Municipal Water Use Permit Extension Rules Approved by Oregon Water Resources Commission

By Steven L. Shropshire

On October 11, 2002, the Oregon Water Resources Commission adopted new administrative rules governing municipal water use permit extensions. The Commission actually adopted two sets of rules — one pertaining to municipal and quasi-municipal water use permit extensions (OAR Chapter 690, Division 315) and a second pertaining to water management and conservation plans (OAR Chapter 690, Division 86). The rules go into effect immediately upon filing with the Secretary of State, which the Oregon Water Resources Department ("WRD") has indicated would occur within two weeks of the Commission meeting.¹

These rules represent the culmination of several years of work by the Department and the many stakeholders interested in municipal² water supply issues.³ The rulemaking effort dates back to August 1997, when the WRD decided to undertake a comprehensive review of the permit extension process.

Unique Municipal Needs. The 1997 review led to a 1998 rulemaking proceeding in which the WRD's permit extension rules were significantly overhauled. However, during this process, the parties agreed that municipal permit extension issues were different from others, meriting a separate rulemaking process.

Oregon's water laws generally require water use permit holders to diligently develop their permitted use within a limited time period (usually no more than five years). For water uses not fully developed within this time, the permit holder must either seek an extension of the permit or face cancellation of the permit. However, this approach does not accommodate the long-term needs of municipal water suppliers, who need long-range water supplies to support future growth in demand. Thus, a specialized set of rules is necessary to govern permit extensions for municipal water providers.

Stakeholder Involvement. In 1998, WRD formed the Community Water Supply Work Group to address concerns relating to the unique needs of municipal providers. This group consisted of a variety of stakeholders and interest groups concerned about municipal permit extension issues. Ultimately the group developed a rule concept that tied long-term municipal permit extensions under Division 315 to the adoption of a current water management and conservation plan under Division 86. The rules adopted on October 11, 2002 implement that concept.

Overview of New Municipal Permit Extension Rules. Under the new rules, long-term municipal permit extensions may be approved for a reasonable time necessary to complete water development or to apply all permitted water to beneficial use. Upon receiving the permit extension, the permit holder has the ability to develop water from identified sources in 20-year blocks as quantified in its initial Division 86 plan and subsequent amendments. The amount of water available for development in the 20-year block is determined by a basic showing of need. Additional amounts of permitted water may be developed for use by updating the water management and conservation plan, and engaging in an analysis of alternative sources, including enhanced conservation measures. For water development extending beyond 2042, the permit holder must satisfy a more rigorous public interest test.

Testimony at the October 11, 2002 Commission Meeting. At the October 11, 2002 Water Resources Commission meeting, the Commission took testimony on the new rules from several representatives of municipal interest groups as well as from the public interest group, WaterWatch of Oregon. The municipal suppliers voiced their general support for the rules that have been generated, recognizing the potential difficulty and expense of putting them into effect. However, the providers were generally supportive of the rulemaking process and the rules themselves. WaterWatch on the other hand, expressed significant concerns regarding the rules. WaterWatch is primarily concerned that the new rules do not require an analysis of competing instream uses when evaluating a permit extension application. Following discussion and consideration of the stakeholders' comments, the Commission ultimately determined that the four and one-half year-long rulemaking process had generated a high quality set of administrative rules that adequately protect, and in fact, are likely to restore stream flows throughout the state of Oregon.

Division 315 Rules for Municipal and Quasi-Municipal Water Use Permit Extensions. The municipal permit extension rules set forth application requirements, criteria for Department review and criteria for determining the appropriate extension period. The new rules also contain language conditioning municipal extensions on the development and approval of a water management and conservation plan under Division 86. Included below is a brief discussion of some of the most significant aspects of the new rules.

• Applicability. The new rules apply to both pending and future municipal permit extension applications. OAR 690-315-0010(4).
  
