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Case 1:01-cv-00591-FMA

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BEFORE THE OFFICE OF ADMINISTRATIVE HEARINGS STATE OF OREGON for the WATER RESOURCES DEPARTMENT In the Matter of the Determination of the Relative Rights of the Waters of the Klamath River, a Tributary of the Pacific Ocean
Edward & Marilyn Livingston, Sylvia G. Bruce, WaterWatch of Oregon, Inc., Horsefly Irrigation District, Langell Valley Irrigation District, Rogue River Valley Irrigation District, Medford Irrigation District, Roger Nicholson, Agri Water, LLC, Richard Nicholson, Jim McAuliffe, McAuliffe Ranches, Maxine Kizer, Ambrose McAuliffe, Susan McAuliffe, Joe McAuliffe Company, Dwight and Helen Mebane,1 Kenneth L. Tuttle and Karen L. Tuttle dba Double K Ranch, Dave Wood, Kenneth Zamzow, Anita Nicholson2, Nicholson Investments, L.L.C., Wm. S. Nicholson, John B. Owens, Kenneth Owens, Wm. L. Brewer, Mary Jane Danforth, Jane M. Barnes, Franklin Lockwood Barnes, Jr., Jacob D. Wood, Elmore E. Nicholson, Mary Ann Nicholson, Gerald H. Hawkins, Hawkins Cattle Co., Owens & Hawkins, Harlowe Ranch, Terry M. Bengard, Tom Bengard, Dwight T. Mebane, Helen Mebane, Walter Seput,3 James G. Wayne, Jr., Clifford Rabe, Tom Griffith, William Gallagher, Thomas William Mallams, River Springs Ranch, Pierre A. Kern Trust, William V. Hill, Lillian M. Hill, Carolyn Obenchain, Lon Brooks, William C. Knudtsen, Wayne Jacobs, Margaret Jacobs, Robert Bartell, Rodney Z. James, Hilda Francis for Francis Loving Trust, William J. Rust, Ethel J. Rust, James R. Goold for Tillie Goold Trust, Duane F. Martin, Peter M. Bourdet, Vincent Briggs, J.T. Ranch Co., Tom Bentley, Thomas Stephens, John Briggs, Wm. Bryant, Klamath Irrigation District, Klamath Drainage District, Tulelake Irrigation District, Klamath Basin

OREGON WATER RESOURCES DEPARTMENT'S CLOSING BRIEF ON REPLY

Lead Case No. 003 Consolidating Case Nos. 003, 118, 119, 120, 129, 137, 148, 149, and 150 Claim Nos. 142, 143, 144, 186, 194, 205, 211, 285, 286, 2874, 2885, 289, 290, 291, 292, 293, 294, 295, 296, 297, 298, 299, 312, 317, 321, 322, 323, and 324
Contests 0005, 0006, 0007, 0008, 0033, 0039, 0040, 0047, 0281, 0516, 0986, 1221, 1455, 1804, 2044, 2048, 2049, 20506, 2051, 2052, 2256, 2491, 2492, 2761, 2778, 2788, 2789, 28517, 2854, 28568, 2858, 2859, 2860, 2861, 2862, 2863, 2864, 2865, 2871, 2876, 2880, 2881, 2882, 28839, 313610, 313711, 313812,

A Change of Ownership form was filed on July 7, 2005, transferring the ownership of Joe McAuliffe Company to Dwight and Helen Mebane. 2 A Change of Ownership form was filed on July 7, 2005, transferring the ownership of Anita Nicholson to Nicholson Investments, L.L.C. 3 Walter Seput filed a Change of Ownership Form on April 18, 2005, transferring his interest to James G. Wayne, Jr. 4 Claim 287 was voluntarily withdrawn by Oregon Department of Fish and Wildlife on September 26, 2003. See NOTICE OF WITHDRAWAL OF CLAIM. 5 Claim 288 was voluntarily withdrawn by David P. Henzel on July 1, 2003. See NOTICE OF WITHDRAWAL OF CLAIM. 6 Klamath Hills District Improvement Company voluntarily withdrew from Contests 2048, 2049, and 2050 on December 16, 2003. See WITHDRAWAL OF CLAIMS BY KLAMATH HILLS DISTRICT IMPROVEMENT COMPANY. 7 WaterWatch of Oregon, Inc. voluntarily withdrew from Contest 2851 on February 19, 2003. See WATERWATCH'S VOLUNTARY WITHDRAWAL OF CONTEST 2851. 8 By an Order dated May 20, 2003, WaterWatch of Oregon, Inc. was dismissed as a party contestant from all proceedings in the Klamath Basin Adjudication. See ORDER DISMISSING WATERWATCH OF OREGON, INC.'S CONTEST NOS 2820 ET AL. 9 Klamath Project Water Users' Renewed Motion to Strike Contest Nos. 2858, 2859-2865, 2871, 2876, and 28802883, and Dismiss WaterWatch as a Party was granted on 4/03/03. See ORDER ON RENEWED MOTION TO STRIKE CONTESTS AND DISMISS WATERWATCH AS A PARTY AND MOTION TO RECONSIDER. Page 1 OREGON WATER RESOURCES DEPARTMENT'S CLOSING BRIEF ON REPLY GENN2442

