Golden Rule Farms v. Water Resources Dept.

43

Argued and submitted February 10, affirmed July 27, 2022

GOLDEN RULE FARMS, INC.,

Petitioner,

v.

OREGON WATER RESOURCES DEPARTMENT,

Respondent.

Oregon Water Resources Department

G16867, G17578;

A172879 (Control), A172880

515 P3d 908

Petitioner applied for extensions of two groundwater permits under ORS

537.630 and OAR 690-315-0040. The Oregon Water Resources Department

(OWRD) issued proposed final orders denying those extensions and advising that

petitioner was entitled to protest the denials as allowed under OAR 690-315-

0100 and OAR 690-315-0060. Petitioner did not initiate the protest procedure

and OWRD issued final orders denying each extension. Petitioner petitioned

OWRD to reconsider its final orders, which ORWD did not act on, resulting in

the petition being denied by operation of law. Petitioner initiated this judicial

review proceeding under ORS 183.482. After petitioner initiated this review,

OWRD withdrew its final orders under ORS 183.482(6), then issued orders on

reconsideration in which it modified several findings of fact. Held: The Court of

Appeals affirmed because petitioner failed to exhaust administrative remedies

by employing the protest procedure. To the extent that the protest procedure was

not available to challenge the modified findings on reconsideration, petitioner’s

arguments fail on the merits.

Affirmed.

Sara Kobak argued the cause for petitioner. Also on the

briefs were Elizabeth E. Howard, Shonee Langford, and

Schwabe, Williamson & Wyatt, P.C.

Inge D. Wells, Assistant Attorney General, argued the

cause for respondent. Also on the brief were Ellen F. Rosenblum,

Attorney General, and Benjamin Gutman, Solicitor General.

Lisa A. Brown filed the brief amicus curiae for WaterWatch

of Oregon.

Before Ortega, Presiding Judge, and Lagesen, Chief Judge,

and Powers, Judge.

44 Golden Rule Farms v. Water Resources Dept.

LAGESEN, C. J.

Affirmed.

Cite as 321 Or App 43 (2022) 45

LAGESEN, C. J.

Petitioner holds multiple groundwater permits in

Harney County. This case involves two of those permits.

When petitioner failed to complete construction of the wells

authorized by the relevant permits or apply the water to

beneficial use by the deadlines specified in the permits, peti-

tioner applied for extensions under ORS 537.630 and OAR

690-315-0040. The Oregon Water Resources Department

(OWRD) issued final orders denying those extensions and

petitioner initiated this judicial review proceeding under

ORS 183.482. After petitioner initiated this proceeding,

OWRD withdrew its final orders under ORS 183.482(6), and

then issued orders on reconsideration in which it modified

several findings of fact. We affirm because petitioner failed

to exhaust administrative remedies and to the extent peti-

tioner challenges the modified findings on reconsideration,

those challenges fail.

The relevant facts are mostly procedural and not

disputed. Any substantive facts are drawn from the uncon-

tested factual findings in the orders on review. Klein v.

BOLI, 317 Or App 138, 506 P3d 1108, rev den, 369 Or 705

(2022).

As noted, this case involves two groundwater per-

mits: G-17441 and G-17100. Both are for groundwater within

the Greater Harney Valley Groundwater Area of Concern

(GHVGAC). OWRD issued Permit G-17441 in 2015, autho-

rizing “the use of up to 2.0 cfs of water from three wells in

Malheur Lake Basin for irrigation use on 160 acres.” The

permit superseded a prior permit for which construction

had not been completed. When G-17441 was issued, the com-

pletion date for construction and application of water was

October 1, 2018. Permit G-17100 had a similar trajectory.

OWRD issued G-17100 on October 31, 2013. It authorized

the use of up to 4 cfs of water from two wells in Malheur

Lake Basin for irrigation of 320 acres. It specified a com-

pletion date for construction and “complete application of

water” by October 31, 2018. Between the dates the permits

issued and the specified completion dates, no action was

taken to begin construction on the wells authorized by the

permits.

