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WaterWatch of Oregon, Inc. v. Water Res. Dep't

Court of Appeals of Oregon

December 31, 2014

WATERWATCH OF OREGON, INC., an Oregon nonprofit corporation, Petitioner,
v.
WATER RESOURCES DEPARTMENT, a state agency; Water Resources Commission, a state agency; City of Lake Oswego, an Oregon municipal corporation; City of Tigard, an Oregon municipal corporation; North Clackamas County Water Commission, an Oregon municipal corporation; Sunrise Water Authority, an Oregon municipal corporation; and South Fork Water Board, an Oregon municipal corporation, Respondents. WATERWATCH OF OREGON, INC., an Oregon nonprofit corporation, Petitioner,
v.
WATER RESOURCES DEPARTMENT, a state agency; Water Resources Commission, a state agency; North Clackamas County Water Commission, an Oregon municipal corporation; Sunrise Water Authority, an Oregon municipal corporation; City of Tigard, an Oregon municipal corporation; City of Lake Oswego, an Oregon municipal corporation; and South Fork Water Board, an Oregon municipal corporation, Respondents. WATERWATCH OF OREGON, INC., an Oregon nonprofit corporation, Petitioner,
v.
WATER RESOURCES DEPARTMENT, a state agency; Water Resources Commission, a state agency; South Fork Water Board, an Oregon municipal corporation; City of Tigard, an Oregon municipal corporation; North Clackamas County Water Commission, an Oregon municipal corporation; Sunrise Water Authority, an Oregon municipal corporation; and City of Lake Oswego, an Oregon municipal corporation, Respondents

Argued and Submitted November 15, 2013

Page 713

Oregon Water Resources Department. S32410, S37839. Oregon Water Resources Department. S46120, S35297, S43170. Oregon Water Resources Department. S3778, S9982, S22581.

Lisa A. Brown argued the cause for petitioner. With her on the briefs was Brad P. Hill.

J. W. Ring argued the cause for respondents City of Lake Oswego, North Clackamas County Water Commission, Sunrise Water Authority, and City of Tigard. With him on the brief was Christine L. Hein, Mark P. Strandberg, and Wren Bender McKown & Ring, LLLP.

Christopher D. Crean argued the cause for respondent South Fork Water Board. With him on the brief were Chad A. Jacobs and Beery, Elsner & Hammond, LLP.

Denise G. Fjordbeck, Senior Assistant Attorney General, argued the cause for respondents Oregon Water Resources Department and Oregon Water Resources Commission. On the brief were Ellen F. Rosenblum, Attorney General, Anna M. Joyce, Solicitor General, and Erin C. Lagesen, Assistant Attorney General.

Richard M. Glick, Michael J. Gelardi, and Davis Wright Tremaine LLP, filed an amici curiae brief for Oregon Water Utilities Council and The League of Oregon Cities.

Before Armstrong, Presiding Judge, and Nakamoto, Judge, and Egan, Judge.

OPINION

Page 714

[268 Or.App. 190] NAKAMOTO, J.

Petitioner WaterWatch of Oregon, Inc. seeks judicial review of three separate final orders issued in contested cases by the Water Resources Department (the department) that were decided based on a consolidated record, and which we have consolidated for purposes of argument and opinion. In those three orders, the department granted to respondents the City of Lake Oswego,[1] the South Fork Water Board, and the North Clackamas County Water Commission[2] (collectively, the municipal parties) extensions of time to perfect water rights under their respective permits for water diversions from the lower 3.1 miles of the Clackamas River. In granting the extensions, the department was required to condition the " undeveloped portion" of the municipal parties' permits " to maintain * * * the persistence of fish species

Page 715

listed as sensitive, threatened or endangered under state or federal law." ORS 537.230(2)(c). Petitioner asserts that the department's conclusion that the fish-persistence requirement has been met by the conditions that the department placed on the municipal parties' permits is not supported by substantial evidence and is contrary to law. Petitioner also challenges the department's modification of the administrative law judge's findings of fact and the department's procedural handling of evidence submitted by petitioner.