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Langell Valley Irrigation District and Horsefly Irrigation District voluntarily withdrew from Contest 3136 on April 22, 2005. See VOLUNTARY WITHDRAWAL OF CONTEST BY LANGELL VALLEY IRRIGATION DISTRICT AND HORSEFLY IRRIGATION DISTRICT. 11 Langell Valley Irrigation District and Horsefly Irrigation District voluntarily withdrew from Contest 3137 on August 21, 2002. See VOLUNTARY WITHDRAWAL OF CONTEST BY LANGELL VALLEY IRRIGATION DISTRICT AND HORSEFLY IRRIGATION DISTRICT. 12 Langell Valley Irrigation District and Horsefly Irrigation District voluntarily withdrew from Contest 3138 on March 21, 2003. See VOLUNTARY WITHDRAWAL OF CONTEST BY LANGELL VALLEY IRRIGATION DISTRICT AND HORSEFLY IRRIGATION DISTRICT. 13 Medford Irrigation District and Rogue River Valley Irrigation District voluntarily withdrew from Contest 3176 on December 5, 2002. See VOLUNTARY WITHDRAWAL OF CONTEST BY MEDFORD AND ROGUE RIVER VALLEY IRRIGATION DISTRICTS. 14 Horsefly Irrigation District and Langell Valley Irrigation District voluntarily withdrew, without prejudice, from Contests 3184 and 3197 on February 25, 2003. See VOLUNTARY WITHDRAWAL OF CONTESTS 3197 AND 3215 [sic] BY HORSEFLY AND LANGELL VALLEY IRRIGATION DISTRICTS. 15 Medford Irrigation District and Rogue River Valley Irrigation District voluntarily withdrew, without prejudice, from Contest 3191 on May 1, 2003. See VOLUNTARY WITHDRAWAL OF CONTEST BY MEDFORD AND ROGUE RIVER VALLEY IRRIGATION DISTRICTS. 16 Horsefly Irrigation District and Langell Valley Irrigation District voluntarily withdrew, without prejudice, from Contest 3208 on February 25, 2003. See VOLUNTARY WITHDRAWAL OF CONTEST 3208 BY HORSEFLY AND LANGELL VALLEY IRRIGATION DISTRICTS. 17 Horsefly Irrigation District and Langell Valley Irrigation District voluntarily withdrew, without prejudice, from Contest 3214 on February 25, 2003. See VOLUNTARY WITHDRAWAL OF CONTEST 3214 BY HORSEFLY AND LANGELL VALLEY IRRIGATION DISTRICTS. 18 Medford Irrigation District and Rogue River Valley Irrigation District voluntarily withdrew, without prejudice, from Contests 3184, 3197, 3208, 3212, 3213, 3214, 3215, 3216, 3217, 3218, 3219, 3220, 3221, 3222, 3227, 3232, 3237, 3238, 3239, and 3240 on September 30, 2002. See VOLUNTARY WITHDRAWAL OF CONTEST BY MEDFORD AND ROGUE RIVER VALLEY IRRIGATION DISTRICTS. 19 Dave Wood voluntarily withdrew, without prejudice, from Contests 3282-3288 and 3301 (Claims 293-299 and 312) on October 26, 2004. See VOLUNTARY WITHDRAWAL OF CONTEST BY DAVE WOOD. 20 Dave Wood voluntarily withdrew, without prejudice, from Contests 3310-3313 (Claims 321-324) on October 26, 2004. See VOLUNTARY WITHDRAWAL OF CONTEST BY DAVE WOOD. 21 Klamath Irrigation District; Klamath Drainage District; Tulelake Irrigation District; Klamath Basin Improvement District; Ady District Improvement Company; Enterprise Irrigation District; Malin Irrigation District; Midland District Improvement Co.; Pine Grove Irrigation District; Pioneer District Improvement Company; Poe Valley Improvement District; Shasta View Irrigation District; Sunnyside Irrigation District; Don Johnston & Son; Bradley S. Luscombe, Randy Walthall; Inter-County Title Company; Winema Hunting Lodge, Inc.; Van Brimmer Ditch Company; Plevna District Improvement Company; and Collins Products, LLC voluntarily withdrew from Contests 3408, 3417, 3424, 3428 and 3629 on April 7, 2004. See NOTICE OF WITHDRAWAL OF CONTEST NOS. 3408, 3417, 3424, 3428 AND 3629. 22 Klamath Hills District Improvement Company voluntarily withdrew, without prejudice, from Contests 2048, 2050, 2051, 3400, 3407, 3408, 3417, 3424, 3425, 3426, 3427, 3428, 3429, 3624, 3625, 3626, 3627, 3628, 3629, and 3630 on January 16, 2004. See VOLUNTARY WITHDRAWAL OF CONTEST BY KLAMATH HILLS DISTRICT IMPROVEMENT COMPANY. 23 Don Vincent voluntarily withdrew from Contests 2048, 2049, 2050, 2051, 3400, 3407, 3408, 3417, 3424, 3425, 3426, 3427, 3428, 3429, 3624, 3625, 3626, 3627, 3628, 3629, 3630, 3635, and 3640 on November 28, 2000. See NOTICE OF WITHDRAWAL OF CLAIMANTS. Berlva Pritchard voluntarily withdrew from Contests 3400, 3407, 3408, 3412, 3417, 3424, 3425, 3426, 3427, 3428, 3429, 3624, 3625, 3626, 3627, 3628, 3629, 3630, 3635, and 3640 on June 24, 2002. See NOTICE OF WITHDRAWAL OF CLAIMANT. 24 The Klamath Tribes withdrew from Contests 4218, 4219, 4220, 4221, 4222, 4223, 4224, 4225, and 4230 on December 3, 2002. See CONTEST DISMISSAL AGREEMENT AND STIPULATION BETWEEN KLAMATH PROJECT WATER USERS, THE KLAMATH TRIBES, AND THE UNITED STATES; [Proposed] Order of the Hearing Officer in Case 003. 25 Contest Nos. 3282, 3283, 3284, 3285, 3286, 3287, 3288, 3301, 3306 3310, 3311, 3312, 3313 held by William J. and Ethel Rust are transferred to David M. Cowan. See CHANGE OF OWNERSHIP form dated February 11, 2005. Page 2 OREGON WATER RESOURCES DEPARTMENT'S CLOSING BRIEF ON REPLY GENN2442

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Improvement District, Ady District Improvement Company, Enterprise Irrigation District, Klamath Hills District Improvement Co., Malin Irrigation District, Midland District Improvement District, Pine Grove Irrigation District, Pioneer District Improvement Company, Poe Valley Improvement District, Shasta View Irrigation District, Sunnyside Irrigation District, Don Johnston & Son, Thomas J. Shaw/Modoc Lumber Co., Bradley S. Luscombe, Randy Walthal and Inter-County Title Co., Winema Hunting Lodge, Inc., Van Brimmer Ditch Co., Plevna District Improvement Company, Travis Huntly/Collins Products, LLC, The Klamath Tribes, Leland Woods Trust, Gary Griffith, Marjorie Divine, Victor Divine, David Griffith, Nora Griffith, John V. Lilly, Edna B. Lilly, Earl Martin Kerns, Shirley F. Kerns, Phyllis Vincent, Don Buffington, Ralph Sterns, Rich Flink/Reams Golf and Country Club, Inc.; Leonard Baio; Gary Strong, David M. Cowan, Contestants, v. Marta C. Carpenter; Flowers Bros. Inc.; Robert Flowers; Klamath Sprig and Honker Club, Inc.; Martin Scull; Karen Tucker; Sandral Tucker, Claimants, And United States of America, Bureau of Reclamation; Geary Bros Caledonia Ranch, a Co-Tenancy; Jeld-Wen, Inc. (Running Y Ranch), Claimants/ Contestants.

INTRODUCTION Pursuant to the April 29, 2004 POST HEARING ORDER and the April 6, 2005 ORDER ON MOTION
TO MODIFY BRIEFING SCHEDULE,

the Oregon Water Resources Department ("OWRD") hereby provides its

Closing Brief on Reply. OWRD provides the following brief concerning only certain aspects of this case. OWRD does not respond to each point made in every brief filed in this matter. OWRD's lack of comment

Contest Nos. 3282 to 3288, 3301, 3306, 3310-3313 held by Roger Nicholson Cattle Company are transferred to Agri Water, LLC. See CHANGE OF OWNERSHIP form dated February 2, 2005. Contest Nos. 3282 to 3288, 3301, 3306, 3310-3313 held by Lloyd Nicholson Trust are transferred to Roger Nicholson and Richard Nicholson. See CHANGE OF OWNERSHIP form dated February 2, 2005. Contest Nos. 3282 to 3288, 3301, 3306, 3310-3313 held by Dorothy Nicholson Trust are transferred to Roger Nicholson and Richard Nicholson. See CHANGE OF OWNERSHIP form dated February 2, 2005. Page 3 OREGON WATER RESOURCES DEPARTMENT'S CLOSING BRIEF ON REPLY GENN2442

