Episode 5: How to protect your water rights from relinquishment with Dan Haller

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Episode 5:
How to protect your water rights from relinquishment with Dan Haller

 
 
 

ABOUT THIS EPISODE

Did you know water rights can be lost, also known as forfeited or relinquished, wholly or in part for non-use and or misuse? It’s a true story and quite possibly the most important thing you want to know and understand as a water right holder or someone interested in buying property with water rights. Join Dan Haller with Aspect Consulting as he breaks down “use it or lose it,” a fundamental tenet of Western water law, including why it exists and what you need to know and do to protect your water rights and future assets.

Please note, while this discussion is focussed on Washington, the “relinquishment clock” and exemptions vary from state to state and even basin to basin in some cases. To better understand your local laws, policies, and regulations, we highly recommend working with a water right professional in your state. 

[01:00] - About Dan Haller
[04:16] - What is water right relinquishment — "use it or lose it"
[07:04] - How water rights can become relinquished
[09:10] - Exemptions to relinquishment in Washington
[13:58] - Two key things you should know and do to protect your water rights from relinquishment
[16:21] - Multiple lines of evidence and important records to keep
[19:18] - Buyer due diligence
[19:50] - Two common reasons water rights are relinquished and how to avoid it
[25:26] - Making changes to this fundamental principle of Western water law
[28:06] - Two key things to remember

 
 

THE SHOW NOTES

Kristina Ribellia  00:07

Welcome to the fifth episode of the Western Water Maret Podcast. In this episode today, I wanted to really take us back to the fundamentals, back to the basics of Western water law, and touch on one of the most important things you should know as a water right holder or someone who's interested in acquiring property with water rights. And that is how to protect your water rights from relinquishment.

I am just thrilled to be sitting down today with Dan Haller from Aspect Consulting. Dan is going to get us started with just a little bit more about himself.

Dan Haller  01:00

Hi, Kristina. Thanks for having me on. Yeah, I am a trained civil engineer. I graduated from Washington State University, and I've been practicing in water rights for about 20 years, almost exclusively in Washington. And I've just always been gravitated toward water rights because they seem such a fascinating kind of blend of science and law and policy. And it's just a really exciting area to practice in. 

Kristina Ribellia  01:23

That's great. Thank you. And you're a certified water right examiner? Is that right?

Dan Haller  01:29

That's correct. So in Washington, fairly recently, in about the last 10 years, the legislature created a certification for water right professionals. It has existed in other states like Oregon for many years, but now scientists can become certified as water right examiners and professionals.

Kristina Ribellia  01:50

And I've heard a rumor actually. You tested highest on that test ever?  It was Dan Haller?  Is that true?

Dan Haller  01:57

Second highest actually.  One of my great colleagues, Andy Dunn with RH2, also a former Ecology employee like myself, was the highest score. And there are probably maybe 50 or so certified water examiners in Washington today.

 Kristina Ribellia  02:11

I was really excited to have you on here, Dan. You were one of the first people I reached out to when I launched Western Water Market last year.  You were certainly one of the most enthusiastic and I was wondering if you could share a bit about what you saw in Western Water Market and why you thought this was a great tool and opportunity in Washington at least.

Dan Haller  02:33

Yeah. The thing that intrigues me about Western Water Market is that before it launched, water right transactions have always been a real intimate kind of environment and discussion. There's probably maybe three dozen practitioners in Washington who handle maybe 90% or more of the water right purchases and sales and leases that are transacted each year. So if a client of mine wanted to buy some water, then usually it's an email conversation historically. I would send an email out to my trusted distribution list of friends and fellow professionals and attorneys and say, hey, I've got this client in this location. This is about what he's looking for. Do you have anybody who is who's interested in parting with some water?  And that ended up being a very non-transparent and at times, kind of clunky and unsatisfying experience for my clients. So having a medium where people can post themselves and really see how those transactions can happen, I think is a pretty powerful tool.

Kristina Ribellia  03:58

That's great to hear. And I'm so thankful that you and Aspect have joined the market and have several of your clients listed on there, both as buyers and sellers and water banks as well. Really key to seeding and starting the market. And I'm very grateful for that. So thank you.

Dan Haller  04:15

You bet.