We conclude that the department's determination that the permits, as conditioned, will maintain the persistence of listed fish species in the affected waterway lacks both substantial evidence and substantial reason. The department based its decision on the distinction between a short-term drop below persistence flows, which will not affect the persistence of listed fish species, and a long-term drop below persistence flows, which will affect the persistence of listed fish species. However, the record lacks [268 Or.App. 191] substantial evidence of what a short-term drop below persistence flows means versus a long-term drop. Additionally, the department failed to adequately explain how its findings support its conclusion that the undeveloped portions of the permits, as conditioned, will maintain the persistence of the listed fish species when, on their face, the conditions fail to ensure that diversion of the undeveloped portions of the permits will not contribute to long-term drops below persistence flows. We reject all of petitioner's remaining arguments on judicial review, and we reverse and remand all three final orders to the department for further consideration.

I. BACKGROUND

A. Overview

The municipal parties are holders of eight separate water-right permits for municipal use that have points of diversion in the lower 3.1 miles of the Clackamas River (affected reach or lower reach).[3] The holder of a permit for municipal water use must complete construction of any works within 20 years of obtaining the permit and put the water right to complete use within the time frame specified in the permit. ORS 537.230(2). A municipal water holder can obtain an extension of time of those deadlines if the department finds that three statutory conditions have been satisfied.[4] Id. At issue in these cases is the department's [268 Or.App. 192] application of the third statutory condition

Page 716

in granting the municipal parties' requested extensions.

That condition required the department to find that the " undeveloped portion" of the municipal parties' permits are " conditioned to maintain, in the portions of waterways affected by water use under the permit, the persistence of fish species listed as sensitive, threatened or endangered under state or federal law." ORS 537.230(2)(c). The statute requires the department to " base its finding on existing data and upon the advice of the State Department of Fish and Wildlife." Id. By rule, the department's finding is limited to effects " related to streamflow as a result of use of the undeveloped portion of the permit and further limited to where, as a result of use of the undeveloped portion of the permit, [the Oregon Department of Fish and Wildlife (ODFW)] indicates that streamflow would be a limiting factor for the subject listed fish species." OAR 690-315-0080(2).

With that background in mind, we turn to the record developed below.

B. Water permits

1. Lake Oswego

The City of Lake Oswego is the holder of two water right permits at issue in these cases. Permit S-32410, which was granted to the city on October 19, 1967, authorizes the city to use up to 50.0 cubic feet per second (cfs) of water from [268 Or.App. 193] the Clackamas River. " Construction of the water development project was to be completed by October 1, 1969, and complete application of water was to be made on or before October 1, 1970." Permit S-37839, which was granted to the city on June 27, 1975, authorizes the city to use up to 9.0 cfs of water from the Clackamas River. " Construction of the water development project was to be completed by October 1, 1977, and complete application of water was to be made on or before October 19, 1978."

The city had received multiple prior extensions of times for both permits, with the most recent extensions setting all permit deadlines on October 1, 2000. On July 1, 2003, the city submitted to the department the current requests to extend the deadlines on both permits to October 1, 2040. The undeveloped portion of Permit S-32410 is 25.0 cfs, and Permit S-37839 is 9.0 cfs.

2. North Clackamas County Water Commission

North Clackamas County Water Commission (North Clackamas)[5] is the holder of three water-right permits at issue in these cases. Permit S-46120, which was granted to the City of Gladstone on January 18, 1982, and transferred to North Clackamas in 2005, authorizes North Clackamas to use up to 8.0 cfs of water from the Clackamas River. " Construction of the water development project was to be completed by October 1, 1983, and complete application of water was to be made on or before October 1, 1984." The department granted two prior extensions of time for Permit S-46120, with the most recent extending all permit deadlines to October 1, 1993. On June 22, 2006, North Clackamas submitted an application to extend Permit S-46120 to October 1, 2025. The undeveloped portion of that permit is 2.99 cfs.

