Full Opinion

OSCN Found Document:Questions Submitted by: The Honorable Mark Lepak, Oklahoma House of Representatives, District 9 Questions Submitted by: The Honorable Mark Lepak, Oklahoma House of Representatives, District 9 2026 OK AG 10 Decided: 06/29/2026 OKLAHOMA ATTORNEY GENERAL OPINIONS Cite as: 2026 OK AG 10 , __ P.3d __ ¶0 This office has received your request for an Attorney General Opinion in which you ask, in effect, the following questions: 1. When a rural water district ("RWD") purchases treated water from a source and subsequently conveys such water to another RWD, are both districts deemed to be retail consumers under Oklahoma law? 2. When a water line is jointly owned by two RWDs and one district (the "delivering district") conveys water through the line to the other district (the "receiving district"), is there a statutory limitation on the amount of any markup that may be imposed by the delivering district on the receiving district? 3. What safeguards are there, if any, to ensure rates charged by a RWD are just and reasonable? I. SUMMARY ¶1 A rural water district ("RWD") that purchases treated water for resale acts as a water wholesaler, not a retail consumer. When a delivering district sells and sends water to a receiving district through a jointly owned water line, the rate is determined by a contract between the districts. As a result, the contract rate is not subject to the "just and reasonable" standard applicable to district member rates. If a district member believes the water district is charging rates that are not "just and reasonable," the member may file a complaint with the RWD. That RWD's decision on the complaint is appealable to district court. When two districts dispute water rates, a district court possesses jurisdiction to adjudicate the RWDs' contractual dispute. II. BACKGROUND ¶2 In 1963, Oklahoma enacted the Rural Water District Act (House Bill 837, 1963 Okla. Sess. Laws ch. 266), authorizing the creation of public, nonprofit RWDs, which allowed RWDs to accept federal funds. Id . ¶3 In 1972, the formation process, powers, and requirements for nonprofit RWDs were set out in the expanded and recodified Rural Water, Sewer, Gas and Solid Waste Management Districts Act (the "Rural Districts Act"), 82 O.S.2021, §§ 1324.1 Id . § 1324.4. The petition must describe the proposed RWD's boundaries and state that (1) residents within the proposed RWD lack an adequate water supply, (2) the deficiency can be remedied through improved infrastructure, and (3) sufficient water is available through private purchase or appropriation by the Oklahoma Water Resources Board. Id . Following a public hearing before the BOCC in the county containing the largest portion of the proposed territory, the BOCC may approve incorporation of the proposed RWD as "a body politic and corporate and an agency and legally constituted authority of the State of Oklahoma for the public purposes set forth in [the Rural Districts Act]." Id . § 1324.6(6) A RWD is a state agency. Sinor's Long Bay Marina, LLC v. Wagoner Cnty Rural Water Dist. No. 2 , 2014 OK 43 335 P.3d 262 82 O.S.2021, § 1324.7 Id . §§ 1324.7, 1324.9(A). ¶4 The district must be operated on a nonprofit basis, with its "rates, fees, rents or other charges for water, gas and other facilities, supplies, equipment or services" set at levels sufficient to cover all operating and maintenance expenses and to fund reserves for debt, 82 O.S.2021, § 1324.11 Id. §§ 1324.10(D), 1324.18(B). Oklahoma law permits a RWD to charge fees to retail consumers, negotiate joint ownership of a water line, and purchase or sell water to other RWDs, but RWDs must still maintain their nonprofit status. See 82 O.S.2021, § 1324.11 III. DISCUSSION A. Neither RWD is a retail consumer in a transaction where one district purchases treated water from a source and conveys that water to another RWD. ¶5 In 2007, an amendment to the Rural Districts Act allowed an RWD to charge up to ten cents per thousand gallons of water sold, to be paid by a retail water consumer in the district. 