Kristina Ribellia  04:18

So today, I want to talk with you about one of the most critical, fundamental tenants of Western water law. Really start at the basics for folks. And it's this idea, or concept or statute really related to "use it or lose it". Could you tell us a little bit more about this and its origins, where it started?

Dan Haller  04:43

Yeah, most Western states have some kind of forfeiture criteria for water rights, which can be a really scary thing. And in Washington, most people know it as relinquishment or "use it or lose it". But there's actually several different flavors of ways that you can lose your water right. And each of them has their own rules. And they apply in some cases to only certain types of water rights. And the three main ones are abandonment, relinquishment, and failure to diligently exercise your water right.  And those are real kind of water rights specific nerdy terms that you know, folks like me understand, but the average person just thinks of, "Well, if I don't use my water, I'm going to lose it." And doesn't really appreciate why that's the case, or they're frustrated by why that even exists as a law. And they don't necessarily understand the ramifications of their actions or their inaction.

So the reason that forfeiture exists, is really grounded in the principle that people should be using their water. And if someone isn't there using their water, then it should return to the state for reallocation to another use. In the period of time when relinquishment came into law, which was 1967 for Washington, we were still very much in a “settle the West” kind of mentality. Water was essentially free. You could file for a water right for $2 and get one for almost any quantity. If you didn't use your water, someone else wanted it and could be farming with it, or building a factory or building houses.

And the notion was that water should return to - relinquish - and return to the state who would then issue a new permit to the next person in line who might be waiting. And so it had its genesis and I think some good public policy. But today, it is probably one of the most controversial and frustrating laws that exist in the water code, because so many of our basins are over-allocated, and spoken for that there's that back-end option of getting a new water right when something relinquishes really doesn't exist anymore.

Kristina Ribellia  07:04

So how are water rights effectively relinquished in Washington? What triggers this?

Dan Haller  07:10

Yeah, I would say it triggers from two things. Number one is the behavior of the water right holder. You put yourself at relinquishment risk if you do not use your full water right, once every five years. That's really the first thing that could create a trigger. And then the second thing is, did somebody noticed that? Is it is it observable? Is it trackable? And is the regulatory agency who's responsible for managing the water code, the Department of Ecology, are they really given an opportunity to act on your behavior? Ecology is required to have that oversight role. The Supreme Court has said, based on interpretation of the water code, that Ecology has to evaluate whether relinquishment occurs. So it's almost always traced back to the behavior of the water right holder, and something that they want to do.

Kristina Ribellia  08:09

Okay, like buy, sell, lease — change it in some way? 

Dan Haller  08:15

That's right. So if someone posted on Western Water Market and said, "I've got a water right for sale, and I want $2,000 an acre-foot for it," and then say, one of my clients saw that ad and said, "Oh, I want to expand my orchard. I want to buy that water right. And I want to move it five miles downstream," say, where my client’s farm is, that kind of move triggers what's called a validity evaluation of that water right. Ecology doesn't want to move water rights that don't exist anymore. They want to let people have certainty in what they're buying and selling. And so that kind of transaction would require Ecology to say, "Well, what was the use of the seller? Did they use their water continuously? Did they actually use it at least once every five years in full?" And if they didn't, then that's what creates relinquishment risk.

Kristina Ribellia  09:10

And I think that's one of the key things of working with a water right professional like yourself. To turn over all of those stones, to really build the best case possible to the Department of Ecology, or whoever the regulatory agency is, in whatever state that you're in, right? Build this case, identify maybe those areas or the quantities or times of year that water rights have been relinquished, is that right? But really build this case and then bring it to the Department of Ecology, or that state agency?

Dan Haller  09:47

I would agree.  I think that water right professionals can definitely help protect a landowner's interest in their water rights. One of the main things that we try to do is get really good data on what their water use is. Sometimes people just don't even understand how much water they use. So things like aerial photography, power records, pump run times, water meter records, cattle use records, crop records — there's a lot of ways that we can attack an understanding of what someone's actual use is and then compare it to what they were authorized to do.

And then the other complicating factor about relinquishment is the legislature since 1967, has always had exceptions to relinquishment.  Certain types of behaviors are immune from relinquishment. And some of these fall off the map pretty quickly and aren't available to most people, like municipal water use is a common relinquishment exemption, right? Well, if you're not a city, then you don't even get to enter into that kind of conversation.