Permit S-35297, which was granted to Oak Lodge Water District on August 25, 1971, and transferred to North Clackamas in 2004, authorizes North Clackamas to use up to 62.0 cfs of water from the Clackamas River. " Construction [268 Or.App. 194] of the water development project was to be completed by October 1, 1973, and complete application of water was to be made on or before October 1, 1974." The department granted multiple prior extensions of time for Permit S-35297, with the most recent extending all permit deadlines to October 1, 2000. In April 2003, Oak Lodge Water District (predecessor to North Clackamas) submitted an application to extend

Permit S-35297, which North Clackamas amended in 2005 to request an extension to October 1, 2030. The undeveloped portion of that permit is 29.01 cfs.

Page 717

Permit S-43170, which was granted to the City of Gladstone on July 25, 1978, and transferred to North Clackamas in 2005, authorizes North Clackamas to use up to 1.73 cfs of water from the Clackamas River. " Construction of the water development project was to be completed by October 1, 1980, and complete application of water was to be made on or before October 19, 1981." The department granted multiple prior extensions of time for Permit S-43170, with the most recent extending all permit deadlines to October 1, 2000. In June 2006, North Clackamas submitted an application to extend Permit S-43170 to October 1, 2025. The undeveloped portion of that permit is 1.73 cfs.

3. South Fork Water Board

South Fork Water Board (South Fork)[6] is the holder of three permits at issue in these cases. Permit S-3778, which was granted to the City of Oregon City on May 11, 1918, and transferred to South Fork in 1983, authorizes South Fork to use up to 20.0 cfs of water from the South Fork Clackamas River, a tributary of the Clackamas River. " Construction of the water development project was to be completed by May 11, 1923, and complete application of water was to be made on or before October 1, 1943." The department granted multiple prior extensions of time for Permit S-3778, with the most recent extending all permit deadlines to October 1, 2000. In December 2003, South Fork submitted its application to extend Permit S-3778 to October 1, 2050. The undeveloped portion of that permit is 15.0 cfs.

[268 Or.App. 195] Permit S-9982, which was granted to the Cities of Oregon City and West Linn on January 19, 1931, and later transferred to South Fork, authorizes South Fork to use up to 30.0 cfs of water from tributaries to the Clackamas River (20.0 cfs from the South Fork Clackamas River and 10.0 cfs from Memaloose Creek). The permit did not contain construction or full application dates and, as a result, the department originally advised South Fork that it did not have to obtain extensions of time for the permit. However, in August 2004, the department advised South Fork that it would need to apply for an extension. In August 2006, South Fork submitted an application to extend Permit S-9982 to October 1, 2038. The undeveloped portion of that permit is 27.0 cfs.

Permit S-22581, which was granted to the South Fork Water Commission (the predecessor to South Fork) on January 22, 1954, authorizes South Fork to use up to 60.0 cfs of water from the Clackamas River. " Construction of the water development project was to be completed by October 1, 1955, and complete application of water was to be made on or before October 19, 1956." The department granted multiple prior extensions for Permit S-22581, with the most recent extending all permit deadlines to October 1, 1999. In December 2003, South Fork submitted an application to extend deadlines to October 1, 2049. The undeveloped portion of Permit S-22581 is 37.6 cfs.

C. ODFW advice and the department's proposed final orders

Pursuant to the fish-persistence requirement in ORS 537.230(2)(c), and after receiving supplemental information from the municipal parties, the department forwarded all eight extension applications to ODFW to review the effect of development of the undeveloped portions of the permits on listed fish species in the lower reach of the Clackamas River. In May 2007, ODFW issued letters to the department for each of the municipal parties' eight applications that took into account the effect of all eight extension requests and contained identical advice.[7] ODFW identified [268 Or.App. 196] target streamflows for fish persistence for each season (persistence flows) and advised the department to condition the undeveloped portion of each of the permits to " maintain persistence of listed fish

Page 718

species consistent with the recommended flows."

