Episode 2: Intro to buying and selling water rights with Jamie Morin
Episode 2:
Intro to buying and selling water rights with Jamie Morin
ABOUT THIS EPISODE
Water rights attorney Jamie Morin with Confluence Law, based in Washington state, gives us an intro to buying and selling water rights and buying and selling property with water rights, including key considerations, from explicitly retaining your water rights before a property sale to relinquishment concerns and more. This is one you don't want to miss.
[3:03] - What is a water right?
[5:19] - Who owns the actual water?
[6:13] - Limits and attributes of a water right
[7:30] - How do I know if I have a water right?
[7:55] - Different forms of water rights
[8:15] - How does someone know if they need a water right?
[9:01] - Is the state still issuing water rights?
[10:47] - Selling a water right (the transaction)
[12:21] - Reserving water rights before selling property
[13:54] - Who is buying water rights?
[17:00] - Buying a water right and making a change to a water right
[24:20] - Buying property with water rights - what to be aware of
[32:38] - Emerging activities in Washington
THE SHOW NOTES
Kristina Ribellia: So today I am sitting down with Jamie Morin with Confluence Law, based out of Seattle and Spokane in Washington State. And it's just such an honor to have this conversation with her today to help us understand more about water rights. Jamie, before we dive in, could you give a little bit more background on who you are and the work that you do?
Jamie Morin: Sure, thanks, Kristina. I'm super excited to be here with you today. This is going to be fun, we're going to have a fun conversation. So my name is Jamie Morin. I'm a water rights attorney in Washington. I work with a whole variety of clients that have water right questions. Water rights are complicated. This stuff is this stuff is old, but really important. So I'm really looking forward to being able to answer some of your questions today and see where our conversation goes.
Kristina Ribellia: Jamie, I think it would be really helpful if we could just start with understanding what a water right is. And this is why I'm particularly interested. So I get questions often about what someone can do with their water, their water right that they own. And they often think that they can do anything they want. They can sell it to whomever they want, wherever they want. It's their water right. So could you kind of help explain a little bit more about what a water right actually is and what people can and can't do with that right?
Jamie Morin: Sure, water rights are a part of our Western landscape. In order to use water in the West, you have to have a water right. That means that if you live in a city and you turn on the tap and your kitchen, the water coming out, the city has a water right. They have a right to draw water from a source, whether it's lake, river, pond. We call those surface water sources or from a well we call that a groundwater source. They have to have permission to do that in the form of a water right. That's what a water right is. It's permission to use water. Water rights are a historic legacy. When you have a water right, it dates back to the first time that water right was used. We call that a priority date. And every water right has a specific attributes. It tells you how much water you can use, how fast you can draw it, where you can use it (place of use), and what purposes you can use it for. That city water right, that's probably a municipal purpose or a domestic purpose. If you're drawing water for irrigation for growing crops, that's irrigation use. If you're using water to make paper, I live in a town with a paper mill, they have big water rights, they use their water rights to make paper. And without a water right, then you don't have the right to use water.
Kristina Ribellia: Just briefly, if you own the right to use water, who actually owns the water, the molecules of water?
Jamie Morin: So that's a little bit of a complicated question. Unless you have a water right, the water that you see in a lake or stream, those are considered waters of the state. So anytime water is occurring naturally within the state of Washington, its waters of the state. So you can get a right to use waters of the state. And that's why you have to have a water right in order to divert water, it's because you're taking part of this public resource and making it private.
Jamie Morin: Now once you have a water right, a water right is a real property interest. It's just like land, but a little more complicated though, because a water right is also what they call a usufruct right. It's arcane, you know, Latin words that lawyers like to use, but what it means is that you have a right to use. So when you have a right to use water, that right is limited by the attributes of your water right. It also means that water rights have to be continuously used. So water right is a perpetual legal interest, as long as you are continuing to use it for beneficial purposes. Here in Washington, if you don't use your water right, for five or more years, it can be considered relinquished. And you won't necessarily know that if you're looking to buy a piece of property that has water right on it. Because that non-use could have happened at any time in its history. And that's what makes buying and selling water rights just a little bit tricky. Making sure you know what you're buying and selling.
Kristina Ribellia: How do you know if you do have a water right?