Some are geographic-based like there are certain ones that only apply. In the Columbia Basin Project. There are some that only apply in the Yakima Basin, for example. So if you're not in one of those geographies, then again, that doesn't help you. But there are other relinquishment exemptions. There are 22 total, that apply everywhere. And part of what our job is, is to look at that specific person's fact pattern and understand if you didn't use your water once every five years, is there one of these exceptions that you qualify for, which then can excuse that behavior and mean that your entire water right is still valid, that becomes a big portion of our work.  Because a lot of people end up in that situation, where they're struggling to understand whether their use is subject to relinquishment.

Kristina Ribellia  11:56

And that can be through a confidential analysis, right?  Versus going to Ecology, that's kind of exposing you?

Dan Haller  12:06

It is. A lot of times, well, you're right, that the process to go through a formal validity evaluation of your water right is a public one.  Regardless of whether you go directly to Ecology or go through what's called Conservancy Boards, which are local county units of government, that are also empowered to evaluate these changes. It's a public process. They're subject to public meetings, you have to publish in the paper. So you are really inviting scrutiny of your past use, not only your past use but all of the previous landowners that came before you because the standard isn't just what you did. It's what was done with that water rights since the last time Ecology touched it, right.

So if Ecology issued a certificate in 1960, say, and you bought this property three years ago, and the person before you owned that property for 10 years, and then the person before you owned that property for 30 years — you're really looking at that entire history from 1960 to present, which is 60 years almost of evaluation of what that water use history is. And exposing that in a review, that's very public without a sense of what the likely answer is, again, can be pretty scary for people.

So a lot of times what water right professionals like doing are these confidential water right assessments. It's almost attempting to prejudge, or, at least give you a sense of what the likely outcome is — no one can completely predict it. Because again, it'll be a public process. People may protest, people may appeal.  Ecology, of course, has the final answer, and they have their own judgments about the data. But at least a landowner can get, you know, a good read about whether something is likely or unlikely to survive that process.

Kristina Ribellia  13:59

What would you say is the number one thing water right holders can do to protect their water rights from relinquishment? Forfeiture? What can they do?

Dan Haller  14:10

So I would boil it into two central principles.  First, you need to know what you're authorized to do. A lot of people have never even seen their copy of their water right. Maybe they got a copy of it when they bought the property and it's sitting in a safe somewhere, but they haven't really looked at it or what it says. They haven't looked at Ecology's online database for water rights that show where it's supposed to be used and how fast it can be withdrawn from the stream or the aquifer and how much you can use over the entire year. There's a lot of these limitations on a water right. And the lay person often hasn't thought about, well, what am I actually even authorized to do here?

And so that's job one: is to get that document out. And while it's somewhat confusing, most laypeople should be able to get on Ecology's website, go to where their property is, look at the pieces of paper, the water rights that overlap that, and say, okay, you know, do I have a water right or don't I? If there are questions, then again, seek a professional if you need that help. But that's step one, what are you authorized to do?

And then step two, what has been done on my property? What have I done? What have my previous landowners done before I bought that property? And trying to compare those two things.  Sometimes it's really easy.  You may have a water right for 160 acres, that has got a pivot on it. And it's really easy to jump into Google Earth and just see what that irrigation has looked like, over the last, you know, several decades. Other times, it's very complicated. The water right may have a very complicated legal description.  It may authorize a bunch of different purposes of use.  It may span multiple property owners, so it may be held in common with other parties. So that's where some of those more complicated situations, you might invite a professional to give you some advice.

Kristina Ribellia  16:21

So you mentioned it's really important for people to understand what they have. So to look on the Department of Ecology's website water rights explorer, and we can link to that in the show notes. And you've also touched on how important it is to keep records.  Could you mention those again? What types of records can help really build that case? And I'm thinking those records might be helpful to keep with the property to build value for the property as a potential property seller or a buyer to be asking for those documents. Could you talk a little bit more about that? 

Dan Haller  16:59

Yeah, so Ecology has a policy where they suggest when they do their work, or when professionals like me do do work, we should consider what's called a multiple lines of evidence approach. So what does multiple lines of evidence mean?

