Methow Valley Citizens' Council
Scaling down the Resort
Index to MVCC's campaign to avert a destination resort in the Methow Valley, Washington
ATTORNEY GENERAL OF WASHINGTON
Ecology Division
629 Woodland Square Loop SE 4th Floor Lacey, WA 98503
Mailing Address: P0 Box 40117 01ympia WA 98504 0117
January 15, 1999
Sarah E. Mack
Stoel Rives LLP
One Union Square
600 University Street, Suite 3600
Seattle, WA 98101 3197 Re: R.D. Merriill Company v. Pollution Control Hearings Board
Supreme Court No. 64607 4 Dear Sarah: The purpose of this letter is to communicate our office's interpretation of certain holdings in the Supreme Court's recent decision in the above referenced case, and to inform you of our opinion relating to the decision's ramifications for water supply at the Wilson Ranch portion of the Arrowleaf resort, and the processing of water rights applications for the next proposed phase of the resort development. At this time, we are also providing an attorney client privileged memorandum to our client, the Department of Ecology. It is necessary for us to provide you with this letter because our office's interpretation of the decision diverges significantly in several key areas from your decision summary, dated January 12, 1999, and the press release pertaining to the decision that has been issued by your client, the R.D. Merrill Company. For the reasons discussed below, we believe that presently the Wilson Ranch project does not appear to have sufficient water to meet Merrill's estimate of annual demand. The esitmated annual demand for the Wilson Ranch project is 30.25 af/y [Footnote 1 inserted here: (This figure is Merrill's projection based on estimates of current and future use, and is not based on analysis by Ecology of actual withdrawal records. Ecology is still in the process of evaluating the December 10, 1998 memorandum from Merrill which provided the estimated demand figures used herein.)] The rights currently upheld by the Court for the project that are available for use include: 1. Vane Certificate for 4.5 gpm/.67 af/y for domestic supply; 2. Ground water permit G4 24313P for 11 gpm/1.5 af/y for domestic and stockwater use (note: this right is an interruptible right if used for group domestic); and 3. Ground water permit G4 24314P for 11 gpm/1.0 af/y for domestic and stockwater use (note: this right is an interruptible right if used for group domestic). In addition to these rights, claim 115860 (Shafter [sic] well) for 10 gpm/1.5 af/y for domestic and irrigation was previously approved by the PCHB and no appeal was taken. The total of all rights thus equals 4.67 af/y with 2.5 af/y classified as interruptible, which leaves 2.17 af/y of uninterruptible water rights. The estimated annual demand for the domestic portion of the Wilson Ranch project is 10.25 af/y, which leaves a deficit of 8.08 af/y for the domestic portion alone. If you consider the use of water for irrigation and makeup of lake evaporation, the total deficit from all rights is 25.58 af/y. In arriving at these figures, we view the Court's ruling that the Wilson imigation right was never perfected and therefore is not subject to change under RCW 90.03.380 as significant because it has eliminated a major right for 35 af/y of irrigation from being available to the project. Further, we do not share your view that rights under the Early Winters ditch shares authonize irrigation water for the development and replace the void caused by the loss of the Wilson irrigation right. Those rights, if they exist, have not been approved for change by Ecology for the Wilson Ranch project. A change of any right held under the ditch shares is necessary to allow both for a change of place of use to cover the entire property and a change of purpose of use to authorize an additional use for lake filling and maintenance. In a letter to you dated March 5, 1997, Deborah advised you that Merrill would need to file a change application if they wanted to utilize the ditch rights for the resort development. To date, Merrill has ignored that directive and has failed to submit a change application. It is our opinion that reliance upon any right held by Merrill under the Early Winters ditch shares, absent approval for charge by Ecology, is not authorized under the law. Second, in regard to water for domestic supply, the Court's issuance of its decision has necessitated our evaluation of the total water supply picture for the Wilson Ranch project. Merrill apparently relies upon claimed rights to exempt wells for 5.60 af/y, a substantial portion of its domestic supply for Wilson Ranch. In the March 5, 1997 letter, Deborah informed you that Ecology did not agree that the quantity of historic water use under the exempt wells totaled 5.60 af/y. Deborah also advised you that Ecology did not agree that the exempt wells could be used for the Wilson Ranch project. At that time, no mechanism existed within the statute that allowed consolidation of exempt wells and there were court rulings that indicated that rights to use exempt wells could not be changed or transferred. Since that time, the law has been modified to allow