 199 (1991) (citing Longmire v. Smith, 26 Wn. 439, 447, 67 P. 246 (1901)).
[30] Neubert v. Yakima-Tieton Irrig. Dist., 117 Wn. 2d 232, 240-41, 814 P.2d 199 (1991).
[31] Postema v. Pollution Control Hearings Board, 142 Wn. 2d 68, 11 P. 3d 726 (2000).
[32] Postema, 142 Wn. 2d at 81.
[33] Id., at 82.
[34] Id., at 81.
[35] Swinomish Indian Tribal Community v. Ecology, 178 Wn. 2d 571, 311 P. 3d 6 (2013).
[36] See RCW 90.54.020(3)(a).
[37] Swinomish Indian Tribal Community, 178 Wn. 2d at 576.
[38] Id., at 590.
[39] Id., at 591.
[40] Foster, Slip op. at 5.  See Postema, 142 Wash.2d at 90, 11 P.3d 726.