BOARDMAN, Ore. -- A year after it opened, Oregon’s second-largest dairy has not secured rights to the nearly 1 million gallons of water per day it needs for its thousands of cows and to process milk.
Instead, Lost Valley Farm near Boardman moved ahead without the necessary permits, using a loophole in Oregon law to pull water out of an underground aquifer that’s been off limits to new wells for 42 years, alarming neighboring farmers who say their water supplies are now at risk.
Documents obtained by the Statesman Journal show Gov. Kate Brown, her staff and the directors of three state agencies knew the dairy would fall back on the loophole if a proposed water trade was challenged.
But with dairy owner Greg te Velde rushing to meet a deadline to receive bank financing and move his 8,000 cows — and with the promise of 150 jobs for rural Morrow County — state officials allowed the dairy to open anyway.
“The proposed dairy is in the best economic interests of the region,” the Oregon Department of Agriculture, Department of Environmental Quality, Water Resources Department and governor's office wrote in a joint memo before announcing they were giving the dairy the go-ahead on March 31, 2017, the same day te Velde's previous lease expired.
The state's approval came after a year of violations by the Tipton, California-based businessman, who is supplying milk to the Tillamook County Creamery Association.
In 2016, the dairy drilled three wells into the already-dwindling aquifer without telling the state, as required by law, and refused to register them for months after state officials found out.
When conservationists challenged a proposed water rights transfer on March 30 — the day before the state approved the dairy — te Velde told state officials he would truck in water while pursuing other options.
But records show he brought in little water.
Instead, Water Resources officials discovered months later that te Velde actually drew most of the water from one of the wells, claiming an exemption for watering stock — just as the earlier memos among the governor's staff and state agencies had predicted.
And when ordered to install a monitoring device on the well, te Velde put in one with an unauthorized reset button, according to Water Resources officials.
Now, the state's water officials say they have no idea how much water the dairy is taking out of the aquifer, which was protected in 1976 as a “critical groundwater area” because pumping levels were declining so rapidly.
Oregon law allows exempt wells for uses such as: less than a half-acre of lawn and garden watering; industrial use of up to 5,000 gallons per day; or domestic and drinking uses of up to 15,000 gallons per day.
There is no gallon limit for stock watering.
Water Resources officials said Oregon law only requires that the water is put to a beneficial use. “Livestock watering is considered a beneficial use,” spokeswoman Diana Enright told the Statesman Journal.
But Brian Posewitz, a lawyer for the water protection group WaterWatch Oregon, says the exemption should be allowed only for small-scale uses that don't impact water resources.
“Allowing Lost Valley Farm to use the stock watering exemption in a critical groundwater area for what is expected to be up to 30,000 cows illustrates an abuse of the exemption, a need to change it, or both,” he said.
Gov. Brown’s press secretary, Bryan Hockaday, refused to answer the Statesman Journal’s questions about the staff memos and emails describing the state’s concerns about approving the dairy before it had water rights.
One of those memos was drafted by the governor’s natural resources adviser, Lauri Aunan, who also communicated directly with the dairy's lawyers about the timeline for approving the water rights transfer. Hockaday said Aunan’s only role was to ensure state agencies coordinated with each other.
"This is not a situation where the governor can intervene on a permitting process, nor did she,” Hockaday said. “It’s not a matter of politics."
Yet documents obtained by the Statesman Journal show several members of Brown's staff were directly involved in discussions about ways to allow Lost Valley Farm to operate and the possible consequences if such actions were challenged by opponents.
As governor, Brown oversees all three agencies and has sole authority to hire and fire the directors.
Brown and Aunan did not respond to the Statesman Journal's requests for comment. Te Velde declined to comment.
Controversial beginnings
Lost Valley Farm has been mired in controversy since 2015, when te Velde bought about 7,000 acres of the former Boardman Tree Farm and announced he would move his existing, leased dairy 14 miles, expanding it from 8,000 to 30,000 cows.