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on any particular issue is not and should not be construed as support for or opposition to any position(s) on any such issue(s). OWRD files this response to comment on several issues raised in Claimants Klamath Project Water Users' Opening Brief on the Merits ("KPWU Brief"), Claimants Klamath Project Water Users' Opening Brief on the Merits for Claim 321-1 ("KPWU Claim 321-1 Brief"), Contestants Klamath Project Water Users' Response Brief ("KPWU Response"), Van Brimmer Ditch Company's Opening Brief on the Merits ("Van Brimmer Brief"), the United States' Closing Brief as Claimant on behalf of the Bureau of Reclamation and the U.S. Fish and Wildlife Service ("United States' Brief"), the United States' Response Brief as Contestant on behalf of the Bureau of Reclamation and the U.S. Fish and Wildlife Service ("United States' Response"), and the Klamath Tribes' Response to the Opening Briefs of the United States and the Klamath Project Water Users ("Klamath Tribes' Response"). This brief provides a discussion of the elements of a pre-1909 claim. In this context, OWRD then discusses two matters. First, this brief provides a discussion of the United States' and the Klamath Project Water Users' ("KPWU") claimed inchoate rights, concluding that such inchoate rights should not be adjudicated in this proceeding. Second, this brief provides a discussion of the legal principles and other considerations that bear on the question of who is the "owner" or "proper holder" of the rights to the use and storage of water within the Klamath Project. DISCUSSION I. State Ownership of Water It is important that the Administrative Law Judge ("ALJ") bear in mind exactly what is being determined in this case: whether claimed rights to the use of water should be approved and, if so, in whose name(s) such rights should be adjudicated. The claims in this case, made by the United States and the Klamath

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Project Water Users, are for the right to the use of water initiated before February 24, 1909, the date that Oregon's Water Rights Act was enacted. ORS 537.010. As stated, the rights being adjudicated in this proceeding are use rights. The corpus of the water--or the water itself--"belongs to the public" and is held in trust by the state. California Oregon Power Co. v. Beaver Portland Cement Co., 295 US 142 (1935) (nonnavigable waters); Shively v. Bowlby, 152 US 1 (1894) (navigable water held by the United States "in trust for the future States"; title vests in the several States, when organized and admitted to the Union"); Jones v. Warmsprings Irr. Dist., 162 Or 186, 196 (1939) (water in naturally occurring watercourse is "nobody's property" and "belongs to the public"). A water right is a right to the use of the water--a usufructary right. In re Hood River, 114 Or 112, 195 (1924) ("No one has any property in the water itself but a simple usufruct."); In re North Powder River, 75 Or 83, 93 (1915) ("it is not the water but the use of it for a particular purpose that is the limit of the right"). See generally 49 Or Ops Atty Gen 284, 308-09. KPWU agrees with these principles. KPWU Brief at 212, n. 61.

II.

General Principles Governing Claims for Appropriative Uses Made or Initiated Before February 24, 1909 In this particular case, the United States and the Klamath Project Water Users have made claims

for the use of water within the Klamath Project.27 All claimants agree that state law governs the question of whether a water right exists, and what the parameters of that right are. See United States' Brief at 68 ("The federal Reclamation Act [32 Stat 390 Ch. 1093, 8, codified at 43 USC 372, 383] directs the Secretary of Interior to obtain water rights for the Reclamation projects pursuant to state law.") and 111-113 (discussing

27

The claims of the United States and the Klamath Project Water Users are similar in a number of--but not all--respects. See generally Affidavit and Testimony of Donald E. Kienlen (comparing the US and KPWU Claims). For example, the United States and the Klamath Project Water Users make claims for the right to use water they each believe is necessary to irrigate the lands identified in their claims; in large part, such lands are the same. As pertinent to the discussion herein, the main differences between the claims filed by these entities involve: the date of claimed initiation of the right (priority date), and the nature and extent of claimed inchoate water rights. Page 5 OREGON WATER RESOURCES DEPARTMENT'S CLOSING BRIEF ON REPLY GENN2442

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elements of a pre-1909 water right under state law); See KPWU Brief at 122-124 (discussing elements of a pre-1909 water right under state law). Under state law, to establish a right to the use of water initiated prior to February 24, 1909 (a "pre-1909 water right"): [a]s a general rule ... three elements must exist: (1) an intent to apply it to a beneficial use, existing at the time or contemplated in the future; (2) a diversion from the natural channel by means of a ditch, canal or other structure; and (3) an application of it within a reasonable time to some useful industry.... In re Water Rights of Silvies River, 115 Or 27, 64-65 (1925); see also Low v. Rizor, 25 Or 551, 557 (1894). This articulation of the elements of a pre-1909 water right parallels ORS 539.010(4), which provides: The right of any person to take and use water shall not be impaired or affected by any provisions of the Water Rights Act ... where appropriations were initiated prior to February 24, 1909, and such appropriators, their heirs, successors or assigns did, in good faith and in compliance with the laws then existing, commence the construction of works for the application of the water so appropriated to a beneficial use, and thereafter prosecuted such work diligently and continuously to completion. However, all such rights shall be adjudicated in the manner provided in this chapter. Id. Thus, this statute articulates a three-part test applicable to a pre-1909 water right: (1) good faith commencement prior to February 24, 1909; (2) of construction of works to apply water to a beneficial use; and (3) prosecuted with due diligence. These same basic standards have been applied to every pre-1909 claim made in the Klamath Adjudication,28 and should be applied in this case as well.29

See, e.g., Proposed Order, Hearing Officer Panel Case No. 014, Claim 167, dated July 19, 2002, at 5; Proposed Order, Hearing Officer Panel Case Nos. 017/018, Claims 213/214, dated October 16, 2002, at 6-7; Proposed Order, Hearing Officer Panel Case No. 019, Claim 218, dated December 31, 2002, at 4; Proposed Order, Office of Administrative Hearings Case Nos. 113, 114, 115, Claims 134, 135, 136, dated July 30, 2003, at 5-6; Proposed Order, Office of Administrative Hearings Case No. 116, Claim 137, dated September 11, 2003, at 5; Proposed Order, Office of Administrative Hearings Case No. 117, Claim 141, dated July 9, 2003, at 7-8; Proposed Order, Office of Administrative Hearings Case No. 123, Claim 173, dated January 27, 2004, at 3; Proposed Order, Office of Administrative Hearings Case No. 125, Claim 178, dated December 8, 2003, at 7-8; Proposed Order, Office of Administrative Hearings Case No. 134, Claim 201, dated January 9, 2004, at 7.

28

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Although OWRD believes that there is little controversy concerning the basic elements of a pre1909 water right, the precise meaning and scope of these elements has been--and continues to be--the source of some controversy between participants in the Klamath Adjudication. As pertinent to this case, KPWU maintains that a portion of their right (and an associated 1868 priority date) can be established by early uses of land following natural overflow or flooding by the Klamath River. The United States has objected to this assertion. United States' Response at 28-31. The United States and the Klamath Project Water Users have also made claims for inchoate or undeveloped water rights. The exact nature and extent of these claims differ. However, the same legal principles govern whether such claims should be approved. OWRD maintains that the inchoate claims must fail because there has not been any showing of any intent to develop these lands by applying water to them for a beneficial use, or these rights were not developed within a reasonable time, or both. In order to provide the necessary framework in which to consider these issues, OWRD next provides a discussion of each of the parameters of each of the elements. A. Intent 1. Legal Principles

The Silvies River court elaborated upon the element of intent: it is the present bona fide design or intention of applying it to some immediate beneficial use, or the appropriation must be made in the present bona fide contemplation of a future application of it to such a purposes; it should be shown in all its fullness by the facts and circumstances to have been present in the mind of the appropriator at the time the appropriation was made or claimed.