Jamie Morin: If you have a water right, in Washington, it's going to be on record with the Department of Ecology. So the Department of Ecology is the state agency that oversees water resources and they have a record of all water rights in the state. Now water rights have different forms. Your water right could be in the form of a water right claim, it can be in the form of a water rights certificate, or it could be in the form of a water right permit. It can also be in the form of an exempt well, but we don't buy and sell those too easily. So we probably won't talk about that too much.
Kristina Ribellia: How does someone know if they need a water right? Maybe they are looking to put in a new house or expand their irrigation. How do they know if they actually do need a water right for that use?
Jamie Morin: Well, if they're going to be using water, they need some kind of water right. But the kind of water right that you need depends on where the property is located and what kind of water use you're going to be doing. So for instance, if you're irrigating more than a half acre of non-commercial lawn/garden, then you're going to need a state-issued water right.
Kristina Ribellia: Is the state still issuing water rights?
Jamie Morin: By and large, the state is not issuing water rights. Many areas of the state are considered over appropriated or already appropriated. Which means there are more legal entitlements to take water than there actually is water provided by Mother Nature. So in those cases, in those areas, new water uses rely on buying and selling existing perfected water rights and moving them around.
Kristina Ribellia: See, this is where I always recommend to folks who contact me at Western Water Market to reach out to one of our water right consultants or attorneys like yourself, who can really help them understand if they need a water right and where they can acquire that water right from. There are so many conditions on things — do you need mitigation for a new home or not? It's best to go straight to the professionals who can help assist with that process. So I'm just so thankful you're here with us today to understand a little bit more about why we might want to work with you upfront.
Jamie Morin: It's tricky because every piece of property has a different story. Every water right has a different story.
Kristina Ribellia: Isn't that the truth? So let's assume we have a water right. And for whatever reason, we want to sell that water right. Could you help explain what that means to actually sell a water right?
Jamie Morin: So a water right is a real property interest. You can sell a water right, just like you would sell land.
When you sell a piece of property that has an appurtenant water right and you sell that property, say you buy a farm or you have a farm and you're going to subdivide some parts and sell those parcels away, then the portion of the water right is presumed to go with that property. Anytime you sell land that has an appurtenant water right, we just assume the water rights stay with the land. Unless the deed specifically says it does not. So you can sell water rights separately. In order to sell a water right separate from the land, you need to make sure that if you sell the land first you've kept the water right back. But otherwise, a water right sale is just like a real property transaction. Very similar process, in terms of reviewing title, we do it with purchase and sale agreements, we file and record deeds. We pay excise tax. So everybody gets their part of a water rights sale.
Kristina Ribellia: That's helpful to understand. So how do I reserve a water right? If I do want to sell it later? Say I'm selling my property. How would we reserve that water right for future use or transfer to sell to someone else?
Jamie Morin: If you're selling a piece of property, but for whatever reason, you want to keep the water right, the deed which sells the property absolutely has to have a reservation in it, calling out that you are reserving the water or the water right to the grantor. But there's a companion issue to that because remember, we talked about a water right being both a real property right and a use right — meaning you have to continually beneficially use the water in order to maintain its good standing. So in the case of selling land, but retaining the water, you will also want to — we call it, put the water right in trust. The State of Washington has a program where you can temporarily or permanently bank your water right in stream. So it's used for in-stream purposes. And while it's banked in-stream, then it's protected from relinquishment. Otherwise, if the water right isn't used for five or more years, it can be relinquished.
Kristina Ribellia: And we don't want that. Right so relinquishment, that means you've essentially lost that right.
Jamie Morin: When it's relinquished, it's gone. So then it goes back to waters of the state.
Kristina Ribellia: And unfortunately, we do see that on occasion, either partially or in whole, that those water rights have been essentially relinquished.
Jamie Morin: It's not uncommon.
Kristina Ribellia: It's so painful. So who is buying water rights these days?
Kristina Ribellia: Well, depending on your regions, of course, the big buyers for water rights are either developers, towns, cities, places that are growing communities that need water for community uses, commercial development, that sort of thing. That's one of the big buyers, we call those Muni buyers. The other thing that we are increasingly seeing is ag lands converting or technology and crop patterns change, farms needing additional water. So we see water rights being sold from annual forage crops into higher value permanent crops like trees and grapes. The other big buyer we see, particularly in the Northwest is our environmental buyers. So nonprofit and public agencies looking to purchase water in order to return water to the stream for fish.
Kristina Ribellia: How would someone from your perspective, find a buyer? If they are interested in selling their water rights? How would someone find a viable buyer?