  
• Application Requirements. OAR 690-315-0070(3) contains the application requirements. This is one significant area where municipal and quasi-municipal permits are treated differently. Only quasi-municipal permit holders must submit evidence that they have taken actions to begin construction on the diversion project to qualify for an extension.
  
  
• Estimated Demand and Justification. All municipal permit holders must provide an estimate of the current population served. More significantly, they must also provide an estimated demand projection, and a date by which the permitted water development is anticipated to be completed and water put to full beneficial use. Extension requests for greater than 50 years must include additional documentation showing that the demand projections are consistent with the amount and types of lands and uses the permit holder proposes to serve. OAR 690-315-0070(3)(k).
  
  
• Extension Approval Criteria — Good Cause. The new rules provide a detailed list of criteria to be used by the WRD in its evaluation of extension applications. The criteria include findings that: (1) the requested extension period is reasonable; (2) the project can be completed within the extension period requested; and (3) there is good cause to approve the extension.
  
  "Good cause" is to be determined by a number of factors, including (1) whether the permit holder has demonstrated reasonable diligence in past development under the permit; (2) the permit holder's good faith; (3) the market and present demands for water or power to be supplied; (4) whether development was delayed by factors outside the permit holder's control; and (5) whether the permit holder has engaged in water use development activities such as water management planning, conservation planning, demand forecasting, source evaluation, and any physical work toward completion of the water system. OAR 690-315-0080.
  
  
• Determining Appropriate Extension Period. Extensions may be granted for the reasonable time necessary to complete water development or apply all water to beneficial use. This could include extensions for 50 years or more if the extension approval criteria are met. Subsequent extensions may also be obtained if the original long-term extension is not sufficient. OAR 690-315-0090.
  
  
• Extensions Conditioned Upon Approval of Water Management and Conservation Plans Under Division 86. For any extension approved under the new rules, the extension order will contain a condition requiring the municipal permit holder to obtain approval of a water management and conservation plan under Division 86 before diverting water at rates exceeding historical development under the permit. The proposed plan must be submitted no later than three years after the extension is approved. Most permit holders serving less than 1,000 people and most permit holders capable of completing development within five years are not subject to this requirement. OAR 690-315-0090.
  
  

Division 86 Rules for Water Management and Conservation Plans. Division 86 contains WRD's administrative rules governing water management and conservation plans for both municipal and agricultural water suppliers. Division 86 has been reorganized in its entirety under the new rules, but the provisions relating to agricultural water suppliers have not been substantively changed. The municipal provisions, however, are significantly different. For municipal water providers, the new rules clarify the tie between municipal permit extensions and development of water management and conservation plans. They also set forth detailed and specific requirements for plan contents and plan approval. Included below is a brief discussion of some of the most significant aspects of the new rules.

• Municipal Water Supplier Plan Elements. A water management and conservation plan must now include several required elements. These elements include: (1) a municipal water supplier description; (2) a municipal water conservation element; (3) a municipal water curtailment element; (4) a municipal water supply element; and (5) a proposed date for submission of an updated plan addressing changed demand within no more than 10 years. OAR 690-086-0125.
• Municipal Water Supplier Description. This element consists of an inventory of the existing water needs and uses. In addition the municipal water supplier must identify each of its water sources and the potential constraints on the future use of those sources, including physical or legal impediments, and resource constraints such as endangered or threatened species requirements, water quality limitations, and critical ground water designations. OAR 690-086-0140.
  
  
• Municipal Water Conservation Element. This element consists of a detailed description of all ongoing water conservation measures and an implementation plan for standard conservation measures required of all municipal suppliers. Such measures include an annual water audit, water use metering, meter testing and maintenance, implementation of volume-based billing practices, public education, a leak detection program (if necessary), and a leak repair program (if necessary). There is also a list of additional measures that must be taken if "feasible and appropriate." These measures include technical and financial assistance to customers, retrofitting programs and conservation kits, conservation rate structures, water reuse, and other identified conservation measures. Suppliers serving less than 1,000 people are exempted from the feasibility analysis. Those serving 1,000 to 7,500 people must only undertake the feasibility analysis if they propose to expand water development from a source with resource constraints. Those over 7,500 must undertake the feasibility analysis. OAR 690-086-0150.
  