The Klamath Tribes argue that the United States' compliance with Section 2 of Oregon's Act of February 22, 1905, Or. Gen Laws, 1905, Ch. 228 ("Act of 1905") vested the United States with title to all the then unappropriated water specified in its notice. Klamath Tribes' Response at 13-14, 18. The Tribes argue further that, as a result of the procedure provided for in Section 2, compliance with Oregon common law principles for appropriation of pre-1909 water rights was unnecessary. Id. For the reasons outlined in Part III.D.1 of this Reply (pp. 37-39), the Act of 1905 did not disturb the requirement of application to beneficial use within a reasonable time.

29

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115 Or 27, 64-65. See also Hindman v. Rizor, 21 Or 112, 120 (1891) ("While (the appropriators) could rightfully appropriate water not only for the present but also for the future needs of the land, the water so appropriated must have been utilized within a reasonable time...."). Thus, while the "use" or application may be present or future, the "intent" or "contemplation" must in either case be contemporaneous with the initial appropriation. The original intention must include that the water will be used on certain lands "then definitely had in mind." In re Water Rights of Deschutes River and Tributaries, 134 Or 623, 655 (1930); see also Nevada Ditch Co. v. Bennett, 30 Or 59, 89 (1896); In re Water Rights of Hood River, 114 Or 112, 137-38 (1924). Although it is necessary that the original appropriator had such intent "in mind" at the time of the original appropriation, it is also essential that the intent continue in the original or subsequent appropriators until actual application to beneficial use. Nevada Ditch Co. at 89 (intent may be declared through another); Hood River at 137-38 (it must be "reasonably anticipated that when the diversion is ultimately completed . . . [the] land will then, or with reasonable diligence thereafter [be] ready to receive it") (Emphasis added).

2.

Factual Development: No Witness Testifying on Behalf of the United States or the KPWU Could Make a Showing of a Continued Intent to Develop Claimed Inchoate Rights a. The United States' Inchoate Rights Claims

The United States filed claims for inchoate water rights. As the United States' witness, Cecil Lesley, testified: The tables in attachment to item 7 of claims 293 and 294 list both irrigated and inchoate lands. The inchoate lands total 15,659 acres out of the 218,654.3 acres claimed in these claims. The inchoate lands in Reclamation's claims are lands that are authorized to be served under an existing contract between Reclamation and another party, but which are not currently served. See OWRD Exhibit 1, p. 01262-01264. United States, Bureau of Reclamation Written Direct Testimony and Exhibits of Cecil Lesley at 10. At the cross-examination hearing, Mr. Lesley testified that the inchoate lands portion of the Bureau of
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Reclamation's claim as lands that "have the potential to be irrigable lands" and that water is being claimed "should their status change in the future." April 7, 2004, 4:32:12 4:32:55. Mr. Lesley was then asked if he had any knowledge of any plans to bring any of the 15,659 acres of land listed in the United States Claim as inchoate acreage, OWRD Exhibit 1, p. 01262 through 01264, under irrigation, Mr. Lesley said: The landscape in the Klamath Basin is constantly changing, and originally a large portion of the lands that were in farmsteads had farm houses and yards on them. Those are inchoate lands under the term as we use it, and that has constantly been changing in the basin, and farm homes are moving off the farmland and being developed as irrigation lands, so the inchoate lands have the potential to be irrigable at any a large portion of those lands have potential to be irrigable at any time. Mr. Lesley, however, was unable to testify as to any specific plans or anything else that would show or tend to show any indicia of intent to bring any of claimed 15,659 acre under irrigation: Q: But are you aware of any particular land owner, and I mean if you could give me an example, that would be great, of any particular land owner who has a piece of land that's covered by an inchoate claim here, and that land owner is planning on applying water to that land at any particular time ... at a specific time in the future? Are you aware of any plans like that? A: Not specifically at this time.

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April 7, 2004, 4:35:47 4:36:14.30 Moreover, Mr. Lesley's written testimony established that the lands claimed as inchoate acreage "are currently not irrigated" and that the lands were merely "within the scope of the Project." United States, Bureau of Reclamation Written Direct Testimony and Exhibits of Cecil Lesley at 70-71. In other words, the only witness testifying on behalf of the United States Bureau of Reclamation did not, and was not able to when given the chance, offer any testimony showing or tending to show any actual intent to irrigate the claimed inchoate acreage. In the absence of being able to make some showing of the intent element necessary to prove a pre-1909 claim, the United States' claim to such a right must fail. ORS 539.110 ("[t]he burden of establishing the claim shall be upon the claimant whose claim is contested.")

b.

The KPWU Inchoate Rights Claims

The KPWU offered the testimony of Donald E. Kienlen, which included a "summary of the claims filed by the Klamath Project Water Users (KPWU) and a comparison of the KPWU claims with other claims included in Consolidated Case No. 003 which assert the same or substantially the same rights." Affidavit and Testimony of Donald E. Kienlen at 3. The basis of Mr. Keinlen's factual knowledge was that he has been actively involved in the Klamath Adjudication since 1996, and has therefore become very

30

The official record of the cross-examination in this matter is the digital audio recording made by the Office of Administrative Hearings. OWRD uses the following convention for citation to this digital recording: Date, Hour:Minute:Second Hour:Minute:Second, with the "Hour:Minute:Second" designations being those that appear when listening to the digital recording on the CD ROMs (provided by the Office of Administrative Hearings) using Olympus DSS Player-Lite. Page 10 OREGON WATER RESOURCES DEPARTMENT'S CLOSING BRIEF ON REPLY GENN2442

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familiar with the Klamath Basin, as well as the historical development of the Klamath Project. April 20, 2004, 1:59:19 - 1:59:39. As contrasted to the United States' inchoate rights claims for 15,659 acres of land that Mr. Lesley described as being potentially irrigable, the KPWU claimed 2,819.4 acres of land. Affidavit and Testimony of Marc E. Van Camp at 16-17; See generally Cross-Examination of Donald E. Kienlen, April 20, 2004, 1:44:09 1:51:34. Mr. Kienlein testified as to the nature of the KPWU claims asserting inchoate rights: Q: Okay, do you have any do you have an understanding that the inchoate acreage claims by the KPWU claimants are, in fact, what have been characterized by some witnesses as in-fill acres, acres that might come under irrigation in the future if roads are removed or ditches are filled in or fence lines are removed and that land becomes irrigated? Does that sound correct? A: I'm certain that is correct. There would be other areas that are now used for other purposes that might come under irrigation. For example maybe a barn that exists today is removed, and that land becomes subject to irrigation.