Jamie Morin: Well, when I have water rights to sell, I put them on your website. I list them on Western Water Market, of course.
Kristina Ribellia: That's so great to hear. We certainly have an increasing network of interested buyers and folks who need water rights that are on our email list or subscribing. We actually have some buyers listed on Western Water Market as well, who are in need of water rights. So that's another way that folks can help make a connection. That's really great to hear. Thank you, Jamie.
Jamie Morin: It's really a great resource. We've had some good success. We've had clients that are looking for water that have had some follow-up from listing on the site. We've also had some sellers, sell much faster, because it's hard to figure out otherwise, how to find the water right. There's a lot of them out there. But it's not like they have signs on the road.
Kristina Ribelli: Yet! We may be doing that next.
Jamie Morin: Yeah, a little "Water right for sale" here sign.
Kristina Ribellia: Yes. Oh that is definitely in our marketing plan. I love that idea.
Jamie Morin: Yeah, it's not easy to figure out how to find and to buy — to get connected. And so your resource is fantastic for that.
Kristina Ribellia: Thank you. And thank you for serving the market. Truly. Confluence Law was one of our early adopters our founding members of Western Water Market. We're just so grateful for your support over the last year. It's been huge.
So Jamie, if someone is wanting to sell their water rights, say to someone who is a few miles away, or they're wanting to make a change in some way to that right that they have, what do they need to do?
Jamie Morin: Yeah, so that's a big deal. Let's talk about that. So I've got a water right, I've been using my water right, I sell it to somebody else, but I'll sell it with the land. So let's talk about what happens when you're buying just a water right, we've been talking about selling water right, but we're going to buy water right, we're gonna have to move it to where we want to use it. So the attributes of a water right, which can be changed are the place of use, the point of diversion, the purpose of use, sometimes, but not always the season of use. The things we can't change is we can't make it any bigger. We can't expand water use, not only beyond what is on the piece of paper, but also that we can't expand beyond the historic water use. And we can't take the water out any faster than's been taken out. So I said that we can change the place of use and point of diversion. And the other thing we can't really change is the source. That's a little bit of a gray area because source -- we'll talk a little bit about source here in a second. But so we buy water right. That means we have to change it, we have to apply to the Department of Ecology to seek permission to move it to where we want to use it. In the process of moving in, we also can't injure anybody else who has a water right. And that's really what it means by we can't change our source. Because if we were to take say, I'm trying to think of a good example, a water right from Whatcom and move it over to Snohomish. That's probably not going to work, because we're taking it out at one source and putting in a different source. But we can move it from a tributary down the mainstem. That's why there's some concern up in headwater counties. Because in headwater counties, once the water is moved downstream that it's not being used in that county anymore, that county loses the economic benefit of having had that water right. So when we're buying a water right and changing it, we're changing it on the same source, making sure that we're not expanding the water use and making sure we're not injuring any other people. This is one of those examples of things that you can't really do at home by yourself, right, this is where you're going to be applying to the agency, the agency is going to ask for a lot of historic use information in order to determine the extent and validity of the water right. They're going to ask for information about how you plan on using it, you'll get a development schedule in order to put it into use in your new way. So you'll have a time schedule in which you have to put it back to use. And then they're going want to make sure that no one in between is affected. That's a very simplified process.
Kristina Ribellia: How long does all that take?
Jamie Morin: Well, there's some public notice process, there's an agency review — it can take anywhere from a year to several years — really to move a water right and change those attributes of it.
Kristina Ribellia: How do we expedite that? What if we want to move more quickly? Are there any things that the seller and the buyer can do to help speed up that process?
Jamie Morin: There are a couple of different ways to have a water right changed through the process. One is to go directly to the Department of Ecology, that is a pretty stodgy, slow process because you have to wait for the Department of Ecology to get to you in line. The alternative is to pay the Department of Ecology to process it. So you're paying for, that's a complicated cost reimbursement, you're paying for the cost of Ecology to process, your change, and anybody who is in line ahead of you. Or you can go, in some parts of the state, we have these things called conservancy boards. Water Conservancy Boards are volunteers who meet regularly and review change applications and have the statutory authority to make recommendations to Ecology about whether the water right change meets the statutory criteria, allowing the change to happen. And most of the Eastern Washington counties, not all the Western Washington counties, but most of the East have these conservancy boards. And that's a way to get a water right change processed more efficiently than waiting for the Department of Ecology to get around to it. That's what most people are using these days. Just for timely purposes.
