Fort Vannoy Irrigation v. Water Res. Comm.

• Decision Date: 10 July 2008
• Docket Number: SC S055361.,CA A130508.,SC S055356.,(Agency No. T8366.
• Citation: 345 Or. 56,188 P.3d 277
• Parties: FORT VANNOY IRRIGATION DISTRICT and Herman Baertschiger, Jr., Respondents on Review, v. WATER RESOURCES COMMISSION and Ken-Wal Farms, Inc., aka Fort Vannoy Farms, Inc., Petitioners on Review.
• Court: Oregon Supreme Court

188 P.3d 277

345 Or. 56

FORT VANNOY IRRIGATION DISTRICT and Herman Baertschiger, Jr., Respondents on Review, v. WATER RESOURCES COMMISSION and Ken-Wal Farms, Inc., aka Fort Vannoy Farms, Inc., Petitioners on Review.

(Agency No. T8366.

CA A130508.

SC S055356.

SC S055361.

Supreme Court of Oregon, En Banc.

Argued and Submitted May 13, 2008.

Decided July 10, 2008.

On review from the Court of Appeals.^*

Ross Day, Oregonians in Action Legal Center, Tigard, argued the cause and filed the briefs for petitioner on review Ken-Wal Farms, Inc.

Denise G. Fjordbeck, Assistant Attorney General, Salem, argued the cause for petitioner on review Water Resources Commission. With her on the briefs were Hardy Myers, Attorney General, and Mary H. Williams, Solicitor General.

Emil R. Berg, Greener Burke Shoemaker PA, Boise, Idaho, argued the cause for respondents on review Fort Vannoy Irrigation District and Herman Baertschiger, Jr. With him on the brief was Ronald S. Yockim, Roseburg.

Joseph H. Hobson, Jr., Ritter Hosbon LLC, Salem, filed a brief on behalf of amicus curiae Oregon Farm Bureau Federation.

Michael W. Peterkin, Peterkin & Associates, Bend, filed a brief on behalf of amicus curiae Water for Life, Inc.

Douglas W. MacDougal, Schwabe Williamson & Wyatt PC, Portland, and Steven L. Shropshire, Jordan Schrader Ramis PC, Portland, filed a brief on behalf of amicus curiae Oregon Water Resources Congress.

David E. Filippi and Heath A. Curtiss, Stoel Rives LLP, Portland, filed a brief on behalf of amici curiae Arnold Irrigation District, Central Oregon Irrigation District, Swalley Irrigation District, and Tumalo Irrigation District.

DE MUNIZ, C.J.

This case arises from a dispute over an application filed by petitioner Ken-Wal Farms, Inc. (Ken-Wal) to change the points of diversion associated with water rights set forth in two water right certificates (8942 and 8943) that were issued in 1930 to the Fort Vannoy Irrigation District (district), of which Ken-Wal is a member. The issue on review is whether Ken-Wal is the "holder of any water use subject to transfer," as that phrase is used in ORS 540.510(1), such that Ken-Wal has authority under that statute to change the points of diversion associated with the water rights established in those certificates. ORS 540.510(1) provides, in part:

"Except as provided in subsections (2) to (8) of this section, all water used in this state for any purpose shall remain appurtenant to the premises upon which it is used and no change in use or place of use of any water for any purpose may be made without compliance with the provisions of ORS 540.520 and 540.530. However, the holder of any water use subject to transfer may, upon compliance with the provisions of ORS 540.520 and 540.530, change the use and place of use, the point of diversion or the use theretofore made of the water in all cases without losing priority of the right theretofore established. A district may change the place of use in the manner provided in ORS 540.572 to 540.580 in lieu of the method provided in ORS 540.520 and 540.530."

(Emphases added.)

For the reasons expressed below, we conclude that the district is the "holder of [a] water use subject to transfer" with respect to certificates 8942 and 8943, and that Ken-Wal is not authorized under ORS 540.510(1) to change the points of diversion associated with the water rights established in those certificates without the district's consent. We therefore affirm the decision of the Court of Appeals.

Our analysis of the issue presented is divided into three sections. First, we describe the factual and procedural background of the proceeding. Second, we place the issue in its historical context, tracing the origins and development of the Water Rights Act and the Irrigation District Law in Oregon.¹ And finally, after identifying the parties' arguments on review, we determine the legislature's intent regarding the meaning of the phrase "holder of any water use subject to transfer" by employing a three-part analysis framed by the statutory text and context. We turn first to the facts and procedural posture of the case.