In addition to being within a designated critical groundwater area, the new dairy also is in the Lower Umatilla Basin Groundwater Management Area, so-designated because there are high levels of nitrogen pollution in the groundwater. And its close to the state’s largest dairy, Threemile Canyon Farms, which has 70,000 animals.
More than 4,100 individuals and a dozen state and national health and environment organizations objected to te Velde's proposed dairy during a public comment period on its wastewater permit, which regulates how it must manage the 187 million gallons of manure it will produce a year. The state received 15 comments in support of the dairy.
Opponents raised concerns about air and water pollution, water use and health impacts on nearby communities.
Te Velde started construction on the dairy in early 2016, more than a year before he had the wastewater permit. In response, a dozen advocacy groups filed a formal complaint with multiple state agencies arguing starting construction before getting the permit violated the law.
But the state allowed the dairy to proceed, granting te Velde two temporary permits to use groundwater for construction.
In late March 2017, as state officials prepared to grant the wastewater permit, they unsuccessfully sought a waiver that would allow te Velde to move his cows in before the permit’s effective date 20 days after its issuance.
“Greg te Velde would like to immediately move cows onto the facility and begin completing the lagoon construction, as early as April 1, in line with the schedule we set up with Rep. Smith,” Don Butcher, DEQ's eastern region water quality permit manager, wrote Aunan and Department of Agriculture officials, referring to state Rep. Greg Smith, R-Heppner. “But it seems that may not be possible.”
State agriculture officials say the cows were moved onto the new property on April 20.
Since then, the dairy has repeatedly violated its wastewater permit, allowing manure to overflow storage lagoons and seep into soil, endangering nearby municipal and private drinking water wells.
Agriculture officials said te Velde has repeatedly ignored orders to operate according to its permit. It has cited the dairy four times and fined it more than $10,000,
Last month, the state filed a lawsuit seeking an immediate and permanent injunction prohibiting the dairy from creating any more wastewater and effectively shutting it down.
On Wednesday, the state settled the lawsuit, allowing the dairy to remain open on a limited basis until it can prove its wastewater storage and treatment system is fully functional.
The creamery association, which makes Tillamook Cheese, last month said it would terminate its contract with Lost Valley Farm because of its problems.
Tillamook spokeswoman Tori Harms said the association has ended the contract, but is temporarily continuing to buy milk from the dairy. "We are mindful of the animal welfare and environmental risk of abruptly shutting down a dairy farm," Harms said.
Additional testing is being done to ensure the milk is safe, she said.
Lost Valley also is breaking promises it made about air quality protections, said Sen. Michael Dembrow, a Portland Democrat who heads the Senate Environment Committee.
Unlike California, Idaho and Washington, Oregon has no regulations covering air pollution from dairies. But in its application, Lost Valley vowed it would exceed industry best practices. Instead, it's barely meeting them, Dembrow said.
Maneuvering for water
Lost Valley Farm’s new property came with rights to Columbia River water, but that water can only be used for crop irrigation and only in the summer. The dairy needs potable water year-round for cows' drinking water and for processing milk.
Since no new wells are allowed in the area, the dairy came up with a plan to trade some of its Columbia River rights for some of a neighboring dairy’s groundwater rights. The neighbor would stop using his wells, and Lost Valley would drill wells on its property.
Internal communications show the governor’s office and state agency heads questioned whether they should give the dairy the go-ahead by issuing the wastewater permit before water rights were secured.
"Should Oregon issue the (operating) permit if (Lost Valley) has not secured the water it needs for dairy operations?" Aunan wrote in a March 6, 2017, briefing memo. "If the permit is issued but the dairy does not secure the water it needs, this puts the dairy at risk and may intensify pressure to allow new groundwater withdrawals."
If the public got wind of the water transfer and filed objections before it was final, the Water Resources Department noted, the deal could get held up in the courts for as long as five years.
That’s exactly what happened.
A coalition of conservation groups filed an objection the day before the state issued the wastewater permit.
