Map: STEPHANIE BARROW / The Register-Guard

In 1960, International Paper Co. built a small concrete dam with steel gates across the small coastal stream in a wooded area just west of Highway 101, allowing the company to store water there as a backup source for its Gardiner paper mill.

Water from Tahkenitch Lake, a few miles to the south, was the primary source for the approximately 15 million gallons a day used by the mill. Tahkenitch water was stored with the help of a dam similar to the one on the Siltcoos and built about the same time.

The paper mill shut down in late 1998 and 3 1/2 years later shows no signs of reopening. However, IP continues to operate the dams in accordance with state rules - releasing water to help salmon runs, keeping lake levels up to enhance summer  recreation and dropping levels in the fall to hold back winter floodwaters.

But now the dams - particularly the one on the Siltcoos - are awash in controversy. Some, including Dunes City, are contesting IP's efforts to "perfect," or make permanent, its decades-old temporary water rights.

The dispute has triggered a public discussion about whether Siltcoos Lake, which covers 4,000 acres and measures about 30 miles around, would be better off if the dam's four gates were left open and the lake and river allowed to drain and flow naturally.

 Although some people believe that allowing the lake to revert to a "natural" state would improve its environmental health, others want the lake level regulated to avoid the possibility of late summer and early fall low-water periods that would shrink the lake shore.  Dozens of people own homes, cabins or resorts around the lake. Dunes City Councilor David Jackson says a major drawdown could leave docks sitting on mud and private water system pumps out of the water.  "There have been a lot of people expressing concern," he says, adding that the council wants a solution that would assure that  the lake level remains regulated. He says Dunes City also has an interest in obtaining the Siltcoos water rights in case the city  ever develops a water system of its own.

But there's a "Catch-22" that could backfire for the city: The state Water Resources Department says if Dunes City or some other challenger prevails and IP loses its Siltcoos water rights, no one would have the right to impound water in the lake. And, unless new water storage rights were granted, the dam would remain open.

Rumors begin spreading

While the controversy plays out, IP continues to operate the dam and regulate the lake level, just as it has for the past four decades. Gary Ferguson, who manages the closed paper mill property for IP, says no decision has been made on whether the mill will remain closed, and the company intends to keep regulating the lake level for the foreseeable future.

The current trouble began after IP launched a low-profile attempt in 1995 to make its water rights permanent. Ferguson says permanent rights are a valuable commodity that the company could someday sell or donate to a public agency in exchange for a tax break.

IP hired some consultants to try to gauge the potential public agency interest in the Siltcoos water rights, the dam and the 40 acres around the dam. Ferguson says the feelers were put out in case the company decided not to reopen the mill.  Tahkenitch water rights were also discussed but generated little  interest, he says.  "I asked (the consultants) to investigate various options - keeping in mind we haven't made a decision yet" on whether to keep the mill closed, he says.

But word got out that IP was shopping the Siltcoos water rights and dam, and rumors began to spread, causing Dunes City officials and lakeshore residents to wonder if IP was looking for a way to rid itself of the responsibility for regulating the lake level.  Ferguson says the only reason IP was talking with public agencies was to get an idea of the possible value of the water rights and associated property, or of the potential tax benefits if the rights and dam were donated. But the process "seemed to  take on a life of its own," he says, leading to the erroneous  impression that the company was ready to end its operation of the dams.

The only real interest shown by any of the public agencies contacted came from the Lane County parks department, which is interested in the 40 acres around the Siltcoos dam for use as a possible park that would cater to all-terrain vehicle owners.  The land is in the Oregon Dunes National Recreation Area and would provide direct access to the open dunes.

Lane parks planner Jacob Risley says the county has applied for a $5,250 grant to determine if creating such a park would be feasible. Among the issues to be resolved, he says, is whether the county would operate the dam.

Dunes City steps in

IP representatives talked with agencies such as the state Department of Fish & Wildlife and the city of Florence about a  possible transfer of water rights. But they didn't talk to Dunes City, and that upset city officials.  "We just want to be a part of the process," Jackson says. "We have enough of a geographic interest for our residents that we should be a primary candidate to be the recipient of that dam if IP no longer wants to continue."

By the time Dunes City officials figured out what was going on, the Water Resources Department had already granted three permanent water rights certificates to IP - one for storing water in Siltcoos Lake, one for storing water in Tahkenitch Lake and one for the right to withdraw specific amounts of water from both lakes.