82 O.S.2021, § 1324.9 Id . So, you ask whether this term applies to RWDs. ¶6 "If the statutory language is clear and unambiguous, this Court must apply the plain and ordinary meaning of the words." St. Anthony South Behavioral Health v. Goodwin , 2026 OK 3 584 P.3d 184 See also 25 O.S.2021, § 1 ultimate consumer ." Retail , MERRIAM-WEBSTER.COM, https://www.merriam-webster.com/dictionary/retail (last visited June 29, 2026) (emphasis added). "Consumer" ordinarily means "one that consumes." Consumer , MERRIAM-WEBSTER.COM, https://www.merriam-webster.com/dictionary/consumer (last visited June 29, 2026). Together, "retail water consumer" refers to the ultimate consumer of water to whom water is sold. ¶7 RWDs are organized under the Rural Districts Act to "develop[] and provid[e] an adequate rural water supply . . . [to] rural residents within the territory of the [rural water] district." 82 O.S.2021, § 1324.3 82 O.S.2021, § 1324.10 B. The Rural Districts Act does not limit the amount of any markup the delivering district may assess for water conveyed using a jointly owned water line to a receiving district. ¶8 The Rural Districts Act grants districts sixteen specific powers, including the authority to contract with other districts or agencies to jointly construct, acquire, or operate water facilities, such as pipelines. 82 O.S. 2021 , § 1324.10 82 O.S. 2021 , § 1324.10 ¶9 By contrast, the Rural Districts Act requires a different and specific standard for setting water rates for the district's members. 82 O.S. 2021 , § 1324.10 Id . The district must review and, as necessary, adjust its rates to ensure revenues are sufficient to cover operating and maintenance expenses and to maintain adequate reserves. 82 O.S.2021, § 1324.11 ¶10 A statute must be read to give every part effect, avoiding rendering any parts superfluous or useless. See Sanders v. Turn Key Health Clinics, 2025 OK 19 566 P.3d 591 See Murray County v. Homesales, Inc. , 2014 OK 52 330 P.3d 519 82 O.S. 2021 , § 1324.11 C. An aggrieved member of a district may file a complaint with the water district challenging the rates charged, which is appealable to district court. Disputes between districts are contractual in nature and may be subject to litigation. ¶11 As stated previously, rates applicable to a district's members must be "just, reasonable and nondiscriminatory." 82 O.S. 2021 , § 1324.10 See Sinor's Long Bay Marina, LLC v. Wagoner County Rural Water Dist. No. 2 , 2014 OK 43 335 P.3d 262 Id. ¶12 Sinor's Long Bay Marina applies only to a member's complaint against his or her RWD, not the complaints of another RWD. Instead, disputes over rates for water sold between two RWDs are governed by the districts' negotiated contract in accordance with title 82, section 1324.10(A)(12) of the Oklahoma Statutes. Such contracts are enforceable or challengeable through the RWD's capacity to sue and be sued. 82 O.S. 2021 , § 1324.10 ¶13 Although Oklahoma law designates no state agency as an active arbiter or overseer of RWDs, the previously described statutory reports serve as important disclosures to district members and other RWDs. The required financial transparency enables the public to scrutinize whether an RWD continues to operate without a profit. They also allow district members or other RWDs to detect any attempts by a RWD to charge arbitrary markups in rates, fees, and upcharges. Ultimately, the reports may be probative in any potential legal disputes. ¶14 It is, therefore, the official Opinion of the Attorney General that: 1. An RWD that purchases water for resale to its members is not a retail consumer. 2. There is no statutory limit on the amount that a delivering district can markup for water conveyed through a jointly owned water line to a receiving district. 3. An aggrieved member may file a complaint with the district challenging the rates charged, and the water district's decision is appealable to the district court. However, a contract for the sale and purchase of water between two RWDs is a contractual matter and thus subject to the rights and remedies provided in the contract or those available under Oklahoma law. GENTNER DRUMMOND ATTORNEY GENERAL OF OKLAHOMA SYLVIA LANFAIR ASSISTANT ATTORNEY GENERAL FOOTNOTES Id . Wholesale , MERRIAM-WEBSTER.COM, https://www.merriam-webster.com/dictionary/wholesale (last visited June 29, 2026). Hughes Cnty. Rural Water Dist. No. 4 v. Hughes Cnty. Rural Water Dist. No. 6 , No. 109264 (COCA Div. III. Jan. 18, 2013) (unpublished) (https://www.oscn.net/applications/oscn/UnpublishedDocument.asp?ID=522305). The Court did not apply a "just and reasonable" standard but instead looked at the negotiated contract between the RWDs. Id . at ¶¶ 8--9. The Court remanded the case to the trial court for declaratory judgment to determine the initial negotiated rate for water as well as how the rate should be calculated going forward. Id .