46 Golden Rule Farms v. Water Resources Dept.

In March 2017, petitioner submitted Permit Amend-

ment T-12609 to OWRD. That application sought to amend

both permits at issue in this case. With respect to both, it

sought to change the place of use and places of appropriation

authorized under the permits to other locations within the

GHVGAC. In September 2018, OWRD notified petitioner by

letter that it could not process the application “without an

active completion date” for Permits G-17441 and G-17100.

It advised that petitioner needed to seek—and obtain—

approval of extensions of time for those permits for OWRD to

approve the amendment application. OWRD did not receive

a response to its September letter and denied the amend-

ment application on November 7, 2018, on the ground that

petitioner was “unable to complete the application of the

water to beneficial use” as required under the permits and

“[w]ithout current dates for complete application of water,”

OWRD could not approve the amendment.

On November 19, 2018, petitioner submitted the

extension requests at issue in this case, seeking to extend

the completion dates of both permits to October 1, 2019. After

a notice-and-comment period, OWRD issued proposed final

orders denying both requested extensions in April 2019. The

proposed final orders advised that petitioner was entitled to

protest the denials as allowed under OAR 690-315-0100 and

OAR 690-315-0060 by filing a written protest with OWRD

by May 31, 2019. Petitioner did not protest either proposed

final order and, on June 14, 2019, OWRD issued final orders

denying each extension. In the final orders, as it had in

the proposed final orders, OWRD determined that “[t]he

applicant has not demonstrated good cause for the permit

extension pursuant to ORS 537.630, 539.010(5) and OAR

690-315-0040(2).”

Almost two months later, petitioner petitioned OWRD

to reconsider its final orders. It asserted that OWRD “did

not act in good faith or in a timely manner during the

review process” of permit amendment T-12609 and that, but

for OWRD’s alleged failure to act in good faith, petitioner

would not have required extensions. OWRD did not act on

the petition, and it was deemed denied by operation of law.

ORS 183.482(1).

Cite as 321 Or App 43 (2022) 47

Petitioner sought judicial review. After petitioner

filed its opening brief, OWRD withdrew the final orders for

reconsideration under ORS 183.482(6) and filed orders on

reconsideration that modified several factual findings but

otherwise adhered to the original orders denying the exten-

sions. Petitioner then filed a supplemental brief, in which it

challenged several of the modified findings.

On review, petitioner argues that, in determining

that it did not demonstrate “good cause” for the permit

extensions, OWRD “acted contrary to statute and outside of

the range of its permissible discretion.” Petitioner contends

that OWRD should not have considered its failure to com-

plete construction of the wells authorized by the permits

because petitioner “sought the extensions solely to apply

the groundwater to beneficial use under the permits,” and

was not seeking to build the wells. Petitioner also argues

that OWRD erred when it did not take into account “its

own unexplained 14-month delay in processing” the permit

amendments requested in T-12609, pointing to the require-

ment in ORS 537.630(2) that OWRD must consider the

extent to which “other governmental requirements relating

to the project have significantly delayed completion of con-

struction or perfection of the right.” ORS 537.630(2). Finally,

petitioner asserts that various factual findings, including

some of the modified findings included in OWRD’s orders on

reconsideration, are not supported by substantial evidence.

OWRD responds that petitioner’s contentions are

not reviewable because petitioner did not exhaust admin-

istrative remedies by employing the protest procedure, and

also because petitioner did not preserve the issues by rais-

ing them with OWRD in the first instance. OWRD other-

wise argues that its order reflects a proper understanding

of ORS 537.630(2), and that its findings are supported by

substantial evidence.