I. FACTUAL AND PROCEDURAL BACKGROUND

Ken-Wal is a landowner within, and a member of, the district. It obtains water to raise its crops under five water right certificates, including certificates 8942 and 8943, which the State Engineer issued to the district in 1930.² The issue on review concerns those two certificates.³ Diverting water from points along the Rogue River and its tributaries, the district delivers the water provided under those two certificates to Ken-Wal's land — as well as to the lands of other members — through the district's irrigation system. That is, Ken-Wal owns a portion of the land to which the district supplies the water provided under certificates 8942 and 8943 (i.e., the appurtenant land).⁴

In November 1999, Ken-Wal applied to the Water Resources Department (department) to change the points of diversion associated with the water rights set forth in all five of the water right certificates. In doing so, Ken-Wal sought to (1) consolidate the points of diversion to two locations within the boundaries of its farm; and (2) deliver the water provided under all five certificates through a new irrigation system that it would construct and maintain.⁵ The district would not exercise control over Ken-Wal's new irrigation system, notwithstanding the fact that Ken-Wal would obtain a portion of the water flowing through that system under the two certificates issued to the district. The district and one of its members, Baertschiger,⁶ protested the proposed changes, asserting, in part, that the district was the "certificated owner of record" of certificates 8942 and 8943 and that its consent therefore was required to change the points of diversion associated with the water rights established in those certificates.⁷ The district refused to give its consent.

The department rejected the district's challenge, issuing a proposed order that approved Ken-Wal's application and that concluded that the district's consent was not required to change the disputed points of diversion. The proposed order incorporated a Ruling on Legal Issues and Order that had been issued earlier in the administrative proceedings and that contained the following conclusion relevant to the issue on review:

"As water rights are, in the West, essentially defeasible usufructuary rights attached to specifically identified land rather than personal rights which may be exercised at any location and only by the individual whose name is on the certificate evidencing that right, it is logical to conclude that the `holder' of the right referred to in [ORS 540.510(1)] is the owner of the land to which the right is appurtenant."

The district filed exceptions to the proposed order. See OAR 137-003-0650(1) (authorizing filing of such exceptions).

The Water Resources Commission (commission) considered the district's exceptions but ultimately issued a final order that conformed to the proposed order. Acknowledging that "the issue of ownership of a water right within an irrigation district is a recurring question," the commission determined that the ownership of the water rights established in certificates 8942 and 8943 did not control whether Ken-Wal was required to obtain the district's consent to change the associated points of diversion. Rather, focusing its analysis on whether the transfer provisions in ORS chapter 540 require the district's consent, the commission apparently considered Ken-Wal the "holder of [a] water use subject to transfer" under ORS 540.510(1) on the ground that the water rights established in the certificates are appurtenant to land owned by Ken-Wal.⁸ In accordance with the commission's final order, the department later issued a final order approving Ken-Wal's proposed changes to the points of diversion.⁹

The district subsequently sought judicial review of the commission's order, and the Court of Appeals reversed. That court identified the relevant inquiry as whether Ken-Wal or the district was the "holder of [a] water use subject to transfer," within the meaning of ORS 540.510(1), with respect to the water rights established in certificates 8942 and 8943. The court examined the statutory text and context, ultimately concluding that the phrase "holder of any water use subject to transfer" refers to the party to which a water right certificate is issued. Fort Vannoy Irrigation v. Water Resources Comm., 214 Or.App. 88, 95-99, 162 P.3d 1066 (2007). That is, the court construed "holder" as referring to the party that owns the "right to use of the water" provided under a water right certificate, which the court determined to be the party to which the certificate is issued. See id. at 96, 162 P.3d 1066 ("[A]n entity in whose name a water right certificate is issued is the owner of the right to use of the water."). For certificates 8942 and 8943, that party is the district.

We allowed the petitions for review filed by Ken-Wal and the commission to interpret the phrase "holder of any water use subject to transfer" in ORS 540.510(1). To do so, we initially place the parties' controversy in its historical context by examining the evolution of the Water Rights Act and the Irrigation District Law.

II. HISTORICAL BACKGROUND

The premium placed on irrigated agriculture in the American West during the preceding 150 years of United States history cannot be overstated,¹⁰ particularly the role that irrigation played in the settlement of the western states. That role is described, among other places, in the observations of Justice Sutherland, writing for the United States Supreme Court in Power Co. v. Cement Co., 295 U.S. 142, 55 S.Ct. 725, 79 L.Ed. 1356 (1935):

"These states and territories comprised the western third of the United States — a vast empire in extent, but still sparsely settled. From a line east of the Rocky Mountains almost to the Pacific Ocean, and from...