Applying for a license to produce recreational marijuana in Oregon is straightforward, compared to other states. The Oregon Liquor Control Commission (OLCC) has neatly set out the forms and protocol for licensing, and many of our clients have applications in the hopper. There is one aspect of licensure, however, that has given some of our producer clients trouble: water rights.
We have written before about how marijuana in Oregon is a “crop” for land use purposes, including Oregon’s right-to-farm laws. Because marijuana requires water, like any other crop, all OLCC licensed producers are required to submit: (a) a water right permit or certificate number; (b) a statement that water is supplied from a public or private water provider; or (c) proof from the Oregon Water Resources Department that the water is from a source that does not require a water right. OAR 845-025-1030(4)(g)(D).
In the past week, we have come across two pot producers-to-be with access to land in unincorporated parts of pot-friendly counties. Each parcel meets zoning requirements, but each lacks a water right (even though one of them contains a private well and the other a natural spring). In still another matter, we represent a seller in a land sale transaction that may fall apart for want of water rights. As you can imagine, these situations are very discouraging for all parties involved.
Although it may seem counter-intuitive, landowners with water flowing past, through, or under their property do not automatically have a water right in Oregon. This is because under Oregon law, all water is publicly owned. Generally speaking, farmers, businesses, and even cities must obtain a permit or license from the Water Resources Department to use water from any natural source. And if a licensee fails to exercise its rights pursuant to that permit for any five-year period over the past 15, these rights evaporate.
Beyond these general statements, water law in Oregon is tremendously complex, so much so that the state’s three law schools usually offer Oregon Water Law as a standalone course. Fortunately, aspiring marijuana producers do not need to dive so deeply. They do, however, need to ensure that a water right is present or accessible before pouring resources into potentially unproductive land.
If water rights are absent, a few options remain. The first is to apply for a water right, assuming the property is eligible. The second is to use collected rainwater, if that exemption is locally available and properly executed (and a few of our clients are doing this during the application period). This exemption requires collected rainwater be passed over a man-made impervious surface, so collecting rainwater in a pond, for example, does not qualify. A third option is to pay a water hauler and use municipal water. Although cumbersome, this is a viable long-term solution for certain producers, particularly those in localities with established programs for this service.
When a water right is sought, the process involves time (nine to twelve months) and expense (variable). As stated by the Water Resources Department, most water rights are obtained in a three-step process. The applicant first must apply to the Department for a permit to use water. Once a permit is granted, the applicant must construct a water system and begin using water. The permit holder must next hire a certified water right examiner to inspect and submit a map and report to the Department. If water has been used according to the provisions of the permit, a water right certificate is finally issued.
Note that water rights are not automatically granted. Other water right holders and the public are allowed to protest the issuance of a permit. These third parties may assert that a new permit may injure or interfere with their water use, or that issuing a new permit may be detrimental to the public interest.
Keep in mind that the OLCC will punt on pretty much any water rights question, and though the Department or watermaster can advise whether a water right is on file for a given parcel, they cannot guarantee that the right is not subject to cancellation due to lack of use. For this reason, even with a property that looks good, aspiring producers should check with neighbors to ensure that the water right has not gone unused, endangering its viability.