Kristina Ribellia: That makes good sense. So maybe shaving off a couple of months or even a year more in some cases by going through the Conservancy board. Yeah. This is something that you don't want to do alone, right? This is not a process that you want to try to navigate without really having an advocate, someone, a professional that can do a lot of that prep work for you upfront so that you are going in with confidence and are able to process things as quickly as possible.
Jamie Morin: Yeah, I'm not even sure you could do it alone some days. And even as a lawyer, I don't do it alone. We have consulting engineers and hydrologists for almost every change application. A couple of them are also on your website.
Kristina Ribellia: That’s fantastic. I do like to think we have the best in the West, both consultants and attorneys on Western Water Market. So I'm so glad they're part of your network as well.
So I have one more question here for you. If someone's buying property and the seller says that they do have water rights that go with the property, what's something that I should look at, or what should I know before I actually move forward with buying this property that has so-called "water rights"?
Jamie Morin: That's a good question because I find sellers have a lot to say about what they have to sell. But sometimes it's a little tricky to figure out what's going to be useful after you buy it. And so, there should be a water right title. So in a preliminary title report, part of the transaction, which should be listed a recorded document there, that says water rights certificate has a vested water right. That's not necessarily true if it's just a permit, or if it's an exempt well, so the first place to look is at the title report. The second is the Department of Ecology has a database of all water rights. It's a little hard to search. So sometimes the agency will help. Sometimes if you're buying a property because of the water rights, you're going to want to find a professional to help you do more than just do-it-yourself search to make sure that the water rights, we call it extent and validity, that they both exist legally, and that they have a good use history.
So the first issue is to make sure they exist legally. And that's where you look at the title or you look at the database from the Department of Ecology.
But then the next issue is to make sure that they haven't been relinquished. And that's really talking to the seller and having them document how they used water, what kinds of crops they've grown -- most frequently, we're looking at irrigation water uses when we're talking about buying and selling water rights. And so really getting a lot of information about how they use water, what kind of equipment did they use to pump water from the well, if they were using a surface water diversion, to ask them for power records. And I've even asked for fertilizer bills to try to establish how much of the property really was being irrigated at different times in different ways. So it comes down to really questioning your seller and then making sure you get out on the property to look at things like the irrigation system. If it's all piled up in a rusty heap behind the barn — well, maybe it hasn't been used recently.
Kristina Ribellia: That's a pretty good indication, huh?
Jamie Morin: Yeah, that should make you a little nervous if it's pretty covered in weeds. And it's really important to do both. It's not just enough to have a certificate in hand. You really do need to dig when you're buying property with the water right. And if it matters that the property has water, you really want to make sure that you see the physical, the physical aspects, and make sure those are consistent with what looks like consistent water use.
Kristina Ribellia: That makes good sense. I have found that Google Earth can be a great tool as well to go back in time and look at irrigation use through the years. And I like to keep in mind, if we can easily do it, I'm sure then the state agencies can also check if it ever came to that.
Jamie Morin: That's true and Google Earth only goes back until about 1985 for Washington. And it's a little bit, that's not quite enough, because the period of time in Washington that we're looking at making sure it has historic water use is from 1967 forward. So that was before I was born. And so any five-year period in there that could have happened, you know if the property was in probate, or there was some sort of bankruptcy or foreclosure actions in between. Now, sometimes non-use can be excused. But you just want to know what you're getting into before you buy it. And to be looking back and asking for those records as far back as as they go.
Kristina Ribellia: What happened in 1967? Why is that such a critical year?
Jamie Morin: So in 1967, there was a bit of a paranoia about when California was going to come steal Washington's water. So California had a series of dry years and had been through some pretty significant drought in the Western US and there was talk about — I don’t even know how much of it was really speculation. There was talk about taking water from the Columbia River, moving it down to California in some way.