Nearby Meenderinck Dairy, worried about its water supply being harmed, filed a second objection a week later.
But Lost Valley Farm had a backup plan.
It applied for two limited well licenses, meant for short-term uses such as construction, and good for five years. The state granted one license that was challenged. In September 2017 the dairy said it stopped using the water, and withdrew its application for the other license.
The dairy had a third plan.
In March 2017 te Velde told the state that until the water rights swap was approved, or he received limited licenses, he would buy water from the Port of Morrow and truck it to the dairy. He provided the state with a copy of a contract with the port, signed March 21, showing it would purchase up to 926,041 gallons per day.
That works out to about nearly 28 million gallons per month, although use would fluctuate slightly with seasons.
But purchase receipts from the port show the dairy bought a small and declining amount each month, ranging from 4.3 million gallons in May to 346,800 gallons in October.
In November 2017, the Oregon Water Resources Department learned the dairy was operating with water pumped from the protected aquifer using one of the wells it illegally drilled in 2016.
As the dairy was drilling the first well, Mike Ladd, the Water Resources Department’s Eastern region manager, wrote te Velde saying it was uncertain whether a water rights transfer would be approved. He also warned that even if it was, a state hydrogeologist would specify construction standards to ensure the wells were accessing the same aquifer.
"Any new appropropriation from the basalts, such as stock water for 30,000 head of cattle, will represent a significant new use within the critical groundwater area that will likely injure senior users," Ladd wrote.
Ladd sent a copy of the letter to the Department of Agriculture, which passed it on to Aunan, Brown's adviser.
Water Resources officials did not penalize the dairy for failing to report the wells.
Finally, on Feb. 9, 2018, the department ordered the dairy to install a monitoring device on the exempt well or stop using the water.
On Feb. 22, officials checked on the meter and discovered it did not meet standards: It recorded gallons instead of acre-feet; it was supposed to include decimal places but did not; and it had a reset button, which is not allowed. The department signed off on a replacement meter that was to begin measuring water use this month.
Ivan Maluski, policy director for the statewide independent agriculture advocacy group Friends of Family Farmers, said it appeared the state "seemed to be bending over backward to get this operation up and running despite all the warning signs."
"The next time a big mega-dairy wants to come to Oregon," Maluski said, "we should seriously scrutinize the proposal and protect our groundwater, instead of trying to find a way to say yes at any cost."
Legislator wants answers
Rep. Smith, who represents Morrow County, said he backed the dairy because his goal is to create jobs in his district.
“I was a huge advocate of trying to advance this project,” Smith said. “That was based upon the assumption they would follow the rules.”
An internal document dated two weeks before the dairy’s approval is titled, “Weekly update to Rep. Smith,” and lays out the approval timeline.
But Smith said he does not remember getting weekly updates, was not involved in the approval timeline and did not weigh in on whether the dairy should open before it secured water rights.
“My role as a legislator was to get the company and the agencies together to communicate,” Smith said.
Dembrow, the Senate Environment Committee chairman, said he has been working on air quality issues connected with the dairy, but was not aware of the water rights issues.
He said was not briefed on the water supply problems before the dairy was approved.
"I didn't know about the agency perhaps being complicit with an alternative route," he said.
Dembrow plans to hold a Senate hearing on the dairy when lawmakers meet in May for their regularly scheduled Legislative Days.
Posewitz, the WaterWatch lawyer, said the state shouldn't allow the dairy to continue to draw from the aquifer.
"The Water Resources Department has a number of tools for preventing Lost Valley Farm's exploitation of the stock-watering exemption, including amendments to the critical groundwater order," he said.
Those could include ordering the dairy to stop using the well on the basis that it will unduly interfere with other wells.
"We think the department should use those tools to protect the ... aquifer for the benefit of all users," Posewitz said.
tloew@statesmanjournal.com, 503-399-6779 or follow at Twitter.com/Tracy_Loew
