BEND, Ore. -

Tom Hignell is looking at what used to be a waterfall on the Pilot Butte Canal north of Bend.

"You can see how big a fall it was, and it used to go down here crashing -- and it was beautiful," Hignell said Friday.

The Central Oregon Irrigation District piped that stretch of the canal earlier and dried it out. Now, they are proposing the same thing for the area behind Hignell's house.

"This is the most beautiful segment in all of the canal systems in Oregon. If it goes, there's nothing to replace it with," Hignell said.

COID wants to pipe 4,500 feet of the Pilot Butte Canal. After nearly a year of legal squabbles, the state Land Use Board of Appeals (LUBA), ruled this week on an appeal, returning the piping project to Deschutes County planners for more work.

"I wouldn't characterize it as a setback," said COID Manager Steven Johnson. "I would characterize it as, it seems to be the right thing, and it confirms our action of applying to the text amendment to Deschutes County."

LUBA ruled that the county didn't properly apply zoning, and more importantly that the project is not considered a utility project, but rather a hydropower project.

That means the COID has to apply for additional permits.

But Johnson said the piping project is about much more than hydropower generation.

"It's tied to future drinking water supply for cities," he said.  "It's tied to keeping water for farming, and to put water in streams for fish and other species."

For Hignell, it's also about more than power. He hopes the canal behind his house won't share the same fate as the former waterfall.

"It's hard to appreciate how much we lost here but we lost a lot," said Hignell.

So the battle over the Pilot Butte canal is far from over.

The Deschutes County Planning Commission plans a two-hour tour of the canal area before the third round of a public hearing on the project, next Thursday at 5:30 p.m. at the county's administrative offices,  at 1300 NW Wall Street in Bend.