What’s your concern with the watershed? What you put on your horse is unlikely to wind up in the watershed, unless something like a spill happens in an inopportune place. Applying to a horse is a bit of a different question than spraying on a garden.
You can minimize risk by applying in a protected area. Wiping on rather than spraying limits what the wind takes away, and rubbing into the coat can up effectiveness and longevity. Don’t apply to your horse before rain, if they’ll be out in it, to reduce what comes off the horse. Oil based might “stick” to the horse better, but really what comes off them is so minimal.
You can limit what you need with sheets, masks, and boots. Effective manure management will also help. Barn swallows, purple martins and bats are excellent to reduce your fly numbers, so giving them space is useful. Giving your horses dark spaces with fans to hide during the worst parts of the day can also reduce your need for spray. Fly predators might also make a dent, depending on what you have nearby. Traps (hung away from the horses/barn) will also reduce the population.