April 20, 2004, 1:48:46 1:49:32. Mr. Kienlen could not identify any documents, plans or make any specific statements that showed or tended to show that any particular water user has any intent to bring any of the acreage claimed under irrigation: Q: Now, as a result of all the conversations you have had and knowledge that you have gained, are you aware of any particular plan to put any of this inchoate acreage under irrigation? A: No, no detailed plans. Q: No detailed plans? So you have never seen a written plan, anything like that? A. No. Q: And would I be correct in assuming that you cannot point to any documents in this case that would show or tend to show such plans for putting inchoate lands under irrigation? A: I have never seen any. Q: Okay. So to your knowledge, there are no such plans?
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A: To my personal knowledge. I'm there may be such plans, but I do not personally know about them. Q: But we've established that you've got a pretty broad base of personal knowledge about the Klamath Project, right? A: Well, but Mr. Wirth Q: Maybe "pretty broad" is a vague term. A: We are talking about we were earlier saying, well if this fence line was removed, or the road was removed, or the ditch became piped. Q: Sure. A: Those are the kinds of things that I don't think there is detailed plans. Those occur, and the landowner at that time is then able to irrigate that land that he can't irrigate today. Q: Okay. But you are not aware of any present intent to do that by and person? I mean if you can name one, I'd be happy to hear about it. A: I don't have that knowledge, though. April 20, 2004, 2:02:04 2:04:17. Moreover, Mr. Kienlen testified that neither he nor MBK Engineers, with whom he worked in preparing the KPWU claims, prepared the inchoate claims made by the Klamath Project Water Users: Q: Okay. Well, can you describe for me generally the nature of the inchoate claims made by the Klamath Project Water Users group? A: Again, MBK did not prepare those. We were given those figures by the various districts or landowners, and we used that data like we use the data on total acreage. We were not responsible for preparing that. April 20, 2004, 1:48:09 1:48:45. Based on Mr. Kienlen's testimony regarding how the inchoate acreage claims were determined several KPWU witnesses should have had knowledge about these inchoate claims, including how the number of acres claimed was arrived at, and what intent there was to actually develop the claimed inchoate acreage. However, when cross-examined on these matters, it was apparent that no KPWU witness could
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offer any testimony that showed or tended to show any intent to actually irrigate any of the claimed inchoate acreage.31 Ady District Improvement Company (ADIC) made a claim for two acres of inchoate lands. Affidavit and Testimony of Marc E. Van Camp at 16. Robert Flowers, testifying on behalf of ADIC, was unable to state exactly where these two acres were located, except to say that they are "sparsed out with different spots within the district." April 12, 2004, 1:52:09 1:52:14. He could not identify the owner(s) of the land(s) where any of these two acre were located, notwithstanding that he testified that he knew all the landowners within ADIC as "they are all basically family members." April 12, 2004, 1:52:45-1:52:46. Mr. Flowers then volunteered that ADIC came up with the two acre number by "guessing."

The only possible exception is Claimant Bradley Luscombe, who claimed 20 inchoate acres of lands. At hearing he testified that he had brought 10 acres of that under irrigation. April 23, 2004, 2:43:38 2:44:34. With respect to the remaining 10 acres, Mr. Luscombe could only testify that five acres not yet irrigated might possibly come under irrigation in the future. Q: Thank you. Now, just to orient ourselves here again, we are talking about the 20 acres of your land that are claimed as inchoate in the claim. You told us that you've irrigated 10 of them to date. Are you still working on clearing the lands, the remainder, the 10 acres that have not yet been irrigated? A: Not most of it, no. Q: Okay. Do you intend to bring that land under irrigation at any point in the future? A: Some of it possibly. Q: Some of it possibly? Could you tell me, do you have any idea how much of that remaining 10 acres A: My house is on part of it, and part of it's a steep hill that you can't do anything with. I would say the 10 acres, possibly 15 acres is all it ever would be. The Administrative Law Judge: Out of the 20? A: Yes. Q: Out of the 20. So you are either completely there, or there might be just a few more acres that you haven't got to yet? A: That's right. Although Mr. Luscombe might be said to have some intent to develop a few more acres, he does not have any specific plan to do so, and it is only a possibility that this will ever occur. Page 13 OREGON WATER RESOURCES DEPARTMENT'S CLOSING BRIEF ON REPLY GENN2442

