A water market for the Klamath Basin

Oregon’s newest water market is about to become a reality in the Klamath Basin, helping resolve tough water problems while providing much needed conservation and wildlife benefits. Kurt Thomas was the first to try it, voluntarily selling the water from his ranching operation so that the Lower Klamath National Wildlife Refuge would not go dry.

We sat down with Thomas to ask him how it happened, and what it means in the Klamath Basin and across the West as we continue to see increasing demands on limited water supply.

(If you’re wondering what a water market is, it’s a system where individuals, businesses, or entities can buy, sell, or lease water rights, often for short or long periods. These markets aim to allocate water more efficiently by allowing those who value water more to purchase it from those who value it less, potentially leading to increased productivity and reduced risk.)

Q: How did this project get started?

Kurt: The Klamath Basin has several national wildlife refuges. The Lower Klamath National Wildlife Refuge is one of them, and it provides important habitat for migratory birds on the Pacific Flyway – shorebirds, waterfowl, eagles, and more. It was the nation’s first wildlife refuge and it’s essential for the survival of these birds. In 2021, it went completely dry for the first time ever. 

Water rights in the Klamath Basin are first in time, first in right. That’s been adjudicated by the courts. The Lower Klamath National Wildlife Refuge had a junior right, behind the Klamath Project farmers (farmers who receive water from the Klamath Irrigation Project, a system built by the U.S. Bureau of Reclamation). Project farmers have a 1905 right, and the refuge has a 1908 right. My water right is north of Klamath Lake, upstream from the refuge and the irrigation project. And my water right is from 1864. It’s senior to everyone in the basin except the Klamath Tribes, who have a time immemorial right. I offered to permanently sell my water right to the U.S. Fish and Wildlife Service, which manages the Lower Klamath National Wildlife Refuge, so they could maintain some amount of water for this very important bird habitat.

Selling water rights is not a new idea. Water markets exist all over California. But it’s a relatively new concept in Oregon. It took four years to get it approved and get the legal pieces in place.

Q: What was it like in 2021 when the wildlife refuges went dry?

Kurt: The refuges are not often dry. 2021 was the first year it had ever been dry in 1,000 years, and it caused an outbreak of avian botulism that killed an estimated 75,000 birds. That prompted a lot of soul searching on everyone’s part. 

Water markets are a logical solution. There is no water market in the Klamath Basin. This was a pilot project designed to create one and show it could be done. If you’re patient and there’s a willing seller and a willing buyer, you can transfer a water right in Oregon and pay for it via a standard purchase and sale contract.

If the funding is available, then there are opportunities in the Klamath Basin to buy water from folks who would prefer to sell water. I think there’s a chance for a fairly robust water market here, which could resolve some of the water shortage issues in the Basin. That is the ultimate goal of this project.  

Q: Why did the refuge go dry in 2021?

Kurt: Hydrology. 2021 was a low water year. A drought year.

There are three primary users of the water in the Klamath Basin: the river, the Klamath Irrigation Project, and the wildlife refuges. That year there was a severe drought, and the Endangered Species Act required flushing flows in the river to keep salmon healthy. Without that water, there could have been another catastrophic fish die-off like in the 2001 drought. 

In 2001, the Tribes didn’t have as much authority over water. But they have that now. They adjudicated their water rights in court after 2001. So when the drought happened in 2021, with the refuge being last in line for water, the refuge lost out. Now, the U.S. Fish and Wildlife Service can put my water in the lake and on the refuge, which also adds to the overall supply of water for farmers.

Q: What were the legal pieces that had to be in place?

Kurt: First, the Oregon Water Resources Department had to approve the transfer of a water right. Then the U.S. Fish and Wildlife Service, which manages the wildlife refuge, had to go through extensive review to buy it for the refuge. There was a lot of public comment, scientific analysis, and due diligence that happened in between to fully understand and validate the transaction. Sustainable Northwest played a key role throughout the process to keep things moving, address questions, and get the deal across the finish line.

Q: Who was involved?

Kurt: Sustainable Northwest and the California Waterfowl Association (CWA) played pivotal roles. 

CWA raised millions of dollars from private donors to lease the water rights over those four years and provide my water to the refuge until the transfer was completed. That’s how I was able to afford to keep my water flowing to the refuge over these last four years.

Sustainable Northwest was a key supporter and very helpful in working with Senator Merkley and the federal agencies to make the case for a permanent fix. This project blazed a lot of trails, and it took two NGOs plus the U.S. Fish and Wildlife Service to get it done.

Q: Does this benefit your business? Do you get paid for your water rights?