From April to June, ODFW identified a persistence flow of 800 cfs, decreasing to 650 cfs in June. It advised that,

" [i]f flows do not meet targets, [the permit holder] should develop a plan to provide for a contingency to reduce its water use. However, according to gaged records this would be an extremely rare event that has not occurred in the gaged record. The severity of the measures taken should be reflective of how much the recommended flows are being missed by and the percentage of water that is withdrawn by the municipality as compared to the overall streamflow level."

For July and August, ODFW identified a persistence flow of 650 cfs, which, on occasion, would not be met. ODFW advised:

" If flows do not meet targets, [the permit holder] should develop a plan to provide for a contingency to reduce its water use or augment stream flows using releases from Timothy Lake. Following are considerations for the Water Resources Department to consider in developing conditions for this permit and for the municipality to consider in the development of any plan to address short falls in stream flow levels.
" o If targeted flow levels cannot be met, flow releases under agreement from Timothy Lake can be beneficial to stream flows and can offset some of the use by the municipalities. Consultation with ODFW is recommended to determine the annual priority for shaping the augmentation flows to best support fish persistence. A plan (in consultation with ODFW) should be developed that considers a flow regime that considers and balances flow augmentation to maintain inundation of winter steelhead redds in early July (through approximately July 15) and the maintenance of consistent flows throughout the remainder of the time period to maximize access to rearing habitat and avoid stranding of fish.
[268 Or.App. 197] " o The severity of the measures taken should be reflective of the available summer rearing habitat within the lower 3.1 miles of the Clackamas River where the diversions occur (which represents less than 2% of the total available rearing habitat) and is habitat that may be avoided by salmonids since the highest temperatures in the basin occur in this stream reach. Because the value of this rearing habitat is low relative to the rest of the basin rearing habitat, measures such as flow augmentation using stored water will offset much of the effect of diverting water out of stream. Additionally, flow augmentation would benefit streamflows and rearing habitat from Timothy Lake through the entire stream reach (23.3 miles) down to the lower 3.1 stream miles where water is withdrawn."

(Emphasis and boldface in original.)

From September to November, ODFW identified a persistence flow of 650 cfs to September 15 and 800 cfs after September 15. ODFW advised:

" If flows do not meet targets after the first Monday in September, [the permit holder] should develop a plan to provide for a plan to augment stream flows and reduce its water use to minimize its impact. Following are considerations for the Water Resources Department to consider in developing conditions for this permit and for the municipality to consider in the development of any plan to address short falls in stream flow levels.
" o If targeted flow levels cannot be met, flow releases under agreement from Timothy Lake can be beneficial to stream flows and can offset some of the use by the municipalities. A main consideration for this time period is to balance flow augmentation to provide for increasing flows that once reached will not be reduced before fall rains arrive and stream flows naturally begin rising. A plan (in consultation with ODFW) should be developed that considers a flow regime that works best for fish spawning in the lower river that provides access to spawning areas and maintains water over those spawning areas until stream flows naturally increase in the fall.

Page 719

" o The severity of the measures taken should be reflective of how much the recommended flows are being [268 Or.App. 198] missed by and the percentage of water that is withdrawn by the municipality vs. the overall streamflow level.
" o Relative to the summer flow season, the significance of the lower 3.1 miles in terms of habitat in the fall is more significant (especially for Fall Chinook) and is more important in maintaining persistence of listed and sensitive species."

(Emphasis and boldface in original.)

From December to March, ODFW identified a persistence flow of 800 cfs, and it advised that it did not anticipate flow-related issues during that time of year. However, ODFW recommended that, " if targeted flow levels cannot be met[,] then the severity of the measures taken should be reflective of how much the recommended flows are being missed by and the percentage of water that is withdrawn by the municipality vs. the overall streamflow level."