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April 12, 2004, 1:57:12 1:57:19. When asked what the basis for that guess was, he said "It's so hard. It's almost impossible to measure them accurately.... It's almost impossibility [sic] to get an accurate measurement of what we are talking about." April 12, 2004, 1:57:28 - 1:57:54. Thus, despite personal knowledge, intimate familiarity with all of the ADIC water users and their lands, Mr. Flowers could not identify the location of the claimed inchoate rights, could not identify any plans to bring these lands under irrigation, and was only "guessing" about the number of inchoate acres. William D. Kennedy, President of the Board of Directors of the Poe Valley Improvement District (PVID), and PVID board member since 1995, April 14, 2004, 4:12:30 4:13:00, displayed a striking lack of knowledge concerning any plans or intent to irrigate any of the claimed 112 inchoate acres located within PVID. Affidavit and Testimony of Marc E. Van Camp at 16 (112 inchoate acres claimed by PVID). Q: Are you aware of any specific plan to irrigate any of the 112 acres that you've described as inchoate acreage? A: No (April 14, 2004, 6:17:31 6:17:47). **** Q: And does the district or do any individual land owners, to your knowledge, have any plans to bury that drain or to put a pipe in and put it underground or something of that nature? A: Not to my knowledge.... (April 14, 2004, 6:18:40 6:18:48) **** Q: Are you aware of any fence lines that are slated for removal? A: No. Q: No specific plans? How about roadways? Also mentioned in your testimony, are you aware that any roads that are currently within PVID's boundaries are going to be removed at any time in the future? A: I don't believe I know of any plans. April 14, 2004, 6:19:30 6:19:49. Mr. Kennedy asserted that the 112-acre number was arrived at by marking up a map, and having HKM Engineers calculate the number from that. April 14, 2004, 6:21:49
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6:22:05. This statement was contradicted by Donald Kienlen who worked with HKM Engineering, when he testified that "we were given those figures by the various districts or landowners ... we were not responsible for preparing that." April 20, 2004, 1:48:24 1:48:45. This, along with the testimony of Mr. Flowers, above, who testified that ADIC's inchoate acreage claim was a mere guess, raises substantial questions as to how the amount of inchoate acres in the KPWU claims were arrived at in the first place. KPWU witness Miles William Moore has been the president of the Board of Directors of Sunnyside Irrigation District (Sunnyside) for 15 years. April 14, 2004, 6:53:26 6:53:34. He testified that Sunnyside is making a claim for eight acres of inchoate lands. April 14, 2004, 7:28:35 7:29:17. See also Affidavit and Testimony of Marc E. Van Camp at 16 (eight inchoate acres claimed by Sunnyside). Mr. Moore testified that he personally knows each of the six landowners within Sunnyside and is personally familiar with their lands. April 14, 2004, 7:30:31 7:30:39. He could not offer any testimony that showed, or tended to show, any intent to bring the claimed inchoate acreage within Sunnyside under irrigation: Q: Are you aware of any specific plan to bring any of these eight acres, eight inchoate acres, under irrigation? A: Not at this time, no. April 14, 2004, 7:30:18 7:30:31. He also testified that he is not aware of any plans to cover drainage ditches, cover irrigation canals, remove fence lines, or remove roadways to bring such areas under irrigation. April 14, 2004 7:30:43 7:31:25. Tule Lake Irrigation District (TID) is claiming about 1300 acres of inchoate lands. See Affidavit and Testimony of Marc E. Van Camp at 16. Earl Danosky has been the manager of Tule Lake Irrigation District (TID) since 1979. April 20, 2004, 6:17:00 6:17:28. Before becoming the manager of TID, he was a ditch rider for about three years. April 20, 2004, 6:17:29 6:17:37. Once establishing these matters, Mr. Danosky testified: Q: So you have a very good idea of the lay of the land out there, correct? A: I do believe so.
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Q: Okay, good. Now, based on this knowledge, based on the interactions you have had with people in the field, based on your tenure as a manager, my question for you is, what can you tell me about these lands that would come under irrigation? Are you aware of any specific plans for this to occur in the future? A: I cannot name a plan that could occur.... April 20, 2004, 6:16:09 6:16:40. KPWU witness Ruth Carland is secretary/treasurer of Midland District Improvement Company (MDIC), which was formed in 1951. She has been familiar with the land within MDIC since 1948. April 21, 2004, 2:27:56 2:28:36. MDIC has made a claim for five acres of inchoate lands--which is merely an "estimate" of the land that might come under irrigation in the future. April 21, 2004, 2:28:36 2:29:15; See also Affidavit and Testimony of Marc E. Van Camp at 16. She knows all four landowners within MDIC. April 21, 2004, 2:29:15 2:29:47. She was unable to testify as to any intent by any landowner within MDIC to bring the five inchoate acres under irrigation: Q: Okay. Let me ask it this way. Do you know of any specific plans by any of the four land owners you've told us about to do the sorts of work or improvement to bring these five acres under irrigation? A: No. April 21, 2004, 2:29:50 2:30:10. Lyle Logan, president of Pioneer District Improvement Company (PDIC), testified (in written direct testimony) that PDIC is claiming 18.4 acres of inchoate lands. Affidavit and Direct Testimony of Lyle Logan at 5. At the cross-examination hearing, Mr. Logan was very confused about this aspect of the claim, and the ALJ had to explain it to him: The Hearing Officer: Yeah, these acres, sir, are scattered around the district and are basically property that's out of irrigation because it's being used for driveways and home sites. Lyle Logan: Oh, I see. Okay. The Hearing Officer: At least that's what your affidavit says.
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April 25, 2004, 4:13:14 4:13:29. When questioned further about the inchoate acreage claim, it was clear that Mr. Logan could not provide any specifics that would demonstrate or tend to show any actual intent to bring the claimed inchoate lands under irrigation: Q: You had some discussion about the 18.4 acres claimed for future development. Do you remember that earlier? A: Yes, yes, I do. Q: And I just wanted to sort of ask you one or two wrap up questions on that. Do you have any additional information about that 18.4 acres? In other words, I could ask you a series of questions about what you know about it, who owns it, when you expect development to occur, things like that. Would you be able to give me any specifics on that? A: No, I would not. April 23, 2004, 4:47:05 4:47: 42. All of the KPWU's witnesses who testified about the inchoate acreage appeared to have significant personal knowledge concerning the claimed lands. In almost every case the witnesses were personally acquainted with the lands at issue in the claims. Several witnesses testified that they knew all of the landowners in their particular irrigation district personally (e.g., Robert Flowers, Miles William Moore). In a number of cases the witnesses had been acquainted with the lands in question for long periods of time--often stretching back several decades (e.g., Ruth Carland--over 55 years of familiarity with the claimed lands; Earl Danosky--over 25 years familiarity with the claimed lands; Miles William Moore--at least 15 years). Notwithstanding this significant bank of personal knowledge, no KPWU witness could offer any testimony showing or tending to show any actual intent to irrigate the claimed inchoate acreage. Indeed, in the ALJ had to explain to one witness (Lyle Logan) what the nature of the inchoate acreage claim was. Witnesses testified that the number of inchoate acres were either guesses (Robert Flowers) or mere

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estimates (Ruth Carland). Moreover, Donald Keinlen and William Kennedy offered inconsistent testimony concerning the method by which the number of inchoate acres was determined. Taken as a whole, the testimony offered by KPWU utterly fails to make any showing of the required intent element necessary to prove a pre-1909 claim. In fact, the testimony by KPWU witnesses shows that the land is not now, nor will it be within any reasonable period of time, "ready to receive" the claimed water. Hood River at 137-138. In the absence of being able to make some showing of intent, KPWU's claims for inchoate rights must fail. ORS 539.110 ("[t]he burden of establishing the claim shall be upon the claimant whose claim is contested.") B. Diversion 1. In General, a Diversion of Some Type is Required

As stated above, a "diversion from the natural channel by means of a ditch, canal or other structure," Silvies River, 115 Or at 64-65 (1925), or the "construction of works," ORS 539.010(4), for the diversion and delivery of water to a beneficial use is generally a required element of a pre-1909 water right. However, the Silvies River court also elaborated upon the "diversion" element, adding the caveat that no initial diversion is required where the appropriator's land is "naturally irrigated" and the appropriator "in some substantial way indicates that it is his intention to reap the benefit of the fruit of the irrigation." Id. at 66. In such case, the priority date is "deemed to be when the proprietor of the land accepts the gift made by nature..." Id. Because this exception to the diversion element has been the matter of some controversy and misunderstanding--particularly by the United States--throughout this Adjudication, OWRD provides a detailed analysis on the point.32

32

Claim 321-1 is "based on natural irrigation and use of the natural irrigated area for grazing and haying, followed by construction of works to utilize waters previously providing natural irrigation." Affidavit and Testimony of Donald E. Kienlen at 5. Thus, in order to properly evaluate the claimed priority date and quantity of water associated with this claim, it is necessary to apply the proper principles, as outlined below. Page 18 OREGON WATER RESOURCES DEPARTMENT'S CLOSING BRIEF ON REPLY GENN2442

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2.

When no Diversion or Other Construction of Irrigation Works is Necessary, one may Establish a Water Right Based on Natural Overflow; Although what is Established is a Water Right, the Natural Overflow Water User Obtains only a Privilege to the Overflow Method of Diversion