With one exception, we agree with OWRD that peti-

tioner failed to exhaust administrative remedies and that

that failure precludes review of the bulk of petitioner’s

arguments to us. As the Supreme Court has explained, “[t]he

general doctrine of exhaustion of administrative remedies

is judicially created, a creature of the common law, and is

48 Golden Rule Farms v. Water Resources Dept.

employed by the courts * * * in the interest of orderly pro-

cedure and good administration.” Tuckenberry v. Board of

Parole, 365 Or 640, 646, 451 P3d 227 (2019). In general,

where, as here, an agency provides a process for raising

issues to it, the doctrine requires a party to present the

issue to the agency through that process before a court

will consider it. Id. Pertinent to this case, “[a] party does

not exhaust his administrative remedies simply by stepping

through the motions of the administrative process without

affording the agency an opportunity to rule on the substance

of the dispute. Exhaustion of administrative remedies is not

accomplished through the expedience of default.” Mullenaux

v. Dept. of Revenue, 293 Or 536, 541, 651 P2d 724 (1982).

OWRD has a well-established administrative pro-

cess through which applicants and others “adversely affected

or aggrieved” by a proposed order on an extension request

can “protest” the order with the agency. OAR 690-315-0060.

That process enables a person to supply “a detailed descrip-

tion of how the proposed final order is in error or deficient

and how to correct the alleged error or deficiency,” OAR 690-

315-0060(2)(d), along with any applicable legal authority

supporting the claim of error. OAR 690-315-0060(2)(e). It is

undisputed that petitioner was given notice of that process,

yet petitioner failed to use it to raise the issues that petitioner

now seeks to raise in this court. We would, of course, have

the discretion to “relax or set aside” the exhaustion require-

ment should the circumstances warrant it, Tuckenberry, 365

Or at 647. But petitioner has offered no convincing reason as

to why we should do that here.

Petitioner suggests that, notwithstanding its fail-

ure to invoke the protest process, we should conclude that

petitioner adequately exhausted administrative remedies

by filing a petition for reconsideration later. We often have

concluded that a party cannot preserve an issue for appeal

by raising it for the first time in a motion for reconsider-

ation when the party had an opportunity to raise it earlier.

Sugiyama v. Arnold, 294 Or App 546, 549-50, 431 P3d 466

(2018). We think it appropriate to apply an analogous princi-

ple in the exhaustion context, at least where, as here, a peti-

tioner failed to invoke the designated process for presenting

issues to the agency, and the agency exercises its discretion

Cite as 321 Or App 43 (2022) 49

not to act on a subsequent petition for reconsideration. We

likewise are not persuaded by petitioner’s related sugges-

tion that it need not have exhausted its administrative

remedies through the protest process, as distinct from the

reconsideration process, because administrative rules, not

statutes, are the source of the protest requirement for orders

on extensions. Having been provided with a well-defined

process to raise its issues to OWRD in the first instance,

it was incumbent on petitioner to use that process, absent

unusual circumstances.

This conclusion—that petitioner failed to exhaust

administrative remedies—disposes of the issues raised

in the opening brief, which could have been raised in the

protest process. But it does not complete the resolution of

this case. As noted, after petitioner filed its opening brief

in this matter, OWRD withdrew its final orders under ORS

183.482(6) and filed revised orders in this court in which it

modified several factual findings. Petitioner then filed a sup-

plemental brief contesting some of those findings. As should

be evident, those modifications occurred when the protest

process was no longer available to petitioner. Consequently,

petitioner had no opportunity to raise any challenges to the

modified findings through the protest process. Rather, this

proceeding presents petitioner’s first opportunity to chal-

lenge those modifications; petitioner had no administrative

remedies available to exhaust. That means the exhaustion-

of-administrative-remedies doctrine does not apply to bar

review of petitioner’s challenges to the modifications.

As for the merits of petitioner’s challenges to the

modified findings, we conclude that those findings are sup-

ported by substantial evidence—that is, that “the record,

viewed as a whole, would permit a reasonable person to

make” those findings, ORS 183.482(8)(c).

Affirmed.