They want an understanding of lots of different ways to get at the answer of whether the water right is still valid or not. So what are some of those common kinds of evidence? Well, aerial photography is a very common one that's available in Google Earth to anyone.  So you can look over the last 20 years and see whether the land is green or not, if it's an irrigation right. But the challenge with Google Earth, for example, is that you really only get one photo every other year, generally. And some of the older photos are in black and white. So just regular personal photos of what irrigation has been going on, or what the use as can be, can be very powerful as well.

Additionally, in some areas, aerial photography is hard to interpret, particularly in the rain shadow of the Cascades, where you got a lot of tree cover, or maybe your parcel is small.  It can be challenging.  Is that green? Is it not green? What's going on there? So personal photos can be very helpful there.

Additionally, power meter records are very useful. If you're selling hay, if you're selling bins of apples, those can be converted to water use by some standard kind of metrics. Same thing with cattle. If you're raising cattle, there's a certain amount of water that each cow-calf pair may use and you can make those kinds of assumptions. So I would say really, the more the merrier on keeping information.  And nobody likes keeping information you know, nobody likes to do taxes but keeping a little file in your file drawer that just periodically has some information in there to round out what is oftentimes a pretty scant record of what could be interpreted for someone's water right is often helpful.

Kristina Ribellia  19:18

And I can imagine we're going see more and more buyers wanting to see those documents before they purchase property with water rights or that they think has water rights. I've heard just horror stories of people getting burned where they buy property, they think it has water rights, when in fact they don't. They've been relinquished.

What are some common reasons for relinquishment that you see? People may not even realize that it's happening. What what are some common ways that it does occur?

Dan Haller  19:50

Yeah, you're 100% right, that the notion of a buyer doing due diligence on a property is very common. And particularly if the property has any size or value to it.  That due diligence period is often embodied in the purchase and sale agreement for the property itself.  You might have, say, 90 days to look at all of the attributes of the property.  What water rights exist, whether there are sources of contamination on the property, like underground storage tanks. That is really a part of the buyer due diligence process, and we're often brought in to handle the water right element of it.

So what do we commonly see, when someone's looking at buying a water right, most of the time, the issue falls into two camps.  One is underuse, which leads to relinquishment risk and the second is compliance. So again, because most people's water rights are tucked away in a safe somewhere or they just have been lost to time, and they're only available through a public record search.  People's use and their behavior often drifts or shifts from what the actual authorization is.

Sometimes I call it coloring outside the lines. The place of use may be here, and the person's behavior is like over here slightly.  Or someone may be authorized for one well, and over time, they've got three wells. Or they're authorized for a certain number of acres. And they're actually irrigating a different number of acres. So those are all what I would put in the compliance camp, right? Maybe they're still using all their water, but they're using it a different way. And that means that either it needs to go back to the way that it was authorized, that's one choice. Or you have to again, do this process where you invite Ecology in through a change process to true up your behavior to what the authorization is. So that's one camp in the buyer due diligence side.

The other side of it is underuse. And underuse is most common, not because someone is underusing their acres, say, but often it's underuse on the amount of water per acre. And the reason is because of conservation and efficiency. When Ecology was issuing water rights in the heyday, right, say from the 40s, to the 80s, when all these water rights were being pushed out for beneficial use, people were using surface application techniques.  Flood and low-efficiency sprinkler kinds of methods. And so the water duties, the amount of water that it took to grow a crop on that acre of land was very high. It might be say four to five acre-feet per acre or even higher in eastern Washington.

Now what are people using today?  They're using micro-spray, they're using drip, they're using high-efficiency center pivots. And so the water duty might, instead of being four to five, might be two to three. And so the result of that is under use per acre, which means that they may not lose any of the footprint of what they're allowed to do. But they could lose volume off that authorization. And that's still scary to a lot of folks and why they resist having any kind of review of their water rights.

Kristina Ribellia  23:18

So what's their option there? If someone does put in a more efficient sprinkler? Are there any programs or ways that they can protect that saved quantity of water from relinquishment?

Dan Haller  23:30

It's very easy to protect water that is saved if you're proactive about it.  It's much harder to heal it if it happened 10 or 15 or 20 years ago. So the proactive way to do it, is, let's say you're buying a farm, and it's got some wheel lines on it. And you're an orchardist and you want to put in an orchard with drip or micro-spray irrigation. And you're thinking is well, I might be saving 10% or more of the water applied because I'm going to this much more efficient measure. As long as you're doing that in the moment before five years has gone by - that relinquishment clock - then the easiest way to do it is take advantage of a really great program that the legislature put in that Ecology manages called the Trust Water Donation Program. It's a very simple form. You fill it out, you say in the last five years, I've used this much, in the next five years, I'm going to use this much.