The Silvies River court stated that establishment of a diversion is generally a required element of a pre-1909 water right, it did note a significant exception to this rule. As it explained, the requirement of diversion of the water has a special application or exception to much of the land in the Harney Valley. It involves the matter of the natural irrigation of the land. Nature has been very generous to the Harney Valley in this respect. With practically no artificial works for irrigation, thousands of acres are naturally watered.... It would seem to be fair and equitable, if not absolutely essential, that such date be deemed to be when the proprietor of the land accepts the gift made by nature, and garners the produce of the irrigation by harvesting or utilizing the crops grown on the land, or making preparation for so doing, or in some substantial way indicated that it is his intention to reap the benefit of the fruit of the irrigation. When no "ditch, canal, or other structure" is necessary to divert the water from its natural channel, the law does not vainly require such works, prior to an appropriation. We do not intend to suggest that in most cases the building of some kind of an irrigation system is not requisite after the appropriation is made in order to effect an economical beneficial use of such water and prevent waste. This should be accomplished within a reasonable time as circumstances permit and necessities require.... Id. (Emphasis added). This principle was affirmed and clarified in Warner Valley Stock Co. v. Lynch, 215 Or 523 (1959), which specifically states that it is "consistent" with the statements of the Oregon Supreme Court in Silvies River, 115 Or 27 (1925), as well as In re Willow Creek, 74 Or 592 (1915), and Hough v. Porter, 51 Or 318 (1908). The Warner Valley Stock Co. case involved interpretation of the findings and order of determination as well as the 1929 decree for the waters of Warner Lakes and their tributaries. 215 Or at 532-33. Plaintiffs filed the suit after the Lake County Circuit Court directed the State Engineer to issue permits to Warner Valley Stock Company for the construction of two reservoirs in Warner Valley. Id. at 526. Plaintiffs, who had water rights based on natural overflow from Hart Lake under the 1929 decree, argued the permits would violate their vested water rights. Id. at 532. Based on the 1929 decree, the Supreme Court affirmed the circuit court's decision that the method of diversion by overflow was wasteful
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and, accordingly, held "the method of diversion by way of natural over-flow is a privilege only and cannot be insisted upon by the objectors if it interferes with the appropriation by others of the waters for a beneficial use."33 Id. at 537 (Emphasis added). It is important to note that the Warner Valley court, consistent with other court decisions, such as Hough v. Porter and Silvies River, specifically states only that the method of diversion by natural overflow cannot be insisted upon where it is wasteful. These decisions still allow an appropriator to establish a water right for use of that quantity of water obtained by beneficial use. In fact, the Warner Valley court went on to emphasize that the appellants had acquired vested water rights that they retained after the court's decision. Id. at 538. Similarly, in Masterson v. Pacific Livestock Company, the court found that prior to the adjudication, the defendants had only irrigated their lands by means of natural overflow. 144 Or 397, 401-2 (1933). The Masterson court found that, although the decree had not provided the quantity of water to be taken under the right, the natural irrigation equaled no more than five acres "in the regular way." 144 Or at 406-8. Thus, the case law indicates that appropriators may acquire pre-1909 water rights using natural overflow as the method of diversion. Based on an abhorrence of wasting water, Oregon courts have held that the natural overflow diversion method is only a privilege. This does not negate the right, but only limits the appropriator's ability to demand delivery of water by the natural overflow method.34 The purpose of the rule enunciated in Warner Valley Stock Co. is to prevent one water user from holding the entire resource hostage by insisting on a method of diversion that may be wasteful. As stated by the State Engineer in the 1929 water rights decree discussed in Warner Valley Stock Co., and approved by the Lake County Circuit Court:
In 1909, the Oregon Supreme Court reached a similar conclusion in Hough v. Porter, 51 Or 318, 420 (1909). The Hough court found that "wasteful methods so common with early settlers can...be deemed only a privilege permitted merely because it could be exercised without substantial injury to any one; and no right to such methods of use was acquired thereby." Id. (Emphasis added.)
33

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It is generally conceded that the present method of irrigation by natural overflow is an extremely wasteful one. The proposed diversion by pumps through artificial ditches would no doubt tend to conserve the water rather than require the use of a greater quantity. Furthermore, it would seem that the best interests of the public at large would be served if the water which is now permitted to lie idle in the lake merely for the purpose of providing a means of diversion for the relatively small quantity actually used, could be drawn from the land and applied to a beneficial use.... Id. (Emphasis added). Thus, under Oregon law, it has long been recognized that the purpose of the rule requiring development of artificial diversion works for irrigation is to ensure water is used as efficiently as possible, for the public good. Given the purpose of this rule, as enunciated in Warner Valley Stock Co., the language of Silvies River requiring development of such works within a "reasonable time" must be interpreted to require development of such works, as the practicalities and exigencies of the situation reasonably require. That is, where sufficient water is not present to satisfy the needs of all water users. Thus, the appropriator must employ some technologically reasonable means of appropriation and cannot insist upon a method of delivery involving allowing the system to actually overflow. The right extends only to the amount of water which would overflow if no water were removed by junior appropriators. Notwithstanding the United States' steadfast protestations to the contrary, the ALJs presiding over pre-1909 water right claims have repeatedly issued orders consistent with the above analysis. See, e.g., Order on Motion for Ruling on Legal Issues, Hearing Officer Panel Case Nos. 124, 126, 127, Claims 177, 182, 183, dated May 22, 2003, at 3; Order on Motion for Legal Rulings, Office of Administrative Hearings Case No. 128, Claim 185, dated August 20, 2003, at 3-5; Order on Motions for Summary Judgment, Motion to Strike and Motion for Stay, Office of Administrative Hearings Case No. 105, Claim 35, dated September 4, 2003, at 2; Proposed Order, Office of Administrative Hearings Case No. 134, Claim 201,

34

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dated January 9, 2004, at 7-8. OWRD believes that the rulings in the above cases on this particular point are correct and should be followed in this case, consistent with the discussion above. Whether KPWU's Claim 321-1 and evidence submitted in support thereof make a sufficient showing under the principles discussed above is a question of fact to be resolved based on the evidence. OWRD takes no position on these factual issues. C. Reasonable Time

The requirement of an "application of (the water) within a reasonable time to some useful industry," Silvies River, 115 Or 27 at 65, is synonymous with "reasonable diligence," which courts use synonymously with "due diligence." See, e.g., Teel Irrigation Dist. v. Water Resources Dept., 323 Or 663, 669 (1996) (noting a showing of "due" diligence under ORS 537.230, which requires "reasonable" diligence). The Silvies River court, for example, defined the "reasonable time" element in terms of "reasonable diligence," explaining that such determination must be fact-specific: The test, both in the construction of the necessary works and in the application of the water to a beneficial purpose, is reasonable diligence. There must be such assiduity of work of construction as will manifest to the world a bona fide intention to complete it within a reasonable time. The question is one of fact and must be determined from the surrounding circumstances. Silvies River, 115 Or 27 at 61 (citations omitted) (emphasis added). See also, In re Water Rights of Hood River, 114 Or 112, 131 (1924) ("That which is usual and ordinary with men engaged in like enterprises who desire to speedily effect their designs is required.").35

1.

No Oregon Case has Allowed Inchoate Rights to be Developed for a Period Approaching 100 Years

On several occasions, the Oregon Supreme Court has considered what constitutes a reasonable time given the particular circumstances of the case. Below, OWRD reviews several prominent cases, which lead to the conclusion that the reasonable time or diligence element requires application of water to a

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beneficial use much more quickly than the 100-year (or more, in the case of some claims) time period apparently identified by the United States and KPWU. One of the water rights adjudicated in In re Water Rights of Deschutes River and Tributaries, 134 Or 623, 641, 676 (1930), involved several notices of appropriation filed by the Pilot Butte Reclamation Company, predecessor in interest to the Central Oregon Irrigation District. The earliest notice of appropriation, filed in 1900, contemplated that about 140,000 acres would be reclaimed under the appropriation. However, over a period of 20 years, only approximately 48,000 acres of land were reclaimed, and the court determined that this was a reasonable time period for development under the circumstances of that case. Deschutes at 635, 655-656. Other land brought under irrigation in excess of the approximately 48,000 acres, were assigned a later priority date under a 1907 notice of appropriation. Id. at 635, 655-656. In Seaweard v. Pacific Livestock Co., 49 Or 157 at 160-61 (1907), the Court stated the general rule succinctly: What is a reasonable time in which to apply water originally intended to be used for some beneficial purpose depends upon the magnitude of the undertaking and the natural obstacles to be encountered in executing the design: Hindman v. Rizor, 21 Ore. 112 (27 P. 13); Nevada Ditch Co. v. Bennett, 30 Ore. 59, 85 (45 P. 472: 60 Am. St. Rep. 777).