consolidation in certain circumstances, but Merrill has not followed the proper procedure to obtain consolidation, nor have these rights been approved by Ecology for consolidation with the rest of the Wilson Ranch project pursuant to the requirements of RCW 90.44.105. With these facts in mind, it is our opinion that Merrill's reliance upon these wells and the water rights from these wells, until such. time that consolidation is approved by Ecology, is not authorized by law. It must further be recognized that if such consolidation is requested and approved, the quantity approved may be less than 5.60 af/y. Based on the above, our office is advising Ecology to focus its efforts first towards working with Merrill to ensure that Merrill holds adequate water rights for the Wilson Ranch project before further extensive effort is directed towards processing applications for water supply for the remaining phase of the Arrowleaf development. Particularly, the loss of 35 af/y under the Wilson Claim 131559 is significant and will have to be dealt with before proceeding with the next phase. This is particularly true since Merrill has communicated that the Willis/Miller irrigation right (Claim No. 116861) will not be used for the Wilson Ranch project and that it desires to change the right for use in the next phase of the development. If Merrill is successful in the remand hearing regarding this claim, the Willis/Miller right would provide significant water to meet the irrigation and lake water maintenance demands for the Wilson Ranch project. Without this right, it is our opinion that Merrill currently does not have a water right that authorizes these uses. It must be further recognized that, if the right is found to not have been relinquished, there may still be a deficit in the domestic needs for Wilson Ranch unless Merrill applies to change part of the right to year round domestic use and Ecology finds that there would be no third party impacts in approving such change. Until an application for a change of any rights held by Merrill for its Early Winters ditch shares is submitted and approved by Ecology, the Willis/Miller right, if upheld upon remand to the PCHB, must be dedicated to the Wilson Ranch project. Therefore, we are advising our client that until it is clear that there is adequate water supply for the Wilson Ranch project it would be contrary to the public interest to approve a change of the Willis/Miller irrigation right to provide water for the next phase of the Arrowleaf development. Additionally, we are advising Ecology to request records of actual water use from Merrill in accordance with the provisions of the change approvals that "meter records of the actual water beneficially used by the completed project shall be used to determine the extent to which the water rights authorized for change were needed to accomplish the Wilson Ranch Planned Development Resort." By Merrill's own estimates, they will need 10.25 af/y of water to meet the domestic needs of the project. It is important for Ecology to determine if Merrill's water usage is in excess of the currently authorized water rights. Unless Ecology makes this determination, it will be unable to determine whether water rights sought to be dedicated to the next phase of Arrowleaf development should be retained for water supply at the Wilson Ranch project. Specifically, it is important to determine Merrill's water usage in order to respond to your assertion that no remand is needed on the Willis/Miller irrigation right issue because that right should be dedicated to the next phase of Arrowleaf Lastly, please be advised that Ecology earlier informed Merrill that if it chose to proceed to develop the Wilson Ranch project before final resolution of the water rights issues, it was proceeding at its own risk. We must inform you that it appears that Merrill may not have sufficient water for operation of the Wilson Ranch project at this time and that efforts should be made to work with Ecology to address these concerns before Merrill follows through on its press release and sells building lots to potentially innocent purchasers for which there are no water rights. We find your position in both your decision summary and your client's press release that additional development of the Wilson Ranch project and Arrowleaf should occur to be untenable given that Merrill currently has a deficit of 8.08 af/y for its estimated domestic water needs at Wilson Ranch. We look forward to working with you to assist in efforts to resolve the difficult water resources issues surrounding the Wilson Ranch project and the Arrowleaf development that have emerged as a result of the Supreme Court's recent decision and our office's evaluation of the overall water rights situation at Wilson Ranch. Very truly yours,
DEBORAH MULL
Assistant Attorney General
(360) 493 9224
ALAN M. REICHMAN
Assistant Attorney General
(360) 459 6161
DLM/AMR/sn
cc: Keith Phillips, Ecology
Fred Rajala, Ecology
Bob Barwin, Ecology, CRO
F:\CASES\REICHMAN\ARROW\MACKLTR2
Index to MVCC's campaign to avert a destination resort in the Methow Valley, Washington