Kurt: Yes. This does benefit my business. Currently I run cattle on my land. But I think the water market could exceed the economic value of water for cattle – perhaps some day also for potatoes (a common Klamath Basin crop). As we look into the future, if we are included to look into the future, water is not a sure thing in the Klamath Basin. The State of Oregon owns it. Tribes own it. The U.S. Bureau of Reclamation owns it. There are a lot of straws that are competing, and they’re not going to slow down in the future. I think ag will come out behind. Ag’s already come out behind in the sense that the Klamath Irrigation Project water can be shut down if salmon need more water in the river. All of these things combined make you look at this thing and think, maybe I should sell it or lease it? I leased my water on an interim basis so we could afford to put it on the refuge. If I take it off the ranch, it cuts cattle productivity in half. I can’t afford that for four years. So the California Waterfowl Association raised money to keep the pilot project alive and lease the rights from me from 2014-2021, and the water went to the refuge. Then, the U.S. Fish and Wildlife Service paid a lump sum to me to buy the rights forever. 

The leasing idea won’t work again, but it was proof of concept for a few years. Now it’s a matter of the government buying water in a lump sum payment, and working with willing water right holders to transfer the water. The government can now buy it outright if the funding and will are there.

Q: This is a completely voluntary program. Do you think other farmers and ranchers will want to do this?

Kurt: I don’t know if other farmers will do it. They might, they might not. There are ranchers in Fort Klamath that have expressed an interest if a water market is put in place. It’s a nascent thing right now. But you can do this kind of thing, and NGOs like Sustainable Northwest are critical to making this happen. California Waterfowl Association provided the funding needed, and Sustainable Northwest helped the agencies and decision makers see the long-term value. This is one more solution that can now be used to help bring balance to water use in the Klamath Basin.

I do hope other farmers and ranchers consider it, not because I did it, but because it makes good sense to consider it. Right now there is a shortage of water in the basin. There are too many demands even in normal water years. The refuges suffer the most when there is not enough water, because they have the last water right. The farmers have been suffering since 2001 and they’re getting drought relief payments from the government. I don’t know how long that can last. Only God can give us more water, so there is no other solution except reducing demand. Right now it’s been reduced by government decree. If it was reduced by, “Here, I’ll pay you for the water,” that seems like a better outcome. A water market moves water around to the person who wants it the most. That’s hard to do. People are used to this water, and they were used to having it for free for a long time. And it’s obviously not free anymore. That’s not going to change. It’s going to get worse. The alternative is litigation, and farmers are batting zero with litigation.

I spoke with some farmers who didn’t want to see this happen. I said, “Wait a minute, it’s my water. You guys don’t think you get a say about my water, do you?” No, they didn’t want to say that, but they didn’t want me to sell it. But that’s not their choice. I sell my calves the way I want to, I sell my water the way I want to. They had not thought about it that way. 

Several ranchers in my valley, above the lake, have been watching this very carefully. They have not said they want to sell yet, because there was no market before. But we’ll see what comes next.

Q: Why is this important?

Kurt: One reason is pure business. When you change the use of a real estate asset, you add value. So it’s an economic decision for me. 

Also, I grew up working as a duck hunting guide in the wildlife refuge. It was full of water and ducks then, not like now.. It’s very gratifying for me to be a solution to their water rights. It’s a critical piece of habitat for millions of birds migrating along the Pacific Flyway. Helping them is a big deal for me and my family. But I don’t have the capital to do it altruistically. And I should not have to suffer to do the right thing environmentally. Maybe you don’t maximize profits, but you should be able to make environmental benefits available and still profit from it. The two should not be antithetical. 

In the future, this water market is important for farmers and ranchers who might want to liquidate some assets. Water markets are voluntary. It’s not eminent domain or anything. This water market just creates another tool for a resource owner – a landowner, ranch owner, farmer – to manage their resources. If the government says my water is worth $1,000 per acre foot, and if the potato market says $500 per acre foot, then farmers can choose. This gives farmers more options.

This was a very pragmatic transfer that made sense for my family, made sense for the basin, and made sense for the refuge. I don’t think it’s a band-aid or an epiphany, just a very pragmatic tool that’s been used throughout the country, and now we’re doing it here. It had not been done before, so it ran into opposition, but it survived. And it can be replicated now.

If you want to hear more about the Thomas’ work at Agency Ranch, check out the interview with PBS’ America Outdoors show here -i and scroll to minute 11:45.

Photo credits: U.S. Fish and Wildlife Service, Shutterstock, Thomas family, and Intermountain West Joint Venture.