  
• Municipal Water Curtailment Element. This element consists of a plan for assuring potable water supply in case of emergency. OAR 690-086-0160.
  
  
• Municipal Water Supply Element. This element consists of the supplier's estimate of water demand projections for at least 10 and 20-year periods. It also includes an analysis of the supplier's ability to meet projected water needs through use of current water sources. Finally, if any new water is needed to meet current or future demand, the supplier must identify supply source alternatives including consideration of availability, reliability, feasibility and likely environmental impacts. This alternate source identification must include an analysis of whether future needs can be met through implementation of conservation measures. OAR 690-086-0170.
• Plan Approval Criteria and Findings. The new rules contain a very specific and detailed list of criteria and findings WRD must use in the evaluation of a water management and conservation plan. This essentially eliminates WRD discretion to approve plans that do not address all the required elements, including the discretion to waive certain conservation requirements. OAR 690-086-0130. At the October 11, 2002 Commission meeting, WRD Director, Paul Cleary, confirmed the Department's commitment to a cultural shift on this issue.
  
  The rules also require WRD to make additional findings if the supplier intends to expand its rate of water diversion over the next 20 years. In this circumstance, WRD must find that the plan (1) includes a schedule for development of cost-effective conservation measures; (2) demonstrates that increased use from a particular source is the most feasible and appropriate water supply alternative available; and (3) documents compliance with any mitigation legally required to address limitations or restrictions on the development of sources with resource limitations. OAR 690-086-0130(7). For plans that propose to increase the maximum rate of water diverted under an extended permit beyond January 1, 2042, WRD must find that the additional diversion of water will not impair or be detrimental to the public interest. OAR 690-086-0130(8).
  
  
• Benchmarks. The new rules incorporate the concept of "benchmarks," which are defined as "specific incremental activities that a municipal water supplier plans to have completed in implementing conservation measures." OAR 690-086-0030(2). These benchmarks are to be built into the water management and conservation plans to identify conservation activities that are appropriate to the unique circumstances of each supplier.

Increased Work Load Resulting from New Requirements. Currently, there are over 120 municipal permit extension applications pending with WRD. Of these, approximately 25% are private water suppliers. Approximately thirty are for community water systems serving fewer than 1,000 people. More than fifty are for community water systems serving more than 7,500 people. WRD will now begin processing these extension applications under the new rules.

Additionally, WRD estimates that it will need to review as many as 200 Division 86 plans over the next three years. Under the new rules, the WRD's preliminary plan review must be complete within 90 days of submission of a draft plan. OAR 690-086-910(4). If WRD fails to meet the review deadline, for municipal suppliers operating under an extension order that requires an approved plan, the WRD Director may allow the diversion of water to prevent harm to the public welfare, safety, and health. OAR 690-086-0910(6). WRD reports that it hopes additional staff will be available as a result of proposed fee adjustments, including a proposed fee for submission of a water management and conservation plan. Stakeholder groups have also indicated an interest in legislation that would grant WRD statutory receipts authority, which would facilitate expedited review of a Division 86 plan by additional staff or third parties paid for by the water supplier submitting the plan for review.

¹In the interim, the new rules can be found at http://www.wrd.state.or.us/cgi-bin/notices.pl?oar_notices.

²For ease of discussion, references to "municipal" permits in this article also include, by implication, quasi-municipal permits.

³For a more detailed discussion of the history and background on municipal and quasi-municipal water permit use extensions, see Shropshire, S., Community Water Supply Permit Extension Developments, Oregon Insider, Issue No. 294 (April 15, 2002).

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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