But the city took advantage of a three-month period during which the certificates can be contested. Others stepped up to contest the rights as well, including WaterWatch of Oregon, a statewide citizen group concerned with water issues.  Robert Craver of Fairview, who owns property on the lake, joined WaterWatch in its challenge. John Carlson, who lives on the Siltcoos River, filed an individual challenge.

The main arguments of those contesting IP's permanent right to the Siltcoos water is that the company has no apparent future use for it and has seldom drawn from the lake in the past.

Karen Russell, executive director of WaterWatch, says she doesn't believe it's good public policy to allow a corporation to gain permanent rights to water for which it has no apparent use, just to be able to sell them to the highest bidder.

Some, such as Rand Dawson, hope that the process to resolve the water rights dispute will take into account the merits of an undammed "natural flow." Dawson, a former attorney from Alaska who spends his summers in a home on Siltcoos Lake, remembers visiting the lake as a youngster in pre-dam days. His father, his grandfather and his children have all enjoyed time at the lake, he says.  He's convinced that Siltcoos Lake provided better habitat for fish in its natural state and could do so again. He also believes decades of keeping the lake artificially high has accelerated the erosion that caused three large islands to disappear.  Even though a natural flow would lead to lower water levels in the summer, the lake would still provide good recreational opportunities, just as it did when he was a youngster, he says.

Ferguson says IP or its representatives didn't contact Dunes City because they assumed that the city's primary interest would be in using the rights to regulate the level of the lake  rather than using the water.  He says it would be to IP's advantage to transfer the water rights to someone who would draw water from the lake for a specific purpose because that would give the rights a higher monetary value, whether they were sold or donated for a tax benefit.

Resolution not yet in sight

Much of the discussion about transferring IP's Siltcoos water rights, dam and 40 acres took place with the state Department of Fish & Wildlife, which wasn't interested.  Bob Buckman, a district fisheries biologist in Newport, says the department considered the offer but decided that it didn't have enough resources to manage such a remote site. And it would have been a liability for the department to become involved in the inevitable controversies over regulating the level of the lake, he says.

Copies of e-mails among department biologists indicate that  they tried to promote a partnership with a number of other government agencies in possibly taking over operation of the dam but found little interest. They also discussed the merits of leaving the Siltcoos dam permanently open.  That discussion, Buckman says, considered potential good and  bad outcomes, such as the beneficial wetlands that might develop below the lake if the dam weren't used to periodically flush the river channel, and the detrimental growth of non-native weeds that might occur if the lake level dropped.   "There are different points of view within and outside the department, and there is a whole lot of uncertainty about what the effect (of leaving the dam open) would be," he says.

Water Resources Department officials won't predict how long it will take to settle the dispute, but they don't expect it to be soon. Department director Paul Cleary will decide whether to hold a contested case hearing at which IP and the parties challenging the permanent certificates would be able to testify.  Cleary will ultimately issue a ruling, which could be challenged in court.  The department's deputy director, Meg Reeves, says her agency may seek a negotiated settlement among the interested parties.  In considering the case, she says, the question of whether the company has a future need for the water won't be as important as what happened in the past.  She's not sure if IP would be required to remove the dams if it loses its water rights but says the gates would likely be kept open to allow a free flow of water.

 Jackson acknowledges that such an outcome is not something the Dunes City Council wants to happen. He says the city's decision to contest IP's water rights is a double-edged sword that could go against the council's interest in continued regulation of Siltcoos Lake water levels.  But he's hoping that the pending negotiations can help Dunes City achieve its goals. Before the city contested the water rights, he says, it was out of the loop, adding, "This process puts us at the table now."

INTERNATIONAL PAPER'S WATER RIGHTS HISTORY

1960: Secured temporary rights to Siltcoos Lake and Tahkenitch Lake water, built dams to control water levels. Tahkenitch Lake served as the primary source of about 15 million gallons of water per day required by the Gardiner paper mill.

 

Feb. 15, 2002: State awarded three certificates for permanent water rights to International Paper Co. One provides storage of up to 15,070 acre-feet per year in Siltcoos Lake. A second allows storage of up to 16,580 acre-feet per year in Tahkenitch Lake. A third allows the company to draw a maximum of 26.3 cubic feet per second from Tahkenitch Lake and 12.42 cubic feet per second from Siltcoos Lake. The company is authorized to regulate Siltcoos Lake at levels  between 3.1 and 8 feet above mean sea level.

 

May 14, 2002: Dunes City contests all three certificates and is joined by two other parties, including WaterWatch of Oregon.