The Court applied this rule to facts involving settlement of land by the Pacific Livestock's predecessors, Morgan and Hinkey, in 1886, with first irrigation in 1887. Between 1887 and 1899 Morgan and Hinkey "were constantly enlarging the area of their arable land." Seaweard at 161. The Pacific Livestock Company bought Morgan and Hinkey's land in 1899, and for a period of five years "made no attempt whatever to prepare any new land for cultivation, whereby a purpose to expand the appropriation might have been disclosed to persons who desired to make a subsequent use of the water." Id. Since no

35

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cause for the delay was given, and therefore "believing it to have been unreasonable," the Court did not allow the Pacific Livestock Company to expand its appropriation based on the early initiation of the right by Morgan and Hinkey. Id. at 161 citing Cole v. Logan, 24 Or 304. In In re Rights to Use of Silvies River, 115 Or 27 (1925), the predecessor to the Burns Flour Milling Co., Brown, posted a notice of appropriation in 1884. Id. at 58-59. Brown dug a ditch (mill race) and took water to a mill site within one to two years. However, local attempts to raise grain largely failed, and there was no grain to grind until about 1899, when the first successful crops were harvested. Id. at 5960. The milling machinery was installed in 1899. The Court held that this was diligence, under the circumstances, since it would have been futile to install the milling machinery when there was nothing to mill. During the intervening time period between 1884 and 1899, certain portions of lands claimed with an 1884 priority date were irrigated out of the mill race, and the Supreme Court allowed an 1884 priority date as to those lands. However, other lands not irrigated, and for which there was no showing of intent to irrigate, were not allowed an 1884 priority, and were instead assigned a 1901 priority, the date that they first came under irrigation. Id. at 39-40. Additionally, two other portions of the Silvies River case allow for development of inchoate rights for periods of 43 years each. In both cases, certain irrigators initiated their rights in 1887, the rights were not fully developed by the time of the Supreme Court's decision in 1925, and the Court allowed five years from entry of the Circuit Court's Decree on remand. See Silvies at 69-70 and 86-90. In Low v. Rizor, 25 Or 551, 557 (1894), where an irrigator failed to increase the area under irrigation for a period of 13 years, he "abandoned the right to increase the appropriation." In Smyth v. Neal, 31 Or 105 (1897), the plaintiff settled on the land in 1873, and, by 1888, had appropriated and applied water sufficient to raise 120 acres of wild grasses that were cut for hay and also irrigated 18 acres of grain and garden. In 1882 plaintiff recorded a notice of appropriation. Notwithstanding that plaintiff had installed a new dam and partially dug a new ditch, between 1882 and the
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institution of the litigation in 1895, plaintiff did not make any additional use of water. Plaintiff also expressly disclaimed any intent to increase his previous (1873) appropriation. Under these circumstances, the Court held that plaintiff's water right was limited to the lands and quantities that were used before 1882. Thus, plaintiff's statements and his failure to expand his irrigated land for a period of 13 years showed lack of reasonable diligence. Id. at 108-110. In In re Hood River, 114 Or 112 (1924), the Oregon Supreme Court held that the diligence period for a water right initiated in 1895 expired in 1915, a period of 20 years. Id at 147. The Court held that enlargements to the irrigation system in 1914 constituted a new appropriation. Id. The Court made this finding even though: Owing to the topography of the country being mountainous, the water had to be conducted from the bank of a mountain stream to a point 20 miles away, passing through and crossing over ravines and canyons, falling over a precipice at one place and many flumes, pipes and siphons were necessary. It was a stupendous task. Id. at 138 (Emphasis added). Thus, even where construction of the irrigation system was determined to be a "stupendous task," the Supreme Court set the diligence period at 20 years. In Wapinitia Irrigation Co. v. Water Users Corp. of Juniper Flat, 141 Or 504, 507-08 (1932), a decree was issued in 1923 allowing for development of certain inchoate rights, to be developed in five years, or pursuant to any extension(s) that the State Engineer may allow. Under the decree, the rights were assigned priority dates of 1904 (direct flow) and 1905 (storage), for a maximum of 12,000 acres. Id. at 507. Irrigation under these rights occurred first in 1917, covering between 1,000 and 2,000 acres. The project was not complete by 1928 when the five-year period expired, and the State Engineer refused to grant any extension. The Court found that considering the circumstances--which included a drought (id. at 519), the great depression and associated difficulties in financing further development of the project at (id. at 512-14), the fact that the irrigation project was a "mammoth undertaking" (id. at 513), and the existence of delivery contracts (id. at 516-17), the State Engineer should have granted the extension under the statutory provisions
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of 517 Or L ( 47-403, Or Code 1930). Significantly, however, the Court allowed only two additional years for completion of the irrigation system and actual reclamation of land (up to 8,000 acres) on or before June 1, 1938. Id. at 522-23. Thus, the court allowed a maximum of 34 years (1905 to 1938) to complete what it characterized as a "mammoth undertaking," even considering drought conditions and severe economic problems that made development difficult. Another example of these principles may be found in Oliver v. Skinner, 190 Or 423, at 437-38 (1951): The original appropriator of the water rights now owned by defendant, however, obviously had no intention of enlarging the scope of his appropriation within a reasonable time after the date of such appropriation, or at all. He and his successors in interest, down to and including defendant, followed the original method of irrigating the lands by flooding them and raising thereon crops of tule grasses and wild hay for sixty-seven years before defendant inaugurated his improvements. The elaborate system of irrigation now put into operation by defendant is, in effect, an attempted new appropriation, and is inferior to the rights of the plaintiff, John A. Oliver, which accrued between the time of the original appropriation for the Lodge lands and such attempted new appropriation. [citations omitted]. Thus, taken as a whole, the reported cases in Oregon demonstrate that the failure to expand one's irrigation and bring additional acreage under irrigation for as little as five years may prevent further expansion of the inchoate portion of such a right. Seaweard v. Pacific Livestock Co., 49 Or 157, 161 (1907). On the other end of the spectrum, a "mammoth undertaking" with many financial and historical impediments to complete construction was allowed a period of 34 years for development, Wapinitia Irrigation Co. v. Water Users Corp. of Juniper Flat, 141 Or 504, 513 (1932), and in other circumstances, 43 years was allowed for the inchoate development of irrigation projects under Silvies River, 115 Or at 69-70 and 86-90. And, along these same lines, the Oregon Supreme Court has ruled that 67 years is too long for one to assert development under a pre-1909 right. Oliver v. Skinner, 190 Or 423, at 437-38. To the best of OWRD's knowledge, no reported Oregon case has allowed 100 (or more) years to complete an

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appropriation or develop an inchoate water right. Thus, the claims for inchoate rights by KPWU and the United States, involving priorities of 1905 or earlier, must fail for lack of diligence in development.

2.

The Klamath Compact does not Alter the Requirement that a Claim of an Inchoate Water Right be Developed more Expeditiously than Within 100 Years

The Klamath Comp