That difference you put into trust and you can basically park it there for either fish benefit or groundwater preservation. Those are the two most common things that Ecology would do with your water while it's in trust, but you can take it back and it comes back exactly the way it came in. So as long as you're proactive, and that five-year clock hasn't run, then it's really easy to protect it in case you want to use it in the future.

The more challenging situation is, I bought that farm and I realize now that 10 years ago, it was converted from wheel lines to drip. And that's really hard.  Because then you have to fit within one of those 22 relinquishment exemptions, which are all very fact-based and a lot of them just won't apply.  Like being drafted in the military is one. Well, you know, that's not one that's going apply to very many people. So that's a much harder solution.

Kristina Ribellia  25:26

Okay, that's helpful. Thank you, Dan. I think we will link to the Trust Water Rights Program, this donation document that you talked about, we'll put that in the show notes for folks.

It seems a little antiquated, this idea of relinquishment. Do you have any suggestions for any new legislation? That's great to hear in Washington that there is the Trust Water Rights Program. But are there any fundamental changes that we should be looking at making in Western water law at this time?

Dan Haller  25:58

Yeah, it seems like every year, the legislature considers ways to change relinquishment. In the last 20 years, there have been hundreds of bills probably that have sought to alter relinquishment. And the only thing that's really happened is more exceptions have been added. So when relinquishment was passed in 1967, there was maybe about 10 of them, and now we've grown to 22.

So every time someone's dissatisfied with relinquishment, usually, the resulting action has been to add things to the water code and say, well, now this behavior is okay, now this behavior is okay. I actually think that less is more when it comes to relinquishment. I would favor something where you take the five-year relinquishment clock and you stretch it out further to say, like 20 years, and you go ahead and get rid of some of these relinquishment exemptions.

Why would that be better? Well, the challenge with relinquishment exemptions is they're heavily litigated and heavily interpreted.  Every time a new one comes out it ends up going to the Supreme Court to try to interpret, well, what does every word of this mean? Because despite I think people's best intent, there's a lot of vague terms or questions about who should really qualify. And so you end up with a lot of time and money and effort, which adds to the transaction costs that people are trying to buy and sell water, that just adds a lot of cost to that, because relinquishment is hard.

If you want to keep relinquishment, and at least make it easier, then maybe fewer exceptions and a longer time period would be a better model. And that's not some epiphany that I necessarily came up with. That bill has run before in the legislature and didn't make it. But it's one that I always come back to. If there was a way to keep things simpler, I think it would be much more powerful.

Kristina Ribellia  27:47

Great. Thank you, Dan. We have just a few more minutes here. I'm curious if there's any thing you would like to leave with folks.  

Dan Haller  28:06

Yeah, I keep coming back to these two main rules, which are: know what's authorized, and then know what has happened on the property. If you can at least get some sense of those two things, you will set yourself up for hopefully not disappointment in buying that property.

And there's a lot of great professionals on Western Water Market and practitioners in the Western states that make this their livelihood and know the ins and outs of the water code.

As I said at the beginning, I love this job. It's a really fascinating place every day to get up and go to work in because usually, it's someone who has this, and I want to do this.  Can you help me change this into this? And that's really gratifying kind of problem-solving. You know, a fun place to play when you're an engineer.

So I would say stick with what's authorized. And that's a good place to start.

Kristina Ribellia  29:05

Dan thanks so much for coming on the podcast today. Could you share with us how folks can get in touch with you

Dan Haller  29:11

Yeah, you bet. My firm name is Aspect Consulting and you can visit our website at any time and you can reach me by email at dhaller@aspectconsulting.com and my office phone is (509) 895-5462.

Kristina Ribellia  29:26

Great. Thanks, Dan. And we'll include your contact information in the notes as well. Thank you again. Look forward to talking to you again soon.

Thank you for tuning in to the Western Water Market Podcast. Now, remember, water rights are complex, and nothing in these episodes are meant to be considered legal advice. To get the support that you need visit westernwatermarket.com to search and work with a water right professional in your state.

 
 
kristina ribellia