So the legislature adopted — they did two things at that time. The first thing they did was require that all water use be documented on file with the Department of Ecology. So, in Washington, the state agency didn't start issuing surface water rights until 1917. Which sounds like a long time ago. But in the scale of water use in the state of Washington, by then many parts of the state had already been completely appropriated. In terms of all the water that was more or less provided on an annual basis was being used by water users in the area. Back in the Yakima, anything after 1905 is considered no good. So in the late 60s, 1967, the state adopted the Claims Registration Act. Sometimes you'll find that you don't have a state-issued certificate or permit, what you have recorded against your property is a claim. What that means is in 1967, between 1967 and 1974 that whoever owned your property at that time, filed a claim to document water use under this statute. The second thing was that you didn't use the water after it was documented, that sort of started the clock on this concept of relinquishment to make sure that water in the state was being beneficially used. The idea being that if you're not using your water, beneficially, there's somebody waiting in line waiting for it, because again, we are over appropriated. So that's the concept behind relinquishment. It's not just to take away a valuable asset from people, but it's to make sure that water is being used because it's so important for so many parts of our life: economic development, showers, swimming, fish, you know, you name it. Everybody has multiple uses of water every day. So we want to make sure that that water is available to meet all those competing needs. But that's what started. That's why that date.
Kristina Ribellia: I didn't I didn't know all of those details. That is really interesting, especially with California looking to Washington for water and kind of triggering this set of actions.
I'm so curious, you're talking water is over-allocated in Washington, in many places across the West as well. Where are you seeing some kind of emerging things happening here in Washington? What new activity may we see popping up in the next couple of years or decades? Are you seeing anything on the horizon that may be notable?
Jamie Morin: Well regionally, it seems like every region has their little issue. Water is very local. The kinds of needs we see, the level of demand we see, the ways to solve these problems does tend to be pretty regional. Around the state, what we're seeing is increased residential development in places where stream flows are low for fish. And so in places where stream flows have been set, by regulation in order to maintain minimum flows, then any new water withdrawals, even for single-family houses may be subject to restriction. And we're seeing in those areas in order to have water for continued development, there's an increasing need to also make sure that any new development doesn't affect these fish flows. We're seeing some pretty creative ways to reallocate water rights that were historically developed through water banks. Under a water bank, somebody will acquire an irrigation right again and use that as mitigation to offset the impacts from exempt wells or additional groundwater development. So that's one of the things we're going to see more and hear more of as time goes on, particularly since the legislature just appropriated a pretty impressive chunk of money to start putting those banks together. Because the other thing we're seeing with that water bank concept is, and again, since we always seem to be looking at irrigation water rights to move around, is that there's some concern that maybe we are moving too much land out of irrigation. And so we're going to start to see some more flexible structures that allow for both keeping water in irrigation uses, but allowing that water to be changed from low or lower value annual or forage crops into higher value permanent crops. The water demands for higher value permanent crops, they're pretty sensitive to any sort of curtailment or restriction of water use. And so they require a firmer water supply than an annual crop does, they're more susceptible to drought. So I think we'll start to see some mechanisms that allow water to move between users and uses a little more easily. But the other side of that is that you got to be careful how that's done to avoid impacting both people's property right interest in the water, but also that need to have water available locally for future uses.
Kristina Ribellia: It's a tough balance to strike for sure. Especially as I'm hearing in the headwater basins where they may have these more senior reliable water rights and lower value crops compared to lower down in the Columbia perhaps around Tri-Cities, or so. Am I tracking?
Jamie Morin: You're tracking.
Kristina Ribellia: That's helpful to get a little more background on that as well. So thank you, Jamie. It's exciting to see. I just love the innovation in the state and that there are so many caring, thoughtful professionals at the state and in the private industry that are working together to try to solve these problems for our communities.
Jamie Morin: There really is a lot going on right now.
Kristina Ribellia: I'm so thankful attorneys like you and others are tracking this closely. So I'm excited to see how things develop.
Jamie Morin: Well, this has been super fun. I'm glad to have been able to chat with you about water. Clearly, it's a subject that really near and dear to my heart. So I really appreciate the time. I'm available for questions. It's a complicated but important topic for people to be aware of when they're buying and selling property.
Kristina Ribellia: And water rights.
Jamie Morin: Buying and selling property is just no good unless you know it has water.
Kristina Ribellia: Well exactly, we need it now for everything really. So how can folks get ahold of you?
Jamie Morin: I have a website, confluencelaw.com.
Kristina Ribellia: Thank you so much, Jamie. Jamie Morin at Confluence Law.
Jamie Morin: Really appreciate it. Thanks, Kristina.
Kristina Ribellia: We'll talk to you soon.
Thank you for tuning in to the Western Water Market Podcast.
Remember, water rights are complex, and nothing in this episode is meant to be considered legal advice. To get the support that you need, visit westernwatermarket.com to search and work with water right professional in your state.