After receiving that advice, in November 2007, the department issued proposed final orders (PFOs) that granted the requested extensions of time on all eight of the municipal parties' permits. Based on ODFW's advice, the department found that use of the undeveloped portions of the permits would not maintain the persistence of listed fish species in the affected reach and thus imposed conditions on the permits to maintain fish persistence. Those conditions included ODFW's recommended minimum flow levels by season and set out the following conditions:

" a. Minimum fish flow needs on the Lower Clackamas River as recommended by ODFW are in Table 2, below, and are to be measured at USGS Gage Number 14211010, Clackamas River near Oregon City, Oregon, or its equivalent.
" b. In cooperation with other members of the Clackamas River Water Providers, [the permit holder] must have an annual meeting with ODFW to devise a strategy to maximize fishery benefits that can be derived from the agreement with PGE for the release of stored water from Timothy Lake. This is of particular significance when augmenting stream flow during the period of July 1 through November 30.
[268 Or.App. 199] " c. From the first Monday in September through June 30 the maximum total amount of the undeveloped portion of the [permit] that can legally be diverted shall be reduced in proportion to the amount by which the flows shown in Table 2 are not met based on a seven day rolling average of mean daily flows (measured on the Clackamas River at USGS Gage Number 14211010, Clackamas River near Oregon City, Oregon, or its equivalent), as illustrated in the examples below."

ODFW concurred in a one-sentence email that the conditions included in the PFOs were consistent with ODFW's advice to the department.

D. Contested case hearings

Both petitioner and South Fork protested and requested a contested case hearing for all eight extension orders, which were then consolidated by the administrative law judge (ALJ). In March 2010, the ALJ held a three-day contested case hearing that was split into four parts. The first part addressed issues common to all eight applications, including matters related to fish persistence, and the remaining three parts addressed issues individual to each permit holder.

Before holding the hearing, the ALJ addressed matters raised by the parties in their motions for summary determinations. As relevant here, the ALJ concluded that ORS 537.230 does not require the department to consider climate change in setting fish-persistence conditions. In accordance with that determination, at the hearing, the ALJ excluded from evidence the exhibits that petitioner offered related to the effect of climate change on Oregon's municipal water supplies and fish and wildlife. The ALJ also excluded as irrelevant letters authored by the Oregon Department of Environmental Quality (DEQ) in 2001 and 2003 that recommended that the department deny applications (not at issue in these cases) for water diversions from the Clackamas River because the lower reach was not meeting water quality standards for temperature, which negatively affects fish.

Page 720

During the hearing, petitioner made oral offers of proof with regard to the DEQ letters. After the contested case hearings, petitioner submitted written offers of proof concerning its climate-change exhibits.

[268 Or.App. 200] In August 2010, the ALJ issued three separate proposed orders--one for Lake Oswego's permits, one for North Clackamas's permits, and one for South Fork's permits--that rejected each of the protests and affirmed the department's PFOs. The three orders contained the same conclusions and recommendations with respect to the fish-persistence requirement in ORS 537.230(2)(c). The ALJ interpreted that statutory requirement as " leav[ing] the [d]epartment with no option but to follow the advice from ODFW." Based on that view of the statute, the ALJ concluded that he could not " go behind" the advice provided by ODFW to determine whether it was correct or incorrect. Because the ALJ found that the department had obtained and applied ODFW's advice, with " one exception," he concluded that, " [a]s [the department] argued, the inquiry about fish persistence of listed fish stops there."

The one exception the ALJ had to the department's PFOs was a modification to the yearly meeting condition. The ALJ recommended the following modification:

" First, although [the department] anticipated an informal meeting with no written conclusions, ODFW intended that there be a written agreement from the meetings--something that the State and the municipalities could look at and use as their guideline for that year. After the evidence was presented, [the ...

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