JEFF BARNARD

Associated Press

GRANTS PASS, Ore. (AP) -- The Oregon Supreme Court on Thursday kept alive claims by Klamath Basin farmers that the federal government should pay them for shutting off water to crops in 2001 to help protected fish survive a drought.

A federal appeals court had asked the state Supreme Court for guidance on a 1905 state law that gave water to the Klamath Reclamation Project, a federal irrigation project.

The state Supreme Court decided that while the law does not give farmers a property interest in the federally owned water, it does not preclude it either.

To resolve the issue, federal courts need to look to water contracts between farmers and the Klamath Reclamation Project, the Oregon justices said.

In 2001, the U.S. Bureau of Reclamation shut off water to most of the 200,000 acres of the project straddling the Oregon-California border to maintain water in its main reservoir for endangered suckers and in the Klamath River for threatened salmon.

Farmers face the prospect of another shut-off this year, with snowpacks and reservoir levels far below normal.

Bill Ganong, a lawyer for the farmers, said they were happy that the Oregon justices agreed that the water could not be separated from ownership of the land, and that they laid out a roadmap for federal courts to consider the contracts in deciding the property interest issue.

The Court of Federal Claims had rejected the farmers' case, saying they had no property interest in the water. Farmers appealed. The case goes back to the U.S. Court of Appeals for the Federal District.

To be decided are whether the farmers have a property right to the water, and if so, how much money it is worth.

"This may not be the end of this long-running dispute, but it does limit the most expansive claims by the irrigators and focus attention on the terms of the contracts between the irrigators and the United States," said Todd True, an attorney for the public interest law firm Earthjustice, which represents salmon fishermen and conservation groups that intervened on the side of the government.

John Echeverria, a professor at the Vermont Law School representing the Natural Resources Defense Council as a friend of the court, said the case has significant implications across the West for balancing farmers' interests in irrigating their crops on federal projects against the public's interest in helping fish and wildlife survive.

"I think the general understanding is that water in which the public has an interest is subject to regulation to protect the public's interest," he said. "My expectation is this claim ultimately will or should fail. If it succeeds, it will be devastating in terms of the public interest."

Copyright 2010 The Associated Press.